Federal retirees face more than a COLA change in 2027

If you’re retired from federal service, a bigger benefit check in 2027 is welcome news. But how much more you’ll get depends on your retirement system, and there are other changes on the horizon that could affect your bottom line.

The cost-of-living adjustment announced this week is 3.6% for CSRS annuities, Social Security benefits, military retirement benefits and VA disability benefits. Eligible FERS annuities will get a smaller 2.6% increase. Here’s what that means for your retirement check.

CSRS retirement and survivor benefits

If you receive a CSRS annuity, your monthly payment will increase by 3.6%. A $4,000 monthly annuity, for example, would go up by about $144, bringing it to approximately $4,144 before deductions. Survivor annuities get the same adjustment, though your first COLA may be prorated based on how many months you’ve been on the annuity roll.

FERS Retirement and Survivor Benefits 

Because the COLA is more than 3%, eligible FERS annuitants receive the COLA rate minus one percentage point. The 2027 FERS COLA is therefore 2.6%, not 3.6%. For example, a $3,000 monthly FERS annuity would increase by about $78, to approximately $3,078 before deductions. The FERS spousal Basic Employee Death Benefit is adjusted by the full 3.6% CSRS COLA to approximately $45,377.34 up from $43,800.53 in 2026.  The official announcement will be reported by OPM later.  This is in addition to one-half of the final annual pay (or average pay, if higher). 

COLA increases for FERS annuitants only apply to the retiree’s basic annuity (not the annuity supplement). For survivor annuitants, COLA applies to both the basic survivor annuity and supplement (if payable) annuity. The COLA increase is prorated according to the annuity commencing date during an annuitant’s first year on the annuity roll. This provision applies to FERS annuitants who are eligible for an “immediate” COLA at retirement. Not all FERS annuitants will receive an immediate FERS COLA. FERS COLAs generally do not apply to annuitants who are under age 62 as of Dec. 1, 2025, except for:  

• Spouse, former spouse, or insurable interest survivor annuitants;  
• Certain disability annuitants;  
• Those who retired under the special provisions for law enforcement officers, firefighters, and Capitol Police;  
• Those who retired under the special provisions for air traffic controllers; and 
• Those who retired under the special provision for military reserve technicians (age 50, 25 years of service) because they ceased to quality for military membership on account of disability;  

FERS disability annuitants receiving the 60% rate during their first year on the disability roll will not receive a COLA increase.  

FERS retirees may want to pay attention to proposed legislation, H.R. 491 /S.624: Equal COLA Act that would provide full cost-of-living adjustments, based on the relevant change in consumer prices, to Federal Employees Retirement System annuities. Don’t get too excited about this proposal, however, according to GovTrack.us, this bill is in the first stage of the legislative process. It was introduced by Congress on Jan. 16, 2025, and has only a nine percent chance of passing at this time.   

FERS Annuity Supplement Earning Limit 

FERS annuitants receiving an annuity supplement are subject to an earnings test. The annuity supplement is reduced if the annuitant earns more than the exempt amount of earnings set forth each year by the Social Security Administration. The Social Security earnings limitation for 2027 is $25,560.00. If a FERS annuitant earns more than this amount, annuity supplement will be reduced by $1.00 for every $2.00 earned over the minimum level unless the annuitant retired under the minimum retirement age and retired under one of the special provisions related to these specific employee populations: law enforcement officers, firefighters, air traffic controllers, military reserve technicians separated for loss of military membership. The 2026 earnings survey will be sent to current retirees in the spring of 2027. The earnings limit for 2026 is $24,480. 

Interest Rate for Service Credit Deposits 

The official 2027 variable interest rate for FERS and CSRS service credit deposits has not yet been released by the Treasury Department or the Office of Personnel Management (OPM). Treasury typically calculates and announces this specific retirement-related interest rate in late November or December for the upcoming calendar year. The 2026 variable interest rate is 4.25%.

Social Security  

Social Security retirement, survivor, and disability benefits will increase by 3.6% beginning with benefits payable in January 2027. The Social Security Administration estimates that the average retired-worker benefit will rise from $2,095 to $2,170 per month—an increase of about $75. The exact change for an individual may differ slightly because Social Security applies the annual COLA to the Primary Insurance Amount determined at the Normal Retirement Age (67 if born in 1960 or later). If you choose to retire earlier, your benefit will be lower than your PIA. On the other hand, if you choose to retire after you reach your normal retirement age, your benefit will be higher than your PIA. 

Other 2027 Amounts That Change 

Social Security taxable maximum wage for the 6.2% FICA tax increases from $184,500 to $192,300. 

One credit of coverage is earned if Social Security covered wages $1,970 in 2027, up from $1,890 in 2026 (four credits earned if wages are $7,880 or more in 2027). 

Retirement earnings test: the annual limit for beneficiaries under normal retirement age increases to $25,560; the limit for the year a beneficiary reaches full retirement age increases to $67,920 for earnings before the month in the year when the normal retirement age is reached. 

Medicare Costs, Part B Premiums, and IRMAA 

The 2027 standard Medicare Part B premium, annual deductible, and income-related monthly adjustment amounts have not yet been officially announced. CMS generally releases the following year’s figures in late October or November; for example, the 2026 amounts were released on November 14, 2025. After the 2027 figures are issued, Social Security will generally send beneficiaries a notice in November or early December showing the new benefit amount, Medicare deductions, and net payment beginning in January. 

How the Standard Part B Premium Is Calculated 

The Part B premium is calculated separately from the Social Security COLA. The Centers for Medicare and Medicaid Services (CMS) actuaries estimate the coming year’s costs for physician and outpatient services, durable medical equipment, certain home health services and physician-administered drugs, expected use of services, medical-price changes, administrative expenses, and a contingency margin. The standard beneficiary premium is generally intended to finance about 25% of projected Part B costs, with federal general revenues financing approximately 75%. Because it is based on Medicare’s projected costs rather than COLA, the premium can rise by more or less than 3.6%. According to the 2026 Medicare Trustees Report, the estimated standard monthly premium for Part B in 2027 will be $209.50. 

How IRMAA Is Determined 

Income Related Monthly Adjustment Amount (IRMAA) is an additional charge for higher-income beneficiaries enrolled in Part B or Part D. Social Security generally uses modified adjusted gross income reported by the IRS for the tax year two years before the premium year. Therefore, 2027 IRMAA will ordinarily be based on the beneficiary’s 2025 federal tax return. For this purpose, modified adjusted gross income is adjusted gross income plus tax-exempt interest. 

Social Security compares that income with statutory brackets for the beneficiary’s tax-filing status. Part B IRMAA tiers increase the beneficiary’s share of program costs above the standard level—generally to approximately 35%, 50%, 65%, 80%, or 85%. Part D uses separate monthly adjustment amounts for the same income tiers, added to the premium charged by the beneficiary’s drug plan. The exact 2027 income thresholds and adjustment amounts will be known only when the official tables are released. 

General Pay Adjustment for Active Federal Employees 

Active federal employees may also hear the term annual pay adjustment, but that adjustment is separate from the COLA for CSRS and FERS annuitants. Retiree COLAs are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, while General Schedule pay adjustments follow a different process intended to reflect changes in private-sector wages and geographic pay differences. The GS base pay schedule is usually adjusted annually each January with an across-the-board pay increase based on nationwide changes in the cost of wages and salaries of private industry workers. Most GS employees are also entitled to locality pay, which is a geographic-based percentage rate that reflects pay levels for non-Federal workers in certain geographic areas as determined by surveys conducted by the U.S. Bureau of Labor Statistics. 

Under the statutory process, January General Schedule pay has two potential components. The first is an across-the-board adjustment to the GS base-pay schedule, normally derived from the Employment Cost Index for private-industry wages and salaries, measured from the third quarter of one year to the third quarter of the next, minus 0.5 percentage point. The second is locality pay, based on Bureau of Labor Statistics comparisons of federal and nonfederal salaries for comparable levels of work in each locality pay area. The Federal Salary Council reviews the data and makes recommendations to the President’s Pay Agent, which consists of the Secretary of Labor and the directors of OMB and OPM. 

The statutory formulas do not necessarily become the actual pay increase. Congress may establish a different amount through legislation, and the President may issue an alternative pay plan when economic conditions or a national emergency make the statutory adjustments inappropriate. The final rates are generally implemented by a presidential executive order near the end of the calendar year, after which OPM publishes the official pay tables. 

For January 2027, the president announced an alternative pay plan freezing General Schedule base and locality rates at their 2026 levels. Accordingly, most covered federal employees are scheduled to receive no general across-the-board or locality-pay increase for 2027 unless subsequent legislation changes that result. This pay freeze does not prevent an employee from receiving a within-grade increase, promotion, or other individually applicable pay action. 

A separate exception is planned for designated federal law enforcement personnel. OPM has been directed to use special salary-rate authority to provide a 3.8% increase for covered positions, with final occupational and agency coverage to be announced in the special-rate tables. Special salary rates are used to address significant recruitment or retention problems and are generally treated as basic pay for purposes such as retirement deductions, overtime and certain percentage-based incentives.