Policy Recommendation: Adjust COLA Provisions for FERS Retirees to Match Rising Living Costs
Under the Federal Employees Retirement System (FERS), retirees do not receive a full Cost of Living Adjustment (COLA), leaving them with what is essentially a “diet” COLA that does not fully keep pace with inflation. For federal employees who retire at an early age—such as air traffic controllers, who often retire between ages 50 and 56—this inadequate COLA can lead to a substantial loss in purchasing power over their retirement years.
FERS retirees receive a reduced COLA, which is capped at 2% when inflation is between 2% and 3% and is only equal to the inflation rate minus 1% when inflation exceeds 3%. This structure leads to real financial consequences, especially in times of high inflation. Unlike retirees under the Civil Service Retirement System (CSRS), FERS retirees see their benefits erode over time, undermining the retirement security they’ve worked toward.
Why a Full COLA Matters for FERS Retirees:
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Protecting Retirement Income: A fair and full COLA ensures that retirement benefits keep pace with rising costs, safeguarding retirees’ purchasing power over the years.
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Supporting Long-Term Retirees: Employees in high-stress positions, such as air traffic controllers, often retire early and face longer retirement spans. Without full COLA adjustments, they risk a significant decline in financial stability over time.
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Parity Across Federal Retirement Systems: Aligning COLA provisions for FERS retirees with those for CSRS retirees would create a more equitable system, recognizing the value and contributions of all federal employees.
A Call for Equitable Retirement Adjustments
By providing FERS retirees with a full COLA, we can ensure that their retirement benefits truly reflect the cost of living. This adjustment would better support federal employees who retire early, allowing them to maintain financial security throughout their retirement and preserving the integrity of the FERS system.