High Inflation Demonstrates Value of COLA

Alexandria, Va.– In response to the 2023 cost-of-living adjustment (COLA) for federal retirement annuities and Social Security benefits determined today pursuant to data calculated by the Bureau of Labor Statistics, NARFE National President Ken Thomas issued the following statement:

“Today’s announcement that the January 2023 cost-of-living adjustment to Civil Service Retirement System annuities and Social Security benefits will be 8.7% came as no surprise, given the steady climb of consumer prices for more than a year.

With inflation so high, the security of automatic COLAs for retirement benefits becomes even more evident. Without it, seniors would see the value of their retirement income erode drastically over time.

“The 2023 COLA represents the highest increase in decades, dwarfing this year’s 5.9% annual cost-of-living adjustment, which was the largest since 1982.

“However, rising health care costs and the unfair treatment of specific federal annuitants could reduce the value of this adjustment.

Spending on Health Care

“Seniors spend more on health care than any other segment of the population, and those who enroll in Federal Employees Health Benefits plans for 2023 will see an average increase of 8.7 percent in their share of premiums, the biggest jump since 2011.

“For years, NARFE has urged Congress to address the inequity of COLAs that don’t keep up with rising health care costs by passing legislation requiring the BLS to calculate COLAs based on the consumer price index for the elderly (CPI-E) instead of the consumer price index for workers (CPI-W).

“And health care costs are poised to continue their ascent: Estimates from the Federal Reserve Bank of Dallas last month indicate the rate of health care inflation could double by mid-2023. Seniors need relief. I urge Congress to pass the Fair COLAs for Seniors Act and ensure retirement income keeps pace with the rising costs seniors face.

Fairness for FERS Retirees

“While CSRS annuities and Social Security benefits will be going up 8.7%, the January 2023 COLA unfortunately will be 7.7% for those who retired under the Federal Employees Retirement System.

“That’s because FERS COLAs are capped at 2 percent when consumer prices increase between 2% and 3%, and are reduced by 1% when consumer prices increase by 3% or more. This inequitable policy, enacted in the 1980s with the creation of FERS, fails to fully protect the earned value of FERS annuities, which decrease in value year after year—exactly what COLAs are intended to prevent.

“The Equal COLA Act, H.R. 304, would correct this unfair policy and bring COLAs for the more than one million FERS retirees and survivors in line with the full COLAs that Civil Service Retirement System retirees and Social Security beneficiaries currently receive.”

Background
• Until 1962, federal law did not provide for automatic cost-of-living adjustments (COLAs) to civil service annuities. However, Congress provided occasional annuity increases to reflect changes in economic conditions. See NARFE’s Fact Sheet on Civil Service COLA History for a history of legislation and Civil Service Retirement System and Federal Employees Retirement System annuities.

• The COLA is calculated by comparing the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) year to year, based on the average of the third-quarter months of July, August and September. The September 2022 increase in the CPI-W was 0.08% which, when added with the July and August numbers, averaged to an 8.7% increase over those three months compared to the same three-month average in 2021.

# # #

As the only organization solely dedicated to the general welfare of all federal workers and retirees, NARFE delivers valuable guidance, timely resources and powerful advocacy. For 100 years, NARFE has been a trusted source of knowledge for the federal community, Capitol Hill, the executive branch and the media.

CONTACT:
Jenn Rafael
NARFE Director of Communications and Marketing
jrafael@narfe.org | (571) 483-1270