Federal civilian retirees are set to receive a 1.7 percent cost-of-living adjustment (COLA).  Retirees covered under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) will see the increase reflected in their January 2013 payment.

The increase is less than half of the 3.6 percent COLA federal retirees received in 2012.  No COLA was paid to retirees in 2010 and 2011.  The last federal retiree COLA increase under 2.0 percent was paid in January 2003.

The annual retiree COLA is calculated as the change in the average Consumer Price Index for Wage Earners and Clerical Workers (CPI-W)—published by the Bureau of Labor Statistics (BLS)—from the third quarter of the previous year to the third quarter of the current year.  This is the same calculation for the Social Security COLA.  Social Security recipients will also receive a 1.7 percent increase in 2013.

The FY2013 budget request called for a .5 percent increase in federal civilian employees pay beginning in January 2013.  However, congress has not supported the pay raise so far in its considerations of FY2013 appropriations bills.   President Obama recommended and Congress agreed to freeze federal civilian pay until Congress completes action on FY2013 appropriations.  As a result, civilian pay was frozen in the FY2013 Continuing Resolution, which runs until March 27, 2013.