Federal civilian retirees will not receive a cost-of-living adjustment (COLA) in 2016.
This will be the first year since 2011 that federal retirees do not receive a COLA. In 2010 and 2011 retiree pay was frozen along with pay of federal civilian employees. Federal retirees received a 1.7 percent COLA in 2015.
The reason why federal retirees will not receive a COLA in 2016 is that consumer prices have declined over the past year. 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. BLS reported that the (CPI-W) actually decreased from the third quarter of 2014 to the quarter of 2015, primarily due to the decline in gasoline prices.
Social Security recipients will also not receive a COLA in 2016 as the Social Security Administration uses the same calculation for Social Security COLAs.
In late August President Obama notified Congress that federal civilian employees should receive a 1.3 percent pay raise in 2016. The 1.3 percent pay raise is a combination of a 1.0 percent across-the-board raise announced in last week’s letter and an increase in locality pay raise the president said he will request later this year. If Congress takes no action on the pay raise when it completes the FY2016 appropriations bills, the president can issue an executive order implementing the raise.