In 2023, Federal retirees will have the greatest COLA rise since more than forty years.

The cost-of-living adjustment (COLA) for Social Security pensioners and Federal retirees is about to climb by the most in more than 40 years.

According to a Social Security Administration announcement made on October 13th, the COLA will rise by 8.7% for 2023. That sum will not, however, be added to the paychecks of all federal retirees. Beginning in January, those who participate in the Federal Employee Retirement System (FERS) will get a 7.7% COLA.

Given the high levels of inflation and increasing consumer prices this year, the significant COLA announcement for 2023 is not surprising, according to Ken Thomas, who is the national president of the prestigious National Active and Retired Federal Employees (NARFE) Association, in a comment released on October 13.

Federal employees and retirees who participate in the Federal Employee Health Benefits Program (FEHBP) would pay an average 8.7% higher amount for their health insurance premiums in 2023.

The goal of COLAs is to keep Social Security recipients and government retirees up to date with rising prices. The popular index known as “Consumer Price Index for Urban Wage Earners and Clerical Workers,” or CPI-W, of the Bureau of Labor Statistics, is used to measure them.

But the precise COLA amount varies depending on the scheme under which a government employee retires. FERS retirees typically receive less COLA than those on the Civil Service Retirement System (CSRS), who are entitled to the entire COLA. Depending on the size of the COLA itself, the precise amount less will be:

The full COLA will be paid to FERS retirees if the CSRS COLA increases by less than 2%.

FERS retirees will receive a 2% COLA if the CSRS COLA rises between about 2% and 3%.

Additionally, FERS retirees will receive 1% less than the full COLA if the CSRS COLA rises by more than 3%.

Even so, the COLA for the following year is the most significant increase since 1982, making the comparatively big COLA of 5.9% for the next year seem insignificant in relation. Prior to that, the last considerable COLA for retirees inside the civil service was 5.8% in 2009.

Sen. Alex Padilla (D-Calif.) presented the Equal COLA Act in May to eliminate the gap in COLAs for retirees under the FERS and CSRS programs. Rep. Gerry Connolly (D-VA) sponsored a related bill in the House last year. The proposed law will grant the total COLA amount to FERS retirees. Connolly has put out comparable measures over the past few years, but Congress hasn’t approved it.

Other legislators have suggested completely overhauling the COLA system. Rep. John Garamendi (D-Calif.) presented the Fair COLA for Seniors Act, which would calculate subsequent COLAs on the Consumer Price Index-E (CPI-E) rather than the Consumer Price Index-W. Both indexes measure consumer costs, but the CPI-E gives healthcare expenses more weight, theoretically resulting in a bigger COLA for pensioners.