What's Happening?
Federal retirees will see a slight increase in their pension payments in 2026, with the Social Security Administration announcing a 2.8% cost-of-living adjustment (COLA). This adjustment is based on the annual
change in the consumer price index. However, retirees under the Federal Employees Retirement System (FERS) will only receive a 2.0% increase due to the system's COLA calculation method. The disparity in adjustments has been a point of contention among federal employee groups, especially as health care premiums are expected to rise by over 10% next year.
Why It's Important?
The modest COLA for federal retirees, particularly those under FERS, highlights ongoing concerns about the adequacy of retirement benefits in the face of rising living costs. The increase in health care premiums further exacerbates the financial strain on retirees, reducing the real value of their annuities. This situation underscores the need for policy changes to ensure that retirement benefits keep pace with inflation and rising costs, a concern that has been raised by federal employee advocacy groups and some lawmakers.
What's Next?
The issue of COLA disparities between different federal retirement systems may continue to be a topic of legislative debate. The Equal COLA Act, which aims to standardize annuity increases, could gain renewed attention as stakeholders push for more equitable adjustments. Additionally, the rising cost of health care may prompt further discussions on how to better support federal retirees in managing their expenses.
