How COLAs Affect Federal Disability Retirement

Apr 17, 2023

colas affect Federal Disability Retirement

If you are a disabled federal employee receiving Federal Disability Retirement, you may be wondering if Cost-of-Living Adjustments or COLAs affect your annuity. The good news is that you will be able to receive cost-of-living adjustments after the first 12 months you are on Federal Disability Retirement. These COLAs can make a significant financial impact on your retirement.

Keep reading to learn how COLAs affect your Federal Disability Retirement.

What is a COLA?

A cost-of-living adjustment or “COLA” is an increase in your federal pay or benefits that depends on the rising cost of goods and services. The government strives to pay their workers a livable wage which involves accounting for economic trends.

COLAs help offset inflation– the rising cost of medical care, food, and everyday necessities. COLAs are especially important for retirees and people with disabilities on fixed incomes who struggle to earn enough to account for inflation.

Cost-of-living adjustments are announced every October and are effective on December 1st of the year in which you become eligible. There will not be a COLA increase every year if there has not been a significant increase of inflation.

How are COLAs computed?

COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated monthly by the Bureau of Labor Statistics by sampling thousands of prices to calculate the overall change.

COLAs are based on the change in the Consumer Price Index (CPI) from the third calendar quarter of the year that just ended to the third calendar quarter of the preceding year.

If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA for the year.

The 2023 COLA was announced October 13th and is set at 8.7% for those under the Civil Service Retirement System (CSRS) and 7.7% for those under the Federal Employees Retirement System (FERS). This is the largest COLA in nearly 40 years and will make a huge impact on federal retirees nationwide.

Do you get COLAs on Federal Disability Retirement?

If you are approved for Federal Disability Retirement, you are not eligible for COLAs for the first year on the benefit. COLAs which occur after this 12-month period are payable.

When you reach age 62 your average salary will be increased by all FERS cost-of-living increases paid during the time you received a disability annuity.

The ability to receive cost-of-living adjustments on top of your monthly annuity can make a huge difference, especially to those who are unable to continue working.

What about survivor benefits?

If you pass before reaching age 62 and you elected a full or partial survivor benefit for your spouse, their benefit will increase with any COLA that you would have received while on Federal Disability Retirement.

If you do not leave a survivor benefit, your spouse will not benefit from annual COLAs.

The combination of survivor benefits and COLAs can set your spouse up for a financially secure future, so it’s an important benefit to consider when making your elections.

We know how confusing it can be to fully understand your federal benefits and all your options for retirement. Our firm strives to educate all federal employees so they can make the best decision for their future.

We have helped thousands of federal employees apply for Federal Disability Retirement at a 99% success rate. And as you can see, the benefits of Federal Disability Retirement can make a huge financial impact for the rest of your life.

Schedule a FREE consultation with our firm today to see how we can help you.

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