The robust increase, announced by the Social Security Administration Oct. 13, reverses the last couple years of consistent declines in the COLA increase, which hit a low of 1.3 percent for 2021.
COLAs are determined using the Consumer Price Index released by the Bureau of Labor Statistics, which calculates changes to the average price of household goods in the U.S.
The announcement means that not only Social Security beneficiaries but also individuals receiving a variety of Veterans Affairs benefits will see a significant bump in their payouts later this year. Last month, Congress approved legislationtying the VA financial support to Social Security COLA.
The change affects the COLA for both Social Security recipients and federal retirees under the Civil Service Retirement System, which is only available to feds that started their federal employment before 1987.
Employees under the Federal Employee Retirement System will only see a 4.9 percent increase, due to legal caps on FERS COLAs.
â€œFor a significant number of federal retirees, the news is not quite as good: The January 2022 COLA will be 4.9 percent for those who retired under the Federal Employees Retirement System,â€ National Active and Retired Federal Employees National President Ken Thomas said in a statement.
â€œFERS COLAs are capped at 2 percent when consumer prices increase between 2 and 3 percent, and are reduced by 1 percent when consumer prices increase by 3 percent or more. This inequitable policy, enacted in the 1980s with the creation of FERS, fails to fully protect the earned value of FERS annuities, which decrease in value year after year â€” exactly what COLAs are intended to prevent.â€
The Equal COLA Act, introduced in January 2021 by Rep. Gerry Connolly, D-Va., and has bipartisan support in the House, would alter the FERS COLA calculations to adhere far more closely to the consumer price index, as the Civil Service Retirement System does.