FERS employees and annuitants: the latest threat to your life – or at least, to your way of life – comes in the form of a proposal to renege on the contract you entered into when you became a federal employee under the Federal Employee’s Retirement System. If you are, or will be eligible to retire under FERS, you have kept your side of the employment bargain. Unfortunately, your employer is being asked to renege on its promise to pay for the services you have already rendered. Services you can’t now take back.

As a fiduciary financial planner for feds, I am extremely concerned about the recent proposal to eliminate the cost-of-living adjustments on FERS annuity payments – including future payments to those who have already retired, or are near retirement. These adjustments are crucial to allowing FERS annuitants to plan and maintain their financial well-being. Without them, annuitants will be forced to rely more heavily on their savings to pay their bills in retirement. This means enduring greater investment risk, or a reduced standard of living, or both.

I have studied the effects of the COLA proposal on real-life FERS annuitants, taking into account the risks of inflation and longevity. I found that reducing the FERS annuity COLA from its current level to zero can be expected to reduce the lifetime standard of living that the annuity income will support for a 62- year-old annuitant, in good health, by about 20 percent.

Looked at another way, at age 62 with 20 years of service, it would take a contribution to your TSP account that is roughly equal to your Hi-3 pay amount to make up for the loss of the COLA on your FERS annuity.

However you look at it, the proposal to eliminate the FERS annuity COLA is an underhanded tactic and a slap to the faces of hard-working career feds. But, it’s also more than that. If enacted, it will significantly and permanently degrade the quality of life for hundreds of thousands, if not millions of individuals who are relying on FERS annuity income to make ends meet. I urge you to speak up, to support federal labor advocacy organizations, and to vote intelligently in every election. Unfortunately, it’s no longer safe to assume that anything is too outrageous, or too unfair, to become reality.

Written by Mike Miles
For the Federal Times
Publication June 12, 2017