Why a COLA Spike Could Put Retirees’ Pay Adjustment at Risk Posted on 7/1/2021 at 13:58:26 by Will Croom
Visitors to MOAA’s COLA Watch, one of the most-viewed pages at MOAA.org, have seen a skyrocketing graph the last few months. It points to the potential for a large cost-of-living adjustment in future retiree pay, but it also presents an unwelcome opportunity for the erosion of your earned benefits.
First, the graph: The May monthly figure for the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), released in June, was 4% above the FY 2021 baseline. That’s the largest increase above the baseline since MOAA began its current method of tracking the index in 2016 – we even had to change the graph’s axis to accommodate the size of the spike.
If that number continues its upward climb to the end of the fiscal year, it could join 2008 (5.8%) and easily surpass 2005 (4.1%) as the largest increases since 1990. And it would mean a significant boost to retiree pay and other benefits indexed to the CPI-W (Social Security, most notably) – but there’s a catch.
MOAA has fought an ongoing battle to prevent Congress from altering this equation by either de-linking the retired-pay increase from CPI-W entirely or using some other calculation, such as “Chained CPI.” A significant increase like the one projected would provide a tempting target.
Why? Any changes this year could be masked by the increase itself. If the CPI-W dictates a 5% increase, for example, Congress could cut that to 3% and proclaim, accurately, that it had provided the largest retiree pay bump since 2011. That may seem significant to those outside the uniformed services community, but retirees would see an immediate erosion in their earned benefit – their retired pay would not keep pace with rising prices, and their quality of life could suffer.
It falls to MOAA and other veterans advocacy groups to remind Congress of the impact these decisions make immediately on individuals ... and the even more pronounced impact they have when compounded over time. While shaving 2 percentage points may not seem significant, especially as lawmakers deal with other budget issues and a rising debt, it could mean hundreds or thousands of dollars per year less than a military retiree had budgeted – and had earned through service.
MOAA continues its work on the Hill to drive this point home with lawmakers and their staffs. In addition to monthly updates at MOAA.org/colawatch, visit MOAA’s Advocacy News page for any news on this and other issues critical to your benefits.
