Money, Military Retirement - Army Times

U.S. Military (Ret.): If inflation rate is negative, retirees won’t get annual COLA increase

The fiscal year ended Sept. 30, which means we will soon know whether the inflation rate for fiscal 2009 ended in negative territory.

If that happens, military retirees would see no annual cost-of-living adjustment in their retired pay, something that has not happened in a generation.

Every year has seen an increase since at least 1975, when the current COLA system began. The highest increase was 14.3 percent in 1980; the lowest was 1.3 percent in 1986 and 1998. Last year, retirees got a 5.8 percent bump, well above the recent historical average.

The formula for the retiree COLA is based on the Labor Department’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

The COLA represents the difference between the average inflation in the final three months of one fiscal year — July, August and September — compared with the same three months of the previous year.

The inflation rate fell 2.2 percent in July and 1.9 percent in August — so it was actually a deflation rate. The final piece of the puzzle, the figure for September, won’t be released until mid-October, but the trend does not look good.

If there’s any good news to be found, it’s that military retiree pay — or Social Security adjustments or any other COLA-type benefits — will never be cut if the inflation rate ends in negative territory; the worst that can happen is no increase.

But there is one other piece of news on this front: Rep. Walter Jones, R-N.C., has introduced a bill, HR 3557, to apply a 3 percent COLA increase effective Dec. 1 to various government benefits — including military retired pay — regardless of what the final CPI numbers indicate.

“The government may have good reasons to hold down spending on entitlements given the deficit, with military retiree issues being one — but don’t say it’s because of deflation,” wrote retired Cmdr. Peter Gregory. “Been to the gas pump? Go food shopping? Pay college tuition? Buy health care?”

With an election year coming in 2010, he said, “hopefully Congress will find the money” for at least a modest retiree COLA.

It’s too early to tell whether Jones’ legislation will receive full approval from Congress, but it couldn’t hurt to contact your lawmakers and let them know how you feel.

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Retired Command Master Chief Alex Keenan served 28 years in the Coast Guard. E-mail him at retired@atpco.com.