A federal retiree in the older Civil Service Retirement System, with an average annuity near $6,000 a month, will collect about $216 more each month starting in January. A retiree in the newer Federal Employees Retirement System, with an average annuity near $2,400, gains about $62. The gap comes from one rule: when inflation tops 3 percent, FERS cost-of-living adjustments run a full point below the 3.6 percent that CSRS retirees receive in full.
The January annuity can be estimated before any notice arrives. A CSRS retiree multiplies the monthly gross annuity by 1.036, and an eligible FERS retiree multiplies by 1.026. The FedSmith report by Ralph R. Smith puts the average gains at $2,592 a year for CSRS and $744 for FERS, before federal income tax, health insurance premiums and other withholding. Individual annuities vary widely around those averages.
Federal health premiums for annuitants rise an average of 10.9 percent in the same January the raise arrives, a second date that catches CSRS and FERS retirees alike.
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The formula that shaves a point off FERS
The Office of Personnel Management’s retirement handbook sets out the sliding scale. When the consumer price index for urban wage earners and clerical workers rises by 2 percent or less, the FERS adjustment equals the increase. Between 2 and 3 percent, FERS retirees get a flat 2 percent. Above 3 percent, they get the increase minus one point. The 2027 reading of 3.6 percent therefore produces 2.6 percent.
The Social Security Administration set the underlying 3.6 percent on October 14, using the third-quarter averages of the same index. FedSmith shows the calculation: 328.746 for 2026 against 317.265 a year earlier, a 3.619 percent rise that rounds to 3.6. The Social Security announcement says nearly 72 million beneficiaries get that same percentage in January, so a retiree with both a federal annuity and a Social Security check receives the full figure on one and the reduced figure on the other.
That split matters most to FERS retirees, FedWeek notes, because Social Security is a basic part of their retirement benefit. It also differs in one more way. Social Security adjustments are not prorated for recent retirees, while federal annuity adjustments are, so a newly retired federal worker can receive the whole 3.6 percent on a Social Security check and only a fraction of it on the annuity.
Who gets no FERS raise yet, and who is prorated
The 2.6 percent applies only to FERS retirees who qualify. OPM says FERS adjustments do not apply to annuitants under age 62 as of December 1, with exceptions for disability annuitants, certain law enforcement officers, firefighters and air traffic controllers who retired under special provisions, and survivor annuitants. A FERS retiree who left service before 62 on an ordinary annuity waits until 62 for the first raise, however high inflation runs in the meantime.
Newer retirees see a partial amount. Both systems prorate the first adjustment for anyone who has been on the annuity rolls for less than 12 months, which OPM computes at one-twelfth of the raise for each month on the rolls before December 1 under CSRS. A federal employee who retired in late 2026 may therefore see a small increase in January, and the full raise arrives a year later.
These rules explain why published averages mislead individual retirees. The $62 figure for FERS assumes a $2,400 annuity and full eligibility, while a younger retiree with the same annuity gets nothing until 62. The January statement is where each retiree sees which rule applied, since the percentage and the dollar change both appear there.
The Equal COLA Act and rising health premiums
Federal retiree groups call the FERS adjustment a diet COLA. William Shackelford, national president of the National Active and Retired Federal Employees Association, said in Government Executive that the reduced adjustment cuts the real value of annuities. “the Equal COLA Act would remedy this inequity, providing full COLAs to FERS retirees.” The legislation is numbered H.R. 491 in the House and S. 624 in the Senate, and it would apply only if Congress passes it.
Health costs are eating into the raise in the meantime. Government Executive reports that the share of federal health benefits premiums paid by annuitants will rise an average of 10.9 percent next year, after increases of 12.3 percent for 2026 and 13.5 percent for 2025. Compounded, those three years add up to roughly 41 percent. Some insurance carriers also say premiums could jump by as much as 100 percent in January.
The comparison is stark for FERS retirees. Premiums are projected to rise 10.9 percent while the FERS raise is 2.6 percent, so health costs grow more than four times faster than the adjustment. On the $62 average gain, an increase in premiums of even a modest amount can absorb the raise, and the net January deposit, rather than the 2.6 percent, is the number that settles household budgets.
Reading the first 2027 annuity statement
OPM’s retirement center is the free starting point for annuity questions, including the statement that shows the new gross amount. The simplest comparison is last December’s gross annuity against January’s: a CSRS retiree should see a 3.6 percent difference and an eligible FERS retiree 2.6 percent, unless proration applies.
A second check belongs next to it, because the health plan premium changes in the same month and appears as a deduction. Federal retirees can compare the net deposit with the gross change to see how much of the raise survives. A retiree under 62 on FERS should expect no cost-of-living line at all.
The Equal COLA Act is the change to watch. H.R. 491 and S. 624 would give FERS retirees the same 3.6 percent as CSRS retirees, and the difference at current averages is about $24 a month on a $2,400 annuity. Until Congress acts, the one-point rule in OPM’s handbook is what sets each FERS retiree’s January raise.
More Financial Reading
- 24 Ways to Stretch a $2,087 Social Security Check
- 17 Places to Find Your Share of the $4.25 Billion States Give Back
- 16 Steps to Stop the Scams That Took $7.7 Billion From Seniors
This article was researched and drafted with the assistance of AI and reviewed by The Money Overview editorial team.
