On a $3,000 monthly FERS annuity, the one-point COLA cap costs $30 a month, $360 in the first year, and roughly $12,300 over a 25-year retirement. The loss never gets repaid. A CSRS retiree with the same annuity gets the full 3.6% bump, or $108 a month. The FERS retiree gets 2.6%, or $78.
That one point is the difference between the two federal systems. Military retired pay, Social Security and CSRS annuities all get the full 3.6%. FERS retirees who are 62 or older get 2.6%.
A caveat on the calendar: NARFE's report describes the increase as applying to January 2026 payments, while its headline points to 2027. COLAs take effect December 1 and show up in the January payment. Confirm the year with SSA, OPM, or DFAS before you build a budget around a specific figure.
By the Numbers
- 3.6%: COLA for CSRS annuities, military retired pay, and Social Security
- 2.6%: COLA for FERS annuities (CPI-W increase minus 1 point)
- $30 a month: the FERS shortfall on a $3,000 annuity ($360 in year one)
- About $12,300: cumulative cost of that one gap over 25 years, assuming later COLAs average 2.5% for everyone
- $108 vs. $78: monthly raise on a $3,000 annuity under the full COLA vs. the FERS COLA
- Age 62: when most FERS retirees start receiving COLAs at all
How it works
Every one of these COLAs starts from the same number: the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, published by the Bureau of Labor Statistics. The government averages the CPI-W for July, August, and September, compares that with the same three-month average a year earlier, and rounds the change to the nearest tenth of a percent. That's the starting COLA.
What happens next depends on which law governs your check.
Social Security pays the full increase under 42 U.S.C. 415(i). It's automatic. No cap.
CSRS annuities get the full increase under 5 U.S.C. 8340. The system was written when inflation ran in double digits, and the COLA was meant to protect purchasing power completely.
Military retired pay gets the full CPI-W increase under 10 U.S.C. 1401a. That covers High-3 retirees and Blended Retirement System retirees alike. The exception is the old REDUX system, which runs at CPI minus 1 point with a one-time catch-up at age 62.
FERS is where the formula changes, under 5 U.S.C. 8462:
- CPI-W increase of 2% or less: FERS gets the full increase.
- Between 2% and 3%: FERS gets a flat 2%.
- 3% or more: FERS gets the CPI-W increase minus 1 point.
At 3.6%, the third rule applies. 3.6 minus 1.0 is 2.6.
The middle band is the oddity. Inflation of 2.1% and inflation of 3.0% both produce a 2% FERS COLA. So the shortfall is barely noticeable just above 2% and grows to a full point at 3.0%. Above 3%, the gap is always exactly one point.
Congress built this "diet COLA" into the 1986 FERS law to trim the system's long-term cost. It has never been repealed, and nothing makes up the difference later.
A worked example
Take a hypothetical retiree, call her Dana, who left a GS-13 job under FERS at 62 with 30 years of service. Her annuity is $3,000 a month, or $36,000 a year. Her CSRS neighbor, call him Walt, also draws $3,000 a month. Both are 62 or older.
Step 1: Apply the COLA.
- Dana (FERS, 2.6%): $3,000 × 0.026 = $78. New annuity: $3,078.
- Walt (CSRS, 3.6%): $3,000 × 0.036 = $108. New annuity: $3,108.
Step 2: Find the first-year gap. $3,108 − $3,078 = $30 a month. Times 12 is $360 a year.
Step 3: See why it compounds. The next COLA is figured on the new, larger base. Walt's base is $30 higher, so every future percentage increase pays him more dollars than it pays Dana. Assume both get a 2.5% adjustment each year after this one. That's an illustration, not a forecast. Dana's $360 first-year shortfall grows to about $369 next year, then about $378, and so on.
Step 4: Add it up. The sum of that growing shortfall over 25 years, ages 62 to 87, is about $12,300. Over 30 years it's closer to $15,000. The exact total depends on future inflation. The direction doesn't: the lower base never gets restored.
One more point on timing. A FERS retiree who hasn't hit 62 gets no COLA at all, so the 2.6% doesn't touch them yet. For anyone who retires early, that matters more than the one-point cap.
Who is affected, and by how much
Here's what 3.6% and 2.6% do to a few different checks. These amounts are illustrations, not averages.
| Monthly payment | At 3.6% | At 2.6% | Difference |
|---|---|---|---|
| $1,500 | +$54 | +$39 | $15 |
| $2,000 | +$72 | +$52 | $20 |
| $3,000 | +$108 | +$78 | $30 |
| $4,000 | +$144 | +$104 | $40 |
The gap scales linearly. It's 1% of your monthly payment, every month.
FERS retirees at 62 or older take the 2.6%. That's most retired FERS employees who left at their minimum retirement age and have since turned 62.
FERS retirees under 62 get nothing this round. The exceptions are disability retirees, survivors, and anyone retired under the special provisions for law enforcement officers, firefighters, and air traffic controllers. Those groups do get COLAs, and they're subject to the same cap.
CSRS retirees are a closing population, since CSRS hasn't had new entrants since 1983. They get the full 3.6%.
Military retirees get the full 3.6% on retired pay. On a $2,500 monthly check, that's $90 more.
Social Security beneficiaries get 3.6%. Someone drawing $2,000 a month gets $72 more. A FERS retiree who also draws Social Security gets a split result: the full COLA on the Social Security check, the capped one on the annuity.
Survivors of FERS retirees generally get the FERS COLA on the survivor annuity. Survivors of CSRS retirees get the CSRS version.
The group that feels this most is FERS retirees who stay in retirement into their 90s. The cap compounds for decades.
How to estimate your own
You need three numbers: your current gross monthly annuity or retired pay, which system you're in, and the COLA rate that applies to you.
- Multiply your gross monthly payment by the COLA (0.036 or 0.026).
- Add the result to your payment.
- Compare that to what a full COLA would have given you. The difference is your cap cost.
Withholding, FEHB premiums, and survivor-benefit deductions come out of the new, larger amount, so your take-home won't rise by the full dollar figure.
If you're still working and want to see how the FERS cap plays out over a whole retirement, the FERS retirement calculator lets you test different retirement ages and annuity levels instead of working it by hand.
FAQ
Why does FERS get less when inflation is high? The FERS statute, 5 U.S.C. 8462, caps the COLA when CPI-W is above 2%. When inflation is 3% or higher, the retiree gets the CPI-W increase minus one point. It was a cost-control design from the 1980s, and Congress hasn't changed it.
Does the FERS Special Retirement Supplement get a COLA? No. The supplement bridges the gap until age 62 for those who retire at their minimum retirement age with at least 30 years of service. It isn't adjusted. It's set when you retire.
Will FERS ever catch up to CSRS? Not through any mechanism in current law. Each year's shortfall becomes a permanently lower base. In low-inflation years, 2% or less, FERS and CSRS get the same COLA. But the earlier gaps stay baked in.
Do military retirees under the Blended Retirement System get the full COLA? Yes. BRS and High-3 retired pay both get the full CPI-W adjustment under 10 U.S.C. 1401a. REDUX retirees are the exception: their COLA is CPI minus 1 point until a one-time catch-up at 62.
When will I see the increase? COLAs take effect December 1 and are first paid in January for CSRS, FERS, military retired pay, and Social Security. SSA pays one month in arrears, so the December-effective increase appears in the January check. The source report mixes up the years, so confirm the exact date with SSA, OPM, or DFAS.
Bottom line
The 3.6% COLA is a real raise for CSRS annuitants, military retirees, and Social Security recipients. For FERS retirees at 62 and older, it's 2.6%, and the missing point costs about $30 a month on a $3,000 annuity. That sounds small. Over a 25-year retirement it's more than $12,000.
Know which formula governs your check, confirm which year the increase applies to, and plan around your own number.