COLA: Cost-of-Living Adjustments
How your pension keeps up with inflation, and the Diet COLA rule that caps the raise
Your FERS pension gets an annual raise to keep pace with inflation, and as an ATC special-provision retiree you receive it immediately, not at age 62 like regular FERS. The catch: the raise is a "Diet COLA" that trails inflation in high-price years.
COLA Compounding Projection
See how your pension grows, and what it still buys, under different inflation scenarios.
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Enter your starting annual pension to project its COLA growth.
| Year | CPI-W | FERS COLA | Nominal Pension | Purchasing Power |
|---|
Projection only, not financial, legal, or tax advice; confirm your numbers with OPM or HR. Actual COLAs are set each year by the CPI-W change and the FERS "Diet COLA" formula. The CPI-W rate you choose is held constant for illustration, your first-year COLA is prorated by retirement month, and purchasing power discounts the nominal pension by that same assumed inflation.
Why ATCs get COLA immediately
Regular FERS employees who retire before 62 get no COLA until they turn 62. That can mean years, even a decade, of a frozen annuity while prices climb. ATC special-provision retirees are the exception: mandatory separation means you can't choose to work until 62, so Congress granted immediate COLA eligibility.
Your first adjustment arrives in the January payment after your first December 1 on the annuity roll, prorated at 1/12 of the increase for each month you were on the roll before that date. Retire at the end of March 2026 and your annuity begins April 1: eight months on the roll, so your January 2027 payment carries 8/12 of the full 2.0% COLA, and every COLA after that applies in full. A regular FERS employee retiring at the same age waits until 62.
Retire in November or December and your annuity starts too late for that year's COLA; your first increase comes the January after next.
The "Diet COLA" formula
Each year's adjustment starts from the CPI-W, the Consumer Price Index for Urban Wage Earners and Clerical Workers (the same index that sets Social Security's COLA). But FERS retirees do not get the full increase. Congress built in a cap, the "Diet COLA", that holds your raise below full inflation whenever CPI-W tops 2%. (CSRS retirees get the full CPI-W.) The three tiers:
FERS COLA = full CPI-W increase. If inflation is 1.5%, your pension gets a 1.5% raise.
FERS COLA is capped at 2%. Even if inflation is 2.8%, your pension only grows by 2%.
FERS COLA = CPI-W minus 1%. If inflation is 5%, your pension gets a 4% raise.
What gets COLA (and what doesn't)
Only your base FERS annuity gets cost-of-living adjustments. The Special Retirement Supplement (SRS) is a fixed payment: your first check and your last check, just before it ends at 62, are the same dollar amount.
Over a 6- to 12-year bridge, even moderate inflation erodes what the SRS buys. Plan your post-retirement cash flow accordingly.
If you elected a FERS survivor annuity, your spouse's or eligible dependent's benefit adjusts each January under the same Diet COLA formula. Unlike most private pensions and annuities, it is inflation-protected for life: one of the most valuable features of the federal system.