Why 2.8% Inflation Paid FERS Retirees 2.0%

FERS retirees are paid the lesser of the inflation change or 2% when inflation is 3% or lower, and the inflation change minus 1 percentage point when it is higher. The cost-of-living adjustment effective 1 December 2025 shows the first branch at work: the CPI-W rose 2.8%, CSRS annuities rose 2.8%, and FERS annuities rose 2.0%.

The two branches in 5 U.S.C. § 8462(b)

The adjustment is measured on the CPI-W between base quarters. A base quarter is, in the statute's words, "the calendar quarter ending on September 30" of the year. The 2.8% figure is the third quarter of 2025 over the third quarter of 2024.

For FERS, § 8462(b) then has two branches rather than three tiers:

• Change of 3% or less: the increase is "the lesser of" the percent change in the price index (rounded to the nearest one-tenth of 1 percent) or 2 percent.
• Change above 3%: the increase is the percent change less 1 percentage point.

CSRS annuities under 5 U.S.C. § 8340 are granted the whole change in both cases. The adjustment is effective 1 December and is first paid in January.

The branches are alternatives, not a sequence. A 2.5% change is not reduced by a point to 1.5%; it falls in the first branch, where the lesser of 2.5% and 2% is 2.0%.

CPI-W change (assumed)	FERS increase	CSRS increase
1.5%	1.5%	1.5%
2.5%	2.0%	2.5%
2.8%	2.0%	2.8%
3.0%	2.0%	3.0%
3.1%	2.1%	3.1%
4.0%	3.0%	4.0%

The table is the statute's two branches applied to assumed rates. Only the 2.8% row is an actual measured change, as of the third quarter of 2025. The step at 3% is real: moving from 3.0% to 3.1% takes the FERS increase from 2.0% to 2.1%, because the second branch begins there.

A worked example, carried to a monthly figure

Take a retiree with a gross annuity of $30,000 a year, $2,500 a month, in force before the 1 December 2025 adjustment and old enough to receive it. The figure is illustrative; it is not drawn from any particular career.

• CSRS-style whole change, 2.8%: $30,000 × 1.028 = $30,840 a year, or $2,570 a month.
• FERS, 2.0%: $30,000 × 1.02 = $30,600 a year, or $2,550 a month.

The gap is $240 a year, or $20 a month, from a single adjustment. It does not close. Each later adjustment is applied to the lower base.

The first adjustment is prorated

Under § 8462(c)(1), the first increase an annuitant receives is one-twelfth of the applicable percent change multiplied by the number of months, not to exceed 12, that the annuity has been payable. A portion of a month counts as a month.

An annuity that commenced 1 July has been payable for five months before 1 December (July through November). Five twelfths of the 2.0% FERS increase is 0.83%, which the site's calculator rounds to the nearest tenth of a percent, 0.8%. On the same $30,000, that is $240 a year, or $20 a month, instead of the $50 a month a full 2.0% pays. From the following December on, the full percentage applies.

Under 62, no FERS adjustment is paid

Section 8462(c)(3) provides that an adjustment "shall not be effective with respect to the annuity of an annuitant who is under 62 years of age." This is a scope limit on annuities payable under §§ 8412, 8413 and 8414, and it excepts § 8412(d)(1) and (e) special provisions retirements and § 8414(c) military reserve technicians by name. Disability annuities under § 8452 and survivor annuities fall outside it.

Adjustments withheld before 62 are never made up. Suppose the same $30,000 annuity starts at 57 and the CPI-W rises 2.8% in each of the next five years, an assumption for illustration only:

• The FERS annuity stays at $30,000, or $2,500 a month, for those five years.
• At 62 the first adjustment applies to the original figure: 2.0% of $30,000 is $600 a year, so the annuity becomes $30,600, or $2,550 a month. Because the annuity has been payable far longer than 12 months, the first adjustment is a whole one.
• An annuity indexed to the whole 2.8% each year would have grown to about $34,442 a year, or $2,870 a month, over the same five years. That comparison figure is $30,000 × 1.028 compounded five times.

What this guide does not cover

It applies the statute to assumed rates. It does not forecast any future CPI-W change. It covers neither the Social Security COLA nor the TSP, and it does not model disability or survivor annuities beyond noting that the age-62 limit does not describe them. It does not decide when to retire. Which retirement rule makes you eligible is a separate question from how the annuity is adjusted afterward.

The FERS COLA Calculator runs this schedule year by year for your own annuity, commencing date and age, under an inflation rate you choose. For what else changes at 62, read What Changes at 62 for a Federal Retiree.

Informational only — not financial, tax, or legal advice. Last reviewed: October 2026.

Frequently asked questions

Why did FERS retirees get 2.0% when inflation was 2.8%?

Because 2.8% is not above 3%, so the first branch of 5 U.S.C. § 8462(b) applies, and it pays the lesser of the change or 2 percent. The CPI-W change for the third quarter of 2025 was 2.8%; CSRS annuities rose 2.8% and FERS annuities rose 2.0% effective 1 December 2025.

At what inflation rate does the FERS increase stop being capped at 2%?

Above a 3% change in the CPI-W. At that point the second branch applies and the increase is the change minus 1 percentage point, so a 3.1% change gives 2.1%.

Does a FERS retiree under 62 get a COLA?

Not under § 8462(c)(3), which makes the adjustment ineffective for an annuitant under 62, with exceptions for special provisions retirements and military reserve technicians. Disability and survivor annuities are not covered by that restriction.

Are the adjustments I miss before 62 paid later?

No. The adjustment measured at 62 is applied to the annuity as it stands, so the amounts withheld before 62 are never made up.

This guide is informational only. It is not financial, tax, or legal advice, and FedAnnuity is not affiliated with OPM or the U.S. government. Retirement rules turn on the specific facts of a career, and only your agency and OPM can give you a binding figure.

Last reviewed: October 2026 · Against primary sources cited in the body.