By Brittany R. Ballenstedt bballenstedt@govexec.com October 16, 2008

Federal retirees in the Civil Service Retirement System will receive a 5.8 percent increase to their pension checks in 2009, the highest increase since 1982.

The government unveiled next year's cost-of-living allowance on Thursday. It is based on the change in the Labor Department's Consumer Price Index for urban wage earners from the third quarter of one year to the same quarter of the next.

The 5.8 percent boost marks the largest increase for federal retirees since 1982, when the CPI rose 8.7 percent. In 2008, CSRS retirees received an increase of 2.3 percent.

The adjustment will not be the same for retirees in the newer Federal Employees Retirement System. If the change in the CPI is more than 3 percent, FERS retirees get the COLA minus 1 percent. So FERS members will get a 4.8 percent adjustment next year. FERS retirees also receive Social Security benefits, which are adjusted by the 5.8 percent change in the CPI.

FERS is more dependent on government matching contributions to the Thrift Savings Plan, a 401(k)-style retirement investment vehicle for federal employees. As a result, FERS retirees sometimes get smaller COLAs, and they receive the cost-of-living allowance only if they are 62 or older.

CSRS annuitants must have been retired one full year to receive the full COLA. If they do not meet that threshold, they receive prorated annuities, amounting to one-twelfth of the applicable increase for each month they have received their pension.

Margaret Baptiste, president of the National Active and Retired Federal Employees Association, said on Thursday that while she was pleased with the higher cost-of-living adjustment, she was concerned that the unanticipated cost of the increase could cause added scrutiny to be applied to the federal retirement system during the 2009 budget process.

"Federal retirees should not have to worry that today's COLA could come at the detriment of their future retirement income," Baptiste said. "NARFE, along with federal employees, retirees and survivors, will be watching the next president and the upcoming Congress closely to ensure they honor promises made to those who have and continue to serve our country."

The 5.8 percent figure does not apply to active federal employees, who receive a pay hike determined by Congress and approved by the president. In late September, the president signed a stopgap funding measure granting federal employees a 3.9 percent pay increase in 2009.

Federal retirees will receive their first checks reflecting the increase in January 2009.