Cost-of-living adjustments will stay relatively static in 2026

Retired federal workers will see their defined benefit pension payments increase slightly next year, though by how much depends largely on when they were hired.

The Social Security Administration announced Friday that Social Security beneficiaries will receive a 2.8% cost-of-living adjustment in January, a slight uptick from 2025’s 2.5% increase in benefit payments. The annual calculation is based on the annual change in the third quarter consumer price index for workers.

That means that federal retirees enrolled in the Civil Service Retirement System will receive a 2.8% increase to their annuities next year, while retirees who entered federal service after the advent of the Federal Employees Retirement System, which launched in the 1980s alongside the Thrift Savings Plan, will get only a 2.0% adjustment to their annuity payments.

That’s because FERS’ cost-of-living adjustment each year is based on an extrapolation of the Social Security and CSRS increase. If CSRS sees an increase of less than 2%, FERS retirees get the full COLA, while if the adjustment comes in between 2% and 3%, FERS enrollees only receive a 2% increase. If the CSRS COLA is 3% or more, FERS retirees would see that adjustment, minus 1 percentage point.

The bifurcated COLA process for federal retirees has been a sore point for federal employee groups and some Democratic lawmakers for years. The Equal COLA Act, introduced each Congress by the late Rep. Gerry Connolly, D-Va., would standardize the annuity increase for CSRS and FERS retirees. Connolly’s recently elected successor, fellow Democrat James Walkinshaw, took over lead sponsorship of that bill after his swearing in last month.

In a statement, National Active and Retired Federal Employees Association President William Shackelford said the reduced cost of living adjustment received by FERS retirees blunts the annual increase’s impact, particularly as the Office of Personnel Management estimates that health care premiums through the Federal Employees Health Benefits Program are set to jump by more than 10% next year.

“With inflation above 2%, FERS retirees will have their COLAs capped, reducing the real value of their annuities,” Shackelford said. “Inflation impacts these FERS retirees the same way as all other retirees, yet they are forced to accept a diet COLA . . . This COLA also does not adequately compensate for the sharp increase in the enrollee share of health insurance premiums affecting the federal community, which will rise by an average of 12.3% next year for federal annuitants, following a 13.5% increase for 2025."