Cost-of-Living Increases for Federal Civilian and Military Retirees

GAO has long been concerned about the equity and costs of the Government's policy of full, automatic cost-of-living increases for Federal civilian and military retirees. GAO was pleased to see that the First Concurrent Budget Resolution for fiscal year 1981 assumed enactment of its recommendations to Congress to provide retirement cost-of-living adjustments annually and prorate the initial adjustments of new civil service retirees to reflect only Consumer Price Index increases occurring after their date of retirement. GAO strongly urged Congress to enact the legislation necessary to effect these needed changes. It would make the adjustment process more rational and more consistent with prevailing non-Federal practices; less costly; and would help encourage valuable, experienced employees, particularly top Federal officials, to continue working instead of retiring. To fully satisfy these objectives, GAO believed an additional change should be made to limit the amount of the adjustment provided to something less than the full percentage increases in the Consumer Price Index. Because the present indexing base is highly inequitable to others not similarly treated and costly, it should not be continued. The cost-of-living adjustment provisions for Federal retirees are far superior to those enjoyed by retirees of private industry and State and local governments. Such a change may seem unduly harsh, but less than full indexation for retirement income is the prevailing non-Federal practice. GAO believed it is unreasonable to force taxpayers whose incomes are not fully protected from inflation to pay for full, automatic indexation of Federal retirees' benefits. This places a financial burden on current as well as future taxpayers.