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Budget Would Deny COLA for Federal, Military Retirees

February 6, 1986

WASHINGTON (AP) _ Military and federal civil service pensioners, whose benefits were frozen this year, would also be denied a cost-of-living increase next January under President Reagan’s fiscal 1987 budget.

For the civilian retirees, cost-of-living increases in 1988 and beyond would be limited to the rise in the Consumer Price Index minus 2 percentage points, under Reagan’s plan.

They have been getting annual increases matching the full rise in the CPI, but their January 1986 raise of 3.1 percent was held up due to provisions of the Gramm-Rudman deficit-reduction law. The raise will disappear on March 1 unless Congress intervenes, which is not expected.

The administration is also seeking other legislative changes to tamp down what it called the ″very generous benefits″ now available to retired civil servants. It wants them to contribute 9 percent of their salary to the retirement program instead of 7 percent.

To get full benefits, they would have to work until age 62. They now can retire at 55 with 30 years of service and draw their full retirement pay. They could still retire at 55, but their benefits would be trimmed 2 percent for each year under 62.

However, employees who are already 55 would not be affected, and the plan would be phased in over four years ″to avoid unduly upsetting the plans of employees who are already near 55,″ an administration’s budget document said.

Benefits would be based on the highest five years of salary instead of the current three.

Military retirees would give up their 1987 cost-of-living increase, but they would not be subject to the other retirement changes - including the CPI- minus-2 percentage points - in later years.

Two million civil service retirees and survivors are receiving payments this year costing $24 billion. Without any changes, that would rise to $25.6 billion in 1987, but the administration cuts would save $674 million and bring in $937 million more in higher payroll taxes.

Some 1.5 million military retirees and survivors are getting $17.6 billion in benefits this year and normally would get $18.5 billion in 1987. Skipping the cost-of-living increase would save $500 million.

Congress would have to approve any or all of these changes in the retirement programs. Gramm-Rudman exempts Social Security from cuts, so its 37 million beneficiaries received their full 3.1 percent raise in January.