Military and federal civilian retirees, survivor benefit annuitants, disabled veterans and social security recipients will get a 1.5 percent cost-of-living adjustment in January.
Annual COLAs for federal benefits are based on inflation, as tracked by the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Changes in prices across a market basket of goods and services from the third quarter of last year to the third quarter this year determine the January COLA.
BLS senior economist Ken Stewart said declines in gas prices from last year led to the modest inflation rate reported. The COLA in 2013 was 1.7 percent.
Various debt-reduction studies including the National Commission on Fiscal Responsibility and Reform, also known as the Simpson-Bowles commission, have proposed moving from CPI-W to a "chain-weighted" CPI for adjusting federal entitlement and retirement programs. Proponents say it would save an estimated $200 billion over the next 10 years.
Typically use of a chain CPI dampens reported inflation by about .2 of percent a year. This year produced an anomaly. If the chain CPI had been used instead of CPI-W, with no other change in the formula for setting COLAs, federal benefits still would be adjusted in January by 1.5 percent.