NOVEMBER 13, 2020 – Today, the Department of Defense announced annual cost of living adjustments that will benefit military retirees and survivors during calendar year 2021. Most military retirees will receive a 1.3 percent increase to their retired pay beginning with the pay they receive on December 31, 2020. Likewise, survivors of members who died on active or inactive duty, or survivors of military retirees who participated in the Survivor Benefit Plan will, in most cases, see a 1.3 percent increase to their annuities beginning in January.
Survivors who are eligible for the Special Survivor Indemnity Allowance (SSIA) will also receive an increase to their SSIA payments that reflects this 1.3 percent adjustment. The maximum amount of SSIA payable will be $327 beginning in January, although some survivors may receive less in SSIA as the Department of Defense begins to implement the phased reduction in the Survivor Benefit Plan – Dependency and Indemnity Compensation offset, as enacted by the National Defense Authorization Act for Fiscal Year 2020.
These cost of living adjustments are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers for the four quarters ending with the third calendar quarter of 2020 (July, August, and September 2020).
Those military retirees who retired during calendar year 2020, and all military retirees who retired under the REDUX retirement system may receive a slightly different annual cost of living adjustment. Click here for the complete list of updates to military retired and retainer pay, and survivor annuities, allowances, and premiums.
Retirement Cost of Living Adjustments (COLA)
The retired pay computed under each retired pay plan is adjusted each year, effective December 1st, by the change in consumer prices. The COLA is determined by the percentage increase, if any, between the average 3rd quarter Consumer Price Index (CPI) of the current year over the average 3rd quarter (CPI) of the prior year. In the event of a decrease in the CPI, the COLA will not be negative, but will be zero. Additionally, the COLA for the next year will reach back to the 3rd quarter CPI to the last year in which there was a positive COLA increase.
If the percent determined above is greater than 1 percent, the COLA for REDUX retirements will be reduced by 1 percent. If the percent determined above is 1 percent or less, the COLA for the REDUX retirement plan will be the same as for all other retirement plans.
The first COLA adjustment after retirement is calculated under a formula different than that above, if the member retires between January 1st and September 31st. This is to preclude the advantage of receiving a retirement based on both a new pay raise and full COLA in the first year of retirement. The amount of this first “partial COLA” is calculated differently for the Final Pay and High-36 retirement plans. The partial COLA for REDUX plan retirees is based on the High-36, with a further prorated deduction. The first partial COLA under the Disability retirement plan is the same as for the Final Pay retirement plan.
Note that the COLA for retired pay is calculated differently than the increase to active duty pay. Thus, retirement pay COLAs and annual active duty pay raises will differ as active duty pay raises will differ.
