§4066 Cost-of-living adjustment of annuities

Summary

Annuities paid from the Fund must get cost-of-living increases on the same date and at the same percentage as the federal annuity cost-of-living adjustment. Annuities that began on or before the effective date get the increase. The first increase for some annuities (for example, survivors of someone who died in service or cases where the annuity was not earlier increased) is prorated. That first increase equals 1/12 of the percentage change times the number of months the annuity was paid (count any part of a month as a whole month). That prorated amount is rounded to the nearest 0.1 percent. A survivor who starts receiving an annuity gets the total percentage increases the original annuitant had at death. For a child’s annuity, the fixed dollar figures $900, $1,080, $2,700, and $3,240 are increased by the same total percentages used for the federal annuity adjustments on the date the child’s annuity starts. No cost-of-living increase is applied to any extra annuity bought at retirement with voluntary contributions. After an increase, the monthly payment is rounded down to the next lowest whole dollar, but the change must still be at least $1. A surviving spouse whose right to an annuity came from an annuitant who, before October 1, 1976, chose a reduced benefit to provide a spouse’s survivor annuity gets a 10 percent increase from the start date. An increase cannot raise an annuity above the greater of two amounts: the maximum pay for class FS–1 as of 30 days before the increase, or the former participant’s final pay (or higher average pay) grown by the compounded overall annual percentage pay adjustments in the Foreign Service schedule from the annuity start date to the increase date. For these limits, “pay” means the rate of salary or basic pay, including any legal limits on spending.