From a significant pay raise for GS workers and the highest Cost of Living Adjustment (COLA) for retirees in over 40 years, to a 7.2% increase in FEHB premiums, big changes are coming in 2023. Let’s start with the good news.
2023 Pay Raise Plan Is The Largest Since 2002
On August 31, 2022, in a letter to congressional leaders, President Biden formalized his plan to provide 2-million-plus GS workers with an average 4.6% pay increase in 2023. Federal employees will see a raise in basic pay of 4.1%, and an average 0.5% increase in locality pay. As many have noted, this will be the largest pay increase for civilian federal employees since 2002 and it’s considerably larger than the 2.7% average pay raise employees received in 2022.
2023 Cost Of Living Adjustment For Federal Retirees
In January, 2023, CSRS annuitants will receive the full 8.7% COLA added to their monthly pension. However, FERS annuitants will receive a bump of only 7.7%. Nicknamed the Diet COLA, FERS COLAs are capped at 2% when consumer prices increase between 2% and 3%. Or, they are reduced by 1% when consumer prices increase by 3% or more. This has been the policy since the creation of FERS in 1986 under the Reagan Administration. There’s another difference between CSRS and FERS annuitants when it comes to COLAs. CSRS or CSRS Offset retirees receive a COLA bump to their annuity regardless of their age. But those retired under FERS don’t receive COLAs until they turn age 62.
“Add to this, for federal workers and retirees, their share of FEHB premiums will increase by 8.7% (on average) which is the highest since 2011.
Higher FEHB Premiums For 2023
The Office of Personnel Management has announced that the total average increase in 2023 FEHB premiums for non-postal employees and retirees will be 7.2%. Compare this to 2022 when the overall average premium increase was 2.4%. Add to this, for federal workers and retirees, their share of FEHB premiums will increase by 8.7% (on average) which is the highest since 2011. Meanwhile, the increase in the government’s share of premiums will be 6.6% in 2023.
2023 Maximum Taxable Earnings Increase
For FERS/CSRS Offset participants who pay into Social Security through payroll taxes, your maximum taxable earnings for 2023 increased to $160,200 from $147,000 in 2022. This means an additional $13,200 of your earnings may be subject to Social Security taxes. Also known as the Social Security tax cap, the maximum taxable earnings is the limit on the amount of your earnings that is taxed by Social Security. With a tax cap bump of nearly 9%, it’s considerably higher than previous years.
