5 U.S.C. § 8462 — Cost-of-living adjustments

(a) Definitions. The "base quarter" for a year is the three months ending September 30 of that year. The "price index^*" for that quarter is the average of the index over those three months. The "percent change in the price index" for a year is found by: taking that year's base-quarter price index; subtracting the base-quarter price index from the last year an adjustment was made; dividing that difference by the earlier index; and multiplying by 100.

(b) Each December 1 when an adjustment is due, every annuity from the Fund^* (except an annuity under section 8443) that started on or before that December 1 is adjusted this way: if prices rose 3% or less, the annuity increases by whichever is smaller — the price increase (rounded to the nearest tenth of a percent) or 2%. If prices rose more than 3%, the annuity increases by the price increase minus 1 percentage point. An adjustment only happens in a year if that year's base-quarter price index is higher than the price index from the last year an adjustment was made. Annuities under this chapter are not adjusted under the older section 8340 rule — though that does not change how section 8443(a)(2) amounts are computed.

(c) Who is eligible for an increase depends on when their annuity started, with some exceptions. If someone's first raise (other than a child annuitant^* under section 8443) comes partway through the year, it's prorated: one-twelfth of the year's percentage raise, multiplied by the number of months (up to 12) the annuity was already being paid before the raise took effect — or, for a survivor^* of someone who never got a raise, the number of months since the deceased person's annuity began. A survivor's annuity (other than certain widow/widower or child annuities) is increased, from the day it starts, by the total percentage the deceased annuitant's own annuity had been raised between when it began and when the person died. An annual raise does not apply to an annuitant who is under 62 years old when the raise would otherwise start — this rule applies only to annuitants under sections 8412, 8413, or 8414, except it does not apply to certain early or disability retirees described in section 8412(d)(1), 8412(e), or (for reserve technicians retired due to disability) 8414(c). A widow's or widower's first raise, if their annuity is computed under section 8442(g), is similarly prorated based on months since the last raise (or the start date) of the annuity their benefit was based on.

(d) After a raise, the monthly annuity payment is rounded down to the next whole dollar — but every raise must add at least $1 to the monthly payment.

(e) The $15,000 figure used in section 8442(b)(1)(A)(ii) goes up at the same time, and by the same percentage, as annuities under the older Civil Service^* Retirement System^* (subchapter III of chapter 83).