ADVISORY	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 07-03
TO	:	ALL STATE WORKFORCE AGENCIES
FROM	:	CHERYL ATKINSON Administrator Office of Workforce Security
SUBJECT	:	Increase in Federal Military Pensions

1. Purpose. To transmit Federal military retired pay due to annual cost of living adjustments (COLAs).

2. Background. Military COLA increases were effective December 1, 2002, based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) through September 2002. Military retired pay, by law, is always rounded down to the next lower dollar amount. The term “retired pay” includes retainer pay and the term “member” includes former members.

3. COLAs for Retired Pay.

   1. Members Before September 8, 1980. The retired pay COLA for those who became a member of a Uniformed Service before September 8, 1980, is specified according to the effective date of the active duty basic pay rate used to compute their pay as follows*:

      Retired Pay Based on Rates of Pay Effective	Percent Increase	10 U.S.C. Authority
      Before January 1, 2002	1.4 percent	1401a(b)(2)
      January 1, 2002	1.4 percent*	1401a(c)

      *The adjustment specified by 1401a(c)(1) would have been 1.8% but for the limitation imposed by section 633 of FY 2003 National Defense Authorization Act. As a result, the adjustments for those whose retired pay is based on the rates of pay effective January 1, 2002 is limited to the increase for those retired before January 1, 2002, or 1.4%.

   2. Members On or After September 8, 1980. The retired pay COLA for those who became a member of a Uniformed Service on or after September 8. 1980, is specified according to the effective date of their retirement as follows:

      Retirement Effective	Percent Increase	10 U.S.C. Authority
      Before January 1, 2002	1.4 percent	1401a(b)(2)
      January 1-March 31, 2002	1.4 percent*	1401a(d)
      April 1-June 30, 2002	1.4 percent*	1401a(d)
      July 1-September 30, 2002	0.5 percent	1401a(d)
      October 1-December 31, 2002	0.0 percent	1401a(d)

      *These adjustments are limited to 1.4%. The adjustments would have been 1.8% and 1.6% respectively, but for the limitation imposed by section 633 of the FY 2003 National Defense Authorization Act.

4. Instructions. It is necessary for states with laws that provide for reduction of the weekly UI benefit amount by the prorated weekly amount of retired pay and pensions to review the claimants records to identify claimants who will be affected by these COLA increases.

   States should take action to make the appropriate deductions as required by state law based on the increased military retired pay in accordance with state law.

5. Action Required. State Administrators should provide the above information to appropriate staff.