DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 07-02
TO	:	ALL STATE WORKFORCE ADMINISTRATORS
FROM	:	GRACE A. KILBANE 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, 2001, based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) through September 2001, and will be payable in the January 2002 annuity checks. 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 "members" includes former members.

3. COLAs for Retired Pay. 

   1. Members Before September 8, 1980.  The retired pay COLA for those who first became members 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 retired pay as follows*:

      Retired Pay Based on Rates of Pay Effective	Percent Increase	10 U.S.C. Authority
      Before Jan. 1, 2001	2.6 percent	1401a(b)(2)
      Jan. 1, 2001**	2.0 percent	1401a(c)
      July 1, 2001***	None - 0.0 percent	1401a(c)

      *  The effective date of a pay cell (i.e., a pay rate specified for a given grade and years of service) in the July 1, 2001, table is considered to be January 1, 2001, if the pay rate for that cell is unchanged from the January rate.

      **  Includes those whose retired pay is computed on a pay cell of the July 1, 2001, pay table unchanged from the rate for that pay cell in the January 1, 2001, pay table.

      ***  Includes those whose retirement pay is computed on a pay cell of the July 1, 2001, pay table changed from the rate for that pay cell in the January 1, 2001, pay table.

   2. Members On or After September 8, 1980. The retired pay COLA for those who first became members 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 Jan. 1, 2001	2.6 percent	1401a(b)(2)
      Jan. 1 - Mar. 31, 2001	2.0 percent	1401a(d)
      April 1 - June 30, 2001	1.1 percent	1401a(d)
      July 1 - Sept. 30, 2001	0.0 percent	1401a(d)
      Oct. 1 - Dec. 31, 2001	0.0 percent	1401a(d)

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 retirement 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.