5 C.F.R. § 591.226 – How does OPM apply the CPIs?

(a) OPM uses a three-step process to adjust price indexes by relative annual or biennial changes in the CPIs. For steps 1 and 2, OPM computes the annual change by dividing the CPI from 1 year after the survey by the CPI from the time of the survey. OPM computes the biennial change by dividing the CPI from 2 years after the survey by the CPI from the time of the survey.
1. (1) Step 1. OPM computes the annual or biennial CPI change for the COLA area.
2. (2) Step 2. OPM computes the annual or biennial CPI change for the DC area.
3. (3) Step 3. OPM multiplies the COLA area price index from the last survey by the COLA area CPI change computed in step 1 divided by the DC area CPI change computed in step 2. The adjusted price index is rounded to the second decimal place.
(b) Example:
2008 2009
COLA Area CPI 172.2 174.7
DC Area CPI 159.7 161.9
COLA Area Survey Index 117.33 (1)
COLA Area CPI Adjusted Index (2) 117.42
1 No survey.
2 N/A
Computation: 117.33 × (174.7/172.2)/(161.9/159.7) = 117.4159, which would round to 117.42.