(a) COLA's on combined CSRS/FERS annuities are computed by increasing the CSRS component by the percentage change and the FERS component by the amount of COLA's under §841.703(a).

(b) The initial monthly rate is computed by—

(1) Applying CSRS rules to CSRS service to obtain the annual rate of the self-only annuity (as defined in §831.603 of this chapter) based on the CSRS service; then

(2) Applying FERS rules to FERS service to obtain the annual rate of annuity determined under §842.403, §842.405, §842.406, or §842.407 of this chapter based on the FERS service; then

(3) Making any applicable FERS reductions for age and/or survivor benefits to the amounts computed under paragraphs (b)(1) and (b)(2) of this section; then

(4) Dividing the sum of the reduced amounts computed under paragraph (b)(3) of this section by 12; then

(5) Dropping any cents.

(c) The initial monthly CSRS component is computed by—

(1) Applying CSRS rules to CSRS service to obtain the annual rate of the self-only annuity (as defined in §831.603 of this chapter) based on the CSRS service; then

(2) Making any applicable FERS reductions for age and/or survivor benefits; then

(3) Dividing the annual amount by 12; then

(4) Dropping any cents.

(d) The initial monthly FERS component is computed by subtracting the initial monthly CSRS component from the initial monthly rate.

(e) A retiree who was covered under FERS for at least one month has a FERS component. If the amount of the FERS component as computed under paragraph (d) of this section is zero (because the CSRS component is equal to the monthly rate, leaving no balance for the FERS component), the FERS component is $1 per month. The retiree is due a full dollar increase on the FERS component with the next COLA. An employee with less than a month of FERS service has no FERS component and is not due any FERS COLA's.

(f) COLA's are determined by applying the appropriate increase to each component and rounding to the next lower dollar (each component must increase by at least one dollar if a COLA applies to each component) before adding them together for the new monthly amount payable.