“This is the third consecutive year, and the fifth time in six years, that the increase will be less than 2 percentage points,” said David Cox, president of the American Federation of Government Employees, the largest federal employee union.

“The costs for items that most seniors spend their money on – health care and groceries – are rising faster than the overall inflation rate. For instance, premiums for retirees and current employees in the federal health insurance program will rise 3.8 percent next year,” Cox said.

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Cox said that while some increase is better than none, for seniors, the annual increases “will be gone before most even receive them.”

AARP CEO Jo Ann Jenkins called the COLA increase “modest” and a “partial protection against inflation.”

While overall inflation has been low, federal retirees face a 3.8 percent increase in their health insurance premiums next year. That elicited a note of displeasure from the National Active and Retired Federal Employees Association.

"News of the cost-of-living adjustment for the coming year always is eagerly awaited by the countless Americans who rely on the increase to keep up with the rising price of food, housing, transportation and medical care," Joseph A. Beaudoin, president of the organization, said. "However, despite the partial relief this COLA will provide, the announcement is a reminder that our method for calculating the increasing cost of goods and services is out of sync with the reality faced by millions of federal (retirees), Social Security recipients and military retirees."

The Social Security Administration also announced the maximum amount of earning subject to Social Security tax will increase to $118,500, from $117,000, due to increases in average wages, affecting about 10 million taxpayers next year. The tax amounts to 12.4 percent of an individual’s earnings.

Congress approved automatic increases for Social Security beneficiaries in 1975, when inflation was considerably higher.

The cost of living in the U.S. barely rose in September, leaving inflation below the Federal Reserve’s goal as fuel prices plunge this month.

The consumer-price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report released Wednesday showed. The median forecast of 84 economists surveyed by Bloomberg called for no change. Excluding volatile food and fuel, the so-called core measure also advanced 0.1 percent after being little-changed in August.

A slowdown in global economic growth and declining energy and commodity costs will restrain overall price pressures this month, indicating contained inflation will give Fed officials room to keep interest rates low well into 2015. Lower fuel bills are also helping boost consumer confidence and purchasing power, which will underpin the U.S. expansion.

“There are very few price pressures throughout the economy,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly projected last month’s CPI increase. “It’s generally positive for consumer spending.”

Bloomberg News contributed to this report.