Posts tagged "COLA"

People who receive Social Security benefits are entitled to a Cost-of-Living Adjustment, or COLA, to their benefits when there is a rise in the Consumer Price Index. The purpose of the adjustment is to make certain that benefits keep up with the pace of inflation. Although Social Security beneficiaries did not see a COLA for 2011 or 2010, if there is an increase in the Consumer Price Index, they could see an increase in their benefits for 2012.

Unfortunately, the same cannot be said for veterans who receive disabled veterans' benefits. Presently, veteran's benefits do not automatically increase to keep up with the consumer price index. However, several key lawmakers in the U.S. Senate are introducing legislation that could change that.

In October, we wrote that a cost-of-living adjustment (COLA) for Social Security Disability and SSI beneficiaries might not happen in 2011. Recently, the Social Security Administration officially announced that more than 58 million Americans who receive Social Security benefits will not see their benefits automatically increase this year.

The Social Security Act provides for an automatic increase Social Security disability and SSI benefits every year if there is an increase the cost of living. To determine the cost of living, the government looks to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If the CPI-W increases by less than 0.05 percent, or if the CPI-W decreases, there will be no cost-of-living adjustment. The Bureau of Labor Statistics determined there was no increase in the CPI-W from the last time a cost-of-living adjustment was made, so there will be no COLA in 2011.

Social Security disability beneficiaries may not see an increase in benefits next year, making it the second year in a row without any cost-of-living Adjustments (COLAs). Why is this happening?

Since 1975, Social Security benefits have been automatically adjusted based on the cost-of-living. The basis for this adjustment has been a measure of inflation of prices established by Congress in the 1970s. We have had inflation every year since then, except for this year and last year. If inflation is flat or negative (also known as deflation), there are no cost-of-living adjustments. The Social Security Administration's position is that the agency has no ability to increase payments if the inflation measurement does not require an increase. As a result, we are not going to see a cost-of-living adjustment this year unless a change in the law is made.