Social Security COLA for 2014 Will be Announced
Tomorrow: Early Halloween or Christmas
Most experts predict a record low 1.5 percent
increase – or less
29, 2013 – Halloween may come a little early for senior citizens, but
hopefully it will be an early Christmas. The Consumer Price Index for
September is due to be released tomorrow at 8:30 a.m. by the Department
of Labor Statistics. It is the last number needed to determine the
Social Security cost-of-living adjustment (COLA) for 2014, which is
currently projected to be a small bump of 1.5 percent or less. It was
only 1.7 percent for 2013. The Social Security Administration says they
will announce the COLA “sometime tomorrow.”
Although the increase is expected to be small,
seniors got some relief yesterday from an announcement by the Centers
for Medicare & Medicaid Services (CMS) that there will be
no increase in 2014 Medicare Part B premiums and
deductibles, and more than $8 billion in cumulative savings in the
prescription drug coverage gap known as the “donut hole.”
Social Security Act specifies a formula for determining each COLA.
According to the formula, COLAs are based on increases in the Consumer
Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws
are calculated on a monthly basis by the Bureau of Labor Statistics.
A COLA effective for December of the current year
is equal to the percentage increase (if any) in the average CPI-W for
the third quarter of the current year over the average for the third
quarter of the last year in which a COLA became effective.
If there is an increase, it must be rounded to the
nearest tenth of one percent. If there is no increase, or if the rounded
increase is zero, there is no COLA.
Assuming there will be an increase in the COLA,
benefits will increase beginning with the December 2013 benefits, which
are payable in January 2014. Federal SSI payment levels will also
increase by the same percent effective for payments made for January
2014. Because the normal SSI payment date is the first of the month and
January 1 is a holiday, the SSI payments for January are always made at
the end of the previous December.
If 1.5% proves to be correct, then the
average COLA paid over the past five years was will be 1.4%, according
to Shannon Benton, Executive Director of The Senior Citizens League.
“This would be a record low period since
the COLA became automatic,” she adds.
“The purpose of the COLA,” according to
SSA, “is to ensure that the purchasing power of Social Security and
Supplemental Security Income (SSI) benefits is not eroded by inflation.
It is based on the percentage increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter
of the last year a COLA was determined to the third quarter of the
current year. If there is no increase, there can be no COLA.”
This year, there is also concern among senior
citizens and their advocates about the possible change of the CPI, since
President Obama suggested earlier that the annual COLA should be based
on an inflation measure known as the “Chained CPI.” Identified as
he chained CPI, according to AARP, “measures living
costs differently because it assumes that when prices for one thing go
up, people sometimes settle for cheaper substitutes (if beef prices go
up, for example, they'll buy more chicken and less beef).
“Bottom line: Cost-of-living adjustments would be
lower with the chained CPI than with the plain old CPI. So depending on
which formula is used, the amount of your Social Security payments could
change over time.
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