Social Security Makes It Official: No COLA Increase
for Seniors in 2010 Due to No Inflation
SSA calls for passage of $250 payment to each
senior citizen as recommended by President Obama
Oct. 15, 2009 – Social Security made it official
this morning. Over 57 million Americans will not see an automatic
Cost-of-Living Adjustment (COLA) added to their Social Security payments
for 2010. More than 36 million of these are senior citizens. The COLA is
automatically determined each year to cover inflation, but, since the
economic crash back in 2008 inflation has gone flat in the struggling
economy.
This will be the first year without an automatic
Cost-of-Living Adjustment (COLA) since they went into effect in 1975.
“Social Security is doing its job helping Americans
maintain their standard of living,” Michael J. Astrue, Commissioner of
Social Security said.
“Last year when consumer prices spiked, largely as
a result of higher gas prices, beneficiaries received a 5.8 percent
COLA, the largest increase since 1982. This year, in light of the human
need, we need to support President Obama’s call for us to make another
$250 recovery payment for 57 million Americans.”
The President, yesterday, threw his support behind
efforts in Congress to make a one-time pay
(More information on bills active in Congress that
are asking to provide funds to senior citizens to offset the lack of an
increase in Social Security can by found in stories linked in sidebar on
left.)
The Social Security Act provides that Social
Security and Supplemental Security Income benefits increase
automatically each year if there is an increase in the Bureau of Labor
Statistics' Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) from the third quarter of the last year to the third
quarter of the current year.
This year there was no increase in the CPI-W from
the third quarter of 2008 to the third quarter of 2009. In addition,
because there was no increase in the CPI-W this year, under the law the
starting point for determinations regarding a possible 2011 COLA will
remain the third quarter of 2008.
Some other changes that would normally take effect
in January 2010 based on the increase in average wages also will not
take effect, even though average wages did increase.
Since there is no COLA, the statute prohibits an
increase in the maximum amount of earnings subject to the Social
Security tax as well as the retirement earnings test exempt amounts.
These amounts will remain unchanged in 2010.
The chart below provides more information on 2010
Social Security changes.
Information about Medicare changes for 2010, when
available, will be found at
www.Medicare.gov.
The Department of Health and Human Services has not
yet announced if there will be any Medicare premium changes for 2010.
Should there be an increase in the Medicare Part B
premium, the law contains a “hold harmless” provision that protects
about 93 percent of Social Security beneficiaries from paying a higher
Part B premium, in order to avoid reducing their net Social Security
benefit.
Those not protected include higher income
beneficiaries subject to an income-adjusted Part B premium and
beneficiaries newly entitled to Part B in 2010.
On September 24th, the House passed legislation by
406-18 that would, on a fully paid-for basis, prevent abnormally large
premium increases. The President is calling on the Senate to enact this
legislation before it becomes too late for the Social Security
Administration to update its computer systems to implement this needed
change.
Frequently Asked Questions About the 2010
Cost-of-Living Adjustment
by Social Security Administration
Q. What is a cost-of-living adjustment (COLA)?
A. A COLA is an automatic adjustment in benefits
that occurs annually. The purpose of the COLA 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 one year to the
third quarter of the next. If there is no increase, there is no COLA.
Q. Who determines the CPI-W?
A. The CPI-W is determined by the Bureau of Labor
Statistics in the Department of Labor. It is the federal government’s
official measure used to calculate COLAs.
Q. Why is there no COLA for 2010?
A. By law, Social Security and Supplemental
Security Income benefits increase automatically each year if there is an
increase in the Bureau of Labor Statistics’ Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter
of the last year to the corresponding period of the current year. This
year there was no increase in the CPI-W from the third quarter of 2008
to the third quarter of 2009.
Q. If there is no COLA, will my benefits stay
the same?
A. If there is no COLA, your Social Security and
SSI benefits will remain the same.
Q. Will the maximum taxable earnings amount
change in 2010?
A. No. Because there is no COLA, the Social
Security Act prohibits an increase in the contribution and benefit base
(Social Security’s maximum taxable earnings), which normally increases
with increases in the national average wage index. The maximum amount
of earnings subject to the Social Security tax (taxable maximum) will
remain $106,800.
Q. Will the retirement earnings test exempt
amounts change in 2010?
A. No. Because there is no COLA, the Social
Security Act prohibits an increase in the retirement earnings test
exempt amounts. The earnings limit for workers who are younger than
“full” retirement age (age 66 for people born in 1943 through 1954) will
remain $14,160. (We deduct $1 from benefits for each $2 earned over
$14,160.) The earnings limit for people turning 66 in 2010 still will
be $37,680. (We deduct $1 from benefits for each $3 earned over $37,680
until the month the worker turns age 66.) There is no limit on earnings
for workers who are “full” retirement age or older for the entire year.
Q. If Medicare premiums increase in 2010, will
my Social Security benefit be reduced?
A. The law contains a “hold harmless” provision
that protects about 93 percent of Social Security beneficiaries from
paying a higher Part B premium, in order to avoid reducing their net
Social Security benefit. Those not protected include higher income
beneficiaries subject to an income-adjusted Part B premium and
beneficiaries newly entitled to Part B in 2010.
If a beneficiary subject to IRMAA in the current
year will not be subject to IRMAA in the next year, the “hold harmless”
provision can apply.
There is no “hold harmless” provision for Medicare
Parts C and D, meaning that beneficiaries must pay any higher premiums.
Q. How long has Social Security had COLAs?
A. Congress enacted the COLA provision as part of
the 1972 Social Security Amendments, and automatic annual COLAs began in
1975. Before that, benefits were increased only when Congress enacted
special legislation.
Monthly Social Security and
Supplemental Security Income (SSI) benefits will not
automatically increase in 2010 as there was no increase in the
Consumer Price Index (CPI-W) from the third quarter of 2008 to
the third quarter of 2009. Other important 2010 Social Security
information is as follows:
Under full
retirement age
NOTE: One dollar in benefits will be withheld for every $2 in
earnings above the limit.
$14,160/yr.
($1,180/mo.)
$14,160/yr.*
($1,180/mo.)
The year an
individual reaches full retirement age
NOTE: Applies only to earnings for months prior to attaining
full retirement age. One dollar in benefits will be withheld for
every $3 in earnings above the limit.
$37,680/yr.
($3,140/mo.)
$37,680/yr.
($3,140/mo.)
There is no
limit on earnings beginning the month an individual attains full
retirement age.
Oct. 15, 2009 – Social Security made it official
this morning. Over 57 million Americans will not see an automatic
Cost-of-Living Adjustment (COLA) added to their Social Security payments
for 2010. More than 36 million of these are senior citizens. The COLA is
automatically determined each year to cover inflation, but, since the
economic crash back in 2008 inflation has gone flat in the struggling
economy.
Action stops insurance increase for about 27% of
senior citizens, others protected already; Seniors won’t see COLA for
2010
Q. Who determines the CPI-W?