Social Security COLA Increase of About 1.5 Percent
Now Expected on October 30
The cost-of-living allowance for seniors and others
on Social Security was delayed due to ‘lapse in funding’ by Department
of Labor’s CPI determination
Oct. 18, 2013 – Senior citizens and others on
Medicare will find out their pay increase for 2014 on Wednesday, October
30. The Department of Labor says that is the day it will release the
Consumer Price Index for September, which is the last number needed to
calculate the cost-of-living adjustment (COLA) for 2014. Current
estimates are an increase of 1.4 or 1.5 percent.
"The Consumer Price
Index, September 2013, will be released at 8:30 a.m. on Oct. 30,” says
the Bureau of Labor Statistics news
release. “It was originally scheduled for Oct. 16. The index is a
measure of the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services.”
The release was delayed
because of the “lapse in appropriations” during the government shutdown.
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.
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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.
With only the cost of living change for September
to go to complete the calculation, the 2014 COLA is expected be about
1.5%, although recent predictions have placed it even lower.
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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