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Social Security says law blocks COLA for seniors in 2016

Agency explains what is happening to cost-of-living adjustment for next year

graphic depicting money flying awayOct. 15, 2015 – Here is what the Social Security Administration has to say about the cost-of-living adjustment (COLA) next year for senior citizens and others in the program: “With consumer prices down over the past year, monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.” Does that invite action by Congress?

Following is the rest of the news release issued today by SSA today with links to other information about the COLA.

“The Social Security Act provides for an automatic increase in Social Security and SSI benefits if there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 

 

“The period of consideration includes the third quarter of the last year a cost-of-living adjustment (COLA) was made to the third quarter of the current year.  As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter of 2015.  Therefore, under existing law, there can be no COLA in 2016.

“Other adjustments that would normally take effect based on changes in the national average wage index also will not take effect in January 2016.  Since there is no COLA, the statute also prohibits a change 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 2016. 

“The attached fact sheet provides more information on 2016 Social Security and SSI changes.

“The Department of Health and Human Services has not yet announced Medicare premium changes for 2016.  Should there be an increase in the Medicare Part B premium, the law contains a “hold harmless” provision that protects approximately 70 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 2016.  In addition, beneficiaries who have their Medicare Part B premiums paid by state medical assistance programs will see no change in their Social Security benefit.  The state will be required to pay any Medicare Part B premium increase.

“Information about Medicare changes for 2016, when available, will be found at www.medicare.gov

“For additional information, please go to www.socialsecurity.gov/cola.”

Frequently Asked Questions (Answers by Social Security Administration)

What is a cost-of-living adjustment (COLA)?

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 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.

Who determines the CPI-W?

The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.

Will the maximum taxable earnings amount change in 2016?

No. The maximum amount of earnings subject to the Social Security tax (taxable maximum) will remain $118,500 because there is no COLA.

Will the retirement earnings test exempt amounts change in 2016?

No. The earnings limit for workers who are younger than "full" retirement age (age 66 for people born in 1943 through 1954) will remain $15,720. (We deduct $1 from benefits for each $2 earned over $15,720.)

The earnings limit for people turning 66 in 2016 will stay at $41,880. (We deduct $1 from benefits for each $3 earned over $41,880 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.

Will my Medicare premiums increase in 2016?

Information about Medicare changes for 2016 is available at www.Medicare.gov.

Should there be an increase in the Medicare Part B premium, the law contains a "hold harmless" provision that protects approximately 70 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 2016. In addition, beneficiaries who have their Medicare Part B premiums paid by state medical assistance programs will see no change in their Social Security benefit. The state will be required to pay any Medicare Part B premium incrase.

How long has Social Security had COLAs?

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.


Related Social Security News from Senior Journal Archives

No Social Security COLA for senior citizens in 2016 seems certain as do Medicare hikes

Means problems for Medicare: Part B premiums cannot increase for most , so minority has to bear burden of rising costs - Oct. 8, 2015

Social Security important to all but few know much about it

AARP, financial planners release survey results on knowledge gap - Oct. 1, 2015

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