Social Security ’21 Cola Increase Anemic

Published in RINewsToday.com on on October 19, 2020

With the Social Security Administration’s (SSA) announcement of next year’s Social Security and Supplemental Security Income’s (SSI) meager cost-of-living adjustment (COLA), over 70 million beneficiaries will only see an increase of 1.3 percent in their monthly checks in 2021.  Last year’s COLA increase was 2.8 percent, the largest in seven years.

According to SSA, the 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries start on December 31, 2020. 

SSA ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics. 

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700, says SSA.

The earnings limit for workers who are younger than “full” retirement age will increase to $18,960. (SSA deducts $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (SSA deducts $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are “full” retirement age or older for the entire year. 

Next Year’s COLA Increase Not Enough 

Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM) calls the increase as inadequate especially for COVID-Ravaged Seniors and noted that it’s the lowest since 2017.  

“The timing could not be worse. The COVID pandemic has devastated many older Americans both physically and financially.  Seniors living on fixed incomes need a lifeboat; this COLA increase is more like an underinflated inner tube,” says Richtman.

The average Social Security beneficiary will see a paltry $20 month more in benefits in 2021, calculates Richtman. “This COLA is barely enough for one prescription co-pay or half a bag of groceries. Worse yet, seniors could lose almost half of their COLA increase to a rise in the Medicare Part B premium for 2021, the exact amount of which has not yet been announced,” he warns.  

“The current COLA formula – the CPI-W – is woefully inadequate for calculating the true impact of inflation on seniors’ pocketbooks. It especially under-represents the rising costs that retirees pay for expenses like health care, prescription drugs, food, and housing. We support the adoption of the CPI-E (Consumer Price Index for the Elderly), which properly weights the goods and services that seniors spend their money on,” says Richtman. 

Examining the Growth of SSA COLAs 

Social Security checks in 2020 are almost 20 percent lower than they otherwise would be, due to the long-term impact of extremely low annual inflation adjustments, according to a newly released analysis by The Senior Citizens League (TSCL).  The analysis comes as SSA announced that the 2021 COLA will be just 1.3 percent, making it one of the lowest ever paid. 

“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments (COLAs),” says TSCL’s Mary Johnson, a Social Security policy analyst for the Alexandria, Virginia nonpartisan senior advocacy group. “What’s more those inflation adjustments do not account for rapidly rising Medicare Part B premiums that are increasing several times faster than the COLA,” she says, noting that this causing those with the lower Social Security benefits to see little growth in their net Social Security income after deduction of the Part B premium.  

Johnson’s COLA analysis, released on Oct. 13, compared the growth of retiree benefits from 2009-through 2020 to determine how much more income retirees would receive if COLAs had grown by a more typical rate of 3 percent. TSCL’s analysis found that an “average” retiree benefit of $1,075 per month in 2009 has grown to $1,249 in 2020, but, if COLAs had just averaged 3 percent, that benefit would be $247 per month higher today (19.8 percent higher), and those individuals would have received $18,227.40 more in Social Security income over the 2 010 to 2020 period. 

During that period COLAs have averaged just 1.4 percent. In 2010, 2011, and 2016 there was no COLA payable at all and, in 2017, the COLA was 0.03 percent. “But COLAs have never remained so low, for such an extended period of time, in history of Social Security,” says Johnson, who has studied COLAs for more than 25 years.  Over the 20-year period covering 1990 to 2009, COLAs routinely averaged 3 percent annually, and were even higher before that period. 

According to Johnson, the suppressed growth in Social Security benefits not only creates ongoing benefit adequacy issues, but also Medicare budgetary programs when the COLA is not sufficient to cover rising Part B premiums for large number of beneficiaries. When the dollar amount of the annual Medicare Part B premium increase is greater than the dollar amount of an individual’s annual COLA, the Social Security benefits of about 70 percent of Medicare beneficiaries are protected by the hold-harmless provision in the Social Security Act.  The Medicare Part B premium of those individuals is reduced to prevent their net Social Security benefits from being lower than the year before, she says. 

However, Johnson notes that the people who are not covered by hold harmless include higher income beneficiaries, beneficiaries who have not started Social Security yet and who pay for Medicare by check and about 19 percent of beneficiaries whose incomes are so low that their state Medicaid programs pay their Medicare Part B premiums on their behalf. 

Johnson says, “that a provision of a recently enacted government spending bill restricts Part B premium increases in 2021. The bill caps the Part B premium increase for next year at the 2020 amount plus 25 percent of the differences between the 2020 amount and a preliminary amount for 2021.”

Don’t look for the “potential Part B spike” to go away, warns Johnson. “Unless Congress acts to boost Social Security benefits and finds a better way to adjust benefits for growing Medicare costs, this problem will continue occur with greater frequency in the future,” she says.

Fixing SSA’s COLA Problem Once and For All

During the COVID-19 pandemic seniors are relying more on their Social Security check but continue to face cost increases each year beyond the extra income provided by the COLA, says Social Security Subcommittee Chairman John B. Larson (D-Connecticut) in a statement following SSA’s announcement of its tiny 2021 COLA increase. “It’s time to fix that by enacting the Social Security 2100 Act.,” says the Connecticut Congressman calling for passage of his legislative proposal that would strengthen SSA benefits by basing the COLA on what seniors actually spend on items such as medical expenses, food, and housing. Under this new CPI-E index, a beneficiary would experience benefits that are 6 percent higher by the time they reach age 90. 

Meanwhile, Congressman Peter DeFazio (D-Oregon) sponsored and Larson, a co-sponsor, have proposed emergency legislation to increase next year’s COLA up to 3 percent. “Due to the COVID-19 pandemic, seniors are facing additional financial burdens in order to stay safe,” said DeFazio.  “This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19. Raising the COLA to 3 percent 2021 will provide seniors with an immediate, crucial lifeline during the ongoing coronavirus crisis,” says the Oregon Congressman. DeFazio’s legislative proposal, the Social Security Expansion Act, would also provide a permanent fix to the COLA formula, like Larson using a CPI-E index to factor in seniors’ actual, everyday expenses.

Social Security Recipients Thirsty for COLAs

Published in Pawtucket Times on October 19, 2015

With Christmas fast approaching, almost 65 million people who collect Social Security checks will get hit hard in their pocketbooks. On Thursday, the Social Security announced that there will be no cost of living adjustments (COLA) for 2016. It’s the third time this has happened in over 40 years. .

Unless Congress promptly acts to change the law to give COLAS, Medicare premiums will also be increasing dramatically for almost one-third of Social Security recipients. “The average American senior simply can’t afford a triple-digit increase for their Medicare coverage, says Max Richtman, President/CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM) in a statement. The Washington, D.C.-based organization has lobbied Congress to pass legislation to address this urgent policy issue. “For millions of seniors, this large Medicare hike is devastating and a result of a well-intended “hold harmless” provision that left out too many Medicare beneficiaries,” he says.
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According to Richtman, “All of this was triggered by a zero COLA increase in Social Security for 2016, confirming yet again, that the current Social Security COLA formula isn’t accurately measuring seniors’ expenses. Seniors across this nation understand how important having an accurate measure of the increase in their real costs is to their day-to-day survival.”

House Democrats Rally for a COLA

Just one day before SSA’s announcement of no COLA next year, Congressman David N. Cicilline (D-RI), and 55 Democratic House members had sent a letter to the Social Security Administration (SSA) calling for the federal agency to find a way to provide a COLA for 2016. Not surprisingly Cicilline was not joined by House GOP lawmakers. Only Congressional action can revise this decision.

In the Ocean State, there are 153,349 beneficiaries who received $266,541,000 in total benefits in December 2014. In January 2015, beneficiaries received a 1.7% COLA, which averaged $29.55 per month, or $354.58 per year.

“Seniors, who are relying on Social Security for their retirement, have seen the costs of everything go up and deserve a COLA so they can have their basic needs met,” said Cicilline. “I hear from Rhode Islanders every day who are living on Social Security about their struggles with the rising costs of housing, food, and medicine. In fact, it seems everything is going up, except their Social Security check and this is dead wrong.”

SSA’s announcement on October 14 clearly shows that the current method of calculating COLA’s for Social Security beneficiaries negatively impacts the recipients, says Cicilline. The Democratic Congressman calls on Congress to quickly fix this problem now. The lawmaker has co-sponsored H.R. 1811, the Protecting and Preserving Social Security Act, to do just that.

Cicilline charges that the Social Security Administration has used the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to determine whether the cost-of-living has increased. According to the Washington Post, the “biggest reason retirees aren’t getting a raise” is due to lower fuel prices, even though medical, housing, and food costs have increased.

It’s time to change the way COLAs are calculated, says Cicilline. Critics to the existing formula charge that fuel prices are less important in determining cost of living for the nation’s seniors – individuals ages 65 and older make up only 16% of all licensed drivers in the United States. To fix formula glitch, Cicilline has signed on as a co-sponsor of the CPI-E Act, which would replace CPI-W with the Consumer Price Index for the Elderly. CPI-E more accurately reflects cost of living for today’s older persons by weighting the cost of housing and medical care more compared to CPI-W. It also de-emphasizes fuel and transportation costs.

Blunting the Pain of Medicare Premium Hikes

Promptly responding to SSA’s double whammy of no COLA for 2016 and hikes in Medicare premiums, AARP, the nation’s largest aging advocacy organization in a letter called on Congress to “pass a fix.”

In her correspondence, Nancy LeaMond AARP’s EVP and Chief Advocacy and Engagement Officer, asks Congress to protect all Medicare beneficiaries from sharply increased out-of-pocket costs in light of the COLA announcement, requesting specifically that Congress “reduce. the impact of the sudden, sharp increases in the Part B premiums and deductible as soon as possible. Ideally, all Medicare beneficiaries should be held-harmless in the face of no Social Security COLA adjustment.”

LeaMond’s letter notes that 16.5 million Americans face sharp premium increases and that “all Medicare beneficiaries will see their Part B deductible increase 52 percent…from $147 to $223.” Additionally, AARP reiterates its opposition to the Chained Consumer Price Index (CPI), noting that “the Social Security COLA would be even more inaccurate and benefits would be even less adequate if recent proposals to adopt a Chained CPI had been enacted.

AARP has opposed all Administrative and Congressional attempts to enact a Chained CPI, and says it will continue to do so, says LeaMond, because the Chained CPI would further under reported inflation experienced by Social Security beneficiaries, and further erode their standard of living, cutting an estimated $127 billion in Social Security benefits from current and near retirees in the next ten years alone.”

With Capitol Hill polarized by political a House and Senate captured by ultra conservatives, Social Security beneficiaries will have to find ways to stay financially afloat until Congress can reduce the damaging impact of the Part B premium increases with no COLA increase to reduce the pain. Aging groups push for holding beneficiaries harmless to Medicare premium increases. With the election over a year off, law makers might just listen or face the wrath of older Americans who just exercises their right to vote at the polls.

Herb Weiss, LRI ’12 is a Pawtucket writer covering aging, health care and medical issues. He can be reached at hweissri@aol.com.