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How Cost-of Living Adjustments (COLA) are Determined

Last July, a bill that guarantees veterans a cost-of-living increase in 2017 passed Congress. Veterans can expect to see a 0.3 percent COLA increase this year.

The 2017 COLA increases monthly benefits for more than 70 million Americans, but only by a few dollars. 2017 is the third consecutive year in which annual adjustments will be less than 0.5 percent. Recipients saw absolutely no COLA in 2010, 2011 or 2016 and the current increase is the smallest since the Social Security Administration began automatic annual adjustments in the 1970s.

Who Benefits From COLA

A cost-of-living increase does not affect adjustments for military retirement, as these are calculated through other methods. Cost-of-living adjustments are for:

  • Retired Military Veterans
  • Disabled Veterans
  • Veteran’s Pension Benefits
  • Survivor Benefit Annuitants
  • Surviving Families of Veterans
  • Social Security recipients
  • Federal Civilian Retirees
  • Supplemental Security Income or SSI
  • Eligibility for Medicare Extra Help or Medicaid
  • Federal and State Food and Housing Assistance Programs

How is COLA determined?

The Consumer Price Index, which measures inflation in the cost of goods and services, is used to determine COLA. During the fall, the U.S. Bureau of Labor Statistics determines the Consumer Price Index for Urban Wage Earners and Clerical Workers. They compare these results to the results from the third quarter of the last year in which a COLA was awarded. If the comparison shows that prices have gone up, Social Security grants a cost-of-living increase.

Even though annual cost-of-living increases are automatic for social security benefits, veterans’ benefits fall into a different category that requires law makers to vote on an adjustment every year. Over the past few decades, veterans have seen their annual adjustment differ from Social Security COLA only once, in the year 2000.

More than 60 million retirees, disabled workers, spouses and children receive social security benefits as do 4 million disabled veterans, 2.5 million federal retirees and survivors and 8 million Americans receiving Supplemental Security Income (SSI).

Annual Cost of Living Adjustments Are Important

No COLA in 2016 meant that millions of social security recipients, disabled veterans and federal retirees had to pay for increasing food, medical and other costs with absolutely no increase to their income.

Not having a COLA in 2016 also had a major impact on the 2017 cost-of-living adjustment. This is because of the way in which COLA is determined. The law governing the Social Security Administration requires the agency to compare the three-month average figure with the average for the same three month period of the last year in which a COLA became effective. This means that the 2014 third quarter average was the reference used to determine the 2017 COLA.

Bergmann & Moore is a law firm dedicated to helping veterans and their families. For more information, please contact us today.

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