No benefit increase for Social Security next year

For just the third time in four decades, Social Security recipients will not be receiving an annual cost –of-living adjustment. The impact may not be huge but retirees may have to cut back on spending a little in 2016.

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, the Social Security Administration reported on Thursday, Oct. 15.

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), it was reported.

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 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.

It is estimated that about 30 percent of Medicare beneficiaries – about 17 million Americans – could see their Part B premium and deductible rise 52 percent because of provisions in the Social Security law.

The price tag for Congress to protect seniors from higher Part B premiums and deductibles has been estimated at $12 billion.

Experts say that the cost of living for seniors is rising, and their quality of life is falling. According to the Senior Citizens League, Social Security recipients have lost nearly 25 percent of their buying power over the past 15 years. 

Consider this: The cost of housing, often a retiree’s greatest expense, has increased 44 percent since 2000; heating oil, 159 percent; eggs, 117 percent; and gasoline, 76 percent. In contrast, Social Security COLAS averaged just 2.2 percent per year since 2000, or 36.3 percent overall.

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