The Social Security Administration has announced that there will be no annual cost-of-living adjustment (COLA) increase for 2016. This, coupled with the increase in Medicare Part B premiums, means a double whammy for those receiving federal retirement benefits through CSRS.
More than 2.5 million federal retirees depend on annual cost-of-living adjustments to help their pensions keep pace with inflation. Federal retirees under the newer Federal Employees Retirement System (FERS) also count on the COLA increase for their Social Security checks.
COLA Freeze Triggers Calls For New Formula to Help Retirement Benefits Keep Pace With Inflation
The government measures changes in the cost of living through the Department of Labor’s Consumer Price Index (CPI-W). The CPI has not risen since the last cost-of-living adjustment in 2015, so Social Security benefits will remain the same for 2016.
The problem is that formula works better for those who are working than for retirees. For example, the CPI did not rise this year in large part because of lower fuel prices. However, retirees spend relatively little on fuel, and a lot more on medical, housing and food costs, which have all increased.
Then there’s also the fact that those receiving federal retirement benefits under the Civil Service Retirement System (CSRS) and who do not receive Social Security benefits will be paying 50 percent more than most other seniors in Medicare Part B premiums, due to the so-called ‘hold harmless’ provision of Social Security law. These individuals will see their premiums rise 52 percent, from $104.90 to $159.30 per month.
This double whammy of a COLA freeze and a 52% increase in Medicare Part B premiums will cut a big hole in the retirement benefits of millions of federal retirees, unless Congress and the Social Security Administration take action on both fronts.
Federal employee and retiree unions including NARFE and AFGE have issued statements demanding that Congress move forward with a legislative fix to protect their members from increases in Medicare Part B premiums.
Several members of Congress, including U.S. Congressman David N. Cicilline (D-RI), and U.S. Senators Jack Reed (D-RI) and Sheldon Whitehouse (D-RI), have called for the SSA to initiate a formal review of the calculation used to determine annual cost-of-living adjustments (COLAs).