Bill Would Change Social Security COLA Formula

The cost of living adjustments should reflect seniors' costs, not those of workers, says Rep. Garamendi

Health care costs can eat into senior savings and income. Health care costs can eat into senior savings and income.

The U.S. government has a measure for seniors' living costs, but does not use it when giving Social Security recipients an annual cost-of-living adjustment (COLA).

A bill introduced this week by Rep. John Garamendi, D.-Calif., aims to correct this.

Garamendi introduced H.R. 1251 on Tuesday. It would use the Consumer Price Index-Elderly (or CPI-E) measure rather than the traditional CPI for workers (or CPI-W).

“The fact that we do not use the CPI-E already is shocking. Instead, cost-of-living adjustments for seniors collecting Social Security and federal civilian or military retirement benefits are based on the costs experienced by ‘urban wage earners and clerical workers.’ They are not based upon the costs retired individuals experience. And that does not make a lot of sense,” said Richard G. Thissen, president of the National Association of Retired Federal Employees, in a statement.

The 2017 COLA was 0.3%, while there was no COLA in 2016.

Meanwhile, seniors’ cost of living incurred grew 2.1% in 2016 and 0.6% in 2015. For the average federal retiree, using the CPI-E would have meant an increase of roughly $950 per year, the group says.

Legislative Push

Garamendi’s bill, called the CPI-E Act of 2017, would change the CPI calculation to the CPI-E, which the Bureau of Labor Statistics has been calculating since 1982. CPI-E measures prices experienced by those 62 years of age and older.

From 1982 to 2014, it showed a yearly jump of 0.2% or more on average.

According to the employee group, this increase reflects the fact that seniors consume more health care, and such price increases “have far outpaced the increases for other consumer goods.”

“So we have an index that accounts for price effects on seniors – that would give seniors a fair COLA – yet Congress has failed to adopt it,” Thissen said.

Drugmaker Johnson & Johnson, for instance, said its medicines rose 8.5% on average in 2016; taking discounts and rebates into account, this figure falls to 3.5%.

“The good news is that this bill offers that simple fix, and is an equitable improvement for the millions of seniors relying on their earned Social Security benefits and millions of federal and military retirees who have served their country both in and out of uniform,” the NARFE leader added.

COLA Growth Slows

Over the past seven years, COLAs have “flatlined at unprecedented lows,” according to the Senior Citizens League, and have averaged 1.2% per year — less than half the 3% that COLAs averaged from 2000 to 2009.

This low growth in benefits “has a significant impact on overall retirement income of anyone who has been retired since that year,” said Mary Johnson, a Social Security policy analyst and researcher for the Senior Citizens League, in a statement in October, when the 2017 COLA was announced.

“For people retired over the past seven years, monthly benefits in 2016 are today 13% lower than if inflation had been the more typical 3% per year,” she pointed out. “In dollar amounts, that’s $150 per month lower for someone with average benefits.”

According to the Senior Citizens League, if the CPI-E had been used over the past 25 years, Social Security recipients likely would have seen 9% higher yearly payouts – almost $30,000.

However, some seniors point out, CPI-E fails to include the costs of Medicare Part A.

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