Senior and Retired Veterans Hope for COLA Increase in 2016
In light of the pay raise for federal employees last week as an executive order by the President, many sectors of the government and special interest groups are calling on the government to also provide a Cost of Living Allowance (COLA) to Seniors on Social Security and Veterans for 2016.
Why you might not get a COLA increase in 2016
In the last 40 years, it has happened on three occasions that seniors did not get their annual COLA increase. It appears to be the case for 2016, as no legislation has been approved to date, but it also happened in 2010 and 2011. Last year in October, federal retirees received a 1.7% COLA increase for their civil service annuities, so why not this year?
The largest reason why COLA increases were not put into effect so far this year is because these increases are generally based on the Consumer Price Index figure. Yet according to the CPI for 2015, prices have actually decreased. The CPI which includes food, energy and shelter costs actually fell by 0.1% mainly due to the falling price of gasoline. Since the federal government bases their annual COLA adjustments on this primary index, when it is in negative territory, no COLA adjustments are triggered.
Why the CPI may not be the right metric
However, it has been pointed out again and again, that using the strict confines of the CPI for a COLA adjustment does not truly reflect the cost of living issues affecting senior retirees. In fact, in 2016 increases in health care costs that have already been announced will effectively increase the cost of living for seniors, even with the lower energy and food costs.
Since retirees rely on these COLA adjustments annually simply to continue at the same quality of life, the extremely rare year when inflation does not increase, can make for extremely tough years. Take for example those federal retirees under the Civil Service Retirement Service (CSRS) enrolled in Medicare Part B that are bracing for a 52% increase in premiums this year due to rules that dictate these increases. Legislation in the works may not mitigate this increase in time for January. The COLA adjustment for retirees would definitely benefit from an overhaul in how it is calculated with a weighting more tied to health care costs that food.
2 Houses, 2 Bills
However, there has been serious movement in Congress and the Senate to implement COLA adjustments for retired civil servants for 2016, with the first bill being introduced in October this year, calling for a 2.9% COLA increase by Alan Grayson (D-FL). Seniors Deserve a Raise Act as it was called never passed, mainly because two other bills submitted on the issue. One was a follow up by Grayson, known as Seniors and Veterans Emergency (SAVE) Benefits Act as a companion bill to a Senate bill introduced on November 5.
Yet this is not the only current bill put forth, as on 1 December, Rep. Tammy Duckworth (D-IL) introduced another companion bill to the same one that Grayson’s was submitted with. Although Duckworth’s bill calls for a 3.9% COLA adjustment and both would fund the increase by closing a loophole that allows companies to deduct executive bonuses from their taxes if they were performance related.
Whichever bill makes it to the finish line is not important; simply that one of these bills does so, in order to defray the rising costs of health care for retired civil servants and veterans.
