Low gas prices are to blame. Joseph Sohm / Shutterstock.com
It's Official: Retirees Will Not Receive a COLA in 2016
This is only the third time in 40 years that there hasn’t been an adjustment.
This story has been updated.
Federal and military retirees will not receive a cost-of-living adjustment for 2016.
The Bureau of Labor Statistics on Thursday published the final data point used to calculate the annual COLA for all retirees and disabled veterans. There will be no benefit increase, largely because of low gas prices.
The average of the July, August and September 2015 Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), along with the average from the third quarter of 2014, is used to calculate the 2016 COLA. The annual COLAs are based on the percentage increase (if any) in the average CPI-W for the third quarter of the current year over the average for the third quarter of the last year in which a COLA became effective. In this case, that is 2015 and 2014.
The average CPI-W for the third quarter of 2015 is 233.278; that’s less than the average for the third quarter of 2014 (234.242). No increase, no COLA.
The CPI-W measures price changes in food, housing, gas and other goods and services.
This is only the third time in 40 years that there hasn’t been a COLA.
Many federal retirees will feel the pinch of no COLA because of a jump in Medicare Part B premiums, which are estimated to increase by more than 50 percent next year.
National Treasury Employees Union President Tony Reardon said it was “absolutely unfair” to force those retirees to pay higher premiums. “NTEU is committed to doing all it can to protect seniors from escalating and unaffordable Medicare costs in 2016,” he said.
Part B beneficiaries who are covered under the Civil Service Retirement System (CSRS) and who do not receive Social Security benefits will have to pay the 2016 premium increase unless Congress changes the law to lump them in with the 70 percent of beneficiaries who are “held harmless” from the increase. Under the hold harmless provision of the Social Security Act, the dollar increase in Medicare Part B premiums is limited to the dollar increase in an individual’s Social Security benefit.
“This is about more than just money, it is about basic fairness,” said National Active and Retired Federal Employees Association President Richard Thissen.
“There is no reason why two people with the same income should pay different Medicare premiums based on whether the money is coming from a Social Security check or a checking account.”
Rep. Dina Titus, D-Nev., and Sen. Ron Wyden, D-Ore., have introduced legislation to make the hold harmless provision applicable to all Medicare beneficiaries.
American Federation of Government Employees President J. David Cox also decried the absence of a COLA for retirees next year, pointing to the 7.4 percent increase in premiums for enrollees in the Federal Employees Health Benefits Program. “The prices for many items that seniors must purchase is rising faster than the overall inflation rate. The most important of these are health insurance premiums."
Retirees received a 1.7 percent COLA increase for 2015, a 1.5 percent boost for 2014, a 1.7 percent increase for 2013 and a 3.6 percent bump for 2012. The 2012 COLA increase was the first since October 2008 (which took effect in 2009).
If there had been a COLA for retirees, it would have been become effective in December 2015, with pay-outs starting in January.
Employees still working for the federal government do not receive a COLA, but they may end up doing better than retirees. Federal workers at the moment are on track to receive a 1.3 percent pay raise in 2016.
For a history of COLAs and federal employee pay raises going back to 1970, review this Retirement Planning column from Tammy Flanagan, the senior benefits director for the National Institute of Transition Planning Inc.
(Image via Joseph Sohm / Shutterstock.com)