Author: Gary Sidor, Information Research Specialist
To compensate for the effects of inflation, Social Security recipients usually receive an annual cost-of-living adjustment (COLA). Because inflation did not increase from 2014 to 2015 according to parameters outlined in the Social Security Act, no COLA will be payable in 2016. Social Security COLAs are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Department of Labor’s Bureau of Labor Statistics (BLS). The COLA equals the growth, if any, in the index from the highest third calendar quarter average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. The COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect the benefits due for the preceding month.) If there is no percentage increase in the CPI-W between the measuring periods, no COLA is payable. The absence of a COLA in 2016 will mark the third time since 1975 that a COLA will not be triggered and paid. No COLA was payable in January 2010 or January 2011. COLAs were paid from 2012 to 2015. Because no COLA will be paid to Social Security beneficiaries in 2016, there will be no increases in Supplemental Security Income (SSI) and railroad retirement “tier 1” benefits. In addition, other changes in the Social Security program will not be triggered. Although COLAs under the federal Civil Service Retirement System (CSRS) and the federal military retirement program are not triggered directly by the Social Security COLA, these programs use the same measuring period and formula for computing their COLAs. As a result, their recipients similarly will not receive a COLA in 2016. The Congressional Budget Office (CBO) and the trustees for the Social Security trust funds both project annual COLAs beyond 2016.