compensate for the effects of inflation, Social Security recipients received
cost-of-living adjustments (COLAs) through the legislative process
sporadically from 1950 to 1974, and automatically through a trigger
mechanism in all but two years from 1975 to 2012. No adjustment was made
in 2010 and 2011. Benefits will be increased by 1.7% in 2013, after an increase
of 3.6% in 2012. 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), is the measure that can trigger a
change. The Social Security COLA is based on the percentage change 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.
No COLA was payable in January 2010 because the average CPI-W for the third
quarter of 2009 did not increase from the average CPI-W for the third
quarter of 2008, and again in 2011 because the average CPI-W for the third
quarter of 2010 remained below the average CPI-W for the third quarter of
2008. When the average CPI-W for the third quarter of 2011 exceeded that for
2008 by 3.6%, establishing a new benchmark, a COLA was payable in 2012.
Because the average CPI-W for the third quarter of 2012 exceeded the
average CPI-W for the third quarter of 2011 by 1.7%, the COLA for 2013
will be 1.7%.
Because a COLA of 1.7% will be paid to Social Security beneficiaries in 2013,
identical percentage increases in Supplemental Security Income (SSI) and
railroad retirement “tier 1” benefits will be paid, and other changes in
the Social Security program will 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 receive a 1.7%
COLA in January 2013.
The Congressional Budget Office (CBO) and the trustees for the Social Security
trust funds both project annual COLAs beyond 2013.
Date of Report: November 8, 2012
Number of Pages: 9 Order Number: 94-803 Price: $19.95
For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card
number, expiration date, and name on the card. Indicate whether you want e-mail
or postal delivery. Phone orders are preferred and receive priority processing.