Itfs Official: No Social Security COLA in 2010

Obama supports bills in Congress that would give beneficiaries a $250 payment

By: Carole Fleck | Source: AARP Bulletin Today | October 15, 2009

For the first time in 35 years, millions of older Americans wonft be getting a fatter Social Security payment next year. As expected, the Social Security Administration announced Thursday that there wonft be an automatic cost-of-living adjustment (COLA) for 2010.

But beneficiaries can still hope for extra money. President Barack Obama on Wednesday called on Congress to approve a new $250 payment to some 56 million people next year in lieu of a COLA. The payment, equal to a 2 percent increase, would go to those who receive Social Security retirement or disability benefits, veterans benefits, and to railroad retirees and retired public employees who donft get Social Security. A $250 payment for many of the same people was included in the huge federal stimulus package approved earlier this year.

Obamafs proposal, which is similar to several bills in Congress, would cost about $13 billion. Michael J. Astrue, commissioner of Social Security, called on lawmakers Thursday to support Obamafs plan.

Plea for ethose hardest hitf

gEven as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession,h Obama said. gThis additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis.h

Sen. Bernie Sanders, I-Vt., and Rep. Peter DeFazio, D-Ore., are sponsors of legislation to provide a $250 payment to Social Security recipients to make up for the lack of a COLA. A separate bill in the House, sponsored by Rep. Carolyn McCarthy, D-N.Y., would give beneficiaries a payment of $150. Most top Democratic leaders in the House and Senate back the extra payment, though some Republicans oppose it.

Social Security COLAs are tied to inflation, which has been negative this year, largely because of lower energy costs. But advocates say older people still face higher living expenses because they spend a disproportionate amount of their income on health care, which rises faster than inflation every year. Many also have suffered from shrinking nest eggs and retirement income.

gThe current recession has become a perfect storm for millions of older Americans, who find themselves struggling with skyrocketing health care costs, shattered nest eggs and now stagnant Social Security benefits,h AARP CEO A. Barry Rand said in a statement. gAARP calls on Congress to take up the presidentfs call to action, and provide $250 in relief to millions of Americans who count on Social Security to pay their bills.g

Some argue that Social Security recipients should not get additional money. gSince the purpose of COLAs is to preserve beneficiariesf purchasing power, the decline in overall prices means that beneficiaries do not need a COLA in January 2010,h according to a report by Kathy Ruffing, a policy analyst at the Washington-based Center on Budget and Policy Priorities.

Next year will be the first time since 1975 that Social Security beneficiaries have not received a COLA. About 51 million retirees and Americans with disabilities get Social Security benefits. The average monthly benefit for retirees is $1,160 this year. All beneficiaries received a 5.8 percent increase in January, the largest in 26 years.

Medicare premiums may rise for millions

Without a COLA, about 6 million people who have Medicare Part D prescription drug premiums deducted from their checks could actually see a slight decrease in payments next year, since those premiums are expected to rise. According to the Centers for Medicare & Medicaid Services, Part D premiums will rise to about $30 in 2010 after a $2 average increase, though some may see a much larger increase depending on their plan.

Millions of people with Medicare Part B coverage for doctorsf visits also have their premiums deducted from Social Security payments. Part B costs are expected to rise as well for some beneficiaries unless Congress steps in to freeze their premiums.

By law, a Part B increase cannot be larger than the increase in Social Security benefits for most recipients. That means more than 75 percent of Medicare beneficiaries wonft see a premium hike. But without congressional action, premiums will rise for about 11 million beneficiaries. These include those who pay an additional high-income surcharge for Part B, those who will be new to Medicare next year, and low-income gdual eligiblesh who receive both Medicare and Medicaid and have their Part B premiums paid by Medicaid.

Those groups face a hike in premiums of up to $25 a month in 2010, according to the Congressional Budget Office.

Last month the House voted overwhelmingly to eliminate premium increases for Part B coverage, saying older Americans shouldnft have to pay more since theyfre not getting a COLA. The bill is now being considered by the Senate.


Carole Fleck is a senior editor at the AARP Bulletin.