27 May What is COLA?
Often when it comes to Social Security Administration (SSA) benefits, there will be mention of the cost-of-living adjustment, which is commonly referred to as COLA. While most people have likely heard COLA mentioned, it may not be widely understood.
The following information provides an explanation of what COLA is and how it is calculated. While it is not critical to understanding COLA, many people are interested because it can have a significant impact on the benefit amount they will receive. This may be particularly true of individuals receiving SSA disability benefits.
Background on COLA
COLA is an adjustment made in order to keep an individual’s income current with the cost of living. It is intended to help maintain the purchasing power and a viable standard of living for individuals by accounting for inflation. Inflation is the rate at which the general level of goods and services rise. COLA is applied to wages, salaries, and benefits, but is most widely used in relation to SSA benefits, and also includes Social Security Disability Insurance (SSDI).
The calculation of what COLA should be, which is expressed as a percentage, is based on the Consumer Price Index (CPI). The CPI is the federal government’s official measurement of inflation, which is accomplished by measuring changes in the prices of 80,000 goods and services. COLA takes effect when prices increase. Although, it is possible that COLA can also be used to reduce wages or benefits as a result of deflation (when prices decrease); however, this very rarely occurs.
The Social Security Administration implemented the use of automatic annual COLAs in 1975. Prior to that, benefits were only increased through special legislation passed by Congress. Since the early 1980s, COLA has remained below 6 percent. For 2015, COLA is 1.7 percent, meaning the benefits an individual receives will be 1.7 percent higher than they were last year. This took effect for December 2014 benefits, which were payable in January of 2015. Increased payments, through COLA, benefit over 58 million Social Security and 8 million SSI beneficiaries.
SSA provides benefits for individuals deemed disabled under both the SSDI and the Supplemental Security Income (SSI) programs; COLA applies to both programs. SSI is a needs-based program for individuals with very limited resources. Under SSDI, benefits are based on an individual’s work history. A person’s average lifetime earnings prior to his or her disability will impact the amount they are eligible to receive under SSDI. Most SSDI recipients receive between $700 and $1,700 per month. The maximum amount an individual may receive is $2,663. For both SSI and SSDI, a change in COLA will correspondingly change the amount an individual receives.
Help Obtaining Benefits
For many individuals, COLA is critical in maintaining a standard of living, especially in relation to disabilities benefits. If you would like more information regarding the process of obtaining disability benefits, contact an experienced disability law attorney today. At the Klok Law Firm LLC, we understand the importance of these benefits and would be proud to use our knowledge and expertise to assist you in applying for them.