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Cost-of-Living Increases

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at ssa.gov.

719. Cost-of-Living Increases

719.1 How do cost-of-living increases affect benefits?

Benefits may be automatically increased to keep pace with increases in the cost-of-living if laws for general benefit increases are not passed. Benefit increases depend upon the condition of the Federal Old-Age, Survivors and Disability Trust Funds. The increases are based on the smaller of either: (1) the Consumer Price Index as published by the Department of Labor; or (2) the average wage index, that is based on nationwide wages. Where the index for a current base quarter shows an increase over the same index for the last base quarter, the following happens: each PIA (the unreduced amount that would be paid at full retirement age), each related maximum family benefit, each transitionally insured benefit and each special age 72 payment is raised to reflect the same percentage of increase (rounded to the nearest one-tenth of one percent). The base quarter is either: (1) the third calendar quarter of each year after 1982, or (2) a later calendar quarter within which a general benefit increase became effective. After the cost-of-living is added, reductions and deductions are applied to the new amount.

For the most current Cost-of-Living Adjustment (COLA), see: http://www.socialsecurity.gov/cola/.

719.2 When does the cost-of-living benefit increase become effective?

This cost-of-living benefit increase becomes effective beginning with December of the year that contains the base quarter for the index increase. The cost-of-living increase is published in the Federal Register on or about November 14 of the year preceding the year the benefits are payable.

719.3 How are Social Security program amounts determined under automatic adjustment provisions?

For current Social Security program amounts determined under automatic adjustment provisions, see: http://www.ssa.gov/OACT/COLA/autoAdj.html

Last Revised: Nov. 15, 2005


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