Introduction |
Legislation enacted in 1973 provides for automatic
cost-of-living adjustments, or COLAs. The COLAs prevent inflation from eroding
Social Security and Supplemental Security Income (SSI) benefits. |
Latest COLA |
The latest COLA is 2.7 percent
for Social Security benefits and SSI payments. Social Security benefits
will increase by 2.7 percent beginning with the December
2004 benefits, which are payable in January 2005. Federal
SSI payment levels will also increase by 2.7 percent
effective for payments made for January 2005.
Because the normal SSI payment date is the first of the month and
January 1 is a holiday, the SSI payments for January are always made at
the end of the previous December. |
How the COLA is calculated |
The Social Security Act specifies a formula for
determining the COLA. In general, the COLA is equal to the percentage increase
in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)
from the third quarter of one year to the third quarter of the next.
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Computation of 2.7-percent COLA |
For the December 2004 COLA, we measure the increase in the average CPI-W
from the third calendar quarter of 2003 to the third quarter of 2004.
These averages are 180.3 and 185.1 for the third
calendar quarters of 2003 and 2004, respectively, and are derived
from monthly CPI-Ws developed by the Bureau of
Labor Statistics.
Month |
CPI-W for-- |
2003 |
2004 |
July |
179.6 |
184.9 |
August |
180.3 |
185.0 |
September |
181.0 |
185.4 |
Total |
540.9 |
555.3 |
Average (rounded to the nearest 0.1) |
180.3 |
185.1 |
The percentage increase in the CPI-W from the third quarter of 2003
through the third quarter of 2004 is 2.7 percent.
The calculation of this percentage increase is as follows (rounded to the
nearest one-tenth of one percent):
(185.1 - 180.3) /
180.3 x 100 = 2.7.
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Possible limitation on the COLA |
Legislation enacted in 1983 may limit the COLA if
the combined assets of the Social Security trust funds are below 20 percent
of annual expenditures. (This limitation only applies to Social Security;
SSI would be unaffected.) Such limitation has not
occurred in the past, nor does it affect the current COLA determination.
The combined trust fund assets at the beginning of 2004 are estimated
to be 305.6 percent of 2004 expenditures. |
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