It’s Official: No COLA in 2016

By on October 15, 2015 in Pay & Benefits, Retirement with 100 Comments

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As we noted in an article published on October 12th, there will not be a cost of living adjustment (COLA) for federal retirees and Social Security beneficiaries in 2016.

The Bureau of Labor Statistics data has been released with the Consumer Price Index figures used to calculate an annual COLA and confirms there will be no benefit increase in 2016 for millions of Social Security recipients, disabled veterans and federal retirees. This is the third time in 40 years that benefits will remain flat. These three occasions have occurred since 2010.

The president of the National Active and Retired Federal Employees Association (NARFE), Richard G. Thissen, responded quickly with this comment: “Federal retirees received a “double whammy” of bad news today. With the announcement by the U.S. Bureau of Labor Statistics (BLS) that there will be no cost-of-living adjustment (COLA) to federal civilian and military retirement annuities and Social Security benefits in 2016, “not only will federal retirees not see an increase in their annuities next year, but they also will be paying 50 percent more than most other seniors in Medicare Part B premiums, due to the so-called ‘hold harmless’ provision of Social Security law.”

Interest groups for retirees have argued for some time that a different method of calculating the COLA for older Americans should be used.

An index has been developed with different weighting for expenses, such as medical expenses, as elderly people spend more on health care than younger consumers. The index is called the Consumer Price Index–Elderly (CPI-E). The CPI-E has been under review by the Bureau of Labor Statistics for about three decades but it is still considered an experimental program.

Rep. Michael Honda (D-CA) has re-introduced H.R. 3351, the CPI-E Act of 2015, which would adopt a measure of inflation more tailored to the costs of older Americans but, with the massive national debt that is increasing by hundreds of billions each year, there will not be a rush in Congress to increase federal spending.

Under the regular consumer price index, medical care is not given as much weight as many other types of expenses. Retirees are more likely to be going to a doctor or a hospital than getting a college education, so the price index does not necessarily reflect your real expenses if you are retired.

“Today’s news also highlights why Congress should require use of the CPI-E as the measurement for setting COLAs,” according to NARFE. “On top of a large increase in Medicare premiums, federal retirees are facing an average increase of over 7 percent in their Federal Employees Health Benefits Program premiums. Any COLA measurement must account for how seniors spend their money.”

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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