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Federal annuitants to get 1.7 percent COLA

The Social Security Administration announced a 1.7 percent increase in Social Security benefits for 2013.

The Social Security Administration announced a 1.7 percent increase in Social Security benefits for 2013.

The 1.7 percent cost-of-living adjustment will begin in January 2013 for about 56 million Social Security beneficiaries. Eligible Civil Service Retirement System and Federal Employees Retirement System retirees both will receive the same 1.7 percent increase in their annuities in 2013.

SSA also said the maximum amount of earnings subject to the Social Security tax in 2013 will increase to $113,700 from $110,100, an increase expected to affect about 10 million workers.

An SSA COLA increase is based on the rise—if any—in the average Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for July, August and September, compared to the same period’s average the prior year. A 1.66 percent increase in 2012 over the average in 2011 produced the 1.7 percent COLA for 2013.

In 2012, CSRS retirees received a COLA of 3.6 percent—by law the same as the Social Security COLA. Under the rules for setting COLAS for FERS, if the CPI-W index is above 3 percent, FERS retirees receive 1 percent less. Consequently, in 2012 FERS annuitants received a COLA of 2.6 percent.

American Federation of Government Employees National President J. David Cox, Sr. said it could have been worse.

“While next year’s COLA is much smaller than the increase federal retirees and Social Security recipients received at the beginning of this year, it could have been much worse.” Cox said in a statement. “Under the deficit reduction plan proposed by Morgan Stanley Director Erskine Bowles and ex-Senator Alan Simpson, the annual COLA would be cut by three-tenths of a percentage point.”

Cox said that would have resulted in a 1.4 percent COLA.

“Although a 0.3 percent cut doesn’t sound like much, it adds up over time,” Cox said. “Over 10 years, that 0.3 percent difference would mean a 3 percent cut in benefits. Over 20 years, the loss in benefits rises to 6 percent.”

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