Sweetening No-Cal COLAs: A Senior Moment?

Thursday - 10/21/2010, 4:00am EDT

Social Security recipients are just learning what savvy federal and military retirees who are regular readers of this column have known since mid-July: there will not be a cost of living adjustment (COLA) in benefits in 2011.

That's a blow because the retirees didn't get a COLA this year either.

The no-cal COLA is a particular problem for low-income retired feds (and their even lower income survivors) because federal health insurance premiums are going up, again, in January. And when the 2011 FEHBP benefits package is announced, there will likely be significant changes in out of pocket costs to the insured.

Health premium increases can be minimized by shopping during the open season and moving to a plan with lower premiums but similar benefits. Provided you shop and make changes.

Making the most of the health insurance open season, Nov. 8th to December 13th, is always important. It's a chance to shop and save. Especially this year because retirees won't get a COLA. And while white collar federal workers are on track for a modest 1.4 percent increase, that isn't certain until the President (Congress willing) issues an executive order.

To shield themselves from angry Social Security beneficiaries, about 1 in every 6 Americans, Congress and the White House this year made up for the no-COLA situation by voting the retirees a one-shot, (taxable) $250 payment. They've already signaled that they will do that again.

So instead of a COLA which would boost monthly benefits, the Social Security people will probably get a flat $250 payment in 2011to make up for not getting an inflation adjustment when there is no inflation, according to the Bureau of Labor Statistics' Consumer Price Index.

Not everybody is crazy about the $250 payment. In an Oct. 14, 2010 editorial entitled "Another Senior Moment" the Washington Post blasted Congress and the Obama administration for "pandering" to senior citizen voters by giving them inflation-adjustment money in a time of minimal to zero inflation.

The law states that retirees - federal, military and Social Security - will get a raise each year to help people keep pace with inflation, as measured by the CPI. And thanks to spiking oil prices, retirees got a 5.8 percent COLA in January, 2009. That was the largest since the keep-up-with-inflation formula was voted into law.

But when prices began to drop and there were months of deflation, retirees were assured that no benefits would be cut. But that was not enough for many of the hard-pressed retirees, especially those modest or minimal checks from Social Security.

So Congress and the White House made sure that most of the no-COLA Social Security retirees get a $250 payment this year. And that's likely to happen again next year. What that will mean to federal retirees who get annuities from the CSRS or FERS retirement system remains to be seen.

To reach me: mcausey@federalnewsradio.com


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