Bill would change equation for seniors when calculating COLAs

The CPI-E Act would require federal retirement programs to use the Consumer Price Index for the Elderly (CPI-E) when calculating cost-of-living adjustments. Cur...

Elderly retirees have a dramatically different life than younger workers, so why should their cost-of-living increases be based on the same math?

Rep. John Garamendi (D-Calif.) is answering that question with new legislation aimed at calculating COLAs for seniors on the Consumer Price Index for the Elderly (CPI-E), rather than the current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Called the CPI-E Act, the bill is designed to ensure that the benefits of Social Security insurance keep pace “with the real costs that seniors endure,” Garamendi said, like prescriptions, medical services and in-home care.

Right now COLAs for seniors are based “on a young or middle-aged worker, somebody that’s out there in the working field, driving a car, raising a family,” Garamendi said. “Because their COLA has been based on something that’s not relevant to them, they have fallen behind, their insurance benefit has become less and less able to keep up with the costs that they have.”

The 2017 COLA is 0.3 percent.

Retiree COLAs are supposed to be based on the rise in the CPI from the third quarter of the current year (July, August and September) over the third quarter of the previous year.

Retirees didn’t get a COLA last year. In 2015, they got 1.7 percent and in 2014 the retiree COLA was 1.5 percent. Federal workers got a 1 percent raise (not including locality pay) in 2016, 2015 and 2014. Between 2011 and 2013, there was no federal pay raise.

Richard Thissen, president of the National Active and Retired Federal Employees Association, said in the past two years, the actual cost-of-living for seniors increased by 2.7 percent — 2.1 percent in 2016 and 0.6 percent in 2015. Those numbers should have been reflected in the 2016 and 2017 COLAs.

“That is what seniors should have received and that is what this bill will provide them,” Thissen said, adding that those numbers equate to roughly $950 extra per year for the average federal annuitant. “What this bill says to seniors is that your cost-of-living adjustments will more accurately reflect your cost-of-living. That’s it, it’s as simple as that.”

The Labor Department uses the CPI to measure inflation or deflation nationwide on a monthly basis. Since oil prices dropped dramatically, the rate of inflation has been flat.

“The way the COLA is measured now is flawed,” said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare. “It looks at how inflation has impacted a wage earner. It does not take into account inflation impact on the goods and services seniors rely on. So last year when the price of gasoline plummeted, it dramatically pushed down the COLA. There was a zero COLA.”

Meredith Somers discusses this story on Federal Drive with Tom Temin

Garamendi said the CPI-E calculation won’t meddle with Social Security or “erode the system” as some fear.

More people are working as a result of normal growth of the economy, he said, and wages are increasing faster than cost of living increases for the elderly.

“I don’t believe it’s going to erode the financial standing of Social Security insurance,” Garamendi said. “It’s certainly going to significantly help the erosion that has taken place for the seniors as they have been trying to eke out a … living based upon their Social Security benefit.”

Garamendi’s bill has more than 20 co-sponsors so far, and the hope is to gather additional support for the bill so that next year he can “hopefully be able to put some real momentum behind this.”

The congressman said he thinks with midterm elections next year, there will be more support for a bill that helps half of voters in candidate’s congressional district.

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