NEW YORK, NEW YORK – There will be no cost-of-living (COLA) increase for 57 million Social Security beneficiaries next year because consumer prices have fallen, the Social Security Administration announced on Thursday. It marks the first time that Social Security benefits have not been increased year over year since the cost-of-living adjustment was put into effect in 1975. To help counterbalance the hit, President Obama is calling on Congress to send another $250 relief payment to seniors and other Americans to stem the economic strain.
Last year, Social Security beneficiaries got a 5.8% COLA adjustment, the largest since 1982, largely because of the spike in energy prices. Since there will be no COLA for benefits, the law also prohibits the Social Security Administration from increasing the maximum amount of earnings subject to the Social Security tax. This year and next, the first $106,800 of a worker’s earnings is subject to the 12.4% Social Security tax. Workers typically pay half of that and their employers pay the other half.
It’s still not clear yet what if any changes will be made to seniors’ Medicare Part B premiums for hospital care next year. The Social Security Administration said in its announcement that if there is an increase that a “hold harmless” provision in the law would protect 93% of Social Security beneficiaries from the increase.
Obama’s proposed $250 payment is roughly equal to a 2% increase in benefits for the average Social Security beneficiary. Congress approved a similar payment as part of the $787 billion economic recovery act enacted in February. As with the first $250 recovery payment, the second one will be exempt from income tax. If approved by Congress, the payments would be sent out in 2010, most likely in the first half. According to White House estimates, the measure would cost $13 billion over 10 years.
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