The Social Security Administration (SSA) announced on Tuesday, October 18, that for 2017 there will be a 0.3 percent increase to the monthly Social Security benefits for more than 60 million recipients.
The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.
The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.
Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation.
Beginning in 1975, Social Security started automatic annual cost-of-living allowances. The change was enacted by legislation that ties COLAs to the annual increase in the Consumer Price Index (CPI-W), according to the SSA.
Some of the more notable changes that are taking place in 2017:
The maximum amount of earnings subject to the Social Security tax (maximum taxable) will increase to $127,200.
The earnings test thresholds for 2017 will increase from $15,720 to $16,920 for all years prior to a beneficiaries full retirement year. During the year a worker turns full retirement age the earnings threshold will increase from $41,880 to $44,880, which impacts all months prior to a beneficiary's DOB.
For a full list of the updates, print or download a copy of the fact sheet and have it accessible for you client’s questions.