Lack of Social Security COLA could adversely affect some federal workers

As expected, the Social Security Administration announced on Thursday that there would be no cost-of-living adjustment for Social Security payments in 2010, a development that could hamstring some federal employees as they try to pay for increased medical costs next year.

President Obama on Wednesday announced a proposal to give 57 million retirees -- including 1 million local, state and federal government employees who do not receive Social Security benefits -- an additional $250 in individual payments in 2010 as part of the economic recovery package. This plan -- which must be approved by Congress -- was proposed in September by Sen. Bernie Sanders, I-Vt.

SSA's announcement was based on a report from the Bureau of Labor Statistics, also released on Thursday, that showed no increase in the Consumer Price Index for urban wage earners and clerical workers from the third quarter of 2008 to the third quarter of 2009. In particular, food and energy prices fell during the past year. This is the first time since the cost-of-living adjustment was implemented in 1975 that there has been no adjusted increase for Social Security benefits.

Most Medicare recipients are protected from premium hikes through a hold-harmless provision in the current law that states that such increases for Medicare Part B cannot be more than Social Security cost-of-living adjustments, but those protections don't apply to state, local and federal government employees who do not receive Social Security payments. In particular, employees in the Civil Service Retirement System, who do not receive such benefits, could be affected, according to the National Active and Retired Federal Employees Association.

The House in September overwhelmingly passed H.R. 3631, the Medicare Premium Fairness Act, which would use money from the Medicare Improvement Fund to cover premium increases for those outside the hold-harmless provision.

But the bill is still before the Senate Finance Committee. According to the office of Chairman Max Baucus, D-Mont., the senator tried to pass the bill through unanimous consent last week, but Republican objections blocked it.

Daniel Adcock, legislative director for NARFE, said he was hopeful the bill would pass the Senate in time to take effect in 2010.

Adcock said the additional $250 payments from the federal government were necessary because although inflation is down, mostly due to reduced energy prices, the costs that typically hit seniors, such as health care, continue to rise.

If Congress approves the proposal to provide the additional money to seniors, those outside the Social Security system most likely would receive the payment as a tax credit, while everyone else would obtain it through their Social Security payments, Adcock said.