Lawmakers Seek to Increase Retiree COLA for Next Year to 3%

A group of 42 House Democrats last week introduced legislation that would increase the 2021 cost of living adjustment for Social Security beneficiaries and federal retirees to 3%, after advocacy groups roundly criticized the automatic 1.3% increase slated for next year.

Last week, the Social Security Administration announced that the annual increase in Social Security benefits and federal employee retirement annuities would be 1.3% in 2021. That figure is automatically calculated based on the annual increase in the consumer price index for workers (CPI-W) for the third quarter of the calendar year.

That figure was met with heavy criticism from federal employee groups and other advocacy organizations, who said the cost of living adjustment does not adequately reflect the increase in prices seen by seniors, particularly during the novel coronavirus pandemic. The 1.3% increase is the lowest in the last four years—in 2020, the COLA was 1.6%; in 2019, 2.8%; and in 2018, 2%.

Rep. Peter DeFazio, D-Wash., and 41 Democratic colleagues introduced the Social Security Expansion Act (H.R. 8598), which would set the 2021 cost of living adjustment at 3% and base future increases on the annual change in the consumer price index for the elderly (CPI-E). DeFazio noted that an adjustment of 1.3% would mark the second lowest increase in retirement annuities in the history of automatic Social Security benefit adjustments.

 “This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19,” DeFazio said. “Raising the COLA to 3% for 2021 will provide seniors with an immediate, crucial lifeline during the ongoing coronavirus crisis. It’s also critically important that Congress provide a permanent fix to the COLA formula that actually reflects the real costs that seniors face.”

Retiree and federal employee groups have long urged lawmakers to shift the basis for cost of living adjustments from the CPI-W to the CPI-E, arguing that the latter index more accurately reflects how seniors need to spend their money, particularly when it comes to essentials like health care and prescription drugs. Former Vice President and Democratic presidential nominee Joe Biden told the National Active and Retired Federal Employees Association last month that if elected, he would work to implement that change.

The 1.3% cost of living adjustment slated for next year came under renewed fire last week after the Office of Personnel Management announced that employees and retirees’ share of premiums for insurance under the Federal Employees Health Benefits Program would increase by an average of 4.9% next year. Employee groups said that increase threatens to subsume the annuity increase for retirees and the slated 1% across-the-board pay raise for current federal workers.