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A cost-of-living adjustment (COLA) is an increase in income that is meant to reflect the cost of living. The federal government applies a COLA every year to Social Security benefits. Companies, on the other hand, that operate in a competitive marketplace do not typically use COLA. Most determine their employees’ income based on merit instead of the average cost of living.

If you plan to apply for Social Security disability benefits or are currently receiving benefits, you will likely come across the term “cost-of-living adjustment.” We have outlined everything you need to know about COLA below. If you need help understanding any part of your benefits, our Los Angeles Social Security lawyers at the Law Offices of Dr. Bill LaTour are here to help.

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The History of COLA: What Is its Purpose?

COLA was added to Social Security benefits in 1975 in order to protect beneficiaries from double-digit inflation at the time. This change increased people’s benefits in accordance with rising prices. COLA rose 8.0 percent in 1975 and reached as high as 14.3 percent in 1980 to account for inflation.

Since then, inflation levels have decreased, resulting in little to no COLA increases. In fact, it has been at 4.0 percent or less since 1992, with the exception of 2008.

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are designed to provide financial assistance to individuals whose disability or medical condition prevents them from holding a job.

The purpose of the COLA is to ensure that inflation doesn’t lower the value of these important benefits. This allows beneficiaries, who are provided a fixed monthly amount, to continue to account for everyday essentials.

How is it Calculated?

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COLAs are based on percentage increases in what’s known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This is the federal government’s official metric for inflation.

The Bureau of Labor Statistics determines the CPI-W, which is then used by the SSA to calculate the COLA each year. Their formula uses the percentage increase in the CPI-W from the third quarter of one year to the third quarter of the following year.

In other words, if the Consumer Price Index shows that the prices of goods and services have gone up, a COLA will be made to Social Security benefits that is typically equal to that increase.

For example, if you received $10,000 last year in Social Security benefits and the COLA for this year is 4.1 percent, your benefits for this year would be $10,410.

If there is no increase in the CPI-W, no COLA will be made.

What Is the COLA for 2019?

In October 2018, the Social Security Administration (SSA) announced that the more than 67 million Americans receiving Social Security and SSI benefits would see a 2.8 percent increase in their benefits for 2019.

Are COLAs Applied Automatically?

If the Consumer Price Index increased, a COLA will be made automatically. You do not have to contact the SSA or apply to receive a cost of living increase in your benefits. If a COLA is applicable, beneficiaries of SSDI will begin receiving their increased benefits in January of the year the COLA is applied to, and SSI beneficiaries will receive their first increased payment in December of the year prior. In its 2019 COLA announcement, the SSA stated:

“The 2.8 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 62 million Social Security beneficiaries in January 2019. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2018.”

SSDI/SSI recipients are normally notified of their specific new benefit amount by mail in early December. However, you can now also review your COLA notice online through your ‘my Social Security’ account.

Our Los Angeles Social Security Lawyers Can Help You Understand the Factors That Can Affect Your Monthly Disability Payments

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The Social Security system is incredibly complex and can be intimidating for people attempting to receive benefits. In addition to the cost-of-living adjustment, there are many factors that can affect your benefits.

We know the challenges that life with a disabling physical or mental disability can present. If you’re struggling to apply, were denied, or simply have questions regarding your current benefits, our Los Angeles Social Security lawyers can assist you.

We’ve been helping disabled individuals in the Greater Los Angeles area, the Inland Empire, and Orange County get the disability benefits they need for years. Call Dr. Bill LaTour and his team today at 800-803-5090 to schedule a free consultation.