Dick Kaplan on Social Security’s “no COLA” year….

The Social Security Administration announced Sept. 30 that therewould be no increase in retirement benefits next year – the firstfreeze in more than three decades. Law professor Richard L. Kaplan, anexpert in elder law, discusses the reasoning and the consequences in aninterview with News Bureau Business & Law Editor Jan Dennis.

What is the basis of the freeze?

Itis a very unusual development. Since automatic cost-of-livingadjustments began in 1975, there has never been a year when SocialSecurity benefits did not increase. This year’s result is due to thefact that the Consumer Price Index has gone down during the 12-monthperiod that is used to adjust these benefits. The law prohibitsbenefits from being cut, so the result is that benefits will remainunchanged.

Many older people complain that their cost of living, especiallymedical expenses, continued to rise despite the CPI decline. So shouldthey get an increase nonetheless?

Current law ties adjustment of Social Security benefits to the CPIcomputed for “urban wage earners and clerical workers.” That index maynot be especially representative for older Americans whose consumptionpatterns differ from the so-called basket of goods that is used toderive the CPI. But until the government designs a variant of the CPIspecifically for older people, no cost of living increase is allowableunless the currently computed CPI rises.

Read more here:  http://illinois.edu/lb/article/72/30133