Expert's View

Here we go again. Retirees, survivors and Social Security beneficiaries are facing a second year without a cost of living adjustment. Tied to that zero increase are the benefits of children who have lost one or both parents. They, too, won’t get an increase. Similarly, the lump-sum payment paid on death in service under FERS in certain circumstances is frozen.

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The good news for retirees and survivors is that 1) by law their annuities can’t be reduced, and 2) if they are receiving a Social Security benefit and are enrolled in Medicare Part B, their premiums won’t be increased. You can thank the “hold harmless” provision in the Social Security law for that.

On the other hand, if you are enrolled in Medicare Part B and aren’t eligible for a Social Security benefit, the news isn’t good. Your premiums will rise once again. Similarly, premiums in the FEHB program are increasing by an average of about 7 percent in 2011, the third straight year of increases in that range. So even though overall inflation is flat, costs that hit retirees especially hard are going up.

Here’s how cost-of-living adjustments for retirees and survivors have changed over time. It will give you a chance to relive the good old days and lament what’s happening now.

CSRS FERS

2005 2.7 2.0

2006 4.1 3.1

2007 3.3 2.3

2008 2.3 2.0

2009 5.8 3.8

2010 0.0 0.0

2011 0.0 0.0

I’d like t tell you that “There’ll be a brighter day tomorrow,” as it says in the song, but I can’t. Signs of economic recovery that would cause a substantial increase in the inflation index to which COLAs are tied are hard to find. And without that, we could be marking time for a long time to come. Due to a quirk in the law, the lack of a COLA for 2010 and 2011 means that the starting point in the count toward any 2012 adjustment started at the same, temporarily high, point that the index hit just before the financial crisis sent the economy into a tailspin and caused a period of deflation. So the current count began underwater and like the prior one, could stay there.