No COLA for 2010 Projected; Count Still Negative

A CBO estimate projects that there will be no retiree COLA in 2010, and that inflation will remain generally low for several years as the economy continues to feel the slowdown effects of the recession. According to the latest COLA count, with four months left in the count toward the January figure, the count remains negative at -3.1, following an increase in May in the inflation index used in the count of 0.4 percentage points. If the count finishes negative, benefits will be frozen although not reduced. Because the COLA for Social Security benefits is calculated in a similar way, there likely will be no COLA in 2010 in that program either, and also likely no increase in the maximum amount of earnings subject to Social Security tax, currently $106,800, said CBO. In turn, says a Senate Budget Committee analysis, provisions of Medicare law designed to prevent lower-income retirees from suffering a net loss of income if Medicare premium costs outstrip increases in Social Security benefits could result in premiums for those beneficiaries being frozen while higher-income beneficiaries would end up paying an even steeper increase than otherwise would be the case.