Cost of Living Increase Nixed for Social Security

By Stephen Ohlemacher, Associated Press Writer

WASHINGTON (AP) — There will be no cost of living increase for more than 50 million Social Security recipients next year, the first year without a raise since automatic adjustments were adopted in 1975, the government announced Thursday.

Blame falling consumer prices. By law, cost of living adjustments are pegged to inflation, which is negative this year because of lower energy costs. Social Security payments, however, cannot go down.

Thursday's announcement comes a day after President Barack Obama called for a second round of $250 stimulus payments for seniors, veterans, retired railroad workers and people with disabilities.

The payments would match the ones issued to seniors earlier this year as part of the government's economic recovery package. The payments would be equal to about a 2% increase for the average Social Security recipient.

Social Security payments increased by 5.8% in January, the largest increase since 1982. The big increase was largely because of a spike in energy costs in 2008.

"Social Security is doing its job helping Americans maintain their standard of living," said Social Security Commissioner Michael J. Astrue.

But, he added, "In light of the human need, we need to support President Obama's call for us to make another $250 recovery payment for 57 million Americans."

The Labor Department reported Thursday that consumer prices had declined 2.1% from July through September compared to the same period a year ago. The cost-of-living adjustment for Social Security is based on the change in consumer prices from the third quarter of one year to the next.

The lack of a cost of living increase triggers several provisions in the law. Among them, the amount of wages subject to Social Security payroll taxes will remain unchanged. The first $106,800 of a worker's earned income is currently subject to the tax.

Also, Medicare Part B premiums for the vast majority of Social Security recipients will remain frozen at 2009 levels. However, premiums for the Medicare prescription drug program, known as Part D, will increase.

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