Social Security news: 2023 COLA looking like 8.7% + legislation to eliminate the WEP and GPO makes it out of House committee.
In the middle of Summer, as inflation was rising, the CPI-W index was indicating the 2023 Cost-of-Living Adjustment (COLA) could be the first increase where the percentage was double digits since 11.2% in 1981. While most professionals were estimating the 2023 COLA for Social Security to be between 7.3% and 10.8% - other groups such as the “Senior Citizens League” suggested the upcoming adjustment could be as high as 11.4%. This would’ve made it the second highest COLA since 1975, when these increases to social security benefits were first tied directly to the CPI-W inflation index. However, it appears the good news is that inflation is still high but not as intense as it was predicted to be closer to June and July.
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2023 COLA for Social Security, FERS, and CSRS
While the “Consumer Price Index for Urban and Clerical Workers” (CPI-W) does determine upcoming adjustments, only the months of July, August, and September are used to determine the actual COLA. So, because inflation was not as intense as first anticipated in these months, it looks like the actual figure will be closer to 8.7% and not 10% or higher. Federal retirees who receive a pension from the older CSRS system will see a COLA in their annuity equal to the increase seen in Social Security benefits. Because the adjustment will be more than 3%, FERS annuitants will see the Social Security COLA minus 1%, so a realistic expectation would be a 7.7% adjustment for FERS retirees.
GPO and WEP Done For At Last?
Recent statistics show that roughly 65 million Americans receive Social Security benefits and that 48 million of those are receiving retirement benefits (as opposed to disability or survivor) – and then, around 2 million of those recipients see their benefits reduced (or completely eliminated) by what is known as the windfall elimination provision (WEP). A part of the 1935 Social Security Act, the WEP limits the Social Security of those who receive a government pension (such as CSRS). Should someone subject to the WEP pass away, any beneficiary entitled to their Social Security survivor benefits would see that amount reduced or practically erased as well. This is also a product of the 1935 legislation and known as the Government Pension Offset (GPO).
As reported last month, Illinois Representative Rodney Davis made an attempt to revive the Social Security Fairness Act, which would in turn strike both the GPO and WEP from existing laws. With bipartisan support and 299 cosponsors, the bill made it out of the House Ways and Means Committee on September 20th. While several similar acts have been introduced on Capitol Hill in the past few decades, this is the first one to survive its committee approval process.
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Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
