Wonderful news today! Your taxes won't be increasing, your healthcare and medical costs will decrease, and everyone is getting a COLA increase!
So many wish that were true.
The unfortunate reality is Social Security recipients will not be seeing a COLA increase in 2016, and this will be the third time this is happening in the past six years.
Social Security Cost-Of_living Adjustments since 2008:
January 2008 -- 2.3%
January 2009 -- 5.8%
January 2010 -- 0.0%
January 2011 -- 0.0%
January 2012 -- 3.6%
January 2013 -- 1.7%
January 2014 -- 1.5%
January 2015 -- 1.7%
January 2016 -- 0.0%
That's approximately 65 million retired and disabled workers, disabled veterans, federal retirees along with their spouses and children, collecting Social Security benefits every month in the United States. More than two-thirds of seniors depend on their Social Security benefits for more than half of their incomes.
"Social Security recipients have lost nearly a fourth of their buying power over the last 15 years, according to the Senior Citizens League. Consider: The cost of housing, often a retiree’s greatest expense, rose 44% since 2000; heating oil, 159%; eggs, 117%; and gasoline, 76%. In contrast, Social Security COLAs averaged just 2.2% per year since 2000, or just 36.3% overall." -Robert Powell, Special to USA TODAY, October 15,2015
According to the 2014 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL DISABILITY INSURANCE TRUST FUNDS (OVERVIEW):
There's more bad news for Social Security recipients: a no COLA increase means higher medical costs, and who pays more? Those that made more.
Hold Harmless Rule
According to NOLO: "There is a special rule for Social Security recipients called the: hold harmless rule, that ensures Social Security checks will not decline from one year to the next because of increases in Medicare Part B premiums. The hold harmless rule applies to most, but not all, Social Security recipients. Most people who receive Social Security disability or retirement benefits and Medicare Part B (coverage for doctor visits) are eligible for protection under this rule. Whether this rule comes into play in a particular year depends on the amount of COLA and the Medicare Part B premium increase.
The hold harmless rule applies to all Social Security recipients except the wealthy (defined as those earning $85,000 for an individual or $170,000 for a married couple) and those who are receiving Medicare for the first year. In addition, there are low-income Medicare recipients whose Medicare premiums are paid by their state Medicaid agencies, and those premiums are not protected by the hold harmless provision.
The hold harmless rule also does not apply to the Medicare Part D (prescription drug) premium, but that program just started in 2006 and has not seen significant premium increases yet."
There are approximately 30% of Social Security beneficiaries that do not fall under this "hold harmless" umbrella. This amounts to roughly 7.5 million retirees.
There seems to be quite a disparity between what Social Security recipients are facing nationwide ,versus what is happening locally with our municipal retirees.
The city of Warwick has four pension plans.
The (1.) Municipal Plan covers non-public safety employees. The retiree COLA is based on how well the pension fund is performing and if there are excess earnings. For the past seven years, municipal retirees have not received a COLA. This fiscal year however, active municipal employees received a three year, 3% compounded salary increase (9.53% compound increase which includes increases in FICA/Medicare by $85,729 over next three years.
The older (2.) Police/Fire I plan, the COLA is based on whatever raises active city employees receive. This fiscal year, police received a 3% salary increase and fire received a 1.5% salary increase (compounded increases over next three fiscal years).
In the newer (3.) Police II and (4.) Fire II plans, retirees automatically receive a three 3% compounded COLA. That means each year, a 3% COLA increase is applied to the previous year’s pension total, so the pension builds upon itself every year.
Additionally, Warwick taxpayers are also currently paying (this fiscal year), $2,648,820 for city employee FICA and $854,702 for city retiree Medicare.
That's $11,543,823 Warwick taxpayers are currently paying this fiscal year to cover the healthcare costs for 924 city retirees, and this total doesn't even include life insurance, severance pay and sick pay bonuses.
As is the case for Social Security costs exceeding incomes, so is the case for the financial health of the city of Warwick, for its : city debt is currently exceeding city assets.
Right now, the Warwick pension and healthcare unfunded liabilities are in excess of six hundred million dollars ($600,000,000)., and our city's healthcare liabilities (OPEB) are ZERO FUNDED.
(*Note: just last year alone, the city's unfunded healthcare liabilities buried us deeper into the financial debt hole by another $17,000,000, seventeen million. Five years ago, the healthcare actuary highly suggested the city start putting away $20.2 million per year to fund our OPEB. To date, the city has funded it by $0).
For years now, the healthcare experts and the citizens of Warwick have repeatedly shared their concerns, yet Warwick city leadership continues to drag its heels when it comes to cracking down on the ever increasing healthcare costs, and the spiraling *out-of-control* unfunded healthcare liabilities.
Local taxes have increased fifteen straight years and it doesn't look like there is any tax increase end in sight. Local leadership continues to fail, year after fiscal year, to implement the necessary changes that will protect and retain our active and retired city employees and local taxpayers.
Warwick cannot afford to continue to pay for city retiree healthcare while retirees and their spouse's pay nothing... it is unfair and unethical. Social Security retirees are not receiving a COLA and Warwick families and business owners face their own financial burdens associated with their own healthcare costs. How is it even morally logical, never mind fair, that some city retirees receive a 3% compounded annual COLA regardless, some get nothing, and others get what active employees get? It simply makes no SENSE.
I would love to know how many Warwick city retirees are still living in Warwick or anywhere in the state of R.I? How many Social Security recipients are still here and how many are planning to leave? How could we ever expect our retirees living on a fixed income, not receiving a COLA next year, to stick around? I wonder how many are just stuck here. What will Social Security recipients on a fixed income be cutting out of their spending budget next year? Yet, the city just increased its spending by almost five million ($4.8 million) this fiscal year.
It's no wonder why more and more are leaving the city of Warwick and /or the state of R.I... the costs of living are brighter elsewhere.
Other Sources: http://www.pbs.org/newshour/making-sense/social-security-cola-means-big-medicare-headache/
Warwick General Fund Budget, Fiscal Year 2015-2016