Federal Groups Blast Potential Fiscal Cliff Switch to 'Chained CPI'

[ProSense]

Federal Groups Blast Potential Fiscal Cliff Switch to 'Chained CPI'

By Kellie Lunney, Government Executive

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Moving to the chained CPI would be “unfair” and “reduce significantly earned retirement benefits,” according to a Dec. 17 letter from the National Active and Retired Federal Employees Association to members of Congress. President Obama and House Speaker John Boehner, R-Ohio, both reportedly have offered proposalsthat include switching from the current formula to what’s known as the chained CPI to calculate annual cost-of-living adjustments for federal retirees and Social Security recipients.

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COLAs currently are determined using a formula that takes into account increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, but some experts argue that a chained CPI, which takes into account modifications in purchasing habits as prices change, provides a clearer understanding of inflation.

NARFE criticized that assessment. “Both the current index and the chained CPI fail to accurately reflect the costs most seniors face,” the letter stated. “Notably, they do not account for how much seniors spend on health care, the cost of which continues to outpace inflation of other consumer goods.” The group also said using the chained CPI would increase taxes on lower- and middle-income taxpayers. “The average 65-year-old retiree, receiving about $15,000 in Social Security benefits after earning an average income of about $43,000, would need to have saved an additional $28,000 to account for the lost future income,” NARFE stated.

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None of this is welcome news to retirees who already aren’t receiving an overly generous COLA in 2013. Federal retirees will receive a 1.7 percent cost-of-living adjustment in 2013, according to figures the Bureau of Labor Statistics released in October. And the COLA amount that recipients actually end up with is affected by Medicare Part B premiums, since those premiums are deducted from Social Security payments. The Centers for Medicare and Medicaid Services announced in November that the 2013 monthly premiums would increase 5 percent, so most retirees will end up with less than the 1.7 percent COLA.

- more -

http://www.nationaljournal.com/congress-legacy/federal-groups-blast-potential-fiscal-cliff-switch-to-chained-cpi-20121219

[pscot]

1. Rising insurance premiums more than offset

my annual cola increases. I lose ground every year. Chained CPI will accelerate that process.

[Cleita]

2. Yes, I would probably do all right if I didn't have all the insurance costs that

bite into my Social Security. I will pay more than $300 a month for those insurances in 2013. My COLA increase this year was $25 in round figures.

[rhett o rick]

3. Exactly. Health Insurance wipes out all of a typical COLA if you are even fortunate to get one. nm

[jsmirman]

4. Terrifying