What is a COLA?
Legislation enacted in 1973 provides for cost-of-living adjustments, or COLAs. With
COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with
The latest COLA is 1.7 percent for Social Security benefits and SSI payments.
Social Security benefits will increase by 1.7 percent beginning with the December
2012 benefits, which are payable in January 2013. Federal SSI payment levels
will also increase by 1.7 percent effective for payments made for January 2013.
Because the normal SSI payment date is the first of the month and January 1 is a
holiday, the SSI payments for January are always made at the end of the previous
How is a COLA calculated?
The Social Security
Act specifies a formula for determining each COLA. According to the formula, COLAs
are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor
A COLA effective for December of the current year is equal to the percentage increase
(if any) in the average CPI-W for the third quarter of the current year over the average
for the third quarter of the last year in which a COLA became effective. If there is an
increase, it must be rounded to the nearest tenth of one percent. If there is no
increase, or if the rounded increase is zero, there is no COLA.
The last year in which a COLA became effective was 2011. Therefore the law requires
that we use the average CPI-W for the third quarter of 2011 as the base from which
we measure the increase (if any) in the average CPI-W. The base average is
223.233, as shown in the table below.
Also shown in the table below, the average CPI-W for the third quarter of 2012 is
226.936. Because this average exceeds 223.233 by 1.7 percent,
the COLA effective for December 2012 is 1.7 percent. The COLA calculation, with the result rounded to the nearest
one-tenth of one percent, is:(226.936 - 223.233)
/ 223.233 x 100 = 1.7 percent.
|Third quarter total
|Average (rounded to the nearest 0.001)