Q & A

Is it possible for COLA to be 0% or even a negative amount?

Complete Question: The government says COLA is based on the increase in costs of consumer goods and services. But it seems so low. Is it ever possible for the COLA to be 0%? Or even worse, could Social Security ever claim a decrease in the costs of goods, thus resulting in a negative COLA?

Answer: COLA is based on annual increases in the cost of living. The percentage increase is determined by the percent change in the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), which is measured by the Bureau of Labor Statistics (BLS). Over the years, the law has changed exactly how the CPI-W is used for COLA purposes; however, the current law has been the same since 1986.

Currently, COLA is determined by calculating the percent change in the CPI-W from the third quarter of last year to the third quarter of this year. For example, from the third quarter of 2013 to the third quarter of 2014, the CPI-W increased by 1.7%; therefore, the COLA for 2015 is 1.7%. (COLA percentages are rounded to the nearest one-tenth of a percent).

It is possible to have a 0% change in CPI-W, which results in no COLA increase for Social Security recipients. This actually occurred fairly recently in 2009 and 2010. When this happens, the new COLA is determined by calculating the percent change in CPI-W from the third quarter of the last year in which there was a COLA to the third quarter of the current year. For example, when determining the COLA for 2011, Social Security calculated the percent change in CPI-W from the third quarter of 2008 to the third quarter of 2010, which resulted in a 3.6% COLA increase for 2011.

Even though it is possible to have no COLA increase (or a 0% COLA), current law prohibits COLA decreases even if the percent change in CPI-W is negative. Social Security law dictates that there will be a COLA increase as long as there is an increase in the average of the CPI-W from the third calendar quarter of the prior year to the third calendar quarter of the current year of at least 0.1% (one-tenth of a percent). If the CPI-W increases by less than 0.05%, or if the CPI-W decreases, there will not be a COLA.

Therefore, the short answer to your question is that the absolute minimum that the COLA can be is 0%.

C.J. Miles, MSA, MBAHCM
Research Analyst & Certified Social Security Advisor
AMAC Foundation
Notice: If you have any additional questions about COLA or any other Social Security issue, you can reply below. When replying to this website, please do not provide any personal identification information, such as Social Security numbers. If you would like to discuss your situation privately, you can email C.J. at [email protected].

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