Paltry COLA Will Leave Postal, Federal Retirees Worse Off

APWU Working with Allies to Address Unintended Consequences

October 20, 2016

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The APWU has joined with 74 other organizations to urge Congress to correct an outrageous disparity, Retirees Department Director Nancy Olumekor reports.

Unless the legislature takes action, a miniscule 0.3 percent 2017 cost-of-living adjustment (COLA) for millions of retirees will result in a substantial reduction in the annuities of hundreds of thousands of postal and federal employees who are enrolled in Medicare.

The decrease is the result of the so-called “hold harmless” provision of Social Security law, explains Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE):

“Under the hold harmless provision of the Social Security Act, the dollar increase in Medicare Part B premiums is limited to the dollar increase in an individual’s Social Security benefit. With such a low COLA for Social Security benefits, about 70 percent of beneficiaries will be held harmless, meaning their Medicare Part B premiums will increase, on a dollar-to-dollar basis, only in proportion to the increase in their Social Security checks. The baseline premium for current beneficiaries held harmless is $104.90/month.

“However, the remaining 30 percent of Part B beneficiaries who are not held harmless, including federal retirees who are covered by the Civil Service Retirement System (CSRS) and who do not receive Social Security benefits, will shoulder the bulk of the cost of the 2017 premium increase. As projected by the Medicare Trustees, these individuals will see their premiums rise significantly. Without the effect of the hold harmless provision, there would be little to no increase in the standard Medicare premium.”

Thissen went on to say, “It is grossly unfair that those who pay their premiums from something other than Social Security must pay more in premiums. There is no reason why two people with the same income should pay different Medicare premiums based on whether the money is coming from a Social Security check or a federal annuity.”

The APWU has joined with NARFE and other allies to urge Congress to correct the discrepancy. In a Sept. 27 letter to House and Senate leaders, the organizations wrote:

“As it did in 2015, Congress should make it a priority to shield people with Medicare from the unintended consequences resulting from the application of the hold harmless provision. No beneficiary should be forced to pay more than they otherwise would simply because some beneficiaries are afforded critical protections against reductions in their Social Security checks. We urge Congress to act accordingly and swiftly following the announcement of the 2017 COLA. The longer Congress delays, the more uncertainty for our nation’s retirees, people with disabilities, and their families who are counting on you.”

In addition to the disparity facing postal and federal retirees, the tiny increase doesn’t reflect the increase in costs most retirees face. The COLA formula itself, the Consumer Price Index for Urban Wage Earners, CPI-W, “clearly does not reflect how seniors spend their money, particularly in light of recent Medicare premium increases,” Thissen noted. “The current measure, the CPI-W, fails to accurately reflect changes in consumer prices experienced by seniors, particularly those related to health care.”


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