Exploring the Additional Cost-of-Living Increase for Social Security Benefits, § 404.278

The Social Security Administration (SSA) may provide an additional cost-of-living increase beyond the standard calculations described in § 404.275.

This blog post outlines the conditions and process for determining the additional increase, as described in § 404.278.

1. Conditions for an Additional Increase (§ 404.278(a))

An additional cost-of-living increase may be granted if:

a. The OASDI fund ratio is more than 32.0 percent in the given year in which a cost-of-living increase is due; and b. In any prior year, the cost-of-living increase was based on the AWI as the lower of the CPI and AWI.

2. Measuring Period for the Additional Increase (§ 404.278(b))

The measuring period for the additional increase begins with the year in which the insured individual became eligible for old-age or disability benefits, or died before becoming eligible. It ends the year before the first year in which a cost-of-living increase is due based on the CPI and the OASDI fund ratio is more than 32.0 percent.

3. Compounded Percentage Benefit Increase (§ 404.278(c))

To compute the additional cost-of-living increase, the compounded percentage benefit increase (CPBI) must be calculated for both the cost-of-living increases that were actually paid during the measuring period and for the increases that would have been paid if the CPI had been the basis for all the increases.

4. Computing the CPBI (§ 404.278(d))

The computation of the CPBI involves obtaining the sum of the actual cost-of-living increase percentage for each year in the measuring period, multiplying the resulting amounts, subtracting 1 from the last product, and multiplying the remaining product by 100. This process is repeated for the assumed CPBI using the cost-of-living increase percentages that would have been used if the increases had been based on the CPI.

5. Computing the Additional Cost-of-Living Increase (§ 404.278(e))

To compute the percentage increase, subtract the actual CPBI from the assumed CPBI, add 100 to the actual CPBI, divide the difference by the adjusted actual CPBI, multiply the quotient by 100, and round to the nearest 0.1. The result is the additional increase percentage, which is applied to the appropriate amount described in § 404.271 after that amount has been increased under § 404.275 for a given year. If the increased amount is not a multiple of $0.10, it will be decreased to the next lower multiple of $0.10.

6. Restrictions on Paying an Additional Cost-of-Living Increase (§ 404.278(f))

The additional increase will be paid only to the extent necessary to bring the benefits up to the level they would have been if they had been increased based on the CPI. However, the additional increase will be paid only to the extent that payment will not cause the OASDI fund ratio to drop below 32.0 percent for the year after the year in which the increase is effective.

Conclusion: The additional cost-of-living increase serves as a supplementary adjustment to social security benefits in specific circumstances. Understanding these conditions and the process of calculating the additional increase ensures that beneficiaries receive the appropriate adjustments to their benefits in response to changes in the cost of living.

https://www.ssa.gov/OP_Home/cfr20/404/404-0278.htm