The SSA has made several Cost-of-Living-Adjustment (COLA) increases in benefits for 2020, but the changes fill a mixed bag of news for recipients. While the amount of benefit payments and earnings thresholds for disability payments have increased, so have the costs for Medicare Part B.
After reviewing increases to the Consumer Price Index (CPI-W) for the third quarter of 2018 through the third quarter of 2019, the Social Security Administration has implemented several changes to Supplemental Security Income (SSI) for 2020 benefit recipients. The changes consist of:
- A 1.6% increase cost of living adjustment (COLA).
- An increase in yearly earnings subject to the Social Security tax from $132,900 to $137,700.
- Social Security beneficiaries age 65 and younger can now earn up to $18,240 per year before benefits are temporarily withheld.
- An increase to 66 years and 8 months of age for full retirement for those born in 1958.
Social Security Disability Thresholds, the amount of money benefit recipients can earn before losing SSDI payments.
Substantial Gainful Activity(SGA) has also seen increases in the gross amounts.
- For non-blind benefit recipients, the limit of SGA has gone from $1,220 per month to $1,240, an increase of $20.
- The threshold for blind recipients has increased from $2,040 to $2,110, an increase of $70.
- The Trial Work Period limit has increased $30, up from $880 per month to $910.
What is COLA?
When an SSI recipient’s actual costs rise faster than their COLA, the buying power of Social Security decreases. The SSA uses COLA to prevent inflation from decreasing the purchasing power of Social Security and Supplemental Security Income benefits. Despite this, a study by The Senior Citizen League found that this buying power has eroded 33% since 2000.
The SSA bases any cost of living adjustment on increases in the Consumer Price Index from the third quarter of the last year benefits increased through the third quarter of the next.
The Bureau of Labor Statistics within the US Department of Labor calculates the CPI-W, creating the official numbers used by the SSA. Based on this increase for 2018-2019, this adds up to a 1.6% increase. While better than nothing, the 2020 increase amounts to more than a percentage point less than the previous 2.4%, the lowest COLA since 2017.
TSCL’s Social Security policy analyst Mary Johnson notes Social Security benefits have worked out to 17.5 percent lower today than if inflation had averaged the more typical 3% over the same period. “Over ten years, that’s about $17,299 less in retirement income for someone with average benefits,” she said.
What does it mean?
The average payout for retired workers will increase about $25 to $1,502 per month. Married couples claiming benefits can expect to see approximately $40 more for an average total of $2,531 per month. The maximum taxable income will see an increase of $4,800 for a total maximum of $137,000, and workers will pay 6.2% of earnings into Social Security until they exceed this maximum.
Medicare Part B effect
“Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A.”
According to an assessment by Disability World, Social Security recipients on the low end of benefits will see little if any of this year’s increase.
“If premiums rise by $8.80 or more, and if the cost-of-living adjustment (COLA) is 1.6 percent as we estimate, then Social Security recipients with benefits of about $550 or less are at risk of seeing the Part B premiums take their entire COLA, leaving nothing extra to deal with other rising costs,” Johnson told The Senior Citizen League.
Monthly premiums for standard Medicare Part B enrollees will rise to $144.60 for 2020, $9.10 more than the $135.50 in 2019. The annual deductible for all Medicare Part B has increased to $198, $13 more than the annual deductible of $185 in 2019.
How will this affect you?
The rise in the cost of Medicare Part B means that Social Security recipients with benefits of $550 or less could see their entire COLA increase eaten away by Part B Coverage.
But this isn’t universally true.
The Social Security code contains a special provision, called the “hold harmless rule,” designed to prevent Social Security checks from decreasing with the change of the year. As explained by Investopedia:
- The Medicare hold harmless provision prevents a recipient’s Social Security benefits from being reduced due to Medicare Part B premiums.
- People who pay Part B premiums directly to Medicare or who have premiums paid by Medicaid do not qualify for the hold-harmless provision.
- To qualify, recipients must receive Social Security benefits and have their Medicare Part B premiums paid by those benefits for a minimum of two months in the previous calendar year.
- Disability World says that the rule protects about 70% of
- recipients, but those with incomes so low that state Medicare pays for Part B
- coverage, individuals making more than $85,000 per year, and couples making
- more than $175,000 per year do not receive protection under the provision.
The Centers for Medicare and Medicaid Services attribute the increase in the Part B premiums and deductibles to rising spending on physician-administered drugs.
When to Contact a Legal Expert
If you have questions about your Social Security benefits, particularly SSDI and SSI, or want to make sure you’re getting the most out of your entitlement, contact the experts at The Good Law Group. They can guide you through the changing rules and application process, helping you cut through the government bureaucracy, especially when it comes to disability benefits.
With more than 30 years of experience, the attorneys at The Good Law Group can help you apply for benefits, contest denials, and make sure you get all the benefits you deserve. Contact them through e-mail or live chat on the website, or call them at (847) 577-4476 for a free case evaluation today.