20 C.F.R. §§ 404.270–404.278

§404.270. Cost-of-living increases.

20 C.F.R. § 404.270

Your primary insurance amount may be automatically increased each December so it keeps up with rises in the cost of living. These automatic increases also apply to other benefit amounts, as described in § 404.271.

Notes, amendments, and revision history

Amendments

[47 FR 30734, July 15, 1982, as amended at 51 FR 12603, Apr. 14, 1986]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[47 FR 30734, July 15, 1982, as amended at 51 FR 12603, Apr. 14, 1986]

§404.271. When automatic cost-of-living increases apply.

20 C.F.R. § 404.271

Besides increases in the primary insurance amounts of current beneficiaries, automatic cost-of-living increases also apply to—

(a)

The special minimum primary insurance amounts (described in §§ 404.260 through 404.261) of current and future beneficiaries;

(b)

The primary insurance amounts of people who after 1978 become eligible for benefits or die before becoming eligible (beginning with December of the year they become eligible or die), although certain limitations are placed on the automatic adjustment of the frozen minimum primary insurance amount (as described in § 404.277); and

(c)

The <I>maximum family benefit amounts</I> in column V of the benefit table in appendix III.

Notes, amendments, and revision history

Amendments

[47 FR 30734, July 15, 1982, as amended at 51 FR 12603, Apr. 14, 1986; 83 FR 21708, May 10, 2018]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[47 FR 30734, July 15, 1982, as amended at 51 FR 12603, Apr. 14, 1986; 83 FR 21708, May 10, 2018]

§404.272. Indexes we use to measure the rise in the cost-of-living.

20 C.F.R. § 404.272

(a)

The bases. To measure increases in the cost-of-living for annual automatic increase purposes, we use either:

(1)

The revised Consumer Price Index (CPI) for urban wage earners and clerical workers as published by the Department of Labor, or

(2)

The average wage index (AWI), which is the average of the annual total wages that we use to index (i.e., update) a worker's past earnings when we compute his or her primary insurance amount (§ 404.211(c)).

(b)

Effect of the OASDI fund ratio. Which of these indexes we use to measure increases in the cost-of-living depends on the Old-Age, Survivors, and Disability Insurance (OASDI) fund ratio.

(c)

OASDI fund ratio for years after 1984. For purposes of cost-of-living increases, the OASDI fund ratio is the ratio of the combined assets in the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund (see section 201 of the Social Security Act) on January 1 of a given year, to the estimated expenditures from the Funds in the same year. The January 1 balance consists of the assets (i.e., government bonds and cash) in the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, plus Federal Insurance Contributions Act (FICA) and Self-Employment Contributions Act (SECA) taxes transferred to these trust funds on January 1 of the given year, minus the outstanding amounts (principal and interest) owed to the Federal Hospital Insurance Trust Fund as a result of interfund loans. Estimated expenditures are amounts we expect to pay from the Old-Age and Survivors Insurance and the Disability Insurance Trust Funds during the year, including the net amount that we pay into the Railroad Retirement Account, but excluding principal repayments and interest payments to the Hospital Insurance Trust Fund and transfer payments between the Old-Age and Survivors Insurance and the Disability Insurance Trust Funds. The ratio as calculated under this rule is rounded to the nearest 0.1 percent.

(d)

Which index we use. We use the CPI if the OASDI fund ratio is 15.0 percent or more for any year from 1984 through 1988, and if the ratio is 20.0 percent or more for any year after 1988. We use either the CPI or the AWI, depending on which has the lower percentage increase in the applicable measuring period (see § 404.274), if the OASDI fund ratio is less than 15.0 percent for any year from 1984 through 1988, and if the ratio is less than 20.0 percent for any year after 1988. For example, if the OASDI fund ratio for a year is 17.0 percent, the cost-of-living increase effective December of that year will be based on the CPI.

Notes, amendments, and revision history

Amendments

[51 FR 12603, Apr. 14, 1986]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[51 FR 12603, Apr. 14, 1986]

§404.273. When are automatic cost-of-living increases effective?

20 C.F.R. § 404.273

We make automatic cost-of-living increases if the applicable index, either the CPI or the AWI, rises over a specified measuring period (see the rules on measuring periods in § 404.274). If the cost-of-living increase is to be based on an increase in the CPI, the increase is effective in December of the year in which the measuring period ends. If the increase is to be based on an increase in the AWI, the increase is effective in December of the year after the year in which the measuring period ends.

Notes, amendments, and revision history

Amendments

[69 FR 19925, Apr. 15, 2004]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[69 FR 19925, Apr. 15, 2004]

§404.274. What are the measuring periods we use to calculate cost-of-living increases?

20 C.F.R. § 404.274

(a)

General. Depending on the OASDI fund ratio, we measure the rise in one index or in both indexes during the applicable measuring period (described in paragraphs (b) and (c) of this section) to determine whether there will be an automatic cost-of-living increase and if so, its amount.

(b)

Measuring period based on the CPI—

(1)

When the period begins. The measuring period we use for finding the amount of the CPI increase begins with the later of—

(i)

Any calendar quarter in which an ad hoc benefit increase is effective; or

(ii)

The third calendar quarter of any year in which the last automatic increase became effective.

(2)

When the period ends. The measuring period ends with the third calendar quarter of the following year. If this measuring period ends in a year after the year in which an ad hoc increase was enacted or took effect, there can be no cost-of-living increase at that time. We will extend the measuring period to the third calendar quarter of the next year.

(c)

Measuring period based on the AWI—

(1)

When the period begins. The measuring period we use for finding the amount of the AWI increase begins with the later of—

(i)

The calendar year before the year in which an ad hoc benefit increase is effective; or

(ii)

The calendar year before the year in which the last automatic increase became effective.

(2)

When the period ends. The measuring period ends with the following year. If this measuring period ends in a year in which an ad hoc increase was enacted or took effect, there can be no cost-of-living increase at that time. We will extend the measuring period to the next calendar year.

Notes, amendments, and revision history

Amendments

[69 FR 19925, Apr. 15, 2004]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[69 FR 19925, Apr. 15, 2004]

§404.275. How is an automatic cost-of-living increase calculated?

20 C.F.R. § 404.275

(a)

Increase based on the CPI. We compute the average of the CPI for the quarters that begin and end the measuring period by adding the three monthly CPI figures, dividing the total by three, and rounding the result to the same number of decimal places as the published CPI figures. If the number of decimal places in the published CPI values differs between those used for the beginning and ending quarters, we use the number for the ending quarter. If the average for the ending quarter is higher than the average for the beginning quarter, we divide the average for the ending quarter by the average of the beginning quarter to determine the percentage increase in the CPI over the measuring period.

(b)

Increase based on the AWI. If the AWI for the year that ends the measuring period is higher than the AWI for the year which begins the measuring period and all the other conditions for an AWI-based increase are met, we divide the higher AWI by the lower AWI to determine the percentage increase in the AWI.

(c)

Rounding rules. We round the increase from the applicable paragraph (a) or (b) of this section to the nearest 0.1 percent by rounding 0.05 percent and above to the next higher 0.1 percent and otherwise rounding to the next lower 0.1 percent. For example, if the applicable index is the CPI and the increase in the CPI is 3.15 percent, we round the increase to 3.2 percent. We then apply this percentage increase to the amounts described in § 404.271 and round the resulting dollar amounts to the next lower multiple of $0.10 (if not already a multiple of $0.10).

(d)

Additional increase. See— § 404.278 for the additional increase that is possible.

Notes, amendments, and revision history

Amendments

[69 FR 19925, Apr. 15, 2004, as amended at 72 FR 2186, Jan. 18, 2007]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[69 FR 19925, Apr. 15, 2004, as amended at 72 FR 2186, Jan. 18, 2007]

§404.276. Publication of notice of increase.

20 C.F.R. § 404.276

When we determine that an automatic cost-of-living increase is due, we publish in the Federal Register within 45 days of the end of the measuring period used in finding the amount of the increase—

(a)

The fact that an increase is due;

(b)

The amount of the increase;

(c)

The increased special minimum primary insurance amounts; and

(d)

The range of increased maximum family benefits that corresponds to the range of increased special minimum primary insurance amounts.

Notes, amendments, and revision history

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

§404.277. When does the frozen minimum primary insurance amount increase because of cost-of-living adjustments?

20 C.F.R. § 404.277

(a)

What is the frozen minimum primary insurance amount (PIA)? The frozen minimum is a minimum PIA for certain workers whose benefits are computed under the average-indexed-monthly-earnings method. Section 404.210(a) with § 404.212(e) explains when the frozen minimum applies.

(b)

When does the frozen minimum primary insurance amount (PIA) increase automatically? The frozen minimum PIA increases automatically in every year in which you or your dependents or survivors are entitled to benefits and a cost-of-living increase applies.

(c)

When are automatic increases effective for old-age or disability benefits based on a frozen minimum primary insurance amount (PIA)? Automatic cost-of-living increases apply to your frozen minimum PIA beginning with the earliest of:

(1)

December of the year you become entitled to benefits and receive at least a partial benefit;

(2)

December of the year you reach full retirement age (as defined in § 404.409) if you are entitled to benefits in or before the month you attain full retirement age, regardless of whether you receive at least a partial benefit; or

(3)

December of the year you become entitled to benefits if that is after you attain full retirement age.

(d)

When are automatic increases effective for survivor benefits based on a frozen minimum primary insurance amount (PIA)?

(1)

Automatic cost-of-living increases apply to the frozen minimum PIA used to determine survivor benefits in December of any year in which your child(ren), your surviving spouse caring for your child(ren), or your parent(s), are entitled to survivor benefits for at least one month.

(2)

Automatic cost-of-living increases apply beginning with December of the earlier of—

(i)

The year in which your surviving spouse or surviving divorced spouse (as defined in §§ 404.335 and 404.336) has attained full retirement age (as defined in § 404.409) and receives at least a partial benefit, or

(ii)

The year in which your surviving spouse or surviving disabled spouse becomes entitled to benefits and receives at least a partial benefit.

(3)

Automatic cost-of-living increases are not applied to the frozen minimum PIA in any year in which no survivor of yours is entitled to benefits on your social security record.

Notes, amendments, and revision history

Amendments

[68 FR 4702, Jan. 30, 2003]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[68 FR 4702, Jan. 30, 2003]

§404.278. Additional cost-of-living increase.

20 C.F.R. § 404.278

(a)

General. In addition to the cost-of-living increase explained in § 404.275 for a given year, we will further increase the amounts in § 404.271 if—

(1)

The OASDI fund ratio is more than 32.0 percent in the given year in which a cost-of-living increase is due; and

(2)

In any prior year, the cost-of-living increase was based on the AWI as the lower of the CPI and AWI.

(b)

Measuring period for the additional increase—

(1)

To compute the additional increase for all individuals and for maximum benefits payable to a family, we begin with the year in which the insured individual became eligible for old-age or disability benefits to which he or she is currently entitled, or died before becoming eligible.

(2)

Ending. The end of the measuring period is the year before the first year in which a cost-of-living increase is due based on the CPI and in which the OASDI fund ratio is more than 32.0 percent.

(c)

Compounded percentage benefit increase. To compute the additional cost-of-living increase, we must first compute the compounded percentage benefit increase (CPBI) 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.

(d)

Computing the CPBI. The computation of the CPBI is as follows—

(1)

Obtain the sum of (i) 1.000 and (ii) the actual cost-of-living increase percentage (expressed as a decimal) for each year in the measuring period;

(2)

Multiply the resulting amount for the first year by that for the second year, then multiply that product by the amount for the third year, and continue until the last amount has been multiplied by the product of the preceding amounts;

(3)

Subtract 1 from the last product;

(4)

Multiply the remaining product by 100. The result is what we call the actual CPBI.

(5)

Substitute the cost-of-living increase percentage(s) that would have been used if the increase(s) had been based on the CPI (for some years, this will be the percentage that was used), and do the same computations as in paragraphs (d) (1) through (4) of this section. The result is what we call the assumed CPBI.

(e)

Computing the additional cost-of-living increase. To compute the percentage increase, we—

(1)

Subtract the actual CPBI from the assumed CPBI;

(2)

Add 100 to the actual CPBI;

(3)

Divide the answer from paragraph (e)(1) of this section by the answer from paragraph (e)(2) of this section, multiply the quotient by 100, and round to the nearest 0.1. The result is the additional increase percentage, which we apply to the appropriate amount described in § 404.271 after that amount has been increased under § 404.275 for a given year. If that increased amount is not a multiple of $0.10, we will decrease it to the next lower multiple of $0.10.

(f)

Restrictions on paying an additional cost-of-living increase. We will pay the additional increase 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, we will pay the additional increase only to the extent 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.

Notes, amendments, and revision history

Amendments

[51 FR 12604, Apr. 21, 1986, as amended at 69 FR 19925, Apr. 15, 2004; 83 FR 21708, May 10, 2018]

Authority

Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

Source

Source: 47 FR 30734, July 15, 1982, unless otherwise noted.

Amendments

[51 FR 12604, Apr. 21, 1986, as amended at 69 FR 19925, Apr. 15, 2004; 83 FR 21708, May 10, 2018]