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Fact Sheet

Consumer Price Index Fix

  • The Social Security Administration (SSA) will be issuing one-time payments in mid-July to about 45 million Social Security beneficiaries and approximately six million Supplemental Security Income (SSI) beneficiaries. These payments will ensure that beneficiaries are compensated for any shortfall in their benefits paid from January 2000 through July 2001 as a result of an error the Bureau of Labor Statistics (BLS) made in the calculation of the consumer price index (CPI) starting in 1999.
  • Regular monthly benefits, if affected, will be adjusted beginning with the payment received in August 2001.
  • Beneficiaries will receive a written explanation of their one-time payment and an explanation about their adjusted monthly benefit. This process will occur in mid-July 2001 and will be automatic. Beneficiaries do not need to take any action to receive their adjusted benefits.

Background on the CPI Error

  • On September 28, 2000, the BLS, an agency in the Department of Labor, announced that an error had occurred in the computation of the CPI. For more information, go to: http://www.bls.gov/cpi/cpirev01.htm.

Effect of the CPI Error

  • By statute, SSA uses the CPI, as published by BLS, to calculate annual increases in benefit levels for Social Security and SSI payments.
  • As a result of the CPI error, the December 1999 cost-of-living adjustment (COLA)--paid in January 2000--was one-tenth of one percent below what it would have been had the error not occurred. As a result, the COLA applied to Social Security and SSI payments was 2.4 percent, rather than 2.5 percent.
  • Most Social Security and SSI beneficiaries have received lower payments, since January 2000, than if there had been no CPI error. The shortfall for the majority of beneficiaries is
    $1 per month.

The Fix

  • In mid-July 2001, lump-sum retroactive payments will be issued to Social Security and SSI beneficiaries. These payments, which will be separate from regular monthly payments, represent the money that beneficiaries would have been paid since January 2000 if there had been no error in the CPI. Of course, retroactive benefits will only be paid to individuals who actually received benefits at some time between January 2000 and July 2001, and who were affected by the December 1999 COLA.
  • For the majority, these payments will total up to $19, or $1 per month for January 2000 through July 2001.
  • Some Social Security beneficiaries (those with higher monthly benefit payments) will receive larger retroactive payments. These payments represent an increase in monthly payments of $2, $3, or $4 to offset the effect of the CPI error.
  • In August 2001 and beyond, fully adjusted benefits will be issued. These payments will include the amount due, based on the recalculated CPI.
  • The total amount of retroactive payments to compensate for the shortfall to beneficiaries is estimated to be $1.1 billion. This represents adjustments to benefits paid for calendar year 2000 and calendar year 2001 through July.

Note: Some beneficiaries will only receive a retroactive payment and no increase in their regular monthly payment. For example, some Social Security beneficiaries will only receive $12 in retroactive payments, $1 per month for calendar year 2000, but no retroactive payments for calendar year 2001 and no increase in their regular monthly payments because their benefit level for 2001 was not affected by the CPI error. These payments will compensate for the shortfall. In a small number of cases, beneficiaries will be due no retroactive payment and no increase in their regular monthly payment because they received no benefits in 2000, and their benefits in 2001 were unaffected by the CPI error.

For answers to additional questions about the CPI Fix visit our "Adjustments to Compensate for the Consumer Price Index Error, Questions and Answers."

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