SSA Announces 2007 COLA

The Social Security Administration has announced that the cost of living increase for Social Security benefits and for the SSI Federal Benefit Rate (FBR) for 2007 will be 3.3%. This will raise the SSI FBR from $603 to $623 per month for an individual and from $904 to $934 for an eligible couple. The estimated average monthly individual Social Security retirement benefit will increase from $1,011 per month to $1,044. For the most retirees, $5 of the increase in monthly benefits will go to pay the increase in the Medicare Part B premium which will be $93.50 per month for those individuals earning no more than $80,000 per year. However, for the first time, there will be a means test for determining the amount of the Part B premium with the result that some high income retirees could see their whole Social Security benefit increase go to pay the increase in the Medicare Part B premium. For example, for individuals earning over $200,000 per year the Part B premium will increase to $162.10 per month, an increase of $74 per month over the current level.

Other changes for 2007 include an increase in the earnings required for a quarter of coverage from $970 to $1,000 and an increase in the substantial gainful activity (SGA) level from $860 to $900 per month for a person with disabilities who is not blind and from $1450 to $1500 for a blind individual. Also, earnings in excess of $97,500 per year will be exempt from the Social Security tax compared to the current $94,200 cutoff. These figures are based on the increase in average covered wages rather than the increase in cost of living.

Also, the amount of annual earnings exempt from the retirement earnings test will increase from the current $12,480 to $12,960 for those under full retirement age with one dollar in benefits withheld for every two dollars in earnings over the exempt amount. The exempt amount in the year an individual reaches full retirement age goes from the current $33,240 to $34,440 per year, with one dollar in benefits withheld for every three dollars in earnings above the limit. In this connection it should be noted that full retirement age will increase to 65 years and 10 months in the course of 2007. This will affect workers born in 1942.