SOCIAL SECURITY

ADJUSTMENTS TO COMPENSATE
FOR
THE CONSUMER PRICE INDEX ERROR

Questions and Answers

I heard that SSA will send an extra check in July. Is that true?

Yes. SSA will be sending payments, checks and direct deposit, to most Social Security beneficiaries and Supplemental Security Income (SSI) recipients in July. SSA will also be sending a written explanation to each person receiving a payment. You do not need to contact SSA.

Why is SSA sending the extra payment?

Last year, the Bureau of Labor Statistics discovered an error in the way the Consumer Price Index was calculated for 1999. That error meant that the Social Security cost-of-living-adjustment at the beginning of 2000 was 1/10 of 1 percent lower than it would have been had the error not occurred (2.4 percent rather than 2.5 percent). The extra payment compensates those Social Security beneficiaries who were affected by the error for any shortfall they experienced between January 2000 and July 2001, when the payments will be made.

Who was affected by the mistake?

The mistake affected people who were eligible for Social Security before January 2000. People who became eligible for Social Security January 2000 or later were not affected. Individual SSI recipients who were eligible for SSI anytime between January 2000 and July 2001 were also affected. However, those who received SSI as a member of a couple, were not affected.

Did everyone have a shortfall in benefits?

Most Social Security beneficiaries and SSI recipients had a shortfall as a result of the CPI error. However, because SSA is required by law to round benefits to the next lower whole dollar and to use other rounding rules in calculating benefits, some individuals received the same amount as they would have received if the error had not occurred. For the same reason, SSI couples also did not have any shortfall, although individual SSI recipients did.

By how much were benefits lower?

Most Social Security beneficiaries received $1 less per month than if the error had not occurred. A few individuals with higher Social Security benefits received $2 or $3 per month less. A very few individuals received $4 per month less. Most individual SSI recipients received $1 less per month. SSI couples did not have a shortfall because of the way their benefits are calculated.

I heard that SSA was sending extra payments. I didn't get one. Why not?

Not everyone who is receiving Social Security benefits today had a shortfall as a result of the error. There are several reasons why that may be the case. Some of those reasons are: you could be receiving retirement benefits, but turned 62 after January 2000; or you may have first begun receiving benefits in 2001 and, because of the rounding rules the Social Security Administration uses to compute benefits, the error didn't affect you; you may have become disabled after January 2000; or you may be a member of an SSI couple.

Is the problem fixed?

It will be. SSA will send out payments to those individuals who were affected to compensate them for any shortfall experienced between January 2000 and July 2001. Beginning in August 2001, SSA will adjust monthly benefits so that individuals will not experience any future shortfalls in their payments.

How much will I get?

The most common amount will be $19, $1 for each of the 19 months from January 2000 to July 2001. The amount that any given individual will actually receive depends on when he or she began to receive benefits, the level of the Social Security benefit, and whether he or she receives just Social Security, just SSI or both. Social Security will send affected beneficiaries information explaining any changes to benefits.

Social Security: Everyone who was eligible for Social Security before January 2000 and who received benefits during 2000 will receive $1, $2, $3, or $4 (depending on their monthly benefit level) for each of the 12 months in 2000, or $12, $24, $36, or $48. Most affected individuals will receive $12 for 2000.

In addition, affected individuals who received benefits in 2001 will have their benefits recalculated and receive an amount for 2001 equal to the difference between their "old" 2001 benefit amount and their "new" 2001 benefit amount for each of the seven months between January 2001 and July 2001. For instance, if their new benefit is $1 higher, they will receive $7 for 2001. If their new benefit is the same, then they will not receive anything for 2001, because they did not have a shortfall in 2001.

Beginning in August 2001, benefits will be fully adjusted and individuals will not have any future shortfalls.

SSI: SSA will determine what SSI benefits would have been for each month between January 2000 and July 2001 and pay any shortfall to the affected SSI recipients. Beginning August 2001, SSI benefits will be adjusted so that no shortfall will occur in the future.

Both Social Security and SSI: For those who receive both Social Security and SSI, the Social Security payment for the shortfall in their Social Security benefits for the period from January 2000 to July 2001 will not count as income for SSI. However, their future SSI checks may be reduced if their Social Security payment increases.

My relative died recently. Will SSA send a payment for him/her?

SSA will compute the shortfall for everyone who was affected, even those that have died since January 2000. SSA will automatically send the payment to a survivor if SSA has already established that the survivor is entitled to payments, such as the lump-sum death benefit. If you believe you are entitled to a payment on behalf of a deceased relative who became eligible for benefits before January 2000, but do not receive one automatically, contact SSA at 1-800-772-1213.

I receive Special Veterans Benefits from SSA. Will I get a payment?

Many recipients of Special Veterans Benefits (SVB) had shortfalls and will receive payments. The information above for SSI applies to SVB, except that where the shortfall in the monthly payment standard for SSI was $1, the shortfall for the SVB monthly payment standard was 75 cents. SVB is a program that began in May 2000 to pay benefits to certain World War II veterans who reside outside the United States. SVB shortfall payments will cover the period from May 2000 to July 2001.

How much will all of this cost SSA?

In total, SSA will send about $1.1 billion in payments to approximately 50 million Social Security and SSI recipients. The administrative costs to SSA will be about $57 million.

Will these payments worsen Social Security's long-term financing?

No. These payments, although they are a large amount of money in the short-term, will have a negligible effect on Social Security's long-range financing.

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