Office of the Commissioner; Benefit Adjustments Pursuant to Public Law 106-554

AGENCY:

Social Security Administration.

ACTION:

Notice.

SUMMARY:

Pub. L. 106-554 authorizes Federal agencies to compensate beneficiaries, to the extent practicable and feasible, for any shortfall in benefits that may have been caused by an error that affected the Consumer Price Index starting in 1999. This index, produced by the Bureau of Labor Statistics in the Department of Labor, was slightly understated for certain months in 1999.Pursuant to Pub. L. 106-554, the Commissioner has determined that some recipients of Social Security and Supplemental Security Income benefits did experience a shortfall in payments in 2000 and 2001 due to the Consumer Price Index error. This is because the 2.4-percent cost-of-living increase, promulgated in the Federal Register on October 25, 1999, would have been 2.5 percent in the absence of the 1999 Consumer Price Index error.

Accordingly, the Commissioner has proposed, and the Office of Management and Budget has approved, a plan for making the appropriate compensation payments under Pub. L. 106-554.By August 1, 2001, we will make a one-time payment that compensates for the entire shortfall experienced in months prior to August 2001. Benefits paid in August 2001 and later will be adjusted as if the Consumer Price Index error had not occurred. In this notice we are announcing the appropriate bases and formulas we will use to compute benefits to be paid in August 2001 and thereafter.

FOR FURTHER INFORMATION CONTACT:

Jeffrey L. Kunkel, Office of the Chief Actuary,Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235, (410) 965-3013.

Background

Sections 215(i)(1) and 1617 of the Social Security Act (the Act) provide that the Consumer Price Index (CPI) be used to determine “automatic” adjustments to benefits under title II and title XVI of the Act. The Bureau of Labor Statistics (BLS) in the Department of Labor publishes the CPI. On September 28, 2000, the BLS announced their discovery of a software error used in the CPI calculation, affecting the calculation for months after 1998. The BLS recalculated the CPI for each month from January 1999 through August 2000. Based on criteria related to the size of the error, the BLS revised the CPI for January 2000 through August 2000, but did not revise the index for January through December of 1999.

Effects of Pub. L. 106-554

Section 308 of Pub. L. 106-554, enacted December 21,2000, requires the Office of Management and Budget and Federal agencies that administer benefit programs to determine whether the CPI computation error for 1999 resulted in a shortfall in payments to beneficiaries and to compensate beneficiaries for any such shortfall. We determined that the 2.4-percent cost-of-living increase, promulgated in the Federal Register on October 25, 1999, would have been 2.5 percent in the absence of the 1999 CPI error. We also determined that the 3.5-percent cost-of-living increase, promulgated in the Federal Register on October 24, 2000, was not affected by the 1999 CPI error. In compliance with Pub. L. 106-554, payments will be made to compensate for the past shortfall, and ongoing payments will be increased to the extent required to remove the effects of the CPI error. The following describes the basis for such compensation and adjustment.

Basis for Compensation and Adjustment

Bulletin No. 01-04 from the Executive Office of the President, Office of Management and Budget, dated January 16,2001, contains the recalculated CPI values for 1999 (these were not published as revisions by the BLS). For the quarter ending September 30, 1999, the published CPI for Urban Wage Earners and Clerical Workers was in error only for the month of September. The published CPI for September 1999 is 164.7 while the recalculated value is 164.8. Thus, the recalculated CPI values for this quarter are: July 1999, 163.3; August 1999, 163.8; and for September 1999, 164.8. The average CPI for this calendar quarter was originally determined based on published values to be 163.9. It is 164.0 based on the recalculated CPI values. The average CPI for the third quarter of 1998 is 160.0 (this was unaffected by the computation error). Thus, on a recalculated basis, the average CPI for the quarter ending September 30, 1999, exceeds the average for the quarter ending September 30, 1998, by 2.5 percent.

The quarter ending September 30, 1999, was a cost-of-living computation quarter for all purposes of the Act. The average CPI for the quarter ending September 30, 2000, (169.7 as published October 24, 2000 in the Federal Register) exceeds that for the quarter ending September 30, 1999 on either basis, (164.0 recalculated or 163.9 based on BLS-published monthly CPIs) by 3.5 percent. Thus, the cost-of-living increase for December 2000 remains 3.5 percent, unchanged from the value previously promulgated.

Title II Benefits

Consistent with the above cost-of-living increase calculations and pursuant to Pub. L. 106-554, we will calculate title II benefits, to be paid in August 2001 and later, as if the December 1999 cost-of-living increase had been 2.5 percent. Such calculation applies only in the case of workers and family members for whom eligibility for benefits (that is, the worker's attainment of age 62, or disability or death before age 62) occurred before 2000.

For eligibility after 1978, we generally determine benefits by means of a formula. This formula, while unaffected by the CPI error, produces an initial benefit that is subsequently increased with cost-of-living increases that become effective in or after the first year of eligibility.

For eligibility before 1979, we determine title II benefits by means of a benefit table. Both the table for December 1999 and the table for December 2000 are affected when they are computed as if the cost-of-living increase for December 1999 had been 2.5 percent. The table for December 2000 is affected because values in that table are dependent on those in the December 1999 table. A copy of either adjusted table is available on the Internet at http://www.ssa.gov/OACT/ProgData/tableForm.html. For a printed copy, write to:Social Security Administration, Office of Public Inquiries, 4100 Annex, Baltimore, MD 21235.

Other title II benefits given by specific tables are “special minimum” benefits, as described in section 215(a)(1)(C)(i) of the Act. As in the case of the benefit tables applicable to beneficiaries eligible before 1979, the special minimum benefit tables for both December 1999 and December 2000 are affected by computation as if the December 1999 cost-of-living increase had been 2.5 percent. The adjusted tables are shown below.

Title XVI Benefits

Supplemental Security Income (SSI) payment levels for the aged, blind, and disabled, payable under title XVI of the Social Security Act, are increased annually with cost-of-living increases. For SSI payment levels for the year 2000, we used a cost-of-living increase of 2.4 percent based on published CPI figures. Pursuant to Pub. L. 106-554, in order to compensate for the shortfall in past benefit payments and provide the basis for adjusting ongoing and future payments, we will adjust the title XVI Federal payment levels as if the cost-of-living increase for January 2000 had been 2.5 percent. Accordingly, we provide the following calculations of title XVI payment levels.

For 1999, we derived the monthly benefit amounts for an eligible individual, an eligible individual with an eligible spouse, and for an essential person from yearly unrounded Federal SSI benefit amounts of $6,010.02, $9,014.01, and $3,011.89. For adjusted 2000 values, these yearly unrounded amounts increase by 2.5 percent (on a recalculated basis) to $6,160.27, $9,239.36, and $3,087.19 respectively. Each of these resulting amounts must be rounded, when not a multiple of $12, to the next lower multiple of $12. Accordingly, the corresponding adjusted annual amounts, effective for 2000, are $6,156, $9,228, and $3,084. Dividing the yearly amounts by 12 gives the corresponding monthly amounts for 2000—$513, $769, and $257, respectively. Of these 3 monthly amounts, only the $513 amount for an eligible individual is higher than the previously determined value for 2000 (based on the published CPI).

Similarly, SSI payment levels for the aged, blind, and disabled increased by 3.5 percent effective for January 2001. For 2001, the adjusted yearly unrounded amounts for 2000, as shown above, increase by 3.5 percent to $6,375.88, $9,562.74, and $3,195.24 for an eligible individual, an eligible individual with an eligible spouse, and for an essential person, respectively. Following the procedure outlined above, the corresponding adjusted monthly amounts for 2001 are $531, $796, and $266. Again, of these 3 monthly amounts, only the amount for an eligible individual ($531) is higher than the previously determined value for 2001.