Most Look Forward to Boost; Low-Income Retirees Worry Benefits Could be Trimmed
By Rick Delaney, Chairman of the Board
We have been hearing from hundreds of you who are watching the inflation numbers and eagerly looking forward to getting a high inflation boost next year. But a number of you point out an urgent problem that occurs when COLAs raise the income of people with lower incomes. The higher inflation boost can sometimes disqualify people of modest means from receiving low-income benefits such as food stamps (SNAP) or rental assistance.
Recently we received the following example:
I live on a fixed income of less than $900 dollars a month. I live in public housing for seniors, and during the pandemic, I had to rely on help from my children to eat every month. I was approved for $256 a month in food stamps. A blessing! However, when you live in public housing, and then get a $20 cost-of-living adjustment, it affects your eligibility for public benefits. In my state, the formula they use took 30% of my COLA. Then because of the COLA your food stamps can be lowered. What's the point of getting a raise? Something should change about the formula. — A.R., IL.
Virtually all low-income programs such as food stamps, rental assistance and Medicare Extra Help, come with complex eligibility rules and income restrictions that are tied to a percentage of the federal poverty level, such as 100%, 135% or 150%. If your income is right on the borderline, and you get a high COLA boost, that could potentially cause you to see trims to benefits from programs that have income restrictions. Some individuals might lose access to certain low-income benefits altogether because the COLA boosts their income over the limit.
The effect tends to be tempered by the fact that the federal poverty level itself is adjusted for inflation every year, using the Consumer Price Index for Urban Consumers (CPI-U). In most years the CPI-U grows slightly faster than the index used to adjust Social Security benefits, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Thus, it tends to keep pace with the COLA. But in 2020, the CPI-U grew more slowly than the COLA, growing just 1% instead of the CPI-W’s 1.3%. Thus, SNAP benefits (food stamps) and many other types of benefits were reduced or even eliminated this year for some beneficiaries.
This occurred all over the U.S. at the very same time that food prices exploded. On December 21, 2020 the Louisiana Department of Children and Family Services, for example, announced that as of January of this year, 75,079 SNAP households would see an average reduction of $7 in monthly benefits due primarily to the COLA. Another 118 SNAP cases would close, as increased income pushes those households over the eligibility limit.
TSCL hopes that most of these people who lost SNAP benefits at least received emergency stimulus payments in 2020 and 2021 to help cover the loss of these benefits. But we are highly concerned that a high COLA could have similar unintended consequences for low income retirees in 2022.
In advocating for emergency COLAs TSCL has in the past, recommended that legislation contain wording that such COLA increases and Social Security benefits boosts be disregarded or not counted, in determining eligibility for SNAP, rental assistance, and other low - income benefits. In addition, TSCL is calling on Congress to pass a $1,400 stimulus payment for Social Security recipients, to help offset potential reductions or loss of low-income benefits.
Source: “Federal Cost of Living Adjustment Will Affect SNAP And Other Benefits Received Through DCFS, December 21, 2020.