Leaders Seek Emergency Payment to Offset No COLA Increase

The Internal Revenue Service and Social Security Administration confirmed that the Cost of Living (COLA) in the United States did not increase enough to justify an increase in the COLA for Medicare. There will also be no compensation for contribution limits to retirement plans or medicate compensation. Many financial experts attribute this lack of change to lower gas prices.

 

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This news means that Medicare COLA will not increase for the year of 2016. This was largely expected by experts, but it does cause trouble for some individuals. In addition to no increase, many expect an increase in Medicare Part B premiums. This means that 1/3 of Medicare patients will see a significant increase in their premium payment. This year marks the third in the last five years that the COLA did not increase at the beginning of the year.

 

Lawmakers Pushing for Emergency COLA

 

While reports suggest that the COLA will not change this year, some lawmakers are pushing for an emergency COLA payment, to help offset no increase this year. More than 20 senators had joined the petition to give federal retirees a one-time payment of 3.9 percent of their annuities. On average, retirees would get around $580. The bill, which would apply to more than 70 million Americans, would offer money so that retirees could pay for necessities.

 

“The legislation will help 1.1 million seniors, veterans of Social Security age and federal retirees in Maryland so they aren’t left out in the cold when it comes to Social Security benefits they’ve earned and deserve. I will continue to fight so that seniors, veterans and federal employees have a government on their side,” Senator Barbara Mikulski, a democrat from Maryland told reporters.

 

Federal Retirement Plan Limits

 

Federal retirees will also see some adjustment to their federal retirement plans limits. The changes affect contribution limits, and will affect 401k plans, IRAs, simplified employee pensions and SIMPLE plans. While most of the limitations stay the same, the IRS says that the increase in cost-of-living index was not substantial enough to justify changes.

 

Limitation amounts will not change for 401k, 403b, Federal Thrift Savings Plan and some 457 plans. Federal employees can contribute up to $18,000 in 2016 and federal employees (over the age off 50) can contribute an extra $6,000 to catch up for missed year.

 

Limits on contributions for the IRA stays at $5,500 and employees over 50 can contribute and extra $1,000. Limits also remain the same for the annual compensation, SEP and SIMPLE retirement accounts.

 

Federal employees will notice a limitation increase in the following federal retirement programs:

 

• IRA AGI Deduction Phase-out Range: The limitation is raised from $183,000 to $193,000 and $184,000 to $194,000 for married individuals filing jointly. This change is will affect individuals who contribute but are not covered by any workplace plan, but is married to someone who is.

 

• Multiemployer Plans: The ceiling that decides whether this type of plan is offered raised from $1 million to $1, 012,000,000.

 

• Retirement Savings Contribution Credit: The savers credit has increased minimally for all groups covered under the AGI Limit. Contribution increases totaled $500 for each group (married filing jointly, head of household, single etc.)

 

• Roth IRA Phase-out Range: The same increases for the AGI Deduction phase are seen here. In addition, singles and heads of households see an increase from $116,000 to $131,000.