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Leslie Bonacum
Neil Allen

Gas Costs Drive Social Security Benefits Upward

(RIVERWOODS, ILL., October 24, 2000) - Social Security beneficiaries in 2001 will see the largest increase in benefits in nearly a decade, according to CCH INCORPORATED (CCH), a leading provider of pension, benefits and tax law information and software. As a result of inflation, an increase of 3.5 percent will be applied to this coming year’s benefits starting with December 2000 benefits which are paid in January 2001.

The 3.5-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $845 for all retired workers in 2001, $29 a month more than in 2000. A typical married couple, both receiving benefits, can expect to find $1,410 in their monthly benefit checks in 2001, $47 more than the comparable 2000 benefit, while the average-aged widow or widower will receive an average benefit of $811, an increase of $28. The maximum benefit payable in 2001 will rise by $103 to $1,536.

Energy Costs Drive Increase

The COLA increase is the largest one in nine years, according to Avram Sacks, JD, CCH Social Security analyst, who noted that higher prices at the gasoline pump were largely responsible.

"The large increase in the cost of living is primarily due to a 15.7-percent increase in energy costs since last September, and the bulk of that increase arises from the increased costs of gasoline, natural gas and electricity," said Sacks. "Without the increased energy costs, the increase would have been the same as last year, 2.4 percent."

Earnings Limits Also Rise

The amounts that certain Social Security beneficiaries can earn without having their benefits reduced – "Earnings Test Exempt Amounts" in Social Security terminology – also will go up next year.

Workers under age 65 who are receiving benefits can earn up to $10,680 in 2001, or $890 per month, without having their benefits reduced. This is an inflation-adjusted increase of $600 annually over the 2000 limit.

A modified test applies to workers who reach age 65 in 2001. These individuals may earn up to $25,000 per year or $2,084 per month in the months before their 65th birthday without having their benefits reduced.

An "earnings test" for beneficiaries ages 65 through 69 was abolished by legislation earlier this year. Beneficiaries age 70 and older have not been subject to benefit reductions based on earnings since 1983.

COLA Affects Many Benefits

The Social Security COLA is applied to several types of benefits: retirement, disability, survivors (including children and widow(er)s) and to the maximum family benefit – the maximum that can be paid if more than one family member is receiving benefits based on one wage earner’s account.

It also affects what are known as "transitional" benefits – a special calculation applicable to those who reach ages 80 to 84 in 2001 – and to "special age 72" benefits, which are limited benefits paid to certain aged workers and their spouses or surviving spouses in cases where the worker is not credited with enough "quarters of coverage" to qualify as "fully insured," under the Social Security program, according to Sacks.


CCH INCORPORATED, headquartered in Riverwoods, Ill., is a leading provider of Social Security, pension and benefits law information for attorneys, accountants and human resources professionals, including the Social Security Reporter, Unemployment Insurance Reports, Payroll Management Guide, Pension Plan Guide and Employee Benefits Management. CCH also provides tax and business law information in print and electronic form for accounting, legal and healthcare professionals. CCH is a wholly owned subsidiary of Wolters Kluwer North America. The CCH web site can be accessed at and the CCH Human Resources group site is

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