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This year, lower oil prices are almost certain to block any cost-of-living adjustment for military retirees, federal civilian retirees, social security recipients, survivor benefit annuitants or disabled veterans.
The expected adjustment "goose egg" will be the first since Congress began to adjust federal entitlements automatically using inflation rates as tracked by the U.S. Bureau of Labor Statistics. The cost of goods and services has fallen nationwide this year. No inflation means no cost-of-living adjustment. What happened?
"Gas prices," said Malik Crawford, an economist at the bureau's headquarters in Washington, D.C.
The federal adjustment is based each year on the average change in the cost of a market basket of goods and services from the third quarter (July through September) one year to the third quarter of the next year. Through July, the cost of living for U.S. wage earners has fallen by 2.7 percent.
"That's huge," Crawford said.
Though fuel prices are just one item given "small official weight" in the market basket tracked by the bureau, Crawford said, "they have an outrageous impact" on overall prices because transportation costs affect the cost of everything that needs transport to market.
"It's not like gas prices are great" now for consumers, Crawford said. "They are almost back up to $3 (a gallon). But they are still a full dollar below where they were last year. To go from $4 to $3 is a 25 percent fall. You go 25 percent down (in gas prices) and you're down 2.7 percent (over all). ... That's how the math plays out."
If prices climb sharply in August and September, is a cost-of-living adjustment still possible? Unlikely, said Crawford. Price data already are in for most of August, he said. Only a spectacular spike in September, which is highly unlikely, could trigger an adjustment effective Dec. 1 and payable in January.
"Israel would literally have to attack Saudi Arabia for that to happen," Crawford said. "And I mean like bomb them, not just threaten."
The adjustment last December was 5.8 percent, the largest in nearly three decades. To get that, Crawford said, federal retirees and social security recipients "really lucked out. ... Gas prices peaked in the third quarter last year."
If no adjustment is paid to social security recipients, said Dan Moraski, spokesman for the Social Security Administration, the law would protect many of them from an increase in Medicare Part B premiums in January.
WIDOWS' SBP WIN UPHELD
A federal appeals court has upheld a lower court's ruling that the Defense Department unlawfully withheld from three military widows -- and probably 400 others -- full survivor benefit payments owed to them since Dec. 16, 2003.
On that date, the Veterans Benefits Act of 2003 (Public Law 108-183) became law and restored eligibility for Veterans Affairs Dependency and Indemnity Compensation to military surviving spouses who remarry after age 57.
But three widows successfully argued before the U.S. Court of Federal Claims, and now before a three-judge panel of the U.S. Court of Appeals for the Federal Circuit, that the 2003 law did something more:
It exempted the same small group of widows from the onerous dollar-for-dollar reduction in military Survivor Benefit Plan payments that occurs when a survivor spouse chooses to receive DIC.
DIC, a tax exempt payment, is payable when a military member dies on active duty or in retirement from a service-related condition. But a surviving spouse who draws DIC sees her Survivor Benefit Plan payment reduced by an equal amount.
Patricia Sharp, Margaret Haverkamp and Iva Dean Rogers argued the plain meaning of the 2003 statute exempted them and any other widow who remarries after age 57 from the SBP-DIC offset.
The appeals court agreed, calling the government's arguments to the contrary "unconvincing," including its contention that Congress would not have targeted so small a group of widows for Survivors Benefit Plan payment offset relief.
"Perhaps Congress intended to encourage marriage for older surviving spouses," the appeals court said in its 11-page decision. "Perhaps section 1311(e) simply represents a first step in an effort to eventually enact full repeal. After all, the service member paid for both benefits: SBP with premiums, DIC with his life."
"Hallelujah," Sharp said when told Wednesday of the decision. The remarried widow of an Army brigadier general said she is owed about $96,000 in forfeited survivor pay. "I have reinstated confidence in the government of the United States of America for making laws and abiding by them."
Michael Franzinger, a lawyer for the widows, said up to 400 surviving spouses could see more than $35 million in Survivors Benefit Plan payments restored over 10 years if the government decides not to appeal to all 12 judges on the U.S. Court of Appeals or the U.S. Supreme Court.
Government attorneys had indicated in the lower court that if the ruling was upheld on appealed, Defense Department officials would work to find and pay all impacted widows rather than require them to apply for benefits owed.
