Cost-of-Living Increase on Veterans’ Benefits Could Boost Your Finances

Cost-of-Living Increase o…

Raise your hand if you could benefit from some extra cash as the holidays approach and the year draws to a close. If you’re a veteran, good news: those extra funds are about to materialize. In September, Congress passed a veterans’ benefits cost of living increase. That increase should be appearing in disability benefit checks as of December 2021.

The cost-of-living increase is the result of S. 189, the Veterans’ Compensation Cost-of-Living Adjustment Act (the Act). In an era in which legislation often passes or fails along party lines, the Act is true bipartisan legislation, having passed unanimously in the House of Representatives in September. Earlier in the summer, the bill passed without objection in the Senate, and President Biden signed it into law on October 8.

What Does the Veterans’ Compensation Cost-of-Living Adjustment Act Do?

As the name suggests, the Act provides military veterans with an adjustment to their benefits to reflect increases in the cost of living. But what is significant about this legislation is that it ties the adjustment to the annual cost of living adjustment (COLA) in Social Security benefits. Prior to the new legislation, Congress needed to approve an increase to veterans’ benefits on an annual basis. Going forward, the bump up in benefits will be automatic, like the annual increase in Social Security benefits.

The adjustment applies to “wartime disability compensation, additional compensation for dependents, the clothing allowance for certain disabled veterans, and dependency and indemnity compensation for surviving spouses and children.” For veterans with service-connected injuries and their families who depend on disability payments for their financial survival, the increase in benefits could not have come at a better time.

The Act does more than just provide the certainty that veterans’ benefits will increase annually to keep pace with inflation. It will provide an increase that is much greater in amount than previous cost of living adjustments. Increases for veterans’ benefits have averaged slightly less than 1.3 percent for the past six years. For the past ten years, the increase has not been more than 3 percent in any given year. For 2022, the increase will be 5.9%. That reflects the most significant annual increase to benefits in almost 40 years — since 1983.

What does the increase look like in terms of dollars and cents for a disabled veteran? A veteran with a 10 percent disability rating can expect to receive about $8.50 more per month in their check. A veteran who carries a 100 percent disability rating would see an increase of about $186 per month, or $2,232 per year.

How is the Veterans’ Benefits Cost-of-Living Increase Calculated?

The annual cost-of-living adjustment for veterans’ benefits is the same as that for retirees’ Social Security benefits. But where does that figure come from?

The Social Security COLA is based on the change in cost of a “market basket” of goods from one year to the next, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). What kind of goods are in the “basket?” Everything from food and beverages, housing, medical care, and clothing to education, recreation, transportation, and more. The costs of over 200 individual items are considered.

The Social Security COLA is based on the change in cost of a “market basket” of goods from one year to the next, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). What kind of goods are in the “basket?” Everything from food and beverages, housing, medical care, and clothing to education, recreation, transportation, and more. The costs of over 200 individual items are considered.

The Social Security Administration (SSA) measured the change in the CPI-W from a three-month period in 2020 to the same period in 2021. The percentage difference year over year is used for the COLA. The increase will be especially large in 2022 because extreme weather and COVID-19 have driven up energy prices and affected supply chains.

Although the 5.9% increase is significant, it is less than the 6 to 6.2% some sources predicted. It is also much less than the single biggest annual increase to Social Security benefits. That was a 14.3 percent jump in January 1981.

Veterans’ Disability Claims on Increase

The cost-of-living adjustment for disabled veterans’ benefits could apply to even more people — eventually. There has been a growing backlog of first-time veteran disability claims. The backlog may be due in part to delays in processing caused by the pandemic. Prior to the pandemic, the backlog of first-time disability and pension claims had not risen above 200,000 since 2015. While that figure is high, it is nowhere near the current backlog of 215,000 cases, triple the backlog in early 2020. Since July, 2021, the backlog of first-time claims is up more than 15%.

If you have questions about the cost-of-living increase for veterans’ disability benefits, or questions about veterans’ benefits in general, we invite you to contact our law office to schedule a consultation.