COLA Increase for 2012

The Bureau of Labor Statistics announced this week that the official Cost of Living Adjustment (COLA) increase for 2012 is 3.6 percent. This is the first COLA increase in two years and will be reflected in military retired pay, VA benefits for disabled veterans, survivor annuities, and Social Security benefits for next year. The increase takes effect December 1, 2011, and will apply to January 1, 2012, checks. 

The Consumer Price Index (CPI) is used to calculate this annual COLA and is based on the cost of a “basket of goods” for the average American during the period from October 1 to September 30 each year. In conjunction with deficit-reduction options, some lawmakers and others are discussing the use of a new index, the “chained CPI,” that takes into account the substitutions consumers make in response to changes in prices, which may result in slightly reduced COLAs. FRA continues to closely monitor negotiations to reduce government spending, particularly as proposals relate to military pay, health care, benefits and other quality-of-life programs.