With tensions brewing in Washington, retirees may be wondering just how worried they should be about a potential government shutdown and its impact on their daily lives.
While they can rest easy about receiving their Social Security benefits, which would continue without interruption during a shutdown, there are other concerns to consider. The big ones: retirees seeking certain services could face delays, and all may have to wait to learn their raise for next year if the standstill lasts long enough to postpone the announcement of the 2024 cost-of-living adjustment.
The federal government has been moving closer to a shutdown ahead of the Oct. 1 start to the new fiscal year. Lawmakers have so far failed to pass legislation to fund discretionary spending, a category that includes defense, transportation, education, and much more.
Barring action by the Sept. 30 deadline, the federal government will temporarily stop paying its employees and contractors and halt nonessential functions. (This is different from what would happen under a default scenario, which was averted earlier this year and would have involved a longer list of entities not being paid and a more severe impact on the financial markets.)
Social Security and Medicare are considered mandatory spending and thus are not subject to the annual budget appropriations process in Congress. Social Security benefits stipulated by law are permanently authorized and funded, so the government must pay them even during a shutdown, says Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities.
Yet the Social Security Administration would discontinue certain activities in the event of a shutdown, according to the agency’s contingency plan. For example, corrections and updates to earnings records would not be made during a shutdown, and benefit verifications would not be issued. Original and replacement Social Security cards would be issued, but replacement Medicare cards would not.
Customer service would likely suffer, sources say, as Social Security Administration staff would be working without pay and would be limited to performing only those tasks deemed essential. (Employees would be made whole after the shutdown ends.) The agency is understaffed as it is, and if beneficiaries are made to wait longer for help, “it could be a hardship for them,” says Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
What’s more, Social Security recipients may have to wait to learn how much their checks will increase next year. The Social Security Administration is expected to announce the cost-of-living adjustment for 2024 on Oct. 12, soon after the Bureau of Labor Statistics releases the consumer price index data for September.
Yet during a shutdown, the BLS “will suspend data collection, processing, and dissemination,” an agency spokesperson told Barron’s. “Once funding is restored, BLS will resume normal operations and notify the public of any changes to the news release schedule on the BLS release calendar.”
The last time a COLA announcement was delayed due to a government shutdown was in 2013, Johnson says. Beneficiaries had to wait nearly two weeks past the original mid-October release date to learn the COLA increase for the following year. The projection for the 2024 COLA is 3.2%, according to Johnson; the final calculation will be based on a comparison between inflation data from the third quarter of 2023 and the same period last year.
Write to Elizabeth O’Brien at [email protected]
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