A “COLA” Reminder
A “COLA” Reminder
by Gary Kirkman, Director of Compliance Training
With the new year upon us, property management companies and on-site managers must be mindful of compliance and how it relates to addressing several income sources that may experience a rate change, effective the first of the new year.
On October 13, 2020, the Social Security Administration (SSA) announced the Cost-of-Living Adjustment, otherwise known as COLA, where it stipulated that there would be a 1.3% increase beginning January 2021. That’s correct. With the posting of this blog, the 2021 COLA is in effect.
Some applicants may come into site offices with their updated benefit letters from SSA, while others may still be holding on to letters they received in 2020. We want to remember, to be valid, benefit letters have to be within the verification dates required by the affordable housing program (e.g., 12o days from the effective date of the certification for LIHTC, 90 days from the certification’s effective date for Rural Development, and as stated in their Enterprise Income Verification (EIV) Policy & Procedures for Housing and Urban Development).
If you happen to receive a social security award letter from 2020, and the letter is within the housing program’s verification timeframe, but it does not reflect the 2021 benefit award amount, there are two ways to calculate the anticipated 2021 increase and benefit amount.
- Take the 2020 benefit amount and multiply it by the 1.3% COLA increase. Then take the anticipated increase amount and add it to the 2020 benefit award amount to obtain the anticipated 2021 benefit amount.
Example – $790 (2020 benefit amount) × 1.3% = $10.27 + $790 = $800.27 (anticipated 2021 benefit amount)
- Multiply the current benefit amount by 1 plus the COLA % expressed as a decimal (1.3% = 1.013) to obtain the anticipated 2021 benefit amount.
Example – $790 (2020 benefit amount) × 1.013 = $800.27
Remember, when anticipating income, compliance, and managers are to project the income forward for the next 12 months from the effective date of the certification.
Typically the Social Security Administration will mail out the new benefit award letters in December. These letters will reflect the new benefit amount for social security payments beginning in January 2021. Supplemental Security Income (SSI) recipients should see their increase on December 31, 2020, but it also goes into effect in January 2021.
With the information above being important to remember as managers complete files for 2021, it is also essential for management companies to have clear and concise policies and procedures for staff. Often in classes, trainers are asked if the award benefit letters are eligible to be used for the entire year, and managers are reminded to follow their policies and procedures and the affordable housing program requirements. While some management companies will accept the social security benefit award letter for the entire year, others may require a new benefit letter to be obtained after verification dates (e.g., after 120 days for LIHTC, etc.).
As a closing reminder, in addition to social security, the 1.3% COLA increase also applies to the following income sources:
- Supplemental Security Income (SSI)
- Veterans Affairs Pensions
- Civil Service Pensions
- Railroad Retirement
Do you have questions about Housing Compliance? Or do you need housing compliance training for your staff? E&A Team’s Housing Compliance Training Team would love to help you. You can reach them by emailing Compliance@EandATeam.com