A decades-old proposal to change how Social Security benefits are adjusted for inflation is gaining fresh attention in the United States, with critics warning that it could reduce purchasing power for a large majority of beneficiaries.
The proposal, known as a “flat-rate COLA,” was introduced in 1987 by former Democratic Representative Tim Penny of Minnesota. Under the idea, all Social Security beneficiaries would receive the same dollar increase in their monthly payments, rather than receiving the same percentage increase.
The current system uses a percentage-based cost-of-living adjustment (COLA), calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This means that beneficiaries with larger monthly payments receive larger dollar increases when the COLA is applied.
Under the flat-rate system, the annual inflation adjustment would first be calculated for a beneficiary around the 20th percentile. That dollar increase would then be applied equally to everyone.
For example, if the 20th-percentile beneficiary received a $35 monthly increase, every Social Security recipient would get an additional $35, regardless of their existing benefit amount.
Supporters argue that such a system would make Social Security more progressive by providing relatively greater support to people receiving lower benefits. The Committee for a Responsible Federal Budget has also suggested that a flat-rate COLA could help extend Social Security's ability to pay full benefits.
However, critics say the policy could hurt millions of middle-income retirees. According to an AARP analysis cited by Hindustan Times, around 80% of beneficiaries could receive smaller annual increases than they would under the existing system.
AARP estimates that if the flat-rate system had been used at the beginning of 2026, the average beneficiary would have received an increase of about $34.20 per month. Under the actual 2026 COLA, the average increase was around $57.90. That would represent roughly $23.70 less each month, or about $285 over a year.
The bigger concern is the long-term impact. If annual increases fail to keep pace with inflation, beneficiaries could gradually lose purchasing power. This could be particularly difficult for retirees who depend heavily on Social Security for everyday expenses such as food, housing and healthcare.
The debate therefore centers on a difficult policy choice: whether providing relatively stronger increases to lower-income beneficiaries is worth potentially reducing inflation protection for the majority of Social Security recipients.
Reader Comments 0