What Is VA COLA and How Does It Affect Your Benefits?
Discover how VA COLA protects the purchasing power of your benefits, automatically adjusting for economic shifts.
The Department of Veterans Affairs (VA) regularly adjusts the financial benefits provided to eligible veterans and their families through a mechanism known as the Cost-of-Living Adjustment, or COLA. This annual adjustment helps to ensure that the purchasing power of these benefits remains stable despite changes in the economy.
Understanding VA COLA
VA COLA stands for Veterans Affairs Cost-of-Living Adjustment. Its fundamental purpose is to counteract the effects of inflation, which is the general increase in prices and fall in the purchasing value of money. When the cost of goods and services rises over time, fixed benefits would lose their real value without such an adjustment. This adjustment helps beneficiaries maintain their standard of living by increasing their payments to reflect the rising costs of essentials like food, housing, and transportation.
VA Benefits Subject to COLA
Several types of VA benefits are subject to the annual Cost-of-Living Adjustment. One primary benefit is VA disability compensation, which is a tax-free, monthly payment for veterans with disabilities that resulted from or were made worse by their military service. The exact amount of this compensation varies based on the veteran’s disability rating and the number of dependents.
Dependency and Indemnity Compensation (DIC) is another significant benefit affected by COLA. DIC is a tax-free monetary benefit paid to eligible surviving spouses, children, or parents of service members who died in the line of duty or veterans whose death resulted from a service-related injury or disease.
VA pension benefits, which are needs-based programs for low-income wartime veterans, also receive COLA adjustments. These tax-free payments help provide supplemental income for veterans who are aged 65 or older, or who have a permanent and total non-service-connected disability, and meet specific income and net worth limitations. The COLA ensures that these essential support payments maintain their purchasing power for eligible recipients.
How VA COLA is Determined and Applied
The VA COLA is directly linked to the Cost-of-Living Adjustment announced by the Social Security Administration (SSA). By law, the VA is directed to provide a COLA for veterans’ benefits that matches the COLA applied to Social Security benefits. This means that when Social Security benefits are adjusted, VA benefits typically follow the same percentage increase.
The SSA determines its COLA based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the average change in prices for a selection of consumer goods and services, including food, housing, and medical care. The percentage increase in the average CPI-W from the third quarter of the previous year to the third quarter of the current year dictates the COLA.
The SSA typically announces the COLA for the upcoming year in October, following the release of the September CPI-W data. For VA benefits, this adjustment then becomes effective on December 1st of the current year, with the increased payments usually reflected in checks received in January of the following calendar year. Beneficiaries do not need to take any action to receive this adjustment; it is automatically applied to their eligible benefits.