[Code of Federal Regulations]
[Title 20, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 20CFR404.272]

[Page 88-89]
 
                      TITLE 20--EMPLOYEES' BENEFITS
 
               CHAPTER III--SOCIAL SECURITY ADMINISTRATION
 
PART 404_FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE (1950	 )
--Table of Contents
 
              Subpart C_Computing Primary Insurance Amounts
 
Sec. 404.272  Indexes we use to measure the rise in the cost-of-living.

    (a) The bases. To measure increases in the cost-of-living for annual 
automatic increase purposes, we use either:
    (1) The revised Consumer Price Index (CPI) for urban wage earners 
and clerical workers as published by the Department of Labor, or
    (2) The average wage index (AWI), which is the average of the annual 
total wages that we use to index (i.e., update) a worker's past earnings 
when we compute his or her primary insurance amount (Sec. 404.211(c)).
    (b) Effect of the OASDI fund ratio. Which of these indexes we use to 
measure increases in the cost-of-living depends on the Old-Age, 
Survivors, and Disability Insurance (OASDI) fund ratio.
    (c) OASDI fund ratio for years after 1984. For purposes of cost-of-
living increases, the OASDI fund ratio is the ratio of the combined 
assets in the Federal Old-Age and Survivors Insurance Trust Fund and the 
Federal Disability Insurance Trust Fund (see section 201 of the Social 
Security Act) on January 1 of a given year, to the estimated 
expenditures from the Funds in the same year. The January 1 balance 
consists of the assets (i.e., government bonds and cash) in the Federal 
Old-Age and Survivors Insurance Trust Fund and the Federal Disability 
Insurance Trust Fund, plus Federal Insurance Contributions Act (FICA) 
and Self-Employment Contributions Act (SECA) taxes transferred to these 
trust funds on January 1 of the given year, minus the outstanding 
amounts (principal and interest) owed to the Federal Hospital Insurance 
Trust Fund as a result of interfund loans. Estimated expenditures are 
amounts we expect to pay from the Old-Age and Survivors Insurance and 
the Disability Insurance Trust Funds during the year, including the net 
amount that we pay into the Railroad Retirement Account, but excluding 
principal repayments and interest payments to the Hospital Insurance 
Trust Fund and transfer payments between the Old-Age and Survivors 
Insurance and the Disability Insurance Trust Funds. The ratio as 
calculated under this rule is rounded to the nearest 0.1 percent.

[[Page 89]]

    (d) Which index we use. We use the CPI if the OASDI fund ratio is 
15.0 percent or more for any year from 1984 through 1988, and if the 
ratio is 20.0 percent or more for any year after 1988. We use either the 
CPI or the AWI, depending on which has the lower percentage increase in 
the applicable measuring period (see Sec. 404.274), if the OASDI fund 
ratio is less than 15.0 percent for any year from 1984 through 1988, and 
if the ratio is less than 20.0 percent for any year after 1988. For 
example, if the OASDI fund ratio for a year is 17.0 percent, the cost-
of-living increase effective December of that year will be based on the 
CPI.

[51 FR 12603, Apr. 14, 1986]