As the end of 2022 approaches, we try to anticipate any major changes that may affect the industry and anticipate how we may provide tools to help industry stakeholders. Everyone should be thinking a little bit about the 2023 COLA. While COLA increases always generate questions, this year’s COLA may create new questions and new “best practice” responses.
At this point, prognosticators are predicting an 8.7% COLA. On Thursday, Oct. 13, 2022, at 8:30 a.m. EDT, the U.S. Bureau of Labor Statistics (BLS) will release the September inflation data. This will allow the current-year average CPI-W reading for Q3 to be calculated and compared to the previous year's average CPI-W reading during Q3. The year-over-year percentage increase, rounded to the nearest tenth of a percent, will determine how much Social Security checks will climb in 2023.
The Centers for Medicare and Medicaid Services recently announced that Part B premiums will fall about 3% in 2023. Right now, the standard Medicare Part B premium is $170.10 per month. But next year, the standard Part B premium is dropping to $164.90, representing a $5.20 decrease per month. Not only are Part B premiums going down in 2023, but the annual deductible is dropping, too. Right now, it's $233. Next year, it will be $226.
For most single-member households, the COLA increase combined with the medical expense decrease will not create a $200 per month income increase. However, a two-member (or more) household receiving SSA could potentially see an increase to income significant enough to create the requirement to report for Interim Recertification. Using 8.7% COLA to estimate increases, any household currently receiving around $2400 in SS benefits (or other federal benefits) will receive an income increase high enough to warrant an Interim Recertification.
Owner/agents are already asking a lot of questions about how to handle residents who are currently receiving benefits that will increase to the point an IR is required. I don’t know if any software produces a report that provides income information by income type, but it looks like it will be needed this year. Also, while I’m talking about SSA, VA and other federal benefits are generally subject to the same COLA increase.
As for verification, many of us have had discussions about guidance provided by HUD in HH 4350.3 Paragraph 9-6.
Benefits that include the cost of living adjustments (COLAs) are not available from SSA for uploading into EIV until the end of the calendar year.
When processing recertifications with an effective date of January 1, February 1, March 1 and April 1, in order to complete the Recertification Steps outlined in Chapter 7, Figure 7-3, and provide the tenant with the required 30-day notice of any increase in rent, the owner must use one of the methods below for determining the tenant’s income.
(1) Use the benefit information reported in EIV that does not include the COLA as third-party verification as long as the tenant confirms that the income data in EIV is what he/she is receiving;
(2) Use the SSA benefit, award letter or Proof of Income Letter provided by the tenant that includes the COLA adjustment if the date of the letter is within 120 days from the date of receipt by the owner;
(3) Determine the tenant’s income by applying the COLA increase percentage to the current verified benefit amount and document the tenant file with how the tenant’s income was determined; or
(4) Request third-party verification directly from SSA when the income in EIV does not agree with the income the tenant reports he/she is receiving. (See Paragraph 9-15)
(5) All recertifications effective after April 1 must reflect the SSA benefit that includes the COLA.
When HUD provided this guidance, I don’t think that they anticipated a COLA that could result in an income increase of $200 or more per month. So, the use of last year’s SSA income might conflict with guidance requiring an IR if income increases by $200 or more per year.
Keep in mind that EIV will not be updated until December 2022 to reflect the 2023 COLA.
Award letters will be issued, but many CAs and/or state agencies will not accept the award letters because there is no date – we don’t know why, but it is a fact.
Therefore, many owner/agents of both HUD and LIHTC properties may be scrambling for alternative verification options.
Of course, use of the SSA website (my SSA) will provide required third-party verification as defined in HH 4350.3 Paragraph 5-13.
However, owner/agents also have the option of implementing Streamlined Verification of Fixed Income. (see HUD HSG Notice 2016-09 Streamlining Administrative Regulations for Multifamily Housing Programs). This requires the owner/agent to obtain verification of the COLA increase – usually by accessing the SS 2023 COLA Fact Sheet - and then OAs may just calculate the increase. No additional verification documentation is required. – No Award Letter – No EIV. Using Streamlined Verification of Fixed Income is valid if UIV or third-party verification was obtained no more than three years prior.
Year 1 2021 - UIV or third-party verification
Year 2 2022 – Streamlined Verification is acceptable
Year 3 2023 – Streamlined Verification is acceptable
Year 1 2024 - UIV or third-party verification
Year 2 2025 – Streamlined Verification is acceptable
Year 3 2026 – Streamlined Verification is acceptable, Etc.
Please note that Streamlined Verification of Fixed Income does not apply when processing Move-in transactions.
When applying the COLA increase, owner/agents should remember to round at the end of the income calculation. For example:
Current SSA Income
Randy Resident $1214.00 * 12 = $14568.00
Rachel Resident $1181.00 * 12 = $14172.00
New SSA Income if COLA is 8.7%
(Please note that the 8.7% COLA increase amount is being used as an example)
Randy Resident $1214.00 + 8.7% = $1319.62
$1319.62 x 12 = $15835.44 ($15835.00 Annual Income)
Increase $105.62 (monthly increase)
Rachel Resident $1181 + 8.7% = 1283.75
$1283.75 * 12 = 15405.00 (Annual Income)
Increase $102.75 (monthly increase)
Using this example, this results in an income increase of $208.37
Reduction in Medicare Part B Premiums and lowering the annual Medicare deduction will make the increase of Adjusted Income slightly higher.
There are a variety of reasons I am sending this HUDBlast out…first and foremost to support the property management professions who will need to respond.
Also, if owner/agents or applicants/residents are required to contact SSA via phone or by visiting the SSA offices, I’m sure it will create an unanticipated burden. We don’t want that.
Using Streamlined Verification of Fixed Income or verification obtained directly from the ssa.gov website will help circumvent that problem.
To participate in RBD OnDemand Training explaining Streamlined Verification and Streamlined Certification, visit our website at https://www.rbdnow.com/ondemand-training. RBD OnDemand training classes include a comprehensive workbook, interactive exercises, and an optional Knowledge Assessment to help gauge your understanding of the training topic.
Do you need a new policy or supporting forms? Our RBD FASTForms Streamlining Bundle ($150.00) includes the following policies and forms: