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Cost-of-Living Adjustment (COLA) Definition

VA adjusts monthly compensation amounts based on the yearly change in the cost of living as determined by the Social Security Administration (SSA). These periodic changes made to VA compensation rates allow for VA benefit amounts to increase with the rate of inflation.

Again, VA cost-of-living adjustment (COLA) rates are based on the COLA rates set forth by the SSA. The SSA bases COLA rates off of the percentage increase in the Consumer Price Index for Urban Wage Earnings and Clerical Workers (CPI-W) from the third quarter (July, August, September) of the previous year to the third quarter of the current year. The CPI-W is a statistical measure of change of the prices of goods and services over time in “major expenditure groups” such as clothing, food, housing, medical care, and other entities that are typically purchased by consumers.

The COLA rate for 2020 (1.6 percent) went into effect on December 1, 2019, resulting in an increase in benefits for veterans. In October 2019, President Trump also signed into law the Veterans’ Compensation Cost-of-Living Adjustment (COLA) Act of 2019. The new law increases the amount of disability compensation, dependent compensation for Gold Star families, and the clothing allowance for veterans.