Inflation Causes Significant Increase in Maryland Annual Cost of Living Adjustment (COLA) from Previous Year

In Maryland, permanent total disability Award payments are subject to an annual cost of living adjustment (COLA). The purpose of COLA is to protect against the erosion of benefits due to inflation.

On or before June 30th of each year, the Maryland Department of Commerce determines the rate of change in the Consumer Price Index (CPI) in the previous calendar year and reports to the Workers’ Compensation Commission.

On or before July 31st of each year, the Commission then publishes the new COLA that becomes effective on January 1st of the following year.

Historically, COLA increases have ranged from as low as .33% in 2017 to as high as 5.0% in 1992, which is the maximum adjustment afforded under the Workers’ Compensation Act. While increases are most common, COLA may also be subject to decreases, which occurred in 2011 when COLA was reduced to -0.4%.

For the year 2023, however, Maryland COLA Is now at a staggering 3.96%, which is a considerable increase from 0.9% the year before.

As provided under Md. Lab. & Empl. § 9-638(d)(1-2), COLA payments are adjusted by (1) multiplying the initial rate of compensation by the cost of living adjustment; and (2) adding the product to the compensation, as adjusted, paid during the prior year. COLAS are calculated exactly and are not subject to the rounding to the next highest dollar provision that compensation rates are.

A link to the COLA chart published on the Commission website can be found here: https://www.wcc.state.md.us/PDF/Rates/COLA.pdf.

It is important to make the necessary adjustments each year to permanent total disability payments, as required under the Act. Please reach out to the attorneys at Tarpine, Heller & Pendergrass if you have questions on how to calculate COLA adjustments or set reserves for future exposure.

Katie Nalley