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How is the Cost-of-Living Adjustment (COLA) Changing?
At the September 15, 2016 Board meeting, SERS’ Board of Trustees approved seeking the following legislative changes to SERS’ COLA:
The proposed changes will not affect the COLA increases retirees received before January 1, 2018. For example, if the “current month” COLA amount on your check stub as of December 1, 2017 is $165, you will continue to receive $165 monthly from 2018 through 2020 (as shown in the sample check stub below). However, your COLA amount will not increase during those years.
The gross amount of your check will remain the same; however, the net amount may change based on your deductions.
Why are These COLA Changes Necessary?
While SERS is not in financial crisis, the COLA changes are necessary to address immediate financial challenges and long-term funding goals.
What Will the COLA Changes Do?
On the present course with no changes, SERS’ actuary predicted the System would not reach 70% funded until 2030. This would likely cause major changes to SERS’ health care. With the COLA changes, the System is expected to reach 70% funded by 2018 and 90% funded by 2034. The 90% level is critical because, at that level, the pension fund is stable and can withstand a market downturn
Why Were Retirees Who Live on a Fixed Income Included in the COLA Changes?
There are several reasons the COLA changes include retirees:
How Many Times Has the COLA Changed?
Since the COLA was introduced in 1971, there have been a total of eight COLA and ad hoc changes. Changes included implementing and removing waiting periods (from one year to three years), raising and lowering fixed rates (from 1.5% to 3%), using a rate tied to the CPI-W, and one-time increases to allow older retirees to “catch up” with new retirees.
When Will These Changes Take Effect?
Changes to the COLA require legislative approval. It is unknown at this time how long that approval will take. Our estimate is that the COLA changes will take effect January 1, 2018.
Click here for a printable version of the COLA changes.
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COLA Changes: What You Need to Know
Click here to read about the proposed changes to the Cost-of-Living Adjustment.
Click here for a chart that compares SERS' proposed COLA changes to the COLAs of other Ohio public retirement systems. This document also contains a breakdown of percentage changes in the Consumer Price Index over the past 15 years.
Click here for a detailed statement from SERS' actuary.