Member Concerns: Cost of Living Adjustments

The new 98th General Assembly convened on January 8, 2013, but will not return to Springfield and begin work on legislative proposals until the end of the month.

All legislation introduced and debated during the 97th General Assembly, but not enacted, is no longer active. We will continue to track important legislation affecting the state’s pension code and respond to member concerns. Currently, many of those concerns center on the annual cost-of-living adjustment:

There have been no changes to the state law governing the cost-of-living adjustment for TRS members. While various proposals have been debated that would drastically alter eligibility rules for the cost of living adjustments (COLA), as well as the COLA itself, the General Assembly to date has not enacted any changes.

TRS cannot predict if, or when, the General Assembly may alter the state law regarding the COLA. It is certain, however, that if the laws governing the TRS COLA are changed, the matter will be challenged in court, a matter that will likely take a few years to resolve. A court challenge to any change in the state’s pension laws would very likely freeze the current COLA provisions in place until the case is decided.

Under current state law, TRS members who retire before age 61 receive their first annual COLA increases in the January after they turn age 61. TRS members who retire at age 61 or older receive their first COLAs in the January following the first anniversary of their retirements. In either case, the first pension check to include the COLA is the February check.

To determine a member’s first COLA increase, TRS calculates the amount of time elapsed from the member’s retirement date to the January when he/she becomes eligible for the COLA and multiplies that number by 3 percent. In each January after age 61, each member’s annual COLA is calculated by taking his/her current annuity and multiplying it by 3 percent.
              
None of the legislative proposals reviewed by TRS have suggested that annuities already received by retired members be reduced or scaled back. In other words, members would keep what they currently receive if the law changes.

However, there are proposals being discussed that would eliminate all COLA increases being accumulated, but not yet received, by retired members between the ages of 55 and 61. There also are proposals that would change the eligibility for all COLAs to a minimum of five years after retirement or age 67, whichever comes first; as well as proposals that would tie future COLA increases to inflation and require all future COLA increases be calculated from a member’s original pension, not his/her current pension.

But it is impossible for TRS to know at this point in time if a member who retires between ages 55 and 61 within the next few years will receive their first scheduled COLA increase on time. It is impossible to know if any active or retired members will have to wait until age 67 to receive their first COLAs. Those answers will depend on future actions taken by the General Assembly and state officials, the timing of those actions, and the timing of any lawsuit and court decision.

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