LACERS BOARD UPDATE
By Michael R. Wilkinson
It is that time of year again. No, I don’t mean spring training and one more chance that the Dodgers will not break our hearts again. No, it is COLA time. The time when the LACERS Board considers granting a Cost of Living Adjustment (COLA) based on changes to the federal Consumer Price Index (CPI) for all urban consumers in the Los Angeles-Long Beach-Anaheim area. This is an average increase for the year-to-year change from the 2017 to 2018 calendar year.
The increases, taking effect in the paychecks this July, will be 3 percent for Tier 1 and Tier 1 Enhanced Members, and 2 percent for Tier 3 members. This represents the maximum COLA amount for each tier based on a CPI of 3.8 percent. Tier 1 members will have 0.8 percent banked for future years, and Tier 3 members are not entitled to banking. Banking means than any CPI above the 3.0 percent maximum allowed is put in a bank that can be reclaimed when the CPI is less than 3 percent. So if there is a 2 percent CPI in a future year, then Tier 1 members would get the 2.0 percent plus 0.8 percent from the COLA bank for a total COLA of 2.8 percent. The COLA bank would then be reset to zero.
I often get questions when someone finds out that another pension plan or Social Security got a higher increase and asks why. The COLA is set by statute, and we follow that CPI that is set in the Administrative Code. Other plans follow other groups, some follow a national standard, and some plans use different regions or different time periods. So, as they say, your mileage may vary, but over time things tend to even out.
Correction: In last month’s LACERS Financial Report, I wrote incorrectly that the LACERS health plan is 70.1 percent funded. The correct figure is 80.1 percent funded.