LACERS BOARD UPDATE
By Michael R. Wilkinson, LACERS Commissioner
Email: MikeWilkinson4LACERS@gmail.com
T
he LACERS Board of Administration has set the Cost-of-Living Adjustment (COLA) at three percent for Tier 1 members effective July 1. The COLA is based on the Consumer Price Index (CPI) for all urban consumers in the Los Angeles, Long Beach and Anaheim area as determined by the Federal Bureau of Labor Statistics.
Los Angeles Retirees’ Cost-of-Living Adjustment (COLA) is based on inflation (CPI). Tier 1 Retirees will get a COLA raise of three percent this year; the extra .5 percent will go into a COLA bank for future low-inflation years. This system helps ensure Tier 1 Retirees keep up with inflation during high-cost years, while still providing some raise in low-cost years. Tier 3 Retirees will receive a COLA raise capped at two percent without a savings pool.
The accumulated COLA bank percentage is determined by retirement date and ranges from 20.2 percent to .5 percent. For Tier 1 members retiring after July 1, 1980, the bank is 5.7 percent or less.
There is no longer a Tier 2. Tier 3 is made up of members who started with the City on or after Feb. 21, 2016, unless they qualified for Tier 1 membership.
Whenever we talk about COLAs, there is always a temptation to ask why “the grass is always greener on the other side of the fence,” to quote the old proverb. I frequently get the question on why this pension plan or that pension plan or Social Security has a higher COLA. The answer is that the laws are different, and the plans use different CPIs and different dates to set the CPI. Sometimes the other plan is higher and some years it is lower.
It’s important to remember that COLA isn’t guaranteed everywhere. Some plans don’t offer COLA adjustments at all. Others have lower caps on annual increases or might even skip COLA payments entirely if the plan isn’t financially healthy. Additionally, some plans don’t factor previous COLA raises into future calculations, which can significantly reduce the overall benefit over time. This clarifies that COLA is a benefit, but not a universal one, and highlights some potential limitations to be aware of.
