The COLA and The ‘Uncola’

RLACEI

Tom Moutes

Retirees Update

By Tom Moutes, RLACEI Legislative Director
Email: Tom.Moutes@RLACEI.org

If you are old enough to remember the “Uncola” 7 UP advertisements of the 1970s, then you are old enough to remember the persistently high inflation and resulting COLAs (Cost of Living Adjustments) during that decade.

Recently, the Social Security Administration (SSA) announced the COLA for its benefits will be 5.9 percent for the coming year. This will be the largest COLA increase since 1982! There were several years during the 1970s “Uncola” era when the SSA increases were larger, a couple of which were even in double digits.

So, what does this mean for us LACERS Retirees? It means something and not much at all at the same time. The “something” is that clearly costs of goods have gone up. We are all probably feeling that.

The “not much” is due to the way the SSA calculates its annual COLA versus the way LACERS does. According to the SSA website, its “COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics. A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective.”

The LACERS COLA is provided on a fiscal year basis and is based on the average annual percentage change in the Consumer Price Index (CPI) for the Los Angeles area for the previous calendar year.

So, while the SSA’s COLA is based on national statistics and measured at the third quarter each year, the LACERS COLA is based on the local level and is measured at the end of the calendar year. These differences in measurement sometimes produce similar results, but sometimes the results are quite different. Of course, the LACERS Tier 1 COLA is capped at 3 percent per year, but any excess is banked for future years.

Even if there are differences in the amounts of the SSA COLA, which is effective soon and the LACERS COLA at the end of the fiscal year, it looks like we can all raise our glasses of the “Uncola” to be thankful for increased retirement checks in the future!

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