One of the pillars of Rhode Island’s sweeping 2011 pension reform law was the suspension of annual cost-of-living-adjustments for retirees.
According to the Civic Federation, the reform law mandated:
Automatic annual increase in pensions benefits (COLA) is suspended until state employees, teachers, nurses, correctional, officers, judges, and state police plans’ funding level calculated together exceeds 80 percent; interim increases will be paid at 5-year intervals, based on investment returns.
The interim annual increase and all future annual increases will be applied only to the first $25,000 of income (indexed) and based on investment returns.
But in 2015, for the first time in years, many municipal retirees are will receive a COLA. The raise will be to the tune of 2.73 percent. [See which systems are receiving COLAs at the bottom of this post.]
The increase was triggered by funding improvements that moved many pension systems over the 80 percent funding threshold required for members to receive COLAs. From the Providence Journal:
Good news for many Rhode Island municipal retirees: they will see a 2.73 percent increase in their pension benefits starting next year.
[…]
59 of the 113 municipal plans in the state-run Municipal Employees Retirement System are healthy enough now (at least 80 percent properly funded) that their members will see the COLA next year on the first $25,000 of their pension benefit, reported the state Retirement Board on Wednesday.
The COLAs were approved by the board as it accepted its annual valuation reports for the MERS plans and the Employees Retirement System of Rhode Island, the major retirement plan for state employees and teachers.
Those valuations reports showed that the state’s overall investments earned 8.23 percent last year on a five-year “smoothed” basis, outperforming the state’s 7.5 percent assumed rate of return.
The ERSRI plans are not expected to reach 80 percent funding until around 2031. But since passage of the pension overhaul law, lawmakers approved a provision where some pension increase for those workers could be added every five years if certain investment levels were met.
To see the list of retirement systems receiving COLAs, see below or click here:
Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons
