At its recent meeting, the Select Committee on Pensions Policy (SCPP) received a briefing and heard testimony from retirees about a potential cost of living adjustment (COLA) for the PERS 1 and TERS 1 pensions programs. PERS 1 covers many local government retirees and TERS 1 covers teachers.

The PERS 1 pension is for local and state general government employees who were enrolled prior to 1977. The PERS 1 pension was underfunded and as a result, current local employers pay an extra assessment included in the employer rate for current PERS 2/3 plans to help fully fund the PERS 1 plan.

The PERS 1 plan wasn’t designed with regular COLA increases, meaning that any new COLA’s must now be approved by the Legislature. Most recently the Legislature authorized a COLA in 2019. Additionally, due to the underfunded status of the plan, new COLAs can result in an increase in costs for current PERS 2/3 employers.

The SCPP is responsible for making recommendations on policy and rates related to the PERS pensions plans. At the most recent meeting, they heard about the need for another COLA from retirees and received a briefing on the history of COLAs for PERS 1.

In the past, AWC has expressed opposition to PERS 1 COLAs that may increase plan costs and create new unfunded costs for cities. AWC has been sympathetic to the needs of the retirees, especially those receiving only the minimum benefit. However, passing on new costs to city employers is not sustainable. AWC has asked that the Legislature fully fund any PERS 1 COLAs so that they do not increase the unfunded liability that already exists for the PERS 1 plan and pass those costs onto cities.

AWC will continue to monitor the conversation and provide feedback to the SCPP as they consider the possibility of recommending a COLA for the PERS 1 plan.