Important Notice Regarding the Retiree Cost-of-Living Adjustment (COLA) – 2019

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The SCERS Board of Retirement approved cost-of-living adjustments (COLA) at its meeting on February 20, 2019.

All Tier 1 members (both Miscellaneous and Safety) will receive a 4% COLA.  All Miscellaneous Tier 3, 4, and 5 members and Safety Tier 2, 3, and 4 members will receive a 2% COLA.  The COLA for 2019 will be reflected in direct deposits and checks issued on April 30, 2019.

The SCERS Board of Retirement approved cost-of-living adjustments (COLA) at its meeting on February 20, 2019 (COLA by plan and tier).

All Tier 1 members (both Miscellaneous and Safety) will receive a 4% COLA.  All Miscellaneous Tier 3, 4, and 5 members and Safety Tier 2, 3, and 4 members will receive a 2% COLA.  The COLA for 2019 will be reflected in direct deposits and checks issued on April 30, 2019.

The COLA is governed by Section 31870 of the Government Code, as part of the  County Employees ‘ Retirement Law of 1937 (1937 Act). Under that section, the SCERS Board must determine the appropriate COLA for SCERS retirement benefits and implement that COLA on April 1 each year. The COLA is based on the annual change in the U.S. Department of Labor, Bureau of Labor Statistics Consumer Price Index (CPI) for All Urban Consumers for the San Francisco-Oakland-Hayward area. The law requires that this change be rounded to the nearest one-half percent.

SCERS performs the calculation of the cost-of-living increase. In making this calculation, SCERS compares the average annual CPI for the calendar year just ended with the average annual CPI for the preceding calendar year, and not the end-of-year CPI for the two years. Thus, to determine the COLA effective April 1, 2019, SCERS compared the average annual CPI for 2017 and 2018, not the December 2017 CPI compared to the December 2018 CPI. The average annual CPI is often slightly different than the year-end CPI, but over time the two measures produce virtually identical results.

Determination of the COLA is not based on simple subtraction of the average annual CPI for 2017 from the average annual CPI for 2018. Instead, the COLA is based on the ratio of the two average annual CPIs. This is done because the actual CPI number is a measure of how much consumer prices have changed relative to a designated ‘base period’ (the current base period is 1982-1984). In order to measure the amount of change from year to year, as opposed to the amount of change from the base period, SCERS must use the ratio of the two average annual CPI numbers. Put another way, via the ratio, 2017 becomes the base year for measuring the increase in the cost-of-living in 2018.

The chart on the U.S. Department of Labor statistics on cost-of-living for the San Francisco-Oakland-Hayward area shows that the average annual CPI for 2018 was 285.550 and the average annual CPI for 2017 was 274.924 . The ratio of these two annual average CPIs shows an increase of 3.87% from 2017 to 2018. This results in a base COLA of 4.0% when rounded to the nearest one-half percent, as required by the law.

The actual COLA that a person receives is dependent upon the individual’s tier and date of retirement, and includes consideration of whether the individual has any accumulated carry-over in his/her ‘COLA Bank.’ A person accumulates a balance in his/her COLA Bank if the average annual CPI for a year is greater than the maximum annual COLA authorized for the person’s tier by the 1937 Act. For example, the maximum annual COLA for a Tier 3 Miscellaneous member is 2%. If the average annual CPI was 3%, the Tier 3 member would get a 2% COLA and accumulate 1% in his/her COLA Bank. The balance in the COLA Bank would then be applied the next time the average annual CPI for the year was less than the annual maximum COLA. Accordingly, if the average annual CPI the next year was 1%, SCERS would add the 1% balance in the COLA Bank to the 1% COLA for the year, resulting in a total COLA of 2%. The balance in the COLA Bank would be reduced to zero.