Continually improving pension COLA policy has been a key focus of Mass Retirees since our founding in 1968. The recent spike in inflation and the impact of higher prices on retirees makes this work more important than ever.

While we are grateful to the Legislature for approving the 5% COLA in FY23, as well as thankful that roughly 2/3rds of the local retirement systems implemented the additional 2% benefit, the fact remains that Massachusetts public retirees continue to feel the pain of higher prices and an inadequate pension COLA.

This is particularly true for members of the State and Teachers’ Retirement Systems, where the COLA base has remained at $13,000 since 2011. Since 1998, the State/Teacher base has increased just once – by $1,000 to the current $13,000 base.

To be clear, the COLA base is the maximum amount by which the annual COLA can be calculated. For instance, a 3% COLA on the current $13,000 base amounts to a maximum annual benefit increase of $390. Using the traditional 3% COLA as a guide, each $1,000 increase in the base adds $30 to a retiree’s pension (annually). That COLA then becomes a permanent part of your base pension, never to be taken away.

Across the 102 local retirement systems, the overwhelming majority have done well by their local retirees by incrementally increasing the COLA base every few years. These periodic increases have proven to be a more manageable approach that fits within the confines of long-term pension funding schedules.

As we have explained in the past, it is the legal and accounting requirements of properly funding public retirement benefits that present a hurdle that must be overcome to improve COLA benefits. For example, when the COLA base is raised the increase carries both a short and long-term cost to the retirement system that must be funded. Those new costs are considered to be a new unfunded liability to the system, which must be paid for over the life of the schedule.

Local retirement systems that have more advanced COLA bases, like Bristol County and the Town of Wellesley, have routinely increased the benefit in small increments. This phased in approach helps to keep the cost of the COLA manageable, while sharing the investment success of the retirement system with retirees – something we believe to be essential.

However, given the size and long-term funding plans of the State and Teachers’ Retirement Systems (approximately 67,000 and 69,000 retirees, respectively) the cost of increasing the COLA base presents a funding challenge. Is it now stands, the Commonwealth is scheduled to be fully funded in 2036.

For these two systems, which are run by and funded by the state government (along with contributions from active employees), the cost of each $1,000 increase in the COLA base is roughly $500 million in unfunded liability. Without investment gains to offset the cost, each $1,000 increase adds some $45 million to the state’s annual pension funding appropriation – which clocked in at $4.1 billion for FY24 (the current fiscal year, which began on July 1).

The reason, why we focus so much time and energy on the financial picture of these benefits, is because it is the cost of the benefits creating the hurdle that must be overcome. You would be hard pressed to find more than a handful of elected officials who do not support the merits of improving the COLA base, as well as creating a new benefit for long-term retirees. The problem is and has long been managing the cost.

Similar to the task we faced back in 1996-97 creating and passing COLA reform, these next steps in improving the current COLA benefit will take an all-hands effort. This means working closely with Governor Maura Healey and her new Administration, as well as with the State Legislature and key members of the retirement policy community.

To that end, earlier this week Association President Frank Valeri and I met with senior Healey Administration officials to discuss a State / Teacher COLA base increase, as well as the creation of a new “senior” or enhanced COLA benefit.While this week’s meeting was the first of what will likely be an involved process over the coming months, it is clear that Governor Healey is an ally in this process.

We will also continue conversations with key legislative leaders and retirement system leaders – all geared toward creating a viable path to improve retiree benefits.

One positive sign pointing toward a successful outcome is the strong performance of the investment markets during the first half of 2023. Coming off a year when the Commonwealth’s pension investment returns suffered a double-digit loss, a turnaround in 2023 will go a long way toward helping to pay for improved COLA benefits.

Once we have investment return reports from the state’s Pension Reserves Investment Trust (PRIT) Fund, our plan is to provide a full update on the year-to-date performance. However, we do know that both the S&P and NASDAQ are up by double digits for the first six months of 2023. While these indexes are not indicative of the overall returns of the highly diversified PRIT Fund, they are a strong indication that the markets are trending in the right direction.

Now, in terms of the FY24 COLA, retirees who are members of the 102 local retirement systems should receive the new 3% COLA in your July pension check, which is paid at the end of this month. The 3% COLA will be applied to the COLA base of each individual system – now ranging from $12,000 to $20,000 for FY24.

Members of the State and Teachers’ Retirement Systems will receive the 3% COLA on a $13,000 base once the FY24 State Budget has been finalized and approved – likely in the August check. The COLA will be retroactive to July 1, 2023. At this time, the budget remains in a legislative conference committee. Once it is approved by the House and Senate the budget will be sent to the governor, who then has 10-days in which review the document before acting.

The 3% State & Teacher COLA was included in Healey’s original budget proposal, as well as both the House and Senate versions of the budget. Its passage into law is not in doubt.

Last week’s report, focusing on the various retirement systems that operate in Massachusetts, proved to be a big hit with members. With 104 different public retirement systems, serving more than 225,000 retirees and surviving spouses, it is no wonder that things can get confusing! We plan to run the weekly message as an article within the September newsletter for those members who do not have an active email address.

Before closing, I’d like to leave you with one final thought. While the work required to improve your retirement benefits can seem daunting, we will get the job done. As the saying goes, nothing worth doing is ever easy. Thankfully, we have hardworking, reasonable, and caring people across state and local government willing to work with us to find solutions to important problems. Together, we are tackling these issues and will get positive results for you. I have not a shadow of doubt!

With great appreciation,


Shawn Duhamel
Chief Executive Officer
Mass Retirees Association

Comments are disabled.