The Special Commission on State and Teacher COLA improvements recently held its second meeting on March 10th. During this meeting, in-depth exhibits were presented by State Actuary John Boorack to the Commission members, identifying various levels of improvements, costs and possible methods of financing those improvements to the State and Teacher COLA benefits.
The Commission consists of nine members who are very knowledgeable, experienced in benefit levels, finances and funding of the Commonwealth’s pension systems. The two systems are the largest in the state and represent over 140,000 public retirees, approximately 60% of all public retirees from Massachusetts.
“I believe the makeup of the Commission consists of very capable individuals who understand the systems’ plan benefit and recognize the need to improve cost of living benefits that have been fixed at a flat rate of $390 since 2012 for members of these systems,” according to Mass Retirees President Frank Valeri, who is the Association’s representative on the Commission.
After the Commission’s organizational meeting earlier this year, the last two meetings included cost analysis of raising the current COLA base of $13,000 that essentially has capped annual benefit increases to a $390 maximum since 2012 for State and Teacher retirees, as well as the costs involved with providing enhanced benefits for long term retirees. Presentations by Actuary John Boorack detailed the liabilities involved with raising the COLA base at different levels up to $18,000 and costs attributable to an enhanced COLA for long term retirees. While the increased costs involved raising the base was by each $1,000 intervals were significant, Boorack provided a method of offsetting costs triggered by a lump sum payment with excess investment earnings realized over two- and three-year periods. The enhanced COLA benefit, at varying eligibility levels, were significantly less than base increases and could be also considered paid by such excess investment gains.
According to President Valeri, “The discussions have been very positive, with members making suggestions on how to effectuate and trigger, utilizing such investment gains to pay for these benefit enhancements. Our position has always been that such gains should be shared in this way by retirees and beneficiaries and not be entirely rolled into the funding process of the Commonwealth’s pension liabilities.”
The Commission’s next meeting is scheduled for Monday, April 7th.