At the request of our Association, the Special COLA Commission was initiated by Governor Healey and included by the legislature within the FY25 State Budget. For nearly a year the Commission has focused on its three primary missions: COLA base increase for members of the State and Teachers’ Retirement System; creation of a new Enhanced or “senior” COLA; exploring new payment methods to fund the benefit improvements.
It is important to point out that any new COLA benefits, not already available to members of the 102 local retirement systems, that result from the Commission’s efforts must be adopted through local option. The legal requirements under the 1980 Prop. 2 ½ prohibit unfunded state mandates. Therefore, if the Enhanced COLA is passed into state law the provision would then need to be adopted locally as well.
In terms of the COLA base, local retirement systems already have the legal authority to regularly increase the base with the approval of the local legislative body. Across the 102 local systems, the average COLA base is approaching $17,000, with a growing number of systems with a base now exceeding $18,000. The Town of Montague maintains the highest COLA base at $30,000.
It should be noted that the smaller size of many local retirement systems, some of which have been aggressively funded for decades, has helped to facilitate regular improvements to the base.
As we head to press in early December, the Commission is preparing to release its report and recommendations to the governor and legislature. It is anticipated that this will take place just after Christmas. The recommendations will then need to be passed by the legislature before being sent to the governor for final approval prior to becoming law.
“Dating back to the late 1960s when the COLA benefit was first created, cost has always been the primary hurdle. Members may know that the first major victory for Mass Retirees came in 1971 when the Association helped change state law to allow the COLA to be granted to all public retirees regardless of the size of one’s pension. Prior to that only retirees with pensions of less than $6,000 received any COLA at all,” explains Association CEO Shawn Duhamel. “As the size of the State and Teachers’ Retirement Systems grew, so has the overall cost of new COLA benefits. Every $1,000 increase in the base adds hundreds of millions in new unfunded liabilities. Paying for the new benefits is then further complicated because the 2036 full funding deadline is now within 10 years, compressing the time to pay off any new debts. This is why the Commission is so important in delving into the details to chart a path forward.”
Benefit Proposal Details Yet to Emerge
From the outset of the Commission’s work, the goal has been to formulate recommendations for a modest increase in the traditional COLA base for the State and Teachers’ Retirement Systems while creating the new Enhanced COLA benefit.
The Enhanced COLA, which has been pursued by Mass Retirees for the last several years, would be paid in addition to the traditional COLA. And like the traditional COLA, it would become a permanent part of a retiree’s base pension. This is a somewhat unique provision in our COLA law that dates to the 1971 reform, whereby COLAs become a cumulative permanent part of the pension and can never be taken away.
While not yet finalized and subject to change, we believe the Commission will recommend that the Enhanced COLA apply to retirees who been retired for no less than 10 years. For illustration purposes only, an example of the potential Enhanced benefit is as follows: Retired 10-14 years $100; 15-19 years $200; 20+ years $300.
To help pay for the creation of the Enhanced COLA, as well as help facilitate more frequent increases in the traditional COLA base, we anticipate the Commission will recommend that a portion of annual PRIT Fund earnings that exceed the benchmark (7%) be set aside. The funds would be held in what would be known as a COLA Reserve Fund and continue to be invested by the PRIM Board along with all other pension funded assets.
“A process needs to be created whereby a small portion of excess investment gains are set aside in a special reserve fund that is to be used exclusively to fund COLA benefit improvements. We understand that these benefits are expensive, but there is no denying the fact that retirees are in desperate need of relief from inflation. Creating a reserve account and dedicating a small portion of excess investment gains to pay for the COLA is not going to negatively impact the pension fund or the State Budget,” comments Valeri.
“The Commission has put a lot of time and effort into developing this report and recommendations. I want to not only thank my fellow commissioners, but also PERAC Chief Actuary John Boorack and his staff for the countless hours they have dedicated to this important project.”
Once the Commission files its report in mid-December, the issue will be before the legislature – specifically the Joint Committee on Public Service. Our legislative team, led by Legislative Chairman Tom Bonarrigo, will then focus on moving a bill through the legislative process with the goal of passing the recommendations into law prior to the start of FY27 on July 1, 2026.