CPI-U Low, Resulting in No COLA for January 2020; Contribution Rates to Remain Stable

At the October 28, 2019 meeting of the PSRS/PEERS Board of Trustees, Board members voted on whether to grant a January 2020 cost-of-living adjustment for benefit recipients, as well as the active member and employer contribution rates for the 2020-2021 school year.

CPI-U Not High Enough for a January 2020 Cost-of-Living Adjustment

At their October 28, 2019 meeting, Board members voted not to grant a cost-of-living adjustment (COLA) effective January 1, 2020.

Each year the COLA decision is based in part on the Consumer Price Index for Urban Consumers (CPI-U) as determined by the U.S. Bureau of Labor Statistics for the previous fiscal year, as well as the recommendation of the Systems’ actuary, PricewaterhouseCoopers. The increase in the CPI-U for PSRS/PEERS’ fiscal year 2019 was 1.65%.

“The decision was made according to the COLA policy that was adopted in 2017 to provide increases for our retirees as often as possible, while at the same time safeguarding the funded status of the Systems,” said Board Chair Aaron Zalis. “The policy states that in years when the increase in the cumulative CPI-U is between zero and 2.0%, no COLA will be given.”

Since a COLA will not be granted in January 2020, the 1.65% change in the CPI-U will carry over and be added to the next fiscal year’s cumulative calculation. Therefore, the change in the CPI-U during fiscal year 2020 would need to be 0.35% or more in order for eligible retirees to receive a 2% COLA in January 2021 under this policy. The calculation is as follows:

Contribution Rates Unchanged for 2020-2021 School Year

Board members also voted to maintain the current active member and employer contribution rates for both PSRS and PEERS for the 2020-2021 school year. the 2020-2021 school year runs from July 1, 2020 to June 30, 2021.

Based on the recommendation of the systems' actuary, PricewaterhouseCoopers, PSRS and PEERS contribution rates will remain as follows: