Board Approves 2% Cost-of-Living Adjustment effective January 2021; Contribution Rates Unchanged for Next School Year
At the October 26, 2020 PSRS/PEERS Board of Trustees meeting, the Board voted to grant a 2% cost-of-living adjustment (COLA) for eligible benefit recipients effective January 1, 2021. They also voted to maintain the current active member and employer contribution rates at their current levels for the upcoming school year.
2% Cost-of-Living Adjustment Effective January 1, 2021
The COLA decision is based in part on the Board's current COLA policy, which takes into consideration the increase in 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 (PwC).
| CPI-U | COLA per Board-Approved Funding Policy |
|---|---|
| Less than 0.0% | 0.0% |
| 0.0%-2.0% | 0.0% when CPI-U is cumulatively below 2.0% |
| 0.0%-2.0% | 2.0% when CPI-U cumulatively reaches 2.0% or more* |
| 2.0%-5.0% | 2.0% when the CPI-U is at least 2.0%, but less than 5.0% |
| 5.0% or more | 5.0% |
| *resets cumulative calculation after a COLA is provided | |
It is the Board's fiduciary responsibility to the Systems and members to make decisions that are consistent with maintaining the Systems' ongoing financial health and strong funded status. As of June 30, 2020, PSRS was 84.0% pre-funded and PEERS was 86.3% pre-funded. This means, that as of the end of our last fiscal year, PSRS/PEERS had enough assets on hand to pay more than 80% of all present and projected future benefits with today's dollars.
Based on this year's actuarial valuation, and according to the COLA policy, PwC recommended a 2% COLA. The Board voted in agreement with PwC's recommendation.
Since a COLA was not granted in January 2020, the 1.65% change in the CPI-U from the previous fiscal year carried over and was added to this fiscal year's cumulative calculation. Therefore, the change in the CPI-U during fiscal year 2020 needed to be 0.35% or more in order for eligible retirees to receive a 2% COLA in January 2021 under this policy. The actual increase was .65%.
The calculation is as follows:
| Period | Change in CPI-U | Final Results |
|---|---|---|
| Fiscal Year 2018-2019 | 1.65% | No COLA Granted |
| Fiscal Year 2019-2020 | .65% | |
| Cumulative CPI-U as of June 30, 2020 | 1.65% + .65% | Basis for January 1, 2021 COLA |
Contribution Rates Unchanged for New School Year
The Board also voted to maintain the current active member and employer contribution rates at their current levels for the upcoming school year. The 2021-2022 school year runs from July 1, 2021 to June 30, 2022.
Based on PwC's recommendation, PSRS and PEERS contribution rates will remain as follows:
| Member Rate | Employer Rate | Combined Rate |
|---|---|---|
| 14.5% | 14.5% | 29% |
| Member Rate | Employer Rate | Combined Rate |
|---|---|---|
| 6.86% | 6.86% | 13.72% |
Contribution rates have held steady since 2011.
"We have made it a priority to provide a COLA to our retirees whenever it is fiscally responsible for us to do so, and to keep the contribution rates steady for our working members for as long as possible," said PSRS/PEERS Executive Director Steve Yoakum. "It is a testament to the diligence and expertise of our Board and staff that we remain well-funded enough to do both this year."
PSRS/PEERS provides service retirement, disability, and survivor benefits for more than 129,000 active members and over 97,000 retired Missouri public school teachers, school employees, and their families. The market value of invested assets for PSRS and PEERS combined were approximately $45.6 billion as of June 30, 2020 making the combined entity larger than all other public retirement plans in the state combined, and the 45th largest defined benefit plan in the United States and 101st largest plan in the world.