Did the Retirement Board approve a COLA?

Rather than a traditional COLA, the Retirement Board approved a one-time increase, of $153 for every member who retired prior to January 1, 2008. It is very important to understand that this is not a traditional COLA. The $153 is a one-time payment that will be added in a lump sum to your benefit, probably in October. The following months, your benefit will go back to what it is today. If, for example, your monthly pre-tax benefit is $800, then for one month your pre-tax benefit will be that amount plus $153, or $953. The next month, and this is very important to understand, your pre-tax benefit would revert back to $800.

Why doesn’t it increase my regular monthly benefit amount?

Unlike a traditional COLA, this one-time payment does not impact (i.e. increase) your monthly base benefit. The Board’s main concern must be the long-term financial soundness of the Plan. Based on a detailed analysis completed by the Plan’s independent actuary, the Board saw that there were not enough excess funds available to grant a traditional COLA. But there were, however, sufficient funds to grant a one-time payment in the amount of $153 to all members who retired prior to January 1, 2008.

Does this mean we will never get a traditional COLA again?

No. This one-time additional payment mechanism is only for 2008. We have left in place, unchanged, the language in the law that allows the Board to grant a traditional COLA when adequate funds are on hand to do that.

I still don’t understand why you can’t afford a “real” COLA.

Under a traditional COLA, your annual benefit permanently increases to a higher level. Since your benefit in all future years would be higher, a traditional COLA is therefore a lot more expensive, from the Plan’s point of view, than granting a one-time payment. The Plan doesn’t have enough funds to grant a traditional COLA and still maintain the level of funding needed to guarantee every dollar of payment already promised to every current and future retiree.

When will I get my $153?

We expect that the $153 will be added to your October benefit payment. Because this is a brand new type of benefit adjustment, our computer programmers need some time to write and test the computer program that will add the benefit to your check for the one month.

$153 doesn’t sound like very much, especially since it doesn’t increase my monthly benefit amount going forward.

The Plan’s independent actuary advised the Board that there were only enough excess funds for this type and size of payment.

How did the Board decide on giving everyone $153?

The Board had limited funds to make this extra payment. After reviewing several possible payout methods, the Board decided on an equal payout “across-the-board.” It was considered the most equitable. The elected Advisory Committee also agreed with this approach.

Did the Board approve an increase in the health insurance benefit?

The Plan has a legally separate fund to cover the health insurance benefit. It remains under-funded. The Board certainly recognizes that health insurance premiums continue to rise. Existing funds allow the Plan to maintain the current level of health insurance benefits, but unfortunately not to increase them for 2008.

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On behalf of the Board, I would be glad to discuss this important matter with any member, and to answer any questions that you might have.

Sincerely,

Steven Hutt
Executive Director