IT'S PENSION COLA SEASON

Early Voting Process Urged

JANUARY 1, 2009: Although the next pension cost-of-living increase is not due until July, the process of voting for this 3% increase by our 104 local retirement boards has already begun.

As they have done in the past, Hingham and Wellesley were the first two boards to vote for July ’09 COLAs, both by 5-0 votes at their October meetings.

Medford, Plymouth, Taunton, as well as Bristol and Plymouth Counties quickly followed at their November meetings, all by 5-0 votes. Hull and Newton had scheduled votes for their December meetings, along with a number of others that will be voting at their December or January meetings.

COLAs for members of the State and Teachers’ Retirement Systems will be initiated by Governor Deval Patrick’s budget, which he will submit to the Legislature this January and subsequently acted upon by the House and Senate. We are very optimistic that the Governor will include the 3% COLA in his budget.

When the twelve-month Consumer Price Index (CPIW) cycle ended this past September 30, the increase was 5.8%. That triggered a 5.8% increase in Social Security payments beginning this January. It also allowed our local retirement boards to begin scheduling a vote for the maximum allowable 3% on behalf of their retirees and survivors.

Had the twelve-month CPI been less than 3%, the law allows individual boards to vote for that lesser figure. For example, one board, Springfield, voted for last year’s CPI of 2.3% for its members’ COLA, rather than 3%. This was one of the rare instances – only five times in the past 10 years – that a board voted for a COLA of less than 3%. And in seven of those 10 years, the CPI was less than 3%. Under extreme circumstances, a board can also vote to not approve a new COLA. This has only happened once.

 

Market Meltdown Impact

With the Commonwealth’s giant pension fund (PRIT) having lost close to 25% of its value at the time, the state’s 106 retirement boards, including the State and Teachers’, met at their fall conference in Springfield this October (see pages 10 & 11). Association President Ralph White urged the local boards to address their COLA vote as soon as possible. All pension funds are facing the same losses as the PRIT Fund, White pointed out.

The market meltdown has spared no one. Faced with a recession that has no end in sight, city and town officials are looking to pare budgets in any way possible. Although pension fund losses can be recovered during future bull market years, COLAs are a tempting target of immediate relief.

“If the meltdown continues at its present pace, there is always the remote possibility that a mayor or town manager could recommend that their community’s retirement board forego a new COLA,” said White.

“Even though COLAs are built into all long-range pension funding schedules, the safest way to protect its retirees is for a board to vote for a COLA now and remove it from any possibility of being a public issue down the road,” he said.

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