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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Monday, September 22, 2014

***Corrected information on PSPRS COLA's for fiscal year 2014-15***

PSPRS posted this corrected information about COLA's (aka permanent benefit increases) for fiscal year 2014-15.  The previous post should be disregarded.  This post has additional information and makes it clear that the monthly COLA for PSPRS retirees, who meet the criteria under the "old law," will be $65.20 per month, not $32.60 as I wrote in the last post.  In PSPRS' previous information, I read the $65.20 amount to be the retroactive COLA's for July and August 2014.  I apologize for this mistake (and thanks to the commenter that noted this in the last post).   Following in boldface type is the information PSPRS posted on 9/19/2014:

INFORMATION REGARDING THE JULY 2014 PBI PAYMENT (PAYABLE IN SEPTEMBER 2014)  FOR ELIGIBLE RETIREES 

The retroactive permanent benefit increase (PBI) will post to your account payable for Friday, September 19, 2014.  This payment is for the two month timeframe of July and August 2014. The regularly scheduled benefit payment on September 30 will incorporate the new pension amount going forward from September 30, 2014 through June 30, 2015.  Please note that for the majority of our membership this two month payment may be very small in comparison, especially to the payment for the 3 year retroactive adjustment made in June. 

Below are the average payments for each system/plan:
PBI CRITERIA FOR MEMBERSHIP
If membership (hire) date with current employer was before 1/1/2012 (“OLD” LAW) and RETIRED on or before 7/1/2011 plus retired for 2 years (by July 1), or age 55 and retired for 1 year (by July 1)
PSPRS $65.20 monthly increase Monies available in reserve account
CORP
1.59% increase Monies available in reserve account
EORP 4.00% increase Monies available in reserve account
 
If membership (hire) date with current employer was before 1/1/2012 (“NEW” LAW) and RETIRED on or after 8/1/2011 plus retired for 2 years (by July 1), or age 55 and retired for 1 year (by July 1)
OR
If membership (hire) date with current employer was after 1/1/2012 (“NEW” LAW) plus age 55 by July 1, or if receiving a survivor/disability retirement for 2 years (by July 1)
PSPRS No increase available Investment return based on prior fiscal year and current funding status of the Plan
CORP
0.81% increase Investment return based on prior fiscal year and current funding status of the Plan
EORP No increase available Investment return based on prior fiscal year and current funding status of the Plan

Remember: This retroactive payment is separate from your regular September benefit payment which will occur on September 30.

Please create a Members Only account (Click Here) if you have not done so in order to view your own personal record. 

This should mean that the retroactive COLA for July and August will be $130.40 ($65.20 X 2), and this should have already been paid out September 19th to PSPRS retirees meeting the criteria under the "old law."  The $65.20 COLA represents a raise of 2.17% for someone with a $3,000 monthly benefit and a 1.63% raise for someone with a $4,000 monthly benefit.  According to InflationData.com, the annualized inflation rate for the 12-month period ending August 2014, the latest listed, is 1.70%.

For anyone who falls under the criteria of the "new law" (i.e. SB 1609), no COLA will be paid.  It is important to remember that the February 2014 Fields decision only covered those who were already retired when SB 1609 went into effect.  Those who retired after that date are still covered under the provisions of SB 1609, which requires a minimum funding level of 60% and a minimum 10.5% rate of return for the previous year.  For the past fiscal year, PSPRS easily exceeded the 10.5% return but did not meet the minimum funding level of 60%.  CORP is better funded than either PSPRS or EORP and met both the required benchmarks to pay a COLA.

There a still two pending cases, the Hall case against the Elected Officials' Retirement Plan (EORP) and the Parker case against PSPRS, which were filed by employees who were still active when SB 1609 went into effect.  These cases are challenging the constitutionality of both the change in the COLA formula and the increase in contribution rates for active employees hired before 2012 .  The issues in the cases are essentially identical, so a decision in either will cover both cases.  A decision in favor of the plaintiffs would mean those covered under the "new law" would have to be paid COLA's for fiscal year 2014-15.  Unfortunately, I do not know the current status of these cases.

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