High Inflation Leads to Expensive Cost-of-Living Adjustments for CalPERS and Others

Link: https://www.ai-cio.com/news/high-inflation-leads-to-expensive-cost-of-living-adjustments-for-calpers-and-others/


With big returns come big expenses. That’s what seems to be the case for pensions across the country, as they are forced to increase their payouts to beneficiaries due to inflation. While the past year has been a record breaker for pension fund returns, inflation will be claiming its fair share of the gains as well.

For CalPERS members, those who retired between 2006 and 2014 will receive the biggest increase at 4.7%. This will be the largest cost-of-living increase for beneficiaries in the past 32 years, dating to 1990.

While the Bureau of Labor Statistics has estimated the Consumer Price Index to have increased by 7% over  2021, CalPERS is not using the 7% to calculate its increased payments. Instead, it uses an average of each month’s numbers.

CalSTRS similarly also has built in inflation protection, thanks to a California law that requires public pensions to do so. However, CalSTRS’ method of calculating this payment is slightly different. The fund gives quarterly supplement payments to those whose annual benefit falls below 85% of their original benefit. This year’s inflation numbers will likely increase the number of supplemental payments that CalSTRS in forced to provide.

Author(s): Anna Gordon

Publication Date: 1 Mar 2022

Publication Site: ai-CIO

‘The Pension Bill Has Something For Everybody’: A Look Into How Illinois Lawmakers Justified Their Pension Benefit Boosts

Link: https://www.forbes.com/sites/ebauer/2022/02/03/the-pension-bill-has-something-for-everybody-a-look-into-how-illinois-lawmakers-justified-their-pension-benefit-boosts/?sh=207f9a5233bb


In my prior article, I laid out the Illinois General Assembly’s repeated unanimous, near-unanimous or strong bipartisan majority support for a series of bills increasing pension benefits for public employees from 1989 – 2000.


With respect to the SERS benefit increase, the Senate debate centers around collective bargaining. As Senator Jones says in the May 31, 1997 transcript, “I think Senator Collins had worked hours, and many hours and years to sponsor this piece of – this legislation so that we can arrive at the point we are today. So I – I stand up gladly and proudly to – to support you in this endeavor, but I think we should know where the real, real support originally came from and how it all came about. And it came about as a result of collective bargaining legislation.” (Again, all transcripts can be viewed online.)

On the House side, there was more discussion. The CGFA’s summary notwithstanding, there were a number of benefit boosts, including a “30 and out” provision. It was explained by Rep. Poe that the bill was “funded” by the fact that during the AFSME contract negotiations, the union accepted a reduced wage increase (relative to what they’d otherwise have demanded) in order to achieve this pension benefit increase, and it was taken on faith that the bill was indeed therefore truly “paid for,” when it ought to simply have been met with incredulity instead.


This is, of course, exactly the core of the reason why public sector unions are fundamentally so ripe for abuse, when the individuals who nominally have the role of “employer” gain so much politically from providing these generous benefits.

This brings us to the Teacher’s equivalent and the transcripts of May 21 – 22, 1998. Here the path of the bill was not as simple, as the speaker delayed moving the bill out of the Rules committee.


Finally, we have transcripts of the 1989 COLA/pension funding bait-and-switch bill to read. Again recall that this bill was wholly rewritten through negotiations, and presented in its final form on the day it was voted upon, June 30, 1989. 


“The pension bill has something for everybody, folks. It’s been designed in such a way that everybody’s got something in here.” 

But as Schuneman continues to speak, it is clear that he is cynical about this design and in fact he is concerned about the cost, and he continues talking about the pension debt as the equivalent to paying the minimum payment on a credit card – but gets no traction. The next speakers are far more interested in clarifying the (even more generous) benefit boosts for General Assembly members, and after some side-tracking Jones picks up his “something for everything” point but not with Schuneman’s cynicism but sincerely calling for passage, citing the governor’s support (and with no mention of costs or the funding plan): 

“Sure, there is something in here for everyone. The Office of the Governor came out very strongly for the workers of the State of Illinois and in strong support for the compounding of the increases for State Employees and retirees. So, let’s give me a favorable vote on this bill, and we will do good for the people who work hard for the State of Illinois.”

Author(s): Elizabeth Bauer

Publication Date: 3 Feb 2022

Publication Site: Forbes

Top Democrats challenge Janet Mills to give retired state workers a big pension boost

Link: https://bangordailynews.com/2022/02/04/politics/top-democrats-challenge-janet-mills-to-give-retired-state-workers-a-big-pension-boost-xoasq1i29i/


Top legislative Democrats joined a Thursday letter challenging Gov. Janet Mills to give state retirees a bigger cost-of-living increase to address inflation with the governor nearly ready to release a key spending plan.

People in the Maine Public Employee Retirement System, which includes retired state employees and teachers, were told last summer that they would receive a 3 percent increase to their benefits up to nearly $23,000. Inflation during that time was 5.4 percent.

A letter sent to the governor on Thursday by 59 lawmakers led by Sen. Joe Rafferty, D-Kennebunk, and joined by all Democratic leaders in both chambers, including Senate President Troy Jackson, D-Allagash, and House Speaker Ryan Fecteau, D-Biddeford, asks Mills to fund an increase commensurate with the level of inflation in her upcoming budget proposal.

Author(s): Caitlin Andrews

Publication Date: 4 Feb 2022

Publication Site: Bangor Daily News

The Social Security shell game

Link: http://exclusive.multibriefs.com/content/the-social-security-shell-game/civil-government


According to The Senior Citizens League, the sleight of hand behind it is a formula for calculating the Cost of Living Adjustment (COLA) that has robbed seniors of 33% of their buying power since 2010.

Since then, annual COLA increases have averaged a meager 1.375%. That means the average recipient has received a COLA increase of less than $20 a month. For many, the con job is even more vexing because much of that gain is taken back with increases in Medicare premiums.

These annual COLA adjustments are based by the U.S. Bureau of Labor Statistics (BLS) on a formula that uses the Consumer Price Index for All Urban Wage Earners and Clerical Workers — a lengthy descriptor that’s usually abbreviated as CPI-W. Therein lies the problem — this index does not accurately reflect the rising costs that most affect seniors — such as medical care and drugs, food/staples and rent. Even the most modest estimates suggest these costs are increasing at a rate of somewhere between 5% and 10% annually.

Author(s): Dave G. Houser

Publication Date: 5 March 2021

Publication Site: Multibriefs

Members of teacher pension fund planning lawsuit to force transparency

Link: https://news.yahoo.com/members-teacher-pension-fund-planning-110300430.html?guccounter=1


About 1,000 current and retired Ohio educators skeptical of the true financial shape of their $90 billion state pension fund are preparing to sue to force greater cooperation with a $75,000 self-funded investigation of its books.

The forensics audit, financed through money raised from members, is being undertaken by pension investment expert Ted Siedle — a former Securities Exchange Commission attorney, financial forensics investigator, and co-author of the book “Who Stole My Pension?”

The public records lawsuit will ask the Ohio Supreme Court to force the State Teachers Retirement System, serving some 500,000 active, inactive, and retired members, to release information that investment firms have claimed is proprietary or a trade secret.

Author(s): Jim Provance, The Blade, Toledo, Ohio

Publication Date: 3 May 2021

Publication Site: Yahoo News

Vermont Pension Reform Plan Blasted by State Teachers, Workers

Link: https://www.ai-cio.com/news/vermont-pension-reform-plan-blasted-state-teachers-worker/



A plan proposed by Vermont lawmakers to bolster the state’s pension systems, which are facing nearly $3 billion in unfunded liabilities, has been resoundingly panned by state teachers and public employees who said they felt abandoned and betrayed.

According to a draft of the pension reform plan released by the state’s House lawmakers, teachers and state employees would be required to pay more in contributions to the fund, stay in the workforce longer, and get less in monthly benefits when they retire. Additionally, cost of living adjustments (COLAs) would apply only to the first $24,000 of the retirement benefit, and to be vested in the program, employees would have to work twice as long—a minimum of 10 years from the current five.

Author(s): Michael Katz

Publication Date: 30 March 2021

Publication Site: ai-CIO

Pritzker digs Chicago financial hole deeper by increasing city firefighter pensions – Wirepoints



Chicago households are on the hook for a combined $63,000 in Chicago-only debt, based on Moody’s calculations. It’s why the city and the school district have been junk rated for years.

Pritzker’s COLA increase runs against what most of Illinois’ political elite already know – COLA cuts are necessary and inevitable at all levels of government. As Greg Hinz said in his review of Wirepoints’ Pension Solutions, “…that juicy perk over time has amounted to megabillions that state government just doesn’t have.”

The COLA hike will cause more financial headaches for Chicago. Mayor Lori Lightfoot says the COLA increase will cost the city an additional $18 to $30 million a year in pension costs. In all, the perk will force taxpayers to pay an additional $850 million over time.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 8 April 2021

Publication Site: Wirepoints

Illinois governor signs bill that increases Chicago’s pension liabilities

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104061236SM______BNDBUYER_00000178-a783-de03-a7ff-b7e7bf7e0001_110.1#new_tab


Illinois Gov. J.B. Pritzker signed legislation that benefits retired Chicago firefighters, rejecting city warnings adding to its already burdensome pension tab could damage ratings and drive up taxes.

The added cost to bring cost-of-living adjustments for all firefighters in tier one up to a simple 3% annual increase despite their birth date amounts to $18 million to $30 million annually and up to $823 million in full by 2055 when the fund is slated to reach a 90% funded ratio.

Pending legislation to do the same for the police fund carries a steeper price tag of up to $90 million annually and $2.6 billion through 2055.

Author(s): Yvette Shields

Publication Date: 6 April 2021

Publication Site: Fidelity Fixed Income

Gov. Pritzker Signs Firefighter’s Pensions Reform Legislation Codifying Benefits

Link: https://www.riverbender.com/articles/details/gov-pritzker-signs-firefighters-pensions-reform-legislation-codifying-benefits-49231.cfm


HB 2451 addresses disparate pension benefits among Chicago firefighters. Currently, employees eligible for a pension in the Firemen’s Annuity and Benefit Fund of Chicago (FABF) who were born after January 1, 1966 are granted a 1.5 percent COLA. However, firefighters who may have started on the force the same day, may unfairly receive different benefits based on their dates of birth. The legislation addresses this discrepancy by adjusting the COLA for these firefighters from 1.5 percent to 3 percent.

The legislation eliminates the 30 percent cap on cumulative COLA adjustments. For employees eligible for a 1.5 percent COLA, they would have hit the cap at 20 years. The reforms made in this legislation provides firefighters the ability to plan for themselves and their families.

HB 2451 is effective immediately.

Publication Date: 5 April 2021

Publication Site: Riverbender

Editorial | Legislative lunacy

Link: https://www.news-gazette.com/opinion/editorials/editorial-legislative-lunacy/article_967b0ad5-3d2e-544a-b7ae-83f75d384af4.html


When it comes to politics and government, Chicago is a force unto itself. Its strengths and weaknesses are, mostly, of its own making.

But the city was recently victimized by the General Assembly, and it’s important for the people of Illinois to know why. What happened speaks to a serious problem — a Legislature seemingly untethered to reality.


Unfortunately, state legislators voted during the recent lame-duck session to increase retirement benefits for 2,200 Chicago firefighters.

Mayor Lori Lightfoot, as a newspaper headline put it, objected “strenuously” to the Legislature’s action.

She correctly described it as a “massive unfunded mandate to the taxpayers of Chicago at a time when there are no funds to cover this new obligation.”

Publication Date: 22 January 2021

Publication Site: The News-Gazette

Social Security COLA: What’s Working, What’s Not

Link: https://www.thinkadvisor.com/2021/01/12/social-security-cola-whats-working-whats-not/


The only remaining provider of inflation-protected annuities in the United States is the federal government through Social Security. Retirees today can buy more of this income by waiting until age 70 to claim Social Security, thereby boosting their inflation-protected income by 30% over their full retirement age.

For healthy, higher-income retirees who have seen the largest improvements in longevity in recent decades, this increase in lifetime inflation-protected income appears to be a bargain.

Authors: Jason Fichtner and Michael Finke

Publication Date: 12 January 2021

Publication Site: Think Advisor