HB 42 by Representative Sam Jones, and 75 co-authors, authorizes a cost-of-living adjustment (COLA) of up to 1.5 percent (based on the amount of funds available in the Experience Account) for eligible retirees and beneficiaries payable July 1, 2015. A calculation of the amount of funds available will be made by the LASERS Actuary. The LASERS Board of Trustees is required to direct its Actuary to account for this COLA in the System's 2015 valuation.
House Bill 42 is subject to veto by the Governor. He has until July 5 to take action on the bill. If the legislation is approved, LASERS will make a retroactive payment for the July COLA amount. Eligible retirees will be notified of the timing of the payment and the month when they can expect that their monthly benefit will reflect their adjusted benefit amount.
The COLA is payable only on the first $60,000 of the retirement benefit. In order to be eligible for the increase:
- Retirees must be age 60 or older and must have received a benefit for one year as of June 30, 2015;
- Disability retirees must have received a benefit for one year as of June 30, 2015; or
- Beneficiaries of retirees, who would have attained age 60, are eligible if benefits have been paid to the retiree or the beneficiary, or both combined, for at least one year as of June 30, 2015.
The legislation also contains a number of pension reform provisions, such as:
- The Experience Account will not be refilled in years when a COLA is granted. This will apply more investment earnings to debt and less toward funding of COLAs. The result will likely reduce frequency of future COLAs.
- Certain amortization periods are changed from 30 to 20 years, through incremental reductions. This change will have a larger impact on future actuarial losses than it will on gains, which means money will come into the System sooner.
- The re-amortization of certain schedules which will result in a more balanced recognition of gains and losses and will serve to lower the employer contribution rate.
- COLAs will be funded within 10 years; more closely aligning the funding of COLAs cost with the expected lifetime payments to the recipients.