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View Poll Results: Is your public pension COLA'd?
No, it is a fixed amount 4 10.26%
It is partially COLA'd 13 33.33%
It is fully COLA'd 21 53.85%
Other 1 2.56%
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Is your Public Pension COLA'd?
Old 10-23-2010, 12:24 PM   #1
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Is your Public Pension COLA'd?

As promised, I'm posting the rest of my polls relating to public employee pensions. As for the other polls, please don't vote unless you are now or have in the past worked for local, state or federal government, including military.

The next question is, does your pension have a COLA? Pensions in the Seattle system are partially COLA'd: they increase by 1.5% per year with a "floor" of 65% of the original purchasing power. My mom is a retired teacher and has a similar provision in her pension.
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Old 10-23-2010, 01:05 PM   #2
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I am a retired federal employee.
My pension is both CSRS and FERS. The CSRS part is COLA'd. The FERS part becomes COLA'd when I turn 62; it also decreases at that point (a SSA supplement goes away).

Does that make perfect sense?
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Old 10-23-2010, 01:08 PM   #3
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Quote:
Originally Posted by kyounge1956 View Post
As promised, I'm posting the rest of my polls relating to public employee pensions. As for the other polls, please don't vote unless you are now or have in the past worked for local, state or federal government, including military.

The next question is, does your pension have a COLA? Pensions in the Seattle system are partially COLA'd: they increase by 1.5% per year with a "floor" of 65% of the original purchasing power. My mom is a retired teacher and has a similar provision in her pension.
Is the 1.5% per year an automatic bump, or is it "the lesser of actual cpi inflation or 1.5%"?

And once the floor kicks in, does the pension move in lockstep with cpi? Do you perhaps have an open link to Seatle and/or King County documents on this?

Ha
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Old 10-23-2010, 01:09 PM   #4
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Quote:
Originally Posted by Khan View Post
I am a retired federal employee.
My pension is both CSRS and FERS. The CSRS part is COLA'd. The FERS part becomes COLA'd when I turn 62; it also decreases at that point (a SSA supplement goes away).

Does that make perfect sense?
And I thought mine was hard to figure out!
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Old 10-23-2010, 01:15 PM   #5
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Originally Posted by kyounge1956 View Post
And I thought mine was hard to figure out!
There was also a break in service and a withdrawal of funds along the way.

And a special pay bracket for IT personnel.
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Old 10-23-2010, 01:35 PM   #6
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I answered my own question re Seattle COLA. An automatic 1.5% bump, until and unless you hit the 65% floor, at which time you maintain no less than 65% of "your original purchasing power".

POST RETIREMENT COST OF LIVING INCREASES
Each December the monthly retirement allowance will be increased to provide the highest benefit calculated under one of the following cost of living adjustments:
1. A 1.5% annual compounding COLA
2. A COLA which would provide 65% of the purchasing power which the member‟s original retirement allowance could purchase.

http://www.seattle.gov/retirement/documents/SCERSHandbook092009.pdf

So someone with a long retirement, and even modest average inflation, is quite likely to hit that 65% floor and stay even thereafter.

Ha
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Old 10-23-2010, 01:51 PM   #7
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Quote:
Originally Posted by Khan View Post
I am a retired federal employee.
My pension is both CSRS and FERS. The CSRS part is COLA'd. The FERS part becomes COLA'd when I turn 62; it also decreases at that point (a SSA supplement goes away).

Does that make perfect sense?
Similar situation here. About 75% of mine is CSRS which is fully COLA'd, the remainder under FERS is diet COLA'd but it started at retirement as well (rather than age 62) since I am under the firefighter regs.
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Old 10-23-2010, 02:00 PM   #8
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Originally Posted by haha View Post
I answered my own question re Seattle COLA. An automatic 1.5% bump, until and unless you hit the 65% floor, at which time you are kept no less than 65% of "your original purchasing power".

POST RETIREMENT COST OF LIVING INCREASES
Each December the monthly retirement allowance will be increased to provide the highest benefit calculated under one of the following cost of living adjustments:
1. A 1.5% annual compounding COLA
2. A COLA which would provide 65% of the purchasing power which the member‟s original retirement allowance could purchase.

http://www.seattle.gov/retirement/do...book092009.pdf

So someone with a long retirement, and even modest average inflation, is quite likely to hit that 65% floor and stay even thereafter.

Ha
As Ed McMahon used to say, "You are correct, sir!" I figured out once that at a constant 4% inflation rate, it would take about 23 years to "hit the floor". With increasing lifespans, I am sure many Seattle retirees will have reason to be glad it is there.

However, the way the ordinance that created the floor is written, every time the pension funding level reaches 100%, the floor can be raised by 5 percentage points, with no corresponding change in contribution levels. ISTM this is a catastrophe waiting to happen. Any time there is a market bubble, the funding percent will go up to 100%, the floor will be raised, and when the bubble bursts the fund will be left with increased obligations and decreased resources from which to meet them. The floor was originally set at 60% in 2001 or so and raised to 65% in 2007 or thereabouts. Sometimes I toy with the idea of running for the Pension Board after I retire to see what can be done about re-writing or repealing that ordinance. The actuaries say that even with increased employee and employer contributions, it will take decades to get the system back to the 100% funding level. I don't think it's realistic to think of raising contributions much higher than where they are most likely headed over the next two years. If I were on the board, I think I would also advocate changing the Fund gradually to a more conservative asset allocation. IMO another hit like 2008 will kill the system for future City employees, and I'd hate to see that happen.
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Old 10-23-2010, 02:23 PM   #9
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Mine (Hawaii state) is 2.5% of the original benefit per year.
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Old 10-23-2010, 02:42 PM   #10
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When I retire from my federal employee job in 2 yrs, I will be under the CSRS, which is a COLA pension. On my 60th birthday, 7 yrs from now, my military reserves pension will kick in and also will be COLA'd. When I get to age 62, I'll get a small SS payment, maybe $300, which has been reduced by the Windfall Elimination Provision (WEP).
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Old 10-23-2010, 02:48 PM   #11
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Mine (Hawaii state) is 2.5% of the original benefit per year.
Interesting. The Seattle system makes it clear that the 1.5% increase is compounded year over year.

I believe one advantage of complex formulae like Seattle's is that it would effectively obscure the risks and costs from the public. And the feature that KYounge just described is not even in the handbook, as far as I saw in my brief look.

Ha
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Old 10-23-2010, 03:21 PM   #12
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Interesting. The Seattle system makes it clear that the 1.5% increase is compounded year over year.

I believe one advantage of complex formulae like Seattle's is that it would effectively obscure the risks and costs from the public. And the fillup that KYounge just described is not even in the handbook, as far as I saw in my brief look.

Ha
What fillip? Do you mean the potential for the "floor" to go up? You are right, that isn't in the Handbook, I think they probably just revise that to reflect whatever the current floor is. The raising of the floor is in the text of the originating ordinance, which is also available, via the "Ordinance Search" at the website for the Office of the City Clerk's. If I get ambitious, I'll hunt it out and post a link, but it always takes me a while to find it.

The Seattle system has changed over the years. I think originally it had no COLA, then in the high-inflation years of the 1970's there were some one-time adjustments. As I recall, one of these was to restore the benefits to 40% of original purchasing power. If retirees pensions had eroded that much due to inflation, they must've been hurting bigtime. Later, there was a "percent of original benefit" adjustment (but it was an increasing percentage the longer you had been retired, not a constant percentage as in Hawaii), and after that for a time I believe it was either "percent of original benefit" or "1.5% annual" depending on when you had retired—or maybe whichever was greater. I forget! IIRC at one time retirees also got a "13th check", if the system's funding was at an adequate level that particular year. So even though it's complicated now, it's less complicated than it has been in the recent past.

P.S. I wouldn't worry about the floor COLA. If I understand the actuaries' report on its current condition (also linked on the retirement system website), the Seattle pension fund won't see 100% again for a very long time, perhaps not within my lifespan. But I'd still like to see that ordinance revised or repealed. IMO it was well-intentioned, but not well-thought-out. I wouldn't assume that the complexity of the system was deliberately created for the purpose of obscuring the risks and costs (although I won't deny that it can have that effect.) When I traced the development of the system via the various ordinances that have affected it, it seems to me more that it just evolved over time as a result of repeated tinkering to fix whatever was perceived to be the problem at that time.
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Old 10-23-2010, 03:30 PM   #13
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Still wondering (since my question on another thread got derailed),is a military reserve pension the same as a regular military pension for same rank at retirement?

A.

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On my 60th birthday, 7 yrs from now, my military reserves pension will kick in and also will be COLA'd. .
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Old 10-23-2010, 03:41 PM   #14
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When I retire, I get an immediate 4% increase. Every year I get an increase of that same original amount. So it is COLA'd but the amount gets progressively smaller when calculated as a percentage.

I also get an additional one time 3% raise when I hit 55. Not sure how its figured if I retire after already turning 55 and I don't plan to find out.
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Old 10-23-2010, 04:19 PM   #15
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What fillip? Do you mean the potential for the "floor" to go up? You are right, that isn't in the Handbook, I think they probably just revise that to reflect whatever the current floor is. The raising of the floor is in the text of the originating ordinance, which is also available, via the "Ordinance Search" at the website for the Office of the City Clerk's. If I get ambitious, I'll hunt it out and post a link, but it always takes me a while to find it.

The Seattle system has changed over the years. I think originally it had no COLA, then in the high-inflation years of the 1970's there were some one-time adjustments. As I recall, one of these was to restore the benefits to 40% of original purchasing power. If retirees pensions had eroded that much due to inflation, they must've been hurting bigtime. Later, there was a "percent of original benefit" adjustment (but it was an increasing percentage the longer you had been retired, not a constant percentage as in Hawaii), and after that for a time I believe it was either "percent of original benefit" or "1.5% annual" depending on when you had retired—or maybe whichever was greater. I forget! IIRC at one time retirees also got a "13th check", if the system's funding was at an adequate level that particular year. So even though it's complicated now, it's less complicated than it has been in the recent past.

P.S. I wouldn't worry about the floor COLA. If I understand the actuaries' report on its current condition (also linked on the retirement system website), the Seattle pension fund won't see 100% again for a very long time, perhaps not within my lifespan. But I'd still like to see that ordinance revised or repealed. IMO it was well-intentioned, but not well-thought-out. I wouldn't assume that the complexity of the system was deliberately created for the purpose of obscuring the risks and costs (although I won't deny that it can have that effect.) When I traced the development of the system via the various ordinances that have affected it, it seems to me more that it just evolved over time as a result of repeated tinkering to fix whatever was perceived to be the problem at that time.
I think we agree. I didn't try to guess anyone's purpose in making a provision, I just said that some provisions can have side benefits that don't immediately jump out and may be obscure to the general public/taxpayer, who while intermittently interested, usually are not highly motivated to understand the details.
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Old 10-23-2010, 05:57 PM   #16
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When I retire, I get an immediate 4% increase. Every year I get an increase of that same original amount. So it is COLA'd but the amount gets progressively smaller when calculated as a percentage.

I also get an additional one time 3% raise when I hit 55. Not sure how its figured if I retire after already turning 55 and I don't plan to find out.
When you retire, do you have a starting pension of X dollars, plus an immediate increase of 4% of some other quantity? If so, what is that other quantity?
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Old 10-23-2010, 06:03 PM   #17
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As an employee of the Canadian federal government my pension would be indexed to CPI.
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Old 10-23-2010, 06:09 PM   #18
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Originally Posted by kyounge1956 View Post
When you retire, do you have a starting pension of X dollars, plus an immediate increase of 4% of some other quantity? If so, what is that other quantity?
I am not him, but it appears that what he is describing is similar to simple interest. Say he retired at year end 2010, and will receive $50,000 for 2011. In 2012 that would bump up to $50,000 + 4%* $50,000, or $52,000. However, each year thereafter he would continue to get "only " an additional $2000, so that his total pension would increase arithmetically rather than exponentially. Thus in 2013 he gets $54,000, in 2014 $56,000, etc. This ignores the extra bump somewhere along the way that he mentioned in his description.

Ha
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Old 10-23-2010, 06:16 PM   #19
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I am not him, but it appears that what he is describing is similar to simple interest. Say he retired at year end 2010, and will receive $50,000 for 2011. In 2012 that would bump up to $50,000 + 4%* $50,000, or $52,000. However, each year thereafter he would continue to get "only " an additional $2000, so that his total pension would increase arithmetically rather than exponentially. Thus in 2013 he gets $54,000, in 2014 $56,000, etc. This ignores the extra bump somewhere along the way that he mentioned in his description.

Ha
that part I understood. What puzzled me, was how can there be an immediate increase of 4% upon retirement? I don't think it can be 4% of pension, because before retirement utrecht wouldn't have been receiving a pension yet.
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Old 10-23-2010, 06:47 PM   #20
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I think we agree. I didn't try to guess anyone's purpose in making a provision, I just said that some provisions can have side benefits that don't immediately jump out and may be obscure to the general public/taxpayer, who while intermittently interested, usually are not highly motivated to understand the details.
I wouldn't call that a "benefit", unless confusion is a good thing. A side "effect" rather.

As promised, here is a link to the Floor COLA ordinance. I think the sequence went like this:
Ordinance #120656 eliminated the earlier patchwork system of COLA adjustments in favor of a 1.5% compound adjustment with a 60% floor, to take effect as soon as the pension fund hit the 100% level. Reaching the 100% level also automatically amends the pension ordinance, setting up a further raising of the floor when the funding level next reaches 100%. IIRC, the 100% level was reached shortly after this ordinance went into effect, and the 60% floor and automatic amendment were both triggered.

Ordinance #120685 was enacted only a few weeks later, setting in place a trigger to raise the floor to 65%, and changing the text of the automatic amendment from 65% to 70%. The trigger point was reached in 2007 or so at the height of the most recent stock market bubble; the floor is now 65%, and the automatic amendment has changed the text of the relevant Municipal Code section so it will increase to70% next time the funding level reaches 100%. I don't know whether there is also an ordinance that will automatically set up a future 75% floor at that time (if it ever comes).
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