2009 COST-OF-LIVING RETIREE BENEFIT ADJUSTMENT

On February 12th, the Board of Retirement (BOR) approved the 2009 cost-of-living adjustment (COLA) for retirees and survivors, effective April 1, 2009.

California Government Code mandates that each year, prior to April 1, the BOR will determine whether there has been an increase or decrease in the cost-of-living, as reflected in the Bureau of Labor Statistics Consumer Price Index (CPI).

The Bureau of Labor Statistics indicated the percentage difference between the December 2007 and December 2008 CPI Indexes for All Urban Consumers for the Los Angeles-Anaheim-Riverside area was +0.1 percent. By law, this CPI percentage change is rounded to the nearest one-half of one percent, which results in a zero adjustment for 2009.

HOW COLA ACCUMULATION AFFECTS ZERO COLA

The law sets an annual maximum COLA increase for each plan. The maximum allowable increase for Plan A is 3.0 percent, the maximum allowed in Plans B, C, D and E is 2.0 percent.

According to the law, the Board must accumulate the difference between any CPI Index percentage change and the maximum percentage allowable in each plan, and use it to fund or supplement a future COLA benefit. The accumulated percentage carryover is known as the COLA Accumulation.* Since the 2009 COLA is 0.0 percent, there is no carryover percentage; therefore no deposits will be made to the COLA Accumulation in 2009.

Retirees and survivors who have an accrued COLA Accumulation will see an increase to their monthly allowance, beginning with their April 30th check.** Those without an accrued COLA Accumulation will not see an increase in their monthly allowances.

The percentage of each increase is dictated by the balance of each retiree’s COLA Accumulation (within the allowable limit of each respective plan).***

To illustrate how COLA Accumulation can affect a member’s monthly allowance, here are two examples, based on this year’s zero COLA:

EXAMPLE 1

MARCH 1991 PLAN A RETIREE: COLA ACCUMULATION FUNDS MAXIMUM INCREASE***
Accrued COLA Accumulation	4.4%
2009 COLA Adjustment	0.0%
Maximum Allowable COLA Increase	3.0%
Amount of COLA Accumulation Used (Withdrawn)	3.0%
2009 COLA Increase to Retiree	3.0%
New Balance of COLA Accumulation	1.4%

EXAMPLE 2

MARCH 2008 PLAN A RETIREE: COLA ACCUMULATION FUNDS PARTIAL INCREASE***
Accrued COLA Accumulation	1.2%
2009 COLA Adjustment	0.0%
Amount of COLA Accumulation Used (Withdrawn)	1.2%
2009 COLA Increase to Retiree	1.2%
New Balance of COLA Accumulation	0.0%

*Carryover percentage is not subject to rounding.
**Plan E COLA increases apply only to service credit earned after June 4, 2002. Plan E members who retired after June 4, 2002 will receive up to a 2 percent COLA increase. The portion of the 2 percent COLA is based upon a ratio defined as the months of service earned after June 4, 2002, divided by the total months of service.
***Data also applies to survivors of LACERA retirees who died during that period.

See the 2009 COLA Accumulation Chart

10/23/09