OPERS considers changes to cost-of-living adjustment OPERS is considering changes to the cost-of-living adjustment (COLA). Options are being evaluated and retirees are being surveyed. No action has been taken at this time.

OPERS is in a strong financial position because we are proactive in making changes to ensure our long term stability. That is why staff has begun to gather feedback from retirees about potential changes to the COLA.

The pension changes enacted in 2013 with Senate Bill 343 were largely designed to address the issue of members living longer. However, those pension changes impacted only active members. The changes included requiring members to work longer, modifying the benefit formula, having their benefits actuarially reduced if they retire early, paying the actual cost for service credit, and many others. Couple these changes with the higher contribution rates that current members pay compared to many retirees, these changes reduced our unfunded liability.

These recent pension changes did not impact retirees’ pension benefits. COLAs were established to reduce the effects of inflation, not to fully offset inflation. Since the inception of the COLA in 1970 at a 1.5 percent rate, the COLA has been modified over time to its current form. However, due to low inflationary times, the COLA has outpaced inflation 60 percent of the time in the last 30 years. The combination of retirees living longer and the COLA exceeding inflation has caused us to reevaluate the COLA.

OPERS is not the only system to consider COLA changes in recent years. More than 25 other systems have reduced COLAs. Most of Ohio’s other retirement systems have already made changes to reduce or suspend COLAs. The COLA predates the existence of OPERS health care coverage and this has never been associated with health care inflation.

While many options have been evaluated, the current options under consideration include:

Option 1

(a) Modify the fixed 3 percent COLA for current retirees to a COLA based on the percent increase in the Consumer Price Index (CPI) up to 3 percent. For example, if the CPI was 2.3 percent, that is the amount the COLA would be. This change alone offers an estimated $1.6 billion in savings to OPERS.

(b) Modify current retiree COLA calculation to CPI not to exceed 3 percent, plus an ad hoc increase to the benefits of retirees who are under 85 percent of their purchasing power. For example, a person who retired in 1979 would receive a monthly ad-hoc increase of $395 to reach 85 percent purchasing power. Estimated savings: $1.57 billion.

Option 2

Adopt option 1(a) or (b) and freeze all COLAs for a period of one to five years. Estimated savings are as follows:

Option 3

The Board may also consider changing the 3 percent cap to a lower number, such as 2.5 percent, 2.0 percent or 1.5 percent. Estimated savings: $6.32 billion for a 1.5 percent cap, $4.41 billion for a 2 percent cap and $2.89 billion for a 2.5 percent cap

OPERS continues to gather retiree and stakeholder feedback. A survey has been mailed to all retirees to solicit feedback on different COLA options. A video and other information is also available at www.opers.org/cola