Will you see your pension lowered due to a negative COLA in your state?

[Curmudgeon]

No COLA last year from either my pension plan or Social Security. No COLA this year from SS and I don't expect one from the pension because they're based upon the CPI. But that hasn't stopped healthcare, gasoline, some foods and other prices to rise so in effect, the lack of COLAs are tantamount to takeaways. But no major complaints, yet!

[Escort Rider]

Yes, I am aware that I am reviving an old thread - five years old to be exact. First, it would be interesting to see whether other states have adopted the practice in the intervening years. And second, I wanted to state that California teachers' pensions have an automatic 2% per year, non compounded COLA increase which is not tied to any cost of living index. We get it even if the cost of living has gone down! Of course if the cost of living has gone up 8% in a given year, we still get the 2%. Since I retired almost 11 years ago there has not been very much inflation and I am ahead.

However, these automatic 2% yearly increases could be done away with by the state legislature, unlike the basic pension itself, which has been held to be a contractual obligation on the part of the state and therefore cannot be reduced or eliminated by legislative action. I may live to see the elimination or the modification of the automatic COLA, but I will be fine no matter what they do to it.

[Curmudgeon]

Originally Posted by TuborgP

Not sure everyone realizes that some public pensions have a negative COLA adjustment. If the basis of how your COLA is calculated decreases your pension is suppose to also since it includes a COLA from previous years. At least one state that does it that way deferred the decrease to the up coming year and was going to subtract it from any increase. Oooops what if the increase is less than the decrease or none at all? With all the strain on state budgets will they follow through with their guidelines and reduce the pension? Plan for it!

The COLA in our California State (not teachers) pensions and COLAs are a matter of a binding contract so while not munificent (not less than 2% compounded) they're constant. One year (see above 2011 post) I received no COLA due to a quirk in their formula but my wife did. The following year she received 2% and I received 4.7%. We retired in different years which made a difference and have received the same percentage every year since. No worries here! Social Security, on the other hand, not so much as shown this year. Still, no worries that it's going to evaporate in our lifetimes.