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Cost-of-Living Adjustments (COLAs)

Obtaining a COLA

Cost-of-Living Adjustments, or COLAs, are not provided automatically for school retirees in Pennsylvania. COLAs are granted by the General Assembly on an “ad hoc” basis, which means at the will of the legislature.

Your legislators determine when, to whom, and in what amounts retirees’ pensions are adjusted. To receive pension increases we, the retired school employees of the Commonwealth, must join together and lobby our legislators to pass a COLA. This is a major activity in which PASR members regularly engage.

Obtaining benefit increases in retirement requires a totally different approach than obtaining benefit increases in active service. When you were in active service your benefits were largely determined through the collective bargaining process. In collective bargaining your active employee organization provided representatives to negotiate for you and you provided strength to your representatives with the threat of a work stoppage or strike.

To secure retirement benefit increases in the legislative process, you must become personally involved in the “negotiations” and contact your legislators yourselves. Legislators simply do not respond to individuals hired to speak for others. What strength does a lobbyist have to negotiate a COLA? Can they call on you to strike if the legislators do not pass a COLA? Of course not.

The most that a lobbyist can do is advise you not to vote for the legislators who don’t respond favorably. Think about it, though, how often did you vote for legislators based solely on the advice of your active employee organization when you were working? Many do, but most individuals do not base their voting decisions on whether or not the candidates have been endorsed by the organizations to which the individuals belong.

Most of the active employee organizations endorse candidates, solicit contributions for their political action committees, and contribute the funds collected to political campaigns. Very few organizations fully explain to their members what exactly the legislators do or don’t do to warrant the organization’s support or opposition. PASR takes an entirely different approach.

What PASR does, is tell its members exactly what their legislators do and don’t do with respect to its legislative proposals. PASR first determines from its members what issues are of common concern to all school retirees and then drafts legislative proposals to address their needs. The Association takes a very active role in the design, technical drafting and introduction of the legislative proposals. It also produces extensive publications to communicate the details of its proposals to the members so that they, in turn, can present and discuss them with their legislators back home in the legislators’ districts.

When the legislators are working in Harrisburg, PASR reports back to the members everything the legislators do there. The Association lists who has and who has not signed on to sponsor the bills in its statewide quarterly publication, the PASR NEWSLETTER, and it reports the results of every vote taken on the bills at every step in the legislative process — votes taken in the committees as well as on the floor of the House and Senate.

You decide whom you want to vote for based not on what your organization tells you to do, but on what you know your legislators have done or not done for you. PASR provides the background information, but you make the decision for yourself. Is this approach effective? Ask your legislators!

No organization has a more successful legislative record than PASR. In more than 60 years neither the House nor the Senate has ever voted to defeat a bill drafted and promoted by PASR. Why? Because our bills are designed by the members and they are promoted by the members, working one-on-one with their legislators in a highly organized and coordinated manner. And because we work to maintain positive relations with all four legislative caucuses and the Governor.

PASR has been the driving force behind every COLA passed to date. The last COLA (HB 27), passed by the Legislature in 2002, moved unanimously through both the House and the Senate. The COLA bill was passed in reaction to a massive campaign PASR conducted, culminating with an immense demonstration on the steps of the Capitol. This event was the second largest rally in Harrisburg since the latter part of the 90’s.

Don’t let our successful record mislead you to believe that securing passage of COLAs is easy. It is anything but easy. It takes an enormous amount of energy and resources to fully inform and coordinate the individual efforts of our 41,000 plus members. This can easily come to a cost of $200,000 to PASR and it takes the combined force of all members to get the legislators to part with the money to pay for COLAs. They are expensive. The 1998 and 2002 COLAs, for example, will require a combined cost of approximately $5 billion from the state and local school districts.

In preparing for retirement there are a few points you should consider and plan for that will help you obtain the COLAs you need in retirement. They include:

Prepare to Work with All School Retirees: While working school employees were separated into different groups — variety of teacher, administrator, and school support personnel organizations. You were divided for good reason — to more effectively negotiate in the collective bargaining process. In retirement, however, all school employees are treated equally in the legislative process.

Federal law and IRS regulations prohibit the legislature from granting COLAs and other benefit improvements separately for retired teachers, retired administrators, and/or retired school support personnel. All school employees are classified as “annuitants” upon retirement. The retirement system does not even record the position held before retirement. Why? Because the legislature must apply COLAs and other benefit improvements equally to all retired members of the same retirement system. So realize that when you retire you are placed in the same boat and need to work together with other school retirees in order to place maximum pressure on the legislators and secure the benefit improvements you need.

Beware of COLA Delays: Every COLA passed to date has employed a different formula for determining the adjustment amounts, but there has been some consistency in the eligibility criteria. First of all, most COLAs have been limited to apply to individuals who have been retired at least two years. The 2002 COLA campaign was an exception in that PASR successfully sought eligibility to include all individuals who were retired that did not benefit from the pension multiplier increase given in Act 9.

Secondly, the past several COLAs have included restrictions “early retirees,” including individuals who retired under the 30-and-Out special retirement provisions. The restriction has been that the early retirees can not begin to receive the COLA benefits until the July following that point in time when the individuals would have achieved “superannuation” or normal retirement age had they not elected to retire early.
“Superannuation” is obtained by any of three ways: 1) Age 62 with at least 1 year of service; 2) Age 60 with 30 years of service; or 3) 35 years of service regardless of age.

Terminate Service Before June 30: The eligibility cut-off dates and “effective dates of retirement” used to define the amounts of the increases have typically been based on the Commonwealth’s fiscal year — July 1 to June 30. Your “effective date of retirement” is the day following your reported last day of service. Administrative and many school support personnel on twelve month schedules often effect their retirements at the end of June placing June 30 on their retirement applications as their last day of service. This means your effective date of retirement will be recorded as July 1.

For COLA purposes you will want your effective date of retirement to be recorded as June 30 or earlier, otherwise you may find yourself either missing out entirely or receiving a smaller COLA amount because you missed the cut-off dates by one day!

Don’t Count On Full Inflation Adjustments: Public pension COLAs do not provide for full replacement of inflation. They are not like Social Security COLAs, which are fully adjusted to inflation. Pennsylvania, like most other states, targets COLAs to replace approximately one-half of the pension income lost due to inflation. This is based on the belief that a retiree’s total income consists of the pension, Social Security, and private savings and investments. Since Social Security is fully indexed, and a person’s savings and investments are expected to generate returns higher than the rate of inflation, pensions need only be adjusted by one-half the rates of inflation to maintain the buying power of an individual’s total retirement income. PASR doesn’t agree with this methodology, but it is the mindset of the legislators.

Your Beneficiary Can Not Receive COLAs: If you select an option to provide an annuity benefit to your spouse or other beneficiary upon your death, know that beneficiaries can not receive COLAs. The Pennsylvania Constitution prohibits the Legislature from granting COLAs to individuals who have not themselves contributed service to the Commonwealth.