Monday, the PSRS/PEERS Board of Trustees approved a 2 percent Cost-of-Living Adjustment (COLA) that will go into effect January 1. PSRS/PEERS is the Public School and Education Employee Retirement Systems of Missouri.
In addition to giving retirees a small raise this year, the board restructured the manner in which they will decide on adjustments in future years in an effort to keep the retirement systems stable in this challenging economy.
The new plan “establishes a shared commitment between both active and retired members for the future stability of the system,” PSRS/PEERS Executive Director Steve Yoakum told the Missouri School Boards’ Association (MSBA) in July.
Yoakum presented the plan last month to the MSBA, seeking the buy-in of their board of directors. In response, the MSBA board issued the following statement: “The MSBA Board of Directors sees the 2% Cost of Living Adjustment option as a positive move to protect the PSRS/PEERS system. MSBA encourages the PSRS/PEERS Board to continue to aggressively explore options to fully fund the retirement system, as well as close loopholes that threaten the integrity of the system.”
Under the new plan, if the inflation rate is negative, then retirees will not receive a raise. If the inflation rate is over 5 percent, then retirees will receive a 5 percent raise. And if the rate is in between those percentages, then retirees will receive a 2% raise.
Last month, the U.S. labor department’s Bureau of Labor Statistics announced the inflation rate in the United States was 0.5 percent.
Under the old plan, if the inflation rate was under 5 percent, the PSRS/PEERS board had some discretion in deciding the amount of retirees’ Cost-of-Living Adjustment.
Last fall, retirees did not receive a raise, even though the inflation rate increased slightly.
“This was a very difficult decision for the Board,” according to a statement on their website regarding last year’s adjustment. “However, the PSRS/PEERS Board of Trustees is charged by law with making decisions that are in the best interest of the membership as a whole and which preserve the integrity and financial soundness of the Retirement Systems. Granting a 1.1% COLA would have added approximately $130 million to the liability of the systems, which would have to be paid for by the active members and the school districts.”
An alternative plan the board considered and rejected for this year would have been to decrease new-employee benefits and increase the retirement age.
The seven-member board met Monday, August 29, in Jefferson City. There they approved the plan to improve the financial stability of the school retirement system.
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