| Retiree Benefit Enhancements |
CONTRA
COSTA COUNTY
EMPLOYEES' RETIREMENT ASSOCIATION |
 |
| |
|
| |
|
|
|
| The COLA is a Cost of Living Adjustment used by CCCERA to help maintain the value of pension payments in relation to economic conditions. The COLA is usually an increase in benefits (although it can be a decrease, depending on the Bay Area Consumer Price Index (CPI)). This index goes up or down, varying with a yearly cost survey for goods and services area residents use. |
| |
CCCERA is required by law to adjust retiree benefits to reflect inflation rates by applying an annual COLA. If the annual cost of living goes up, retirees see an increase in the COLA portion of their retirement benefit. However, if the cost of living goes down, the COLA portion of the benefit may decrease to reflect lower marketplace conditions. |
|
| |
Traditionally, many members choose Spring as a good time to retire, since May 1st marks the pension payment that includes the new COLA amounts for the year. |
| |
How is the Cost of Living Factor Determined? |
| |
The cost of living factor is determined by comparing the December CPI (Consumer Price Index) for the San Francisco-Oakland-San Jose area, for the past two years. Actuaries compute the resulting percentage change and recommend an annual adjustment factor. The actual cost of living adjustment is dependent on your previous employment tier and your retirement date. |
| |
The 1937 Act "caps" the maximum percentage CCCERA can increase the COLA portion of your benefit in any one year. If the inflation rate is higher than this statutory limit, the unused portion is "banked" for future years, and applied if the CPI is lower than the annual maximum. This helps stabilize the COLA figure from year to year.
|
| |
The cost of living adjustment is separate from other benefit enhancements. While some enhancements, such as "New Dollar Power" for members retired prior to 4/1/1982, affect specific groups, all retirees are eligible for the COLA. |
|
The New Dollar Power Benefit
"New Dollar Power" is a supplemental cost-of-living benefit for eligible retirees whose purchasing power has been reduced by inflation. It is designed to restore 80% of purchasing power for retirees and their eligible survivors who retired prior to April 1, 1982. New Dollar Power is proportional to each eligible retiree's current monthly allowance. Here's an example:
|
|
| |
| |
|
A Tier 1 member retired in 1980 with a $12,000 yearly benefit. By 2004, the actual purchasing power of this pension decreased by 38%, leaving 62% of spendable income. The purchasing power target for the New Dollar Benefit is 80%. The calculation follows. |
| |
|
80% - 62% = 18%
18% of $12,000 = $2,160
$12,000 + $2,160 = $14,160 is the new yearly benefit |
| |
|
This benefit is identified on retirement checks by the acronym NEW $$ POWER. |
| |
|
The Pre-83 $200 Benefit |
| |
|
SB795 was a legislative bill designed to give Contra Costa County and Special District retirees a new $200 per month benefit increase. The bill was signed into law in 2001. Within the law was a provision that the County Board of Supervisors had the ability to ratify a benefit cutoff date. After months of intense negotiation, the County Board of Supervisors chose January 1, 1983 as the eligibility date, meaning members who retired after that date are not eligible for the benefit. This benefit is a permanent addition to eligible members' pensions, so the annual COLA (cost-of-living-adjustment) is figured on this benefit supplement. The benefit is also considered a "supplement" by the IRS, and therefore taxable. Beneficiaries who receive a survivor continuance for the Unmodified Option and Option 2 benefit, or who elected a combined benefit, receive $120 a month. Beneficiaries of members who elected Option 3 at time of retirement receive $100 a month from this benefit. |
|
| |
|
Other Post-Employment Benefits (OPEB) |
| |
|
OPEB is an acronym for Other Post Employment Benefits. "Other" means benefits in addition to your vested pension amount. Generally, these benefits have not been pre-funded by employer and employee contributions during our working careers. The full cost is added to the UAAL (Unfunded Actuarial Accrued Liability.) By law, employers are responsible for paying the UAAL. As the costs of OPEB benefits increase, so does the future debt incurred by the employers.
These costs have always existed, but recent changes to the law now require reporting of this liability. Because employers assume all risk in the Retirement system, meaning if projected earnings on investments are not achieved, or if an unforseen liability occurs (such as the Paulson Litigation), the employer still must provide your benefit. Regardless of the fluctuations in real estate, or stock investments, benefits will be paid, since the is a defined benefit retirement system. |
| |
|
|
