Periodic cost-of-living adjustments (COLAs) in some form are provided on most state and local government pensions. The purpose of a COLA is to offset or reduce the effects of inflation on retirement income. Considerable variation exists in the way COLAs are designed, and in many cases they are determined or affected by other factors, such as inflation or the financial condition of the plan. COLAs add both value and cost to a pension benefit. Public pension COLAs have received increased attention as many states look to make adjustments to the cost of benefits amid challenging fiscal conditions and the current low-inflationary environment. This brief presents a discussion about the purpose of COLAs, the different types of COLAs provided by government pension plans, and an overview of recent state changes to COLA provisions.
The costs of state pension plans are much in the news. Generally, people lump together these unfunded liabilities and make alarming claims that all state plans are about to go bankrupt. The evidence, though, suggests otherwise. On the other hand, looking just at pension plans and just at states doesn’t give the full picture of costs facing states and localities.
Every American deserves to retire with dignity.
However, due to the shift from pensions to 401(k)s, a secure & dignified retirement isn’t a reality for millions of working people.
401(k)s were never designed to be the primary retirement savings tool for working families – learn why in our latest video:
Illinois State Treasurer’s Office, Springfield, is searching for an investment and administrative consultant for the Illinois Secure Choice Savings Program, said Greg Rivara, spokesman, in an e-mail.
The Illinois Legislature approved a bill in December 2014 to establish the Illinois Secure Choice Savings Program, an auto-enrollment, payroll-deducted retirement savings account for certain private-sector employees whose employers do not offer retirement plans outside of Social Security.
New Jersey became the state with the worst-funded public pension system in the U.S. in 2015, followed closely by Kentucky and Illinois.
The Garden State had $135.7 billion less than it needs to cover all the benefits that have been promised, a $22.6 billion increase over the prior year, according to data compiled by Bloomberg. Illinois’s unfunded pension liabilities rose to $119.1 billion from $111.5 billion.
The two were among states whose retirement systems slipped further behind as rock-bottom bond yields and lackluster stock-market gains caused investment returns to fall short of targets. The median state pension had 74.5 percent of assets needed to meet promised benefits, down from 75.6 percent the prior year. The decline followed two years of gains. The shortfall for states overall was $1.1 trillion in 2015.
If you work for a school or nonprofit of any sort, there is a decent chance that your workplace retirement savings plan is not as good as it could be — if you are lucky enough to have one at all.
While employees of universities and big hospitals often have reasonably attractive plans, public schoolteachers, charity workers and many employees of religious organizations who examine their retirement accounts frequently find that the investment choices are mediocre and the fees are too high.