PERS has posted the 2016 COLA for all the different retiree cohorts. This COLA will be payable on July 1, 2016 and receivable with the payment posted on August 1, 2016 (PERS always pays in arrears). The actual CPI-U change for 2015 was 1.23%, but because of COLA banks available for all members who retired prior to 2013, those members will receive a 2.0% COLA by drawing 0.77% from existing COLA banks. The full document, explaining the 2016 COLA, can be found at http://www.oregon.gov/PERS/RET/docs/general_info/2016-COLA.pdf. Note that this document contains a second hyperlink to the COLA bank document that breaks down both the current balance, and the balance after the 2016 COLA adjustment is made. Members who retired 2014 or later do not have a COLA bank because the cost of living change from 2013 to 2014 and from 2014 to 2015 was less than 2%. Therefore, the COLA adjustments for members retiring in that time period are less than 2%. You should save this document in your own library as it contains the figures you’ll need in the future if PERS does not publish the full bank figures in the future.
If we could figure out a way to get the Bureau of Labor Statistics to better reflect the changing costs of health care, which weigh more heavily on retirees than actives, the actual CPI changes would be “truer” to experiences we are all having. It is always helpful when the price of gas, heating oil, and other products heavily dependent on petroleum products go down in price, but when those decreases are more than offset by the expanding out-of-pocket expenses for medical care, it is never a neutral result. While I believe that the overall cost of living may have only increased by 1.23% during 2015, I have a hard time reconciling that with the increased costs of healthcare, increased automobile insurance costs, and increased costs of visits to the grocery store. Somehow I’ve always wanted to strive and prosper, but I never anticipated the corrosive and erosive effects of what appears to be nominal inflation. Nominal enough that no ones wages are increasing by a significant amount, but big enough that wage increases are necessary.
Trust me, I’m not complaining. I’m very happy to have a well-funded pension, and am glad that I made the choices I did. But still…….
10 comments:
You're certainly right about automobile insurance. Ours went up 10%, with the big jump being in the PIP/uninsured motorist coverage, primarily due to changes embodied in SB411.
Thanks for the pose Marc. One minor correction: the COLA is based on the CPI-U and not the CPI-W. And a good thing for us, since the CPI-W only went up 0.42% in 2015.
Looking at the chart, one can see how far behind retirees are with only a 2% COLA. People retired in 1988, for example, are 25% behind. New retirees have it even worse with essentially only a fixed 1.25% COLA.
Gary: It isn't quite as simple as that. The actuaries do a study every other year on purchasing power of the retirees' benefits relative to inflation and the COLAs. The results show that the COLA bank is only an inexact proxy for the disparity between actual living costs (measuring things that retirees tend to buy vs the general population), and so the purchasing power for a 1988 retiree is probably 20% less than when they retired. A slight improvement, but still shows the distance accelerating the further away from retirement.
New retirees do have it worse, but it isn't a fixed 1.25% COLA. Because of the blending provisions between the old and new COLA system, most new retirees have spent the bulk of their careers prior to May 1, 2013. As a result, the old system still plays an outsized role in determining the size of the COLA. Members who retire in the 2020s are likely to feel the impact of the new COLA system more significantly than those retiring now. That said, if the CPI-U stays under 2% for the indefinite future, they have little to no bank to draw up to upsize the pre-2014 COLA to the 2%. Had 2013, 2014, 2015 retirees had any significant COLA bank, their COLAs would have been much closer to 2% than they turned out to be.
Looking at the chart, one can see how far behind retirees are with only a 2% COLA. People retired in 1988, for example, are 25% behind. New retirees have it even worse with essentially only a fixed 1.25% COLA.
This is one of those "boring" (meaning something that requires actual thought) issues that citizens, especially reporters and talk show hosts, should be asking national and state candidates about. It's easily fixable, if there is a will to fix it. We know how to calculate a CPI for those over 60 or 65, so nobody can claim that we just can't figure out how to do it.
Our PERS ODS Health Plan Medigap insurance (was a real shocker this year. Increased per person from $155.18 to $197.98! (We live in California) That of course translates to a whopping $1,028.38 increase this year. I don't know about the rest of you, but we can't afford increases like this on a regular basis. Meanwhile, our deductibles increase and everything else goes up as well, far beyond our 2% increase from PERS.
If you think it was bad last year just hang on. Democrats in the Oregon legislature have passed some really bad one sided partisan bills that will increase gasoline costs by an estimated 19c a gallon, electricity costs will increase yearly by 1% to 3%,housing fees and food costs will have additional yearly increases and that is just for starters as next year the same group already has another group of bills planned.
If gas tax increases actually fix the crumbing roads, it will be a godsend. My cars' alignment gets trashed running on Oregon roads in and around the Portland area. Roads are dug up multiple times and then patched rather than repaved. It costs me several hundred dollars per year to replace blown tires and realign the front ends of my cars. The 19 cent per gallon tax increase wouldn't phase me if I could eliminate those added expenses.
So, while I'd rather not be paying all those increases, there are some benefits that more than offset the costs.
The fuel cost increase will not help roads. It is estimated that SB 324 which is a feel good clean fuels bill will do nothing for Oregon other than raise costs. Fuel prices will increase and fuel companies will use the funds to buy clean air credits. Some legislators hope to overturn the bill next session.
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