Cost-of-Living Adjustment (COLA) FAQs

Frequently Asked Questions

Also see COLA Percentages by Plan—2019


1. What is a cost-of-living adjustment (COLA)?

A COLA is an adjustment to your monthly benefit after you retire. The type of COLA you are eligible for depends on your retirement system and plan.

2. Does my retirement plan have a COLA?

All retirement plans we administer, with the exception of the Judges Retirement Fund, provide one or more COLAs.

COLA Type COLA Applies to
Base COLA Judicial
LEOFF Plans 1 and 2
PSERS
PERS Plans 2 and 3
SERS Plans 2 and 3
TRS Plans 2 and 3
WSPRS Plans 1 and 2
Uniform COLA
Removed in May 2011
TRS Plan 1
PERS Plan 1
Minimum COLA TRS Plan 1
PERS Plan 1
Adjusted Minimum Benefit TRS Plan 1
PERS Plan 1
Age 65 COLA TRS Plan 1
PERS Plan 1
Optional COLA TRS Plan 1
PERS Plan 1
3. What is the Base COLA?

A Base COLA is applied to your benefit after you have been retired for one full year. The COLA adjusts the benefit based on the change, if any, in the Consumer Price Index (CPI) for the Seattle-Tacoma-Bellevue area. The only exception is the Judicial Retirement System, which bases its COLA on the CPI for U.S. cities. Here are the details:

  Base COLA Plans
  All Plan 2
All Plan 3
Judicial
WSPRS Plan 1*
LEOFF Plan 1
Base COLA Eligibility You must have been retired for at least one year by July 1. There is no age requirement. You must have been retired for at least one year by April 1. There is no age requirement.
Base COLA is applied July 1 April 1
Base COLA Maximum The COLA is limited to a maximum benefit adjustment of 3% and includes COLA Banking. LEOFF Plan 1 Base COLA does not have a maximum and does not include COLA Banking. Based on your retirement date, you may qualify for a first-year COLA adjustment.
Example of a Base COLA calculation:

$1,500 (monthly benefit) X 2.5% = $37.50 increase to benefit for a new monthly benefit of $1,537.50


Retirees do not apply for this benefit. Read more about the CPI indexes.

4. What was the Uniform COLA for PERS Plan 1 and TRS Plan 1?

The Uniform COLA was removed by the Legislature during the 2011 legislative session.

From 1995-2010 eligible PERS Plan 1 and TRS Plan 1 retirees received an Annual Increase each July. Though it was referred to as a COLA, the Annual Increase was based on years of service, not changes in the cost of living.

How it worked: to be eligible you must have been retired for at least one year by July 1 and reached age 66 by Dec. 31 of that same year. The Annual Increase was calculated by multiplying the retiree's years of service by the Uniform COLA Amount provided by the Office of the State Actuary.

Provisions in law will continue Annual Increases for PERS and TRS Plan 1 retirees who currently receive a benefit that falls below a minimum level. This applies to two groups of retirees:

  • Those who have been retired for 25 years or more and have at least 20 years of service (or they have been retired for 20 years or more and have at least 25 years of service) and their base monthly benefit is less than a new minimum threshold of $1,545 (learn more about Adjusted Minimum Benefit); and
  • Those with a base benefit below the current minimum of $44.57 per month per year of service. People in this category generally received lower compensation while working and/or did not have many years of service (learn more (below) about Minimum COLA).
5. What is the Minimum Benefit and Annual Increase for PERS Plan 1 and TRS Plan 1?

The original Minimum Benefit was first introduced in the 1960s to ensure a minimum benefit level for PERS Plan 1 and TRS Plan 1 retirees. The Annual Increase was added to the Minimum Benefit in 1995 to provide a uniform benefit increase each year without legislative action. Those eligible for these benefits generally received lower compensation while working and/or did not have many years of service. Retirees do not apply for this benefit. The Minimum Benefit and the Annual Increase have no age requirements, other than eligibility for retirement, and you don't have to be retired for a year. The Minimum Benefit and Annual Increase are independent from any other COLA.

If you qualify at retirement, you'll receive the Minimum Benefit and in the years that follow the Annual Increase will be applied to your pension amount. If you qualify after retirement, you won't receive the Minimum Benefit; instead, the Annual Increase will be added to your current pension amount.

Eligibility at Retirement

Eligibility at retirement is determined by comparing your initial benefit (minus specific adjustments) against the current minimum amount. If your benefit is under the threshold, you receive the Minimum Benefit and the Annual Increases automatically at retirement.

Example: Eligibility at Retirement

A 60-year-old PERS Plan 1 member retired July 1, 2019, with 10 years of service. They elected to provide an Option 2 survivor benefit for their spouse who is 4 years younger. To calculate the benefit, we compared the initial benefit using the 2% formula with the minimum benefit formula. Whichever is greater is the formula that will be used to calculate the benefit.

Example:

Initial Benefit using the 2% Formula:

.02 X 10 (years of service) X $1,500 (Average Final Compensation) X .879 (Option 2 factor based on spouse's age) = $263.70 (monthly benefit)

Minimum Benefit Formula:

10 (years of service) X $62.35 (2019 Minimum Benefit amount) X .879 (Option 2 factor based on spouse's age) = $548.06 (monthly Minimum Benefit amount)

The benefit calculation falls under the Minimum Benefit amount formula therefore, the retiree would receive $548.06 as a monthly benefit in July 2019 and they would receive the Annual Increase every year after.

Eligibility after Retirement

Retirees are evaluated annually to determine if their current benefit (minus specific adjustments) has fallen below the current minimum amount. If your benefit falls below the threshold, the Annual Increase will be added to your current pension amount.

Example: Eligibility after Retirement

A member retired July 1, 2018, with 10 years of service, and an Average Final Compensation of $3,000. They elected to provide an Option 2 survivor factor to their spouse who is 4 years younger. To calculate the benefit, we compared the initial benefit using the 2% formula with the Minimum Benefit formula.

2018 Initial Benefit using the 2% Formula:

.02 X 10 (years of service) X $3,000 X .879 (Option 2 factor based on spouse’s age) = $527.40 (monthly benefit)

2018 Minimum Benefit Formula:

10 (years of service) X $59.89 (2018 Minimum Benefit amount) X .879 (Option 2 factor based on the spouse's age) = $526.43 (monthly Minimum Benefit amount)

Since the retiree received a higher benefit under the 2% formula, they did not qualify for the Minimum Benefit at retirement.

But in July 2019, the Minimum Benefit amount increased to $62.35 per year of service credit and the retiree did not receive any other cost-of-living adjustments. So the current benefit of $527.40 was compared again to the Minimum Benefit formula, this time using the 2019 Minimum Benefit amount.

2019 Minimum Benefit Formula:

10 (years of service) X $62.35 (2019 Minimum Benefit amount) X .879 (Option 2 factor based on the spouse's age) = $548.06 (monthly Minimum Benefit amount in 2019)

The initial benefit now falls under their 2019 Minimum Benefit threshold of $548.06, so the 2019 Annual Increase of $2.46 per year of service credit, is added to the current pension benefit:

New Monthly Benefit

Annual Increase = 10 (Years of Service) X $2.46 (2019 Annual Increase) = $24.60

$24.60 (Annual Increase) + $527.40 (current pension benefit) = $552 (the new monthly benefit)

6. What is the Adjusted Minimum Benefit for PERS Plan 1 and TRS Plan 1?

Legislation passed in 2004, and expanded in 2006 and again in 2011, established a minimum benefit level for qualifying PERS Plan 1 and TRS Plan 1 retirees. It is only available to retirees who have met one of these requirements:

  • At least 25 years of service credit and have been retired at least 20 years; or who
  • At least 20 years of service credit and have been retired at least 25 years.

A retiree who qualifies for the Adjusted Minimum Benefit receives an automatic 3% increase each July. Retirees do not apply for this benefit. Read more about qualifying requirements.

7. What is the Age 65 COLA for PERS Plan 1 and TRS Plan 1?

The Age 65 COLA legislation was enacted in July 1989 and was replaced by the Uniform COLA in 1995. PERS Plan 1 and TRS Plan 1 members, who lost 40% of their purchasing power at age 65 were eligible. Those previously covered under the Age 65 COLA could choose to keep the Age 65 COLA instead of converting to the Uniform COLA. Only retirees who chose this COLA in 1995 are eligible.

8. What is the Optional COLA for PERS Plan 1 and TRS Plan 1?

The Optional COLA has been available to PERS Plan 1 and TRS Plan 1 members since 1987. It's optional at the time of retirement. Eligible members can choose to reduce their initial retirement benefit in exchange for an annual cost-of-living adjustment. The Optional COLA has no age requirement and is limited to a maximum of 3% of your monthly benefit. The Consumer Price Index for Seattle-Tacoma-Bellevue (CPI-W) is used to calculate the Optional COLA.

If you have questions, see the Optional COLA Frequently Asked Questions. To compare your benefit with and without the Optional COLA, use the Optional COLA Calculator.

9. What is COLA Banking?

The Optional COLA and Base COLA (except for the LEOFF Plan 1 Base COLA) include a 3% maximum COLA increase for the year, combined with a feature called COLA Banking.

In years where the CPI increase is more than the 3% maximum, the difference is banked for future years. The banked percentage is used in years when the COLA is less than the maximum.

Example:

The CPI is 6.48%. You receive a 3% increase and the remaining 3.48% is banked for you. The following year the CPI is negative .27%. In July, the banked amount provides you with a positive 3% COLA, and you still have a CPI increase (.21%) in the bank for future years.


Another time when COLA banking is useful is the period between your retirement date and when your COLA begins. Here's how it works, using the example above:

Example:

You retire in August but you're not eligible to receive the COLA the following July (you haven’t worked a full year), so the entire 6.48% is banked for you; however, you will be eligible the next July when the CPI is negative .27%, and you’ll receive a full 3% COLA. The remaining increase (.21%) is left in the bank for future years.

10. What is a CPI? Who calculates it?

The Consumer Price Index (CPI) is an index of inflation based on the change in prices of goods and services purchased by urban households. Some of our Cost-of-Living Adjustments (COLAs) are based on CPIs.

CPIs are maintained by the United States Bureau of Labor Statistics. If you're curious about what types of goods and services are included, or how the calculation is performed, learn more at the Bureau of Labor Statistics Consumer Price Index Frequently Asked Questions.

11. Which CPI applies to my COLA?

Separate CPIs are produced for regional urban areas and the nation as a whole. Indexes are further specified "all urban consumers" (CPI-U), and "urban wage-earners and clerical workers" (CPI-W).

The Base COLA, Age 65 COLA and Optional COLA are legislatively mandated to use the regional Seattle-Tacoma-Bellevue (CPI-U) with only one exception: the Judicial Retirement System is legislatively mandated to use the U.S. Cities (CPI-W).

12. Who should I contact if I still have additional questions?

If you have any questions about COLAs, please contact us for more information.

*Before July 1, 2001, WSPRS Plan 1 had an annual 2% post-retirement increase.