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Among the most silly and most costly aspects of our pension system is this: As inflation moderates, the automatic annual increase in pension benefits, in real terms, increases.

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Andrew Szakmary
About those so-called COLAs (they are really Automatic Annual Increases – AAIs – in legal terms, but whatever): the employees pay a specific, dedicated percentage of their salary into the pension funds while working in return for their contractual right to receive the AAI in retirement. Also it was the state, not the unions, that insisted on the 3% AAI. When negotiations took place in the late 1980’s, the unions wanted an actual CPI inflation adjustment identical to what is provided by the federal government to Social Security benefits. However, inflation was running higher than 3% at the time, so the state, thinking it would save money,… Read more »
There is indeed a portion of an employee’s contribution – a whopping 0.5% – that goes towards automatic annual increases in retirement. However, when this was first enacted and negotiated for decades ago, the AAI was calculated at 1.5% simple interest. Since then, the Legislature upped it to 2% (1972), then 3% (1978), then changed the interest formula from simple to compounded (1989). None of these increases were collectively bargained for, otherwise something would’ve been given up in exchange for the increased benefit. What was given up? Other than the clause in the state constitution, there is no “COLA” contract. I’m not sure why the “price” for… Read more »