Plans 2 & 3 COLA Amounts Announced
The Washington State Department of Retirement Systems (DRS) has released the annual cost of living adjustment (COLA) amounts for retirees in Plans 2 & 3 of PERS, SERS, TRS, and PSERS. As costs of groceries and housing skyrocket, these COLAs will provide retirees with some much-needed relief from inflation, but not as much relief as you might expect.
Annual COLA amounts are determined by annual inflation measured by the Seattle Consumer Price Index (CPI). However, COLA increases are limited to 3% in a single year. Even though the Seattle CPI currently measures 8.81% annual inflation, all Plans 2 & 3 retirees who retired prior to July 2, 2022, will receive 3% COLAs.
The 5.81% difference between 8.81% annual inflation and the 3% COLA that retirees will receive in 2023 will be “banked”, or stored for use in future years when inflation falls short of 3%. With 5.81% banked in 2023 alone, retirees can expect to receive 3% COLAs for at least the next few years, even if inflation falls substantially.
The following graphic from DRS illustrates an example of COLA banking.
More information about banking can be found here.
Plans 2 & 3 retirees will see COLAs reflected in their pension payments received at the end of July 2023. These annual COLAs are automatic. RPEC is currently working to restore automatic COLAs for PERS 1 & TRS 1, the only pension plans administered by DRS that do not have automatic recurring COLAs. Check www.rpecwa.org for updates on our progress.