Showing posts with label Consumer Price Index. Show all posts
Showing posts with label Consumer Price Index. Show all posts

Oil Prices & COLA Rate

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What does decreasing oil prices have to do with a COLA increase? No elaboration on this comment, it is related to stocks?
The price of gasoline/oil is one factor in the consumer price index (CPI).

According to Missouri State Law, cost of living adjustments (COLAs) for MOSERS retirees are to be based on the Consumer Price Index (CPI). We compare the average Consumer Price Index (CPI) for the calendar year just completed (2015) to the average CPI from the prior year (2014) to determine the percentage change between the two years. COLAs are based on 80% of the percentage increase in the average CPI from one year to the next.

The CPI is defined as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services by the Bureau of Labor Statistics (BLS). One of the categories is transportation which includes the price of gasoline.  As we have all witnessed, the average price of gasoline in 2015 was lower than it was in 2014.
It says  on the BLS website that the CPI does not include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

There is very helpful information on the Bureau of Labor Statistics’ Frequently Asked Questions web page and on MOSERS’ COLA page. Print Friendly and PDF

Cost-of-Living- Adjustments (COLA)

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Considering MOSERS has done so well with investments this last fiscal year, can we look forward to a COLA greater than "0" or will we be "tied to the SSA COLA of 0?"
Cost-of-living adjustments (COLAs) are not tied to MOSERS' investment performance or to the Social Security COLA rate.  Instead, the COLA is tied to the statutory provisions in Missouri state law. State law provides a COLA based on 80% of the percentage increase in the average Consumer Price Index for all Urban Consumers (CPI-U) from one year to the next At this point, we don't know if there will be a cost-of-living-adjustment (COLA) in 2011. We will not be able to make a determination until mid-January at which time we will have the complete picture of the CPI-U for all of 2010. The COLA rate is determined each January and we will inform members of the COLA rate at that time.  You can find additional details on COLAs on our website.
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What is the history of the COLA in MSEP 2000 and when does it take effect?

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I have been thinking of retiring sometime in the next few years. I would like to know what has been the cola for the 2000 plan for the last two years.
The next question is when does the new COLA take effect. In July? January? or when?
The annual cost-of-living allowance (COLA) rate applied during a calendar year is based on 80% of the percentage increase in the average consumer price index for the previous year. For example, the COLA rate for benefit adjustments made during calendar year 2008 was determined by comparing the average Consumer Price Index (CPI) for 2007 with the average CPI for 2006, determining what the percentage increase was from 2006 to 2007, and then taking 80% of that amount.
In general, COLAs are payable on the anniversary of your retirement date. However, if you are eligible for and elect the BackDROP at retirement, your COLA will be payable on the anniversary of your BackDROP date.


COLA Rates for MSEP 2000

COLA Year / MSEP 2000 COLA Rate
2008------------2.278%
2007------------2.581%
2006------------2.710%

2005------------2.130%
2004------------1.823%
2003------------1.265%
2002------------2.277%
2001------------2.689%
2000------------1.767%
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What is the COLA going to be for 2008?

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What is the COLA going to be for 2008?
 The annual cost-of-living allowance (COLA) rate is calculated in January of each year. It is based on 80% of the change in the Consumer Price Index (CPI) for the previous year. Our benefit auditor makes the final calculations when he receives complete CPI data for the previous year (near the middle of January).
The average CPI for 2007 was 2.848% higher than the average for 2006 – 80% of that change in the CPI is 2.278%. We post the rate for 2008 on the COLAs page of our website, under the Retired Members section. Print Friendly and PDF

How much, if any, of an increase in their pension can Missouri retirees expect in July?

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How much, if any, of an increase in their pension can Missouri retirees expect in July?
 MOSERS retirees receive their annual cost-of-living allowance (COLA) each year on the anniversary of their retirement date. Members who retired with a BackDROP will have their COLA paid on the anniversary of their BackDROP date and the retired MSEP members who converted to the MSEP 2000 in 2000 will have their COLAs paid in July. 
The 2007 COLA rate, based on 80% of the increase in the Consumer Price Index for 2006, is 2.581% effective January 1, 2007 . Therefore, members retiring under the MSEP 2000 will receive a 2.581% cost of living adjustment this year. Members retired under the MSEP who have not yet reached their COLA cap will receive a 4% COLA. For more information on retiree COLAs, see the COLA page under the Retired Member section of our website.
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How does MOSERS establish COLA dates for retirees? Is there a difference (for example) if I were to retire May first as compared with July first of t

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How does MOSERS establish COLA dates for retirees? Is there a difference (for example) if I were to retire May first as compared with July first of the same year, under the MSEP2000 plan?
 Annual COLA’s (cost of living allowances) under the MSEP 2000 (and the MSEP) occur on the anniversary of your retirement. In other words if you retired in October, your COLA will occur each year during that month. If you elected the BackDROP option, your COLA will occur on the anniversary of your BackDROP date each year. You will be notified during that month with a Retiree Statement indicating just how much your increase will be. The rate is set each year in January and is the same for the entire calendar year regardless of the month in which you retire. 
For more information on MOSERS’ COLAs, please visit the COLA page on the Retired Member section of our website. Print Friendly and PDF

If a person is looking at early retirement, under the old plan (hired prior to 1997), I understand that the person would take a loss

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If a person is looking at early retirement, under the old plan (hired prior to 1997), I understand that the person would take a loss in original benefit of .5% for each month prior to normal retirement date. However, would that person get the 4% raises each year beginning a year after retirement, the same as the normal retirement folks do under the old plan?
Also, could you explain the 65% cap - how that dollar amount is figured for an individual retiree? Is that 65% of your average compensation while you were working?
You are correct in your assumption that a member who is eligible for early retirement (reduced benefits) will have their base benefit reduced by 0.5% (0.005) for each month their age at retirement is younger than their normal retirement age. All MSEP retirees who were hired prior to 8/27/97 are guaranteed a minimum 4% COLA regardless of whether they retired with a normal or early retirement benefit. The guaranteed minimum COLA will continue until the accrued COLAs reach 65% of their initial benefit. For example, if a member's original benefit was $1,000, they could continue receiving annual COLAs of 4% until the COLAs equaled $650.00 (65% of $1000 = $650.00) for a total of $1,650. Assuming a 4% COLA rate, this will happen in approximately 13 years. Once the COLA "cap" is reached, the annual COLA will be based on 80% of the increase the Consumer Price Index (CPI). In any case, the maximum COLA is 5%. See page 26 of the retirement handbook for further details on the COLA.
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I was told that if you choose to take the BackDROP (a lump sum) when you retire that you give up the right to a 4% COLA

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I was told that if you choose to take the BackDROP (a lump sum) when you retire that you give up the right to a 4% COLA thru the rest of your retirement. Someone said you only got a 2% Cost of Living Adjustment and someone said you did not get any. Is this correct? Thanks!
 Choosing the BackDROP as an option at retirement will not affect your COLA. The COLA you will receive depends on the plan you choose at retirement, either the Missouri State Employees’ Plan (MSEP) or the Missouri State Employees’ Plan 2000 (MSEP 2000).
You will receive a 4% COLA if you:
  • Retire under the MSEP
  • Have not met your 65% COLA cap under the MSEP
You will receive a COLA based on 80% of the change in the Consumer Price Index if you:
  • Either retired under the MSEP 2000 or were hired on or after August 27, 1997 and retire under the MSEP
  • Have reached your 65% COLA cap under the MSEP
For more detailed information about your choices, please contact a MOSERS benefit counselor at (800) 827-1063.
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I know that the cost of living adjustments are based on the computation allowable by statute. My question that I hope you can shed light on is

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I know that the cost of living adjustments are based on the computation allowable by statute. My question that I hope you can shed light on is, what is the philosophical thinking that allows only 80% of the CPI? I am trying to imagine a scenario of living for 25 years beyond retirement and an average 4% CPI for each year. This scenario would evidence the actual cost to live increasing by 100% yet the retiree only getting 80% of that increased cost to exist. As most retirees are living on reduced incomes anyway, why was it necessary to effectively “reduce” their retirement check each year? Lastly, would it be theoretically possible for retirees and soon-to-be-retirees to pressure the legislators to change the statutes or is this an accepted “national” trend? Thanks for offering this Q & A service.
 We don’t have historical information available that tells why the legislature at that time decided to set the COLA at 80% of the CPI. However, one consideration could be that COLAs for active employees are not always provided each year, and those increases have not always kept pace with inflation. The current law provides for an annual COLA for retirees so, unlike raises for active employees, the amount of the retirees’ COLAs is not determined through the appropriations process. An additional factor is the cost associated with increasing the COLA. An increase in the COLA is a benefit increase for all retirees. The general assembly in recent years has not been inclined to increase the liabilities of the retirement system, in part because that causes an increase the amount of contributions that the state must pay into the system to fund the benefit increase. In these times of tight budgets, legislators would have to take that into consideration. Finally, more and more comparisons are being made between private sector and public sector employees – the common condition in the private sector is for retirement benefits to have no COLA at all. Given a 4% CPI, at the end of 25 years a one dollar benefit with no COLA would be worth 37 cents whereas with the MOSERS’ COLA it would be worth 82 cents.
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When the 80% of CPI is applied to a retiree's benefits in the MSEP 2000 plan, is the

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When the 80% of CPI is applied to a retiree's benefits in the MSEP 2000 plan, is the increase figured using the base benefit only or the total benefit amount including the temporary benefit that is received until age 62?
When retiring under the MSEP 2000 with a temporary benefit, members will receive an annual COLA of 80% of the CPI on both their base and temporary benefits.
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Once a person reaches BackDROP eligibility, will the COLA be 4% for each of those BackDROP years

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Once a person reaches BackDROP eligibility, will the COLA be 4% for each of those BackDROP years or will it depend if, at the end of employment, the retiree takes the BackDROP in MSEP or MSEP 2000?
The COLA rate you will receive for your BackDROP period will depend on the plan you choose at retirement. If you choose to retire in the MSEP, and began work in a MOSERS covered position before 8/28/97, you will receive a 4% COLA for your BackDROP period. If you elect to retire in the MSEP and were hired after 8/28/97 or elect the MSEP 2000, you will receive a COLA of 80% of the Consumer Price Index for your BackDROP period.
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I have a question about what the COLA for 2006 will be since I retired under the MSEP 2000 plan.

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I have a question about what the COLA for 2006 will be since I retired under the MSEP 2000 plan. I know it is based on 80% of the change in the Consumer Price Index. When will you know what the Cost-of-Living Allowance will be for 2006?
The annual COLA rate is calculated in January of each year. Our benefit auditor makes the final calculations once he receives the CPI data for December 2005 near the middle of January. Once the calculations have been made, we will post the rate for 2006. You will also receive notice of your COLA increase during the month it becomes effective.
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I retired in 1995 under the rules that the COLA would be a minimum of 4% or a max of 5%...what is the COLA for the coming year? 4% or 5% and why is it

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I retired in 1995 under the rules that the COLA would be a minimum of 4% or a max of 5%...what is the COLA for the coming year? 4% or 5% and why is it not more widely publicized?
Members who retired under the MSEP, who were employed before August 28, 1997 are guaranteed at least a 4% cost of living allowance (COLA) each year until their benefit reaches 165% of the initial amount. All other retired members (those retired under the MSEP 2000, or those under the MSEP who were initially employed with the state after August 28, 1997) will received a COLA based on 80% of the change in the Consumer Price Index. This number is calculated each year by our Benefit Auditor. For 2005, the calculated COLA is 2.13%. Since this number is not greater than 4%, the 2005 COLA for MSEP members hired before August 28, 1997 is 4%.
MOSERS posts this COLA information on our website and in our General Employees' Retirement Handbook. For more information on how COLAs are calculated, see our COLA page under retired members. We also send retirees an annual statement that specifies the amount of the COLA. This statement is received during the month the COLA is applied to your benefit.
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New Clarification - Do MOSERS initial pension benefits still increase

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New Clarification
Do MOSER'S initial pension benefits still increase by 4% per year for each year an employee continues to work full-time after his 65th birthday?

There is a special Cost of Living Allowance (COLA) for MSEP members who continue to work beyond age 65. (This provision is not applicable in the MSEP 2000.) Upon retirement, your monthly benefit will increase by the annual COLA rate between your 65th birthday and your termination date. For members who were hired prior to August 28, 1997, your annual increase is based on 80% of the change in the Consumer Price Index subject to a minimum of 4% and a maximum of 5%. Otherwise if you were hired on or after August 28, 1997, your annual increase is based on 80% of the change in the Consumer Price Index subject to a maximum of 5%. To qualify, you must meet the following requirements:
  • You must be fully vested at age 65 (at least 5 years of service with the state of Missouri)
  • You must be actively employed by the state of Missouri on your 65th birthday
  • You must retire under the MSEP
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