Understanding COLAs: North Carolina Cost of Living Adjustments for State and Local Government Retirees Not Keeping Pace with Inflation

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Understanding COLAs: North Carolina Cost of Living Adjustments for State and Local Government Retirees Not Keeping Pace with Inflation

RALEIGH, N.C. (May 17, 2016) – North Carolina’s strong retirement benefits system brings great value to 300,000 deserving local and state government retirees. However, as lawmakers debate the state budget, many current and future government retirees worry that their benefits could be at risk. The North Carolina Retired Governmental Employees’ Association (NCRGEA) helps to protect these benefits, and a key priority for NCRGEA is Cost of Living Adjustments, or COLAs. In 2015, some local government retirees received a small COLA, while state government retirees did not receive any. It is confusing, and now, NCRGEA wants to help both local and state government retirees understand what this decision means for them.

“A COLA is designed to provide retirement security by protecting purchasing power from the effects of inflation,” explains Richard Rogers, Executive Director of NCRGEA. “If COLAs do not keep pace with inflation, many retirees are forced to make difficult choices between necessities such as food and medicine.”

During the 2015 legislative session in North Carolina, the House unsuccessfully proposed a two percent COLA for the Teachers’ and State Employees’ Retirement System (TSERS) and a one percent COLA for the Local Governmental Employees’ Retirement System (LGERS) via House Bill 616, however it has yet to be passed. Just this week, the House budget proposed a 1.6 percent COLA for teachers and state government retirees.

“The House budget’s proposed COLA is a step in the right direction. However, with COLAs below the pace of inflation since 2008, we still have a lot of work to do to guarantee security for our retirees,” explains Rogers. He points out there are several key factors influencing the need for a COLA in 2016:

  • Once retired, the majority of North Carolina’s former government employees’ pension is on average $17,000 for LGERS and $20,500 for TSERS per year. Small changes in consumer prices can have a substantial negative impact on these fixed-income retirees.
  • Retirees have different spending patterns than those in the workforce, yet COLAs are calculated based on the costs-of-goods frequently purchased by current workers. For example, many current workers have benefitted from the recent drop in oil prices; however, retirees tend to spend significantly less on gas, so it does not greatly impact their finances. Therefore, the calculation used to determine a COLA does not necessarily reflect retirees’ purchasing needs.
  • These retired men and women taught our children, built our roads, maintained our parks and protected us from crime. They worked hard to earn their retirement benefits.For these reasons, securing a COLA remains a goal for NCRGEA’s membership of over 66,000 local and state government retirees. “Public servants provide an important and valued service for our state, and they deserve financial security in their retirement,” says Rogers. “A COLA for both state and local government retirees would be a strong step in the right direction.”

About NCRGEA

The North Carolina Retired Governmental Employees’ Association (NCRGEA) is a private non-profit association of local and state governmental retirees that focuses on helping you enjoy your retirement years by keeping you informed about retirement benefits, programs, and services. With membership over 66,000, NCRGEA is the largest lobbying Association in the nation for retired state and local governmental employees. The objectives and mission of this Association have been and will continue to advance, promote and defend by any lawful means the rights, interests and welfare of retired employees of the local governments and the State of North Carolina. For more information visit www.ncrgea.com.