During their February 19, 2025 Meeting, ICERS’ Board of Retirement affirmed the 2025 COLA benefit of 3% which will allow those members having retired prior to April 1st of this year to earn an additional 2% added to their pension allotment and “bank” an additional 1% to be used in the future.

But what exactly is a COLA and how does all of this work?

We’re glad you asked. In order to help answer these and other pressing questions about this important Retiree benefit, Staff has put together a list of frequently asked questions:

The COLA is a benefit provided to retired members and their beneficiaries to help maintain the purchasing power of their pensions in the face of inflation.

Does ICERS have a COLA policy?

Yes. During their December 18, 2024 meeting, the ICERS’ Board of Retirement adopted its new COLA Policy, which memorializes some of the points raised in this FAQ, has been subsequently added to ICERS’ existing Governance Policy Manual found here.

How is the COLA calculated?

The COLA is calculated as required in the County Employees Retirement Law (CERL) based on changes in the Urban Consumer Price Index (CPI) for the Western Region. The CPIs for the two prior calendar years are averaged and rounded to the nearest half-percent. Each retirement tier has a maximum COLA of 2%. You will only receive up to the maximum COLA for your tier even if the change in the CPI is higher. This year, the average of the two CPIs shows an increase of 2.81%, which rounds to a 3.00% COLA for 2025. COLA's are automatically included in the pension checks distributed at the end of April.

What is COLA “Banking”?

If your maximum allowable COLA is less than the increase in the CPI, the difference is “banked” for possible use in a future year (as provided by law). If the change in the CPI is less than your maximum allowable COLA, we will make a withdrawal from your COLA bank, if available, in order to bring your increase up to the maximum allowable. The following two examples highlight both scenarios:

• Example 1:  COLA granted is less than increase in the CPI – The Board affirms a COLA of 4.5%. Retirees who had retired before April 1st of the current year will receive the full 2% allowed and will “bank” 2.5%; Retirees who retire on or after April 1st of the current year will not receive a COLA for the current year.
• Example 2: COLA granted is more than the increase in the CPI – The Board affirms a COLA of 0.5%. Retirees who had retired on or after April 1st of the prior year but before April 1st of the current year will receive allotted 0.5%; Retirees who had retired before April 1st of the prior year AND had a COLA bank at the time of the new COLA announcement, will have their “bank” amount added to the affirmed COLA up to the allowed 2%.

Why do ICERS' members have a retiree COLA?

ICERS' plan is governed by the part of the California Government Code known as the County Employees Retirement Law of 1937, referred to as the CERL or the 1937 Act. While most of the provisions of the CERL are required, some of them are optional and must be adopted by participating employers in order to be effective. You have a future COLA because your employer adopted the sections of the CERL that provide a COLA to retirees.

Does the Retirement Board grant the COLA?

No. Your COLA is set as part of your tier and was established by your employer when your tier was created. The Retirement Board’s job is to determine whether ICERS' actuary has calculated the COLA correctly, affirm the correct calculation, and apply the COLA to your benefit, if there is one, for that year.

Who pays for the COLA?

Both employees and employers share equally in funding future retiree COLAs through their contributions. When the actuary calculates contribution rates for the plan, a portion of the normal cost rate includes the future cost of the COLA. It is one of the many assumptions that are used in ICERS' funding model.

Does the retiree COLA increase ICERS' unfunded liability?

Since the cost of your future COLA is paid for through employee and employer contributions, the COLA itself does not increase ICERS' unfunded liability. The amount of contributions required to fund all ICERS benefits is based on actuarial assumptions. If one or more of the actuarial assumptions are not met, including the expected long-term average COLA for the plan, then there may be an increase in the unfunded liability. Likewise, if the annual COLA is less than the amount used to fund the cost of the plan there may be a decrease in the unfunded liability.

 I’m thinking about retiring before the end of March, either this year or next so I can receive the April COLA. How soon can I find out what next year’s COLA will be?

The Retirement Board affirms the actuary’s calculation of the COLA every year at the February Retirement Board meeting, which is generally held on the third Wednesday of the month. The COLA information is always available after this meeting.

Do you have any more questions that should be on the list? Please let us know at icers@co.imperial.ca.us