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GENERAL PROVISIONS

Cost of Living Adjustments

Cost-of-living Adjustments – (See R. S. 11:1549)

The Board of Trustees may, upon majority vote, grant or provide a cost-of-living adjustment to retired members who have been retired for at least one full calendar year as provided for in the section titled “Calculation of Cost-of-living Adjustments,” but only in the event that:

(1)   At the end of the system's current fiscal year, the funded ratio of the system as of the end of the previous fiscal year equals or exceeds the target ratio as of that date for the system, and

(2)   The level of the Consumer Price Index for All Urban Consumers (CPI-U) for the current fiscal year is at least three percent higher than the level of the CPI-U for the fiscal year in which the last cost-of-living adjustment was granted.

The "funded ratio" as of any fiscal year end, as applied above, is defined to be the ratio of the actuarial value of assets to the actuarial accrued liability under the funding method prescribed by the office of the legislative auditor.  The actuarial value of assets and actuarial accrued liability for the system will be the amounts reported to the office of the legislative auditor in the Annual Report for Public Retirement Systems.

The "target ratio" as of any fiscal year end, as applied above, is defined as the lesser of (1) or (2) below:

(1)   One hundred percent

(2)   The sum of (a), (b), (c), and (d) below:

        (a)   The funded ratio as of the 1986 Fiscal Year end.

        (b)   The number of fiscal years elapsed since the 1986 Fiscal Year end multiplied by one-thirtieth of the difference between one hundred percent and the funded ratio of the system as of the 1986 Fiscal Year end.

        (c)   The amount of each change in funded ratio due to mergers or changes in actuarial methods or assumptions occurring after the 1986 Fiscal Year end.

        (d)   For each change in funded ratio due to mergers or changes in actuarial methods or assumptions occurring after the 1986 Fiscal Year end, an amount of opposite arithmetic sign from such change in funded ratio equal in absolute value to the number of fiscal years since the change in funded ratio multiplied by one-thirtieth of the original change in funded ratio due to the merger or change in actuarial methods or assumptions.

Amount of Cost-of-living Adjustment Payable Under R. S. 11:1549

Any cost-of-living adjustment granted by the board of trustees, based on this section of law, must not exceed the lesser of:

(1)   An increase in benefits of two and one-half percent per year for each full calendar year of retirement.

(2)   An increase in benefits of forty dollars per month in any one year.

Cost of Living Adjustments to Benefits – (See R. S. 11:241, R. S. 11:242, and R. S. 11:246)

The section of statutes that relates to all state and statewide retirement systems in Louisiana provides for two potential cost of living adjustments as detailed in R. S. 11:241 and R. S. 11:246, which differ from that contained in R.S. 11:1549.

R. S. 11:241 provides that cost of living benefits may be in the form of $X´(A+B) where X is at most $1 and "A" represents the number of years of credited service accrued at retirement or at death of the member or retiree and "B" is equal to the number of years since retirement or since death of the member or retiree to June 30^th of the initial year of such increase.

R. S. 11:246 provides for a cost of living increase for retirees and beneficiaries over the age of 65 equal to 2% of the benefit in payment on October 1, 1977, or the date the benefit was originally received if retirement commenced after that date.   Such an increase may be granted only in years where the system earns an actuarial rate of return in excess of the valuation interest rate (which is 8% as of July 1, 2009).  The adjustments are payable only from the investment income in excess of that determined by the application of the valuation interest rate to the actuarial value of assets.

R. S. 11:242 provides a restriction on the granting of any cost of living increase provided for in the statutes. In order to grant a cost of living increase as described in the statutes, the ratio of the plan’s Actuarial Value of Assets to the Pension Benefit Obligation must exceed a minimum “target ratio”, as described in the statutes.