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2014 Retiree COLA

The Austin Police Retirement System Act (Act), Article 6243n-1, requires a recommendation from the System's actuary for approval of a "Retiree" Cost of Living Adjustment (COLA). The COLA shall be determined by the Board and the actuary based on the Consumer Price Index, actuarial experience of the System, and prior increases granted. While the COLA presented for approval by the Board must be approved by the System's actuary, it does not state specific guidelines for such approval.In 2012, the Board adopted a "COLA Adjustment Policy", which would set forth a specific methodology to determine the satisfaction of actuarial soundness of providing an annual COLA. Under this Policy, the actuarial basis for determination will be to perform a ten-year projection using the System's assumptions. This projection will determine if the funding period to amortize the unfunded accrued actuarial liability is no greater than 30 years at any point in the projection period. In addition, the GASB 25 funded ratio during the projection period must always equal 80% or more. The satisfaction of these two parameters will suffice as evidence of actuarial soundness after an adoption of a COLA and will allow for an approval by the System's actuary. The increase in the CPI-U as defined in this Policy for the 12 month period ending September 30, 2013 would have provided a 1.2% COLA. However, based upon the prior projections provided to the System in October 2013, these two parameters will not be satisfied for 2013 and a COLA will not be approved for the January 1, 2014 retiree payroll.

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