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Cost-of-Living Adjustments

A Cost-of-Living Adjustment (COLA) is an increase made to a pension benefit to offset the effects of inflation on retirement benefits. Historically, COLAs provided to Public School Employee Retirement System (PSERS) members have been a permanent, supplemental percentage increase to their benefit. 

The Public School Employees’ Retirement Board and PSERS have the authority set forth in the Public School Employees’ Retirement Code and, therefore, cannot authorize an increase in a member’s pension benefit that is not set forth in the law.  Only the Pennsylvania General Assembly may grant COLA increases for PSERS retirees. PSERS, however, does offer drafting assistance and cost information to the General Assembly when they are considering a COLA. 

The current assets held in the PSERS Fund will pay the benefits of current retirees and the future retirement benefits of active, contributing members based on the current statutory scheme.  COLAs, generally, are not prefunded and any COLA enacted would require a funding mechanism.  

Current Legislation:
Members of the General Assembly introduce some PSERS-related bills each year. Often, only a few of PSERS-related bills that are introduced make it through the entire legislative process and are signed into law by the Governor.

You can visit the General Assembly's website to search the content and status of all legislation introduced in Pennsylvania.
The Independent Fiscal Office also maintains a searchable database specific to retirement-related legislation. You can find proposals and related documentation concerning Pennsylvania school, state, or municipal retirement systems.

Common Questions Regarding COLAs

Here are some common questions PSERS receives regarding COLAs.

PSERS has billions in assets. Can’t some of that money be used to grant a COLA? 
No, PSERS’ defined benefit plan prefunds its pension benefits according to law. The existing funds that are dedicated to pay the current members’ pension benefits for the rest of their lives. A COLA would require new additional funding from employers and add an immediate additional debt to PSERS. 

Why can’t PSERS and its Board just grant a COLA? 
The Board is a creature of statute and cannot exercise a right not provided by law.  Only the General Assembly has the authority to grant a COLA by passing legislation. 

Aren’t retirees entitled to a COLA as part of their pension benefit? 
No, COLAs are not a guaranteed part of your PSERS pension benefit. You are guaranteed a pension benefit based on a formula set forth in the Retirement Code that does not include an automatic COLA. A COLA requires separate legislation and additional funding.