Annual Benefit Increases

When you retire, you will receive annual benefit increases to your PERA benefit based on various factors. Senate Bill 10-001 (SB 10-001) contained provisions that went into effective on February 23, 2010, that moved the payment date of all annual increase payments to July, changed the eligibility requirements for an annual increase, and changed the amount of the annual increase.

SB 10-001 changes related to the annual increase are as follows:

For benefit recipients in the PERA benefit structure who began membership before January 1, 2007, and benefit recipients in the DPS benefit structure

Payment Month: The annual increase will be paid in July.

Eligibility: For benefit recipients whose benefit is based on a retirement date prior to January 1, 2011, and the benefit recipient has been receiving benefits for at least seven months as of the July in which the annual increase is to be paid.

Annual Increase Amount: 2 percent per year unless PERA has a negative investment year in which case, for the next three years, the annual increase becomes the lesser of 2 percent or the average of the monthly CPI-W amounts for the prior calendar year. (A negative investment year has an overall return that is less than zero.)

For benefit recipients whose benefit is paid based on a retirement date on or after January 1, 2011

Eligibility: Full service retirees, disability retirees, reduced service retirees who are eligible to receive a benefit on January 1, 2011, and survivor benefit recipients, and the benefit recipient has received benefit payments for 12 months.

Eligibility: Reduced service retirees who are not eligible to retire as of January 1, 2011, are eligible to receive an annual increase in July of the year in which both of the following conditions are met: (1) the retiree has received benefit payments for 12 months and (2) as of January 1 of the year the annual increase is paid, the retiree has either reached age 60 or the age and service rule applicable to the retiree’s membership plan.

Annual Increase Amount: 2 percent per year unless PERA has a negative investment year in which case, for the next three years, the annual increase becomes the lesser of 2 percent or the average of the monthly CPI-W amounts for the prior calendar year. (A negative investment year has an overall return that is less than zero.)

For benefit recipients in the PERA benefit structure who began membership on and after January 1, 2007

Payment Month: The annual increase will be paid in July.

Eligibility: For full service retirees, disability retirees, and survivor benefit recipients, the benefit recipient becomes eligible in July of the calendar year following the calendar year in which the benefit recipient has received 12 months of benefit payments.

Eligibility: Reduced service retirees are eligible to receive an annual increase in July of the year in which both of the following conditions are met: (1) as of January 1 of the year the annual increase is to be paid, the retiree has received 12 months of benefit payments in the prior calendar year and (2) as of January 1 of the year the annual increase is paid, the retiree has either reached age 60 or the age and service rule applicable to the retiree’s membership plan.

Annual Increase Amount: The annual increase is the lesser of 2 percent or the average of the monthly CPI-W amounts for the prior calendar year. In no case can the sum of annual increases paid to a division’s benefit recipients exceed 10 percent of the divisional annual increase reserve.

Changes to the 2 Percent Annual Increase Cap

If PERA’s overall funded status is at or above 103 percent, the annual increase cap of 2 percent will increase by 0.25 percent per year. If after PERA’s overall funded status reaches 103 percent and it subsequently drops below 90 percent, the 2 percent annual increase cap will decrease by 0.25 percent per year, but will never drop below 2 percent.

Annual Increases fact sheet