Tom Curtis to Mike Nehf and STRS Board re: COLAs

From Tom Curtis, July 9, 2009
Subject: 070909 To Nehf & Board. STRS COLA

Hello Mike,

"COLAs for retirees, unfortunately, are the most expensive pension cost – these can save billions of dollars." - Mike Nehf

This is what another retiree sent me about COLA costs.

The STRS RETIREMENT INCOME PROTECTION STATISTICS REPORT as of 6/30/2008 shows COLA costs at 64 million, and, if COLA were reduced 50%, the savings in 2008 would have been 32 million.

That might amount to half a percent of total retiree benefits paid out.

If you add 5,000 more retirees eligible for COLA in 2009 at an FAS of $50,000, you would increase the 32 million by approx 4 million to 36 million. ***($50,000 x 3% = $1500 **** $1500 x 5000 = 7.5 million **** half = 3.75 million)

I am curious how you translate that cost into billions and for what time period?

You may be using an actuarial report for your data. But, actuarial does not mean actual, it is an estimate of future liability.

Such an estimate would have to be considered and evaluated with a reasonable projection of actual COLA money paid out over the same period of time.

I doubt you had an active retiree group like CORE at your heels in Georgia, when I am told you balanced the budget by simply reducing or eliminating the COLA.

Did you have a HC plan for retirees in Georgia? What was the situation there?

Tom Curtis
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