Gary Rusk provides us with a COLA chart and Bob Buerkle gives us an explanation using bowling pins! Way to go, Gary and Bob!

 

From Bob Buerkle

February 26, 2022

The chart prepared by Gary Rusk is correct. Great job Gary. If I can explain the first 4 years I think you will grasp the additive process of the "Simple COLA" structure that STRS uses and you will understand Gary Rusk's entire chart. 

Beginning in 1971, when STRS began paying the first COLA, and ever since, STRS has never paid a "Compounded COLA." 

Now, think of the 10 pins set up in a bowling alley. The #1 pin closest to you is the first year's COLA. In year two, there are two pins in row #2, right behind the #1 pin. One of those two pins represents the first COLA you received because you get to continue to receive all COLAs granted from previous years. The other pin is the new COLA that you received in year #2. 

Each additional year, when you receive a new COLA, your pension base is increased by the value of one more COLA. When you receive COLA #4 you will have received the value of 10 COLAs, just like the 10 pins on the bowling alley. 

Also, all future COLAs that you receive will always be based on your original pension base. If you began retirement with a $50,000 pension then a 2% COLA would add $1000 to your base, and a future COLA of only 1% would only add $500 to your base, while a 3% COLA would add $1500 to your base. 

Looking at Gary's chart again, at 20 years of 2% COLAs worth $1000, your original pension base would have increased by $20,000, rising from $50,000 to $70,000, while your total additional COLA income over the 20 years would have been $210,000. (210 COLAs x $1000 = $210,000)

Think of pins 1, 3, 6 and 10 as the new COLAs granted over a four year period while pins 2, 4, 5, 7, 8 and 9 represent the income from the COLAs previously granted, while pins 1, 3, 6, and 10 are the COLAs that increased your pension base over the 4 year period displayed.