Significant revisions could be coming to keep solvent South Dakota’s public pension system that covers state government as well as many local governments and school systems. Trustees for the South Dakota Retirement System listened to suggestions Thursday from two of their long-time advisers….First would be reducing the minimum annual cost of living adjustment, known as the COLA, to zero percent. The current range is 0.5 percent to 3.5 percent.
The board’s goal has been the COLA should match or stay close to inflation. The COLA that takes effect July 1 is 1.56 percent and is based on what’s used for increasing Social Security benefits.
The variable COLA took effect in 2011. The Legislature previously had it at 3.1 percent per year, but transitioned to 2.1 percent for 2010.
The COLA currently is 2.03 percent. It changes to 1.56 percent in July.
Trustee Jim Hansen of Pierre represents retired members. “I think retirees can accept the zero percent COLA if it would correct the problem,” Hansen said.
He added, “No retirees want a cut in the COLA, but if that’s what we need to do, that’s what we need to do.”
The second suggested change would be allowing an unfunded liability for a short term. Doug Fiddler, the system’s senior actuary, said the definition of short would be 10 years. He said an industry white paper used 15 to 20 years.
“While we would have an unfunded liability, there would be no COLA,” Fiddler said about the potential effect of those two suggestions.
The third priority would shift all Foundation-benefits members into the newer Generational-benefits structure for future service. Each person’s benefits would be calculated on service time under each structure.
“It would not be without complications,” consulting actuary Paul Schrader said. He also outlined several other options that seemed to have less appeal, based on responses from trustees.”
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This article republishes selections from “South Dakota Retirement System trustees are asked to look at changes, such as a 0% COLA,” an article by Bob Mercer for Keloland.com, 4/2/2020.