OPERS announces COLA for 2025
Inflation-based adjustment to be 2.9%, based on government statistics
By Michael Pramik, Ohio Public Employees Retirement System
July 18, 2024 – Cost-of-living adjustments for OPERS members in 2025 will be either 3% or 2.9%, depending on when members began receiving a benefit.
While those with a benefit effective date prior to Jan. 7, 2013, automatically receive a 3% adjustment, those with an effective date after that date have their COLAs based on the Consumer Price Index-W, the government’s inflation index for urban wage earners and clerical workers.
According to state law, the annual COLA for those retirees is to be based on the change in the CPI-W from the end of June 2023 to the end of June this year, with a maximum adjustment of 3%. The U.S. Bureau of Labor Statistics reports that the CPI-W increased 2.9% over that period, so OPERS’ CPI-based COLA for 2024 will be 2.9%. For reference, click on “CPI-W, June 2024” on this page of the Bureau of Labor Statistics website and refer to cell AD-7 in the spreadsheet.
OPERS’ inflation-based COLA uses the same index as Social Security. But the time period measured is different, so the adjustments might not always match up.
The adjustment is calculated on recipients’ original monthly benefit and is paid on the anniversary of their benefit effective date. COLAs will be paid next year to those with a benefit effective date of Dec. 1, 2024, or earlier.
Michael Pramik
Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.
When will I see the differance?
Gary,
It will begin to be paid next year, on the anniversary of your benefit effective date.
2.9% is beneficial. A lot better than 0.5% in 2021. 2020 was 1.4%, 2022 was 3%, 2023 was 3% and 2024 is 2.3%.
I received two years at 0.5% then 3% while social security soared, nevermind the fact that at least half of my social security is taken away from me because of wep and then I have to pay taxes a second time on the little bit of social security I do receive. Why did I have two years with 0.5% if you only had one?
What is your state of residence? Ohio does not tax social security pensions. You include it in your total income on page 1 of the tax form, but then on one of the schedules, you subtract social security benefits from your total income so it is not taxed.
Troy,
The COLA is always based on your original benefit. If that benefit is $1,000 per month, then when you’re eligible for a COLA you would receive an adjustment based on $1,000.
If you’re eligible for a COLA in 2025, that would be 2.9% of the base benefit payable the month you received your initial benefit. For instance, if that month is September, you would receive $1,000 through August, then begin receiving $1,029 for 12 months beginning in September.
If a 3% COLA is granted in 2026, you’d receive an additional $30 monthly beginning in September 2026, for a total monthly benefit of $1,059. That would be your benefit for 12 months, until the next COLA is granted.
That is how it works with a simple COLA. A “compounding” COLA would base any new adjustment on the cumulative amount of your base pension benefit and subsequent COLAs. For instance, if the COLA were compounding in the example above, the 2026 benefit would include a 3% COLA based on $1,029, not $1,000. The simple COLA in that example applied the 3% additional amount on the original base benefit of $1,000.
Please explain how the non-compounding COLA works.
As I understand it, If my initial monthly benefit is $1000 and the 2025 COLA is 2.9%, my 2025 monthly benefit will be $1029 for 2025.
So in the example above, if the 2026 COLA would be 3% my 2026 monthly benefit would be $1030 and not $1059.87, is this correct?
Troy,
The COLA is always based on your original benefit. If that benefit is $1,000 per month, then when you’re eligible for a COLA you would receive an adjustment based on $1,000.
If you’re eligible for a COLA in 2025, that would be 2.9% of the base benefit payable the month you received your initial benefit. For instance, if that month is September, you would receive $1,000 through August, then begin receiving $1,029 for 12 months beginning in September.
If a 3% COLA is granted in 2026, you’d receive an additional $30 monthly beginning in September 2026, for a total monthly benefit of $1,059. That would be your benefit for 12 months, until the next COLA is granted.
That is how it works with a simple COLA. A “compounding” COLA would base any new adjustment on the cumulative amount of your base pension benefit and subsequent COLAs. For instance, if the COLA were compounding in the example above, the 2026 benefit would include a 3% COLA based on $1,029, not $1,000. The simple COLA in that example applied the 3% additional amount on the original base benefit of $1,000.
Thanks for the clarification Michael.