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CalPERS retires to get pension COLAs after high inflation

CalPERS is adding the largest cost-of-living increases to retirees’ pensions in 32 years due to high inflation.

Public employees who retired between 2006 and 2014 and some others will receive a 4.7% bump this year, according to figures the California Public Employees’ Retirement System posted to its website Thursday.

That’s the largest increase since 1990, according to the federal Bureau of Labor Statistics figures on which CalPERS ‘calculations are based.

Most other retirees will receive either 2% or an increase of between 2% and 4.7%, depending on the year they retired and the provisions in their employment contracts.

Inflation increased 7% through 2021, according to the Bureau of Labor Statistics. CalPERS ‘figure of 4.7% is an average of each month’s inflation figure throughout the year, from 1.4% in January to 7% in December.

About 750,000 retirees and beneficiaries receive CalPERS pensions. They receive $ 37,000 per year on average. The system paid out $ 27.4 billion in retirement benefits for the fiscal year ending June 30.

CalPERS did not provide a total cost figure for this year’s cost-of-living increases. Last year, when most retirees received either 1.2% or 2% increases, the total cost was $ 242 million.

Former public employees who retired in 2003 or earlier for the most part will receive 2%, as will those who retired in 2020. Those who retired between 2015 and 2019 will receive between 2.77% and 3.13%, according to CalPERS charts. Those who retired in 2021 will not receive a cost-of-living increase in 2022. All increases are effective May 1.

Each month, the Bureau of Labor Statistics publishes a figure for how much inflation increased from a year earlier. The widely published figure of 7% for 2021 was the 12-month increase by the end of December.

Rather than using that figure, CalPERS averaged each month’s 12-month inflation figure. For example, January 2021’s figure was 1.4%, meaning inflation had risen that much since January 2020. February’s figure was 1.7%. CalPERS averaged all 12 of those monthly figures for the year to arrive at 4.7%.

The method means a smaller maximum increase this year than if the retirement system had used the 7% rate, but it means next year’s figure will be higher than if CalPERS were to use the 7% figure this year.

It also means those who retired in 2021 will still see an effect on their pensions from the year’s 7% inflation rate, even though they will not receive a cost-of-living increase this year.

This story was originally published February 28, 2022 9:30 AM.

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Wes Venteicher anchors The Bee’s popular State Worker coverage in the newspaper’s Capitol Bureau. He covers taxes, pensions, unions, state spending and California government. A Montana native, he reported on health care and politics in Chicago and Pittsburgh before joining The Bee in 2018.

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