The board of the Public Employee Retirement System of Idaho voted today to give state retirees their first cost-of-living increase in six years, beyond the 1 percent a year already required by law. State retirees will get a 2 percent increase, consisting of the 1 percent mandatory boost and another 1 percent to reflect increases in the consumer price index; the decision is contingent on the new CPI report that’s due out tomorrow, which PERSI expects to come in at 2 percent.
In addition, the board voted to grant a 2 percent retroactive cost-of-living adjustment to make up a small part of what retirees missed out on for the past six years as COLAs were withheld. Of the 2 percent, 1.92 percent of that would apply to everyone who retired prior to July 1, 2008, while the remaining 0.08 percent would apply to those who retired by July 1, 2010. The cost-of-living adjustments were withheld all those years based on the status of the state retirement fund, which suffered during the recession but now has earnings robust enough to easily cover the increases, the board decided.
“There were a lot of people that walked out of there with smiles on their faces, because the board made decisions that people have been waiting for and are excited about,” said Kelly Cross, PERSI spokesman. “Because of the great recession, it took a while for the fund to dig out of that hole and get back to a healthy state. We had a 17.2 percent return for fiscal year 2014.” That meant a net gain, after all payouts to retirees were made for the year, of $1.9 billion for the fund.
PERSI is the retirement program for thousands of state and local government employees in Idaho, including teachers and public safety officers.
In addition to the total of 4 percent in cost-of-living increases – the board could have granted up to 8.05 percent, based on foregone increases over the last six years, but opted for a total of 4 percent – the PERSI board also voted to cancel two rate increases for employers and employees that otherwise would have taken effect next year and the year after. The two increases had been delayed repeatedly; an earlier one, a 1.5 percent hike, took effect in 2013 after several years of delays. “Employers and employees had been anticipating those two bumps up for some time,” Cross said, “so now this is a significant relief.”
The PERSI board also approved a decrease in the excess contribution rates for 22 fire departments and districts in the Firefighters’ Retirement Fund, which has been closed to new members since 1980, from 17.42 percent down to 5 percent. That’s because the funded status has reached 110 percent. Of the 550 members of that fund, just two are still actively working. The savings will be substantial to the employers involved, including the Boise Fire Department, which will save nearly $3 million. You can read PERSI's full announcement here, which notes that after the 4 percent COLAs, PERSI's funded status is 92.3 percent, with an amortization period of 12.8 years. By law, its amortization period must be 25 years or less; public pension systems are considered healthy when they're funded at 80 percent or better.