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A Message from Comptroller Thomas P. DiNapoli
For years, retirees expressed concern that their pensions did not keep pace with inflation. In July 2000, the Retirement System was at the forefront of a successful effort to enact a law providing an annual cost-of-living adjustment (COLA) for retirees.

A COLA payment is a change, based on the cost-of-living index that permanently increases your retirement benefit. It is designed to address future inflation as it occurs. Once you become eligible and receive your first COLA payment, subsequent payments will continue automatically each September.

This is a benefit we are proud to offer, and we hope this brochure makes COLA easier for you to understand. If you have any questions, please feel free to contact our Call Center.

Sincerely,
Thomas P. DiNapoli

State Comptroller


What is COLA?
COLA stands for cost-of-living adjustment. A COLA payment is an adjustment, based on the cost-of-living index, that will permanently increase the retirement benefit you receive from the New York State and Local Retirement System. Once you become eligible and the payments begin, they will continue automatically each September.

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How is COLA calculated?
COLA payments are based on the rate of inflation and the consumer price index published by the U.S. Bureau of Labor Statistics. The law requires that COLA payments be calculated based on 50 percent of the annual rate of inflation, measured at the end of the fiscal year (on March 31st). In addition, the COLA cannot be less than 1 percent or greater than 3 percent of your pension.

Another provision of the law requires that the COLA be calculated based on the first $18,000 of your annual Single Life Allowance amount, even if you have selected a different option.

For example, assume the inflation rate from March 2003 to March 2004 was 1.6 percent. Fifty percent of this would be 0.8 percent. However, the law states that COLA payments must be a minimum of 1 percent. Therefore, the COLA payment in this example would be 1 percent. So, if your pension is $12,000 a year, it would increase by $120 a year. If your pension is $25,000, it would increase by $180, representing 1 percent of the first $18,000 of your Single Life Allowance.

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Why is the Single Life Allowance payment option used?
As you may recall, when you retired, you were given various options for how your retirement benefit could be paid to you. All of the options provide you with a monthly benefit for life, but the Single Life Allowance option provides the highest pension. However, under Single Life, no payments are made to beneficiaries after you die. In exchange for providing for your beneficiaries upon your death, all of the other options reduce your benefit.

Therefore, calculating your COLA as if you had chosen the Single Life Allowance guarantees you the highest amount possible, since this option offers the highest benefit. If your retirement benefit is less than $18,000 annually under the Single Life Allowance, the calculation is based on that amount.

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Who is eligible?
In order to receive your COLA, you must be:

•Age 62 or older and retired for five or more years; or
•Age 55 or older and retired for ten or more years for uniformed employees such as police officers, firefighters and correction officers; or
•Receiving a disability pension from the Retirement System for five or more years, regardless of age.
There are two other situations where someone may be eligible for COLA:

•A beneficiary receiving the accidental death benefit for five or more years on behalf of a deceased Employees’ Retirement System member; or
•The spouse of a deceased retiree receiving a lifetime allowance (under an option elected by the retiree at retirement) is entitled to one-half the COLA amount that would have been paid to the retiree when he or she would have met the eligibility criteria.
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Will I be notified when I become eligible?
Yes. We will notify you when your COLA payments will begin shortly after you meet the requirements. Once they start, the benefit will continue automatically and be adjusted every September.

Who can I contact if I have any questions about my COLA?
The requirements and calculation methods for COLA increases are complex. It is important to note that COLA amounts are determined by law and not administratively by the Retirement System. If you have any questions, contact our Call Center toll-free at:

If you have any questions, contact our Call Center toll-free at:

•1-866-805-0990 if you are calling long-distance, or
•518-474-7736 if you are calling within the Albany, New York area.
You can also:

Send us an email through our website or write us at:

New York State and Local Retirement System

Pension Payroll Unit

110 State Street

Albany, NY 12244-0001

Meet with one of our Information Representatives at any of our locations throughout the State. A list of these consultation sites is available through our website or from our Call Center.

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5 Step Plan for Retirement
Step 1: Determine Your Retirement Needs
You may think that your retirement benefit and Social Security benefits will be enough, but enough for what? It all depends on what you want to do. You need to determine how much income you will need in retirement. The first step is to draw up a list of all your expenses.

Step 2: Estimate Your Retirement Income
1. Find out about your Social Security benefits

The average retiree receives about 20 percent of pre-retirement earnings from Social Security. If your income has been below average, Social Security may replace more of your income, while above average earnings mean a lower percentage will be replaced.

Call the Social Security Administration at 1-800-772-1213 for a free personal earnings and benefit estimate statement.

2. Learn about your pension plan

Review your retirement plan booklet and your member statement. Each year you receive a Member Annual Statement that shows your member account and approximate retirement benefits. Use this information to estimate what percentage of your pre-retirement income your pension will replace.

3. Identify any other income

Savings, investments, income from rental property, a pension from private employment, proceeds from a deferred compensation plan, or any other source of retirement income should be identified.

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Step 3: Calculate Your Expenses
Determine if your retirement income will be enough to meet your expected expenses. Retirement can be very expensive. Experts say you will need about 80 percent of your pre-retirement income to maintain your standard of living when you stop working. The difference between retirement dreams and what retirement will really be like depends a great deal on how much money you will have when you retire.

For example, a Tier 4 member retiring at age 62 with 25 years of service will receive a maximum retirement benefit of 50 percent of final average salary and Social Security income of 20 percent of pre-retirement earnings. In our example, the combination of Social Security and retirement benefit totals only 70 percent of pre-retirement income. Will this be enough for you?

Before you answer, remember, you may be retired for 15 to 20 years or longer. That means that inflation will have 15 or 20 years to eat away at the value of each dollar of income you have.

If inflation averages only five percent during your retirement, in just 15 years your income would have to more than double just to buy the same amount as when you retired. The fact is that although your retirement benefits rank among the best in the world, your pension and Social Security benefits alone may not provide the level of income you’ll need throughout your retirement to allow you the freedom to make the lifestyle choices you would like. Where will you get the extra money you may need? If you’re like most of us, you will have to provide the additional retirement income through a savings and/or investment plan.

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Step 4: Develop a Savings Plan
Your Savings Plan
The single most important key to a successful savings plan is to start early. No matter what your age, it’s not too early to start financial planning. The sooner you start saving, the more time your money has to grow. (See our Weekly Investment Plan to see how large a retirement account a weekly investment can grow by age 65.)

For some, retirement is a long way off. But the same process that you need to follow to buy your first home or meet the educational costs of your children will build the foundation for your retirement planning. If you are older, or you don’t have other concerns, you can focus completely on reaching your retirement goals.

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