Current Pension Topics:
Must Upgrade Retiree COLAs

By JOEL L. FRANK

Now that the Mayor got the United Federation of Teachers off his back with an agreement for a 25/55 retirement plan, I would like to see His Honor, along with Governor Spitzer, recognize just how pitiful the current cost-of-living adjustment program for retirees is and correct it forthwith.

The smallest COLA that can be granted is 1 percent of $18,000, or $180 per year. That amounts to $15 per month, or 49 cents per day. The maximum COLA that can be granted is 3 percent of $18,000, or $540 per year, or $45 per month and $1.48 per day. When factored into these figures the fact that one must be retired for at least five years before being entitled to these economic crumbs, the use of the word "insult" is far from being inaccurate when attempting to show what the State/City fathers think of their former employees.

Is the labor movement in this state giving the Governor and Mayor a pass when it comes to the size of the COLA because all public employees in New York are also members of the Social Security System? I trust not! Social Security grants a full COLA (as measured by the Consumers Price Index) effective on Jan. 1 following the month of retirement. Example: Employee retired on July 1, 2007 at age 66 on a State/City pension of $1,500 per month as well as a Social Security annuity of $1,500 per month. The retiree will be getting a 2.3-percent COLA, or $34.50, in addition to his monthly Social Security check ($1,500 + 34.50 = $1534.50) on Jan. 1, 2008 (six months after the date of retirement). The retiree, however, will have to live on a fixed $1,500 monthly State/City pension for 62 months before being entitled to a COLA; and then the most he can expect as a monthly increase is $45 effective on Sept. 1, 2012.

Insofar as each check comes from a separate, dedicated source of funds, the State/City should not gain any comfort in knowing that the Social Security system is much more respectful of its retirees than the State/City are. C'mon State/City Fathers, just like you designed the best Deferred Compensation Plans in the nation without any union involvement or prodding, it is long overdue for you to do the right thing when it comes to COLA increases for pensioners. The design is already available: It is called the COLA Program of the Social Security Administration.

Mr. Frank is a fee-only Retirement Financial Planner and a retired NYC High School Teacher of Accounting. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net .