Dear Benny
I read that the COLA is based on the CPI from the prior year, and the COLA is set for 3.5%. However, it said that the COLA will actually only be 3% with the remaining 0.5% going into the retiree's COLA bank. Why isn't the full 3.5% given to recipients?
The 3% limit is outlined in Government Code section 31870.1
In short, a COLA Bank is a reserve where any amount exceeding the 3 percent limit in COLA adjustments is saved for later use.
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Thank you for your questions regarding COLA and COLA banks.
The 3% limit is outlined in Government Code section 31870.1
The COLA has a cap of 3 percent for annual increases or decreases. If the cost of living figure surpasses 3 percent, such as in 2023 or 2024, any excess amount is deposited into an OCERS member’s “COLA Bank.” When the Consumer Price Index is lower and there is a positive balance in the payee’s COLA Bank, OCERS will use it to provide the highest possible COLA adjustment, up to 3 percent.
In short, a COLA Bank is a reserve where any amount exceeding the 3 percent limit in COLA adjustments is saved for later use.
To learn more about COLA, please visit: https://www.ocers.org/cola-and-star-cola
This video also discusses COLA and the COLA bank: https://youtu.be/57XSt-YjToA?si=64yP1vFsvz_iCpz_