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SDRS projects COLA top at 1.56% as board sets 2027 interest rates
Summary
The South Dakota Retirement System projected a constrained cost-of-living adjustment range, with staff saying a 1.56% COLA is likely for July despite inflation of 2.76%; the board also set the fiscal year 2027 effective interest rate at 3.663% and adopted a 4.0% supplemental pension interest-rate assumption.
The South Dakota Retirement System (SDRS) board received a projected funded-status update and took several administrative votes Thursday, approving interest-rate assumptions for fiscal year 2027 after a staff presentation that put the likely maximum COLA at 1.56% for the coming July.
Doug (senior actuary) told trustees that SDRS’s two-step COLA calculation yielded a funded-ratio breakpoint at 1.56%, meaning the board’s modeled COLA range for July becomes 0%–1.56%. He noted the CPIW-based inflation measure for the period came in at 2.76%, so staff expect the plan would post a 1.56% COLA if investment and contribution assumptions hold.
"That ratio of assets to liabilities is 100% or more — that happened at 1.56% this year," Doug said, explaining the mechanics in detail and urging trustees to continue contingency planning given sensitivity to market returns and salary data.
The board then moved to formal votes on technical rates that feed member accounting and contract pricing. Hank Prim moved and James Apple seconded a motion to set the fiscal year 2027 effective interest rate — the rate that will accrue to member accounts July 1, 2026 — at 3.663%, the statutory cap of 90% of the 2025 average 91-day Treasury yield. The motion carried.
Separately, trustees set the supplemental pension benefit (SPB) interest-rate assumption at 4.0% after staff presented a range: the external actuary recommended 4.25%–5.25% while the state investment officer suggested roughly 3.75%; the board adopted 4.0% as a midpoint (motion moved by Jake Oakland; seconded by Kruis Lina Kruis).
Board members and staff emphasized that the COLA outcome remains contingent on final market returns and payroll data for the fiscal year, and that the board has scheduled a June discussion on long-term benefit goals and contingency planning. Doug said final salary data and remaining market volatility over the last quarter could shift projections before year-end reporting.
What’s next: staff will finalize year-end valuation numbers and present any updates at the June meeting when ballots for the single contested trustee seat will also be certified.
