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Pension board orders formal cost study after Foster & Foster models 2% lifetime COLA
Summary
Edgewater trustees asked actuaries to produce a formal set of scenarios after a Foster & Foster analysis showed a 2% automatic lifetime COLA (starting five years into retirement) would raise plan costs by roughly 5% of payroll — about $150,000 annually — and trustees discussed member-pay and state-share funding options.
The Edgewater Police Officers' Pension Board voted to commission a formal cost study of potential cost-of-living adjustments after an actuarial briefing on Dec. 8, 2005. A Foster & Foster representative presented a preliminary model showing a 2% automatic lifetime COLA, starting five years into retirement, would increase plan liabilities by a little north of 5% of payroll — about $150,000 per year, according to the presenter.
"They would get a 2% automatic cost of living adjustment for life, with the first one starting five years into retirement," the Foster & Foster representative said, summarizing the structure modeled for other plans. The presenter said the modeled cost equates to roughly $150,000 annually for the Edgewater plan.
Board members discussed three general ways to cover the added cost: 1) increase member payroll contributions (the presenter estimated roughly a 5.5% increase in member contribution as one option); 2) reallocate a portion of the state '185' monies currently flowing to the share plan to offset some or all of the cost; or 3) request a city contribution — the board noted the city option was unlikely but kept it as a theoretical possibility.
A trustee moved to have staff and the actuary prepare a formal cost study detailing multiple funding scenarios and the motion was seconded and approved. The board requested the study show the implications of member-funded versus state-share reallocation and be ready for review at a future quarterly meeting. The vote to authorize the cost study was recorded by voice (ayes) and the chair announced the motion passed.
Next steps: the actuary will develop scenario tables and, if requested, a simple chart showing the out-of-pocket impact on members at different salary levels so officers can assess how much a periodic payroll-deduction increase would cost them.
