COLA Cuts in State/Local Pensions

Source: Alicia H. Munnell, Jean-Pierre Aubry and Mark Cafarelli, Center for Retirement Research at Boston College, SLP#38, May 2014

The brief’s key findings are:
– Since the financial crisis, 17 states have reduced, suspended, or eliminated cost-of-living-adjustments (COLAs) for public employee pensions.
– This response was surprising as current employees and retirees tend to be legally shielded from benefit cuts.
– But the COLA cuts have largely been upheld in the courts under the rationale that – unlike core benefits – they are not part of a contractual right.
– In short, defined benefit promises in the public sector are not as secure as many thought.