Sec. 5-162h. Cost of living adjustment.
Sec. 5-162h. Cost of living adjustment. (a) Notwithstanding the provisions of
sections 5-162b and 5-162d, on and after October 1, 1982, the cost-of-living allowance
increase for members or their beneficiaries who are receiving benefits under the provisions of tier I shall be up to six per cent if and only if (1) the member was not covered
by Social Security for at least half of the period of his state service and (2) the person
receiving benefits, either the member, his spouse, or contingent annuitant, has attained
age sixty-two provided any member who retired on or after October 1, 1982, and who
exercised the option under an applicable collective bargaining agreement to transfer out
of part A, without Social Security coverage, and to be covered retroactively under part
B, without Social Security coverage, shall be eligible for the cost-of-living adjustment
provided in section 5-162d. If on any applicable anniversary date, the Retirement Commission determines that the National Consumer Price Index for urban wage earners and
clerical workers for the previous twelve-month period has increased less than such six
per cent, the cost-of-living allowance increase shall be equal to the percentage change
in such index, provided such cost-of-living allowance increase shall not be less than
three per cent.
(b) (1) If an actuarial surplus exists for the system, the Retirement Commission
may elect to increase benefits of some or all retired employees, provided the granting
of such increase is consistent with the commission's fiduciary obligation to the members
of the system as specified in section 5-155a. The procedures in subdivisions (2) and (3)
of this subsection shall be used to determine whether an actuarial surplus exists. Any
such increase shall be in addition to any other cost-of-living increases automatically
provided to retired employees. The lump sum actuarial value of any such increase shall
in no event be greater than the difference between the actual unfunded past service
liability as determined pursuant to subdivision (3) of this subsection on the appropriate
June thirtieth and the expected unfunded past service liability as determined by the table
developed pursuant to subdivision (2) of this subsection for that same June thirtieth.
(2) As part of the December 31, 1983, valuation of the system, the system's actuary
shall develop a table of the expected unfunded past service liability for the plan as of
each June thirtieth, beginning with June 30, 1984, and ending with June 30, 2026. The
table shall be based on the unfunded past service liability generated by the valuation
and shall reflect the fact that less than one hundred per cent of the normal cost and full
forty-year amortization will be paid into the system prior to July 1, 1986. Such table
shall not be adjusted in future years, except to the extent necessary to reflect changes
in actuarial assumptions or actuarial cost methods approved by the Retirement Commission. Such table shall be used to determine whether an actuarial surplus exists in the
system.
(3) Within six months after each June thirtieth commencing with June 30, 1984,
the Retirement Commission shall determine whether the retirement fund had an actuarial
surplus for the completed year. Such surplus shall be deemed to exist if, and only if, the
following three criteria are all met:
(A) The investment return on the fund has exceeded the interest rate assumption
employed for regular valuation purposes by the fund. The investment return for the fund
shall be calculated by the following formula:
2 I
A + B − I
Where
A is the market value of the fund, including any due but unpaid contribution, as of
the first day of the fiscal year;
B is the market value of the fund, including any due but unpaid contribution, as of
the last day of the fiscal year; and
I is the market value return of the fund, which shall be equal to B reduced by A, but
increased by the total amount of benefits and expenses paid from the fund during the
year, and decreased by the total amount of employer and employee contributions for
that year, whether or not paid;
(B) The market value of the system's assets as of the appropriate June thirtieth was
greater than fifty per cent of the sum of (i) the liability for retired members and their
beneficiaries; (ii) the liability for former members entitled to a deferred vested benefit;
and (iii) the then current value of employee contributions, plus interest, for active members. In determining such liabilities, the fund's actuary shall recognize future cost-of-living adjustments provided under tier I and tier II and shall employ the actuarial assumptions utilized for regular valuation purposes. The actuary may utilize reasonable estimates to make such calculations; and
(C) The actual unfunded past service liability of the system as of the appropriate
June thirtieth was less than the expected unfunded past service liability as indicated by
the table developed pursuant to subdivision (2) of this subsection for the June thirtieth
five years later. In determining the actual unfunded past service liability, the actuary
shall employ the actuarial assumptions and procedures utilized for the last regular valuation. The actuary may utilize reasonable estimates to make such calculations.
(P.A. 83-533, S. 9, 54; P.A. 85-510, S. 6, 35.)
History: P.A. 85-510 amended Subsec. (a) to provide that the cost-of-living allowance under tier I shall be "up to" 6%,
instead of 6%, and to provide that any member who retired on or after October 1, 1982, and who exercised the option under
a collective bargaining agreement to transfer out of part A, without Social Security coverage, and to be covered retroactively
under part B, without such coverage, shall be eligible for the cost-of-living adjustment provided in Sec. 5-162d.
Cited. 34 CA 510; judgment reversed, see 234 C. 424.