The cost of living adjustment (COLA) will be 2% beginning February 1, 2018.
The COLA calculation is set forth in SB 2190, which was enacted in the 85th Texas Legislature and amended the HMEPS Pension Statute. Under the amended Statute, the COLA is equal to HMEPS’ five-year investment return, based on a rolling five-year basis and net of investment expenses, minus the assumed rate of return less two percentage points, and multiplied by 50%, but not less than 0% nor more than 2%. The five-year investment return on HMEPS’ investments as of the end of fiscal year 2017 is 9.04%, and the 7% assumed rate of return less two percentage points is 5%, and half of the difference between the five-year investment return minus 5% is 2.02%, which is greater than the 2% maximum. Therefore, the COLA is 2%.
The COLA, not compounded, is applied to pension benefits for all group A retirees and group B retirees, and for all group D retirees who terminate employment on or after July 1, 2017 with at least five years of credited service, and survivor benefits for eligible survivors of a former member of group A or group B, or of a former member of group D who terminated employment on or after July 1, 2017 with at least five years of credited service, if such eligible person is receiving a pension or survivor benefit as of January 1 of the year in which the increase is made. For DROP, the COLA, not compounded, is applied only to the DROP account of an active DROP participant who is at least 62 years of age as of January 1 of the year in which the increase is made.