P 3 Actuaries you can understand 1 Annual COLA for April 2006 February 15, 2006 P.

1P3 Actuaries you can

understand

Annual COLA for April 2006

February 15, 2006

P


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Outline

• CERL Guidance

• Consumer Price Index

• COLA Calculation

• COLA Bank

• Inflation Comparisons


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COLA• 31870. The board shall before April 1 of each year determine whether there

has been an increase or decrease in the cost of living as provided in this section. Notwithstanding Section 31481 or any other provision of this chapter (commencing with Section 31450), every retirement allowance, optional death allowance, or annual death allowance payable to or on account of any member, of this system or a superseded system, who retires or dies or who has retired or died shall, as of April 1st of each year, be increased or decreased by a percentage of the total allowance then being received found by the board to approximate to the nearest one-half of 1 percent the percentage of annual increase or decrease in the cost of living as of January 1st of each year as shown by the then current Bureau of Labor Statistics Consumer Price Index for All Urban Consumers for the area in which the county seat is situated, but such change shall not exceed 2 percent per year;…


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COLA Bank

• 31870 (cont). …however, the amount of any cost-of-living increase or decrease in any year which is not met by the maximum annual change of 2 percent in allowances shall be accumulated to be met by increases or decreases in allowances in future years; except that no decrease shall reduce the allowance below the amount being received by the member or his beneficiary on the effective date of the allowance or the application of this article, whichever is later.


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Consumer Price Index• US City Average

– Northeast Urban– Midwest Urban– South Urban– West Urban

• Anchorage, AK• Denver-Boulder-Greeley, CO• Honolulu, HI• Los Angeles-Riverside-Orange County, CA• Phoenix-Mesa, AZ• Portland-Salem, OR-WA• San Diego, CA• San Francisco-Oakland-San Jose, CA• Seattle-Tacoma-Bremerton, WA


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Consumer Price IndexAll Urban Consumers

San Francisco-Oakland-San Jose

Year J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec Annual1995 150.3 150.5 151.1 151.5 151.3 151.7 151.5 151.5 152.3 152.6 152.4 152.1 151.61996 152.9 153.2 152.9 153.9 155.1 155.2 155.9 155.6 156.3 156.9 156.9 156.0 155.11997 157.0 157.9 159.2 159.6 159.8 160.0 160.6 161.2 161.6 162.5 162.6 162.6 160.41998 163.2 164.6 165.5 166.6 167.2 167.4 165.51999 169.4 172.2 171.8 173.5 175.2 174.5 172.52000 176.5 178.7 179.1 181.7 183.4 184.1 180.22001 187.9 189.1 190.9 191.0 191.7 190.6 189.92002 191.3 193.0 193.2 193.5 194.3 193.2 193.02003 197.7 197.3 196.3 196.3 196.3 195.3 196.42004 198.1 198.3 199.0 198.7 200.3 199.5 198.82005 201.2 202.5 201.2 203.0 205.9 203.4 202.7


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COLA Calculation

• Step 1– Annual Average 2005 / Annual Average

2004– 202.7 / 198.8= 1.96%

• Step 2– Round to nearest ½%– 1.96% rounds to 2.00%


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COLA BANKRetirement during twelve-month period

ended April 1

AccumulatedCOLA BankApril 1, 2005

Decrease in COLA Bank


1973 or earlier 69.5% (1.0%) 68.5%

1974 69.0% (1.0%) 68.0%

1975 66.0% (1.0%) 65.0%

1976 59.0% (1.0%) 58.0%

1977 52.0% (1.0%) 51.0%

1978 49.5% (1.0%) 48.5%

1979 45.0% (1.0%) 44.0%

1980 38.5% (1.0%) 37.5%

1981 33.0% (1.0%) 32.0%


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COLA BANKRetirement during

twelve-month periodended April 1




1982 21.0% (1.0%) 20.0%

1983 11.0% (1.0%) 10.0%

1984 8.5% (1.0%) 7.5%

1985 8.5% (1.0%) 7.5%

1986 6.0% (1.0%) 5.0%

1987 5.0% (1.0%) 4.0%

1988 5.0% (1.0%) 4.0%

1989 4.5% (1.0%) 3.5%

1990 3.0% (1.0%) 2.0%

1991 1.0% (1.0%) 0.0%


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COLA BANKRetirement during

twelve-month periodended April 1




1992 1.0% (1.0%) 0.0%

1993 1.0% (1.0%) 0.0%

1994 1.0% (1.0%) 0.0%

1995 1.0% (1.0%) 0.0%

1996 1.0% (1.0%) 0.0%

1997 1.0% (1.0%) 0.0%

1998 1.0% (1.0%) 0.0%

1999 0.5% (1.0%) 0.0%

2000 0.5% (1.0%) 0.0%

2001 and later 0.0% (1.0%) 0.0%


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COLA

Retirement during twelve-month period

ended April 1This Year’s

COLA

Use of

COLA Bank

COLA

Using Bank

1998 or earlier 2.0% 1.0% 3.0%

1999 2.0% 0.5% 2.5%

2000 2.0% 0.5% 2.5%

2001 and later 2.0% 0.0% 2.0%


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CPI Comparison 2005

Region Inflation

SF 1.96%

LA 4.45%

West 3.06%

US 3.39%


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Comparison of InflationSan Francisco - Oakland - San Jose vs

Los Angeles - Riverside - Orange County

0%

4%

8%

12%

16%

20%

1976 1981 1986 1991 1996 2001

Year

An

nu

al In

flat

ion

LASF


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West Urban

0%

4%

8%

12%

16%

1976 1981 1986 1991 1996 2001

Year

An

nu

al I

nfl

atio

n

WestSF


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US

0%

4%

8%

12%

16%

1976 1981 1986 1991 1996 2001

Year

An

nu

al In

flat

ion

USSF


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National Inflation Components

Category2005 Inflation

Rate2004 Relative Importance Index

All Items 3.4% 100.000

Housing 3.3% 41.993

Transportation 6.6% 17.414

Food and Beverages 2.5% 15.291

Medical Care 4.2% 6.132

Apparel (0.7)% 3.841

Recreation 0.7% 5.733

Education and Communication 1.9% 5.846

Other Goods and Services 2.9% 3.750


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P 3 Actuaries you can understand 1 Annual COLA for April 2006 February 15, 2006 P.

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