> Cost-of-Living Adjustment (COLA)

Cost-of-Living Adjustment (COLA)

COLA Effective July 1, 2010: 0%

The Virginia Retirement System (VRS) Board of Trustees announced a 0 percent cost-of-living adjustment (COLA) for retirees, effective July 1, 2010, despite the fact that economic conditions and a lowering of the inflation rate could have resulted in a negative cost-of-living adjustment.

In 2009, for the first time in 30 years, an inflation rate of -0.36 percent from 2008 to 2009 caused a decline in the Consumer Price Index-Urban (CPI-U). Although this could have led to a decrease in monthly retirement benefit payments, the VRS Board of Trustees believes, and the General Assembly concurs, that VRS will not decrease monthly retirement benefits, even when the rate of inflation is 0 percent or less.

The COLA allows retirement payments to keep pace with inflation. The amount is based on the CPI-U, which measures the rate of inflation.

In years when COLAs are applied to the retirement benefit, they go into effect the second calendar year after you retire and are effective July 1 each year hereafter. For example, if you retire on September 1, 2010, you are eligible to receive your first COLA effective July 1, 2012.

What is the Consumer Price Index?

The U.S. Bureau of Labor Statistics defines the Consumer Price Index (CPI) as a measure of the average change over time in the prices paid by urban consumers for goods and services such as food, housing, apparel, transportation, medical care, recreation, education, communication and other goods and services.