PERAC Memo #18 - 1998: COLA Schedules and FY99 Appropriation

COLA Schedules and FY99 Appropriation

Summary

PERAC Memo #18/1998 addresses how retirement boards should handle FY99 appropriations for systems that adopt the COLA legislation before June 30, 1998. PERAC's preference is that the FY99 appropriation immediately reflect the COLA's funding impact via a revised schedule, but boards may instead delay incorporation of the COLA cost until the FY00 appropriation, provided the underlying schedule is based on a valuation dated January 1, 1996 or later. Boards should be aware that choosing to delay will result in higher required appropriations in future years, including FY00, compared to adopting the revised schedule immediately.

Full Text

PERAC MEMO #18/1998 M E M O R A N D U M TO: All Retirement Bo ards FROM: Robert F. Stalnaker RE: COLA Schedules and FY99 Appropriation DATE: April 9, 1998 We have received a number of inquiries regarding the adoption of the COLA legislation and the determination of the FY99 appropriation. Once a system accepts the COLA legislation, a revised funding schedule (including the impact of the COLA) should normally be adopted effective with the FY99 appropriation. This memo addresses an alternative approach we will accept if there is a timing issue regarding the FY99 appropriation. We previously provided your FY99 appropriation (not including COLA) in our letter of December 15, 1997. A number of systems have subsequently requested revised appropriation letters for FY99 based on a schedule that recognizes their adoption of the COLA. We prefer that the FY99 appropriation include the impact of the COLA if a system accepts the COLA legislation prior to June 30, 1998. However, we will allow schedules that first reflect the impact of the COLA legislation with the FY00 appropriation, provided that the schedule is based on a valuation performed on or after January 1, 1996. Please note that delaying the schedule would result in appropriations in future years (including FY00), above that which would take place had the schedule commenced in FY99. Please call our actuary, Jim Lamenzo, if you have any questions.