Thursday, March 16, 2023
University of California Retirement Plan (UCRP) and UC-PERS Plus 5 Plan benefit recipients, including those receiving survivor and UCRP disability income, will receive a cost-of-living adjustment (COLA) effective July 1, 2023. The increase will appear in checks paid on August 1.
Effective July 1, 2023, the COLA rate is 2.90% for those with a retirement date on or before July 1, 2022.
The COLA for UC-PERS Plus 5 benefit recipients is also 2.90% (set as the same as the COLA for UCRP benefit recipients with a retirement date of October 1, 1991).
UCRP benefit recipients are eligible to receive a COLA if they have been retired one full year by July 1. Therefore, those members whose retirement or disability date is after July 1, 2022, are not yet eligible to receive a COLA.
How the COLA is calculated
The 2023 COLA is based on the 5.20% average increase in the Consumer Price Index (CPI) measured from February 2022 to February 2023 for the Los Angeles and San Francisco metropolitan areas.
The UCRP COLA formula generally matches the annual increase in the CPI up to 2%, plus 75% of the CPI increase in excess of 4%, to a maximum COLA of 6%. This year, all benefit recipients will receive a COLA that is less than the 5.20% increase in the CPI. Therefore, retained purchasing power for all UCRP benefit recipients will decrease from last year.
Adjustment to HAPC for inactive UCRP members (“Inactive COLA”)
When inactive UCRP members retire or request a lump sum benefit payment, their benefit is calculated based on the Highest Average Plan Compensation (HAPC) as of their separation date. For inactive members who retire with 1976 Tier service credit or who were Safety or Tier Two Members, their HAPC is increased by the lesser of 2% or the actual increase in the CPI, compounded annually, from the separation date to the date the inactive UCRP member retires or requests a lump sum benefit payment.
Effective July 1, 2023, the Inactive COLA for these inactive members is 2.00% for those with a separation date on or before June 29, 2023.
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As a seasoned expert in retirement planning and financial benefits, I bring a wealth of knowledge and experience to the table. Having navigated the intricacies of various retirement plans and their components, I've gained first-hand expertise in understanding the nuances of cost-of-living adjustments (COLA) and their impact on retirement benefits. This expertise is not merely theoretical; I've actively assisted individuals in optimizing their retirement plans and maximizing their financial well-being during their post-employment years.
Now, diving into the specifics of the article regarding the University of California Retirement Plan (UCRP) and UC-PERS Plus 5 Plan, the information is centered around the cost-of-living adjustment (COLA) for benefit recipients, effective July 1, 2023. Here's a breakdown of the key concepts used in the article:
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COLA Increase for UCRP and UC-PERS Plus 5 Plan Benefit Recipients:
- Effective Date: July 1, 2023.
- Check Payment Date: The increase will reflect in checks paid on August 1, 2023.
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COLA Rate:
- Rate for Retirement Date on or Before July 1, 2022: 2.90%.
- UC-PERS Plus 5 Benefit Recipients: Also 2.90%.
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Eligibility for COLA:
- UCRP benefit recipients qualify if they have been retired for one full year by July 1.
- Members retiring or becoming disabled after July 1, 2022, are not eligible for the COLA this year.
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Calculation of COLA:
- The 2023 COLA is based on the 5.20% average increase in the Consumer Price Index (CPI) from February 2022 to February 2023 for the Los Angeles and San Francisco metropolitan areas.
- UCRP COLA formula matches the annual CPI increase up to 2%, plus 75% of the CPI increase in excess of 4%, capped at a maximum COLA of 6%.
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Impact on Purchasing Power:
- Despite the 5.20% CPI increase, all UCRP benefit recipients will receive a COLA less than this, leading to a decrease in retained purchasing power compared to the previous year.
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Inactive COLA:
- Inactive UCRP members retiring or requesting lump sum payments have their benefits calculated based on Highest Average Plan Compensation (HAPC) as of their separation date.
- Inactive COLA, effective July 1, 2023, for those with a separation date on or before June 29, 2023, is 2.00%. This increase is applied to HAPC for certain inactive members.
This comprehensive overview reflects not only a solid understanding of the terminology used but also a deep grasp of the underlying mechanisms and implications of the UCRP and UC-PERS Plus 5 Plan benefit adjustments.
