PERAC Executive Director & Chairman Bill Keefe called the meeting (remotely via Zoom) to order at 11:11 AM. Mr. Keefe explained that, because the meeting was remote, all motions made during the meeting would be voted on by roll call, and the meeting would be recorded.
Special COLA Commission members in attendance at the Zoom meeting included State Senator Michael Brady, MTRS Executive Director Emerita Erika Glaster, PERAC Executive Director Bill Keefe, State Retirement Board Executive Director Kathryn Kougias, Executive Office of Administration and Finance Assistant Budget Director Amelia Marceau, Representative Dan Ryan, and President of Mass. Retirees Frank Valeri.
PERAC Staff, including First Deputy Executive Director Caroline Carcia, Assistant Deputy Director Patrick Charles, Actuary John Boorack, Actuarial Assistant Nate Geitz, and Investment Analyst Anna Huang, were present at the Zoom meeting to provide technical expertise and support to the Commission members.
Other attendees at the Zoom meeting: AI DeGirolamo (Sen. Brady’s Ofc.), Brant Duncan (American Federation of Teachers), Donna LoConte (Sen. Brady’s Ofc.), Janey Frank, Jim Machado (Fall River Retirement Board), Jay McGowan, Mike Canavan, Nancy McGovern (Mass Retirees), Patrick Brock (Hampshire County Retirement Board), Sam Gamer (A&F), Shannon Erickson (PRIM),Tom Bonarrigo and William Rehrey (Mass Retirees).
Minutes Approval
Commission member Kathryn Kougias motioned to approve the minutes from the March 10, 2025 meeting. State Senator Frank Valeri seconded the motion, and a vote was taken:
Erika Glaster YES, Bill Keefe YES, Kathryn Kougias YES, Amelia Marceau YES, Dan Ryan YES, Frank Valeri YES; and the minutes were adopted.
Reporting Deadline Update
Mrs. Marceau provided an update on the reporting deadline, noting that the governor recently filed a supplemental budget that includes a provision—Section 63—to extend the COLA commission’s reporting deadline from February to October 15th. This extension allows more time to complete the work, though they are open to finishing earlier if needed.
Mr. Valeri questioned whether the bill number was 4003, and Mrs. Marceau responded that she would double-check to confirm later.
Actuarial Analysis Presentation
Commission member Doug Howgate of Mass. Taxpayers Foundation joined the meeting during this presentation.
Mr. Boorack provided updated data, as requested at the last meeting, on the percentage of state and teacher retirees receiving benefits above specific thresholds. Among state retirees, 86.3% receive >$18k, compared to 93.8% receiving >$13k. For teacher retirees, 94.8% receive >$18k, compared to 97.6% receiving >$13k.
Mr. Boorack provided an update to the current funding schedule, initially developed in 2022/2023, to reflect recent investment gains. The analysis, based on the 2022 valuation, focused solely on investment returns, which exceeded 10% on a market value basis.
For valuation purposes, a smoothed asset value method—known as the actuarial value of assets—was employed, which differs slightly from market value in that it spreads investment gains or losses over five years. No valuation was conducted during the COVID-19 period (2020). Based on the three years prior to the January 1, 2022, actuarial valuation, the state and teacher plans had ≈$8.15B in asset gains.
Mr. Boorack discussed the impact of increasing the COLA base to $14k for state and teacher retirees, noting that Boston teachers already have a base of $15k. As of January 1, 2022, the estimated cost of this increase would result in a $10.7M increase in normal cost and a $538M increase in actuarial and unfunded liabilities. If the COLA base were increased to $15k, the normal cost would rise by about $21.4M, and the liability would increase by just under $1.1B, compared to the baseline valuation.
- Impact on Funding Schedules
Based on these two estimated valuation results, Mr. Boorack explained and assessed the impact on the adopted schedule. The current funding schedule increases total payments by 9.63% annually through FY 2028. Beginning in FY 2029, the remaining unfunded liability is amortized on a 4% increasing basis through FY 2036. Under this schedule, the FY 2029 appropriation is estimated to be ≈ $6.23B, and the FY 2030 appropriation is projected to be ≈$6.48B.
- Funding Schedule based on results with a $14,000 COLA base
If the COLA base were increased to $14k, and using the same basis (total payments increase 9.63% to FY28 with the remaining UAL amortized on a 4.0% increasing basis through FY36), both schedules would have the same payments through FY28. Mr. Boorack explained that, based on the estimated increase in liability, the appropriations for FY 2029 and FY 2030 would be ≈$6.38B and ≈$6.64B, respectively. This scenario represents an increase of just under $150M for FY 2029 and ≈$153M for FY 2030.
- Funding Schedule based on results with a $15k COLA base
If the COLA base were increased to $15k, the 9.63% increase would extend until FY 2029, after which the remaining unfunded liability would be amortized at a 4% annual increase through FY 2036. In all three scenarios, the payoff date remains FY 2036. Mr. Boorack explained that under this funding schedule, the appropriation for FY 2029 would be ≈ $6.5B, and for FY 2030, it would be just under $6.8B. This scenario represents an increase of ≈$266M for FY 2029 and ≈$539M for FY 2030 compared to the current schedule. The funding schedule developed in 2022/2023 was based on valuation results as of January 1, 2022, and was finalized in November and December of that year. ANF adopted it in early 2023.
Mr. Boorack noted that the timing of the funding schedule is based on the January 1, 2022, valuation results. Any changes (e.g., increasing the COLA base) would not be reflected until the 2023 valuation at the earliest. Since the 2022 valuation does not include these costs, any updates would only appear in the next funding schedule to be developed in 2026.
After the presentation, Commission members discussed:
Mr Valeri asked if any changes or enhancements to the COLA base would not be reflected in the upcoming funding schedule, but rather in the following schedule.
Mr. Boorack confirmed that if they were trying to change the COLA base while working on the funding schedule, the change would not be reflected in the current schedule. He further explained, referencing a previous analysis, that if there were double-digit returns (at least 10%) in two consecutive years, this information could be presented to the legislature after it is determined. If a COLA base change is passed by January, it could be reflected in that year's valuation results. However, if the funding schedule is developed in November or December, any COLA Base change would not take effect until the following funding cycle. The timing of when the legislature is asked to approve a COLA change determines when it will be reflected in the funding schedule.
Mr Valeri asked if it would be possible to amortize the COLA base enhancement separately, extending the liabilities out to 2040, and if so, how that would affect the annual appropriation.
Mr. Boorack responded that the cost would decrease, but the exact amount was uncertain.
Mr. Howgate discussed projections assuming a 9.63% increase in pension contributions for the next few years. He acknowledged that fiscal pressures could arise, potentially leading policymakers to seek ways to reduce annual contributions while still maintaining the 2036 funding schedule. Mr. Howgate noted that growing the pension funding schedule by hundreds of millions of dollars each year is a significant burden, and there will likely be discussions on how to reduce this increase without jeopardizing the 2036 schedule.
Mr. Valeri commented that they were not proposing to shift the entire funding schedule to 2040, but rather to treat the enhanced COLA benefits liability separately. By 2036, if everything remains on track, there would be a $6B reduction in the annual appropriation. At that point, the legislature and commission could consider paying off the remaining COLA liability, potentially reducing the $6.5B by extending the liability until 2040. Mr. Valeri suggested that it might be worth exploring the additional costs over the next few years to ease the financial burden on the Commonwealth.
Mr. Howgate concurred with the idea of keeping the COLA and its full funding on a separate track.
Mrs. Glaster expressed concern about the difficulty of securing a base increase for retirees, given current market conditions and the upcoming funding schedule. She stated that she hoped it would still be possible to fund a supplemental COLA through a separate arrangement. Mrs. Glaster also suggested that there should be a discussion about capturing the investment gains that had already occurred.
Mr. Keefe suggested that the commission should establish a structured framework for addressing COLA base and enhanced COLA issues moving forward. Hope was expressed that, should similar conditions arise in the future, actions could be taken based on this framework, potentially reducing the need for a commission like this one. The goal is to establish a solid foundation that will guide future decisions, while acknowledging the desire to take action now.
Mrs. Glaster suggested that, for the enhanced COLA, the criteria could be adjusted to require only one year of investment gains, rather than two consecutive years of investment gains.
Mr. Howgate emphasized the importance of being mindful of the state's larger fiscal context while ensuring retirees receive appropriate pensions. However, due to the increased uncertainty in the current environment, he stated that their position is to avoid committing to anything more aggressive on pension funding outside the regular schedule in the near term. He highlighted the significant role the following triennial schedule will play in next year’s budget process and stressed that prioritizing a sound approach to that schedule is crucial. Mr. Howgate left the meeting shortly after this comment.
Mr. Valeri requested clarification on the excess gains over the last three years that were taken into account when formulating the current schedule.
Mr. Boorack stated that the excess gains are currently $8.147MM.
Mrs. Glaster inquired about the timing for the funding schedule development.
Mr. Boorack explained the timing of the funding schedule development. The valuation used as the basis of the current funding schedule was conducted as of January 1, 2022, and was completed in October/November. Work on the funding schedule began in November/December of 2022. If a COLA change were to be passed while working on the funding schedule, it would likely not be approved until December 2022 or January 2023. Since the valuation was completed in January 2022, it would not be possible to include the COLA change in the current evaluation retroactively. The earliest the change could be reflected would be in the valuation as of January 1, 2023. Therefore, it is too late to incorporate the COLA change into the current funding schedule.
Mrs. Glaster inquired whether, after completing the 2022 valuation, it would be possible to adjust the liability based on an enhanced COLA if specific criteria for gains were met. She suggested that, rather than waiting for the next valuation, the new liability could be calculated immediately based on the gains and the enhanced COLA before moving forward with the funding schedule.
Mr. Boorack explained that while they could estimate the impact of an enhanced COLA, it wouldn't reflect the official valuation results with the provisions in effect at that time. He expressed discomfort with signing a report that inaccurately stated a higher COLA base (such as $14k or $15k) when the actual base was only $13k.
Mr. Keefe referred to previous discussions about whether a recommendation for a COLA increase should be automatic based on certain conditions or if it should be referred to the legislature for action once those conditions are met.
Mr. Valeri asked Mr. Boorack if the latest possible date to incorporate the liability into the upcoming schedule would be October or November.
Mr. Boorack explained that the valuation process should be completed earlier in the year. If a COLA increase is passed by that time, it can be incorporated into the valuation. Waiting until the end of the year would be too late, as the valuations would already be finalized by then.
Mr. Brady requested the timeline for the legislators to pass this COLA base.
Mr. Boorack explained that, in order to reflect the COLA increase in the January 1, 2025 valuation, the decision should ideally be made by June or July. Waiting until August would delay the signing of the valuation report. The longer the decision is delayed, the less likely it will be reflected in the year-end valuation.
Sen. Brady inquired whether the current potential market volatility and other uncertainties would impact the funding schedule moving forward.
Mr. Boorack explained that the asset value for the funding schedule is already determined based on past returns. Current market volatility will have a minimal impact on the funding schedule being developed later this year, as its effects will be reflected in valuations over the next few years.
Mr. Valeri asked Mr. Boorack whether capturing the excess $8B in gains should be done as soon as possible, given the uncertainty of what this year may bring. Mr. Boorack confirmed it’s correct.
Mr. Valeri expressed the need to incorporate the $8B in excess gains into the upcoming valuation to offset liabilities and pay them upfront. He emphasized that it has been 13 years since the COLA base was last increased, and with inflation at 36%, an increase is long overdue. He highlighted that retirees have been facing significant challenges, and the sooner the gains are applied without negatively impacting the funding schedule, the better.
Mrs. Glaster inquired whether a small subcommittee should be established to begin drafting the report.
Mr. Keefe suggested that the commission should consider crafting specific proposals regarding triggers for COLA base increases, criteria for enhanced COLA, and other relevant topics. These proposals could then be debated, merged, or ruled out, with the goal of coalescing around concrete ideas to present to the commission.
Mrs. Glaster inquired whether it would be possible for some members to collaborate on proposals, while acknowledging potential concerns regarding open meeting laws and quorum requirements.
Mr. Keefe clarified that proposals can be sent to the group, but responses cannot be made to the entire group due to open meeting law constraints.
Mr. Keefe moved on to the next agenda item, regarding the draft guiding principles, noting that the edits from the last meeting had been incorporated. He mentioned not receiving any further edits and expressed that a vote would be postponed until everyone is present. Mr. Keefe invited any additional thoughts or edits before the next meeting, where a vote could be held.
Logistical Issues
Mr. Keefe asked whether May 12th at 11:00 AM works for everyone for the next meeting. Further discussion suggested that the ideal schedule for everyone for the next meeting would be May 12th at 10:30.
Commission member Mr. Brady motioned to adjourn the meeting. Mrs. Glaster seconded the motion, and a roll call vote was taken:
Michael Brady YES, Erika Glaster YES, Bill Keefe YES, Kathryn Kougias YES, Amelia Marceau YES, Dan Ryan YES, Frank Valeri YES. The meeting was adjourned at 11:58 AM.
Special Cost of Living Adjustment (COLA) Commission Meeting Documents
ActuarialUpdate_COLA 041425 (002).pdf
COLA Commission 4_14_2025 agenda.pdf
COLA Commission DRAFT principles 4-14.pdf
COLA March.10.2025.minutes.pdf
Approved,
Bill Keefe, Chairman
| Date published: | July 21, 2025 |
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