PERAC Executive Director & Chairman Bill Keefe called the meeting to order (remotely via Zoom) at 11:07 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, Mass. Taxpayers Foundation President Doug Howgate, PERAC Executive Director Bill Keefe, State Retirement Board Executive Director Kathryn Kougias, Executive Office of Administration and Finance Assistant Budget Director Amelia Marceau, PRIM Executive and Chief Investment Officer Michael Trotsky, 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, Communications Director Natacha Dunker, 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: Tobias T. Cowans (Sen. Brady’s Ofc.), Donna LoConte (Sen. Brady’s Ofc.), Francesco Daniele (PRIM), Jay Leu (PRIM), Jay McGowan, Karen Gross, Mike Canavan, Patrick Brock (Hamshire Regional Retirement), Seth Gitell (PRIM), Shawn Duhamel (Mass. Retirees).
Minutes Approval
Commission member Doug Howgate motioned to approve the minutes from the June 16, 2025 meeting. Frank Valeri seconded the motion, and a vote was taken:
Erika Glaster YES, Doug Howgate YES, Bill Keefe YES, Kathryn Kougias YES, Amelia Marceau YES, Dan Ryan YES, Michael Trotsky YES, Frank Valeri YES. The minutes were adopted.
Update on Legislative Meetings
The Chair invited Frank Valeri and Doug Howgate to give a brief update. At the previous meeting, the Commission had asked whether there had been discussions with the House and Senate Committees on Ways and Means. Both confirmed that those meetings had taken place and were given the chance to share a short report with the Commission.
Mr. Howgate reported that he and Mr. Valeri met with both House and Senate Ways and Means chairs about two to three weeks ago, on the same day. He described the meetings as very positive and explained that the purpose was mainly to introduce the Commission’s work and establish communication. They emphasized that the Commission is one of many included in the budget and wanted to ensure legislators understood that their meetings have been constructive.
The discussions were kept at a high level, focusing on themes such as creating a sustainable structure that could gradually increase COLA bases without creating negative investment incentives, reviewing how other states approach similar issues, and considering current budget realities. Mr. Howgate mentioned that Mr. Valeri highlighted the importance of acknowledging tight fiscal conditions while exploring more targeted approaches that could provide immediate help to the lowest-income retirees most in need.
They also reminded the legislators that the next triennial pension funding schedule begins in fiscal year 2027 and encouraged them to keep the Commission’s work in mind as planning begins this fall. The overall takeaway was that the legislators appreciated being updated, encouraged the Commission to stay in touch, and kept the conversation general. No specific requests were made, and the meetings were framed as courtesy discussions to build awareness and keep communication open.
Mr. Valeri added that the legislators appreciated the collaborative approach of the Commission’s leadership and responded particularly well to the idea of an enhanced, targeted COLA for long-term, lower-paid retirees. They viewed this as a creative solution that would be less costly and create less liability, and their reaction to that proposal was notably positive. Overall, the legislators encouraged the Commission to stay in touch, signaling openness but offering no specific commitments at this stage.
Senator Michael Brady joined the meeting by phone at 11:13 a.m., and the Chair welcomed and acknowledged his participation.
Mr. Valeri stated these meetings were very constructive and positive. Legislators acknowledged that this Commission is actively meeting and producing work. Mr. Valeri expressed appreciation to Mr. Howgate for his effort in coordinating both meetings on the same day despite a hectic schedule and emphasized that the discussions went well. He concluded by expressing hope that the legislators will seriously consider the Commission’s recommendations when they are filed.
Guiding Principles Approval
The Chair thanked Mr. Valeri and Mr. Howgate for their update and moved to the next agenda item: adopting the Commission’s guiding principles. He noted the principles had been included in several meeting packets and explained that a vote would be taken now that all members were present. He offered to read them into the record if necessary, but left it to the Commission to decide.
The Chair opened the floor for discussion or edits. He explained that the Guiding Principles outlined the policy context for the Commission’s work, including the idea that using a share of significant investment gains could have the least impact on the general fund and budget. The principles also stated that pensions do not keep pace with Social Security, that it has been a long time since the COLA base was increased, and that inflation reduces retirees’ buying power over time. It emphasized the importance of pensions, described the retirement system as a partnership among stakeholders, and concluded that increasing COLAs is a just action that must be done cautiously and responsibly.
Mr. Valeri made the first motion for voting, and Senator Brady seconded the motion. Mr. Howgate suggested a minor amendment to principle number 7 by adding the word “responsibly” to emphasize the importance of balancing the use of a share of significant investment gains. He noted that this change does not materially alter the principle but reinforces the idea of careful consideration, stressing that it should remain consistent with the Commission’s overall focus on fiscal solvency.
The Chair noted that if adding “responsibly” to principle number 7 was the only edit, the Commission could proceed by entertaining a motion to approve the principles as amended, unless there were any other suggested changes.
Mr. Valeri suspended his motion, and Senator Brady withdrew his second on the motion.
The Chair suggested that if there were any additional edits, they could be addressed together, and the motion could be restated to include all changes. Since no further edits were proposed, the Chair moved to take a new motion to approve the Guiding Principles, incorporating the amendment adding the word “responsibly” at the start of principle number 7, and asked if there was a motion to approve.
Mr. Valeri motioned to approve the amended principles, and Senator Brady seconded the motion, and a vote was taken:
Michael Brady YES, Erika Glaster YES, Doug Howgate YES, Bill Keefe YES, Kathryn Kougias YES, Amelia Marceau YES, Dan Ryan YES, Michael Trotsky YES, Frank Valeri YES. The Guiding Principles were adopted.
Enhanced COLA Estimates Update
Actuary John Boorack (PERAC) provided an updated cost analysis for the proposed enhanced COLA. The enhancement would apply to retirees with 20 or more years of service and an annual retirement allowance below 150% of the average annual allowance from the most recent actuarial valuation (January 1, 2024). The proposed additional annual COLA would be: $120 for retirees with 10–14 years of retirement, $240 for 15–19 years, $360 for 20–24 years, and $480 for 25 or more years.
The total estimated cost of this enhancement would be approximately $322 million for the state retirement system and $559 million for the teachers’ retirement system, for a combined total of about $881 million.
Mr. Boorack also noted an alternative scenario in which the $480 benefit for retirees with 25 or more years of retirement is reduced to $360. Under this adjustment, the cost would drop to approximately $290 million for the state system and $511 million for the teachers’ system, totaling around $801 million. This alternative calculation was prepared in response to a later request and was not included in the original handout.
Mr. Howgate asked if it was possible to break down the $881 million cost of the enhanced COLA by retirement cohort (10–15 years, 15–20 years, 20–25 years, and 25 or more years). He noted that understanding how much of the total cost is concentrated in each group would be helpful, particularly since retirees with longer service are likely to have lower incomes and benefits for a more extended period.
Mr. Boorack responded that he could provide that analysis.
Mr. Valeri noted that the current enhanced COLA proposal is an expanded version of the original plan, now including retirees with 10 or more years of service rather than starting at 15 years. He acknowledged that this expansion contributes significantly to the increased cost and expressed interest in seeing the cohort breakdown. He also pointed out that the added tiers for those with 25 or more years of retirement, which have higher benefit levels, further raise the total cost, making the updated estimate roughly double the original estimate for the narrower 15–20-year proposal.
Mr. Boorack explained that the February meeting proposal had focused on retirees with at least 20 years of service, providing a $100 COLA for those retired 15–20 years and $200 for those with 20 or more years, with an estimated cost of approximately $174 million. He noted that the increase to the current enhanced COLA, which expands eligibility to retirees with 10 or more years of service and adds $360 and $480 benefit tiers, accounts for the difference between the $174 million and the updated $881 million total cost.
The Chair asked for clarification, noting that the earlier estimate applied to benefits below the average, while the newer enhanced COLA proposal applies to benefits less than 150% of the average.
Mr. Boorack confirmed that in March, a similar analysis was conducted using a benefit threshold of less than 150% of the average, consistent with the current proposal. Focusing on retirees’ length of service, He explained that for those retired 15–20 years, an extra $100 per year, and for those retired 20 or more years, $200 per year, the estimated cost was roughly $350 million. Removing the benefit limit entirely for retirees of at least 15 years would cost about $375 million.
Mr. Boorack also reviewed targeted enhancements for lower-income retirees: providing the COLA to households below the poverty level ($21,150 for a two-person household) would cost $22.9 million, while using 150% of that threshold for a household of 2 ($31,725) would cost $81.3 million. These estimates reflect variations in benefit levels, COLA amounts, and length of retirement. Mr. Boorack then invited questions regarding these analyses.
Mr. Valeri asked for confirmation that removing the benefit limit entirely would increase the total cost by only about $25 million compared to the proposal using 150% of the average benefit threshold.
Mr. Boorack confirmed that the $25 million estimate was correct but said he would double-check the calculation for accuracy.
Mr. Valeri remarked that the cost was significantly higher than what he had anticipated from the limitless scenario.
The Chair observed that the higher cost primarily reflects the pension levels of retirees who have been retired for a long time, noting that relatively few retirees have benefits above 150% of the average.
Mr. Valeri agreed with the Chair’s comment and asked Mr. Boorack how many retirees it would cover, recalling a previous estimate of 60,000 to 68,000 individuals.
Mr. Boorack confirmed that the 150% threshold refers to the current analysis under discussion. He estimated that the cost would be roughly $9,900 for the state retirement system and about $38,000 for the teachers’ retirement system.
Mr. Valeri expressed concern about administering a benefit limit, noting that retirees near the average or 150% threshold could move in and out of eligibility over time, creating an administrative challenge. He suggested that eliminating the benefit limit would simplify administration, especially since the additional cost would be relatively small, and stated that this approach would be their preference.
Mr. Howgate noted that there are many possible ways to structure the enhanced COLA, with costs that could vary widely depending on the approach chosen. He emphasized that as policymakers develop triennial schedules, they face different economic realities each cycle. He highlighted the value of focusing on retirees most reliant on fixed incomes and providing targeted benefits accordingly. While noting challenges such as administrative complexity and “cliff effects” for eligibility, he suggested that a flexible, “a la carte” approach could allow the state to prioritize retirees in greatest need. Mr. Howgate also pointed out that the feasibility of options may depend on broader economic conditions and that presenting a menu of targeted approaches is especially useful for the Commission’s work.
Mr. Valeri agreed with Mr. Howgate and praised Mr. Boorack for clearly presenting the various options. He noted that while there are many ways to structure the enhanced COLA, his primary concern is administrative practicality. He highlighted potential complaints from members who contributed consistently but might be excluded under certain limits and emphasized that removing the benefit limit could reduce administrative challenges and public perception issues. He observed that the cost difference between the 150% limit and no-limit scenarios is minimal and expressed a preference for helping retirees most in need while minimizing implementation difficulties. Overall, they suggested that the no-benefit-limit option aligns best with their priorities.
Mr. Howgate asked for clarification on the cost figures, confirming that the dollar amounts represent the lump-sum contributions the state would need to fund the actuarial cost of the enhanced COLA fully. He noted that this also reflects the fiscal reality of managing pension obligations.
Mr. Boorack confirmed that this is correct.
Mr. Howgate observed that the larger COLA proposals costing several hundred million dollars are likely not feasible in the current year. Some of the smaller options may be more achievable.
The Chair noted that the costs would be spread out over time rather than paid as a one-time amount, but acknowledged that higher benefit levels would still result in larger payments.
Mr. Valeri noted that the annualized cost of the enhanced COLA would be considered over the next 10 years, but then questioned whether the payments would actually begin in 2030.
Mr. Boorack explained that the enhanced COLA costs would not be included in the current funding schedule but, if approved, would first appear in the 2030 schedule. Under current law, the costs would be amortized over a 10-year period, through 2040.
Mr. Valeri asked if the current funding schedule is through 2036.
Mr. Boorack confirmed that the current funding schedule extends through 2036 but noted uncertainty about the next schedule to be developed later this year, explaining that it may be extended, shortened, or remain the same.
Mr. Boorack noted that the outcome in 2030 is uncertain, implying that it cannot be predicted at this time.
Mr. Valeri noted that if the Commission recommended setting aside a portion of excess earnings, by 2030 there could be sufficient funds from those earnings to cover the enhanced COLA fully.
Mr. Boorack responded that, in theory, this approach could work.
Mr. Valeri suggested that the Commission could establish a COLA reserve fund or set aside a percentage of excess earnings to finance this type of benefit.
Mr. Boorack agreed.
Ms. Glaster suggested considering whether the eligibility threshold for the enhanced COLA should be raised from 20 years of creditable service to 25 or 30 years. She noted that with the repeal of the GPO/WEP rules, mid-career employees who split public and private service may now receive full Social Security benefits. Ms. Glaster emphasized that if the goal is to help the neediest retirees, a higher threshold might better target career public employees most in need. She acknowledged that cost implications are not yet known and invited discussion, while indicating that keeping the threshold at 20 years is also acceptable.
Mr. Howgate described the enhanced COLA as a “waterfall” approach, emphasizing the importance of targeting benefits to those most in need and least helped by recent policy changes. He stressed aligning the design with the Commission’s principles, balancing sustainability, and recognizing that fiscal impacts can vary widely depending on how the benefit is structured. Mr. Howgate emphasized the importance of prioritizing retirees with the longest tenure.
Mr. Valeri noted that teacher and state pension systems have different demographics. Focusing on the state system, he explained that 20 years of service is already a long period and that the average retirement age is 72. Raising the eligibility threshold to 25 years could exclude a large number of retirees, which is their primary concern. He suggested reviewing the numbers before making any changes.
Ms. Glaster clarified that she was referring specifically to creditable service—the length of service to the Commonwealth—rather than other measures.
Mr. Valeri agreed, noting that the concern is even greater because many retirees have personally reached out to him about the issue.
Mr. Valeri explained that some employees, including part-time workers, may have long careers of 30–35 years but only accumulate 20–24 years of creditable service, and under a higher threshold, they would not qualify for the enhanced COLA. Mr. Valeri highlighted the consideration of including other local retirement systems if the enhanced COLA were to be expanded to cover them. He noted that setting the eligibility threshold at 25 years would exclude many retirees, particularly in the local retirement systems.
Mr. Howgate suggested analyzing the enhanced COLA options amortized over different schedules, such as 6 or 10 years, noting that this would provide helpful insight into what might be feasible while being mindful of the data requests already placed on Mr. Boorack.
Mr. Valeri asked Mr. Howgate if he was requesting an annualized cost, specifically how the $375 million would be distributed each year over the next 10 years.
Mr. Howgate stated that it is correct.
Mr. Valeri observed that when the enhanced COLA costs are considered on an annual basis relative to the total appropriation, the percentage increase is minimal.
Mr. Howgate suggested that breaking out the enhanced COLA costs with a set of assumptions would provide meaningful information, while acknowledging that it would require additional work.
Mr. Valeri noted that while the enhanced COLA numbers may appear large upfront, their impact relative to the total appropriation is very small. He referenced earlier analyses showing minimal increases to the COLA base and unfunded liability and suggested that presenting costs as a percentage of the total would be helpful. He also expressed interest in seeing the effect of raising the eligibility threshold to 25 years and noted that the 10-year group had been removed in prior analyses.
Mr. Boorack clarified the parameters for the enhanced COLA cost analyses, confirming the starting amounts for retirees with 15 years of service and asking whether to include higher amounts ($360) or stop the calculation at $240.
Mr. Valeri suggested eliminating retirees with 10–15 years and those with 25 or more years of service from the enhanced COLA calculation, while keeping the other two levels.
Mr. Boorack confirmed that, under the proposed adjustment, retirees with 15–20 years of service would receive a $120 increase, and those with at least 20 years would receive $240.
Mr. Valeri confirmed using 20 years of service as the threshold, while inviting other suggestions if anyone had different ideas.
Mr. Boorack outlined the next steps for the enhanced COLA analysis, including evaluating costs for retirees with 25 or 30 years of service and confirming whether to maintain the $120/$240 amounts for those retired 15–20 years and over 20 years. He also asked which benefit threshold should be applied: 150% of the average, the average, or no limit.
Ms. Glaster asked if it would be possible to show all current enhanced COLA options for retirees with 25 or 30 years of creditable service, including different maximum amounts ($240, $360, or $480). She inquired whether this request would be too burdensome.
Mr. Boorack noted that conducting more analyses would be time-consuming and suggested narrowing the focus to make the work more manageable.
Mr. Valeri stated that he does not see the $480 enhanced COLA option as feasible.
Ms. Glaster suggested removing the $480 option but keeping the analysis for retirees with 25 years of service. She then suggested that the $480 option could help make the other COLA levels more affordable, and preferred to consider keeping it until seeing the numbers. In a later discussion, she agreed that the $480 COLA option is excessive and suggested removing it.
Mr. Valeri asked for clarification, confirming whether the $360 COLA would apply to retirees with over 25 years of service.
Mr. Boorack explained that raising the eligibility from 20 to 25 or 30 years of service would significantly reduce the number of eligible retirees. He suggested showing the different retirement levels to reflect this change. He stated that he assumed that Ms. Glaster’s request was to show the enhanced COLA based on length of service.
Ms. Glaster responded that this is correct.
Mr. Valeri asked for clarification, confirming that the enhanced COLA starts at 15 years of service rather than 10.
Ms. Glaster suggested showing both options, emphasizing the importance of understanding the costs so the legislature can consider a menu of choices.
Mr. Boorack noted that once all figures are available, there is a request to show the lump-sum costs amortized over a 10-year period.
Mr. Boorack stated that this particular request is by far the easiest to complete.
Mr. Howgate requested that the statement be added to the record.
Mr. Boorack explained that once the first analysis is done, all amortizations are proportional, making this request the easiest to complete, and confirmed that he will prepare all figures for the next meeting.
Introducing a Proposal
The chair moved the meeting to the next agenda item, introducing a proposal submitted by Mr. Valeri and Ms. Glaster.
Mr. Valeri presented a proposed framework for implementing the Commission’s recommendations into Chapter 32. He emphasized creating a starting point that reflects the Commission’s discussions over the past several months.
Key elements included:
COLA Reserve Fund Overview
- Definitions:
a. Cost of Living (COLA) Reserve Fund: A fund set aside for enhanced retirement benefits.
b. Excess Investment Income: Earnings above a defined threshold (anything over 9%, assuming a 7% baseline), with approximately 28.75% of these excess earnings credited to the COLA Reserve Fund.
- Fund Structure and Accounting:
a. The COLA Reserve Fund would remain part of the PRIT assets and not be separated from investment activities.
b. The fund would be credited annually based on prior fiscal year annuity reserve totals.
- Purpose and Use:
a. The reserve fund would finance enhanced benefits, such as those discussed in Section 22, including allocations for specific accounts like military reserves.
b. The goal is to ensure funds remain invested and part of the overall PRIT assets while being earmarked for future COLA enhancements.
Mr. Valeri noted that the framework is open for discussion and legal review to ensure compliance and proper accounting treatment.
The Chair asked Mr. Valeri to pause so Doug could comment before leaving.
Mr. Howgate apologized for leaving early, thanked Mr. Valeri and Ms. Glaster for their work on the statutory language, and noted that agreeing on specific numbers in the statute may be challenging due to economic uncertainty, emphasizing the importance of the exercise and planning to follow up later.
Mr. Valeri explained that the draft provides a concrete starting point for discussion, focusing on creating two funds and defining excess income. He acknowledged concerns about setting a separate bogey and clarified that the draft can be adjusted to avoid pressuring the PRIM Board. He also noted that the proposed 28% allocation of excess earnings over 9% might need adjustment. He emphasized the goal of establishing a policy to support both enhanced COLA benefits and future cost-of-living increases.
Mr. Howgate expressed appreciation for the work done and the discussion, thanking everyone and apologizing for any interruptions.
Mr. Valeri summarized that the bill outlines the intended framework, including a draft of the enhanced COLA benefit for retirees with 10+ years and up to $480 for those with 25+ years of service, noting that these levels are included for discussion on whether to keep them.
Ms. Glaster noted that the draft includes a basic framework for an automatic COLA increase based on performance. Still, she acknowledged Mr. Howgate's concern that he cannot support specific legislation within the commission’s report, suggesting further consideration is needed.
Mr. Valeri emphasized the need for the commission to make recommendations on what definitions and policies should or shouldn’t be included in the general laws to guide the establishment of this policy, even if not providing full bill text.
The Chair commented that Mr. Howgate’s suggestion meant the focus should be on providing a general framework rather than specific details.
Mr. Valeri emphasized that the draft is broad, includes the 10-year and 480-level provisions, and reflects prior work, but is open for discussion and further debate.
Mr. Valeri asked for further discussion on the “bogey,” questioning what percentage of earnings above the 7% assumed rate of return would be appropriate to set aside for COLA improvements, suggesting consideration of a lower percentage than the roughly 28–30% representing members’ contributions and assets.
The Chair commented that if the threshold for setting aside earnings is lowered, the percentage allocated would also need to be reduced, noting that Mr. Boorack’s estimates showed there would still be sufficient funds for multiple COLA bases over the past 20–30 years, even at a lower percentage.
Mr. Boorack shared a screen showing a spreadsheet with three tabs illustrating a hypothetical reserve fund from 2015 onward. The first tab showed returns above the assumption, demonstrating how allocating 5% to the fund would yield just over $2 billion by 2024, and 10% would yield $4.1 billion. Additional tabs examined different scenarios using thresholds above the bogey and varying percentages of excess returns to model potential fund growth.
The Chair asked for confirmation that allocating 5% of returns above the assumption would yield over $2 billion.
Mr. Boorack confirmed that by the end of 2024, the fund would indeed exceed $2 billion.
The Chair noted that a COLA base increase of roughly $600 million, along with smaller enhanced COLA amounts, would make a meaningful impact at a baseline level.
Mr. Boorack suggested that, based on quick estimates, one of the enhancements could be absorbed into the COLA-based fund, potentially supporting around $2,000 in COLA-based changes.
Mr. Valeri felt that allocating 5% of excess earnings to the fund is too low and would prefer 10% or 15%.
Ms. Glaster emphasized that, moving forward, it’s important to consider higher percentages since future opportunities to capture excess earnings are limited.
Mr. Valeri agreed with Ms. Glaster, noting that the approach being discussed would extend considerations to the end of the current funding schedule.
Ms. Glaster emphasized the importance of accumulating the funds earlier.
Mr. Valeri commented that a 5% allocation is insufficient, noting that even with past successes, the fund is already 10 years behind.
Ms. Glaster noted that starting the fund now differs significantly from leaving it untouched for 10 years.
Mr. Valeri suggested using a 15% rate for catch-up purposes and requested Mr. Boorack to run the numbers accordingly.
Mr. Boorack noted that while 15% would yield $6 billion historically, He couldn’t estimate future numbers starting from now.
Ms. Glaster noted that allocating 15% of excess returns for an enhanced COLA would generate a substantial amount—potentially hundreds of millions—even if some of it is used immediately for payouts.
Mr. Boorack estimated the contribution would be approximately $110 million.
Mr. Valeri suggested setting aside 15% of returns above 7% to help catch up, expressing that it’s a personal preference given the current 2024 context.
Ms. Glaster noted the need for legal analysis on the COLA Reserve Fund structure, ensuring the funds remain within the PRIT system and clarifying accounting measures to avoid double-counting, asking Mr. Boorack to explain further.
Mr. Boorack elaborated on the concept of not “counting the funds twice” with respect to the hypothetical COLA Reserve Fund. He explained that if a portion of investment gains—say, 5% over the past ten years—were allocated to this separate fund, the resulting balance would be roughly $2 billion. The key point is that this money must be treated as distinct from the funds already included in calculations of the system’s unfunded liabilities.
Mr. Boorack further explained that if the same money were simultaneously counted toward reducing the unfunded liability and used to pay for a COLA or COLA enhancement, it would constitute double-counting. Therefore, the funds must first be set aside and not factored into the existing plan liabilities. Once a COLA base or enhancement is approved, the money can then be applied to the plan to support the benefit, but only at that point. Until then, it must remain separate to ensure that using it later does not artificially reduce or offset the unfunded liability. He posited that this would provide an accurate accounting and avoid overstating available resources.
Ms. Glaster asked about the timing of transferring funds to the COLA Reserve Fund in relation to the system’s valuation analysis.
Mr. Boorack explained that the transfer to the COLA Reserve Fund would occur once the excess investment gains are determined, which is early in the year.
Mr. Valeri asked why the amounts in question wouldn’t be considered assets of the PRIT fund.
Mr. Boorack explained that if the total liability of the system is $100 billion and the total assets are $70 billion, with $60 billion held in a separate side fund, the unfunded liability would initially be $30 billion, calculated as $100 billion minus $70 billion in total assets. If $50 billion from the side fund is then used to fund a COLA enhancement and is counted as part of the plan’s assets, the total liability would increase by $50 billion to $150 billion. In comparison, the plan’s reported assets would remain $70 billion. This would effectively inflate the unfunded liability because the $50 billion from the side fund is already committed. To avoid this double-counting, the side fund should not be included in the plan’s assets when calculating the unfunded liability. When money from the side fund is used for a COLA base or COLA enhancement, it should be treated separately so that the unfunded liability remains unchanged, ensuring that only the assets outside the side fund offset the total liability.
Mr. Valeri noted that the projected asset figures were much lower than expected, closer to $2 billion over 10 years rather than $60 billion.
Mr. Boorack clarified that they used extreme figures only as an example to illustrate his point. He explained that to set up a fund like this, it must be kept separate from the plan’s assets until a COLA base or enhancement is approved. At that point, assets can be moved over without increasing the unfunded liability. Until then, calling it a “hypothetical fund” means nothing has truly been set aside.
Mr. Valeri clarified that he intended to keep the money within the pension fund without distorting the funding level. He noted that Section 22 was meant to align with existing provisions where assets are set aside for specific purposes, similar to reserve accounts. Mr. Valeri emphasized that this is a legal issue and wanted assurance that such funds would not be excluded from total assets in a way that would affect liability calculations.
Mr. Boorack explained that if the goal is to create a special COLA fund, its assets must be kept separate from the plan’s main assets. They cannot be counted toward offsetting total liabilities until a COLA enhancement is adopted, at which point the money can be moved over. This separation is necessary to avoid artificially changing the unfunded liability when a COLA change is made.
Mr. Valeri emphasized that if funds are not set aside for future COLA liabilities, they will simply be absorbed into the funded liability, causing assets to disappear over time. He noted that only a small percentage (5%) is being directed, and suggested that it should not be included in the funded liability. His primary concern was to ensure money was set aside with a clear purpose and not left idle without being invested.
Mr. Boorack clarified that the funds would continue to be invested through PRIT but would be reclassified under a separate category—referred to as a "special COLA fund"—so they wouldn’t be included in the total asset calculation. He further explained that funds in the special COLA sleeve can't be moved into the broader plan assets until a COLA change occurs. Once that happens, the transfer can take place.
Mr. Valer asked for confirmation that the proposed approach—using a separate COLA fund that remains invested but excluded from overall assets—is indeed the intended goal.
Mr. Boorack agreed with the goal but cautioned that the proposed structure shouldn't be labeled as a "fund" solely for accounting reasons. He noted that if the plan is to redirect funds, it must be done at the start of the year during asset evaluation, and those redirected funds shouldn’t be counted when calculating the unfunded liability.
Mr. Valeri commented that money is being lost with each funding schedule, and this approach could prevent that. While the funds would still go toward future liabilities, it's a necessary way to finance them without extending the funding schedule or changing assumptions. He believed it's reasonable, since it simply returns some of the asset gains from members' contributions—and acknowledged it's not just an accounting move.
The Chair reminded the commission members of the scheduled end time and emphasized being respectful of everyone’s time, while also welcoming continued discussion if needed.
Ms. Glaster emphasized the need to appropriately amend Chapter 32 to support Mr. Boorack’s proposal, which everyone agrees with—the challenge is figuring out how to word it correctly.
The Chair suggested commission members consider whether to present it as a policy framework rather than drafting specific language right away. He proposed postponing that discussion to the next meeting.
Logistical Issues
Before adjourning, the Chair requested input on scheduling the next meeting, proposing the last week of August. It was noted that Mr. Boorack may require additional time to address the inquiries he has received. Senator Brady and Mr. Valeri recommended scheduling the meeting in September, citing that many people are typically away during August. The possibility of holding two meetings in September was discussed, with September 8th suggested for the first. Additional dates considered for the second meeting included September 22nd and September 29th.
Commission members Doug Howgate and Michael Trotsky left the meeting at noon.
Commission member Kathryn Kougias motioned to adjourn the meeting. Frank Valeri seconded the motion, and a roll call vote was taken:
Erika Glaster YES, Bill Keefe YES, Michael Brady YES, Kathryn Kougias YES, Amelia Marceau YES, Dan Ryan YES, Frank Valeri YES. The meeting was adjourned at 12:29 PM.
Special Cost of Living Adjustment (COLA) Commission Meeting Documents
25 COLA Commission Meeting Minutes _AH_7.15.docx
Actuarial Update COLA Commission 7-29-25.pdf
COLA Commission 7_29_2025 agenda__.docx
COLA Commission DRAFT principles 5-13 edit.docx
COLA Commission principles approved by vote July 29 2025.docx
Proposal for Enhanced COLA and Cost of Living Reserve Fund.docx
Proposal for Enhanced COLA, Cost of Living Reserve Fund and COLA base.docx
Approved,
Bill Keefe, Chairman
| Date published: | August 6, 2025 |
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