Industry News

On June 10, 2026, the National Association of State Retirement Administrators (NASRA) released its issue brief, Cost-of-Living Adjustments, which updates an earlier version published in August 2025. The brief covers the: 1) purpose of Cost-of-Living Adjustments (COLAs); 2) types of COLAs; 3) costs of COLAs; 4) recent state COLA legislative changes; 5) recent initiatives to develop policies or fund for future COLAs; and 6) impact of inflation on COLA changes. 

According to the brief, the design of public pension COLAs varies greatly. Most state and local government pension plans provide some form of COLAs to offset or reduce the effects of inflation on retirement income. In addition, COLAs are important for state and local government employees who do not participate in Social Security in order to supplement their income during disability or normal retirement. Typically, governments prefund the cost of a COLA over an employee’s working career.   

In addition, the report provides a summary of COLA provisions by state-level plans, including any recent legislative changes. According to the report, of the 101 selected state-level plans that provide COLAs, 74 plans provide them on an automatic basis and 27 plans provide them on an ad hoc basis.    

Since 2009, 17 states have changed their COLAs for current retirees, eight states have changed COLAs for current employees’ benefits and seven states have changed COLAs for future employees only. However, in several states, the legality of these changes has been challenged. In addition, some states are including provisions that would allow COLAs to increase if the plan’s funding status or fiscal conditions improve or if inflation rises.   

The brief concludes, “The effects of a COLA can be consequential both in protecting the purchasing power of beneficiaries and in adding costs to a plan. Policymakers and public pension plan sponsors are challenged to balance three key variables: benefit adequacy, plan sustainability, and affordability. Amid the recent spike in inflation, policymakers and, in certain cases, public pension trustees, continue to reexamine all aspects of benefit design and financing, including the way COLAs are determined and funded.” It adds, “the recent spike in inflation led some states that do not provide an automatic COLA to grant an ad hoc COLA for the first time in several years.”

The report also includes an appendix with a listing of COLA provisions for many state-level retirement plans and identifies the applicable changes from 2009 through 2026. 

The brief is available here.