cost of living

Section 22C establishes the commonwealth's mandatory funding schedule for transferring amounts to the Commonwealth's Pension Liability Fund to eliminate the state's unfunded pension liability by June 30, 2040. The Commissioner of Administration must file and update a triennial funding schedule reviewed and approved by the House and Senate Ways and Means Committees, with annual increases in the amortization component capped at 7.5%. For fiscal years 2024–2026, specific dollar amounts are fixed by statute: $4,104,583,378; $4,499,854,757; and $4,933,190,770. The section also requires an additional Governor's recommendation for an amount equal to the full normal cost and benefits paid, and authorizes an advanced funding schedule for surplus investment returns.

Section 22D allows local and county retirement systems (other than state and teachers') to voluntarily adopt a formal funding schedule designed to eliminate their unfunded actuarial liability by June 30, 2030. Systems accepting this section may receive annual pension funding grants from the Commonwealth, calculated as a share of revenue growth in state income, corporate, and sales taxes. Acceptance also triggers mandatory adoption of several benefit provisions — including 10-year vesting, supplemental dependent allowances, survivor benefits, and fitness/wellness programs — and requires annual reports to members. Acceptance is irrevocable.

Section 22F allows local and county retirement systems to revise their existing Section 22D funding schedules based on an actuarial valuation conducted as of January 1, 2009 or later, extending the unfunded liability amortization period to no later than June 30, 2040. Annual amortization increases under a revised schedule may not exceed 4%, no year's payment may be less than the prior year's payment until fully funded, and if a year's payment would exceed the prior year by more than 8%, PERAC approval is required. Systems may also use a revised schedule to increase the COLA base amount in $1,000 increments.

Section 90C1/2 provides that state employees and state teachers' retirement system members who have been retired on superannuation, accidental disability, or ordinary disability with at least 25 years of creditable service shall have their retirement allowance increased to not more than $15,000, subject to section 102(e) limitations.

Section 96 allows cities, towns, districts, and counties to increase any retirement allowance, pension, annuity, or other benefit that is less than $1,200/year (payable to former officials, employees, or their dependents) to up to $1,200/year, provided the person had at least 15 years of service.

Section 102 establishes the cost-of-living adjustment (COLA) mechanism for the state employees' and teachers' retirement systems: the actuary files an annual report, the legislature determines COLA percentages, increases are applied to up to $13,000 of each member's allowance and funded from investment income, and the adjusted amount becomes the new base for future COLAs.

Section 103 establishes an optional COLA mechanism for local (non-state) retirement systems: upon acceptance by board vote with legislative body approval, a system may grant annual COLAs (up to 3% if they opt into subsection i) on a base amount starting at $12,000, funded from investment income, subject to the system's funding schedule, with procedures for opting out of a COLA in any given year.

PERAC has announced the 2026 COLA rate of 2.8%, based on the Social Security Administration's CPI-W increase for the prior year. Pursuant to G.L. c. 32, § 103(c), retirement boards may vote to grant a COLA effective July 1, 2026. Under § 103(i), a board may vote to increase the COLA up to 3.0% with proper notice to the legislative body, but this must occur before June 30, 2026. Every board must notify PERAC through PROSPER within 30 days of their decision, whether or not they grant a COLA.

PERAC clarifies that COLAs under G.L. c. 32, § 103(c) must be applied to Section 100 benefits paid to survivors of public safety employees killed in the line of duty. Section 100 benefits are classified as a "pension" under the statute, making them subject to COLA grants by retirement boards. Any board that has not been applying COLAs to Section 100 benefits must correct this error immediately, recalculate any unpaid COLA amounts owed to beneficiaries, and remit payment with corrections-of-errors interest going forward.

This memo supplements Memo #28/2025 on Section 100 benefits and COLAs. It clarifies two key points: first, COLAs are not "benefits" themselves but enhancements to an existing pension, so the Section 100 "alternative benefit" language does not bar COLA eligibility. Second, when calculating back COLA payments owed to Section 100 beneficiaries, boards need only go back to July 1, 1998 — prior to that date, the pre-1997 version of Section 102(a) provided for the greater of a COLA or a Section 100 increase but not both, so COLAs would have been the smaller amount.