PIERRE – People who receive retirement benefits from South Dakota’s public-pension system will receive a 2.1 percent cost of living adjustment next summer.
Trustees for the South Dakota Retirement System gave their official blessing Wednesday to the improvement.
The 2.1 percent is the minimum increase allowed under state law because the system remains out of financial balance.
The system has 411 member governments at all levels in South Dakota, with a membership of 75,368 as of June 30. A total of $397 million was paid to 22,408 members in the past year.
In response to benefit increases that had become overly generous in a highly volatile time for investments, the Legislature in 2010 established a sliding scale for the annual improvement factor.
A four-tier approach was set by lawmakers based on the market value of the system’s investment portfolio each year on June 30:
If the system is funded at less than 80 percent, the factor is 2.1 percent;
If the system is funded at 80 percent or greater but less than 90 percent, the factor is the increase in the consumer price index from third quarter to third quarter, but no less than 2.1 percent and no more than 2.4 percent;
If the system is funded at 90 percent or greater but less than 100 percent, the factor is the CPI increase, but no less than 2.1 percent and no more than 2.8 percent; and
If the system is funded at 100 percent or better, the factor is 3.1 percent.
As of the June 30, 2012, end of the system’s fiscal year, the system’s market value of investments was 93 percent. The CPI increase was 1.659 percent.
Those two numbers meant the improvement factor must be 2.1 percent.
Prior to the change in 2010, state law granted a 3.1 percent cost of living adjustment annually regardless of the system’s investment performance and financial strength.