COLAs in private sector defined benefit plans?

[Susan L.]

Are you aware of any private sector defined benefit plans, not including multiemployer plans, that still occasionally provide for an ad hoc cost of living increase of retiree pension payments?  Or do you know any resource for researching this question?  Thanks for any assistance you can provide.

[Mike Preston]

What question?

[Susan L.]

The question is whether there are any private sector defined benefit plans that still provide for COLAs on retiree pensions.  For research we're doing in the public sector, I'm trying to determine if there are any private sector defined benefit plans that still provide ad hoc COLAs.  This would be known anecdotally or perhaps through a resource that provides data on plan features such as COLAs.  I know it's a long shot, but I was thinking that actuaries or their firms, who do lots of annual actuarial valuations for private sector defined benefit plans would have a sense of the prevalence of retiree pension COLAs.

[CuseFan]

We have a couple of clients that will do an ad hoc retiree COLA every 3-5 years and I think one client that actually has a built in COLA, also very rare.

And then there are a few more clients that have done maybe one or two COLAs over the course of our long-term relationship.

I don't think you could find a publicly available resource that provides data on this - you may be able to find a survey or two somewhere that tracks but whether access to such would be free, who knows? This is something you basically have to consult on from experience and (as you've requested) the experience of others that you can glean.

Good luck!

[CuseFan]

It's not prevalent at all.

Not counting our small plan practice, probably 2% or less - maybe more if you count any who ever did a COLA, but still less than 5% I'm sure.

[Susan L.]

CuseFan, very much appreciate these responses.  Could you also tell me if the COLA-giving clients are in any particular business or industry?  Anything in common, geographically or size or anything else?  I know the energy sector used to have pretty generous benefits, including COLAs, but don't know where things are on this topic today.

[david rigby]

Automatic COLAs are very rare; I've seen only a few; they exist much more in the govt plan arena.  In my current situation, there are 2 such plans in the office, one of which is a non-profit, spun-off from a local government (ie, the govt plan had a COLA).  Ad hoc COLAs are even more rare; in my 4+ decades, I've seen only one, not recently.

[AndyH]

On 10/9/2020 at 5:05 PM, david rigby said:

 in my 4+ decades

Geez you must be old! lol.  (I'm almost there myself)

 

[Sellarsian]

FWIW, my experience has mostly been with corporate private sector plans.

Agree with David Rigby that automatic COLAs in private sector DB plans were hardly ever seen. I encountered one or two among regulated utilities -- i.e., where plan costs were borne by rate payers -- but that was about it.

But in a variety of industries (finance, energy, manufacturing , ...), occasionally granting an ad hoc COLA did not become uncommon until about 20 years ago. What happened? Obviously increasing cost pressure on DB sponsors was one factor. Another was plan design changes that made lump sum payouts common among new retirees -- corporate decision makers stopped seeing it as important to keep up a COLA precedent for the life annuitants. And starting in the 1990s (I think) the IRS started warning that a regular pattern of plan amendments, such as an ad hoc COLA every few years, could constitute an ongoing commitment to continue that pattern. 

[Bob the Swimmer]

I'd try one of the trade groups, or the Pension Research Council at Wharton or EBRI in DC or these below:

The American Retirement Association is comprised of five premier retirement industry associations; the American Society of Pension Professionals & Actuaries (ASPPA), the American Society of Enrolled Actuaries (ASEA), the National Association of Plan Advisors (NAPA), the National Tax-deferred Savings Association (NTSA), ...

[Susan L.]

Thanks, all, for these helpful responses.  I'll report back after I contact the couple of trade groups mentioned by Bob.