Cost-of-Living Adjustments

Introduction

Periodic increases in some form, generally referred to as cost-of-living adjustments (COLAs), are provided on most state and local government pensions. The purpose of a COLA is to offset, to some extent, the effect of inflation on retirement income. Considerable variation exists in the way COLAs are designed, and in many cases they are determined or affected by other factors, such as the actual rate of inflation or the financial condition of the plan. COLAs add both value and cost to a pension benefit.

Public pension COLAs have received increased attention in recent years amid two competing factors: first, in the wake of the Great Recession, many states reduced benefits; and second, inflation rose in 2021 and 2022 to its highest level in 40 years. This brief presents a discussion about the purpose of COLAs, the different types of COLAs provided by government pension plans, and an overview of recent state changes to COLA provisions.

Date published

June 2026

Contact

Keith Brainard, Research Director
Alex Brown, Research Manager

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What’s New at NASRA: Employee Contributions to Public Pension Plans

Employee contributions remain a central part of public pension financing, and the way those contributions are structured is subject to change depending each states' governance rules. . NASRA’s 2026 updated brief finds median employee contribution rates of 6.2 percent of pay for employees who participate in Social Security and 9.0 percent for those who do not. For employees who do not participate in Social Security, the public pension often plays a broader role in retirement security, effectively providing two of the traditional three legs of the retirement stool rather than one.

Since 2009, 41 states increased employee contributions in at least one plan, while some states recently reduced rates for selected employees. Variable contributions are also becoming more common, with 26 plans in 17 states adjusting employee rates based on funding, plan costs, or other factors. The brief provides current trends and a state-by-state look at employee contribution requirements across public retirement systems.