Retired Maryland teachers, state and municipal employees, correctional officers and police will notice an increase to their monthly retirement benefit in July as the annual cost-of-living adjustment (COLA) takes effect.

This year’s COLA rate is 1.812%.

The increased monthly benefit will be shown on the Automatic Deposit Advice mailed to the homes of all retirees on July 31.

Frequently asked questions

Q. Who qualifies to receive the COLA this July?

A. A retiree who has been retired at least one year as of July 1, 2020 qualifies for this year’s COLA. Those who retired after July 2019 (August 2019 or later) will receive their first COLA increase in July 2021.

The COLA does not apply to retired Maryland legislators, judges or governors. Those retirees receive adjustments based on the specific terms of their plans.

Q. How is the annual COLA increase applied?

A. A retiree’s benefit system determines how the annual increase is calculated for his or her payment. Eligible retirees receive either a compound rate or a simple rate. For retirees receiving the compound rate, the COLA increase is based on their current allowance, allowing COLAs to compound over time. Under the simple rate, the increase is based on the retiree’s initial retirement allowance.

The compound rate applies for eligible retirees of all systems except the Employees’ Non-Contributory Pension System and the Local Fire and Police System. (For retirees who transferred into the Local Fire and Police System from the Employees’ Retirement System, the compound rate applies.)

Q.  How is the COLA rate determined?

A. The COLA rate is calculated using a formula provided in state law and is based on the change in the Consumer Price Index (CPI) for the most recent calendar year ending December 31, compared to the CPI for the prior calendar year.

This rate is then compared to the maximum COLA rate allowed by state law for the various Maryland retirement plans to determine the correct adjustment to each individual retirement allowance. This year, the COLA rate does not exceed any of the rate caps that apply to retirees of the various state systems, so the COLA for each eligible retiree will be based on the COLA rate of 1.812%.