South Dakota Gov. Dennis Daugaard signed into law on Thursday a bill changing the cost-of-living-adjustment requirements for the $10.5 billion South Dakota Retirement System, Pierre.
The bill changes the retirement system’s COLA to no more than 3.5% and no less than 0.5% a year, as long as the retirement system is 100% funded. If the funding ratio falls below 100%, the retirement system’s board creates a “restricted COLA maximum” that enables the retirement system’s funding ratio to rise back up to 100%.
Previously, the COLA was based on the funding ratio of the retirement system. When fully funded at 100% or more, the COLA was 3.1%, and when it was less than 80%, the COLA was 2.1%. When it was between 80% and 100%, a scale based on the funding ratio and the consumer price index is employed.
The state House of Representatives voted in favor of the bill 65-3 on Jan. 23 and the Senate approved it 31-2 on Feb. 2.
Robert A. Wylie, executive director of the pension fund, said in an earlier telephone interview the retirement system originally proposed the legislation following changes to some actuarial assumptions the board made in November, including a reduction in the assumed rate of return to 6.5% from 7.25%.
The retirement system’s funding ratio as of June 30 was 96.9%.