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What is a cost-of-living adjustment (COLA)?

April 26, 2017adjustment Cola cost-of-living

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What is a cost-of-living adjustment (COLA)?

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A cost-of-living adjustment is a small incremental increase made to a retiree’s monthly pension benefit in an attempt to keep his/her benefits in line with inflation. COLA increases are not applicable to every plan. Therefore, adjustments for COLAs would only be applicable in a present value analysis of benefits that have COLA adjustments guaranteed under the terms of the plan.