Provides that retirees in the state pension system receive cost of living adjustments compounded into the retiree’s total retirement benefits each year beginning January 1, 2026. This act would be prospective only.

Rhode Island Pension Cost-of-Living Adjustment Bill

This bill would change how annual cost-of-living adjustments (COLAs) are calculated for retirees in Rhode Island's state pension system. Starting January 1, 2026, these adjustments would be compounded — meaning each year's increase would be calculated based on the retiree's total benefit amount at that time, including all previous adjustments. Under a compounding approach, the COLA builds on itself over time, similar to how compound interest works in a savings account.

The bill specifies that it is prospective only, meaning it would only affect COLAs going forward from 2026 and would not retroactively change or recalculate past adjustments that retirees have already received.

This bill directly affects retired state employees, teachers, and other public workers who receive pension benefits through Rhode Island's state retirement system. For retirees, compounding COLAs would generally result in larger benefit increases over time compared to non-compounded adjustments, helping their retirement income keep pace with inflation more effectively. The trade-off is that compounding adjustments can cost the pension system more money over the long term, which could have implications for the state budget and the overall financial health of the pension fund.

The bill has been introduced and referred to the House Finance Committee, where legislators will likely examine the projected costs and fiscal impact before deciding whether to move it forward.