About 35,000 South Dakotans receiving benefits from the South Dakota Retirement System (SDRS) will see a 1.56% cost-of-living adjustment beginning July 1, 2026. Trustees approved the increase Wednesday, though it falls short of the 2.76% inflation rate recorded in the third quarter of 2025—marking the fifth straight year COLA has failed to keep pace with inflation.
State law caps COLA at 3.5%, a level reached only once since 2011. SDRS leaders emphasized the need to keep the system fully funded, noting investment returns of 5.44% in fiscal 2025 fell below the 6.5% target. SDRS paid $762 million in benefits last year, supported by $355 million in contributions.
The system now covers 510 employer units and 105,473 members, including nearly 35,000 retirees. SDRS officials acknowledged beneficiaries may be frustrated by COLA trailing inflation but stressed the importance of financial stability. Many retirees also receive Social Security, which adjusts annually for inflation.
Looking ahead, actuaries warned that achieving the maximum 3.5% COLA in 2027 would require investment gains of at least 13.6%. They also projected a one-in-three chance of no COLA by 2031 if corrective measures are needed.
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