South Dakota retirement officials said Wednesday that if current investment trends hold, retirees could see a cost-of-living adjustment in July 2027 similar to the 1.56% increase scheduled for this July.
Senior actuary Doug Fiddler said inflation has remained above 2% since 2022, but limited investment returns and fixed contribution rates make it difficult to match inflation with benefit increases. Most public employees contribute 6% of their pay, matched by employers, to the system, which serves more than 105,000 members.
“With 6% contributions, we can’t afford a 9% COLA,” Fiddler said, noting weak investment performance during periods of high inflation. He added that market volatility is unlikely to change the trend.
The retirement system is on track for a 6% to 6.5% return this fiscal year. Fiddler said the maximum 3.5% COLA would require returns of about 13.5% or higher. The board will set the July 2027 adjustment later this year.
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