MPSERS Post-Retirement Increase: The 3% Annual COLA Explained

Who Gets the 3% Increase

Only members retiring under the Member Investment Plan (MIP) — including MIP Fixed, MIP Graded, and MIP Plus — receive an automatic 3% annual post-retirement increase. This applies to members first hired between January 1, 1990, and June 30, 2010, or Basic Plan members who elected into MIP during historical election windows.

Basic Plan retirees (hired before January 1, 1990, without a MIP election) do not receive an automatic annual increase. Their monthly pension stays at the amount calculated at retirement for life.

Pension Plus and Pension Plus 2 retirees also receive no automatic post-retirement increase on their defined benefit pension. Their monthly DB payment remains fixed.

How the 3% Is Calculated

The increase is not compounding on last year's payment. ORS calculates it on your initial pension amount after any early-reduced or survivor-option reduction. Each October after you have been retired a full year, you receive an additional 3% of that initial amount.

Example: If your initial Straight Life pension is $2,400 per month, the 3% increase adds $72 per month. ORS applies it in October after you have been retired a full year, and each October thereafter. After five annual increases, that's $360 more per month, for a total of $2,760.

The increase is sometimes described as a "COLA" (cost-of-living adjustment), but unlike a true COLA it isn't tied to inflation. It's a fixed 3% of the initial pension amount after any early-reduced or survivor-option reduction, regardless of what consumer prices do.

The Equated Plan Wrinkle

If you elect an Equated Plan option, the pre-age-62 advance portion is excluded from the 3% increase calculation. The increase applies only to the underlying pension portion, not the Social Security advance. After the permanent age-62 reduction kicks in, the 3% increase continues on the reduced base — which can create a confusing year where your total payment drops (from the age-62 reduction) even though the annual increase is also being added.

The MPSERS Retirement Guide includes a worked example showing how the 3% increase and the age-62 Equated reduction interact year by year.

What This Means for Payout Option Decisions

The 3% increase is part of what makes MIP one of the stronger MPSERS plan tiers. Over a 25-year retirement, cumulative increases add roughly 75% to the initial option-adjusted pension amount. That's a real hedge against inflation, and it factors into the survivor-option decision: a surviving beneficiary under a 100%, 75%, or 50% Survivor Option also receives the applicable share of the accumulated increases — they don't reset.

For Basic Plan and Pension Plus members without the automatic increase, maintaining purchasing power over a long retirement depends entirely on other income sources — Social Security COLAs, personal savings, and the DC component (for Pension Plus members).

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