title
To amend City Code § 22-8, concerning cost-of-living adjustments, for the purpose of establishing an annual cost-of-living adjustment or supplement policy for the Richmond Retirement System, subject to appropriation by City Council.
body
THE CITY OF RICHMOND HEREBY ORDAINS:
§ 1. That section 22-8 of the Code of the City of Richmond (2026) be and is hereby amended as follows:
Sec. 22-8. Cost-of-living adjustments and annual supplements.
(a) In addition to the monthly allowances payable under Articles VII, VIII and XI of this chapter, cost-of-living adjustments [may] or non-compounding annual supplements may be payable, subject to annual appropriations by City Council, as post-retirement supplements authorized by § 5B.02 of the Charter of the City of Richmond (2026), in accordance with the provisions of this section to the recipients of such allowances. Any post-retirement supplements shall be contingent upon actuarially determined System funded status such that cost-of-living adjustments shall only constitute permanent changes to base benefits when the funded status is 95 percent or greater and shall constitute non-compounding annual supplements when the funded status is at least 85 percent but less than 95 percent. Such adjustments and annual supplements shall be subject to the same conditions of payment as are such allowances. Cost-of-living adjustments shall also be added to the monthly allowances being credited to the deferred retirement option program (DROP) established pursuant to Section 22-204 only when the funded status is at least 95 percent.
(b) [The] In accordance with § 5B.02 of the Charter, the amounts of the cost-of-living adjustments or supplements provided for hereunder shall be determined as percentages of the allowances adjusted hereby. Except as may otherwise be specifically ordered by the City Council, such percentages shall be determined [by reference to the increase, if any, in the United States Average Consumer Price Index for all items, as published by the Bureau of Labor Statistics of the United States Department of Labor, from its monthly average for the calendar year in which the allowance initially commenced as a result of the death or retirement of a member of the system to its monthly average for the calendar year immediately prior to the calendar year as of which the amount of the cost-of-living adjustment is determined, with such averages adjusted, if necessary, so as to relate to the same reference base period for the computation of such index.] as follows:
(1) Commencement. Beginning with the fiscal year commencing July 1, 2027, and ending June 30, 2028, the amount to be paid as an annual supplement or permanent cost-of-living adjustment, subject to Council appropriation, shall be determined annually by the Richmond Retirement System actuaries by reference to the increase in the United States Average Consumer Price Index for all items, all urban consumers, as published by the Bureau of Labor Statistics of the United States Department of Labor. The annual increase, if any, in such Consumer Price Index for all urban consumers shall be considered up to a maximum cost-of-living annual supplement of five percent, when the actuarially determined system funded status is less than 95 percent, or a permanent cost-of-living adjustment of two percent in any given year, effective June 30 of that year and reflected in July 31 benefit payments. In addition, the following conditions shall apply:
a. Any cost-of-living adjustment or supplement shall be contingent upon a minimum funded status of 85 percent as determined by the System’s actuaries through the annual valuation process.
b. The annual increase to pension benefits to be proposed in accordance with this policy, whether a permanent cost-of-living adjustment or non-compounding annual supplement, and associated costs shall be communicated in writing by the System’s actuaries to the System’s board of trustees, and such communication transmitted by the board of trustees to Council and the Mayor, no later than February 15 of each year. For years in which the System funded status is at least 85 percent but less than 95 percent, the written communication shall specify the total cost of the proposed supplement for that fiscal year. For years in which the System funded status is 95 percent or greater, thus enabling a permanent cost-of-living adjustment, the written communication shall clearly differentiate between the cost to the City of the proposed annual cost-of-living adjustment if fully pre-funded and the cost per year if amortized over a ten-year period as authorized by Section 22-8(c).
(2) Non-compounding annual supplements. For years in which the actuarially determined funded status is at least 85 percent but less than 95 percent, proposed automatic annual cost-of-living supplements shall be calculated as follows:
a. Annual supplement of one percent if the Consumer Price Index for all urban consumers is less than one percent.
b. Annual supplement of three percent if the Consumer Price Index for all urban consumers is between one percent and three percent.
c. Annual supplement of five percent if the Consumer Price Index for all urban consumers is greater than three percent.
(3) Permanent cost-of-living adjustments. For years in which the actuarially determined funded status is at least 95 percent, proposed annual cost-of-living adjustments shall match the Consumer Price Index for all urban consumers up to two percent.
(c) [In accordance with Section 5B.02 of the Charter, the City Council shall make an annual review of the cost-of-living adjustments being paid in accordance with this section and Section 5B.02 of the Charter and shall determine whether or not such adjustments shall be recomputed and the effective date of any benefit increase which may result.] The total cost of a permanent annual cost-of-living adjustment may be amortized over a maximum period of ten years.
§ 2. This ordinance shall be in force and effect upon adoption.
DATE: September 28, 2026
TO: The Honorable Members of City Council
THROUGH: RJ Warren, Council Chief of Staff
THROUGH: Maria Garnett, Council Policy Analyst
FROM: The Honorable Cynthia Newbille, Council President 7th District
The Honorable Reva Trammell, Councilmember 8th District
RE: To amend City Code § 22-8, concerning cost-of-living adjustments, for the purpose of establishing an annual cost-of-living adjustment or supplement policy for the Richmond Retirement System, subject to appropriation by City Council.
CNL-2026-0063
PURPOSE: This ordinance establishes a fiscally responsible policy for determining, subject to Council appropriation, annual supplemental payments or cost-of-living adjustments (COLAs) for the Richmond Retirement System (RRS), which has granted a total of three ad hoc COLAs and four one-time supplemental payments since 2006 (see Attachments 1 and 2). The proposed policy would enhance retirement security for RRS participants, particularly retirees whose benefits have been eroded by inflation, while also safeguarding fiscal responsibility and increasing predictability for the City’s budget.
BACKGROUND: The lack of COLAs for RRS retirees over the past two decades, due in large part to RRS’s historically low funded status relative to outstanding liabilities, has resulted in profound erosion of the value of pension benefits for former City of Richmond employees. For example, according to U.S. Bureau of Labor Statistics inflation data, a $1,000 monthly benefit in June 2006 would have needed to be $1,645.89 to maintain the same purchasing power in June 2026-but that monthly RRS benefit would only have increased via ad hoc COLAs to $1,033.25, thereby losing more than one-third of its value, with less than $400 total in one-time supplements approved since 2023.
Although some degree of inflation protection for retirement benefits is an essential component of retirement security, regular COLAs for RRS retirees would not have been fiscally responsible prior to the implementation of recent reforms that improved RRS’s funded status and investment performance, including the issuance of $120 million in pension obligation bonds and closing RRS to new participants in concert with joining the Virginia Retirement System (VRS). (See, for example, Res. 2023-R050 and Ord. 2023-313.) However, those reforms have been successful, and RRS, its trust fund, and the City’s net pension liabilities are in a substantially better position today than even two years ago. As of June 30, 2025, RRS reported a funded status of 84.9% of outstanding liabilities (up from 80.9% in 2024), and RRS leadership informed Council via public presentation in March 2026 that RRS was on track for a 99.1% funded status by 2034.
Despite the steady improvement in the financial fundamentals of RRS, the 84.9% funded status fell just short of the 85% threshold required for consideration of new benefits per the reforms (Sec. 12-266), and the Mayor’s proposed budget for FY2027 did not include an ad hoc COLA or supplement for RRS retirees. In response, Council amended the FY2027 budget to include a one-time supplement equal to one percent of annual benefits for RRS retirees-and made a public, explicit commitment to working to develop a permanent and predictable COLA policy for those who dedicated their working lives to serving the City of Richmond and its residents. As noted by pension policy experts at The Pew Charitable Trusts, a nonpartisan policy research organization:
Although ad hoc increases can restore a portion of lost purchasing power, they do not offer a sustainable path to providing retirees with inflation protection while ensuring affordability and predictability of costs for the [plan sponsor]. In contrast, policies that provide an actuarially funded annual COLA can help to better maintain the purchasing power of retiree benefits over time while reducing the need for policymakers to consider ad hoc increases that boost unfunded pension liabilities. Successful retirement systems can also use COLAs as part of their toolkit to manage risk by connecting increases to plan funding or investment performance. (The Pew Charitable Trusts, “Rhode Island Analysis Shows Benefits of Pension Risk Management Strategies,” July 2025; see Attachment 4)
It is the belief of Council that developing a clear, predictable, risk-conscious policy mechanism to protect the purchasing power of RRS benefits as part of the annual budget process is not only important for retirement security, fiscal sustainability, and budgetary predictability, but also to ensure equitable benefits for all City employees and retirees, a growing share of whom is now entitled to annual automatic COLAs for retirement benefits (except for years with no recorded inflation) through VRS as established in Va. Code section 51.1-166 and enacted by the VRS Board of Trustees each year. Committing to a mechanism for funding fiscally responsible annual supplemental payments or COLAs for RRS retirees, subject to Council appropriation each year, is also consistent with the City’s commitment to providing regular pay increases to current employees (whether covered by a collective bargaining agreement or not).
Preliminary fiscal impact estimates for a permanent annual COLA of up to 2%, as relayed to Council staff by the Administration as well as the actuaries for RRS, suggest that implementation of a full, compounding COLA beginning in FY2028 would impose substantial annual costs to the City and add considerably to outstanding liabilities for RRS on the City’s balance sheet, which in turn could negatively impact the City’s fiscal health and perceived creditworthiness in the bond market. This proposal therefore exercises fiscal restraint by maintaining the 85% minimum funded status threshold for new benefits in Sec. 12-266 and only calling for non-compounding supplemental payments to RRS retirees as a form of inflation protection until RRS reaches a funded status of 95%. The predictable annual supplements (subject to Council appropriation) proposed in this ordinance as the “bridge” to a permanent COLA could provide meaningful relief to RRS retirees at a substantially lower cost to the City and without increasing unfunded long-term liabilities.
COMMUNITY ENGAGEMENT: This ordinance is responsive to consistent, year-over-year requests from RRS retirees for the City to take action to address the significant decline in the purchasing power of their retirement benefits.
STRATEGIC INITIATIVES AND OTHER GOVERNMENTAL: Thriving City Hall
FISCAL IMPACT: Based on preliminary estimates provided by Finance staff, the maximum annual supplement of 5% for RRS retirees would cost approximately $3.5 million per year. In general, the fiscal impact of this ordinance, if adopted and implemented via Council appropriation each year, would differ from one year to the next, depending on factors such as the number of retirees and the cost of their benefit payments, RRS funded status, and recorded inflation. Additional actuarial analysis of 1) the potential annual cost of the maximum non-compounding annual supplement of 5% and 2) the potential annual cost and impact on net pension liabilities of a COLA up to the proposed 2% maximum, beginning in FY2028, is forthcoming, pending completion of the June 30, 2026 valuation. Per the ordinance, the City would be authorized to amortize the cost of funding a permanent annual COLA (assuming the 95% minimum funded status) over a maximum of ten years, though doing so would cost more in total than full actuarial funding up front.
DESIRED EFFECTIVE DATE: Upon adoption
REQUESTED INTRODUCTION DATE: September 28, 2026
CITY COUNCIL PUBLIC HEARING DATE: November 9, 2026
REQUESTED AGENDA: Regular
RECOMMENDED COUNCIL COMMITTEE: Finance and Economic Development
AFFECTED AGENCIES: Richmond Retirement System
Department of Budget and Strategic Planning
Department of Finance
RELATIONSHIP TO EXISTING ORD. OR RES.: None
ATTACHMENTS: Attachment 1 - Ad Hoc COLAs Approved by Council 2006-2026.pdf
Attachment 2 - Supplements Approved by Council.pdf
Attachment 3 - NASRA COLA Issue Brief June 2026.pdf
Attachment 4 - Analysis, The Pew Charitable Trusts.pdf
STAFF: Maria Garnett, Council Policy Analyst, (804) 298-5052