cost-of-living adjustment

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Cost-of-Living Adjustment

An increase to a wage, salary, or pension designed so that the real value remains the same. That is, a cost-of-living adjustment increases the underlying wage, salary, or pension so that it keeps pace with (but does not run ahead of) inflation. Federal pensions and Social Security include cost-of-living adjustments, though few other pensions do.
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Cost-of-living adjustment (COLA).

A COLA results in a wage or benefit increase that is designed to help you keep pace with increased living costs that result from inflation.

COLAs are usually pegged to increases in the consumer price index (CPI). Federal government pensions, some state pensions, and Social Security are usually adjusted annually, but only a few private pensions provide COLAs.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

cost-of-living adjustment (COLA)

A change in payments, such as rent in subsidized housing, based on a change in the index that measures inflation.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
GASB: The projection of pension benefit payments for purposes of calculating the employer's total pension liability and the service-cost component of pension expense should include the projected effects of the following when relevant to the amounts of benefit payments: 1) automatic cost-of-living adjustments (COLAs); 2) future ad hoc COLAs in circumstances in which such COLAs are not substantively different from automatic COLAs; 3) future salary increases; and 4) future service credits.
Automatic COLAs were adopted in 1975 so that benefits for people on fixed incomes would keep pace with rising prices.
Automatic COLAs always have been relatively rare in private-sector plans, says John Ehrhardt, a New York-based Principal at consultant Milliman, Inc.
Several major changes to Social Security occurred with the 1972 amendment: automatic COLAs were instituted, a minimum monthly benefit was established, monthly benefits were significantly increased to those individuals waiting until age 65 to retire, and a system for automatic increases in the amount of earnings subject to Social Security taxation was developed.
"It restores some equity between retirees and workers who now support the system but do not get automatic COLAs on their wages every year," said Hollings.

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