The Ohio School Employees Retirement System board voted unanimously in September to grant a 2.5% cost-of-living adjustment for 2027, the maximum that Ohio law allows the board to award. The increase falls short of the 3.5% rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between June 2025 and June 2026. Retirees will not see it all at once on Jan. 1: it is applied on each recipient’s own retirement anniversary, and members who retired recently face a wait of several years.
A 2.5% vote taken against 3.5% inflation
SERS announced the action on Sept. 24 in a notice headlined “Board Approves Maximum COLA for 2027”. The notice says that by statute the SERS COLA is influenced by the year-to-year change in CPI-W from June to June, which was 3.5% for the latest period, and that the board settled on 2.5%. The page names no individual trustee, so the vote is attributed to the board as a body.
The gap is one full percentage point. On a hypothetical annual pension of $30,000, a 2.5% raise adds $750 a year, while a raise matching 3.5% inflation would add $1,050. The difference of $300 is the amount by which purchasing power slips even after the board acts at the top of its authority. The 2026 adjustment also sat at the 2.5% ceiling, so 2027 marks a second consecutive year at the maximum.
Why 2.5% is the ceiling and not a choice
The limit is written into Ohio Revised Code section 3309.374. Before 2018, the section directed annual increases of three percent. The current text caps increases at two and one-half percent and says the retirement board “may annually increase” benefits, tying the amount to the percentage increase, if any, in the consumer price index over the twelve months ending June 30.
SERS’s own COLA information page lays out the same structure: a floor of 0% and a cap of 2.5%, with the board able to adjust the figure if the actuary determines that it will not materially impair the funded status. For 2027 the actuarial firm CavMac confirmed that the 2.5% “will not materially impair SERS’ funded status,” according to the board notice. The prior year followed the same pattern, as the COLA page records a 2.5% increase approved Sept. 19, 2025, when CPI-W stood at 2.6%.
Anniversary dates instead of a January raise
The 2027 adjustment does not arrive on one date for every retiree. Both SERS pages say the COLA takes effect on the benefit anniversary of each recipient’s retirement effective date, not on Jan. 1. A retiree whose benefit began in June, for example, would see the raise in the month of that anniversary.
The timing has a practical effect on 2027 cash flow. The percentage is the same for every eligible recipient, but a retiree whose anniversary falls late in the year spends more months of 2027 at the old monthly amount than one whose anniversary falls early, so the raise is spread unevenly across the calendar. The statute adds that the date of the first increase becomes the anniversary date for every future increase, which means the month is set once and stays fixed.
A four-year wait for retirements on or after April 1, 2018
SERS states that benefit recipients whose benefit effective date is on or after April 1, 2018 must wait until the fourth anniversary of their allowance or benefit before receiving a COLA. The COLA page adds that benefits drawn from the same member account will not exceed a combined four-year waiting period. The rule reads as a date test on the benefit effective date: a benefit that began before April 1, 2018 falls outside the four-year wait that the page describes.
The statute itself points the same way: recipients must receive benefits for twelve months before a first increase, except that those whose benefits began after Jan. 1, 2018 wait for the number of anniversaries the retirement board determines. The April 1, 2018 date and the four-year length are the board’s rule as SERS publishes it.
How the raise compares with Social Security and with tax withholding
The Social Security Administration’s latest adjustment was 2.8%, effective December 2025 and payable in January 2026, a figure based on third-quarter CPI-W comparisons. A retiree who draws both a SERS pension and Social Security therefore receives a different percentage from each program on a different schedule.
Pension income is generally taxable as well. IRS Topic 410 states that pension payments are fully taxable when no after-tax contributions were made, and that the taxable portion is generally subject to federal income tax withholding adjustable on Form W-4P. A larger pension check can therefore raise the tax bill slightly, which reduces the net effect of the increase.
The controlling record for the 2027 figure remains the Sept. 24 board notice: a unanimous vote, 2.5%, CPI-W at 3.5% and the anniversary-date rule.
Sorting taxes on pension, Social Security and account withdrawals
Retirees who draw a pension, Social Security and money from retirement accounts often cannot tell which withdrawals push more of their Social Security into taxable income. The question is usually settled by working through the numbers in a set order rather than by guessing.
The Retirement Tax & Withdrawal Planner is a 12-page planner whose four calculators (provisional income, IRMAA tier, RMD schedule and Roth bracket fill) and account withdrawal order help a reader test how a pension increase changes the tax picture.
Open the provisional income and Roth bracket fill calculators to test a pension increase →
This article was produced with AI assistance and checked against the primary sources linked above.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
