Updated October 30, 2026. Quick answer: The New Mexico Educational Retirement Board adjusts annuities each July 1 by one half of the CPI change, with a two percent minimum (the factor equals the CPI change when the CPI rises less than two percent) and a four percent cap, and the factor is scaled down when the plan is underfunded. For July 1, 2026 the actuary’s January 2026 letter set 2.0% for disability retirees retired at least three years, 1.80% for non disability retirees with 25 or more years of service and a benefit at or below $1,834.85, and 1.60% for all other non disability retirees. The 2027 adjustment is not set yet.
More on public pension retirement ages and eligibility: the New Mexico ERB retirement age and eligibility rules by tier.
How the ERB adjustment works
The ERB COLA page says: “Thereafter, each July 1, a retiree’s annuity will be adjusted by either one-half the percent change in the Consumer Price Index of the preceding calendar year or four percent, whichever is less.” The ERB’s actuary, in its January 2026 letter, explains the limits: “The adjustment factor cannot exceed four percent, nor be less than two percent. However, if the percentage increase of the consumer price index is less than two percent, the adjustment factor will be equal to the percentage increase of the consumer price index.”
The letter also scales the factor to the plan’s funded ratio: “If the plan’s funded ratio for the next preceding fiscal year is 90% or less, Section 22-11-31(C)(3) indicates that the adjustment factor for all non-disability retirements will be 90% of the adjustment factor defined in Section 22-11-31(C)(1) if the member had 25 or more years of service credit at retirement and whose annuity is less than or equal to the median adjusted annuity for the fiscal year next preceding the adjustment date.” It continues: “For all other retirees eligible for an adjustment, the adjustment factor will be 80% of the adjustment factor defined in Section 22-11-31(C)(1).”
The July 1, 2026 factors
The letter reports: “The increase this year is 2.698%.” It also reports: “The funded ratio as reported in the actuarial valuation report for the next preceding fiscal year, or the actuarial valuation report as of June 30, 2025, was 67.8%.” The result is a set of three factors. The first is 2.0%, for retirees whose 65th birthday (67th if the member joined on or after July 1, 2013) falls in or before the current calendar year; the letter says: “This adjustment factor will apply to all disability retirements who have been retired for at least three years, i.e., members who began receiving a disability retirement benefit in calendar year 2022 or earlier.” The second: “Since the plan’s funded ratio as of June 30, 2025 is 90% or less, all non-disability retirements with 25 or more years of service credit at retirement and whose monthly annuity is less than or equal to $1,834.85 will receive an annual adjustment of 1.80%.” The third: “All remaining non-disability retirements will receive an annual adjustment of 1.60%.”
Who is eligible and who waits
The ERB page says: “If you joined NMERB prior to July 1, 2013, you may begin receiving a COLA on July 1 of the year in which you reach age 65 or July 1 of the year following your effective retirement date, whichever date is later.” For newer members, “If you joined NMERB on or after July 1, 2013 you may begin receiving a COLA on July 1 of the year in which you reach age 67 or July 1 of the year following your effective retirement date, whichever date is later.”
On the 2026 adjustment, the letter says: “Note that these adjustments only apply for members who retired in calendar year 2025 or earlier; members who retired in 2026 are ineligible.”
Where 2027 stands
The July 2027 ERB adjustment is not set yet: it depends on the next CPI-U averages and funded ratio, and this page updates when the ERB’s actuary publishes the letter for that adjustment.
A worked example
As a computed illustration (not a source figure), a non disability retiree with a monthly annuity of $2,000 (invented, for the computation) at the 1.60% factor would see an increase of $32 (computed) a month. At the 1.80% factor the same annuity would see $36 (computed) a month.
Common mistakes
- Reading the CPI change as the COLA. The statute uses one half of the CPI change, subject to a two percent minimum, and then the funded ratio scales the factor down.
- Assuming the 2.0% factor applies to every retiree. The letter gives 2.0% to disability retirees retired at least three years and 1.80% or 1.60% to the other non disability retirees.
- Expecting the July 1, 2026 adjustment after retiring in 2026. The letter says members who retired in 2026 are ineligible.
Related: New Mexico ERB retirement decisions, how public pension decisions work, and whether New Mexico taxes pensions.
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Answer againSources
- New Mexico Educational Retirement Board, Cost of Living Adjustment | NM Educational Retirement Board: www.erb.nm.gov
- GRS for New Mexico Educational Retirement Board, 2026 Cost of Living Adjustment for Retirees and Anti-Spiking Threshold (Gabriel, Roeder, Smith & Company letter): www.erb.nm.gov
- Related official page (not quoted): IRS Tax Topic 410, Pensions and annuities: www.irs.gov
- Related official page (not quoted): IRS Tax Topic 411, Pensions: the General Rule and the Simplified Method: www.irs.gov
Read from the primary documents linked above on October 30, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.