Updated October 30, 2026. Quick answer: The South Dakota Retirement System (SDRS) COLA is an annual increase effective July 1, set each year by the Board of Trustees at the CPI-W increase, with a minimum of 0% and a maximum of 3.5% when affordable. When the plan is below 100% funded, the maximum is reduced to the COLA that keeps SDRS 100% funded. The Board set the July 1, 2026 COLA at 1.56%. The July 2027 COLA is not published.
The rule in the handbook
The SDRS handbook says: “A cost-of-living adjustment (COLA) is an annual increase in the amount of monthly benefits effective on July 1 of each year for all eligible member benefit payments.” “The process to determine the COLA considers affordability based on SDRS’ Fair Value Funded Ratio and the annual inflation rate as defined by the Consumer Price Index (CPI-W). The minimum annual COLA is 0 percent and the maximum is 3.5 percent.” On eligibility: “To be eligible for a COLA, you must have received full benefit payments and not been employed by an SDRS-covered employer during the entire previous fiscal year period (July 1-June 30).”
The rule in the statute
The statute, as printed in the board packet, reads: “3-12C-704. The COLA payable is the baseline COLA or the restricted COLA, as applicable. The baseline COLA is equal to the increase in the consumer price index, but no less than zero percent and no greater than three and one-half percent.” The Board minutes record the presenter’s own summary of it: “SDCL 3-12C-704 states that the cost-of-living adjustment (COLA) shall be established by the Board for each fiscal year, based on the fair value funded ratio, actuarially determined contribution rate, and the increase in the Consumer Price Index.” When the plan is below full funding, an SDRS presentation says: “When not affordable, COLA maximum is reduced to COLA that keeps SDRS 100%”. It also says: “COLA equals inflation, up to 3.5% when affordable”.
The 2026 COLA
The December 10, 2025 minutes record: “ESTABLISH THE COLA EFFECTIVE JULY 1, 2026, AT 1.56 PERCENT. THE MOTION PASSED UNANIMOUSLY ON A VOICE VOTE.” The 2025 CPI-W increase of 2.76% was above that restricted maximum.
The range for July 2027
The Board of Trustees meeting material gives only a range for next year: “Fiscal year 2026 returns below approximately negative 7.7 percent would require a corrective action recommendation and no COLA. Fiscal year 2026 returns greater than 13.6 percent would result in the full 0 to 3.5 percent COLA range applying for the July 2027 COLA.”
What the documents do not say
No valuation for the year ending June 30, 2026 was archived, and the minutes’ description of the statute is the presenter’s summary, not the statute text. The handbook read covers members who joined on or after July 1, 2017; Class B, Judicial and Public Safety handbooks were not archived.
Where 2027 stands
The July 2027 SDRS COLA is not published: the Board of Trustees sets it each year, and the 2026 COLA was voted on December 10, 2025.
Common mistakes
- Expecting 3.5% every year. That is the maximum, and it applies only when affordable.
- Treating the 2026 COLA as the rate for 2027. The Board votes a new figure each year.
- Expecting a COLA without meeting the handbook’s test: full benefit payments and no employment with an SDRS-covered employer during the entire previous fiscal year.
Related: South Dakota Retirement System retirement decisions, how public pension decisions work, and whether South Dakota taxes pensions.
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Answer againSources
- South Dakota Retirement System, Class A Handbook for Generational Members, Information About Your SDRS Retirement Benefits: www.sd.gov
- South Dakota Retirement System, Agenda, Joint Meeting SDRS Board of Trustees and Retirement Laws Committee, December 10, 2025 (with presentations): boardsandcommissions.sd.gov
- South Dakota Retirement System, SDRS Board of Trustees agenda and meeting material, April 1, 2026 (includes Dec 10, 2025 minutes): boardsandcommissions.sd.gov
- South Dakota Retirement System, SDRS Update (slide deck dated June 4, 2025): boardsandcommissions.sd.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.