LEXINGTON, Ky. — A Police and Fire Pension special subcommittee approved four scenarios for cost-of-living adjustments to be sent for actuarial study on July 8, addressing a contentious issue that has divided the fund's board and strained city finances.

The pension committee discussed multiple approaches to COLA adjustments, including increases tied to the Consumer Price Index ranging from 1 to 5 percent annually, a 13th check paid every three years, and potential restructuring of the tier system. The debate centered on balancing the financial security of more than 1,400 retirees and their widows against mounting unfunded liabilities and the city's escalating pension obligations.

The discussion proved heated, with retirees emphasizing the need for cost-of-living support as inflation erodes benefit values, while other board members raised concerns about the compounding costs of permanent COLA increases. The city currently contributes roughly 47 percent of police and fire salaries to the pension fund — among the highest contribution rates in the nation — and faces mounting pressure as the fund works to close a $386.6 million unfunded liability.

The pension fund surpassed $1 billion in assets in 2025, though its funded ratio stands at 72.5 percent. Some board members argued the fund's strong recent investment performance — it returned 10.87 percent in the most recent valuation year — provided capacity to support modest COLA increases without jeopardizing solvency.

The actuarial analysis will inform future legislative proposals. No Lexington pension bill appeared in the 2026 Kentucky General Assembly session, with board leaders indicating any changes will likely be pursued in 2027.