Capped-and-Floored COLA Calculator
Apply both adjustment limits.
Capped-and-Floored COLA Calculator: Scenario Inputs
Annual percentage rate or benchmark index change.
Inflation & Purchasing Power Analysis
Over 3 years at 3.5% inflation, a $75,000 salary requires $83,154 to retain equal purchasing power. Without matching raises, your real compensation experiences an effective reduction of $7,355 (-9.81%).
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How Capped-and-Floored COLA Calculator Works?
The Capped-and-Floored COLA Calculator sets a lower and upper limit for each year's pay adjustment. It raises inflation below the floor to the floor, and lowers inflation above the cap to the cap.
Enter pay or benefit
Type the salary or pension that the 2 band limits apply to.
Set floor and cap
Type the minimum and maximum COLA.
Enter yearly inflation
Type inflation for each year, including years below 0%.
Read the result
The output shows each year's COLA, the band edge used and the gap against full indexation.
Capped-and-Floored COLA Calculator Formula
The Capped-and-Floored COLA formula sets each year's COLA to inflation, limited by the floor below and the cap above.
COLAt = min(max(πt, Floor), Cap)
Variables
- Floor
- Minimum COLA
- Cap
- Maximum COLA
- πt
- Inflation in year t
Worked example
With a 1%–3% band, 6.5% inflation gives a 3.0% COLA, and 0.4% inflation gives a 1.0% COLA. Over the 6 example years, a $40,000 benefit grows to $45,480, against $46,637 under full indexation.
Capped-and-Floored COLA Calculator Conversion Table
This table applies a 1%–3% COLA band to a $40,000 benefit over 6 example years.
| Year | Inflation | Banded COLA | Rule applied | Banded pay | Fully indexed pay |
|---|---|---|---|---|---|
| Year 1 | +0.4% | 1.0% | Floor | $40,400 | $40,160 |
| Year 2 | +2.2% | 2.2% | Inflation | $41,289 | $41,044 |
| Year 3 | +6.5% | 3.0% | Cap | $42,527 | $43,711 |
| Year 4 | +4.1% | 3.0% | Cap | $43,803 | $45,504 |
| Year 5 | -0.3% | 1.0% | Floor | $44,241 | $45,367 |
| Year 6 | +2.8% | 2.8% | Inflation | $45,480 | $46,637 |
What is Capped-and-Floored COLA Calculator?
The Capped-and-Floored COLA Calculator is a tool that applies a cost-of-living adjustment (COLA) between a minimum and a maximum rate, such as 1% to 3%. The COLA follows inflation inside the band and stops at the band edges.
A band of 1% to 3% shares inflation risk: recipients gain in low-inflation years and payers gain in high-inflation years.
What are the uses of Capped-and-Floored COLA Calculator?
There are 4 main uses of the Capped-and-Floored COLA Calculator.
Design balanced COLAs
Set a band that shares inflation risk fairly.
Model pension rules
Apply banded COLA rules used by public pension plans.
Test band widths
Compare 0%–2%, 1%–3% and 2%–5% bands.
Forecast costs
Estimate plan costs across inflation scenarios.
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