(a) Commencing October 1, 1994, each person, except those whose employer participated in the Employees' Retirement System pursuant to Sections 36-27-6, 36-27-7, and 36-27-7.1, whose effective date of retirement for purposes of receiving benefits from the Employees' Retirement System is prior to October 1, 1994, and who is receiving or is entitled to receive a monthly allowance from the Employees' Retirement System, shall receive a cost-of-living increase of not less than twenty-five dollars ($25) per month and the increase shall be more if determined by computing the sum of the following three factors:

(1) Two and one-half (2.5) percent of the individual's current gross monthly benefit, including all previous increases.

(2) One dollar and fifty cents ($1.50) for each year of creditable service in covered employment prior to retirement.

(3) One dollar ($1) for each year since the effective date of retirement or the date of death in the case where the employee dies prior to retirement.

Retirees who chose Options 2, 3, or 4 shall receive the cost-of-living increase reduced by the same percentage as the reduction which occurred because of the option selected unless the designated beneficiary under the option is deceased on October 1, 1994, in which case the increase shall not be reduced.

(b) Beneficiaries of deceased members or deceased retirees, except where the deceased member or deceased retiree retired from an employer participating in the Employees' Retirement System pursuant to Sections 36-27-6, 36-27-7 and 36-27-7.1, if the date of death for the deceased member, or the effective date of retirement for the deceased retiree for purposes of receiving benefits from the Employees' Retirement System was prior to October 1, 1994, shall receive the cost-of-living increase in the amount attained by the retiree reduced by the retiree's option election factor but the reduction shall not make the increase less than twenty-five dollars ($25) per month.