(a) The minimum retirement allowance for an employee, during the remainder of such employee's life, shall be computed as follows:

(1) The retirement allowance of such employee who retires upon reaching the minimum age of fifty (50) years or older after a total of not less than twenty-five (25) separate years of service in either or both departments shall be two percent (2%) multiplied by the number of years of service, up to a maximum of thirty (30) years of service, multiplied by such employee's highest monthly salary during such employee's period of service in the department.

(2) Such allowance shall not be less than fifty percent (50%) or greater than sixty percent (60%) of such employee's highest monthly salary during such employee's period of service in the department.

(b) In addition to the retirement allowance, a retired employee shall be paid a cost of living benefit each month beginning January 1 of the year following the twenty-fourth month of such employee's retirement. Such benefit shall be adjusted annually thereafter and shall be computed by multiplying the retirement allowance by the percentage of increase or decrease in the consumer price index, as compiled by the bureau of labor statistics in the United States department of labor, for the twelve-month period ending September 30 of each year. Such percentage shall not exceed three percent (3%) in any year. The retirement allowance shall not be decreased below the amount provided in subsection (a). Such percentage shall be applied only to the retirement allowance and shall not be compounded from year to year.

(c) The retirement allowance of the survivor or beneficiary of any employee or retired employee shall be computed by using the allowances in subsection (a). The cost of living benefit shall be computed in the same manner as provided in subsection (b).