Kentucky Retirement Systems
Kentucky Retirement System Adopts FY 2016 Employer Contribution Rates
At its December 4 meeting, the Kentucky Retirement Systems’ (KRS) Board of Trustees approved contribution rates for Kentucky’s public employers for the 2016 fiscal year. The rates apply to local governments participating in the County Employees Retirement System (CERS), as well as the Commonwealth, its agencies and instrumentalities that participate in the Kentucky Employees Retirement System (KERS) and the State Police Retirement System (SPRS).
THREE SYSTEMS (5 Pension Plans & 5 Insurance Plans): KRS administers three systems: KERS for state employees; CERS for local government employees; and SPRS for uniformed state police personnel. KERS and CERS have both a hazardous duty pension plan for public safety employees (mainly police and fire) and a nonhazardous duty pension plan for all other full time employees. All participants in the SPRS pension plan are hazardous duty employees. Additionally, each nonhazardous and hazardous plan includes an insurance plan.
The retirement contribution paid by Kentucky’s public employers is calculated as a percentage of the compensation earned by each full time employee. The employer contribution rate is set each year by the KRS Board based on an actuarial valuation. The rate consists of a pension payment and a health insurance payment. Local government employers in the CERS system must, by law, pay 100% of the rate adopted by the KRS Board. The Commonwealth, its agencies and instrumentalities participating in the KERS and SPRS systems pay the rate set by the General Assembly every two years in its budget legislation.
RATE CHANGES: For CERS employers, the 2016 fiscal year rates will be lower than the rates being paid in the current fiscal year. This means that public employers in these plans will save money next year on the required retirement contributions for their employees. The rates for employers participating in the KERS and SPRS systems will remain the same because they were set for both fiscal years 2015 and 2016 in the budget bill (HB 235) enacted during the 2014 General Assembly session and the KRS Board has no authority to change the rates. The chart below compares the 2015 and 2016 fiscal year rates.
PLAN NAME FY 2015 CONTRIBUTION RATE FY2016 CONTRIBUTION RATE
KERS Nonhazardous 38.77% 38.77%
KERS Hazardous 26.34% 26.34%
SPRS 75.76% 75.76%
CERS Nonhazardous 17.67% 17.06%
CERS Hazardous 34.31% 32.95%
PERFORMANCE/FUNDING LEVELS: During this past year, KRS earned a 15.55% investment return on its pension assets and a return of 14.89% on its insurance assets. Despite these excellent returns, the KERS nonhazardous pension plan and the SPRS pension plan remain seriously underfunded. The KERS nonhazardous pension plan has only 21% of the assets necessary to pay long term liabilities and lost approximately $182 million dollars during the year from its asset base. The SPRS pension plan has a funding level of 35.64% based on the actuarial value of assets on hand. These funding levels are lower than the previous year’s level. The other three pension plans and all five insurance plans experienced an increase in funding level and an increased asset base for the 2014 fiscal year.
Copies of the complete annual actuarial valuations for each plan, the 2014 KRS audited financial statements, and the KRS Comprehensive Annual Financial Report (CAFR) can be found on the KRS website at www.kyret.ky.gov.