Kentucky Retirement Systems
Kentucky Public Pensions Task Force Issues Recommendations

Press Release Date:  Wednesday, November 21, 2012  
Revision Date:  Monday, September 16, 2013 
Contact Information:  Kentucky Retirement Systems
Questions call: 1-800-928-4646

The recommendations are contained in a PowerPoint presentation and in a matrix which compares current plan components to those recommended by the Task Force. KRS provided its written comments on the options being considered by the Task Force and analyses of the impact of various funding proposals prepared by the KRS actuary – Cavanaugh Macdonald. You can access the KRS comments and accompanying documents by clicking on the lnks at the bottom of the article.

The Task Force will incorporate its findings and recommendations into a final report which will be completed by December 7 and forwarded to the Kentucky General Assembly. The recommendations of the Task Force will be put into bill draft form and considered by the General Assembly during its 2013 Regular Session which begins with an organizational session on January 8, 2013. KRS will work with the staff of the Legislative Research Commission and legislators as legislation is drafted and considered before and during the 2013 session. We will continue to keep our members informed as developments occur. The following constitutes a summary of the principal recommendations of the Task Force.

RECOMMENDATION #1: Begin paying the full Actuarially Required Contribution (ARC) in Fiscal Year 2014-2015 for KERS Nonhazardous, KERS Hazardous, and SPRS.

RECOMMENDATION #2: Repeal the current statutory language establishing an automatic 1.5% Cost of Living Adjustment (COLA), unless reduced or suspended by the General Assembly. In the future, COLAs would have to be specifically granted by the General Assembly.

RECOMMENDATION #3: Reset the amortization period for paying off the KERS, CERS, and SPRS unfunded actuarial liability (UAL) to 30 years, effective July 1, 2014. The amortization period was reset in 2007 to a closed 30-year period which reduces by one year each year. Currently, KRS has 26 years remaining on the UAL amortization period (as of the June 30, 2011 actuarial valuation).

RECOMMENDATION #4: Reemployment after retirement. Extend the required break in service (employment) to one (1) year for hazardous retirees who are reemployed in a full-time hazardous position on or after July 1, 2013; and extend the required break in service (employment) to two (2) years for nonhazardous retirees who are reemployed in on or after July 1, 2013. The current required break in service is three (3) calendar months for nonhazardous retired-reemployed persons and one (1) calendar month for hazardous employees to return to full-time hazardous employment.

RECOMMENDATION #5: Pension spiking, Currently, benefits are based upon salary earned during the last 3 or 5 years of employment. Compensatory payouts are not included for new participants on or after September 1, 2008, and the employer pays the employer contribution on the additional salary earned. Recommendation #5 would require employers to also pay any additional actuarial costs for salary increases above 10% during the last five (5) years of employment.

RECOMMENDATION #6: Transparency. Require KRS to establish a web page with information that is easily available and understood by the public regarding its financial and actuarial condition.

RECOMMENDATION #7: Change the current KRS Board of Trustees structure from nine (9) members to eleven (11) members. Five (5) members would be elected (2 KERS, 2 CERS, and 1 SPRS). Five (5) members would be appointed by the Governor with three (3) of the trustee positions appointed from lists provided by the Kentucky League of Cities, the Kentucky Association of Counties, and the Kentucky School Board Association. One (1) member would be the Secretary of the State Personnel Cabinet.

RECOMMENDATION #8: Create a Hybrid Cash Balance Plan for members who begin participating in the Systems on or after July 1, 2013. The new plan would be administered by Kentucky Retirement Systems, and nonhazardous employee accounts would include a 5% employee contribution and a 4% employer contribution (8% employee contribution and a 7.5% employer contribution for hazardous employees), with a guaranteed annual return of 4%. The employee accounts would receive 75% of returns above 4%, and the employee would be vested for employer contributions and investment return after five (5) years. Upon retirement, an employee would be able to purchase an annuity based on the contents of their account. The annuity would be based on the current mortality and investment assumptions used by KRS.

Pension Task Force Powerpoint Presentation:

Pension Task Force Matrix:

KRS Comments to Task Force: