“There is no such thing as an insurmountable obstacle,” said Gov. Bevin. “We, as a Commonwealth, have a moral and legal obligation to fulfill the promises that have been made to our public employees. This is not just about fixing our present underfunding problem. It is also about ensuring that we leave a better, financially stable Kentucky to our children.
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Highlights of the plan include (click to view):
- “Keeping the Promise” will save Kentucky’s pension systems and meet the legal and moral obligations owed to current and retired teachers and public servants
- Requires full payment of ARC and creates new funding formula that mandates hundreds of millions more into every retirement plan, making them healthier and solvent sooner
- For those still working: no increase to the full retirement age, and current defined benefits remain in place until the employee reaches the promised level of unreduced pension benefit
- For those retired: no clawbacks or reductions to pension checks, and healthcare benefits are protected
- For future non-hazardous employees and teachers: enrollment in a defined contribution retirement plan that will provide comparable retirement benefits
- For current and future hazardous employees: will continue in the same system they are in now
- Closes loophole to ensure payment of death benefits for the families of hazardous employees
- Stops defined benefits plan for all legislators, moving them into the same defined contribution plan as other state employees under the jurisdiction of the KRS Board
- No emergency clause: law will not go into effect until July 1, 2018
- Structural changes should improve the Commonwealth’s rating with credit agencies, which have downgraded Kentucky’s rating, citing unfunded pension burdens
- Gov. Bevin will call the General Assembly into special session in the coming weeks to pass into law these much-needed reforms.
“Our state’s pension systems are among the worst-funded in the country," said Senate President Stivers. "In order to move these systems forward along the path to solvency, bold action is required. The framework that we have in place for a pension reform bill is morally right, fiscally responsible, and legally defensible. I thank Governor Bevin, Speaker Hoover, and all my colleagues in the Legislature for their help and support throughout this process, and I look forward to hearing feedback from constituents and moving forward in the coming weeks.”
“Kentucky’s pension problem has been a long time in the making, and has only gotten worse by past leaders who failed to act, or even acknowledge, the issue,” said Speaker Jeff Hoover. “Unlike in the past, inaction is simply not an option. The New Majority is committed to address the pension problem by providing a strong foundation that results in long-term pension stability for public workers and teachers.”
The Commonwealth’s three major public pension systems — Kentucky Retirement Systems (KRS), Teachers’ Retirement System of Kentucky (TRS), and the Kentucky Judicial Form Retirement System (KJFRS) — collectively administer eight distinct retirement plans.
The state currently has an unfunded pension liability of at least $64 billion, ranking as the worst funded system in the nation. Using prior funding patterns, experts conclude that the Kentucky Employee Retirement System, Non-Hazardous (KERS-NH), will run completely out of money by the year 2022 if meaningful pension reform does not occur.
With $7 billion in negative cash flow over the past decade, Kentucky’s pension spending has been increasing nearly five times as fast as revenues. This effectively reduces funds available for other important budgetary priorities such as education, healthcare, public safety and transportation infrastructure.
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