The Kentucky Public Pension Protection and Modernization Act is a bold, consensus plan that would help protect the retirement savings of Kentucky's teachers, local and state employees, while continuing to allow the state to attract the best and brightest to our schools and to local and state governments.
The Act was developed as the result of months of intensive consultations with legislators, local government officials, pension system staff, and representatives of affected employee groups. It represents a bi-partisan, consensus approach to address this critical pension issue.
"I'm pleased to stand with my fellow elected officials and the people who make our schools and government work-- teachers and public employees -- to introduce this important package of reforms that will establish better oversight, address the funding challenges and modernize the systems for the next generation of employees," said Gov. Beshear.
"As chair of the House State Government committee, I understand the issues facing our retirement systems and the need for changes to ensure its future viability," said Rep. Cherry. "I have been impressed with the approach that the governor has taken in the development of these recommendations. Together with all the stakeholders, he has put together a responsible plan and I'm pleased to be the bill's sponsor."
"Addressing the CERS crisis is the number one legislative priority of cities in the commonwealth," according to Sylvia L. Lovely, executive director/CEO of the Kentucky League of Cities. "We appreciate the governor's willingness to offer assistance and we look forward to working with the General Assembly to find a solution."
Bob Arnold, executive director/CEO of the Kentucky Association of Counties echoed Lovely's comments.
"We appreciate the efforts of Governor Beshear and look forward to working with the House and Senate to ensure that the past promises made to county employees are fulfilled and to maintain appropriate benefits that allow counties to continue to attract and retain dedicated, qualified employees without unduly burdening taxpayers," Arnold said.
The Kentucky Retirement Systems, which manages the pensions of state and local government employees and the state police, and the Kentucky Teachers' Retirement Systems, together face an estimated $26 billion in unfunded liabilities. This projected liability is the result of benefit enhancements with insufficient cost analysis; dramatic federal accounting rule changes; double digit annual increases in health care costs; and inadequate investment returns due to a volatile stock market and unanticipated liabilities.
Highlights of the Kentucky Public Pension Protection and Modernization Act include the following:
Adjustments for Current Teachers, Employees and Retirees:
- Setting the annual cost of living adjustment (COLA) at 1.5 percent, providing equity between the KRS and KTRS. The COLA may be enhanced if approved and pre-funded by the legislature;
- Reducing health insurance costs through the collaboration of all stakeholders, while improving and expanding wellness programs; and
- Reforming provisions for returning retirees that will strengthen the system for current employees, teachers and retirees.
- Incentives for employees to work longer;
- Longer vesting periods for retirement and health benefits;
- Closing loopholes that provide benefits to few, but significant costs to the state and other retirees;
- Limiting hazardous duty benefits to those who daily risk their lives; and
- Differentiating between long-term, career government employees and short-term hires.
"After all, it is the hard-earned money of our public employees, teachers and taxpayers that funds the pension benefits upon which state and local government employees, teachers and retirees depend and they deserve to know how their financial future is being managed," said Gov. Beshear.
