Gov. Matt Bevin says he promises to fully fund Kentucky’s pension systems for the first time in the state’s history.
Sam Upshaw Jr./Louisville Courier Journal
Editor’s note: This story has been updated to include fresh information on the 401(k) entry.
The long-awaited pension reform bill is expected to be filed in the Kentucky Senate or House this week. It is a revision of the reform plan released by Gov. Matt Bevin and top Republican leaders of the General Assembly.
It is the product of weeks of secret discussions among leaders of the Republican majorities in the House and Senate, and is expected to significantly pull back from the most unpopular aspects of the October plan.
Here are some of the most important questions that stakeholders have been asking for weeks – questions that will be answered when the bill is filed.
1. Will retired teachers lose their cost of living adjustments?
Will the bill call for suspending or reducing the 1.5 percent annual cost of living benefit adjustment retired teachers now get? The October plan included it as a way to ease government’s soaring costs for pensions, but opponents say it is a violation of promised benefits to retired teachers who are not part of Social Security and do not get Social Security’s cost of living increases.
2. Shift to 401(k)-like benefits?
Senate leaders have said the bill will not move those in current “defined benefit” pension plans to 401(k)-like plans after 27 years as the October plan would. And Wednesday they said the new proposal, which hasn’t been filed, would not require new hires to move to a 401(k)-style plan either.
3. The 3 percent “pay cut”
The October plan would have required teachers and public employees pay 3 percent more of their salaries for retiree health benefits. It would result in big savings to the state, but public employees protest the 3 percent cut in take-home pay. The revised bill is expected to reduce this payment and the question is how much will it be reduced or could it be completely eliminated?
4. The Teachers’ Retirement System board
Will there be changes in the makeup of the TRS board that transfers control from elected members of the system to political appointees?
5. Local Government Costs
Will the bill give cities and counties some relief from massive increases in pension contributions later this year by phasing in the increase over a period of time?
The October plan would have suspended pensions of most retirees who take another public sector job while they hold that public sector job. But local governments complained this could cause them problems. Will this provision be changed in, or dropped from, the revised bill?
7. “Level Dollar” funding
Will the bill require a new method for government payments for public pensions called “level dollar” funding – an approach that would more quickly reduce Kentucky’s $43 billion pension debts? If so, when and how will this be implemented are crucial additional questions because this approach would – for the next several years – require massive additional increases in government contributions to some plans – particularly the Teachers’ Retirement System.
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