A pension reform bill filed in the Kentucky Senate would enroll future teachers in a new cash balance plan and give other future and current workers the option of participating in a 401(a) plan.
Under the bill filed by Republican Sen. Joe Bowen Tuesday, teachers hired after Jan. 1, 2019, would be enrolled in a cash balance plan instead of the existing defined benefit plan at the $18.1 billion Kentucky Teachers' Retirement System, Frankfort, according to bill documents. Cash balance plans would be maintained for other current and future employees that make up the separate $17.4 billion Kentucky Retirement Systems, Frankfort. However, current and future non-hazardous employees, excluding teachers, would have the option of participating in a new 401(a) defined contribution plan. Under the 401(a) plan, employers would contribute 4%.
Additionally, the bill reduces retired teachers' cost-of-living adjustments to 0.75% from 1.5% if the teachers' system is less than 90% funded as of the most recent actuarial valuation. The plan is currently less than 60% funded. For currently retired teachers, this applies to the period between July 1, 2019, and July 1, 2030. For future retired teachers, this applies up to 12 years after retirement.
The bill also calls for the formation of an advisory committee to study a separation or restructuring of KRS' underlying pension funds and present recommendations to the Public Pension Oversight Board by Dec. 1, 2019. The board helps the General Assembly with its analysis and oversight of the administration, funding, laws and regulations relating to the state retirement systems.
Tuesday's bill marks a significant departure from the reform recommendations released by Gov. Matt Bevin and Republican legislative leaders in October, which called for automatically moving some future workers and eventually some active workers into defined contribution plans, among other changes.
A news release from Mr. Bevin's office in October pegged total unfunded liabilities for KRS, KTRS and the $327 million Kentucky Judicial Form Retirement System, Frankfort, at $64 billion.