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Legislation

Kentucky governor signs pension reform bill; state attorney general, 2 groups file lawsuit

Kentucky Gov. Matt Bevin

Kentucky Gov. Matt Bevin signed into law Tuesday a pension reform bill that would put future teachers in a new cash balance plan. On Wednesday, Kentucky Attorney General Andy Beshear, the Kentucky Education Association and the Kentucky State Fraternal Order of Police filed a suit against the law arguing that the measure violates workers' "inviolable contract" by reducing their rights and benefits.

Under the measure, which passed the General Assembly on March 29 , teachers hired after Jan. 1, 2019, will be enrolled in a cash balance plan instead of the existing defined benefit plan at the $18.1 billion Kentucky Teachers' Retirement System, Frankfort.

Meanwhile, cash balance plans will be maintained for other current and future employees who make up the separate $17.4 billion Kentucky Retirement Systems, Frankfort. However, current and future KRS participants will have the option of participating in a new 401(a) defined contribution plan. Under the 401(a) plan, employers would contribute 4% of an employee's salary and workers, 5%.

Other changes under the law include a reset of the 30-year amortization period to pay off KRS' unfunded liabilities; a change to the way unfunded liabilities are paid off (a level-dollar amortization method will be used rather than a percentage of payroll); and a prohibition on putting unused sick days toward retirement.

Wednesday's lawsuit,which was filed in Franklin Circuit Court, also argues that the manner in which the pension reform law passed the General Assembly was unconstitutional. Specifically, it condemns lawmakers for passing a bill that lacked an actuarial analysis at the time and was not subject to public comment or testimony, and for not allowing sufficient time to fully digest the changes before the bill went to a vote.

Mr. Beshear originally announced his intent to file a lawsuit against the pension reforms after the bill passed the General Assembly. He is also seeking a temporary injunction against the pension reform law.

The lawsuit lists Mr. Bevin, legislative leaders and trustees of KRS and KTRS as defendants. A spokesman in Mr. Beshear's office said the pension funds were included as defendants because they would be responsible for carrying out the law.

In a written statement Tuesday, Elizabeth Kuhn, a spokeswoman for Mr. Bevin, expressed her disappointment over Mr. Beshear's decision to file a lawsuit.

"The attorney general has threatened litigation since the process began, proving that he cared less about the contents of pension reform and more about scoring political points with the KEA — a reliable source for family fundraising," Ms. Kuhn said. "Rather than looking out for the best interest of Kentuckians, the attorney general has chosen a political path, one that will cause irreparable damage to public employees and taxpayers."

In October, Mr. Bevin's office pegged total unfunded liabilities for KRS, KTRS and the $327 million Kentucky Judicial Form Retirement System, Frankfort, at $64 billion.