The Kentucky state Senate approved legislation Tuesday to create a defined contribution plan for state and county employees hired after July 1, 2008, confirmed William Hanes, executive director of the $16 billion Kentucky Retirement Systems, Frankfort. Contributions to the existing defined benefit plan for new employees will be cut to 2.5% of salary from 5%, and those employees will be eligible to invest 2.5% of salary in the DC plan, Mr. Hanes said.
Mr. Hanes said the new arrangement will apply only to new members of the Kentucky Employees Retirement System, the Kentucky County Employees Retirement System and the State Police Retirement System, all overseen by KRS. Current KRS members, as well employees in the $15 billion Kentucky Teachers Retirement System, the $195 million Judicial Retirement System and the $50 million Legislators Retirement System, will not be affected.
The legislation would also allow the state to issue more than $800 million in pension obligation bonds, Mr. Hanes said. There is about a $12 billion shortfall, $3.8 billion of which is a pension liability, Mr. Hanes said. Through the bond issuance, the state pension trust will receive $538 million. This will slow the bleeding, he added.
Another $290 million will go to the Kentucky Teachers Retirement System, said Gary Harbin, executive secretary. That will eliminate the amount the state borrowed from the teachers fund over a four-year period to pay retiree medical benefits, Mr. Harbin said. Bond proceeds will not be used to reduce the teachers funds $5 billion deficit.
Senate President David Williams presented the plan as an amendment to an existing bill, which has moved to the state House. Mr. Williams could not be reached for comment.