Kentucky’s retirement systems could see changes under Matt Bevin’s leadership after the Republican businessman was elected governor of Kentucky on Tuesday.
In his campaign, Mr. Bevin proposed closing the state’s current pension funds to new hires and enrolling them in a 401(k)-style defined contribution plan. Options for moving current employees to the defined contribution plan would further be considered, he said.
Mr. Bevin defeated his Democratic challenger, Attorney General Jack Conway, and will replace outgoing Democratic Gov. Steve Beshear.
A spokeswoman for Mr. Bevin could not immediately be reached for additional information on his pension fund proposals.
“It's time for a governor who will deal with Kentucky’s unfunded pension liabilities that are in excess of $20 billion and, based on more realistic actuarial assumptions, likely more than double that amount. Continuing to ignore the problem is a threat to public safety, education and other viable government services,” said an announcement on Mr. Bevin’s campaign website.
The $18.4 billion Kentucky Teachers’ Retirement System and $15.7 billion Kentucky Retirement Systems, both based in Frankfort, were 45.6% and 43.2% funded, respectively, as of June 30, 2014.
In September, Standard & Poor’s Ratings Services lowered its issuer credit rating for the state of Kentucky to A+ from AA- due primarily to the state retirement systems’ underfunded pension liabilities.
Gary Harbin, executive secretary of KTRS, noted a work group made up of policy and education leaders has been exploring ways to improve KTRS’ finances and that a defined contribution plan for solely for new hires is among the options being considered. A mandated shift for active and retired teachers would be prohibited under state law, Mr. Harbin said.
The work group expects to issue its recommendations in early December.
William A. Thielen, executive director of KRS, raised concerns about the initial high costs of enrolling new hires in a defined contribution plan and how the current pension plans would be impacted without the benefit of new hires’ dollars coming in. This change also does not address the state’s current unfunded liabilities, he said.