Kentucky governor vetoes pension relief bill

Kentucky Gov. Matt Bevin vetoed a pension relief bill that would have allowed state-supported agencies in the $2 billion Kentucky Employees Retirement System for Non-Hazardous employees to leave the system if they were unable to meet rising pension contribution costs.

Kentucky lawmakers in the House and Senate passed the pension relief bill on March 28, but Mr. Bevin said in an April 9 statement that he was vetoing the bill, House Bill 358, "with the confidence that the legislature will make needed corrections."

"While I appreciate the work of our legislators who worked diligently to protect the services provided by many quasi-government entities, parts of HB 358 violate both the moral and legal obligation we have to these very retirees," he wrote.

The bill aimed to extend another year of relief to 121 "quasi-governmental employers" in KERS, including universities, public health departments, regional mental health departments and rape crisis centers, by keeping their employer contribution rates at 49%, the legislation said. Without the bill, their contribution rates would rise. The entities, some of which are struggling to remain open, would also be able to opt back into KERS, but would pay the full actuarially required contribution rate that is already at 83%.

The agencies also received a one-year contribution waiver for the current year, approved in prior legislation, Pensions & Investments reported on April 5.

A key issue Mr. Bevin had with the bill was that it would "very likely result in a suspension of pension and health insurance benefits already earned by retired employees of quasi-government agencies," which he later called "unacceptable."

The bill also sought an unprecedented measure, where a quasi-government agency could elect to leave the system while its Tier 1 and Tier 2 employees could elect to continue to participate in the retirement system, Mr. Bevin added.

If the bill became law, it would have resulted in the KERS Non-Hazardous plan receiving $121 million less in contributions from exiting entities for the next fiscal year, which ends in June 2020. The KERS Non-Hazardous plan, which has 122,788 participants, had $15.5 billion in liabilities as of June 30, P&I reported on April 5.

While Mr. Bevin said that the state should protect the struggling agencies from "potential insolvency due to the onset of significantly higher employer pension contributions," he argued that lawmakers would have to revisit the issue by addressing his concerns with the bill.

Mr. Bevin plans to call a special session for lawmakers to reconvene on pension relief before July 1.