OPINION: Kentucky Pension Plan Keeps Promises

Kentucky Pension Plan Keeps Promises - by Rep. Richard Heath

It’s no secret that Kentucky’s pension systems have been on a crash course for quite some time. Last November, we made a promise to Kentuckians to change the course of the Commonwealth, and with the collaboration of the Kentucky House, Governor Bevin, and the Kentucky Senate, that promise is fulfilled for current retirees and employees, and generations to come with the release of a plan to fix public pensions and ensure benefit obligations in the future.

Today, rather than heading for disaster, Kentucky’s public workers and teachers should have restored confidence in their pensions due to the sweeping plan released to fix the Kentucky Employees Retirement System (KERS) Hazardous and Non-Hazardous, the County Employees Retirement System (CERS), and the Kentucky Teachers Retirement System (KTRS).

Among the details in the plan, current KERS and CERS Non-Hazardous employees will be able to continue their defined pension plan until 27 years of service, or age 65, as promised, and our plan will not change the retirement age. However, to ensure promised benefits will be paid in the future, new hires will enter a defined contribution plan with an employer match, mirroring the private sector. Additionally, KERS and CERS Hazardous employees will have the current cash balance plan with a 4% guaranteed rate of return, and red tape issues that existed for death benefits will be removed to ensure that the families of those killed in the line of duty receive the benefits they deserve.

Like KERS and CERS, Kentucky’s teachers who participate in KTRS will be able to continue their defined benefit plan as promised, and retirement age will not change. New hires will enter in a defined contribution plan with an employer match, which will allow for portability and employee choice in investment, while ensuring promised benefits will be paid in the future.

Kentucky’s teachers and public workers can breathe a sigh of relief with this plan. The details in the plan take major steps to keep the promise of a dignified retirement, including no claw backs or reductions in benefits, while shoring-up retirements for future hires. As promised, the actual legislation representing this does not include an emergency clause, which would make any changes immediately effective. Rather, public servants and teachers eligible for retirement will have until July of 2018 to understand and review all the options they may have.

For years, Kentucky’s Judicial and Legislator retirement systems have been housed as their own entity. Well no more. Under our plan, both Judicial and Legislator pension placed under the KRS umbrella and treated exactly like the systems in place for public workers. Specifics include allowing current Judicial retirees to work until 27 years of service, or age 65, while placing new entrants in the system in a defined contribution plan identical to KERS and CERS. However, Kentucky Legislators will have their defined benefit plan frozen and will be enrolled in KERS non-hazardous. And finally, in a long-overdue move, the plan will base Legislator benefits on time of legislative service – effectively rolling back the “greed bill” and eliminating exorbitant legislator pensions.

With the release of this plan and anticipated passage by the General Assembly, Kentucky looks to provide a new funding formula resulting in hundreds of millions more dollars dedicated to the state’s two largest retirement plans. These structural changes will improve Kentucky’s credit rating, which have been downgraded due to the burgeoning unfunded pension liability and high fixed costs. No longer will we face massive budget cuts to education, health care, public safety, and transportation infrastructure because of pension demands. Rather, today Kentucky is poised for growth.

As promised, we committed to fixing Kentucky’s public pensions, and this plan delivers on that promise. Every single member of the General Assembly was elected to fix the problem, and end the fiscal abuse of Kentucky’s Retirement Systems. Today is a new day in Kentucky, with a brighter future for every single Kentuckian.

Richard Heath represents Kentucky House District 2, which covers Graves County and part of McCracken County in western Kentucky.