FRANKFORT, Ky. (KT) - The Public Pension Oversight Board heard from the Kentucky Retirement Systems and their actuarial consultant on recommendations for changes in the factors used to determine how much state funding will be needed for the state’s public pension systems over the next two years.
Danny White with GRS Retiring Consultants, said Monday retirees are living longer, so the mortality rate needs to be adjusted accordingly.
He noted that there have been reports of life expectancy dropping nationwide of people age 30 to 55, due to obesity and the opioid crisis. However, “Once you get to retirement, that’s when your life expectancy is expected to improve. There’s a lot of talk about pharmacy and drug benefits, which do wonders in extending life expectancy.”
White also said from experience in several states they deal with, the life expectancy for state employees is higher than the general population of those states, so he recommended raising the number of years a male retiree will live to collect benefits from 19 to 21 years, and for women from 22 to 24 years, which will cost more to the retirement systems.
Another factor in developing the actuarial assumptions for needed funding for the public pension systems according to White, is that the rate of turnover should be lowered in the County Employees Retirement System for hazardous duty personnel should be lowered, as once they have been on the job a few years tend to remain. Some may leave one department for another, but they remain in the system.
White said due to their recommendations, another $214 million needs to be put into the retirement systems, which has been adopted by the KRS, and which they will request from the General Assembly during next year’s budget requests. That brings the total recommendation to $2.3 billion.
Gov. Matt Bevin, when he vetoed the pension bill passed by lawmakers this year, said he would call a special session of the General Assembly by July 1, the start of the state’s new fiscal year, to address the issue.
Sen. Jimmy Higdon, R-Lebanon, a co-chair of the PPOB, said he and fellow lawmakers are still waiting to hear when that session will be called.
“The governor will prepare the bill that we’re to vote on,” Higdon said, “and what’s most important is that all parties are in agreement, or that the votes are there, to pass the legislation he introduces. We can adjourn, but only the Governor can call us back.”
When asked by reporters if there are any talks in progress, Higdon said, “To my knowledge, the only talks going on are with the governor and his people. I don’t know of anybody in the General Assembly that has been involved in the talks.”
He also indicated it could be an easy five-day process. “The changes are very simple that he wants to make, so I don’t think there’s a lot of discussion that needs to take place, if I read his veto message correctly.”
One of the reasons Bevin gave for the veto was that benefits to retirees would stop, if the quasi-governmental agencies that are part of the system, such as health departments, are delinquent in payments.
“That same language applies to the County Employees Retirement system,” Higdon said. “Quasi-governmental agencies can file for bankruptcy but counties cannot. Cities can, but counties can’t.”
He said he’s unsure if lawmakers would be called back to Frankfort before July 1. “Again, that’s the governor’s call. He knows the urgency of making sure these quasi organizations have relief by that date. Because on that date, their pension costs will nearly double. Any employer that makes contributions to their employees’ retirement system will say that kind of rate is unsustainable.