Bevin, legislative leaders unveil public pension plan proposal

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FRANKFORT, Ky.  (KT) -  Gov. Matt Bevin and legislative leaders unveiled the framework of the proposed changes to the public pension plans, which will be voted on during a special legislative session.


Flanked by House Speaker Jeff Hoover, R-Jamestown, and Senate President Robert Stivers, R-Manchester, Bevin outlined the plan during a Capitol press conference Wednesday morning.


While he termed the plan “Keeping the Promise,” one big change, according to the governor, is language forcing the General Assembly to provide the annual required contribution to the pension systems, something past legislatures have not done. 


“This one provision alone should cause every legislator, Republican or Democrat alike, to vote for this bill,” Bevin said.


Hoover described one provision that, as he has said in the past, would make current employees and retirees breathe a sigh of relief.


“Our current state employees and teachers will see no increase in the retirement age,” he said.  “You remain in the exact system that you have today, a defined-benefit plan, until you reach 27 years of service or retirement age, if you’re that tier employee.”   


As for retirees, “There is no ‘clawback’ of payments,” Hoover said, “and there will be no change in healthcare benefits.”


Future non-hazardous employees and teachers will be enrolled in a defined contribution program, such as a 401-k, while current and future hazardous employees will continue in the same system they are in now, according to Hoover.


Other major points of the legislation include:

·       Closing the loophole retroactively to ensure payment of death benefits for the families of hazardous employees.

·       Legislators will be removed from their current defined benefits plan and moved into the same defined contribution plan as other state employees under the jurisdiction of the KRS Board.

·       No emergency clause, so the changes won’t take effect until July, 1, 2018.

·       The cost of living adjustment (or COLA) for retired teachers will be frozen for five years.

·       Sick leave balances will be capped to the balance as of June 30, 2018 for state and local non-hazardous duty employees, and they will no longer be used in benefit calculations for those retiring after July 1, 2018.

·       Comp time payments will be used in calculating benefits for non-hazardous state and local employees for those retiring on or before July 1, 2023.

·       Three percent of all employees’ salaries will be used for funding the future retiree healthcare program.

·       Those whose benefits are calculated on their “High 3” or “High 5” wages, will be based on a full 36 or 60 months of service.
  

·       All state lawmakers would be moved immediately from their current plan and moved into a 401-k type system.

·       Retired lawmakers and those in the current system, would have their benefits calculated only on their legislative salary.

State officials said they don’t believe there will be a big spike in retirements before the July 1, 2018 implementation date.


Bevin said these structural changes should improve Kentucky’s rating with bond agencies, which have been downgraded in recent years, due to the unfunded pension liability of more than $60 billion.


“This is a very morally sound plan,” said Stivers.  “A legally defensible plan, and something that the people of Kentucky will understand and accept, as the direction we need to go in future years.”


Stivers also addressed the issue of keeping minority Democrats informed.  “I have been briefing them as well as the Speaker has on progress and ideas and encouraged them to sit down at the table with us, and deliver whatever they may want to deliver.”


Bevin said the troubles in the pension system didn’t happen overnight and won’t be fixed overnight.  “We are over the next four years going to ‘feather in’ the cost of implementing this plan, so this is a 33- or 34-year solution.”


While the governor would not say when he will issue the call for a special legislative session, other than “it will be soon,” he did predict it would last only five days, which is the minimum under Kentucky’s constitution.  Each chamber must have three readings of the bill on three different days, while a third reading and final passage in one chamber can be followed by a first reading on the other chamber on the same day. 


Not everyone is sold on the proposals.  House Minority Leader Rocky Adkins, D-Sandy Hook, said he got his first look at the framework Wednesday morning, although he did get a call from the governor going over the bullet points.  While Adkins said he needs time to review it, there are a lot of unanswered questions.


“How are you going to fund the system?“ Adkins asked.  “What is the cost?  The study and research we’ve done shows moving from a defined-benefits plan over to a 401-K has a cost.  What will be the overall impact on the system?”


Adkins is withholding judgment until he sees the draft legislation.


“There’s an old saying up in the mountains that ‘the proof’s in the pudding’.  And the pudding is going to be the legislation when it’s drafted.”


When asked about moving lawmakers into a 401-K plan immediately and recalculating benefits solely on legislative salary, Adkins said, “There will be a question as to whether you can go retroactive for somebody that’s already receiving those benefits, considering the inviolable contract.  It’ll be up to them to decide whether they want to challenge that.

 


“These questions are ones we need answered.  People who are impacted by the system need to have them answered as well.”

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