From KCEP: Pension Bill Breaks Inviolable Contract, Shifts Contributions from Underfunded Plan

By JASON BAILEY
Kentucky Center for Economic Policy


The Senate version of House Bill 358 essentially forces quasi-governmental agencies like health departments and community mental health centers to break the inviolable contract for pensions with their current employees in order to avoid making pension contributions that the Kentucky Retirement Systems board caused to jump to 83 percent of pay.

By taking employees out of the pension system, the bill would also create added financial challenges for the poorly-funded Kentucky Employees Retirement System (KERS) non-hazardous system.

Bill unnecessarily ties relief for quasis to illegal cut to employees’ pensions 

Pension contributions jumped from 49 percent of pay to 83 percent in the KERS non-hazardous system because the governor-appointed majority on the board voted to lower suddenly the actuarial assumptions of the plan to the most cautious in the country. Recognizing that many quasi-governmental organizations like domestic violence shelters lack revenue options that would allow them to make those additional payments, the General Assembly froze their contributions at the 49 percent level for one year in the budget that passed in 2018. HB 358 extends that 49 percent contribution level for another year, but with a catch.

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