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A look at proposed changes to Kentucky’s pension systems

February 21, 2018

Senate Bill 1 in the Kentucky legislature would make substantial changes to the state’s public pension systems. Kentucky’s public pension systems are among the worst funded in the country, and officials in the state’s Republican-dominated government say they have to make changes.

Here’s a look at some of the most notable proposed changes:

NO MANDATORY 401(K)-STYLE PLANS

Current state workers and public school teachers won’t be forced to enroll in a 401(k)-style plan. Some will have the option to do it if they want. Lawmakers said it cost too much money to convert the system into a 401(k)-type plan.

NO MORE SICK DAYS

Public school teachers get a certain amount of sick days each year. They keep any days they don’t use, and the state pays them for those days when they retire. Under Senate Bill 1, teachers can keep whatever unused sick days they already have and will be paid for them. But they won’t be allowed to accumulate any new sick days after July 1. New teachers hired after July 1 won’t be paid for unused sick days at all.

LOWER RAISES FOR RETIRED TEACHERS

Every year, retired teachers get an automatic cost-of-living raise of 1.5 percent. Senate Bill 1 would cut that raise to 0.75 percent. The cut would only apply when the Kentucky Teachers’ Retirement System is less than 90 percent funded. But it could take a while, since the system is currently 56.4 percent funded.

WORK LONGER, GET MORE MONEY

Public school teachers with less than 20 years of service as of July 31, 2018, could retire after 27 years of service. But if they are willing to work eight more years, they could take advantage of a more generous formula for calculating their retirement benefits. The point is to encourage people to work longer, theoretically reducing the number of years the state will have to pay them retirement benefits.

LAWMAKERS GET LESS

Former Democratic Rep. J.R. Gray worked for 26 years in the House of Representatives making part-time pay. He then spent three years as secretary of labor, earning a six-figure salary. He now earns annual retirement benefits of $117,000. Senate Bill 1 would retroactively recalculate Gray’s benefits and others like him so his pension would be based solely on his legislative pay. Republican Senate President Robert Stivers said he’s not sure if this will be legal, but lawmakers are going to try.

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