Legislative Update – March 30, 2018

The 2018 Session is quickly winding down as Thursday, March 29, marked Day 57 of the 60-day budget session. Budget negotiations are continuing with positive results, and the Senate gaveled in for two days to pass a number of bills including some aimed at helping our first responders and their families. Although the amount of days left is shortening, the days in the Capitol are getting longer as we prepare to pass the Commonwealth’s two-year budget.

The Senate passed public pension reform legislation this week. Most of the provisions of Senate Bill (SB) 1, a reform measure proposed earlier this year, were placed into another bill, SB 151, and sent to the Governor for his signature. I know that there have been many questions about how SB 151 was passed and what changes the legislation made to public employee retirement benefits.

Senate Bill 151 does not change, reduce, or remove cost-of-living adjustments (COLAs) for retired teachers, and no public employee is forced into a 401(k)-style plan. Teachers are not required to stay in the classroom any longer before they can retire and their end-of-career benefit enhancements (High 3 / 3.0 factor) remain in place.

Senate Bill 151 does make one change to retirement benefits for current teachers. In a change suggested directly by the Superintendents’ Shared Responsibility Plan—a measure supported by the Kentucky Education Association (KEA)—teachers will no longer be able to use sick days earned after January 1, 2019 to enhance their final retirement calculation. But teachers can still use their existing sick days to enhance their final year of compensation when they retire. It is important to note, no teacher will ever lose a sick day and he or she will not be forced to retire to use their existing sick days for retirement. Teachers will still be able to cash-in sick days earned after January 1, 2019 at retirement and receive a check for them.

Teachers hired after January 1, 2019 will have their retirement funded by a “hybrid cash balance plan” administered by the Kentucky Teachers Retirement System (KTRS or TRS), the same system that current manages teachers’ retirements. This plan was carefully designed to provide new teachers with a retirement income equivalent to the current system’s benefits, and new teachers’ retirement contributions will be invested by TRS in the exact same way current teachers’ contributions are invested.

There are no perfect solutions, but inaction on reforming Kentucky’s public pension systems was not an option. If the General Assembly had simply raised taxes without fixing a broken system, that would place a burden on Kentucky taxpayers by forcing them to pay for a system we know will just continue to leak funds. The pension reforms enacted by the General Assembly ensure that the core retirement benefits of every current public employee are protected, and new public employees will have a safe, sustainable retirement income in the future.

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