Pension task force recommends sharp increase in state payments, changes to future benefits

11/20/2012 02:45 PM

The legislative task force responsible for recommending ways to stave off financial disaster with the public employee pension systems has suggested altering retirement benefits for future employees and sharply increasing in what the state pays into the retirement fund.

The group voted 11-1 Tuesday afternoon for a set of more than two dozen recommendations. Sen. Joey Pendleton, D-Hopkinsville, was the only no vote.

The centerpiece of the suggestions calls for lawmakers to find more money to pump into the pension system to meet the first recommendation of the group, which is to make the full payment to the retirement system for the first time in more than a decade. That would increase the amount the state spends on public pension system from about $505 million this year to more than $830 by 2015.

The task force opted not to endorse selling a bond, which would mean taking on new debt, in order to help pay down the more than $30 billion unfunded liability in the system.

The decisions by past legislatures and governors dating back to 2002 to short-change the pension payments in order to move that money to other state programs has been the single-biggest cause of the ballooning liability the system currently faces, according to experts with the Pew Center on the States that has advised the pension task force.

Another key recommendation would be to change how benefits for future state, county and city employees are calculated. It would move from a “defined benefit” formula based on years of service and highest three years of salary. Instead, future employees would have a hybrid-type account in which money the state and the employee have diverted would collect 4 percent interest.

The recommendations don’t call for changing the current retirement age.

The recommendations now will be rolled into a bill to be considered during the 2013 General Assembly session that begins in January.

Some other suggested changes:

  • Resetting the clock to pay off the unfunded liability to within 30 years.
  • Repealing automatic cost of living adjustments that are currently set to bump up pension check amounts by 1.5 percent in order to keep up inflation.
  • Curtail “double dipping” in which a retired state employee goes back to work for the state and draws a pension and a salary.
  • Adding two members to the Kentucky Retirement System Board to make it 11. Five will remain elected by pensioners. Five will be appointed by the governor, including two with 10 years investment experience, one from a list suggested by the Kentucky League of Cities, one from a list submitted by the Kentucky Association of Counties and one from a list from the Kentucky School Board Association. And the secretary of the state Personnel Cabinet also will be on the board.
About Nick Storm

Nick Storm joined cn|2 in December 2011 as a reporter for Pure Politics. Throughout his career, Nick has covered several big political stories up close, including interviewing President Barack Obama on the campaign trail back in 2008. Nick says he loves being at the forefront of Kentucky politics and working with the brightest journalists in the commonwealth. Follow Nick on Twitter @Nick_Storm. Nick can be reached at 502-792-1107 or



  • TGIF wrote on November 21, 2012 09:20 AM :

    They have been under funding the pension fund many years prior to 2002. Where did you come up with that year – pull it from your hat? They were not matching the KRS budget request for employer matching contribution many years prior to 2002! Ask any LRC employee who has been working there prior to 2002. Go back and look at the agency budget requests and compare that with the actual budget as enacted by the Legislature and Governor’s Office, then tell us it was only since 2002 the legislature has been short changing the KRS pension funds for non-hadzardous employees. This is a serious issue, and the TRUTH about it would be helpful for your readers to know. I was there and I know what I’m talking about, and this article is wrong.

  • sallysue wrote on November 21, 2012 10:07 AM :

    “It would move from a “defined benefit” formula based on years of service and highest three years of salary.” Just FYI, for most state employees, it is the highest five years of salary, not three. The legislators pension has a high three, part of the bill they passed in 2005 to supersize their pensions.

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