Teachers Retirement System asks for $400 million a year; KRS trying to keep agencies from bolting
09/26/2013 05:19 PM
Facing rising costs and an aging population, the Kentucky Teachers Retirement System will ask lawmakers to kick in about $400 million each year starting in the next two-year budget.
That amounts to nearly half of what Kentucky spent last year on public universities. And it’s more than three times what the Kentucky Retirement System for state and local government workers were able to squeeze out of the General Assembly earlier this year.
The last time the General Assembly authorized money to help the Teachers Retirement System was the 2007-08 fiscal year when it kicked in nearly $39 million, according to figures from the Kentucky Teachers Retirement System.
The Teachers Retirement System faces a shortfall of $12 billion to the retirement plan funding and $3 billion to retiree medical insurance funding. In 2010, teachers agreed to pay more into the medical insurance funding.
The KTRS boasts a membership of more than 140,000 and pay out $136.9 million in monthly annuity benefits and $20.5 million in medical benefits. The system acts like a safety net for 96 percent of retired teachers who are not eligible for Social Security.
The executive secretary of the Teachers’ Retirement System, Gary Harbin, is asking the state for 10.42 percent of the payroll — or $400 million a year — over the next 30 years to get back to fully funded levels.
While the $400 million is more than the $122 million in 2015 and $153 million in 2016 that the Kentucky Retirement System will receive through Senate Bill 2, Harbin said the percentage rate is actually less, because the teachers’ plan is providing for more employees.
Harbin said if the shared responsibility legislation had not passed they would need $683 million to meet their contribution rates.
The need to not fall behind even more is compounded by baby boomers reaching retirement age. Currently, Harbin said there are one in four teachers who are eligible for retirement in the state of Kentucky.
Meanwhile, officials with the Kentucky Retirement System says they’re slowly digging out of their funding hole.
Executive Director Bill Thielen said as long as the General Assembly makes their full payments into the system they should recover. Thielen said it is still likely the funding level will bottom out near 18 to 20 percent.
However, the biggest concern is over organizations that are trying to pull out of the system. The Seven Counties mental health agency has filed for bankruptcy in order to leave the system because of rising pension costs. Now two more non-profit organizations that are in the system are trying to follow suit, Thielen said.
Those two non-profit housing-related groups Frontier Housing and Housing Oriented Ministries have filed joint litigation against the retirement system to leave the organization. But Thielen said the board will fight to keep them in so they don’t over burden their other employer groups.
Click the link to download the complaint from Frontier Housing and Housing Oriented Ministries:
The financial troubles have landed Kentucky on many national lists for being among the worst funded or most-at-risk to go bust.
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