FRANKFORT, Ky. (WTVQ)—Kentucky’s regional state universities saw their employer contribution rate to the Kentucky Employees Retirement System skyrocket in 2018.
Actuarial changes in late 2017 increased the total contribution rate for pension and retiree health insurance for nonhazardous employees at regional postsecondary institutions from 49.47 percent to over 80 percent, said Rep. James Tipton, R-Taylorsville. Knowing the cost was a hardship on the universities, Tipton said the 2018 General Assembly froze the contribution rate through fiscal year 2019 while recognizing more action would be needed.
“In that legislation was a charge that we come up with some suggestions, some ideas on how we can move forward out of this situation,” said Tipton. “Well, our comprehensive universities took this to heart and … I’m here today on behalf of our comprehensive universities.”
The House responded today by voting 76-21 to pass House Bill 358. Sponsored by Tipton, the bill would allow, not require, any of the state’s regional postsecondary institutions—EKU, KSU, Morehead State, Murray State, NKU, WKU and KCTCS—as well as the Kentucky Higher Education Student Loan Corporation to stop participating in KERS by June 30, 2020.
Institutions that choose to leave KERS under HB 358 would have to pay the full actuarial cost of their liability to KERS in a lump sum or over 25 years, per the bill. They would also be required to provide other retirement options for their employees including a defined contribution plan, such as a 401(k).
New hires of an institution that has left KERS would not be allowed to participate in that system.
Tipton said the estimated fiscal impact of freezing the KERS employer contribution rates for the institutions last year was around $132 million. HB 358 would freeze those rates for one more fiscal year, at an estimated fiscal impact of $121 million, he said.
That does not mean, however, that KERS would lose money under HB 358, he said.
“Our universities have shared with me (that) they understand that they have an obligation to pay the liability to their system on behalf of their employees,” Tipton told the House. “Going forward they want to have certainty on what that obligation will be, and they feel like this legislation … will provide them the opportunity to do that.”
House Minority Caucus Chair Derrick Graham, R-Frankfort, said he feels more actuarial information is needed before the legislation is passed. He voted against the bill.
“HB 358 is a major piece of legislation,” said Graham. “And at this time, there are no definitive facts or figures that help us make an informed decision on passage of this bill.
“We are rushing to pass legislation without important facts and figures on the cost of this transition.”
Rep. Jerry T. Miller, R-Louisville, asked the House to pass the bill, telling his colleagues that any necessary tweaks to HB 358 could be made in agreement with the Senate in coming days. He said HB 358 will improve the affordability of a college education in Kentucky.
“This bill is progress. I urge you to vote yes,” he said.
HB 358 now goes to the Senate for its consideration.
Media Release from the Legislative Research Commission