FRANKFORT, Ky. (WTVQ) – A new benefit structure for future regional university hires designed to improve stability of the state’s Teachers’ Retirement System was approved Wednesday by the Kentucky House.
House Bill 613 sponsor Representative James Tipton, R-Taylorsville, says the bill addresses regional comprehensive university presidents’ concerns about the funding level of the system, which Tipton says is now funded at around 50 percent or “nowhere near the funding level that is considered to be appropriate,” he added.
HB 613 would help the retirement system reach $38,000,000 in savings over 20 years and a savings of $104,000,000 over 30 years, says Tipton. He says no action is expected to cause the required level of contributions to increase to $2,400,000,000 per year in 20 years.
HB 613 would place all certified or degreed regional university members hired as of January 1, 2021 and entering the retirement system into a two-pronged plan with both a “foundational benefit” and “supplemental benefit” component. New hires would be eligible for retirement under the foundational benefit at age 55 with a minimum of 10 years’ service, or age 65 with a minimum of five years of service, with a final salary based on an average of their top five salary years. Benefits under the separate supplemental plan would be based on accumulated contributions and interest in that account.
Funding safeguards in the bill would permit the system’s board of trustees to change any or all of the bill’s provisions, including the benefit factor for new university members, etc., to maintain funding at or above 90 percent.
Unchanged would be the current statutory 1.5 percent annual retiree cost-of-living increase, or COLA, which would be provided to retirees under the bill. Retiree health benefits would also be offered.
Those voting against the bill included Representative Patti Minter, D-Bowling Green. The Western Kentucky University professor said the proposal in HB 613 would be a “benefit cut” going forward.
“It will likely force people into the 401k style plan,” said Minter. “So I think there are some pretty grave concerns.”
Supporting the bill was Representive Joe Graviss, D-Versailles, who said HB 613 could potentially save jobs.
“I think that having a hybrid pension and a job is better than not having either one,” said Graviss.
Kentucky’s regional comprehensive universities include Eastern Kentucky University, Western Kentucky University, Morehead State University, Murray State University, Kentucky State University, and the Kentucky Community and Technical College System. HB 613 would not apply to the University of Kentucky or University of Louisville which have separate retirement systems.
HB 613 passed on a 65-31 vote and now advances to the Senate.