Kentucky House to vote on pension bill, would cost system $1 billion
FRANKFORT, Ky. (AP/WTVQ) – The Kentucky Senate has passed a bill that would let some public universities and other agencies leave the state’s already struggling pension system, but would cost the system up to $1 billion.
The Senate approved House Bill 358 by a vote of 25-12 on Wednesday. The bill would let around 118 public universities and “quasi-governmental entities,” such as health departments, domestic violence shelters, and rape crisis centers, leave the state’s pension system without paying what they owe. In a cost analysis of the bill, state officials said it could cost the pension system as much as $1 billion.
According to the Legislative Research Commission, House Bill 358 would allow the state’s public, regional universities to stop participating in the Kentucky Employees Retirement System (KERS) by July of next year. Employees hired before 2014 would have the option to remain in KERS and keep their state pension or join a “defined contribution plan,” which is similar to a 401(k) plan. All employees hired after 2014 would be required to join the defined contribution plan.
Other agencies provided for in the bill would be allowed to stop participation, but their employee’s pensions would be frozen. They could start participating in a defined contribution plan that would be offered to all new hires.
For groups who stop participating in KERS, the bill provides for loans through the retirement system, which would allow those groups to pay their share of the unfunded debt to the pension system.
Even with those loans built into the bill, Republican Senator Chris McDaniel acknowledged the bill will add to the pension system’s woes. But he warned agencies would likely file for bankruptcy if the bill did not pass, because they cannot afford increased pension contributions.
Department of Public Health Commissioner Jeffrey Howard said 63 public health departments would have to close over the next two years without changes.
Senator Whitney Westerfield supports the bill, saying, “It gives those folks one further year of a reprieve on their rate before they have to start deciding what staff to cut or what services to cut.”
Some retirees are worried the changes would put their financial future in peril by weakening the system.
The bill now heads back to the House of Representatives, where Republican Speaker David Osborne said it will likely pass, with amendments made in the Senate.
If it passes the House, it will head to Governor Bevin’s desk to be signed into law.