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State Lawmakers Say New Pension Bill Is Coming This Week

Kentucky state Capitol
Kentucky state Capitol

Republican leaders of the state legislature say a new proposal to overhaul the state’s public retirement systems will be unveiled later this week.

Kentucky’s pension systems are among the worst-funded in the nation and Gov. Matt Bevin, along with many in the Republican-led legislature, wants to change how much state workers earn in benefits in order to reduce the state’s pension liability in the future.

It’s unclear what will be in the new proposal, but lawmakers have hinted that it won’t have some of the unpopular policies that were included in a previous version.

Senate President Robert Stivers said the new bill won’t move workers out of the current pension program that guarantees payments from when a state worker retires until death.

“If you’re in a defined benefit system, you’re going to continue to be in a defined benefit system,” Stivers said on Tuesday.

A previous version of the Republican proposal unveiled by Stivers, Bevin and former House Speaker Jeff Hoover last October would have capped benefits and moved state employees to 401k-style retirement plans after 27 years of service.

Nearly all future state workers would also be moved to 401k-style plans under the previous proposal.

Lawmakers — especially in the 100-member state House of Representatives — have expressed concern about phasing out the state’s defined benefit systems, which rely on new employees to contribute to the system as older employees retire.

House Speaker Pro Tem David Osborne said Republicans in his chamber are divided over whether to keep the current defined benefit program or move to 401ks.

“It’s something that has created a lot of conversation and a lot of disagreement, but again one that I think we put a lot of thought and study into,” Osborne said.

The previous pension proposal was widely opposed by state workers and some representatives from rural areas, many of which rely on state government as their largest employer.

Both Osborne and Stivers hinted that the new pension bill might include a “hybrid” cash-balance plan — which, like 401ks, require workers and employers to make contributions to an individual retirement fund that relies on the stock market.

However, unlike conventional 401ks, the state guarantees a 4 percent annual return on investment under the “hybrid” plans.

Most new state employees in Kentucky were enrolled in cash-balance plans since the last round of pension reforms went into effect in 2014.

However, that didn’t apply to teachers, who still receive more-generous defined-benefit plans that rely on how long an employee has worked in state government, how much they made and how old they are.

Stivers hinted that the new bill might move future teachers into the hybrid plans.

“It could,” he said.

Republican leaders have said a few other unpopular parts of the old pension bill would be scaled back — including a provision that would have required workers to pay 3 percent of their salaries for retiree health and the suspension of cost of living adjustments for retired teachers for five years.

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