SHARED RESPONSIBILITY PLAN
TRS
Changes for Current Teachers (all else stays as is under current statute)
• Freeze sick leave as of June 30, 2018 as salary credit for retirement calculation purposes
• No future accruals of the 3.0 multiplier will occur after July 1, 2024
New Tier For Teachers
• Applies to employees who first participate in the Teacher Retirement System on or after July 1, 2018
• Will be administered by the Teachers Retirement System of Kentucky
• Mandatory defined benefit and voluntary defined contribution tier
• Limits the state’s cost to a fixed contribution
• State has no obligation for any unfunded liability for the new tier but continued full funding is expected
• Employees in this new tier will participate in the 2010 Shared Responsibility (2010 RS HB 540) retiree health plan at 65
1. Defined Benefit Component
1.1 Employee contribution 10% of pay
1.2 State contribution is 6% of pay with expected continued full funding
1.3 Retirement Eligibility
• Normal retirement threshold will be rule of 85 (service plus age)
• Annuity and disability benefits vest with 5 years
• Eligible for retirement with reduced benefits with rule of 70 (service plus age) at age 55 and over; benefit reduced
by 2% per increment between rule of 70 and rule of 85
1.4 Retirement annuity factors
• 2.0 until 20 years of service
• 2.5 for all years of service once 20 years achieved
1.5 The high-five salaries are used to determine final average salary
• Anti-spiking rules apply
• Sick leave and other lump sum payments are not included (boards of education are still permitted to pay a lump
sum for accrued sick leave)
1.6 Employee contribution and accrued plan earnings (loss) are portable
1.7 Annual retiree COLA of 1.5% prefunded
1.8 Disability retirement based on accrued service
1.9 Life insurance ($10,000 active teacher; $5,000 retired teacher)
2. Voluntary Defined Contribution Component
2.1 Employee may elect to participate in 403(b) plan
• Employee contributions are voluntary
• School District / Local Employer contributions are voluntary
• Lump-sum payouts, such as sick leave, may be contributed to the plan pretax within the substantial catch-up
guidelines
• Investment options include use of low-cost, diversified equity and bond index funds managed by TRS for selfdirected
investing
• TRS will offer participants financial education
3. Risk Controls for New Tier
3.1 An annual actuarial valuation establishes the employee contribution rate and unfunded liabilities (if any) of the annuity
component
3.2 If funding is below 95%, the following adjustments are available to be utilized by the Board of Trustees to maintain the
annuity trust funding generally in the following order:
• Employee contributions may increase by up to an additional 2% of pay
• Concurrently, school district (or local employer) contributions will match additional employee contributions up to
2% of pay
• Reduce or suspend the annual COLA
• Reduce future service retirement factor
• Increase retirement rule of 85
SHARED RESPONSIBILITY PLAN
CERS
Changes for Current Tier 3 Classified Employees
1. Allow Tier 3 classified employees the option of remaining in their current plan or choosing a new tier prospectively
New Tier For Classified Employees
• Applies to new hires on or after July 1, 2018
• Mandatory defined benefit and voluntary defined contribution tier
• Limits employer cost to a fixed contribution
• As with existing plan, the state has no obligation for any unfunded liability in CERS
1. Defined Benefit Component
1.1 Employee contribution 6% of pay
1.2 Employer contribution 19.18% of pay
1.3 Retirement Eligibility
• Normal retirement threshold will be rule of 85 (service plus age)
• Annuity and disability benefits vest with 5 years
• Eligible for retirement with reduced benefits at rule of 70 (service plus age); benefit reduced by 2% per increment
between rule of 70 and rule of 85
1.4 Retirement annuity factors
• 1.5 until 20 years of service
• 2.0 for all years of service once 20 years achieved
1.5 The high-five salaries are used to determine final average salary
• Anti-spiking rules apply
• Sick leave and other lump sum payments are not included (boards of education are still permitted to pay a lump
sum for accrued sick leave)
1.6 Employee contribution and accrued plan earnings (loss) are portable
1.7 Disability retirement based on accrued service
1.8 Death Benefit ($5,000 retired; $2,000 active)
2. Voluntary Defined Contribution Component
2.1 Employee may elect to participate in a tax deferred qualified plan
• Employee contributions are voluntary
• Employer contributions are voluntary
• Lump-sum payouts, such as sick leave, may be contributed to the plan pretax within guidelines
• Investment options include use of low-cost, diversified equity and bond index funds managed by CERS for selfdirected
investing
• CERS will offer participants financial education
3. Risk Controls for a newly established separate CERS board
3.1 An annual actuarial valuation establishes the employee contribution rate and unfunded liabilities (if any) of the annuity
component
3.2 If funding is below 95%, the following adjustments are available to be utilized by the Board of Trustees to maintain the
annuity trust funding generally in the following order:
• Employee contributions may increase by up to an additional 2% of pay
• Concurrent local employer/school district contributions will match additional employee contributions up to 2% of
pay
• Reduce future service retirement factor
• Increase retirement rule of 85
3.3 Establish a separate CERS Board with elected representatives reflective of CERS membership.