“The devil is in the details.”
That was an often-repeated phrase after Gov. Matt Bevin and Republican legislative leaders unveiled their long-awaited pension reform framework on Oct. 18.
The framework generally maintains the defined benefit plan for current teachers up to full retirement eligibility, gives a three-year window for teachers at retirement age to remain in the current plan, sets up a defined contribution plan for new teachers and retains – until 2023 – the “high three” and accumulated sick leave in calculating pension benefits.
Attendees at the Bath County Schools annual Legislative Breakfast Oct. 18 benefited from some
coincidental good timing as they watched the governor’s press conference on pension reforms.
KSBA Governmental Relations Director Eric Kennedy continues to meet with the governor’s staff and legislators to get more of the aforementioned details, including the precise structure of the defined contribution plan envisioned for new employees.
“The pension reform framework, as released by the Governor, Senate President Stivers and Speaker Hoover, seems to have addressed some of our most significant concerns which we had discussed with the governor’s staff,” Kennedy said. “That includes not placing new teachers into Social Security, which we worried would lead to higher risk of cost increases immediately and into the future; however, many other concerns remain.”
Not included in the framework presented Oct. 18 are some of the other more controversial recommendations for the Teachers’ Retirement System in a consultant’s report released earlier, including increasing the retirement age to 65 and clawing back the past cost of living increases from current retirees.
Some of the changes compared with the consultant’s outline “may alleviate concerns about an immediate mass exodus of experienced teachers from the classroom,” Kennedy said.
However, he said, there are still several concerns:
• The amount of costs local boards may have to pick up. At this point, the governor’s framework calls for school districts to pick up 2 percent of the 6 percent employer contribution toward the new defined contribution plan for new teacher hires, with the state footing the remainder.
• The ultimate level of retirement security that will be provided to future teachers far down the road under the plan. This will impact the ability of school districts to recruit these teachers now.
To estimate the impact in these areas, Kennedy said, “we need more detailed information on the plan. Ultimately, we will have to read the actual bill itself, whenever it is released, to analyze the impact it will have on local boards.”
Some of the other stakeholder groups share KSBA’s concerns, Kennedy said, and are also concerned about the cost increases planned to fall on current employees. “For example,” he said, “the plan to require current employees to pay 3 percent more toward retiree health insurance is concerning for many groups if pay raises are not provided.”
When this issue of the Kentucky School Advocate went to press, the bill had not been released and a date for a special session to take up the pension reforms had not been set. Kennedy said he expects the most debated issues among legislators between now and the session will be the additional contributions from local boards and employees, and the level of benefits and risk under the new plan.