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2018 General Assembly

Pension bill passed – and challenged

Kentucky School Advocate
May 2018

By Madelynn Coldiron
Staff writer

The final public pension reform bill, Senate Bill 151, did not include many of the most controversial provisions of the versions that preceded it since last summer and fall, with most of its impact falling on future educators, who as a result will not be part of the traditional defined benefits plan.

“People disagree on whether or not this will have a positive or a negative impact on recruitment of teachers into the future,” KSBA Governmental Relations Director Eric Kennedy said.

Capitol Annex hallways frequently were packed during the session when lawmakers

considered pension reform and other bills that impacted public education.

Gov. Matt Bevin signed the bill into law and it has now been challenged in Franklin Circuit Court by Attorney General Andy Beshear, joined by the Kentucky Education Association and the Fraternal Order of Police. Their lawsuit alleges that the bill violates the state’s inviolable contract with public employees.

Aside from potential recruitment impacts, the change that most directly affects school boards is the requirement to begin contributing 2 percent of payroll for new hires who are part of the Teachers’ Retirement System (TRS). The state pays the entire employer contribution for current teachers. For school districts, this is a cost that will obviously continue to grow, Kennedy noted.

“It’s not a one-time hit,” he said. “Paying 2 percent of payroll into the future as new teachers are hired and replaced means eventually every teacher currently in the classroom will be replaced over time with the new teachers for which districts will have to make this contribution.”

State Sen. Joe Bowen of Owensboro, who co-chairs the Public Pension Oversight Board, was the co-sponsor

of Senate Bill 1, the first iteration of a pension reform bill that stalled. Photo courtesy LRC Public Information.

Major provisions of the bill include:

• Teachers hired after Jan. 1, 2019 would be placed in a hybrid cash-balance plan administered by the Teachers’ Retirement System, rather than the traditional defined benefit pension plan. This new plan will consist of aspects of a traditional pension and a 401(k)-style savings plan. These teachers will also work longer before becoming eligible for retirement.

• Benefits for teachers hired after July 1, 2018 would not be covered by the inviolable contract statute. This means their retirement benefits could be changed at any time in the future by the legislature.

• For retired teachers, it retains the current annual 1.5 percent cost-of-living increase, with no reduction or freeze.

• It caps the use of accumulated sick days toward retirement benefit calculations to the number of sick days teachers have accumulated through Dec. 31, 2018.

Last-minute actions
As this issue went to the printer, the legislature overrode the governor’s vetoes of both the budget and pension bills, and a bill to help districts avoid a CERS budget-buster.