Senators could soon vote on pension reform
Published 10:02 am Thursday, January 31, 2013
A public pension reform package is expected to get a vote on the Senate floor about a week after its filed, Senate Republican leaders said Wednesday.
GOP and Democratic senators heard recommendations from a pension task force co-chaired by Senate Majority Leader Damon Thayer in a private meeting Wednesday.
Thayer, R-Georgetown, said the task forces proposal, which includes fully paying actuarially required contributions and placing new state and municipal hires, legislators and judges in a hybrid cash balance pension plan, will be filed as Senate Bill 2 when lawmakers reconvene Tuesday.
The bill could be up for a vote by the Senate late next week or early the following week, he said.
I feel like now weve done our spadework with the entire Senate, Thayer said.
People have asked questions. Its time to move forward and move it early in the session and get it on over to the House for their consideration.
The reform package is an effort to curb $18.1 billion in unfunded liabilities in the Kentucky Retirement Systems, which oversees pension plans for state and local government workers.
As a whole, KRS has 44 percent of the funds needed to pay future pension and insurance costs. The largest plan for state employees is less than 25 percent funded, leading Thomas Cavanaugh, CEO of the actuarial firm that presented the figures to KRS trustees in December, to call it one of the worst-funded plans in the nation.
Senate leaders said they hope the reform package will put the public pension system on better financial footing. Part of that would involve fully funding the actuarially required contributions under SB 2, which could cost the state about $760 million more in pension payments in the next two-year budget cycle.
Another key aspect is the hybrid cash balance pension plan, which would give new state and municipal workers, legislators and judges individual retirement accounts.
Employees would contribute 6 percent of pay into their accounts while the state would pay 4 percent and guarantee a 4 percent return on investments. Seventy-five percent of returns above 4 percent would go to employees while the state would take the remaining 25 percent under the plan.
David Draine, senior researcher with the Pew Center on the States who regularly testified before the pension task force, said there are other ways to solve the problem, but he called the reforms a solid path forward.
Thayer, who has backed efforts to shift new hires into 401(k)-style defined contribution pension plans in prior sessions, acknowledged he and others in the Republican caucus wanted to go further in reform efforts, but senators wanted a plan that could pass both chambers.
Bills dealing with defined contribution pension plans have regularly died in the Democratic-controlled House, but House Speaker Greg Stumbo, D-Prestonsburg, has said he believes the hybrid cash balance plan can pass the chamber.
Its unclear how the pension contributions will be funded. Senate President Robert Stivers said lawmakers should focus on reforming the system first, and then deal with the funding matter when the state drafts the next two-year budget in the 2014 session.
Lets stop the bleeding right now, said Stivers, R-Manchester. Lets get the fix in place.
But not everyone agrees with the proposed reforms.
The Kentucky Public Pension Coalition, a group representing public workers and retirees, hosted panelists Wednesday who urged lawmakers to keep the states defined benefit pension system in place. Few legislators attended.
Panelists said the recommended cash balance system is underfunded and wouldnt provide adequate retirement security for pensioners.
Jason Bailey, director of the Kentucky Center for Economic Policy, said the proposed hybrid cash balance plan would diminish pension benefits and hurt the states ability to attract and retain a quality workforce.
There will be higher turnover because theres not that incentive to stay, Bailey said. That means more money will be spent on recruitment, more money will be spent on training.
When asked about KPPCs criticisms, Thayer said reforms are necessary to save the public pension system for current employees and retirees. The only change that will directly affect those currently vested in KRS is the likelihood of cost of living adjustments not being given in coming years, he said.
I think this is a pretty good plan for employees and retirees, and I think most people understand that we have to do something, Thayer said.