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Dorsey Ridley: Bill to save Kentucky’s pensions finally released, but success remains doubtful

A draft of the massive 505-page bill to address Kentucky’s public pension challenges was released in the late hours of Friday.

I expect the draft bill reflects what was disclosed a few weeks ago when the governor released an outline of the proposed legislation but further scrutiny may cause additional concerns.

The Kentucky Center for Economic Policy analysis of the bill has already found that money that would go into the retiree health care plans from a three percent additional contribution from current teachers and other public employees will not benefit that program “because it will be offset by a three percent lower employer contribution to retiree healthcare.”

The draft bill would move new and recently hired public employees and new teachers into a “defined contribution” plan, like a 401(k) and IRA. Use of sick leave toward retirement would be halted after a specific date depending on the retirement system. Public employees and teachers would pay that additional 3 percent of their salary toward state retiree health care – and future COLAs for retired teachers would be suspended for five years.

The additional three-percent salary contribution would also be required to fund retiree health care for judges and others in the judiciary retirement plan. New members and those who have reached full retirement eligibility would be moved into a defined-contribution plan, with the pension plan available to current employees until they full retirement eligibility.

The draft bill does not call for a change in retirement age. Defined benefit plans, or pensions, would remain in place for most state employees until they reach 27 years of service, age 65 or age 57 with 30 years of service, with pension and cash balance plans remaining open to current hazardous employees including firefighters and police. Current teachers who have 27 years of service by next July could stay in their pension plan for another three years. Current state retirees would have no cuts to their cost of living adjustments (COLAs).

The draft does not contain an “emergency clause,” which means that the bill will not take effect immediately after becoming law. The law would not go into effect until July 1.

The governor has repeatedly said he will call lawmakers into special session to consider pension reforms before year’s end. Time is drawing short, however, because holidays are approaching and the regular 2018 session begins Jan. 2. I think the week beginning Monday, Nov. 13 may be the most likely time for the session, but only the governor has the legal power to call a special session and set the agenda.

I encourage you to stay in touch to share your input on the issues facing our Commonwealth. You may leave me a message by calling the toll-free Legislative Message Line at 800-372-7181. You can also e-mail me directly at Dorsey.Ridley@lrc.ky.gov.

Dorsey Ridley is the Senate Minority Caucus Chair representing District 4, including Caldwell, Crittenden, Henderson, Livingston, Union and Webster counties.

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One Comment

  1. Tough Love says:

    The proposed changes are in the range of 10% to 25% of the corrective action that is NECESSARY to effectively address KY’s pension mess. They will likely do little more than push the day of reckoning only a few years out into the future.

    When you have a BIG financial problem the FIRST Step is always to STOP DIGGING (and making it even worse), and clearly, to CONTINUE to grant FUTURE SERVICE accruals on the same basis as in past years, KNOWING that they are not affordable, is beyond foolish and demonstrates an extraordinary lack of leadership.

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