FRANKFORT — When Kent Stevens retired as a school principal several years ago, the only thing he knew about retirement was "that you didn't go to work any more."
Although he received health insurance as a retired educator, the state representative from Lawrenceburg quickly learned there was no guarantee the state would continue providing the benefit.
Under a proposal debated Tuesday morning by the House Education Committee, the cost of health insurance will increase for current and retired teachers 65 and under.
The increased premiums, coupled with payments by school districts to the state's health insurance pool for retired teachers, will help ensure the system's future solvency, advocates said.
As of June 30, 2009, the retired teachers' health insurance fund had an unfunded liability of $6.2 billion. Under this plan, over time, that unfunded liability would drop to $3.4 billion, said Gary Harbin, the executive secretary of the Kentucky Teachers' Retirement System.
The House Education Committee is expected to vote on the proposal later this week. It will then likely go to the House Appropriations and Revenue Committee.
Stevens said he supported the measure even though it means that as a retired educator under 65 he will pay more for his health insurance.
"Four or five years from now, I don't want to get a letter saying that I'm responsible for all my insurance," he said.
The solvency of the retired teachers' health insurance has been in jeopardy for some time. Currently, only active teachers, those over the age of 65 and the state pay into the system. In order to pay for retired teachers' health insurance, the state has borrowed money from the teachers' pension fund for several years.
That borrowing has put both the retired teachers' health insurance fund and the pension fund — already ailing from an anemic stock performance — in jeopardy.
The Kentucky Teachers' Retirement System has been working with the boards or organizations that represent school boards, school administrators and teachers for more than six months to come up with a proposal to guarantee retiree health insurance, Harbin said.
That plan — House Bill 540 — would ask current teachers, retired teachers under 65 and local school districts to contribute more over time.
Teachers who were hired before July 1, 2008, now pay 0.75 percent of their salary for retiree health insurance.
That would increase 0.25 percent to 1.0 percent in the first year. For a teacher with an average salary of $41,000, that's roughly $10 a month, Harbin said.
In the final year of the plan, 2015-2016, the contribution would be 3.75 percent of a teacher's salary.
Retired teachers who are age 65 and under would pay $37 in the first year and $81 in the second year. By 2016, retirees 65 and under would pay $166 a year. Retirees over 65, who are eligible for Medicare, would pay the same rate.
"There is something in this for everyone, and there is pain in this for everyone," Harbin said.
Harbin told lawmakers on Tuesday that the state could not continue to borrow for retiree health insurance without jeopardizing the future of the system. The plan will eventually become sustainable.
But several legislators, including some retired educators, expressed concern about the plan, saying many teachers may not be aware that it includes increased payments for nearly everyone. The exception is retirees over 65, whose premium for health insurance will not increase.
Rep. Bam Carney, R-Campbellsville, said he was not sure teachers are aware of the potential changes. But Harbin said he and other groups that hammered out the deal have been talking with their respective constituents.
Rep. Bill Farmer, R-Lexington, also questioned whether local school districts — which have previously paid nothing — could afford what would be $26.4 million over the next two years.
Harbin responded that school districts are counting on more teachers to retire in the next few years because they know the health insurance system is solvent. Currently, one in four Kentucky teachers is eligible to retire. Those retirements would either negate the cost of paying into the retiree system or could save school districts money, Harbin said.