Gov. Matt Bevin and legislative leadership unveiled a plan Wednesday that will drastically alter retirement benefits for future state and local employees. But what does it mean for state workers and retirees already covered by pensions?
Here are seven highlights of the plan that have a direct impact on Kentucky’s current and retired teachers:
▪ Teachers must contribute an additional 3 percent of their salaries for retiree health care benefits.
▪ Current teachers are still eligible for their full pension after 27 years of service. However, once they have taught 27 years or reach the age of 60, they’ll be enrolled in a defined-contribution 401(K)-style plan. Any teacher who has reached retirement age by July 1, 2018 will have the option to continue getting benefits on their pension plan for three additional years.
▪ Current retirees will keep their previously granted cost-of-living adjustments, although future cost-of-living adjustments will be suspended for the next five years. Adjustments for future retirees will begin after they’ve spent five years in retirement.
▪ Any current teacher or university employee who is part of the Kentucky Teachers Retirement System and has less than five years of service will have the option of taking the current value of their pension in a lump sum payment and rolling it over into a 401(K)-style plan.
▪ Teachers will not have to contribute to Social Security, nor will they receive Social Security benefits. Teachers will be able to contribute a maximum of 12 percent of their salaries to a defined-contribution plan. The employer match will be 6 percent, including 4 percent from the state and 2 percent from the local school district, for a maximum total contribution of 18 percent.
▪ The value of accumulated sick days can still be used when calculating retirement benefits until July 1 2023. After that, they can not be used for benefit calculations.
▪ Teachers can continue to use their highest three years of salary for benefit calculations until June 30, 2023. After that, they must use their highest 5 years of salary for benefit calculations, which will result in smaller retirement payments.
None of the proposed changes would go into effect until July 1, 2018.