Politics & Government

Days after controversial email, support eroding in House for 401(k)-style public pensions

Demonstrators held signs during a rally against the Republican proposal to reform the state’s pension system outside of the Capitol in Frankfort last November.
Demonstrators held signs during a rally against the Republican proposal to reform the state’s pension system outside of the Capitol in Frankfort last November. aslitz@herald-leader.com

Sentiment appears to be waning in the Kentucky House to switch public pension systems to 401(k)-style accounts as Gov. Matt Bevin proposed last October.

House Education Chairman John “Bam” Carney, R-Campbellsville, said Monday he is “leaning against” moving public employees from a defined-benefits system to a defined-contribution system.

A defined pension plan is one in which an employer offers a specified pension payment on retirement predetermined by a formula based on the employee’s earnings history, tenure and age instead of depending directly on a person’s investment returns. A defined contribution plan depends on individual investments like (401)k programs.

Carney, a teacher, said he is not sure moving to a defined-contribution system would save the state money as some of its advocates have touted. “We just may be better off to stay with defined benefits and fully fund them.”

Rep. Jason Nemes, R-Louisville, agreed with Carney.

“We do not need to be going to defined contributions,” said Nemes. “If we are building a system from scratch, let’s have that conversation. We’re not building a system from scratch, and it would cost a great deal more money to close down the defined-benefit plan. So I don’t think we should do that.”

Nemes said the House Republican caucus “is not favoring going to a defined contribution plan” and predicted that the Republican-controlled House “will maintain some form of defined benefit plan.”

House Speaker Pro Tem David Osborne, R-Prospect, had little to say Monday on what pension changes the House might make.

Asked if thinks the state should go from a defined-benefit system to a defined contribution, Osborne said, “I think once we file a bill, we will address more specifics regarding that. Until the entirety of the bill becomes public record, I will withhold comment.”

Osborne said he is “hopeful” the long-awaited public pension bill will be filed this week, which will mark the halfway-point of the 2018 Kentucky General Assembly.

Osborne said no decision has been made as to whether the bill will start in the House or Senate.

Osborne also said he has not seen a one-page email high-profile business leaders and Republican activists sent to state lawmakers last Friday, urging lawmakers to end defined-pension benefits.

“I don’t know if I accidentally deleted it,” he said of the email that was greeted with outrage by many public employees.

The email said any pension changes made during the 2018 legislative session must include “moving all future employees from a defined-benefits system to a defined-contribution system.”

Any pension bill that does not cut this benefit “willfully ignores the inherent structure problems at the heart of the crisis” and “is a disservice to the people of Kentucky,” the letter said.

Among the 19 people signing the letter were national anti-tax activist Grover Norquist; Mac Brown, state chairman of the Kentucky Republican Party and retired vice president of Brown-Forman Corp.; Larry Cox, retired state director for Republican U.S. Senator Mitch McConnell; Bill Samuels Jr., chairman emeritus of Makers Mark; Jim Stuckert, former chairman and chief executive of investment firm Hilliard Lyons; Terry Forcht, banking and nursing home magnate; Ed Glasscock, chairman emeritus of Frost Brown Todd; and Ann Wells, chairwoman and co-chief executive of Commonwealth Bank & Trust.

Carney said the letter “didn’t speak for me and any of my colleagues. At the end of the day, I’m not sure it helped.”

Nemes said he appreciates any input but thinks the letter “came late in the process. It was not something we have not considered before.”

“The letter was insulting and offensive to all public employees,” said Brian O’Neill, a Louisville firefighter who is spokesman for the Kentucky Public Pension Coalition. The group says it represents about 350,000 Kentuckians, including firefighters, police officers and teachers.

Calling for the legislature to find new sources of revenue rather than make changes to the pension system, public employees rallied against the Republican proposal to reform the state's pension system.

Governor Matt Bevin warned media at his 2017 year in review press conference that taxpayers in 2017, 2018, and beyond will have to pay for the pension obligation.

Jack Brammer: (502) 227-1198, @BGPolitics