Senate Republicans on Tuesday filed their long-awaited bill to overhaul Kentucky’s ailing public pension systems.
Here are highlights of the plan that have a direct affect on Kentucky’s current and retired school teachers:
▪ Teachers who have not yet worked for 20 years will have to work longer in order to receive enhanced retirement benefits. All current teachers can still retire after 27 years of service and receive the same benefits they are promised now, but teachers who don’t have 20 years of service as of July 1 will have to work 35 years and turn 60 before retiring in order to receive the enhanced benefits that teachers get now after working only 30 years.
▪ Annual cost-of-living increases for retired teachers will be cut in half for 12 years. Retirees currently receive a 1.5 percent annual cost-of-living increase to keep up with inflation. For 12 years, they’ll only receive a 0.75 percent increase. The Kentucky Center for Economic Policy estimates this change would cost a 59-year-old teacher getting the average pension about $73,000 over the remainder of her life. The reduced adjustments would occur from July 1, 2019 to July 1, 2030.
▪ Teachers will no longer be able to accumulate new sick days to put toward their retirement after July 1. Any sick days accumulated before July 1 can still be put toward their retirement.
▪ New teachers will be put into a hybrid cash-balance retirement plan, where they will contribute 9.105 percent of their salary to their retirement plan and the state will contribute 8 percent of their salary. Cash-balance plans are individual accounts that are considered less generous than traditional pensions but more reliable than 401(k)-style plans. The new cash-balance plan does not include a guaranteed 4 percent annual return for teachers, unlike the cash-balance plan offered to state and county employees who have been hired since 2014.
▪ Teachers will not have to contribute an additional 3 percent of their salary into their retiree health insurance funds, as Gov. Matt Bevin had proposed.
▪ The bill ends the inviolable contract for new teachers hired after July 1, which means lawmakers can adjust the benefits provided by their retirement plan at any point in the future.
▪ The pension bill does not deal with a provision in Bevin’s proposed two-year state budget that would cut state funding for the health insurance of 8,554 retired teachers who are younger than 65.
None of the proposed changes would go into effect until July 1, 2018.