When Gov. Matt Bevin and Republican leaders unveiled their proposal to overhaul Kentucky’s public pension systems in October, an outline of the plan contained five bullet points detailing major changes to the retirement system for lawmakers.
Like most of the changes Bevin proposed for teachers and government workers, almost all of his proposals for lawmakers got scrapped in the ensuing months. But Republican lawmakers still treated themselves more harshly than most other public employees in the long-awaited pension overhaul bill they unveiled late Tuesday.
Not only does the bill keep perhaps the most controversial portion of Bevin’s plan — a proposal to strip some benefits from retired legislators who padded their pensions by taking high-paying jobs in other parts of government — it also decreases pension benefits for many current lawmakers.
The bill makes no changes for judges, who along with lawmakers are part of the Kentucky Judicial Form Retirement System, according to John Cox, a spokesman for Senate Republicans.
Kentucky’s part-time lawmakers first started receiving retirement benefits in 1980. In 2005, they passed a bill that sweetened those benefits, allowing lawmakers to multiply their length of service in the legislature against the salary from any job in state government.
That enabled some lawmakers, such as former Rep. Harry Moberly, D-Richmond, to collect annual pensions larger than the sums they ever made as lawmakers. Moberly, who received a six-figure salary as executive vice president of Eastern Kentucky University, now collects an annual legislative pension benefit of $154,912.
The bill would strip Moberly, and others like him, of the extra benefits. Instead of multiplying their legislative service against their highest government salary, legislative retirees can only multiply their years of service against their legislative salary.
“That is a great step,” said state Rep. Robert Benvenuti, R-Lexington. “It never should have happened in the first place.”
When asked if he thought the change might bring a legal challenge because it reduces benefits that have already been promised under an inviolable contract, Benvenuti said he welcomed the argument.
“I’m OK if it gets argued legally,” Benvenuti said.
The bill also decreases benefits for lawmakers with a defined-benefit pension plan and gives some lawmakers the option of moving into a 401(k)-style account.
Currently, legislators who were elected before 2014 multiply 2.75 percent of their final salary by the number of years they served to get their retirement allowance. The bill would lower that benefit factor to 1.97 percent after Jan. 1, 2019, thereby decreasing the lifetime benefits of current legislators.
Lawmakers elected after 2014 would be put into a hybrid “cash-balance” retirement plan, though it would be less generous than the cash-balance plan offered to state and local government workers hired since 2014. Instead of getting a guaranteed 4 percent return on investments each year, the new plan will merely shield participants from losing money on their investments.
Lawmakers also would not have to pay 3 percent of their salary to help fund retiree health care, as Bevin had proposed.
Senate President Robert Stivers, R-Manchester, said Republican leaders decided against Bevin’s proposal to entirely scrap the pension system for lawmakers because consultants told them it would have cost millions to shift members into one of the state’s other pension systems.
The Kentucky Judicial Form Retirement System has 79 percent of the funds it is expected to need to pay future benefits, according to the Comprehensive Annual Financial Report. In comparison, Kentucky Employee Retirement System non-hazardous fund is around 14 percent funded.
State Rep. James Kay, D-Versailles, said he still believes lawmakers should be put into the KERS pension system so they can feel the fear that public employees have about their pensions.
“[Legislators] have been treated specially throughout the history of this place and they’re still getting that favorable treatment,” Kay said.
When Benvenuti ran for office in 2012, he campaigned on the idea that lawmakers should be able to opt out of receiving pension benefits. Once he arrived in Frankfort, he was told that wasn’t allowed. The latest bill doesn’t change that, but Benvenuti said the proposal is a step in the right direction.
“I think like anything else, we need to continuously monitor it to make sure it is affordable,” he said.