KY’s troubled state pension fund continues slow recovery but only 24% funded
Kentucky’s state pension system continues to improve after two decades of neglect, although it’s still billions of dollars short of what it will need to provide promised benefits to future state government retirees.
The Kentucky Retirement Systems Board of Trustees on Wednesday approved an actuarial valuation report showing that the primary state pension fund ended Fiscal Year 2024 on June 30 with a funding level of 24.8%, up from 22.2% last year.
Though the situation may appear bleak, the $4.2 billion Kentucky Employees Retirement Systems (Non-Hazardous) pension fund gradually has risen from an all-time low of 12.9% funded in 2018, when it was on the brink of insolvency.
During that low, the pension fund neared a “pay as you go” situation where it simply would have transferred incoming contributions from state agencies and workers to state retirees in the form of pension checks, said KRS trustee C. Prewitt Lane.
“We worked right through that very nicely and are certainly in a very positive cash-flow position (today) thanks to our nice friends in the legislature and the governor and the good (investment) returns,” Lane told his fellow board members on Wednesday.
As of June 30, the pension fund had an unfunded liability of $12.5 billion, down from $12.7 billion last year.
About 48,500 state retirees drew a little over $1 billion a year in pensions from the fund in 2024, according to the actuarial valuation report. About 32,500 active state workers contributed. The fund collected nearly $1.4 billion from state workers and their public employers through their combined contributions.
There also are about 31,000 “inactive” members of the pension fund — people who are vested to collect state retirement benefits when they’re older but don’t presently work for the state.
The Kentucky Employees Retirement System (Non-Hazardous) pension fund remains one of the most impoverished public pension funds in the country, due to two decades of neglect by governors and legislators from both political parties.
But in recent years, starting under former Republican Gov. Matt Bevin, state leaders have committed billions of dollars in every state budget to full annual funding of the pension systems for state workers and teachers. The long-term plan for the several state pension funds is to pay off their huge accumulated deficits by the year 2049.
Apart from making the full annual recommended pension payments, the current two-year state budget includes hundreds of millions of dollars in extra money for the state pension funds to whittle away at their deficits.
A rising stock market and strong economy also helped the pension funds. The state retirement system reported returns on its market investments of between 9% and 11% in 2024, roughly twice its assumed rates of return.
“I think generally we have improved our funding level,” Ryan Barrow, executive director of the Kentucky Public Pensions Authority, told the Herald-Leader on Wednesday. “We’ve still got a long way to go until 2049, but we’re making progress.”
There are two far smaller state worker pension funds: Kentucky Employees Retirement System (Hazardous), for several thousand state workers with jobs that are classified as hazardous, and the State Police Retirement System, covering the Kentucky State Police.
The funding level for the KERS (Hazardous) pension fund stood at 68.3% on June 30, up from 65.4% a year earlier, according to the report. The funding level for the SPRS pension fund stood at 56.7% on June 30, up from 54% a year earlier.
