Teachers’ retirement fund can’t afford new benefit

The Kentucky House voted 93-0 on Feb. 2 to approve House Bill 172, allowing the surviving spouse of a deceased teacher, retired from the Kentucky Teachers’ Retirement System, to continue receiving benefits after remarrying. Survivor benefits currently terminate when the widow or widower is married again.

Most retirement programs have higher contributions or reduced benefits to offset the cost of added or optional benefits. HB 172 does neither.

Survivor benefits came about to provide nonworking spouses the financial means to survive when their retired spouse died. Traditionally, this protection provided an income for women who did not work outside the home and therefore were not able to accumulate a retirement fund of their own. Understandably, the thought was the surviving widow (homemaker) would receive reduced retirement benefits to help meet her financial needs. If she remarried, the thought was that her new husband would meet those needs.

These retirement systems were never intended as dual retirements — retirement for the employee plus retirement for the employee’s spouse.

Over time, many retirement systems evolved to allow an employee to provide an option for providing a reduced benefit to surviving spouses. However, these surviving spouse options come at a cost. Most often they are paid for by reducing the employee’s retirement benefits. HB 172 does not contain any means for paying for its increased benefits.

KTRS is broke. The system has only 42 percent of the funds promised for future obligations and is $24.4 billion underfunded. Is this the time to add or increase retirement benefits? Especially when there is no identified source to pay for them?

Some argue that because teachers are not eligible for Social Security, their benefits need to be increased. HB 172 is directed at surviving spouses.

The teachers themselves would not receive any increased benefits while they are alive. Assuming a teacher did not have any other Social Security-covered employment, it is true the spouse would not be eligible for Social Security surviving-spouse benefits. This is true in any case when the deceased spouse was not paying into Social Security, not just teachers.

Even if Kentucky teachers were paying into Social Security, any retirement payment their surviving spouse received from the teachers’ retirement system would be offset against their Social Security surviving spouse benefits. Most often the retirement system benefits would exceed the surviving spouse Social Security benefits, thus eliminating the Social Security payments. This would be true for any retirement payments the surviving spouse receives, not just from KTRS.

By the way, teachers are already eligible in most states to participate in Social Security; obviously Kentucky is not one of those.

The General Assembly could choose to include teachers in Social Security but would have to pay the employer’s 6.2 percent contribution on each teacher’s salary. And teachers would also have to make 6.2 percent payroll contributions to Social Security. Of course, this is in addition to their contributions to the Teachers’ Retirement System.

Finally, at the risk of sounding sexist, I will add that nearly 80 percent of Kentucky’s teachers are women. When the Teachers’ Retirement System is 58 percent or $24.4 billion underfunded, is this the time to add payments to so many potential surviving male spouses who remarry?

The House’s 93-0 vote was misguided. Please contact our state senators and ask them to protect KTRS by voting “no” on HB 172. Let them know you are not in favor of burdening a system that is already broke.

Fixing our state’s retirement systems is already requiring massive reductions in virtually every other state-funded program and service.

Now is not the time to compound the state’s financial crisis.

This story was originally published February 17, 2016 at 6:00 PM with the headline "Teachers’ retirement fund can’t afford new benefit."