After a new pension reform plan was filed as Senate Bill 1 Tuesday evening, legislative leaders told media Wednesday they expect the plan to save $4.8 billion over 20 years.
At a press conference Wednesday morning, Senate President Robert Stivers, House Speaker Pro Tem David Osborne, and Senate Bill 1 sponsor Joe Bowen told reporters the new bill is a thoughtful and data-driven proposal that is the result of work by many groups.
The leaders said the bill will save $4.8 billion over 20 years with savings from many different sections of the bill. They stated the drafting process included work with multiple actuaries who have been working with the state for many years.
As for specifics on savings from the bill, Senate President Stivers said actuaries scored the proposal as a whole and not in parts.
Some of those savings could come from systematic changes made in the bill including a reduction in cost of living adjustments (COLAs) for teachers, a need to work longer for some to achieve the highest possible benefit providing potential savings, and a cap on using sick days to bump an employee’s total benefits.(Read the full details of the bill and these items here.)
Stivers said the actuarial analysis of Senate Bill 1 will be released through the process as it is required before a floor vote can be taken.
With the bill, they said, the unfunded liability of the systems would be eliminated in 30 years.
In the bill, new employees are placed in a hybrid cash-balance plan. This will be the first time teachers are placed into a new system (new KRS employees were transferred into a similar plan after pension reforms in 2013).
The new plan will not put teachers in social security (they do not receive social security because of decisions made when the system was created) but instead will have a benefit with a 9% employee match and an 8% state match, higher than most private plans and what is done for the KRS hybrid system.
As for the impact the bill will have on the budget, the leaders said there will still be increased costs to the state in future budgets to ensure the systems are fully funded and moving to level dollar funding will cost the state more up front. But Stivers said the change will not impact this upcoming budget as the changes would not be effective yet.
However, Bowen emphasized this plan spreads the large risk associated with the system’s billions of dollars of unfunded liability, stating up to this point taxpayers have been shouldering the burden of the costs alone but the systematic changes to the pension plans will help ensure everyone is working to solve this.
The legislative leaders said the original pension plan released in the fall was a good starting point and after more data was studied, the new plan was made.
Bowen said the current bill is solid and doesn’t expect many changes on the bill as they have already made many concessions with stakeholders and other groups which legislators have heard from through the process.