Teachers’ retirement plan official discusses funding and system specifics with pension working group
In the second meeting of the Public Pension Working Group on Thursday, Kentucky Teachers’ Retirement System (KTRS) Deputy Executive Director and General Counsel Beau Barnes presented to legislators about the structure of the teachers’ pension plan.
KTRS, the system that covers teachers and school personnel, currently sits at around 57% funded. Reforms to that system have been discussed, especially in the 2018 session, as concerns around the sustainability of pension plans have risen and more state money has been required to sustain the systems.
The fact that Kentucky teachers are not in the social security system was a big topic of discussion of the meeting, as it has been throughout the pension reforms talk. Barnes said social security would be, on average, a $23,000 benefit to teachers if they were paying into that system and would get that benefit. Senate President Robert Stivers pointed out that the state’s pension plan for teachers’ accounts for that and ensures that the benefit they receive is equivalent and replaces social security.
When discussing the plan, Barnes said on average, when separating the funding sources, the contributions of a teacher and that of the state cover about eight years of their retirement and the next 12-13 years are paid for with investment returns.
Barnes also highlighted large amounts of additional funding given to the system in recent years, including $1.9 billion in additional funds provided over the next two years on top of the typical cost of the system, and thanked the legislators for the increased funding as it helps the system manage cash flow and make better investments.
When asked about why teachers must only work 27 years before they can retire, Barnes explained that there was a legislative change years ago that reduced the requirement from 30 to 27 years of service. Many legislators expressed concerns over that number as the life expectancy has gone up substantially over the years and people are now living and drawing benefits for much longer than when the plan was created.
Legislators asked questions about the average salary and benefits of Kentucky teachers and discussed the changes made to the system’s medical plan, which was severely underfunded, and the changes they are making on that front to help restore that fund.
One of those efforts, Barnes explained, is a pilot project that uses the DNA of retirees to best determine the proper medications for those members which can result in cost savings for the system and better health outcomes for the individuals. He stated the pilot project of 5,000 has resulted in 5/8 of those participants needing to change their medications and is serving as a model for other systems across the country.
After two hours of discussion and testimony in the Thursday meeting, the group agreed to have Barnes come back to their Tuesday meeting next week to finish his presentation and discuss reform legislation debated in recent years.