Legislation allowing regional universities across Kentucky to move new employees of their institutions into a new plan, more like a 401k, to ensure pension costs do not continue to hinder university budgets and freeze current contribution rates passed through the full House on Wednesday with a 76-21 vote.
House Bill 358, sponsored by Rep. James Allen Tipton, would place all new hires into a university-sponsored defined contribution system rather than the pension plan, freezes contribution rates for the next year so costs don’t continue to rise, and gives universities a way out of the system and a mechanism to pay off their unfunded liabilities within the system over a set number of years.
Under the bill, the regional universities would see:
- All new hires into the system moved into a university-sponsored defined contribution plan
- A one-time window for existing Kentucky Retirement System (KRS) employees to opt-out of their current plan and go into the more portable university-sponsored plan
- A study showing the unfunded liabilities for each regional university based on active, inactive, and retired employees
- An option to get out of the system completely and a set number of years to pay off their unfunded liabilities with a 5.25% interest rate
- A freeze to the current 49% contribution rate over the next year and extend it while the actuarial analysis is being conducted so they don’t see their rates rise to 84% which other employers in the system are currently paying
House Bill 358 now moves to the state Senate to be heard in committee.