After a change in Senate committee adding quasi-governmental agencies to legislation allowing Kentucky’s regional universities an exit from the pension system, the state Senate passed House Bill 358 on Wednesday evening and sent it back to the House for final passage.
As growing pension costs continue to cause a huge strain on the budget of many entities across the state, a bill to allow Kentucky’s regional universities and now quasi-governmental agencies to move new employees of their institutions into a new plan, more like a 401k, to ensure pension costs do not continue to hinder their budgets and freeze current contribution rates continues to move forward. Get the full details of the bill with the changes made in Senate committee on The Bottom Line here.
An actuarial analysis was released Tuesday that showed the financial impact of the amended bill would have a cost to the most underfunded plan in the Kentucky Retirement System (KRS) of $1.036 billion and approximately a 7.00% increase in the actuarially determined contribution rate for the next 21 years.
This number is based on the cost of freezing the contribution rates for universities and quasi-governmental agencies who are currently paying a lower rate, accounting for the cost of groups potentially leaving the system, and the new employees not entering the system.
In a phone conversation with The Bottom Line, Eastern Kentucky University Vice President of Government Relations Dr. David McFaddin stated the university is glad to see the legislation pass out of the Senate and while the bill is now distinctly different than the original plan, they look forward to conversations in the House about possible concurrence and final passage of the legislation.
McFaddin highlighted the fact that some have suggested the universities will not be paying their fair share under this plan, however, the bill states they will not only pay off their full amount of unfunded liability, but will also pay interest on that cost over the term specified in the legislation.
While new employees will not be going into the pension plan, which is part of the calculated cost in the actuarial analysis, McFaddin emphasized the fact that the growth rate for employment has substantially declined for many years and that trend will likely continue.
The amended version of House Bill 358 now heads back to the House where they will either concur with the changes or appoint a conference committee to hammer out the differences. There are two legislative days remaining in the 2019 legislative session.