Pension relief for Kentucky universities and other government entities goes to governor

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After much discussion about how to provide relief to Kentucky’s regional universities and quasi-governmental agencies struggling with the growing costs of pension benefits, lawmakers passed a final solution late Thursday night that would allow those groups a way out of the pension plan and freeze their contribution rates for now.

A conference committee was appointed Thursday afternoon to deal with the issue after the House and Senate could not agree following the Senate’s changes which added the opt-out for quasi-governmental agencies, such as health departments, instead of only the regional universities.

The final agreement closely resembled the Senate’s plan as it does allow for a way out for those quasi-governmental agencies by giving them a window to exit the pension system or opt to stay in the plan instead of moving to more of a 401k-style plan.

If an entity decides to exit the system, they will pay off their unfunded liability to the pension plan over a set number of years so the system is not left with the cost of their employees. This move will cost the Kentucky Retirement System (KRS) millions over the long term as new employees will not be entering the system, but comes as many universities have said the crushing pension costs are forcing higher tuition and layoffs. Likewise, many quasi-governmental agencies have publicly said they are facing bankruptcy and the possibility of closing their doors as a result of the pension costs.

House Bill 358 also freezes the employer contribution rate for the regional universities and quasi-governmental agencies which decide to stay in the system for the next year. That rate is currently 49 percent of pay whereas many other entities are currently paying 84 percent. Their rate would increase next year under this plan.

The final amended version of the legislation now goes to Kentucky Gov. Matt Bevin for his consideration. If he chooses to veto the bill, the policy will not become law as the legislature will not have the ability to override that decision as the 2019 session is now finished.


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Jacqueline Pitts
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