Legislation to change the pension plan for future teachers in Kentucky took its first step through the legislative process Thursday, as it passed through the House with a 68-28 vote after passing through the House State Government Committee earlier in the day.
House Bill 258, sponsored by Rep. Ed Massey, would create a new tier in the Kentucky Teachers’ Retirement System (KTRS) for any new teachers that would be hired in the state that would be part defined benefit plan like the typical pension plan and part defined contribution plan more like a 401(k).
Massey told the committee the legislation comes as a result of months of work between lawmakers and many education groups that led to compromises presented in the bill.
Over 30 years, the bill will save the state more than $3 billion, Massey said. He added the bill also includes a stabilization account that can be utilized in the event funding for the plan falls below 90 percent so the state doesn’t find itself in another deficit situation like the one that currently exists with the state being the only one on the line to pay it back.
Massey noted the bill doesn’t solve the legacy debt issue the state faces with the current plan and paying benefits for anyone currently in the system, but it does avoid adding more personnel to the same system and piling on additional costs to that current plan.
The bill contains a supplemental plan with two percent paid in by each the employee and the state is portable and an employee could take with them if they leave the profession unlike the typical pension plan.
House Bill 258 makes no changes to any benefits provided to current or retired teachers. Education groups say the new plan would be a comparable benefit to the current plan. The new tier would also have an inviable contract for benefits in both sections of the plans.
The Kentucky Chamber of Commerce announced their support of the legislation this week with the following statement:
“The Kentucky Chamber supports efforts to reform the state’s retirement system for teachers. It is crucial to address the future fiscal solvency of the pension plans while ensuring the costs to the state do not continue to grow to a point where other essential services are crowded out. Reforming the system for future members while still providing a solid retirement benefit is the first step to tackling this issue. The Chamber supports this step and emphasizes the importance of continued monitoring of future and legacy costs of the system.”
The legislation now moves to the Senate for consideration in committee.