Archive for Friday, July 22, 2011

Kansas pension group begins studying changes to KPERS

July 22, 2011, 12:48 p.m. Updated July 22, 2011, 3:00 p.m.


— A 13-member panel of Kansas legislators, lawyers and financial planners began work Friday on studying changes to the state's pension plan and the solution for keeping it solvent.

The panel was established by legislators this spring to address the long-term financial problems facing the Kansas Public Employees Retirement System. KPERS projects an $8.3 billion shortfall between revenues and the benefits promised to teachers and government workers through 2033.

"It will be a daunting task, truly challenging," said Senate President Steve Morris, a Hugoton Republican, in remarks opening Friday's discussion.

KPERS Executive Director Glenn Deck said the system is still recognizing investment losses from the start of the Great Recession in 2008. KPERS averages losses and gains over five years, to lessen the year-to-year swings in the value of its assets.

The new figure, released to KPERS trustees last week, is $587 million higher than the previous figure of almost $7.7 billion. The increase is about 8 percent. The figure represents the gap between anticipated revenues and benefits promised to teachers and other government workers through 2033.

KPERS expects the figure to drop significantly when a pensions law enacted this year takes effect. There are 279,000 Kansans participating in the system.

Deck said the KPERS board of directors recently voted to continue the assumption that investments will earn an average of 8 percent at least for the next year. The system experienced a 4.4 percent loss in investments in 2008 and a 19.6 percent drop in 2009.

The fund rebounded in 2010 with a 14.9 percent gain, followed by a 22.2 percent one in 2011.

"This is the most important assumption," Deck said.

The new law increases the state's annual contributions to KPERS. It also requires most public employees to choose between paying a higher portion of their salaries toward their pensions or seeing their future retirement benefits cut.

Those changes won't take effect until the study commission reviews pension issues and makes recommendations to the Legislature, including creation of new 401(k)-style plan.

"If there is a more important issue than KPERS I challenge what it is," said Sen. Jeff King, an Independence Republican.

King and Rep. Mitch Holmes, a St. John Republican, will serve as co-chairmen of the study commission.

The KPERS system currently is a defined benefit plan, meaning employees are entitled to a set amount of money when they retire, based on years of service and their average salary.

Republican Gov. Sam Brownback and others favor a defined contribution plan as a means to improve the overall health of the pension system.

A defined-contribution system, mirroring 401(k) plans in the private sector, would base each worker's benefits on the investment earnings from what they and the state contribute toward their pensions. Existing KPERS plans guarantee benefits up front, based on an employee's years of service and final salary.

Those who favor moving toward a 401(k)-style plan for public employees say traditional pensions can't be sustained financially. But retiree groups and public employee unions argue that a 401(k)-style plan will result in less secure and less generous benefits for workers.


bootlegger 6 years, 10 months ago

I was told by KPERS; that it does not matter how much you put in too the plan; it does not increase your pension anyway...............; what mishmash; mixed up mess this KPERS is.

jafs 6 years, 10 months ago

That's clearly not true.

KPERS benefits are calculated on your final average salary, and your contributions are based on your salary.

So if your salary is higher, your contributions are higher, and your benefits are greater.

JayhawkFan1985 6 years, 10 months ago

What strikes me as blatantly unfair is that state employees and teachers BY LAW contribute either 4% or 6% of their salary into KPERS and pay state income tax on that income that never hits their pocket BUT are any of these people represented on the committee? The answer is "NO." The majority of the Legislature wants to cut KPERS benefits to state employees because they want only to lower taxes. The truth is that KPERS benefits are nothing more than deferred compensation. KPERS is unhealthy due to 3 factors: 1) the Legislature has consistently failed to contribute its fair share as agreed to in the plan that established KPERS by LAW, 2) the downturn in the economy has reduced the assets of the KPERS portfolio, and 3) KPERS has periodically made ridiculously stupid investments. This was primarily done during the 1980s and 1990s as an economic development tool. It didn't work for either eco devo or as an investment tool. The only real solution is for the legislature to divert the higher than expected tax receipts into KPERS to make up for what they should have done for decades but didn't. As mentioned above, the employees ALREADY paid their share at the front end so to cut benefits at the tail end is wrong. No two ways about it. MAKE A PROMISE...KEEP A PROMISE!

1983Hawk 6 years, 10 months ago

Where is the outrage from "conservatives" over a government "taking" of contract rights? They seem hell bent on abrogating that contract by forcing public-sector employees, many of whom may have turned down other opportunities because the KPERS contract was in their retirement planning, to choose between increased contributions or reduced benefits. It's not gov employees' fault lawmakers failed to adequately fund KPERS while giving away billions in corporate tax breaks.

chootspa 6 years, 10 months ago

The current party line is that public employees are all a bunch of lazy government teat suckers. It matters not that they tend to work very hard at the same job for 30 years and have paid into the system whether they wanted to enroll in it or not, the fact that they get something nice when they retire cannot be endured. After all, rich people might take the money that they're not paying in taxes already and someday maybe make a job somewhere... in China.

average 6 years, 10 months ago

When you leave state service, you can always take out what you put into KPERS. Even if you're vested. Even if you have enough points to retire. Including 4% interest since it was put in... 8% (!) if you started in June 1993 or before.

You can do that, but most people with more than 5 years service and less than 20 years till retirement don't. Because that doesn't take into account the employer contribution, while the retirement payout is based on both your contribution and the employer.

Julie Jacob 6 years, 10 months ago

I'll second that thought, bootlegger. Just give me my account balance and I'll take it from here.

average 6 years, 10 months ago

Quit the state, and you can withdraw your contributions in 31 days. With interest paid. Roll it into a personal IRA.

Alceste 6 years, 10 months ago

One is compelled to wonder, given the compelling nature of KPERS funding and "health" as per the remarks from the legislators themselves: Senate President Steve Morris, Sen. Jeff King, an Independence Republican, and Rep. Mitch Holmes, a St. John Republican if these Republican hacks will correct the egregious manner in which they themselves calculate their own KPERS "benefit". I challenge each of this financially intellectual giants to share with the public what they claimed when they themselves signed up for KPERS. I challenge each of these "leaders" to do away with this obscene benefit; particular when one realizes it's these very men who STOLE the money from KPERS in the first place because they are so inept at doing their ELECTED jobs in government. Who wants to take the bet they won't do either?

To determine a legislator's KPERS benefit, his pay is annualized, treated as if the job entailed full-time employment and full-time pay.

"Even though they only really earn that for several months of the year, they get credit for earning it all year long," Basso said.

For the legislator listing all income - the daily rate, subsistence and allowance - this is how annualization is calculated:

•$88.66 (daily rate) x 31 (days) x 12 (months) = $32,981.52

•$123 (subsistence) x 31 (days) x 12 (months) = $45,756

•$7,083 non-session allowance.

Altogether, that equals $85,820.52, and that's the pay figure that would be used for that legislator retiring now.

The Senate president and House speaker are at the top of the pay scale, and annualized pay for those posts could be as high as $99,859.74, depending on their enrollment choices.

ResQd 6 years, 10 months ago

There would also be the people on the bottom of the State payroll who will be adversely affected by this. My brother can retire in 2 years, but doesn't make much money. He has failing health, so wanted to retire early. He would only draw about 1100/month, but luckily his wife works and they will survive. He will also be one the people "screwed", by this.

Alceste 6 years, 10 months ago

Email/fax the RUBES and let them know.....I doubt they care....but at least you will always be able to say YOU TRIED.

The simple fact Morris is a RICH, unconcencerned idiot hasn't anything to do with what is going in your family life.

Still,.....what would your family have done with a WELFARE payout of close to $800,000.00 simply because U did the paper work?

I hope thinking about the above makes you angry.

Alceste 6 years, 10 months ago

Here are the contact email addresses for these men:

William Buchanan

Jeff King

Edward Condon Brian Winter">p>">p> Fax: (785) 296-6718

Now this Steve Morris guy has been on WELFARE for many, many years. He took over $796,185.00 in WELFARE payments from the Federal Government between 1995-2010

What a disgusting cloddhopper. Gotta give the boy some credit.....he just set that cash machine on "auto pilot" and counts. Wonder how he avoided Viet Nam? It's nowhere to be seen on his biography. (•US Air Force, Active Duty Pilot, 1969-1974) He been pulling in Kansas money as a "legislator" since 1993 or such. He gonna have one phat KPERS check extra to count soon.....

Alceste 6 years, 10 months ago

Wooppppppsss.....gotta take the VietNam part back. The boy was given two Air Force Medals for combat missions in 1971 and 1973. Still a clodhopper political hack, though....

Charles L. Bloss, Jr. 6 years, 10 months ago

I retired in 1997 after working under KPERS for over 25 years. My pension is small, but I need it to live. We were promised these benefits, we contributed what was asked of us. Now a bunch of crooks want to steal it from us. They had best watch themselves, or a bunch of retirees will descend upon them like a swarm of bees.

tomatogrower 6 years, 10 months ago

He has slashed everything else. I'll bet the KPERS money will now go towards ethonol production or something else that the Koch brothers are manufacturing. Can't let those rich guys stop making even more money off the taxpayers. Talk about welfare queens.

Alceste 6 years, 10 months ago

you just a ain't even a shower....let alone a thrower.

Suggestion: THROW them tomato products at the people that live fat and large and CONTROL what KPERS recipients rely upon. Otherwise, please be quiet.

nativeson 6 years, 10 months ago

It is silly to blame the current administration for the KPERS unfunded liability. The fact is that it is a defined benefit plan that is disconnected from the market. That is why almost every plan like it in the country is underfunded. States and unions were unwilling to increase contributions to continue funding the liablity when market results were poor. For all 401k participants, they simply lost a chuck of their retirement.

Benefits were increased several decades ago with no change in the funding requirement by participants. This was great when the stock market was increasing. After the crash that took most private sector 401ks down 40%, the state is faced with a hole so deep they can only dig out over the next several decades.

There is certainly blame with the current administration on several topics, but this is not one of them. For those in the plan, I think it is clear that you will have reduced benefits since the formula produces much higher payout than would have otherwise occurred if it was a traditional 401k.

This day has been brewing for a long time. Point the finger at politicians, but go back about 6 administrations to do so. The end of the line financially is near without intervention for KPERS, and whoever is in office at the time gets to deal with the consequences.

coloradoan 6 years, 10 months ago

nativeson, you've missed the real ponts. The blame is on the legislators, not the exectuve adminstration, because the legislators in place now are mostly the same ones who refused to pay into KPERS as required by law. The shortfall is largely due to this failure by the Legislature, as well as bad investing and a bad market. The employees paid in as required, but the legislators refused, and that is why they get the blame.

Alceste 6 years, 10 months ago

For years, the Legislature has failed to fund the employer contributions to KPERS at the appropriate level. At the same time, employees have never failed to fully make their contributions as required.

Several years ago, as the problem of chronic underfunding was making things worse, the KPERS actuary recommended that the legislature raise the cap on employer contribution increases from 0.6% to 1.0%. Although the bill has been introduced in several legislative sessions, the legislature has chosen to ignore the recommendation.

This underfunding, coupled with the failure to address KPERS recommendations, has resulted in continuing growth in the unfunded actuarial liability.

Now, in 2011, when the House of Representatives Committee on Pensions and Benefits decides to act, their bill which passed out of committee yesterday, meets only half of the KPERS actuary recommendation moving the cap from 0.6% to 0.8%.

It's the LEGISLATURE, stupid.....

What a bunch of back slapping, cigar smoking, back door deal making slobs these men and women are.....and the KPERS sweetheart deal they cut for themselves is a disgrace BUT validates the opinion that Kansas legislators care about one thing and one thing only in the final analysis: THEIR OWN POCKETS.

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