Topeka — 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.