Archive for Friday, March 23, 2012

KPERS course

The Kansas House has put forth some solid ideas about how to prop up the state’s pension system.

March 23, 2012

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A measure passed by the Kansas House this week may need some tuning up, but it proposes some positive steps toward shoring up the state’s pension system for teachers and government workers.

As did some other plans, the bill passed by the House would spell the end of the guaranteed benefit plan for new employees entering the Kansas Public Employees Retirement System. Those employees would have to choose between a 401(k)-style plan and a guaranteed fixed-return plan.

The big difference in the House plan is that it sets a specific strategy to address a projected $8.3 billion gap between expected KPERS revenue and the benefits the state has promised to retirees through 2033. An amendment proposed by House Minority Leader Paul Davis, D-Lawrence, and accepted by the House would use a large portion of the revenue from three state-owned casinos to meet the state’s pension commitment.

A casino in Dodge City, along with two new casinos that have opened since the first of the year near Kansas City and Wichita, are expected to generate more than $80 million for the state in the fiscal year that begins July 1. The state already has dedicated $10.5 million of that money to boost engineering programs at state universities, and the House bill would commit three-fourths of the remaining money to KPERS. Although it’s hard to put a solid dollar amount on that revenue, Davis predicted it could produce several billion dollars over the next 20 years.

Although Kansans could think of many other positive ways to use that casino revenue, the state needs to make good on the promise it has made to retiring employees. To help rein in future costs for KPERS, it’s also reasonable for the state to make changes in the plan for new employees. Many private businesses offer 401(k) retirement plans, and that seems like a valid option for state employees. The option of a fixed-return retirement savings plan needs further consideration. The 5 percent annual return guaranteed in that plan is well above any current interest rate on insured savings accounts. Legislators should have learned not to promise retirees more than the state can reasonably expect to financially support. If the state wants to offer a guaranteed-return plan, the plan’s earnings should be flexible and tied to some national economic measure such as the Consumer Price Index.

The Senate is continuing to work on its own KPERS plan. That plan is likely to include some different ideas, but the plan outlined by the House deserves serious consideration. It sets a solid plan for helping the state address the current KPERS shortfall as well as some valid options for putting the system on a firm footing for the future.

Comments

Michael LoBurgio 3 years, 3 months ago

HOUSE PASSES KPERS BILL

This week the House passed a bill that includes a number of provisions to address the current KPERS $8 billion unfunded liability. Here are the key features of the bill:

· On January 1, 2014, Tier I employees’ contribution (that would be most current employees) goes from 4% to 5%. On January 1, 2015, the employee contribution goes to 6%. The multiplier for calculating the retirement benefit goes from 1.75 to 1.85. Contributions prior to 2014 are unaffected. Points to retire are unaffected.

· On January 1, 2014, Tier II employees’ lose the feature of a COLA after retirement. The multiplier goes from 1.75 to 1.85 and that is retroactive back to the hiring date. Points to retire are unaffected.

· On January 1, 2014, new employees go into a “cash balance” plan instead of the traditional defined benefit plan. There is no multiplier. They get a flat 5% interest on their savings. New employees would vest after 7 years instead of the current 5 years. Age 65 with 30 years’ service would be full retirement.

· Employer contributions to the fund are increased. This includes local employers like cities and counties.

· On the House floor we put in a provision that up to $75 million a year from the state casinos would go toward fixing the KPERS unfunded liability.

· We would reach equilibrium before 2025 with this plan. However, on the House floor we also added an option for new employees hired after January 1, 2014, to pick a defined contribution plan (i.e., 401k plan) instead of a cash balance plan for their retirement plan. New employees picking that 401k option would not be contributing to the unfunded liability, and that pushes the equilibrium date out. We are still waiting for actuarial numbers on adding this option, and I’m hoping it comes out of the bill when worked in conference with the Senate. We need to secure KPERS funding as soon as possible.

Michael LoBurgio 3 years, 3 months ago

Legislators' KPERS calculation a 'perk'

Comparing pensions

A legislator retiring with an annualized pay of $85,820.52, and with 10 years' service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years' service, the annual benefit would be $30,037.20, and monthly, $2,503.10.

The News asked some KPERS retirees about their pension benefits. Their answers varied widely.

A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years' service, estimated the earned benefit at $2,300 to $2,400 monthly.

A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.

'Insult'

Kathy Mendenhall, a public speaking instructor at Hutchinson Community College and past president of the Hutchinson National Faculty Association, had not been aware of the annualized pay formula for legislators.

http://hutchnews.com/Todaystop/kpers-and-leg-2--2

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