Funding for Kentucky Pension Systems Still a Challenge, Lawmakers Told
Funding for Kentucky’s public pension systems continues to be challenge, a state retirement official told a state pension oversight board this week.
With the KERS (Kentucky Employees Retirement System) nonhazardous plan now less than 13 percent funded with around $13.5 billion in unfunded liabilities – making it the worst-funded of all the state’s pension plans – Kentucky Retirement Systems (KRS) Executive Director David Eager told the Public Pension Oversight Board that legislative attention is needed.
“We’re pretty close to pay as you go on KERS nonhazardous,” Eager said, explaining to the board that pension funds have decreased as retirements rise and payroll contributions fall.
“If we receive no contribution and no investment income, it’d be insolvent in two years,” Eager said of the KERS nonhazardous plan. “That’s not going to happen. We’re going to get contributions and hopefully we’re going to get investment income. (But) we’re in a very fragile state.”
Some good news shared by Eager and KRS Deputy Executive Director Karen Roggenkamp indicates that the unfunded liability for KRS overall decreased by $450 million between 2017 and 2018, thanks mostly to a decrease in the unfunded liability of retiree health insurance plans.
“So we gained $450 million on that unfunded,” Eager said.
The KRS actuarial review excludes legislative changes made under 2018 Senate Bill 151 – the 2018 General Assembly’s pension reform bill – which is pending a ruling from the Kentucky Supreme Court.
KRS’ County Employees Retirement System (CERS) nonhazardous pension plan’s funding level dipped only slightly from 52.8 percent to 52.7 percent in 2018, accompanied by a slight uptick in the pension plan’s unfunded liability, according to a state legislative actuarial and financial update provided to the board.
Showing improvement is the Teachers’ Retirement System, the state’s retirement system for Kentucky’s active and retired educators. The funding level for the TRS pension plan increased from 56.4 percent to 57.7 percent in 2018, according to the legislative update, while the pension system’s unfunded liability was unchanged.
The unfunded liability for the state’s pension plans overall (including KRS, TRS, and the Judicial Retirement Plan and Legislators Retirement Plan) totals $37.97 billion for 2018 – an increase of $430 million over previous levels, according to preliminary numbers included in the legislative update.
From the Legislative Research Committee
Photo: Rep. Jerry Miller at the hearing (LRC)