Pension bill won’t include mandatory 401(k)-style plan
FRANKFORT, Ky. (AP) — An overhaul of one of the country’s worst-funded public pension systems will not include a mandatory move to a 401(k)-style plan because Kentucky legislative leaders say it would not save enough money.
Senate President Robert Stivers said the bill, which has not yet been filed, won’t require all new hires and employees with at least 27 years of service to move into a 401(k)-style plan. That was the cornerstone of an earlier proposal endorsed by Republican Gov. Matt Bevin and the Kentucky Chamber of Commerce.
But that proposal drew fierce opposition from hundreds of thousands of state workers and public school teachers. The backlash came in advance of an election year, the first since voters gave Republicans full control of the state legislature in 2016.
“We have been getting data that would suggest it actually does cost money to switch everyone to a 401(k)-style, short and long term,” acting House Speaker David Osborne said.
Stivers said other unpopular components of the first proposal, including a five-year freeze on cost-of-living raises for retired teachers, would also not be included. But he said teachers, who don’t qualify for Social Security, would have “multiple options.” He did not specify what those options would be.
Kentucky has one of the worst-funded public pension systems in the country. The system is at least $42 billion short of the money required to pay out benefits over the next 30 years. That’s according to official estimates approved by the state’s various retirement systems. Bevin, a Republican who has aggressively campaigned for pension changes, says the true number is likely double that.
The system’s struggles have strained the state budget. Bevin’s two-year spending proposal includes $3.3 billion for the retirement system, or 15 percent of all state spending. The enormity of the spending prompted Bevin to propose cuts of more than 6 percent across most of state government.
Bevin, along with Stivers and former House Speaker Jeff Hoover, unveiled their pension plan in October after months of negotiations. Bevin had vowed to call a special session of the state legislature to approve the plan by the end of 2017, but that never happened. One problem was Hoover and three other Republican leaders were embroiled in a sexual harassment scandal when the Courier Journal revealed they had signed a secret settlement.
Hoover eventually resigned as speaker but remains in the legislature. The other three Republicans were stripped of their leadership positions but did not resign from the House.
It’s still unclear when lawmakers will introduce a pension bill. Wednesday was the halfway-mark of the 60-day legislative session. Also still on the agenda: Lawmakers must still pass a budget to keep the government funded for the next two years.