Pension Bill passes in the House

LRC

(Frankfort, KY) A major reform of the state's public-employee and teacher retirement systems -- systems beset with unfunded liabilities totaling billions of dollars -- passed the House unanimously this week, a week that also saw a constitutional amendment on casino gambling approved by a House committee.

The pension-reform measure -- House Bill 600 -- seeks to put the brakes on a growing $26-billion shortfall in the pension funds, which affect more than 445,000 current and retired state and local government workers and teachers. Actuaries say the system will go broke by 2022 if nothing is done.

Under the House bill, future state hires would have to contribute more to their retirement, and work longer to qualify for full benefits. Employee contributions would rise to 6 percent of their salary, as opposed to the current 5 percent. Future state and local employees would need 30 years of service to qualify for full benefits, up from the current 27. They would also have to be at least 55 years old. (There is no current age requirement for receiving full benefits, as long as a worker has 27 years of service). Hazardous-duty employees such as police and firefighters would have to work for at least 25 years instead of the current 20 to receive full benefits.

Another major change: The annual cost-of-living increase for retirees will be fixed at 1.5 percent. Currently, the pension system COLA is pegged to the rate of inflation as determined by the Consumer Price Index, and has been running around 3 percent in recent years. The bill also eliminates so-called double dipping, a practice under which retired employees return to work in state government and establish a second pension plan.

The bill now goes to the Senate.