Kentucky’s troubled pension systems continue their downward slide. Plans covering teachers and state employees lost $1.8 billion this year, bringing the total unfunded liability to more than $32 billion.
David Eager, interim executive director of KRS, addressed the Public Pension Oversight Board this week. Co-Chairman Joe Bowen, a state senator from Owensboro, says the news isn’t all bad.
"What folks need to understand is that we have seven retirement systems that are publicly funded, and there's actually only one that you would consider to be in dire straits," Bowen told WKU Public Radio.
That pension plan is the Kentucky Employees Retirement System, or KERS, which has only 16 percent of the funds needed to pay the benefits of future retirees. That makes it among the worst-funded public pension plans in the country.
Other retirement plans covering teachers, judges, and lawmakers are in much better shape.
Critics blame the shortfall on two decades of inadequate contributions from the state, but Bowen says other factors contributed, as well.
"We have assumed the returns would be better than they actually are," states Bowen. "We didn't assume that retirees would be drawing from the pension plans as long as they are."
Contributions have also not taken into account cost of living adjustments and increases in health insurance premiums. Another problem is that there are more KERS retirees than active workers in the system.
Reforms to the state's public pension plans began in 2013 when structural changes were made to apply to new hires. That included moving from a defined benefit contribution to a hybrid cash balance plan, similar to a 401K. Lawmakers also committed to making the actuarially-required contributions.
Lawmakers will do more work to shore up the state’s pension systems during the 2017 General Assembly. Senator Bowen says offering details would be premature before the release of an audit in late December.
