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Bevin Vetoes Pension Bill, Says He’ll Call A Special Session

J. Tyler Franklin

Gov. Matt Bevin has vetoed a bill that would have provided some financial relief to regional universities and agencies like local health departments that are facing massive increases in the amount they have to pay in to the state pension system.

Bevin also said he intends to call a special legislative session to address the issue before July 1 of this year.

House Bill 358 would have allowed the agencies to exit the pension systems and create their own retirement plans, but would have increased the state’s unfunded pension liability, which is currently among the worst in the nation.

In his veto message, Bevin said parts of the bill violate “both the moral and legal obligation” the state has for retirees.

“HB 358 will very likely result in a suspension of pension and health insurance benefits already earned by retired employees of quasi-government agencies,” Bevin wrote.

The bill would have allowed the state to take over agencies that don’t make monthly pension payments to the state, restructuring their finances and even suspending benefits for current retirees.

It would have also reduced retirement benefits for employees hired since 2014 that work for the agencies that exit the pension system.

In allowing the agencies to exit the pension system, it would have increased the state’s $37 billion unfunded pension liability by about $800 million.

Bevin said the amount the agencies would have to pay the state in exchange for exiting the system was not “actuarially sound.”

“Using an unsound discount rate will cost hundreds of millions of dollars to KERS, which further threatens the solvency of the system,” Bevin wrote.

Lawmakers passed the pension bill late during this legislative sessionin response to massive increases in the amount regional universities and “quasi” state agencies are scheduled to pay into the pension systems.

Starting July 1 their contribution rate is set to increase from about 49 percent of every employees’ salary to about 84 percent.

Bevin wrote that he would call lawmakers back to Frankfort to address the issue during a special legislative session sometime before July 1. He said he wants lawmakers to produce a bill that will “provide the relief necessary to protect the solvency of these entities and their ability to provide services, while at the same time maximizing funding to KERS and protecting the inviolable contract rights of retirees.”

Bevin called a special legislative session for lawmakers to address pensions late last year, but lawmakers voted to adjourn a little less than 24 hours after it began without passing anything.

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