After Veto, Bevin Crafts New Pension ‘Relief’ Bill

May 2, 2019

Credit J. Tyler Franklin

Gov. Matt Bevin has crafted a new version of the pension bill he vetoed last month and is expected to call a special session for lawmakers to consider the issue soon.

The measure is similar to the one that Bevin rejected last month. It allows regional universities and agencies like health departments to exit the state’s pension system to avoid a spike in the amount of money they have to contribute to it.

It would also add to the state’s pension debt by allowing some of the agencies to exit without paying the full share of what they owe to the retirement systems.

Jim Carroll, president of advocacy group Kentucky Government Retirees, swiftly criticized the proposal after it was distributed on Wednesday.

“It is bad funding policy and should be summarily rejected by the General Assembly,” Carroll said in a statement. “We urge the legislature to pass a simple one-year extension of the current discounted employer contribution rate and explore funding options in the 2020 session so that quasi-government employers can begin making the full contributions to this fragile pension fund.”

The bill would also freeze the amount that universities and quasi-public agencies have to contribute to the pension systems, which is scheduled to rise from 49 percent of payroll to 87 percent starting July 1.

Regional universities have said the measure would help them avoid tuition increases and cuts to services. Many agencies like local health departments and rape crisis centers have said they would have to close if they are required to make the higher pension contributions.

Unlike the earlier version, the new proposal no longer allows the state to suspend retirement benefits for employees who work for agencies that are delinquent on making payments to the pension system.

But it does allow agencies that exit the system to transfer employees from traditional pensions into 401k-style plans if the employer doesn’t agree to pay higher costs.

The new proposal also incentivizes the agencies to move employees into 401k plans by forgiving agencies’ pension debt after 30 years if they do so.

An actuarial analysis of the bill estimates that it would add about $827 million onto the state’s $37 billion pension debt.

Bevin vetoed the original version of the bill last month, saying that it violated “both the moral and legal obligation” the state has for retirees and would leave the state vulnerable to a lawsuit.

He said he would call a special legislative session for lawmakers to pass a new version of the bill before July 1.

The new bill includes a clause that bans state resources from being used to “challenge the constitutionality of this act.”

A pension bill that passed out of the legislature last year was struck down by the Kentucky Supreme Court after a lawsuit by Democratic Attorney General Andy Beshear.