Begin by informing yourself and getting information on KPERS history, benefits, levels, judges, fire and police, etc. www.kpers.org, go to publications, and then go to benefits at a glance. Explore the possibilities! You can even compute a retirement benefit.
HB 2333 as originally introduced contained a provision to change the 85-point retirement rule to 95 by increasing a point a year. This provision is gone.
This bill does address the fact our current employee pension benefit plan is not sustainable. There are three components to this legislation;
1. Raising the cap on employer contribution,
2. Lowering the multiplier used in computing the annual retirement benefit,
3. Directing the net proceeds from the sale of state owned real property, to pay down the local and school portion of the unfunded actuarial liability.
House Sub for HB 2333 as passed out of committee 2/15/2011 provides for:
The state is the employer for the state agencies and makes a contribution to the KPERS fund on behalf of its various employees and this includes the employer share for all the school districts. This money is one part of the “three-legged stool” used to provide money to pay the KPERS Defined Benefit (DB); the other legs are employee contributions (4% or 6%), and investment returns (stock market).
Actuarial Required Contribution (ARC). This term is used to identify the required contribution to sustain solvency and meet the retirement liability. We are at 64% fund ratio with a $7.9 Billion unfunded actuarial liability (UAL). Investment bankers like for DB plan to be in the 80-85% ratio range
The fundamental principle of sound financing of a defined benefit plan is to consistently pay the full ARC. We have not done that in years.
The following percentage of employee salary is the state contribution to the retirement fund on behalf of the employee. The employee pays 4% or 8% depending on if they are Tier I or II.
As currently funded, the State Group reaches ARC in FY 2018 at 11.8%,
The School group will be 21.37% in 2033 (still below ARC), and
The Local Group reaches ARC at 10.6% in 2018.
What we are proposing to help “stop the bleeding”
1. Increase cap (more money) of employer contribution by .8% per year up from current .6% increase. Helps meet ARC around 2026. (July 1, 2012)
$10 million first year cost, $20 million 2d year and $30 million 3d year and so on.
Next item in the bill.
To compute annual retirement benefit (ARB) we currently use the following formula, average salary X years of service X 1.75 = ARB.
Final annual salary (FAS) Tier I, 3 year average salary, Tier II, 5 year average salary
2.Change the multiplier to 1.4 for all employees Tier I and II. (July 1, 2012)
(This was the multiplier in 1993 and was changed to 1.75)
$40,000 X 30 years X 1.75 = $21,000 ARB
$40,000 X 30 X 1.4 = $16,800 ARB
$40,000 X 25 years X 1.75 = $17,500 + $40,000 X 5 years X 1.4 =$2,800 =$20,300
$40,000 X 28 years X 1.75 = $19,600 + $40,000 X 2 years X 1.4 = $1,120 =$20,720
This actually gets us to 80% RAB around 2028.
Last item:
3. Direct that all net proceeds from sale of state owned real property be used to pay towards state and school group UAL. No fiscal estimate (not much). (July 1, 2012)
Committee action removed tying minimum retirement age to Social Security. This provision was for new employees and would not have any affect on current employees or beneficiaries of KPERS.
We did NOT include COLA, Defined Contribution, Retirement Age, Final Average Salary, Early Retirement Benefit Deduction, Years of Service, and Retirement age eligibility.
House Sub for HB 2333 has some differences compared to SB 49, which is still under consideration in the Senate. Passage gives us a house position as we move through the process of compromise with the senate position.
There are currently 277,000 KPERS participants
161,000 active employees
43,000 inactive (vested working outside the system)
73,000 retirees.
Some Police Departments do not have representation with KF&P
The KPERS trust fund pays the operational and administrative cost required to administer the benefit. Beneficiaries do not directly contribute a fee for services. Your personal retirement plan provider does collect a fee.
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