Welcome to the summer edition of PENSION INSIGHTS, the official newsletter for members and retirees of CERS, KERS, and SPRS.
In this issue you’ll find summaries of important bills passed during the 2022 Regular Session of the Kentucky General Assembly; investment updates; recent board activities; historical retirement trends… and much more.
FROM THE DESK OF
DAVID EAGER, KPPA Executive Director
The funded status of all five retirement and five insurance funds continues to improve (I encourage you to read the Summary Annual Report). For over a decade, our retirement funds saw a serious erosion of their funded status. A number of things happened to cause a turnaround from that dangerous trend.
First, the legislature changed the law, with Senate Bill (SB) 2 in 2013, requiring that all plans be fully funded per the actuarially determined contribution (ADC), which the KPPA actuary calculates each year. Between 2002 and 2014 the retirement funds did not receive the full ADC, leading the plans to pay out more in benefits than they received in contributions and investment income.
Second, with the passage of SB 2, the legislature really began to address the funding and administrative challenges in other ways. They formed the Public Pension Oversight Board (PPOB) to act as their overseer of the governance of the plans. Each year the PPOB makes recommendations to the legislature regarding bills that need to be enacted to facilitate the management and improve the financial condition of all of the funds.
Third, in 2017 Trustees recognized the economic assumptions provided to the actuary were not consistent with history and the investment return outlook forecast by experts. The assumptions became more conservative resulting in increases in the required contributions by roughly 50% to 70%, depending upon the plan.
Finally, Trustees, Executive staff and legislators began engaging to a much greater extent, partly through the PPOB forums and partly through a significant number of one on one and small group meetings.
All five retirement funds remain far short of their required funding, but we are now on track to improve that funding each and every year. Just like you would pay off a home mortgage, it will also take many years to pay off the unfunded liability. But, I am confident we are on the right path.
I will close as I frequently do by saying if you have an idea for how we can better serve you, I would love to hear it. The Kentucky Public Pension Authority’s Sixth Mandate is “Insist on a culture of continuous enhancement to everything we do”. It takes input from our members to accomplish that.
Thank you.
David L. Eager
 Executive Director
The 2022 Regular Session of the Kentucky General Assembly adjourned on Thursday, April 14, 2022. Click here to read the most significant bills and resolutions passed this Session that will have an impact on KPPA. All bills take effect on July 14, 2022 unless otherwise noted.
Highlights of the 2022 Session include:
House Bill 1 and House Bill 604 KERS Nonhazardous and SPRS plans receive additional allocations
House Bill 1 and House Bill 604 provide a major funding infusion to the KERS Nonhazardous and SPRS plans. Not only did House Bill 1 (the State/Executive Branch budget bill) include the full contribution rates recommended by the KPPA actuary, additional funding of $485 million (House Bill 1) and $105 million in each fiscal year (House Bill 604) was earmarked for the KERS Nonhazardous and SPRS pension funds. What is the impact?
No COLAs for Retirees in Upcoming Fiscal Year
House Bill 1 (the State/Executive Branch budget bill) DID NOT include any allocation for a cost of living adjustment (COLA) for retirees. A couple of other bills were introduced this Session that would have granted a retiree COLA, but those bills did not pass.
Only the legislature can grant COLA increases. For more information, please visit our FYI page.
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House Bill 297: Passage creates new health insurance plan for Medicare eligible retired-reemployed members
House Bill 297 included a statutory amendment allowing KPPA to offer a new health insurance plan for Medicare eligible members who are reemployed in a regular full-time position with a participating employer. This new plan will be available effective October 1, 2022.
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Senate Bill 27: Part-Time Adjunct Instructors for the Kentucky Fire Commission
Senate Bill 27 addresses a long-standing problem for the Kentucky Fire Commission. The Commission often uses part-time adjunct instructors to fulfill their mission of training and certifying volunteer and career firefighters in Kentucky, but state retired-reemployed laws have limited their ability to do so.
This bill allows part-time adjunct instructors for the Kentucky Fire Commission who are eligible to retire from the CERS and have not participated in KERS prior to retirement, to retire and draw benefits without being required to resign from their position as part-time adjunct instructor.
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When a member retires KPPA evaluates creditable compensation growth to determine if pension spiking, a 10% increase during the last five years of employment, has occurred. House Bill 49 adds two additional pension spiking exemptions:
1. The first one hundred (100) hours of mandatory overtime required by the employer during a fiscal year; and
2. Overtime performed as a result of a local government issued state of emergency in which the Governor authorizes mobilization of the Kentucky National Guard. This provision is retroactive to May 28, 2020 and will apply toward any overtime worked as a result of the emergency through May 11, 2021 regardless of whether the National Guard was mobilized for the entire period. Retired members who had a spike for this reason will have their benefit recalculated based upon correctly completed verification from the employer.
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Senate Bill 209 increases the non-Medicare eligible retiree health subsidy for career members of KERS, CERS, and SPRS who began participating in the system on or after July 1, 2003, who are eligible for a fixed-dollar retiree health subsidy not tied to the premium.
Additionally, it establishes a health insurance reimbursement program for retirees who receive the insurance dollar contribution.
Click here for more details on the Senate Bill 209 changes.
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For members earning benefits in the SPRS Tier 3 hybrid cash balance plan, House Bill 259 converts unused sick leave in excess of 480 hours (i.e. 60 days) to cash balance pay credits at the end of each fiscal year. The bill also converts the member’s balance of unused sick leave to cash balance pay credits upon termination of employment.
The salary schedule increase began July 1, 2022 and is subject to the General Assembly funding the benefit in the executive branch budget bill. Funding has been provided for the upcoming biennium from July 1, 2022 – June 30, 2024.
Please note that this is only for Tier 3 members: there is no change in benefits for members earning Tier 1 and Tier 2 benefits.
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House Bill 76: Service purchase for Educational Students
House Bill 76 allows members who were “bound by an educational contract prior to December 31, 2003” to purchase service credit and have that credit apply to their retirement eligibility and benefit determination. Previous legislation passed in the early 2000’s placed restrictions on those service purchases effective August 1, 2004. The systems’ independent actuary says this will not have a measurable fiscal impact on the systems.
Members impacted by this bill should submit a copy of their contract to KPPA for review on or after the effective date of the bill, July 14, 2022.
The bill also enhances the frequency and scope of actuarial studies for the state’s pension plans.
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House Bill 9 requires public charter school classified employees to participate in the County Employees Retirement Systems and for the public charter school to make employer contributions to the retirement systems and health insurance plans.
The Governor’s Veto of House Bill 9 was overridden on April 13, and the bill was sent to the Kentucky Secretary of State on April 14. House Bill 9 had an EMERGENCY clause, so it is already in effect.
1. KERS Election Results
Dr. Crystal Miller, Public Health Director at the WEDCO District Health Department, and Mr. David Adkins, Executive Director and Chief Executive Officer of the Council of State Governments, were recently elected to the KERS board of trustees. They began serving their four-year terms on the KRS Board on April 1.
Dr. Miller and Mr. Adkins won the seats that were most recently held by trustees R. Campbell Connell and Larry Totten.
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2. CERS, KRS and KPPA Boards Elect Leadership
County Employees Retirement System (CERS): Betty Pendergrass and Jerry Powell were re-elected CERS Board Chair and Vice Chair, respectively, by their fellow trustees during the Board’s annual meeting on April 20, 2022.
Kentucky Retirement Systems (KRS): Lynn Hampton was elected Chair of the KRS Board of Trustees, and C. Prewitt Lane was re-elected as Vice Chair during the Board’s annual meeting on April 12, 2022.
Kentucky Public Pensions Authority (KPPA): During the KPPA annual meeting on April 28, 2022 the KPPA Board elected CERS Trustee Jerry Powell as Chair and KRS Trustee C. Prewitt Lane as Vice Chair. The 8-member KPPA Board consists of four trustees from the CERS Board and four trustees from the KRS Board. This Board provides oversight for the agency known as KPPA, whose employees provide administrative support to, and conduct daily activities for, the CERS and KRS Boards.
Read more about the 2022 board leadership here.
Read more about the 2022 committee membership here.
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KRS Seeking Candidates for State Police Retirement System Election
The KRS Board of Trustees is seeking applications from members of the State Police Retirement System (SPRS) who are interested in serving as a Trustee.
The election will be held in early 2023 for a four-year term that begins on April 1, 2023.
Please click here for more information.
Combined Pension Fund and Insurance Trust Fund Assets
(Expressed in billions)
 Pension and Insurance Trust Fund Performance
The following charts show fiscal year 2022 performance through April 30, first for the pension funds and then for the insurance trust funds. Performance is shown for the current fiscal year and trailing 3-, 5-, 10-, and 30-year periods through April 30. More information is available in our Investments section by clicking on the Investments Library tab on the left side of the page.
 
Fiscal Year (FY) 2022 saw KPPA process 6,878 initial retirements – slightly below the annual average of 7,063 based on the past nine years’ worth of data, which can be found on our website here.
You can see in the chart that July and August tend to be the busiest months when it comes to retirements. Many factors affect when people opt to retire. You can learn more about timing your retirement in this video on Tier 1 Strategies for Retirement.
We encourage you to create a security culture in your household. Here are a few tips for how to do that:
Use Strong Passwords
Protect your personal accounts by using strong passwords. As a reminder, a strong password is long (a minimum of 12 characters), never used twice, and hard to guess but easy to remember.
Keep Devices Updated
Ideally, enable automatic updating on your devices wherever it is available.
Get the Right Tools
*Password manager: creates, stores, and syncs login credentials across multiple devices.
*Antivirus/anti-malware: defends your devices against viruses and malware.
Limit What You Share
Scammers use social media and other public forums to collect personal information. Never share anything confidential and consider setting accounts to private. Only accept friend requests or connect with people after you have verified their legitimacy.
Stay Alert
You are responsible for the security of your personal information. Be cautious before opening email attachments, clicking on attachments, or giving out personal information over the phone.
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