Bevin’s plan: No pensions for most future workers. Costly changes for current workers
Bevin said today's public retirees and employees would get to keep most of the benefits they expect, including defined-benefits pensions with payments guaranteed to last for the rest of their lives. And there would not be a "clawback" of cost-of-living adjustments from state retirees that pension consultants recommended in August.
Over the next three decades, he said,
"Keeping the promise is really the crux of what we are doing here today," Bevin said.
However, teachers and government workers would have to kick in 3 percent of their salaries to shore up their retiree health care funds -- a de facto pay cut. Retired teachers would forfeit their cost-of-living adjustments for the next five years. Additionally, future retired teachers wouldn't get a cost-of-living adjustment until five years after they retired.
Those parts of the proposal immediately drew protests.
"We're concerned that that particular portion is not legal," said
"We cannot support this plan, which is a further reduction of benefits," said
The biggest change would be for the future: Teachers and government employees hired after
Although
"Turns out they (teachers) don't really want to participate in
As future teachers' sole retirement income, the defined-contribution plan would let them invest up to 12 percent of their salary with a 6 percent employer's match. Four percent of that match would come from the state government; two percent would come from school districts -- a new expense for the districts, which do not currently contribute toward retirement benefits.
Future state and local government employees, who will be enrolled in
For all public employees, a menu of investment options -- most likely, mutual funds -- would be made available, selected by the Kentucky Retirement Systems or the Teachers' Retirement System of
Critics have warned
"For roughly the same amount of upfront cost from the employer, teachers would receive a significantly inferior benefit," said
But Bevin said Wednesday that
"When you see the generosity of the employer match that the commonwealth of
"As a guy who has worked in that world, I would take in a heartbeat the DC plan that we're going to be rolling out over the alternative. I really would," Bevin said. "It's a better plan, it's a richer plan in terms of what it will do for an individual at the end of a career."
Most currently-employed teachers and government employees will retain their defined-benefits pensions, with the exception of state employees hired after
Retirement age for current public employees wouldn't change, Bevin said. But as of next July, they would face a choice after 27 years of service: Retire with your pension, or keep working but close the pension account and start contributing to a defined-contribution account. At present, some public employees work beyond 27 years, which boosts their pension benefits when they finally do retire.
Under the proposal Bevin shared Wednesday, teachers who have met the 27-year threshold next July would get three additional years to keep working and contributing toward their pensions -- a one-time reprieve to avoid an exodus of teachers in 2018.
And the proposal would set new limits on how teachers and public employees can use their accumulated sick days to enhance their retirement benefits.
Groups representing teachers and school boards took a wait-and-see approach Wednesday, because all they had was a list of bullet points to review, not detailed legislation.
"The press conference this morning only gave us small glimpse into what our futures might hold," said
Kentucky Government Retirees, a
"We will be conveying our opposition in our outreach to legislators throughout the review process," said
Bevin said he expects to call a special legislative session to approve a pension reform bill soon, but he does not yet have a date to announce. Lawmakers on hand Wednesday said the session should not last more than five days when it does happen.
The next regular session of the
State officials said they don't yet have a price tag for the changes proposed to the pension systems, but they expect actuarial advisers for those systems to have cost estimates prepared by the start of a special legislative session.
State budget director
Still, 2018 will be "a brutally difficult budget session," Bevin said Wednesday. Lawmakers will have to find the money every year to paying the full actuarial recommended contributions to both of the state's pension systems, he said.
"This is at least a
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