Will a long-awaited pension bill move new teachers into a ‘hybrid’ retirement plan?
When asked if the proposed bill would put new teachers into a cash-balance plan, Stivers said "it could" and did not elaborate.
When House Speaker Pro Tempore
Gov.
As the 2018
Stivers said the pension bill could be filed as early as Wednesday but that it more likely will come on Thursday.
No decision has been made yet about whether the bill will be filed in the House or
Stivers called the still-secret bill "a good piece of legislation" and said it makes sure that current public employees who are in a defined-benefit system stay in that system and are not switched to a defined-contribution plan.
In a defined-benefit system, an employer provides a specific monthly pension payment for life based on a variety of factors, such as an employee's earning history, tenure and age. In a defined-contribution system, employees must save enough money from their pay, sometimes matched by contributions from their employers, to carry them through their old age. Unlike traditional pensions, the money can run out in a defined-contribution pension plan.
A hybrid cash-balance plan has some characteristics of both a defined-benefit plan and a defined-contribution plan. It resembles a defined-contribution plan because it determines the value of benefits for each participant based on the value of an individual's account. However, the assets of the plan remain in a single investment pool, like a traditional defined-benefit plan, and the employer guarantees a minimum return on investments.
Like a defined-benefit plan, it uses a specific formula to determine benefits, which can be taken in a life-time annuity.
According to the Kentucky Retirement Systems website, all state and county full-time employees with non-hazardous jobs who began participation with the retirement systems after
Members and employers contribute a specified amount into the member's account, which earns a guaranteed amount of interest at the end of each fiscal year. Depending on investment returns, there may be an additional interest payment added to the member's account.
When a member is eligible to retire, the benefit is calculated based on the member's accumulated account balance. A member earns service credit for each month they contribute to the cash balance plan.
Both Stivers and Osborne seemed optimistic that lawmakers could pass a major pension reform bill this session.
Osborne said any bill that is filed "would be something that has been discussed pretty thoroughly."
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