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Pension facts, stats and audit recommendations

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Pension facts, stats and audit recommendations

As the next Public Pension Oversight Board meeting on Sept. 25, draws near, here's some quick stats, facts and audit recommendations for Democrats to share. 

Two things not in this primer include the PFM Consulting group suggested a consolidated investment board for all pensions, and despite the growing support pushed by the Kentucky League of Cities, advised against separating the County Employees Retirement system (CERS) from the state pension system. 

Pension facts, stats and audit recommendations

•The average annual benefit for a state retiree from the Kentucky nonhazardous pension system is $16,200 annually;

• in the last 15 years, according to KRS data, the number of active employees in the nonhazardous pension plan has decreased by 9,659 members;

• as a result, the number of retirees has increased, outnumbering the active employees paying into the fund. A defined contribution plan, like a 401(k) wouldn’t increase any funding levels. You take employees out of the system paying for benefits and you decrease employee funding while the state still seeks ways to fund liabilities;

• the ailing nonhazardous plan was fully funded in 2002 with the largest funding gap occurring in fiscal year 2014 with a recommended 32.57 percent contribution rate compared to the actual 17.29 percent contribution rate it received;
• the annually required contributions by the state have since only been paid twice: once during the Beshear administration and most recently by the Bevin administration;

Kentucky Teacher Retirement System quick facts

•Average annual retirement benefit for Kentucky teachers is $36,244 as they don’t receive Social Security. 

•The average retiree age of teachers excluding those claiming disability is 59.

•One aspect not in the inviolable contract on the table is accrued sick days teachers have upon retirement. Accrued sick days are multiplied by 30 percent of a teacher’s final daily rate and added to their benefit. 

•The average amount a teacher receives as a result of accrued sick days is less than $250 per month, according to data collected by KTRS over the last two years. 

•Over the last two years, about 70 percent of the teacher retirees received extra funds as a result of accrued sick days.

•For 42 percent of the teacher retirees that received an increase as a result of accrued sick days, the increase was less than $100 per month. 

•According to the KTRS data, 32,267 teacher retirees received an increase as a result of accrued sick days over the last two years. 

•Out of the 32,267 retired teachers, 70 percent received an increase under $250 per month. 

•Additional break downs in the two-year data is as follows:

$250-$500 per month 20 percent;

$500-$1,000 is 8 percent in last two years;

$1,000- $1,500 is 1 percent. 

Funding 

•As of June 30, 2016, the teacher retirement system’s pension is funded at 54.6 percent. 

•It received $973 million in additional funding for the current biennial years, or 94 percent of the funds it requested. 

•According to KTRS, it will request an additional $15 million for each biennium. 

•For fiscal years 2015 - 2016 it had a $14.5 billion unfunded liability. 

Audit recommendations

• raising retirement age for hazardous employees including law enforcement and first responders to 60 in order to get full benefit package;

• raising the teacher and nonhazardous state employee retirement age to 65;

• put teachers into a Social Security and defined contribution plan and passing on the costs of shifting teachers into Social Security to local school boards;

• remove the option for current teachers and state employees to use accrued sick time or compensation leave as an increase in retirement benefit payments;

• eliminate pension benefit payments from cost of living adjustments between 1996-2012 which the consulting group said could affect retirees’ benefits as much as 25 percent or more;

• a recommended freeze to current workers’ pension benefits and moving them into a 401(k)-style defined contribution plan for the duration of their career;

• the group encouraged a buyout as an incentive to move state workers to the proposed defined contribution plan;

• it’s been estimated to cost 42 percent to 93 percent more for a defined contribution plan recommended by the PFM audit group;

• in 2015, Kentucky hired an actuary that said it would cost more to shift teachers into the proposed plan.