By Tom Latek,
State Budget Director John E. Chilton warned there will be huge increases in employer contributions to public pension systems unless lawmakers enact reform.
Chilton sent out a letter Friday to employers whose workers are covered by the Kentucky Employees’ Retirement System that hikes will range from 66 to 88 percent without pension reform.
Last week he warned of 50 to 60 percent rises to those employer contributions for employees under the County Employee Retirement System.
In the latest letter, Chilton told the employers that for fiscal year 2019, KERS contributions for non-hazardous employees will increase 66.68 percent and 88.45 percent for hazardous duty employees. The jump will be 71.85 percent for those in the State Police Retirement System.
“It is well known that all of the Commonwealth’s pension plans are in a crisis. Using the same investment rates of return that corporate plans are required to use – the Corporate Bond Index rate – the aggregate underfunding for all of Kentucky’s eight plans goes from $33 billion to $64 billion,” he wrote in the letter.
“Furthermore, if Kentucky plans were subject to federal standards for single-employer private plans, six of the plans would be designated as having severe funding shortfalls because their funded status is less than 60 percent. As such, federal law would require that all benefits be frozen and the plans terminated. This is true even using the old 2016 actuarial assumptions, rather than the more realistic discount rates and other assumptions required of private plans.
“The need for significant reform is evident to anyone looking at the health of the Commonwealth’s plans within that larger context.”
Bevin said on Friday that he still plans to call a special session of the General Assembly to address the public pension crisis, sometime this fall.