FRAKNFORT, Ky. (AP) - Kentucky’s Republican leaders unveiled a plan Wednesday to change the state’s pension system, one of the worst funded plans in the country.
Here’s how the plan would affect taxpayers, teachers, state and local workers, police officers and firefighters and legislators.
TAXPAYERS
Taxpayer dollars would be used for a full annual payment to the retirement system. No one knows exactly how much that is yet, but Republican Gov. Matt Bevin administration said it would likely be around $2 billion a year. That’s roughly 20 percent of the state’s annual general fund spending.
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TEACHERS
Retired teachers would stop getting their annual 1.5 percent raises beginning July 1, 2018. But it’s only temporary. The raises would resume in 2023.
Current teachers eligible to retire with full benefits on July 1, 2018, would continue earning their pension benefits. But only for the next three years. After that, they would move into a 401(k)-style plan.
Current teachers not eligible to retire with full benefits on July 1, 2018, would continue earning their pension benefits as they always have. However, once they hit 27 years of service, their pension benefits stop. They can continue working, but they would be moved to a 401(k)-style plan.
Every teacher hired after July 1, 2018, would participate in a mandatory 401(k)-style plan. They would have to contribute 9 percent of their paychecks to a savings account, while state and local governments would contribute another 6 percent. Teachers have the option of adding another 3 percent, for a total of 18 percent of salary.
All teachers would have to pay an additional 3 percent of their salary to fund the retiree health care program.
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STATE AND LOCAL GOVERNMENT WORKERS
Retired workers are not affected.
Current workers eligible to retire with full benefits on July 1, 2018, would have their pensions frozen. They would keep what they have already earned, but going forward they would be put into a 401(k)-style plan.
Current workers not eligible to retire with full benefits would continue earning their pension benefits as they always have. Once they are eligible to retire with full benefits, their pensions are frozen. They can keep working, but they would be moved into a 401(k)-style plan.
All new hires, plus anyone hired after Jan. 1, 2014, would be put into a 401(k)-style plan. They would have to contribute at least 3 percent of their salary to their savings account, with the option of contributing up to another 6 percent. Taxpayers would contribute 2 percent, plus up to 3 percent of optional employee contributions.
All workers would have to pay an extra 3 percent of their salary to fund the retiree health care program.
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POLICE OFFICERS AND FIREFIGHTERS
Retired workers are not affected.
People hired after July 1, 2018, face a choice. They could enroll in a “cash balance plan” - a combination of a 401(k) and a pension. Or they could opt for the 401(k)-style plan.
All workers would have to pay an extra 3 percent of their salary to fund the retiree health care program.
This only affects police officers and firefighters enrolled in the “hazardous” retirement system.
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LAWMAKERS
Some lawmakers served for decades in the legislature, then took another high-paying job in state government for a few years to retire with an annual pension worth more than $100,000 per year. This plan would re-calculate those pensions so they would be based solely on lawmakers’ legislative pay. Some could see dramatic reductions.
All lawmakers would be moved to the same 401(k)-style plans as other state employees.
All lawmakers would pay 3 percent of their salary to fund the retiree health care program.
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