|Sen. Katie Stine reviews Kentucky congressional week|
The public employee pension system is more than $30 billion in the red. Experts predicted it would run out of cash in five years with the commonwealth forced to go to a “pay as you go” system on pension benefits. The Senate has been ringing the alarm on this issue for several years now and I was very pleased that a bipartisan solution was finally agreed upon. Senate Bill 2 will establish a new-style retirement plan for those entering the system next year and require pre-funding of any future cost-of-living adjustments for retirees. Under the bill, pension benefits for new hires would be calculated in a hybrid ‘shared-risk’ plan similar to a 401(k) that will guarantee a 4% annual return on investment. Further, legislators and judges would be treated the same as regular state employees. The General Assembly is required to fund 100% of the actuarially required contribution (ARC). The new cash-balance plan is more predictable and sustainable than the current defined benefit plan without carrying as much risk for employees as a traditional 401(k). Besides saving the state $10 billion over 20 years, SB2 protects the retirement of current employees and retirees as well as the tax-payers’ financial exposure. The bill will have no effect on teachers’ retirement, nor will it apply to current employees and retirees except to stabilize their current plan.
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