GOP lawmakers unveil new plan to fix Kentucky's pension system
The proposal does not shift new employees to 401(k)-style plans.
FRANKFORT, Ky. (WDRB) -- House and Senate leaders have released their do-over of a plan to fix Kentucky’s broken public pension system.
Unlike the plan championed by Gov. Matt Bevin last year, Senate Bill 1 does not shift new state employees to 401(k)-style retirement plans.
Public school teachers protested the proposal to move them to 401(k)-style plans, expressing concern that they do not provide the same security as pensions.
But House and Senate leaders said it was not the protests that caused them to make a change. It was the math. They discovered 401(k) plans did not actually save the state money.
“It was just more costly,” House Speaker Pro Tem David Osborne said. “When the data came back, it just didn't support, financially, our ability to do that.”
Under the revised proposal, new employees will be placed in what is called a hybrid cash balance plan, which contains elements of both the 401(k) and the traditional pension.
“It does offer that stability," Osborne said. "It offers guarantees."
The bill also includes other changes to current retirement benefits and incentives for people to work longer before retiring. Legislative leaders said the changes add up to savings of $4.8 billion over 30 years.
“Truly, the things that are in the bill are data-driven,” Senate President Robert Stivers said.
The bill also commits the state to pumping $3 billion a year into the pension systems, which are more than $40 billion in the hole.
“This is a good product,” said Sen. Joe Bowen, chair of the Senate Pension Committee. “I, for one, don't think anybody can really find any fault with what we've done.”
But the head of the teacher’s union said she cannot give the plan a passing grade, because it does not focus on finding more revenue.
“We have a revenue problem in this state," Kentucky Education Association President Stephanie Winkler said. "The structure of our retirement systems is not the issue. The issue is funding."
Republican leaders said Senate Bill 1 is the result of six months of work and is their best fix to the crisis.
“This can is not going to be kicked down the road anymore,” Bowen said.
There's been no comment from Bevin, but Osborne said Bevin generally supports the bill.
The proposed changes must pass the House and Senate. Public hearings are expected to begin next week.
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