2021 Legislative Highlights
April 22, 2021
The 2021 Regular Session of the Kentucky General Assembly adjourned on Tuesday, March 30, 2021.
The following is an overview of the most significant bills and resolutions passed this Session that will have an impact on the Kentucky Public Pensions Authority (KPPA). Please click on the hyperlink to read each bill in its entirety.
1. Passage of House Bill 8 to Help Insure Agencies Pay Their Fair Share of Unfunded Liability
House Bill 8 (Rep. DuPlessis) changes the current method for calculating employer contributions from a percent of payroll model to a fixed allocation funding method. This is only a change for KERS Nonhazardous employers.
Beginning July 1, 2021 employers will pay the normal cost for their new employees plus their actuarially-calculated portion of the unfunded liability.
This means employers will only pay their fair share of the unfunded liability, and the new structure removes the financial incentive for employers to reduce their contributions and avoid their obligations by outsourcing or otherwise reducing their payroll, which leads to higher contribution rates for the other participating agencies. Read more.
2. CERS Separation Clean-Up Bill
House Bill 9 (Rep. Webber) is the CERS separation (HB 484 - 2020 Regular Session) cleanup bill. Key elements of this bill include the creation of separate statutes for the County Employees Retirement System (CERS) apart from the Kentucky Retirement Systems (which now oversees the Kentucky Employees and State Police Retirement Systems) as provided by intent language included in House Bill 484 during the 2020 Regular Session. The bill also amends current statutes to allow KRS and CERS to use the existing registration of assets in order to avoid additional expenses. There were no changes to benefits as a result of this bill.
3. KPPA Housekeeping Bill Passes
House Bill 87 (Rep. Decker), the KPPA Housekeeping bill, is effective June 29, 2021. This bill makes notable changes to current benefits procedures to improve efficiencies and provides eligible members with the flexibility to choose options best suited to their personal situation. In certain circumstances, this law change allows retired members to change their beneficiary and/or retirement payment option. The bill also provides that members dually employed in full-time hazardous and part-time nonhazardous positions may elect to opt out of nonhazardous participation if eligible; amends pension spiking to establish a $25 monthly threshold; and makes conforming changes to reflect how KPPA currently administers benefits.
4. State Executive Branch Budget Bill, House Bill 192
Due to the COVID-19 crisis, the legislature only passed a one-year budget during the 2020 Regular Session rather than the customary two-year budget. Therefore, the General Assembly passed
House Bill 192 (Rep. Petrie) during the 2021 Session that will cover fiscal year 2021-2022.
A few important retirement-related items were included in the budget bill.
First, the Employer Contribution rates from July 1, 2021 - June 30, 2022 for
KERS Hazardous will be 33.43% (all 33.43% to pension, 0% to insurance) and the rate for the
State Police Retirement System will be 146.06% (127.99% pension and 18.07% insurance).
KERS Nonhazardous rate will be determined by the State Budget Director by May 1, 2021. The rate will be unique to each agency and will consist of the normal cost contribution of 10.10%, plus a prorated amount of the actuarially accrued liability calculated for each individual nonhazardous employer. This change is due to the passage of House Bill 8 and will help ensure each agency only pays the portion of the system's unfunded liability owed by that agency.
Quasi-governmental state agencies will receive a total of $53,477,900 in subsidies to cover the anticipated increase in retirement costs for fiscal year 2021-2022 due to the passage of House Bill 8. The money is allocated as follows: $332,100 for Non-P1 State Agencies; $23,084,600 for Regional Mental Health Units; and $25,169,400 for Health Departments.
The bill contains money from the State to assist with the employer contribution rates for County Attorneys ($2,520,500); and most universities will also receive subsidies to cover the increase in retirement costs due to the passage of House Bill 8 (Northern Kentucky University is not listed here because they received a $73 million reduction in their cessation cost via the Senate Committee Substitute to House Bill 8.
This reduction will result in a collective $6.4 million increase in annual contributions for the remaining participating employers in the system, including the State, for each of the next 20 years).
Finally, the bill contains no raises for State employees, and no Cost of Living Adjustments (COLAs) for retirees. The bill does contain language establishing a process and procedures for State employee layoffs, furloughs, and reduced hours in the event that the Commonwealth or any agency determines it necessary.
Governor Beshear line-item vetoed 20 different parts of the bill on March 26, 2021, but none of the vetoes directly affected KPPA. The new budget begins on July 1, 2021.
5. Changes to Total and Permanent Disability Benefits
Senate Bill 169 (Sen. McDaniel) increases the disability benefits for members who become "totally and permanently disabled" as as result of an act in the line of duty (hazardous) or a duty-related injury (nonhazardous) to be equal to 75% of the member's monthly average pay plus 10% of the member's monthly average pay for each dependent child. The combined benefit payable to both the member and the dependent children while the member is alive is not to exceed 100% of the member's monthly average pay. Health insurance coverage will be available at 100% of the contribution rate for the member, the member's spouse, and the member's dependent children. The bill also provides for prospective adjustments in benefits to those eligible retirees who were already determined to be totally and permanently disabled in the line of duty or due to a duty-related injury.
KPPA's actuary, GRS, determined the bill would increase benefits for four (4) KERS Nonhazardous disabled retirees; thirteen (13) CERS Nonhazardous disabled retirees; and three (3) CERS Hazardous disabled retirees. The fiscal impact on KPPA is expected to be relatively minor, with the largest impact on the CERS Hazardous and SPRS funds because these funds are assumed to have the highest incidence of future disabilities that occur in the line of duty for their active members.
The bill was signed by Governor Beshear on March 24 and will take effect 90 days following the last day of the 2021 Regular Session (sometime around June 28, 2021).
6. Additional Requirements for the Actuarial Analysis Performed on Retirement-Related Legislation
Kentucky Revised Statute 6.350 requires an
actuarial analysis to be performed on any bill that may increase or decrease benefits, the participation in benefits, or change the actuarial liability of any state-administered retirement system. An actuarial analysis is intended to show the anticipated economic impact of a bill on the systems' funding status.
House Bill 69 (Rep. J. Miller) establishes additional standards and requirements for information the actuarial analysis must contain, including a projection of costs/savings over a 30-year period rather than 20 years, completion of the analysis in a format established by the Legislative Research Commission, and the addition of a summary of relevant data and information on the front page of the analysis.
It also requires the systems to provide a projection/analysis over a 30-year period rather than a 20-year period regarding projections in the annual actuarial valuation and as it relates to experience studies, assumption changes, and other changes made by the boards of each system.
The bill was signed by Governor Beshear on March 22 and will officially take effect 90 days following the last day of the 2021 Regular Session (sometime around June 28, 2021). However, KPPA proactively complied with these additional requirements during the 2021 Regular Session.
7. House Bill 261 (Rep. J. Miller) provides a new level of legal protection for the systems against anyone who knowingly submits false or fraudulent claims in order to obtain benefits. The bill makes a person liable for civil penalties, including repayment of fraudulently-obtained benefits and a penalty of as much as three (3) times the amount of the payments; a penalty of $500 for each fraudulent claim submitted; and recovery of all legal fees and costs associated with the investigation and enforcement of civil remedies.
This bill is a positive step toward even stronger protection of the systems' assets.
8. State Senate Confirms Gubernatorial Appointments to CERS and KRS Boards
State law requires gubernatorial appointments to the CERS and KRS boards receive Senate approval. On March 30, four Senate Resolutions confirming Governor Beshear's recent appointments to the boards were unanimously adopted by a vote of 38-0:
Senate Resolution 205 (Sponsor
D. Givens) confirmed the appointment of
George Carlisle Cheatham II to CERS Board of Trustees for a term ending March 31, 2025;
Senate Resolution 206 (Sponsor
J. Adams) confirmed the appointment of
William Thomas O'Mara to the CERS Board of Trustees for a term ending March 31, 2025;
Senate Resolution 207 (Sponsor
J. Adams) confirmed the appointment of
James Michael Foster to the KRS Board of Trustees for a term ending July 1, 2021;
Senate Resolution 209 (Sponsor
J. Adams) confirmed the appointment of
Merl M. Hackbart to the CERS Board of Trustees for a term ending March 31, 2025.
The Resolutions only required Senate confirmation and did not need to be adopted in the House.
Unless the Governor calls a special session later this year, the General Assembly will not convene again until January 4, 2022.
Legislation Status Chart
If you’re interested in the legislative process you can always
watch committee meetings and the proceedings of both chambers live on KET whenever the General Assembly is in session.
Please be advised that these legislative summaries are intended for general informational purposes only and should not be relied upon as legal advice regarding the legislative meaning, purpose, intent, application or administration of a particular statutory change.
If you have questions or concerns regarding the impact of a particular piece of legislation, please contact the Legislative Research Commission or a qualified attorney. If you have questions regarding your Kentucky Public Pensions Authority benefits, please contact us through our webpage at kyret.ky.gov or by telephone at (800) 928-4646.
Public Pension Oversight Board Materials
The Public Pension Oversight Board assists the General Assembly with its review, analysis, and oversight of the administration, benefits, investments, funding, laws and administrative regulations, and legislation pertaining to the Kentucky Public Pensions Authority.