NOTE: This article has been updated since it was originally published in Spring 2019. The effective date of the new factor changes was extended until JANUARY 1, 2020, and the Member Self Service page now allows you to run service purchase costs and retirement estimates with the new factors.
Every five years, KRS's actuary conducts a study to ensure the actuarial assumptions reflect the experience of the Systems and continue to represent the actuary’s estimate of anticipated events. Actuarial factors are used in the administration of KRS benefits to determine the amount of retirement benefits to be paid under various optional forms of payment, including Tier 3 annuity amounts. Actuarial factors are also used when calculating the cost of service purchases. The most recent experience study was approved by the KRS Board of Trustees and, as a result of changes in the interest rate and retiree mortality assumptions, the following purchase and payment option factors will be adjusted effective September 1, 2019.
Payment Option Factors: State law requires all options for receiving a retirement benefit be actuarially equivalent to ensure the various options provide the same level of financial benefit to the member. Depending upon individual circumstances, these factor changes may increase or decrease the benefits payable at the time of retirement.
Service Purchase and Hazardous Conversion Factors: This adjustment will impact purchases made on or after September 1, 2019. Depending upon individual circumstances, these factor changes may increase or decrease the cost to purchase service credit. Employees wanting to “lock in” the cost of purchasing service should make a request to the retirement office before September 1, 2019. Once KRS calculates the cost of service, if the employee fails to make the purchase by the specified deadline in the cost estimate, subsequent cost calculations may be at a higher rate. Note: Repayments of previously refunded service and contributions for service that was omitted erroneously to KRS are not subject to this adjustment.
When a Tier 1 or Tier 2 member is eligible to retire prior to attaining the necessary service or age for an unreduced benefit, a reduction, or early penalty, must be applied to the member’s retirement benefit. To maintain actuarial equivalence and to reflect the assumption changes recommended by the KRS actuary, the reduction factors may also be adjusted effective September 1, 2019.
We encourage you to utilize our on-line calculators via Member Self Service at kyret.ky.gov to calculate retirement estimates or costs to purchase eligible service. The calculators should be updated with the new actuarial factors no later than July 15, 2019.