By Jacqueline Pitts, The Bottom Line
FRANKFORT, Ky. — Legislation allowing regional universities across Kentucky to move new employees of their institutions into a new plan, more like a 401k, to ensure pension costs do not continue to hinder university budgets and freeze current contribution rates passed through the full House on Wednesday with a 76-21 vote.
House Bill 358, sponsored by Rep. James Allen Tipton, R-Taylorsville, would place all new hires into a university-sponsored defined contribution system rather than the pension plan, freezes contribution rates for the next year so costs don’t continue to rise, and gives universities a way out of the system and a mechanism to pay off their unfunded liabilities within the system over a set number of years.
The legislation comes as a result of work by the presidents of the regional universities as increasing pension costs are becoming a huge budget issue.
Under the bill, the regional universities would see:
• All new hires into the system moved into a university-sponsored defined contribution plan
• A one-time window for existing Kentucky Retirement System (KRS) employees to opt-out of their current plan and go into the more portable university-sponsored plan
• A study showing the unfunded liabilities for each regional university based on active, inactive and retired employees
• An option to get out of the system completely and a set number of years to pay off their unfunded liabilities with a 5.25 percent interest rate
• A freeze to the current 49 percent contribution rate over the next year and extend it while the actuarial analysis is being conducted so they don’t see their rates rise to 84 percent which other employers in the system are currently paying
House Bill 358 now moves to the state Senate to be heard in committee.