INTERIM. Lege Trend: Pension Reform from the Land of Horses.

The Kentucky Senate is moving pension reform right along. let’s look at what it did:

• Strengthen pension transperancy & accountability by requiring the adoption of a best practices model
• Requires pension board appointees to have specific accounting skills
• New Contracting requirements for all pension related contracts, including investment contracts, with additional oversight by the board, the auditor & the state Government Contract Review Committee

WKMS | Senate Passes Pension Accountability Bill

Kentucky’s SB 2

Previously on InformedIntel:

5 Lessons from the Most Underfunded Pension in the U.S.

Kentucky, home to horses, is also home to the U.S.’s most underfunded pension. 

What has hampered the Kentucky Pension? Low investment returns, low contributions rates, the need to cash out investments & move investments to low risk, low reward bonds

What are the unfunded liabilities for Kentucky? $10 billion 

What has the Legislature done? In 2013 reforms included:

• creating a hybrid cash plan for new employees (pretty much a defind benefit plan with less risk for the state)
• eliminating COLAs (cost of living adjustments)
• required to the state to make its full actuarial payments immediately (which it hadn’t since 1990s)

Did that help? No. After the reforms, the plan suffered by:

• losing 1/3 of its assets
• only has 19% of the assets it needs to cover 30 years

Were there surprises post-pension reform legislation? Yes, surprises in how quickly the fund lost value

Governing | Kentucky’s Cautionary Tale About Underfunding Pensions