(The Center Square) – The Kentucky House of Representatives voted to create a new tier to the retirement system for public school teachers.
House Bill 258 changes the benefit package for educators who join the Teachers’ Retirement System starting Jan. 1, 2022. Most notably, those enrollees would receive both a foundational benefit and a supplemental one. That means those members would, in essence, have both a pension and a 401(k).
Those members would also need to work 30 years to retire at age 55 and receive full benefits. Full benefits would also be available to retirees at age 65 with five years of service or at age 60 with 10 years of service.
Current teachers can retire at any age after 27 years of service.
Just hours after it cleared the House State Government Committee, the House voted 68-28 to send the bill sponsored by State Rep. C. Ed Massey, R-Hebron, to the Senate.
According to an actuarial analysis on the bill, the new benefit tier would save the state $3.5 billion over 30 years. According to the TRS 2020 fiscal year annual report, the fund has an unfunded liability of $14.8 billion.
“This will be a tourniquet that will stop the hemorrhaging that we’ve had with the increasing cost,” Massey said at the committee hearing.
The bill has support from such groups as Greater Louisville Inc., the city’s chamber of commerce, and the Bluegrass Institute for Public Policy Solutions, a free market think tank.
“While it’s important that lawmakers ensure past pension promises made to Kentucky’s current employees and retirees are kept, they also need to take the next vital step toward ensuring TRS’ future stability with a self-sustaining plan offering generous benefits while appealing to a younger, dynamic and changing workforce and protecting taxpayers from an even-deeper pension hole,” BIPPS President and CEO Jim Waters wrote last week in a blog post on the bill.
Teachers’ organizations, though, have raised some concerns the legislation, if passed, could make it harder to attract high quality applicants to work in classrooms as they claim newer teachers will have to work longer for a potentially smaller benefit.
“We should be having conversations about increasing educator pay but, unfortunately for our educators and their students, we are not,” said Kentucky Education Association President Eddie Campbell in a statement.
Kentucky teachers do not pay into Social Security, meaning the state pension plan is their only retirement fund.
The vote was nearly a party-line vote, although five Republicans joined Democrats in opposing the bill.
State Rep. Buddy Wheatley, D-Covington, said during the floor debate he preferred Kentucky teachers getting options like their colleagues in Ohio have.
“You have an optional defined benefit, optional defined contribution, or you can have a combination thereof," he said.