Guarded optimism reported on pension system

FRANKFORT, Ky. (KT) — The Public Pension Oversight Board heard guardedly optimistic reports on the state’s public pension systems on Monday.

Richard Robben, executive director Office of Investments for the Kentucky Retirement Systems, told the panel that the unfunded liability of the Non-Hazardous Kentucky Employees Retirement System plan, one of the worst in the nation, and Kentucky’s largest public pension plan has bottomed out.

“While it was at 13 percent at the end of the 2019 Fiscal Year,” he told the panel, “we expect the funding ratio to rise to 19 percent by the end of Fiscal Year 2022.”

To give some perspective on how bad things were during his testimony, Robben noted that GRS, their actuarial firm, said the bottom 25 percent of the worst-funded plans are at a 60 percent funding ratio.

“We had a positive cash flow last year for the first time in memory,” he said. “That is huge. From our perspective, there is nothing better than having a positive cash flow.”

When asked by the committee, which includes lawmakers and representatives from several Constitutional Officers, if KRS is positioned to withstand a recession, Robben replied, “Yes.”

Beau Barnes with the Teachers Retirement System told the panel they have a negative cash flow. “Due to the unfunded liability, it will take 25 years to reach a positive cash flow,” he said.

The TRS is in better shape than KERS, Barnes said. “Our pension is funded at 57.7 percent, with medical at 43 percent. We anticipate payroll growth at 3.5 percent into the future.”

Both KRS and TRS says they will be requesting more money for the upcoming biennium.

The Judicial Form Retirement System, which includes judges and legislators, is in the best shape of all. Executive Director Donna Early testified. “We are asking for less money in the upcoming two-year budget because assets are performing better than anticipated. Our health insurance costs will be lower, because the Judiciary defined benefits and hybrid plans, along with the legislative defined benefit plan are 100 percent funded.”

After the meeting, Rep. Joe Graviss, D-Versailles and one of the committee members said, “I really applaud the governor and the General Assembly for making sure that the Actuarily required contribution gets paid. Paying the bill is a huge part of this overall battle.”

However, he said the bill passed in the recent special session to shore up the quasi-governmental agencies such as the regional public universities, local health departments and mental health clinics, which included nearly doubling their contributions, was fundamentally flawed. “With the health problems that we have, the education problems we have and mental health problems that we have, we have got to provide resources to be able to give the least among us what they need to help bring the whole state up higher.”

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