Despite the acrimonious stalemate over how to fix the Bluegrass State’s $43 billion-plus pension deficit, there are small signs of progress: new leaders for the Kentucky system and a bipartisan proposal to fix the problem, or at least part of it.
Rich Robben will finally get the Kentucky Retirement Systems’ corner office on April 1 when he becomes its chief investment officer after serving in interim status since 2017, when David Peden left the CIO post. The organization initiated a search in November before determining Robben was the man all along.
Robben will continue to oversee the fixed income, equity, and alternative assets for the $18 billion organization, while Andy Kiehl will aid him as the new deputy CIO. Kiehl, who also starts his new job April 1, is currently the director of investments for the fund’s real estate and real return classes. Both joined the Kentucky plan in 2015 and were appointed at its Thursday board meeting.
And in the face of partisan squabbling over the teachers plan’s fate, a GOP and a Democratic lawmaker have come up with a possible way to sort out the pension mess. How it will fare in the legislature is unknown, but the attempt at least is heartening for those fed up with the partisan warfare over the issue. The measure would allow teachers to keep their defined benefit plan and imposes new age requirements.
Scott Lewis, a Hartford Republican and former Ohio County Schools superintendent, and Travis Brenda, a Cartersville Republican, drafted a bill last week that attempts to partially fix Kentucky’s pension mess. If passed, the changes would create a two-tier retirement model while still keeping beneficiaries in a defined benefit plan, and add an age minimum for new teachers hired in 2020.
Under this proposal, teachers would contribute to both a traditional defined benefit plan and to a new “supplemental” plan—a cross between a defined benefit plan and a 401(k) plan.
Educators hired after Jan. 1, 2020, would also have to be at least 55 years old in order to qualify for full benefits. Kentucky law currently requires just 27 years of service for educators.
That means new teachers will get smaller pensions than the old guard, and contribute 13.75% of their salary, which is slightly more than the 12.85% they already do.
The document was filed Wednesday, one of the last days for submission in the current session. Lewis, who estimates this would save $335 million over 20 years, had received advice from teachers unions and other education groups.
Another bill, filed Thursday by Rep. Jerry T. Miller, also a Republican, called for a level-dollar funding structure for teachers as a way to gradually increase higher pension contribution rates from cities and counties.
The efforts come after a contentious 2018, when a sewage bill turned pension reform by Gov. Matt Bevin looked to end defined benefits for new teachers, instead moving them into a hybrid 401(k)-style retirement plan, among other things. This not only drew the ire of unions, but also the Attorney General, Andy Beshear, who sued Bevin immediately. The law was struck down by the low court, and later by the state Supreme Court.
The two politicians will face off again in November, in the governor’s race.
A bipartisan group of lawmakers assigned to study the pension predicament was created in January. The group has convened seven times between January 15 and February 5, but has not yet made any recommendations for possible solutions. The Public Pension Working Group, which both Lewis and Miller are part of (Miller as a co-chair), has until March 30 to make reform suggestions to the General Assembly.
The state of Kentucky is 31% funded, according to a study from Pew Charitable Trusts.