Story by Ciara Benham, Staff Writer
A bill that would allow universities in Kentucky to opt out of the state pension plan was passed by the House State and Local Government Committee.
House Bill 358 was passed on Feb. 21 in an attempt to resolve issues that pension plans cause in university budgets.
This piece of legislation applies to regional universities including Murray State University, Morehead State University, Kentucky State University, Eastern Kentucky University, Northern Kentucky University, Kentucky Community and Technical College System and the Kentucky Higher Education Student Loan Corporation.
The bill would require all new hires to be moved into a university-sponsored defined contribution plan, allow current employees to opt out of their current pension plan and freeze the pension rate for one year.
Interim President Bob Jackson said Murray State University supports the passage of the bill in its current form, but the bill is not finalized.
“This bill is still in the House of Representatives and must be passed by both the House and Senate in order to become law,” Jackson said. “Several components of this bill are still being amended and until we see a final version, we cannot state decisively our support of HB 358.”
University employees are currently a part of the Kentucky Employees Retirement System. The current system requires employers to contribute 49 percent of employees’ wages toward their pension, but without the one-year freeze, the rates would rise to 84 percent.
Rep. James Tipton, R-House District 53, sponsored this bill on behalf of regional institutions. He said he sponsored the bill for the financial benefits that it would have for universities like Murray State.
“The General Assembly passed legislation in 2019 to freeze their rate for fiscal year 2018-19, saving them millions of dollars,” Tipton said. “HB 358 would also freeze the rate for fiscal year 2019-20. However, this practice cannot continue. HB 358 will give schools like Murray State an option to consider moving forward. Each school will make their decision based on the projected costs of the buyout.”
The bill also gives other local organizations the opportunity to withdraw their involvement in the Kentucky Retirement System.
“Provided that the KERS employer contribution rate shall be 49.47% of pay in fiscal year 2019-20 for regional mental health programs, local and district health departments, domestic violence shelters, rape crisis centers, child advocacy centers, state supported universities and community colleges, and any other agency eligible to voluntarily cease participating in the Kentucky Employees Retirement System pursuant to KRS 61.522,” according to HB 358.
The bill is facing some criticisms by lawmakers for the lack of actuarial data supporting these changes.
An actuarial analysis, a type of asset to liability analysis used by financial companies to ensure they have the funds to pay required liabilities, was not provided with the presentation of the bill.
Those in opposition say it is difficult to know the full fiscal impact without this data. However, an analysis will supposedly be conducted by the KRS.
Supporters of this bill said that the bill would have financial benefits for both universities and students. HB 358 could potentially lower tuition costs for students and help increase university budgets.
“This bill can benefit universities by giving them certainty over what their future costs for retirement will be and reduce their costs for new employees,” Tipton said. “This bill will benefit students by allowing the schools to stabilize their future costs and financial situation. It should also help to stabilize future tuition increases.”
HB 358 will take effect 90 days after the governor signs it, should it pass.