County Employee Retirement System

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The County Employees Retirement System (CERS) was established July 1, 1958 by the General Assembly. CERS is a part of Kentucky Retirement Systems. Employees who work in a regular full time position for a participating agency must be enrolled in the retirement system at the beginning of their employment. A regular full-time position is defined by state statute as a position that average 100 hours of work per month over a fiscal or calendar year, excluding the classifications of temporary, seasonal, and interim.

For school board employees participating in the CERS non-hazardous plan, a regular fulltime position is defined as a position that requires the employee to averages 80 hours of work per month over the actual days worked during the school year.

No actuarial valuation of CERS was conducted until June 30, 1960 because the statutes did not authorize retirements from the system prior to July 1, 1960. When the first actuarial valuation was completed on June 30, 1960, there were 68 counties participating in CERS.

The cost of insurance for the retired member may be partially or fully paid by KRS depending upon the member’s years of service, the insurance carrier selected and the level of coverage chosen.

Monthly retirement allowances are increased July 1 each year by the percentage increase in the average consumer price index (CPI-U) for all urban consumers for the most recent calendar year not to exceed 5%. The State Legislature may reduce, suspend or eliminate Cost of Living Adjustments (COLAs) in the future.

CERS Highlights: Non Hazardous

Membership

These numbers are as of June 30, 2007.

Active Members 84,920

Inactive Members 53,901

Retired Members and Beneficiaries 35,564

Active Membership

Average Age 45.9

Average Years of Service 8.1

Average Annual Salary $24,457

Retired Membership

Average Age 68.0

Average Annual Benefit $10,212

Number Added 3,244

Number Removed 782

Retirement Eligibility

Age Years of Service Allowance Reduction
65 4 None
Any 27 None
55 5 5% per year for five years before age 64 or 27 years of service. 4% for each year thereafter
Any 25 5% per year for five years before 65 or 27 years of service

Net Plan Assets

Pension Fund: $5,812,936,000

Insurance Fund: $1,084,043,000

Total: $6,896,979,000

Contributions

Employees: 5%

Employers: Pension: 7.76%

Insurance: 12.75%

Rate Effective July 1, 2008

CERS Highlights: Hazardous

Membership

Active Members 10,063

Inactive Members 2,224

Retired Members and Beneficiaries 5,159

Active Membership

Average Age 38.6

Average Years of Service 8.1

Average Annual Salary $45,613

Retired Membership

Average Age 58.6

Average Annual Benefit $24,259

Number Added 500

Number Removed 53

Retirement Eligibility

Age Years of Service Allowance Reduction
55 5 None
Any 20 None
50 15 5.5% per year for five years before age 55 or 20 years of service

Net Plan Assets

Pension Fund: $1,754,935,000

Insurance Fund: $ 570,156,000

Total: $2,325,091,000

Contributions

Employees: 8 %

Employers: Pension: 15.04 %

Insurance: 27.62 %

Total: 42.66 %

Funding Schedule

The Plan's funding ratio is the ratio of a plan's assets to liabilities. Funding ratios of 87% are considered well funded. The average funding ratio nationally for public pension plans stands at 85%. As of June 30, 2009 CERS pension plan was 70.6% funded. This means that for every dollar in liabilities that the plan has incurred, there are only $0.70 worth of assets to cover liabilities.

Fig. 1: CERS Pension Funding Schedule
Fig. 2: CERS Insurance Funds Funding Schedule

From the charts above, the CERS pension funds was 80%+ funded up to 2007, and since then unfunded liabilities have continued to rise significantly reaching up to 116.4% of payroll. The fall in funding ratios for 2008 and 2009 is attributed to the 2008 financial crisis and poor investment performance. Insurance funds (figure 2) funding ratios have remained significantly low over the years as unfunded liabilities as a percentage of payroll continue to rise.

Contribution Schedules

The Charts below show contribution rates for CERS for both Non-Hazardous and Hazardous Plans since 2001. This contribution rate is the ratio of the actual funds contributed to the system to the amount of the annual required contribution (ARC). Employee contribution are deducted from payroll, it is therefore logical to conclude that where contributions have not covered 100% of ARC, it is the employers who have defaulted on their contributions. Contribution rates for both plans have been impressive except in 2008 and 2009 where they fell short.

Fig. 1: CERS Non-Hazardous Contribution Rates
Fig. 2: CERS Hazardous Contribution Rates

See Also

http://www.bipps.org/bipps-blog/http://www.facebook.com/pages/The-Bluegrass-Institute/58521621985?ref=tshttp://www.vimeo.com/freedomkyhttp://twitter.com/BIPPShttp://www.youtube.com/user/FreedomKentuckyIcons.png