Kentucky Employee Retirement system

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KERS was created in 1956 by the Kentucky General Assembly in order to supplement the benefits provided by Social Security. When the first actuarial valuation was completed June 30, 1957, there were 16,000 employees participating in KERS and assets of $2.8 million

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 annual 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.

Non Hazardous system Highlights

Membership

Active Members: 47,913

Inactive Members: 30,904

Retired Members and Beneficiaries: 33,849

Active Membership

Average Age: 43.3

Average Years of Service: 9.3

Average Annual Salary: $37,155

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

Retired Membership

Average Age: 66.1

Average Annual Benefit: $20,120

Number Added: 2,440

Number Removed: 731

Net Plan Assess

Pension Fund: $5,773,157,000

Insurance Fund: $ 663,558,000

Total: $6,436,715,000

Contribution

Employees: 5%

Employers: Pension: 16.54%

Insurance: 20.38%

Rates Effective July 1, 2008

KERS employer rates are subject to state budget approval.

Hazardous system highlights

Membership

Active Members: 4,349

Inactive Members: 2,738

Retired Members and Beneficiaries: 2,202


Active Membership

Average Age: 41.7

Average Years of Service: 7.0

Average Annual Salary: $33,304

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

Retired Membership

Average Age: 61.3

Average Annual Benefit: $13,487

Number Added: 241

Number Removed: 19

Net Plan Assets

Pension Fund: $ 510,775,000

Insurance Fund: $ 280,886,000

Total: $ 791,661,000

Contributions

Employees: 8 %

Employers: Pension: 10.84 %

Insurance: 23.94 %

Rate Effective July 1, 2008

Funding Schedule

Fig. 1: KERS Pension Funding Schedule
Fig. 2: KERS Insurance Funds 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 KERS pension plan was 46.7% funded. This means that for every dollar in liabilities that the plan has incurred, there are only $0.46 worth of assets to cover liabilities.

From the charts, the KERS pension funds was 85% funded up to 2004, and since then unfunded liabilities have continued to rise significantly reaching up to 317.6% of payroll. The fall in funding ratios for 2008 and 2009 is attributed to the 2008 financial crisis and poor investment performance. KERS 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 KERS 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 it is the employers who have defaulted on their contributions. KERS Hazardous Plan contribution have much higher and impressive contribution rates compared to KERS Non-Hazardous Plan.

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