Kentucky Teacher’s Retirement Systems

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Established by law in 1938, Kentucky Teacher's Retirement System (KTRS) legally known as "Teachers' Retirement System of the State of Kentucky" became operational on July 1, 1940. KTRS is classified as an "actuarial reserve, joint-contributory" system, meaning that contributions of the members and employers and the earnings from KTRS investments are placed in reserve to pay for the System's annuity obligations. KTRS maintains 5 Reserve Funds.

Pension Benefits

Members become vested when they complete 5 years of credited service. To qualify for monthly retirement benefits, payable for life, members must either: attain age 55 and complete 5 years of Kentucky service, or complete 27 years of Kentucky service. Participants that retire before age 60 with less than 27 years of service receive reduced retirement benefits. Non-university members receive monthly payments equal to 2% (service prior to July 1, 1983) and 2.5% (service after July 1, 1983) of their final average salaries for each year of credited service. University employees receive monthly benefits equal to 2% of their final average salary for each year of credited service. The final average salary is the member's five highest annual salaries except members at least 55 with 27 or more years of service may use their three highest annual salaries. New members (including second retirement accounts started) after July 1, 2002 will receive monthly benefits equal to 2% of their final average salary for each year of service if, upon retirement, their total service is less than 10 years. New members after July 1, 2002 who retire with ten or more years of total service will receive monthly benefits equal to 2.5% of their final average salary for each year of service, including the first ten years. In addition, non-university members who retire July 1, 2004 and later with more than 30 years of service will have their multiplier increased for all years over 30 from 2.5% to 3.0% to be used in their benefit calculation. The System also provides disability benefits for vested members at the rate of 60% of the final average salary. Cost of living increases are 1.5% annually. Additional ad hoc increases, and any other benefit amendments must be authorized by the General Assembly.

Life Insurance Benefits

Effective July 1, 2001, KTRS started providing life insurance benefits for members:

  • Life insurance benefit in a minimum of $5,000 for its members who are retired for service disability. This insurance benefits is payable upon the death of a member retired for service or disability to the member's estate or to a party designated by the member.
  • Life insurance benefit in a minimum of $2,000 for its active contributing members. This life insurance benefit is payable upon the death of an active contributing member to the member's estate or designated party.
  • Qualified members working 45 days per year will be eligible for survivor benefits and a life insurance benefit for the balance of the fiscal year and disability benefits under certain conditions. For substitute and part-time members, the survivor benefits and life insurance benefit are provided during the first 44 days if death occurs as the result of physical injury on the job. The disability benefit is available as a direct results of physical injury on the job during the five-year vesting period. After vesting, the disability benefit is available upon working 45 days for the balance of that fiscal year in accordance with the regular KTRS disability program.

At June 30, 2009, KTRS insurance covered 33,489 retirees and 6,822 dependents.

Medical Insurance Benefits

KTRS retiree medical eligibility is attained when an employee retires after the completion of 27 years of service or attainment of age 55 and 5 years of service. Disabled employees who are totally and permanently incapable of being employed as teachers and under age 60 but after completing 5 years of service are eligible for subsidized retiree medical coverage based on the number of years of service credit accrued at disability retirement. At the expiration of the disability entitlement period, the subsidy is recalculated based upon the number of years of service credit that would have accrued had the member remained active. Spouses of those actives who die while eligible to retire are eligible to retiree medical coverage when death occurred.

Effective 1/1/2009, contributions towards pre-64 retirees and spouses healthcare are based on the Commonwealth Capital Choice Plan. Spouses of post-65 retirees as well as surviving spouses of deceased retirees pay 100% of the full contribution. For spouses of active members who died while eligible to retire prior to July 1,2002, KTRS provides the same subsidy they would have provided to the retiree for the lifetime of the spouse or until remarriage. For spouses of active members who died while eligible to retire July 1, 2002 or later, spouses pay 100% of the full contribution.

There are 197 participating employers and 75,937 active members contributing to the Medical Insurance Fund.

For members entering the system on or after July 1, 2008, the percentage paid toward the insurance premium by KTRS at retirement is currently as follows:

10 - 14.99 years -- Not eligible

15 - 19.99 years -- 45%

20 - 24.99 years -- 65%

25 - 25.99 years -- 90%

26 - 26.99 years -- 95%

27 or more years -- 100%


KTRS membership is mandatory for all persons in eligible agencies occupying positions which require either certification or graduation from a four year college or university as a condition of employment. Additionally, any person who provides part-time or substitute teaching services that are the same or similar to those teaching services provided by full-time, certified teachers shall be a member of the retirement system, regardless of whether certification or graduation from a four year college or university is required. University employees, however, must be employed on a full-time basis (seven-tenths or more of normal full-time service measured by the contract days remaining in the position for which they are employed) and must be filling a position requiring either certification or a four-year degree in order to be eligible for membership in KTRS.

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Agencies eligible for participation in KTRS include public elementary and secondary schools, regional educational cooperatives, Eastern Kentucky University, Kentucky State University, Morehead State University, Murray State University, Western Kentucky University, the School for the Deaf, the School for the Blind, the Workforce Development Cabinet, the Kentucky Community and Technical College System, the Department of Education, the Education Professional Standards Board and other agencies as specified by law.

  • KTRS currently serves over 72,700 active members, and over 39,300 annuitants.


KTRS is a Defined benefit plan qualified under Section 401(a) of the Internal Revenue Code and is operated on a fiscal year basis ending June 30 of each year. As a result of the qualified status of KTRS, since August 1, 1982 regular contributions to the retirement system that are deducted from the employee’s salary are not subject to taxation, but the portion of their retirement allowance based on these pre-tax contributions will be. Under 401(a) defined benefit plans such as KTRS, employees are eligible upon retirement to draw a retirement allowance for the rest of their lives regardless of how much they contributed to the retirement system over their career in a KTRS covered position.

  • A KTRS retirement allowance may not, by law, be assigned by the employee, or attached or garnished by a creditor, except for the payment of court ordered child support or to satisfy an Internal Revenue Service tax levy.
  • An employee may not withdraw their contributions to KTRS unless they permanently separate from service from their KTRS-covered employment, nor may they borrow against their contributions to KTRS.
  • If an employee permanently separates from service from their KTRS-covered employment, and if they do wish to then refund their contributions to KTRS, they may maintain the tax deferred status of their contributions to the retirement system by rolling them over or transferring them in a timely and appropriate manner to another qualified tax-deferred plan.
  • If an employee is eligible to retire when they permanently separate from service from their KTRS covered employment, they must elect to receive a retirement allowance from KTRS rather than a refund of contributions, unless they wish to use their contributions to purchase retirement credit in another retirement system or unless a KTRS retirement allowance would make you ineligible for Social Security benefits.
  • An employee does not, however, make FICA contributions to Social Security as a result of their KTRS-covered employment unless they are an employee of a university or community college. As a result of their employment in a position that does not participate in Social Security, the current federal Windfall Elimination Provision law will reduce any Social Security income that one could draw from any Social Security-covered employment and the federal Government Pension Offset will substantially reduce any Social Security benefit that one might draw as the spouse or widower of a Social Security recipient. These are provisions of federal law.

Both employees and employers are required to make contributions to help fund the benefits KTRS offers. All benefits are financed from the following three sources: Contributions from members; Contributions from employers; and Investment earnings.

Contribution Rates

  • All members except university and community college employees: 9.855%
  • University employees and community college members: 8.375%
  • University members also contribute to Social Security while most other active members do not contribute to Social Security. KRS 161.565 permits the universities to contribute 2.215% of the 8.375% on behalf of their members.
  • Member contributions are automatically deducted from each member’s salary.

KRS 161.550 establishes the employer funding level at an amount equal to that contributed by KTRS members and in addition requires the employer to provide an appropriation of 3.25% of salaries.

  • The current employer contributions are 13.105% for non-university members and 13.84% for university members.
  • Post July 2008 members are required to contribute an additional 1% to the medical insurance fund. Participating employers are required to contribute the percentage contributed by members plus an additional 3.25% of members’ gross salaries.
  • The member and employer contributions consist of pension contributions and post-retirement contributions to the medical insurance fund. The post-retirement contribution from employee (.75% for members prior to July 1, 2008 or 1.75% for members who joined after July 1, 2008) and the employer contribution rate of .75% of members’ gross salaries help finance KTRS’s retiree medical insurance plan.
  • The Commonwealth of Kentucky contributes the required percentages for the local school district employers except for those members who are employed in federally funded positions, in which case the federal program pays the required percentages.
  • The required member contribution is deducted from each member’s salary each pay period and forwarded to KTRS. Each reporting agency is required to forward all amounts deducted from salaries within fifteen days following the end of each payroll period. When these deductions have been made, the contributions immediately become trust funds that may only be used for the exclusive benefit of KTRS members.

Contribution Trend

The Chart below shows contribution rates for KTRS plan contributions. 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. While contribution rates for KTRS pension funds and KTRS medical insurance fund have decline over the years, contribution rates for KTRS life insurance fund have recorded impressive rates over 200%.

During the 2009 fiscal year, the medical insurance plan member contributions increased $3.3 million and employer contributions increased by $15.5 million over fiscal year 2008. The employer contributions increased primarily because $139.4 million in stabilization funding was placed in the medical insurance fund from the pension fund at the recommendation of the System's actuary. The amount will be repaid over a ten-year period per KRS 161.553.

Fig. 1: KTRS Contribution Rates


Service Retirement

An employee is eligible for service retirement without reduction in benefits if they have twenty-seven or more years of active Kentucky service regardless of age.

An employee may also retire without benefit reduction if they have five or more years of active Kentucky service and are at least age sixty.

Additionally, an employee may retire from service if they have at least five years of Kentucky service and are at least age fifty-five, but they will be subject to a statutory reduction in their retirement allowance.

Disability Retirement

Disability retirement is available for persons who become disabled prior to retiring from service.

Members must have completed five or more years of Kentucky service and must apply within one year of their last contributing service.

Disability retirement is available for members with less than five years of service only if they are physically or mentally incapacitated as a result of an injury related directly to their covered employment.


The two types of service retirement available are “Unreduced Benefit” and “Reduced Benefit” retirement:

Unreduced benefit retirement

Members with twenty-seven or more years of active Kentucky service regardless of age may retire with no reduction in benefits. Members with five or more years of active Kentucky service who are at least age sixty may retire with no reduction in benefits.

Reduced benefit retirement

Members age fifty-five or more but less than age sixty who have five or more years of Kentucky service, but less than twenty-seven years of service, may retire with reduced benefits. The reduction rate is 5% for each year the member’s age is less than sixty or 5% for each year the member’s Kentucky service is less than twenty-seven years, whichever is the lesser number

Survivor Benefits

Survivor benefits are monthly benefits provided to the survivors of an active contributing member upon the death of the member. Survivor benefits are also available to survivors if the member has made contributions in the previous fiscal year or if the member is receiving an allowance based on the disability retirement formula at the time of death. Persons who may, if eligible, qualify for survivor benefits include:a member’s widow or widower if named as primary beneficiary; unmarried children (under age eighteen or up to age twenty-three if a full-time student in college, and mentally or physically disabled adult children); dependent parents; or dependent brothers or sisters.

Survivor benefits are not available once the member retires under the service retirement formula. Survivor benefits terminate upon the marriage of the survivor. Survivor benefits are available in lieu of a refund of a member’s account.

Survivor benefits are available to eligible survivors of non-vested members who are employed on a substitute or part-time basis only if the member completed at least 69% of a full contract year in a single fiscal year and the member's death occurred during the remainder of that fiscal year or immediately succeeding the fiscal year. Additionally for survivors of a non-vested member, benefits will be available only if the member's death was the result of a single traumatic physical injury directly related to the member's covered employment.

Disabled Adult Child

An additional monthly benefit of $200 is available to members who have an adult child whose mental or physical condition is sufficient to cause dependency on the member at retirement. Eligibility for this payment shall continue for the lifetime of the child, until the mental or physical condition creating the dependency no longer exists or until the child marries. Benefits under this program shall also be available to adopted children. The Board of Trustees is the sole judge of eligibility or dependency.

Purchase of Service Credit

Service credit is the time accumulated during one's career in KTRS-covered positions that will be used in calculating retirement benefit. The more service credit one has at the time of retirement, the greater the retirement allowance will be. Eligible members may purchase additional service credit to increase their annuity. Categories of service that may be purchase include:

  • reinstatement of previously withdrawn KTRS service - if a member has a contributing service equal to at least one year by repaying the amount of the original withdrawal plus 8% interest compounded annually for the date of withdrawal to the date of repayment
  • current leave of absence - leave that has been granted for the current fiscal year or school year or the year immediately preceding the current year.
  • non-current leaves of absence - can only purchase credit if the leave was granted for health reasons, for maternity or child rearing or to improve educational qualifications. Members are required to pay both the employer and the member contributions, plus any accrued interest at the rate of 8% per annum
  • military service - members may receive service credit of up to 6 years of active military service in the commissioned corps of the Public Health Services if they are in active contributing status and were, prior to employment in a position covered by KTRS. Members may also receive service credit for military service that occurs after they become a member of KTRS if they give their employer an advance written or verbal notice of performing military service and they return directly to covered employment following military service. Contributions are based upon the salary a member would have earned during the period of absence for military service plus 8% interest per annum. If members are eligible to draw retirement benefits for 20 or more years of active duty military service, they are not eligible to purchase military service credit. Active KTRS contributing members may receive credit for service in the reserves or National Guard. A member may purchase one month of service credit for each six months in the reserve or National Guard.
  • out-of-state teaching service - members who contributed to KTRS prior to July 1, 1976, are eligible to purchase retirement service credit for up to 10 years of out-of-state service performed in a public school of United States Government Dependency School. If a member entered KTRS on or after July 1, 1976, they may purchase one year of out-of-state service credit for every two years of Kentucky service completed. Also members who joined the system on or after July 1, 1976, and have completed 10 years of Kentucky service, may purchase credit for up to 10 years of acceptable out-of-state service. Only full time out-of-state service is purchasable.
  • peace corps service - members who have completed service as federal peace corps volunteers may purchase up to two years of qualifying service credit.
  • federal head start service - an active contributing member who was formerly employed by a federal Head Start Agency who did not not participate in a state-administered retirement system may obtain KTRS service credit for the period of the member's Head Start service
  • fractional service/balance of the year - members employed on a regular full-time or part-time basis or as a substitute teacher, and actually work less than a the regular contract year will earn less than a full year of service credit.
  • mental health and mental retardation service - an active contributing member who was formerly employed by a Regional community mental health and mental retardation service program may obtain credit for the period of the member's service by paying the full actuarial cost of the service credit purchased
  • non-qualified service - an active contributing member who has a minimum of 20 years of service credit may purchase up to a maximum of 5 years of service credit not otherwise provided for in the KTRS statutes

Service credit may be purchased by making a lump sum payment to the retirement system or if eligible, by making payroll deducted or bank draft installment payments. Purchase of service credit may also be made as permitted under the Internal Revenue Code by rolling over or transferring funds from another qualified plan. Service that has been or will be used in qualifying for an annuity with another retirement system that is financed in whole or part by public funds cannot be purchased as service credit with KTRS.


Member and employer contributions are invested under the authority provided in the KTRS statutes and administrative regulations. The Board of Trustees delegates investment authority to an Investment Committee comprised of two trustees and the retirement system’s Executive Secretary. The Investment Committee works closely with experienced investment counselors contracted with by the Board of Trustees to provide investment advice. Investment income pays for the bulk of the average retiree’s lifetime retirement allowance. Employer and member contributions only provide for approximately six years’ worth of retirement allowance payments—all the remaining years are paid for with investment earnings.

Unfunded Liabilities

  • In December of 2006, the actuary submitted experience and valuation reports on KTRS for the period ended June 30, 2006. The actuary reported that liabilities not funded with current assets were $5,467,140. The actuary stated that current levels of contributions from members, employers, and anticipated income from investment earnings will be sufficient to cover the unfunded liability of the system over a period of thirty years. These figures do not include the under-funding of the medical insurance program.
  • The latest actuarial valuation was for the period ending June 30, 2009 reflects the actuarial value of the System’s assets of $14.9 billion and the actuarial accrued liabilities totaled $23.4 billion.
  • The actuary determined that the existing levels of contribution by members and employers would be sufficient to fund all of the System’s liabilities within a reasonable period of time. The report concludes that the System is not operating on an actuarially sound basis since a portion of the annual contributions required to fund pension benefits have been allocated to the Medical Insurance Fund. Assuming that employer contributions continue in the future at rates recommended on the basis of the successive actuarial valuations, the actuary states that the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated

Funding Ratio

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 KTRS pension plan was 63.6% funded. This means that for every dollar in liabilities that the plan has incurred, there are only $0.63 worth of assets to cover liabilities.

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

From the charts above, the KERS pension funds was 81% funded in 2004, and since then unfunded liabilities have continued to rise significantly reaching up to 261.7% of payroll. 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.

Cost of Living Adjustments

A standard, statutory cost of living adjustment (“COLA”) in the full amount of one and one-half percent (1.5%) is provided annually to retirees who have been retired for at least one year prior to July 1, the annual effective date of the COLA. For members who were retired for less than a full year immediately preceding the date that a COLA becomes effective, the COLA is awarded on a pro rata basis depending on how long the member was retired during the prior fiscal year. For example, a member who retires on January 1 of any given year would receive only one-half of the COLA that would become effective on the following July 1. In addition to the standard one and one-half percent (1.5%) COLA, KTRS asks the Governor and General Assembly each biennial budget period for an additional “ad hoc” COLA to help retirement allowances keep pace with inflation. During the 2006 Regular Session, the General Assembly passed, and the Governor signed, House Bill 380 which approved an eight-tenths of one percent (0.8%) COLA effective July 1, 2006, and a six-tenths of one percent (0.6%) COLA effective July 1, 2007.

Forfeiture of Benefits

During the 2002 Legislative Session, the General Assembly amended 161.470(5) to provide that “persons hired on or after August 1, 2002” who are convicted of “a felony related to his employment” shall forfeit his or her retirement benefits and shall be entitled instead only to a return of his or her retirement contributions with any accumulated interest. Forfeiture of retirement benefits shall be stayed pending any appeal of such a conviction.

Post-Retirement Employment

  • Members who retire may elect to waive their annuity and return to regular, full-time employment in a Kentucky public school or state agency covered by KTRS without limitation on the number of days they may work or on the compensation they may earn. Returning to work by waiving current annuity can potentially increase the member's annuity when they eventually cease post-retirement employment. Members do not have to experience a separation in service following retirement before returning to employment. Members cannot receive annuity payments or cost of living increases during the waiver period, and must waive KTRS medical insurance.

Contributions are deducted from members' salaries during the waiver period. However, members who remain on waiver for at least one full contract year may have their annuity recalculated, otherwise contributions will be refunded at the end of the waiver period. Members may return to the retirement payroll upon employer's verification that employment has been terminated.

  • Members may also return to work in a part-time or full-time position while continuing to draw their retirement allowance. Under these return to work provisions, members make contributions to the Retirement Systems and start a new retirement account. Members who returned to work under these provisions prior to July 1, 2008, and earn at least 5 full years of service credit in the new account are entitled to a new retirement allowance. Members not vesting in their new retirement account will be entitled to a refund.

Retired members returning to work under these provisions and starting a new retirement account will not be entitled to a duplication of medical insurance, life insurance, adult handicapped child, disability retirement or survivorship benefits.

All KTRS retirees who return to active employment are eligible for medical insurance coverage through the Kentucky Employees Health Plan, and are required to waive their KTRS medical insurance coverage.

See Also