Pension Bill Update - July 24, 2019
Dear Faculty and Staff,
This is an update about the outcome of the extraordinary session of the Kentucky legislature, how it will affect Eastern Kentucky University and its employees, and what the passage of House Bill 1 means for us moving forward.
Governor Bevin signed HB 1 into law just moments ago, after the Kentucky State Senate approved the measure 27-11. House Bill 1 passed the House by a 52-46 vote on Monday.
There will be no immediate impact to our employees participating in the Kentucky Employee Retirement System (KERS), and no decision about EKU’s participation in that system will be made until April 1, 2020. That decision would be implemented June 30, 2020.
However, there is an immediate impact on the financial stability of the University provided by the passage of HB 1. Employer contributions to KERS will be immediately frozen at 49.47 percent until June 30, 2020. EKU would have faced a 83.43 percent payment of employee’s salaries to KERS without the passage of HB 1.
Moving forward, we will work diligently to determine the best course of action for EKU, keeping in mind our core principles and our mission of providing a top-notch education for our students as well as a productive work environment for our employees.
The legalities of what happens next are as follows:
- Employers have until Dec. 31, 2019, to request an estimate of current liability to KERS, which will provide information regarding the cost of ceasing participation and the amount of the existing liability.
- Beginning April 1, 2020, governing boards of quasi-governmental agencies and regional universities can cease participation in KERS.
- If an employer opts to cease participation, the effective date of cessation for an employer is June 30, 2020.
- If an employer chooses to exit via the lump sum option, the lump sum amount must be paid in full to KERS by June 30, 2021.
- If no exit options authorized in HB1 are utilized and EKU chooses to remain in KERS with no changes, the university will be responsible for paying the actuarial required contribution after June 30, 2020. This rate is currently 83.43 percent, and is expected to increase by next year.
Now the hard work begins to determine our next steps. We will consider all the options provided in HB 1, and will communicate, in a timely manner, any decisions that affect our participation in KERS.
To read House Bill 1, you can follow this link: https://apps.legislature.ky.gov/recorddocuments/bill/19SS/hb1/orig_bill.pdf