SB 1 / AA (BR 427) - J. Bowen, R. Stivers II, C. McDaniel, D. Thayer

     AN ACT relating to retirement.
    Amend KRS 6.505 to provide that the "inviolable contract" provisions shall not apply to legislative changes to Legislators' Retirement Plan (LRP) that become effective on or after July 1, 2018; make technical changes; amend KRS 6.520 to reduce the benefit factor of LRP members who began participating prior to 1/1/2014 to 1.97%; amend KRS 6.525 to recalculate current and future LRP retiree benefits effective 1/1/2019 so that the benefit from LRP is based solely upon salary earned as a legislator; amend KRS 6.518 to conform; amend KRS 21.360 to provide that the "inviolable contract" provisions shall not apply to legislative changes to the Judicial Retirement Plan (JRP) that become effective on or after July 1, 2018; make technical changes; amend KRS 21.374 to remove provisions relative to the election to participate in the cash balance plan by existing members and amend to provide that LRP and JRP members may elect to cease participating in LRP or JRP and participate prospectively in KERS in the new optional 401(a) money purchase plan for any future service as a legislator, judge, or justice; amend KRS 21.402 to change the interest credit in the JRP/LRP cash balance plans to 85% of the 5-year smoothed return above 0% if the member is contributing to a state-administered retirement system or plan and 0% if the person is not contributing to a state-administered retirement system or plan; amend KRS 21.460 to prohibit the purchase of recontributions of refunds to LRP/JRP by members who are participating in the 401(a) money purchase plan provided by this Act; amend KRS 21.480 to provide that the "inviolable contract" provisions shall not apply to legislative changes to JRP that become effective on or after July 1, 2018; make technical changes; amend KRS 21.372 and 21.385 to make technical/conforming amendments to JRP/LRP statutes; create a new section of KRS 61.510 to 61.705 to establish an optional 401(a) money purchase plan for new nonhazardous members who begin participating in the Kentucky Employees Retirement System (KERS) and County Employees Retirement System (CERS) on or after January 1, 2019, who elect to participate in the plan; provide that the optional money purchase plan shall be a mandatory defined contribution plan that will operate as another benefit tier in KERS/CERS and will include a 4% employer contribution; provide that the investment options for members of the money purchase plan shall be determined by theKentucky Retirement Systems (KRS) board and may include options for investing in system assets, investment options provided by an external vendor selected by the KRS board, or investment options provided through an agreement with the Kentucky Public Employees Deferred Compensation Authority (KDC); provide for a 5-year vesting period for employer contributions in the 401(a) money purchase plan; provide that a member can retire and take a refund or his or her account or annuitize his or her account balance in the 401(a) money purchase plan into one of the payment options provided by the system upon reaching age 65 with 5 years' service or upon meeting a combined age and service requirement of 87 years with a minimum age of 57; amend KRS 16.505, 61.510, and 78.510 relative to State Police Retirement System (SPRS), KERS, and CERS to exclude uniform and equipment allowances from the definition of creditable compensation, require that a final compensation based upon the highest 3 (hazardous) or highest 5 (nonhazardous) years of creditable compensation must contain at least 36 or 60 months, as applicable, for those members retiring on or after January 1, 2019; for Tier I nonhazardous KERS and CERS members retiring on or after July 1, 2023, prohibit lump-sum payments for compensatory time at retirement from increasing retirement benefit calculations; define "nonhazardous position" and "accumulated employer contribution" and make technical and conforming changes; amend KRS 61.546 and 78.616 to provide that members of KERS/CERS/SPRS who retire on or after August 1, 2018, shall not receive sick leave service creditfor more than the sick leave they have accumulated as of July 31, 2018, and shall not be eligible to use sick leave service credit for purposes of determining retirement eligibility; provide that no additional KERS/CERS agencies may elect to adopt a sick leave program on or after August 1, 2018; amend KRS 61.565 to define normal cost for purposes of funding for KERS, CERS, SPRS, LRP, and JRP; provide that costs for the optional 401(a) money purchase plan shall be included in the normal cost calculation; provide that for the 2019 actuarial valuation the unfunded liabilities shall be financed using a level dollar amortization method and that unfunded liability payments shall be prorated to each employer based upon the employer's average share of payroll over fiscal years 2015, 2016, and 2017, except for those employers who have ceased participation; provide that employer funding requirements shall be determined using the entry age normal cost method, a 5-year asset smoothing method, and assumptions adopted by the KRS board; provide that KERS and SPRS rates shall be adjusted annually rather than on a biennial basis in the 2020-2022 budget biennium; amend KRS 61.597 to change the interest credit for KERS/CERS nonhazardous members in the cash balance plan to 85% of the 10-year smoothed return above 0% if the member is contributing to a state-administered retirement system or plan and 0% if the person is not contributing to a state-administered retirement system or plan; amend KRS 16.601 to provide that in the event of a line-of-duty death of a KERS, CERS, or SPRS hazardous member, the spouse shall supersede the beneficiary designation on file; amend KRS 61.552 to provide that members who begin participating in the optional 401(a) money purchase plan shall not be eligible to purchase service credit and to make conforming amendments; amend KRS 61.555 to provide that a member in the optional 401(a) money purchase plan shall be credited with employee and employer contributions if called to active duty military service while working; amend KRS 61.637 to specify required breaks in employment for KERS, CERS, SPRS, LRP, JRP, and Teachers' Retirement System (TRS) retirees who retire on or after January 1, 2019, and are reemployed on or after January 1, 2019, and to provide that these reemployed retirees shall not earn a second retirement account upon reemployment; amend KRS 61.702 to require KRS employees who began participating on or after July 1, 2003, but prior to September 1, 2008, to contribute towards retiree health funding an amount equivalent to the lesser of the normal cost of the retiree health benefit or 3% of creditable compensation; provide that the increase in the employee contribution rate shall be phased-in over a 3-year period and may be adjusted annually after that date by the KRS board in increments of 0.25% of pay if the normal cost decreases/increases, but in no case shall it exceed 3% of creditable compensation; amend KRS 61.705 to provide that members who begin participating on or after January 1, 2014, shall not be eligible for the $5,000 death benefit payable to KERS, CERS, and SPRS retired members with at least 4 years of service; amend KRS 16.652, 61.692, and 78.852 to provide that the KERS, CERS, and SPRS "inviolable contract" provisions shall not apply to legislative changes that become effective on or after July 1, 2018; make technical changes; amend KRS 61.5955 to remove provisions relative to election by pre-2014 KERS, CERS, and SPRS members to participate in a cash balance plan and amend to provide that KERS and CERS nonhazardous members may elect to cease participating in the pension plan and participate prospectively in the optional 401(a) money purchase plan for future service; amend KRS 61.655 to provide that no member of the General Assembly, public servant, or trustee or employee of the KRS board shall have any interest in the business of KRS while employed/serving and for a period of 5 years following employment/service (starting from July 1, 2017); amend KRS 16.583, 16.645, 61.575, 61.595, 78.640, 61.580, 61.559, 61.605, 61.640, 61.680, 78.545, and 78.650 to make technical/conforming amendments; create a new section of KRS 161.220 to 161.716 to establish a hybrid cash balance plan for new Teachers' Retirement System (TRS) members who begin participating on or after January 1, 2019; provide that the hybrid cash balance plan shall operate as another benefit tier in TRS and will include an 8% employer credit for non-university members and a 4% employer credit for university members; provide for a 5-year vesting period for employer credits in the TRS hybrid cash balance plan; provide that a member can retire and take a refund of his or her account or annuitize his or her account balance in the TRS hybrid cash balance plan into one of the payment options provided by the system upon reaching age 65 with 5 years' service or upon meeting a combined age and service requirement of 87 years with a minimum age of 57; allow a TRS member with less than 5 years of service to elect participation in the hybrid cash balance plan; amend KRS 161.155 to limit the amount of sick leave payments that can be applied to TRS retirement benefit calculations to the amount of sick days accumulated as of July 31, 2018; retain current high-3 final average salary provisions for TRS members with 20 or more years of service as of July 31, 2018; provide that TRS members with less than 20 years of service as of July 31, 2018, may qualify for a high-3 final average salary calculation if he or she is at least age 60 and has at least 35 years of service; define "university member," "nonuniversity member," "accumulated account balance," and "accumulated employer credit"; amend KRS 161.460 to provide that no member of the General Assembly, public servant, or trustee or employee of the TRS board shall have any interest in the business of TRS while employed/serving and for a period of 5 years following employment/service (starting from July 1, 2017); amend KRS 161.470 to provide that new members of TRS cannot purchase recontributions of refunds and existing members cannot use recontributions of refunds for purposes of determining the date the individual became a member of TRS; amend KRS 161.480, 161.500, 161.507, 161.515, 161.545, 161.5465, 161.547, 161.548, 161.549, and 161.595 to remove certain service purchase provisions for new TRS members effective January 1, 2019; make technical/conforming amendments; amend KRS 161.540 to provide that the employee contribution to fund TRS retiree health benefits for all members shall be increased by the TRS board in 1% of pay increments if the retiree health fund falls below 25% funded, experiences a drop in the funding level for 3 consecutive valuations, or experiences a drop in the funding level of more than 10% over 2 consecutive valuations; amend KRS 161.550 to require TRS employers to pay the full actuarially required contribution rate; provide that for the employer rates payable on or after July 1, 2020, the unfunded liabilities shall be financed using a level dollar amortization method and to prorate unfunded liability payments to each employer based upon the employer's average share of payroll over fiscal years 2015, 2016, and 2017; provide that employer funding requirements shall be determined using the entry age normal cost method; a 5-year asset smoothing method, and assumptions adopted by the TRS board; define "normal cost" and "actuarially accrued unfunded liability contribution," and provide that local school districts shall pay 2% of pay towards the costs of new TRS members retirement benefits; amend KRS 161.568 to prohibit new members, effective January 1, 2019, from transferring service into TRS from an optional defined contribution retirement plan administered by university employers; amend KRS 161.605 to provide that TRS members who retire on or after January 1, 2019, and return to work shall be subject to the amended reemployment after retirement provisions of KRS 61.637; amend KRS 161.620 to provide that TRS members with 20 or more years of service as of July 31, 2018, shall continue to beeligible for a 3% benefit factor for years of service in excess of 30; provide that TRS members with less than 20 years of service as of July 31, 2018, shall be eligible for a 3% benefit factor for years of service in excess of 35 if the member is at least 60 years of age; provide that TRS retirees will receive a 0.75% COLA in lieu of a 1.5% COLA if the pension fund is less than 90% funded as of the most recent valuation for COLAs provided from July 1, 2019, to July 1, 2030; provide that new TRS retirees will receive a 0.75% COLA in lieu of a 1.5% COLA if the pension fund is less than 90% funded as of the most recent valuation for COLAs provided for twelve years following retirement; provide that the TRS COLA provisions do not apply to new members, effective January 1, 2019; amend KRS 161.623 to limit sick leave service credit to the level of sick leave accumulated as of July 31, 2018, for TRS members receiving service credit for accumulated sick leave; provide that agencies who have not elected a TRS sick leave program may not do so on or after August 1, 2018; amend KRS 161.655 to provide that the life insurance benefit from TRS shall not be applicable to new members, effective January 1, 2019; amend KRS 161.661 to conform TRS disability provisions to the plans for new members; amend KRS 161.714 to provide that the TRS "inviolable contract" provisions shall not apply to legislative changes that become effective on or after July 1, 2018 or to new TRS members with the exception of the new member's accumulated account balance; amend KRS 161.400, 161.420, 161.480, 161.520, 161.522, 161.525, 161.580, 161.585, 161.590, 161.600, 161.612, 161.615, 161.630, 161.650, and 161.700 to make technical/conforming TRS amendments; amend KRS 7A.250 to provide that the Public Pension Oversight Board's hiring of an actuary to perform a review of state-retirement system rates is voluntary; make conforming/technical amendments; create a new section of KRS Chapter 18A to establish conflict of interest provisions for Kentucky Public Employees Deferred Compensation Authority (KDC) employees and trustees; provide that no member of the General Assembly, public servant, or trustee or employee of the KDC board shall have any interest in the business of KDC while employed/serving and for a period of 5 years following employment/service (starting from July 1, 2017); amend KRS 11A.010 to make the KDC board subject to the Executive Branch Code of Ethics; amend KRS 18A.245 to make conforming/technical amendments; require the Public Pension Oversight Board (PPOB) to establish an advisory committee to evaluate CERS separation/restructuring of the KRS systems and report recommendations to the PPOB no later than December 1, 2019; provide that line-of-duty death changes to KRS 16.601 are applicable to surviving spouses of hazardous members who died in the line of duty on or after January 1, 2017; provide severability clause.