Kentucky Lawmakers Override Pension Bill Veto

Law, opposed by governor, is allowed to stand, requiring teachers to contribute more and work longer before earning benefits.


The GOP-run Kentucky state legislature has overridden Democratic Gov. Andy Beshears veto of a pension reform bill that will place new teachers in a hybrid pension plan that incorporates aspects of a defined contribution (DC) and a defined benefit (DB) plan.

Under House Bill 258, new teachers are required to contribute more to their retirement plans than current teachers do, and they will have to work for 30 years instead of 27 to earn their maximum benefits. The new rules will become effective at the beginning of 2022.

The bill had been passed by large majority of both chambers of the legislature earlier this year, with the House passing it by a vote of 68 to 28 and the Senate passing it by a count of 63 to 34. Because the state’s Republicans have a supermajority in both the House and Senate, they didn’t have much difficulty in overriding the veto, which was one of 24 vetoes passed down by Beshear, a Democrat, that were overridden in one day.

In vetoing the bill, Beshear said it “prospectively cuts teachers’ retirement benefits, which will impair the commonwealth’s ability to attract and retain teachers,” adding that “teachers deserve better than House Bill 258.”

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Kentucky lawmakers have been trying for several years to get a statewide pension reform bill passed, most recently in 2018. The Kentucky Senate was rebuked by thenAttorney General Beshear and the state teachers associations after passing a pension reform bill that was tucked inside a sewage services bill without allowing the public to comment on it. Although the bill was signed into law by then-Gov. Matt Bevin, a Republican, the state’s Supreme Court eventually struck the law down, saying state lawmakers weren’t given a “fair opportunity” to consider the bill before it was voted on and passed.

According to an actuarial analysis summary by Cavanaugh Macdonald, the new tier of benefits introduced by the law significantly decreases employer costs during the projection period.

“As actuarially required contributions are made, the legacy plan will be more actuarially sound,” said the analysis. “At the same time, there is no impact on any current benefits or participation for any current member of TRS [the Kentucky Teachers’ Retirement System].” It also said that the legacy liability for current members should be paid off in 24 years.

Related Stories:

Kentucky Passes Surprise Pension Reform that Was Inserted into a Sewage Services Bill

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Kentucky Supreme Court Strikes Down Pension Law

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Alts Grow Bigger and Bigger in Institutional Portfolios

Some 86% now invest in alternatives, says Nuveen survey.


Institutional investors are embracing alts in a big way: 86% of them now have money in alternative investments. What’s more, of those, two-thirds plan to increase their allocations this year.

That’s the finding of a survey of pension, endowment, insurance, and other big investors, as well as consultants, done by Nuveen, the investment manager for TIAA. The catalyst for this trend is the pandemic, the study stated, contending that the “crisis has brought some new approaches to the daily work of investing, including the due diligence process.”

More and more, these investors are driving alt investments on their own, without the use of outside managers. They are buying real estate and taking private equity (PE) stakes themselves, according to the survey, conducted late last year.

What are the most popular among the items on the alts smorgasbord? Real estate, cited by 80% of the 700 respondents, followed by 70% who are invested in private equity and 63% in infrastructure. More than half (55%) of alternatives investors said they plan to make a strategic shift away from public to private markets in the next 12 months.

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“In a low-return environment, the shift to private asset classes and other alternatives has accelerated as more and more investors search for sources of alpha that are idiosyncratic— that is, not strongly correlated with other kinds of assets,” said Mike Perry, head of the firm’s global client group.

They are also looking for alt investments that favor environmental, social and governance (ESG) precepts: Some 69% said they’re seeking ESG-oriented investments this year.

At the same time, they are taking a cautious approach. A large number, 79% of investors, said they had made no significant changes to portfolios last year due to COVID-19. Nonetheless, more than half (52%) reported the pandemic market impact will drive portfolio changes in 2021— the most often cited factor. Market volatility and interest rate changes were the two next most important influences, both cited by 42% of investors.

While ESG investing is becoming more mainstream, not all the investors agreed on how important it is. Just 39% indicated that ESG is a valid driver of alpha.

Although 59% believed ESG can help mitigate headline risk, only 36% concurred that it was on par with other investment factors when evaluating risk/return profiles. But only 26% percent agreed that “ESG is a trend rather than a core, long-term investment strategy”; 22% were neutral on the statement, while 53% disagreed.

Reflecting on a year of rising attention toward societal inequity, some institutional investors reported they were looking at enhancing their inclusion and diversity practices.

About four in 10 were planning changes to these practices in 2021. Meantime, one-third of investors were unsure about planned changes; 23% acknowledged that they have no changes planned.

Related Stories:

How Did Alts, a Jumble of Different Things, Get So Popular?

Investors ‘Double Down’ on Alts Amid Market Turmoil

Expect an Increased Tempo for ESG Investing Post-2020

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