Kentucky’s state schools are considering breaking off from the state retirement system and creating a pension plan of their own, according to Michael Benson, president of Eastern Kentucky University.
Benson, who is responsible for convening Kentucky public university presidents, said the plan has already gone to the Council on Postsecondary Education (CPE), and that the next step would be to take the proposal to the state budget director.
“We’re looking at a way that maybe we could opt out of the system and be able to finance it ourselves as one of the options,” said Benson in an interview with National Public Radio affiliate WEKU after the annual convocation before faculty and staff earlier this week. “So we’re in discussions now with CPE and the presidents.”
The Kentucky Retirement Systems (KRS) consists of three separate retirement systems: the Kentucky Employees Retirement System (KERS) for state employees, the County Employees Retirement System (CERS, for local government and classified school board employees, and the State Police Retirement System (SPRS), which is for uniformed Kentucky State Police officers.
According to an audit report from the PFM Group, Kentucky’s retirement system faces a funding shortfall across its pension systems of $33 billion, and could face insolvency in just five years. The universities are looking to emulate CERS, which is in the process of trying to separate itself from the state retirement system. Kentucky Senate Bill 226 aims to divorce CERS from the KRS, and create a separate board of governance.
Benson also said that the universities are eyeing a defined benefit format for a separate pension, which would be a change for new employees who are currently placed a hybrid plan. The hybrid plan has characteristics of both a defined benefit plan and a defined contribution plan. This plan is for members who began participating in the system after Jan. 1, 2004.