Kentucky Senate President Shuts Down Bevin's 401(k) Proposal
Teachers to now choose between two plans in new reform.
According to Kentucky.com, Senate President Robert Stivers declared that the state’s public pension system reform will no longer carry several of Gov. Matt Bevin’s controversial concepts.
The rejected propositions include the moving any existing or future employees from their defined benefits plan (DB) into a 401(k)-style plan, as well as a five-year freeze on cost of living expenses for retired teachers, both of which Bevin proposed in October.
What Stivers did include in the new reforms was allowing teachers to choose between a traditional defined benefit plan and a hybrid “cash balance” plan, which would offer more security than the originally proposed 401(k)-like option as it carries characteristics of both DB and defined contribution pensions, such as a return minimum guaranteed by the employer.
While Bevin had introduced his proposal claiming it would save the state money by converting public pensions to the hybrid plan, Stivers revealed Wednesday that an actuarial analysis determined that Bevin’s proposal would actually cost more money by closing out the traditional DB plan and then converting it to the 401(k)-style plan.
“We have been getting data that would suggest that it actually does cost money to switch everyone to a 401(k)-style,” House Speaker David Osborne said, reported by the Courier Journal.
Kentucky’s current 60-day legislative session is halfway over, and the state faces a $40 billion-plus shortfall.
It is not yet known if the reform bill will be filed in the House or the Senate.