The booming stock market is bolstering KY’s retirement plan, but only barely

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Kentucky’s long-ailing state pension fund received a boost this year from the simmering stock market and a record $ 1.13 billion contribution from the state government and other participating public employers.

The funding ratio for Kentucky Retirement Systems’ primary state pension fund rose to 18.48 percent as of June 30, compared to 14.01 percent last year, according to an audit report presented to the KRS board of trustees on Thursday.

About half of the year-long profit came from KRS’s impressive investment returns and the other half came from the state’s high employer contribution, said David Eager, executive director of the Kentucky Public Pensions Authority. In addition, government officials added $ 90 million to the pension fund during the year.

Eighteen percent is still dangerously low, possibly just a stock market crash away from catastrophe. Kentucky is among the states with the weakest pension plans in the country, including Illinois, New Jersey, and Pennsylvania.

But it’s the highest level Kentucky has seen since 2015. Just three years ago, the pension fund fell to an all-time low of 12.84 percent.

“This is great,” said Larry Totten, a state government retiree who serves on the KRS board of directors’ audit committee.

Kentucky has committed to a 30-year plan to get full funding from its state retirement plan by making required contributions and meeting assumed investment returns each year, Totten said.

“The state funding must be there in any case,” said Totten on Friday. “I don’t think we’ll ever see 25 percent market gains again.”

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Draft Audit Report for the Kentucky Employees Retirement System (Non-Hazardous) Pension Plan for Fiscal Year 2021

The state pension fund is in dire shape with Kentucky governors and lawmakers underfunded for two decades. But as of 2017, heads of state began to shovel huge sums of money into state pensions to replenish them, which weighed on the rest of the state’s $ 12 billion general fund.

Kentucky’s two major public pension systems told lawmakers in September that they are expected to need nearly $ 4.6 billion from the next two-year state budget when it is released this winter.

Most of that funding would go to the Teachers’ Retirement System of Kentucky, which provides retirement benefits to 56,629 Kentucky retired educators, with 73,151 other educators actively enrolled. For fiscal 2023, TRS expects the state to need $ 1.25 billion; for fiscal 2024 it is $ 1.33 billion.

As of June 30, the Kentucky Employees Retirement System (Non-Hazardous) retirement fund had a net position of $ 3 billion compared to $ 2.3 billion a year ago. It includes 123,857 active employees and retirees, most of them current or former employees of the Kentucky government.

A second, much smaller, pension fund that covers only 2,704 former or current Kentucky State Police employees received 33.75 percent funding as of June 30, up from 28.02 percent the previous year.

A third pension fund, which includes 239,626 local government and public nonprofit employees and retirees, received 57.33 percent funding as of June 30, up 10 points from 47.81 percent the previous year. That fund – the County Employees Retirement System (Non-Hazardous) – had a net position of $ 8.5 billion.

The state government, the state police and the municipal pensions are supervised by the KPPA. Teachers have their own separate retirement plan that is overseen by the TRS.

This story was originally published November 5, 2021 3:22 p.m.

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John Cheves is the Government Accountability Rapporteur for the Lexington Herald-Leader. He joined the newspaper in 1997 and previously worked in the Washington and Frankfurt offices, reporting on the courtroom.
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