Tips For A Successful Retirement
- Having a set of financial goals before you reach retirement age is the best way to ensure that youre not just endlessly saving. This will help to identify where you want to end up, and can make your retirement more tangible and attainable.
- Retirement is tough to be prepared for, even if you do have a pre-set pension with the state. The professional guidance of a financial advisor might be perfect way to get your plans in order, all while managing your current finances. SmartAssets financial advisor matching tool has the ability to pair you up with three advisors in your area that are equipped to handle your needs.
Types Of Retirement Systems In Kentucky
Kentucky has a fairly large number of retirement systems for it public employees, with eight offerings across all different jobs. The benefits and retirement requirements that accompany these plans are based on what the position entails. This is most evident with its hazardous versus non-hazardous programs. The more dangerous positions come paired with stronger perks and easier-to-meet prerequisites.
The retirement systems Kentucky offers for public employees are divided into three groups: Kentucky Retirement Systems , Kentucky Judicial Form Retirement System and Teachers Retirement System of Kentucky . KRS consists of the most, and includes the KERS-H, KERS-NH, CERS-H, CERS-NH and SPRS plans. The KJFRS is significantly smaller, and is comprised of just the KJRP and KLRP plans. The TRS program stands on its own.
Making The Full Payment
For almost a decade, policymakers had regularly shortchanged the Kentucky Retirement Systems. The 2008 pension reform legislation was supposed to remedy the system’s gaping funding deficiency, but only after a long ramp-up the state was not required to make full payments until 2024. The 2013 reform committed the state to fully fund the public pension system beginning with the next biennial budget. According to state projections, $131 million in additional funding will be required to make the full pension payment in 2015.
Finding the extra money to make this increased pension contribution will require either raising additional revenue or spending less in other areas. Although the Legislature has a year before it will have to put together the budget for fiscal years 2015 and 2016, when reforms will begin, policymakers have already identified $100 million in annual revenue that will be used to fully fund the state’s pension promises.5 For Kentucky’s pension plans to be sustainable, consistent funding over the next 30 years is a necessity. The $100 million approved by the Legislature represents a strong commitment to funding the state’s pension system going forward.
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Overview Of Kentuckys Retirement Systems
Kentucky Employees Retirement System: Hazardous Employees Being that anyone whos part of this program encounters dangerous activities daily, Kentucky offers stronger death and disability benefits. All employers who have employees that fit this hazardous distinction are required to be a part of the program.
Kentucky Employees Retirement System: Non-Hazardous Employees There are 124,000 employees involved with this retirement system. Around one-third of them remain active members. This theoretically bodes well for this program. Thats because there are more individuals currently contributing to it than taking from it.
County Employees Retirement System: Hazardous Employees In order for an employer, and therefore its employees, to gain eligibility to this system, the KRS Board of Trustees must approve the admission. But if chosen, the benefits hazardous employees receive are similarly robust to those in the state program.
County Employees Retirement System: Non-Hazardous Employees This is the most populated plan in the Kentucky retirement system portfolio. It has nearly 200,000 active, inactive and retired members. Although the state isnt doing too well financially, the sheer size of this system should help protect it.
State Police Retirement System If youre a full-time state police officer, you have no choice but to join the SPRS. It features some of the best retirement ages in Kentucky, but has the smallest member base in the Kentucky retirement system.
Kentucky Employees Retirement System
KERS is a defined benefit retirement plan for benefitted positions at EKU that do not require certification, or a 4-year college degree, or allows experience to substitute for a college degree.
Benefited employees must participate by law and have 30 days to enroll after starting employment. In order to be vested, an employee must have at least 5 years of service.
KERS Retirement & Disability Benefits
Benefits of all vested members are based on years of service and final compensation. Final compensation is the average of five fiscal years. IT will be either the highest 5 years, or the last 5 years. Some accumulated sick leave balances may be converted to service credit at retirement.
An employee who is not eligible for an unreduced benefit may retire due to disability. The employee must have at least 60 months of service.
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County Employees Retirement Systems
Full-time employees participate in the County Employees Retirement System . Plan participants make pre-tax contributions to the CERS pension fund and the citys legislative body contributes city revenues to the fund. CERS is administered by the Kentucky Public Pensions Authority . For more information, contact KPPA 8 a.m. 4:30 p.m. Monday Friday or visit their website.
Kentucky Public Pensions Authority
Public Pensions In Kentucky
|Total cash and investment holdings: $34,968,886,000|
|Number of state and local pension systems: 31|
|Actuarial value of assets|
|Unfunded actuarial accrued liability|
|Annual required contribution|
|Rate of return Active member|
|Inactive member OPEB|
|Hover over the aboveterms for definitions.|
|Note: This page utilizes information from a variety of sources. The information presented on this page reflects the most recent data available as of March 2022.|
Kentucky public pensions are the state mechanism by which state and many local government employees in Kentucky receive retirement benefits.
According to the United States Census Bureau, there were 31 public pension systems in Kentucky as of 2020. Of these, six were state-level programs. As of fiscal year 2020, membership in Kentucky’s various pension systems totaled 573,485. Of these, 199,963 were active members.
See the sections below for specific information on pension systems in Kentucky:
A New Retirement Plan
The goal of the Kentucky Public Pensions Task Force was not just to find a way to deal with the existing problems but to also look for a long-term solutiona way to keep the state’s retirement promises affordable and sustainable. The approach chosen by policymakers included adopting a new retirement plan designa cash balance planfor those hired after Jan. 1, 2014. This hybrid approach to retirement savings combines aspects of both a traditional pension and an individual retirement account.6 Workers put money into individual accounts each year, as do their employers. The retirement plan professionally manages these investments and guarantees an annual return of at least 4 percent. If long-term returns exceed the guaranteed 4 percent, then the extra returns will be shared between employees and a rainy day fund within the pension plan to cover years when returns fall below the guarantee. And when a worker is ready to retire, the money in his or her account is converted to lifetime income in the form of an annuity.
The state’s new hybrid approach provides a more predictable cost structure than the current plan by reducing the number of assumptions that policymakers must make to accurately project costs. Assumptions about employee turnover and salary growth, for example, are not required in a cash balance plan, because employee benefits accrue smoothly and are not based on a formula.
Ky Public Pensions : Who Is In Cers
The Kentucky Retirement System * administers public pension benefits for many public employees. Within KRS, there are three systems:
· Kentucky Employee Retirement System
· County Employees Retirement System
· The State Police Retirement System
CERS has the largest membership in KRS , followed by KERS and SPRS . This includes all active, inactive and retired members. Within CERS, there are two categories: CERS Nonhazardous and CERS Hazardous. Those in the Nonhazardous plan make up the bulk of the membership in CERS .
Most local public employees are in the CERS system, including fiscal courts, cities, boards of education and more. Heres a breakdown of employees of participating employers in CERS as of June 30, 2018.
*In addition to the membership in KRS, the state administers public pension plans for teachers and the Judicial Form Retirement System , which includes the Judicial Retirement Plan and the Legislators Retirement Plan.
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Cash And Investment Holdings
- See also: Pension data, U.S. Census
Investments are a crucial part of the pension process. The goal is that, by investing pension contributions, the pensioner will receive more money when he or she retires than he or she and the employer were able to contribute. These investments are made in cash, short-term investments, securities like equities and bonds, or other assets. Cash investments are usually low-risk, short-term investments that have a lower rate of return than other types of investments. Other short-term investments are riskier than cash investments, but have the potential for greater returns. Securities can refer to stocks, bonds, or other types of financial certificates that hold some sort of financial value. As the values of these securities change, they can be traded to make a profit. While there are other applications of securities investments, this represents one of the most common practices.
As of the fiscal year 2020, Kentucky’s state and local pension systems held $35.0 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Kentucky and surrounding states. The columns labeled “Total cash and short-term investments” and “Total other investments” are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 .
|Total cash and investment holdings in Kentucky|
|United States Census Bureau|
Current Financial Health Of The Kentucky Retirement System
Kentuckys pension funds are the most underfunded in the U.S., with about $20,000 per state resident in unpaid for liabilities. In order to try and realize some level of growth, the state has taken on much more investment risk with its pension funds. In the Kentucky retirement system, that could lead to more trouble. Furthermore, because Kentucky has increased spending within its pension fund, other areas of the state governments services have suffered financially. The education sector is one such example.
There is a hopeful light at the end of the tunnel, though. Governor Bevin has taken aim at this major problem, implementing a plan entitled Keeping the Promise that began July 1, 2018. This strategy takes a multi-pronged approach to try and build this broken system. In addition, the program still protects the rights of those at critical times in their retirement or near-retirement lives. For example, there will be no reductions to current pension checks and the full retirement age will not be altered.
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Background On The Kentucky Retirement Systems
The Kentucky Retirement Systems were created by the General Assembly in the mid-1950s and include the Kentucky Employees Retirement System, the County Employees Retirement System, and the State Police Retirement System. The General Assembly created the Kentucky Employees Retirement System to supplement Social Security benefits for state employees.
Modifications to the systems have been made through the years, but the most significant change prior to the 2013 legislation occurred in 2008. Key changes applied to new employees hired after Sept. 1, 2008, included:
- Increasing the employee retirement contribution by 1 percent.
- Basing final compensation on average high five-year salary .
- Requiring a minimum retirement age of 57 .
- Reducing pension benefits by basing them on years of service.
Despite making these changes, Kentucky’s state and local governments continued to face increasing pension costs and a steadily growing pension debt.