Administrators of a Kentucky retirement system for teachers are developing a request for more funding in the state’s next biennial budget.
TRS General Counsel Beau Barnes presented what he called a “good news” update about the system to the Calloway County Retired Teachers Association in Murray on Monday.
Barnes said the request will be more than last time, but not an exaggerated increase. He said the additional funding will help implement a plan to pay off the system’s unfunded liability over the next couple decades.
“That is a 30-year plan, like paying off a home mortgage,” he said. “We’re down to less than 26 years now - in that mortgage, if you will. And once we do that we’re 100 percent funded then the cost of TRS will be about a little less than social security. Actually, that’s how much we would bill the state for. But it’s a much better benefit because we invest in the hard assets like stocks, bonds, real estate, timberland and other assets that help us grow those contributions that come into the retirement system.”
He described what would happen if the additional funding is not provided: “We would be off our funding plan and then we’d kind of get back to where we were before and we experience the effect of negative compounding because we’re not getting the money in to implement that funding plan.” He said he believes members of the general assembly are committed to providing the funding.
He said TRS is getting full funding in the current budget, including an additional $1.09 billion that had been requested. He said the system is 54.6% funded and has about $14.3 billion in unfunded liability. He said medical insurance is now at 36.3% and noted that a surplus in this past year’s budget put about $70 million towards that insurance.
In previewing legislation that might come up in the next general session, Barnes said to anticipate a bill or bills to address pension reform. He said these typically focus on a new tier for new teachers and not so much on retirees. He said there may be some tweaks to benefits for existing teachers, such as sick leave. Another bill may involve amending the board’s structure.
Barnes said TRS is in “very good” shape and said people often confuse it with the beleaguered KERS. The latter saw some “relief” in a recent special session. He said there are “huge differences” between the two, such as factors involving social security, funding levels and investments. “Everything that we do at TRS is a world away - or a world of difference between how KERS operates,” He said. “Not so that it’s bad. We are just very, very different. Unfortunately, there’s a lot of confusion when they talk about retirement systems who they’re talking about.”