State pension gap getting worse, not better

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By Kevin Wheatley
The State Journal
The funding gap in Kentucky’s pension plan for most state workers and retirees continues to widen while lawmakers hope to stop the bleeding in the upcoming budget session, actuaries told the Kentucky Retirement Systems’ Board of Trustees Thursday.
Actuaries with Cavanaugh Macdonald Consulting said the Kentucky Employees Retirement System non-hazardous pension plan has only 23.2 percent of the funds to pay for future retirement obligations. That’s down from a 27.3 percent funding level last year for the plan that covers 42,226 employees and 40,194 retirees.
The KERS non-hazardous plan’s unfunded liability grew from $8.3 billion at the end of fiscal year 2012 to $8.8 billion as of June 30, according to an annual valuation report presented to the KRS board. That $500 million increase accounted for much of the total growth of KRS’s unfunded liabilities, which reached $17.6 billion as of June 30.
Thomas Cavanaugh, chief executive of the actuarial firm, said the KERS non-hazardous plan remains one of the worst funded in the U.S.
“We would have a real significant problem if we were to have a repeat of 2008 anytime soon,” Cavanaugh said after his presentation. “But absent that, I think we’ve got a basis now at least to get us long-term sustainability of all the funds.”
Cavanaugh is referring to Senate Bill 2, a law that will shutter the state’s defined-benefit retirement plan and replace it with a hybrid cash balance plan starting July 1.