(FRANKFORT, Ky.) – While the Bluegrass Institute lauds new pension legislation filed Wednesday in the state House of Representatives for adopting the institute’s innovative paradigm prohibiting the guarantee of future benefit rates, the bill must be simplified and address other irresponsible spending policies that have created the current crisis in the commonwealth’s retirement systems.
Dr. William F. Smith, director of the Bluegrass Institute Pension Reform Team, praised House Bill 504 for recognizing that the state’s pension system administrators must be able to “adjust pension benefits prospectively when costs exceed the expectations regarding how the plans will perform. It may be the first time in the history of the commonwealth that legislation’s been filed addressing future benefit guarantees.”
However, Smith also called the 108-page bill “overly – and unnecessarily – complicated” when compared to the simple, straightforward proposal offered by the institute’s pension reform team.
“Here’s the plan in a paragraph: Benefits will neither be guaranteed prospectively nor increased retroactively; taxpayers, who are the employers, will have fixed payroll contribution rates and adjustments will be made by the plans’ administrators when the Actuarial Required Contribution exceeds 18 percent,” he said.
He called upon Rep. Scott Lewis, the bill’s sponsor, to simplify the legislation and follow the Bluegrass Institute’s paradigm by “making it more surgical” and focusing more on the right policy rather than pleasing political masters “by ignoring the fact that politicians in the future can go back and still enhance benefits retroactively, which is a major contributing factor to our current pension crisis.”
Bluegrass Institute board Chairman Aaron Ammerman called on Lewis to add parameters to the legislation that would require legislators, without exception, to make changes to the pension system in the future if certain funding levels fall below the threshold mentioned in the bill.
“The wording in the bill indicates that legislators could use their discretion and refrain from adjusting required contributions or benefits if necessary as is the stated goal of the legislation,” Ammerman said. “This needs to be a rules-based approach as we’ve offered in our paradigm. There should be an ironclad commitment between legislators, teachers and taxpayers regarding any future actions needed in order to maintain a financially viable pension system for teachers.”
KentuckyPensionTruth.com is a Bluegrass Institute website dedicated to providing transparent and truthful information regarding government-run retirement systems and the major threat pension crises pose to the economy of Kentucky and many other states.
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