A group is warning lawmakers against shifting new state hires onto a 401(k)-style benefits plan. The Kentucky Public Pension Coalition argues the move would deepen the state’s pension crisis.
With a special session dedicated solely to pension reform on the horizon, the coalition – made up of a dozen groups including the Kentucky Retired Teachers Association and the Kentucky State AFL-CIO – is hoping to convince legislators that moving incoming public workers and teachers into 401(k) defined contribution plans would ultimately cost the state more.
"In such a switch, Kentucky will close the existing defined benefit plans to new workers," said Jason Bailey with the liberal-leaning Kentucky Center for Economic Policy. "That means the additional regular contributions by and on behalf of new workers will no longer be made to those plans. That will result in the closed plans no longer being balanced by workers of different ages."
And that, Bailey said, would lead to a shrinking investment portfolio and higher costs for the state to maintain the closed plan.
But Gov. Matt Bevin has long argued for structural changes meant to lighten Kentucky’s pension load over the long term.
"If we don't make changes, and I mean changes as it relates to how we can ensure that your checks keep coming, then they're going to stop in the next three, four, five, six years, or more perhaps depending on the plan," the governor warned pensioners in a recent video.
Bevin has yet to announce a date for the anticipated special session, but says it’s coming “sooner rather than not.”