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Long-Term Funding Issue Brief
Pending KPERS Changes
Study Commission Results
KPERS' long-term funding shortfall made legislative changes necessary to provide sustainability and to pay promised benefits long-term. Last session, the Legislature passed HB 2194, creating benefit and contribution changes for active members and employers. HB 2194 also required a KPERS Study Commission and additional legislation considered in 2012.
Based on Study Commission results, two bills have been introduced to create a Tier 3 plan for nonvested members and new hires. These are considered the trigger legislation that makes HB 2194 take effect.
HB 2545 and SB 338 create a new tier 3 plan for nonvested members and new hires with two parts:
Each employee would have both parts. This would affect any members who are not vested on the effective date.
In addition to the Tier 3 plan, legislation moves all legislators to Tier 3 and requires employers to contribute at the actuarially-required rate.
Trigger legislation needs to be voted on in a House committee and a Senate committee, then in either the full House or full Senate for HB 2194 to take effect. Final legislation for Tier 3 could look like it does now, have different changes or not pass at all.
It's important to remember that improving the financial health of the Retirement System benefits everyone. The best place to bring concerns about benefits and funding is to your legislator and legislative leadership.
We will continue to provide updated information on www.kpers.org as we move through the process. You can count on KPERS as a trusted partner to help you navigate any changes.
If you're within five years of retirement, this seminar is for you. Seminars will be held February through April at locations across the state.
Your KPERS contributions are subject to Kansas income tax.
Your contributions are deducted from your pay on a pre-tax basis for federal income tax purposes. Because of this, you need to add the contributions back into your gross income when you file your Kansas state income taxes each year. This applies to active members of all Retirement System plans.
Writing a will enables you, and not a probate court, to decide how your last wishes are carried out. But surveys show that 60 to 70 percent of people never write one. Making a will is the first step in the estate planning process. A simple will can be created in a few minutes with online tools. To be valid, a will should be executed with guidance from an attorney in your state.
A will is especially important if you have minor children. This will allow you to choose who will be their guardian.
The information a will contains can be categorized generally as:
There are some things you wish to pass on that a will won't cover. KPERS basic and optional life insurance, for instance. You need to name a beneficiary for these benefits.
Minnesota Life, KPERS’ life insurance provider, has a website with information that goes beyond a standard will, a comprehensive legacy plan.
Additional resources at www.legacyplanningservices.com.
Here are a few highlights of operations and finances for fiscal year 2011. For more details, please see our Comprehensive Annual Financial Report (CAFR) (PDF, 803KB). The Government Finance Officers Association (GFOA) awarded KPERS a Certificate of Achievement for Excellence in Financial Reporting for our 2010 CAFR. KPERS has received the award for the last 17 consecutive fiscal years.
The Retirement System paid about $1.3 billion in benefits during the fiscal year.
|Retirement, $1.15 billion||Withdrawal, $49.6 million|
|Retiree death, $9.6 million||Death/disability, $53.5 million|
Strong investment performance in 2010 and 2011 has offset the negative returns experienced during the 2008-2009 economic recession. The investment portfolio returned 22.6 percent for fiscal year 2011. This return puts KPERS in the top quartile of return performance among its pension peers. The first half of fiscal year 2012 has been a difficult time for global financial assets, with high volatility in the financial markets. In this environment, KPERS has maintained its well-diversified approach and long-term focus. For more information about our investment strategy, please see the Investment Section in our CAFR.
Our most recent actuarial valuation, dated December 31, 2010, showed an overall funded ratio of 62 percent, down somewhat from 64 percent the previous year. The funded ratio is the ratio of assets to future liabilities. The System’s unfunded actuarial liability (UAL) increased from $7.7 billion to $8.3 billion. The unfunded actuarial liability (UAL) is the gap between the actuarial value of assets and the actuarial liability for service already earned. The modest decline in funding is in spite of strong investment performance the last two years, demonstrating KPERS’ fundamental, long-term shortfall. Even with a yearly 8 percent return, the unfunded liability will continue to increase in the coming years with current plan design and funding.
In response to the shortfall, the 2011 Legislature made benefit and contribution changes to the KPERS plan for future service. These changes are a major step toward making the Retirement System more sustainable, but there are still steps to complete in the upcoming legislative session before the law will take effect.
Members need to remember that benefits are safe in the near-term and KPERS has billions of dollars to pay benefits for years. As a fiduciary devoted to the best financial interest of members, KPERS will continue to advocate for policies that promote the long-term financial health of the Retirement System.
|Plan Net Assets|
|Cash and Deposits||
|Changes in Plan Net Assets|
|Net Investment Gain||
|Beginning of Year||
|End of Year|
Your 20s are an exciting time. You're building your career, living on your own, maybe even starting a family or buying your first house. Retirement is a long way off, and it may be the furthest thing on your mind. But don't delay. Make your moves early, and your future self will thank you.
Even small amounts, invested over time, can add up. The important thing is to actually get started, and keep at it. When you start early, the overall amount you'll have to save for retirement can be much less than if you wait.
Remember that KPERS is only one part of your retirement plan. Social Security and your personal savings also play an important role. You can use the Kansas Public Employees Deferred Compensation Plan My Retirement Outlook tool to factor in Social Security, pensions, personal savings and the effects of inflation.
The tool helps you identify potential future shortfalls in your retirement savings and get a better understanding of what you need to do to meet your retirement income objectives. You can also use the paycheck tool to determine how much you can afford to contribute each paycheck.
If you change jobs, don't withdraw your retirement savings, even if the balance is small. Taxes and penalties can take a big chunk, and set back the progress you've made. Rollover to your new employer's plan or even an IRA at your local financial institution.
Have a retirement account with a previous employer? You can consolidate your accounts (PDF, 231KB).
Your financial security isn't something to take lightly. The more you know, the better decisions you'll make. Kansas Deferred Compensation participants have resources available. Visit the KDC "My Learning Center" for tools and calculators, special reports, brochures and more.
You can login to your account to customize topic preferences within broad categories of Retirement, Investing and Personal Finance.
KPERS members have basic life insurance at 150 percent of their salary. You may need more, though. That's where optional insurance comes in. If your employer offers it, you can choose additional coverage amounts from $5,000 to $250,000.
The amount of life insurance you need depends on your individual situation. A single person in their 20s may have student loans, car loans and other debt that they don't want family members to be saddled with. His or her insurance
needs may be modest.
On the other hand, a single parent with children or a married homeowner with children may have much larger responsibilities.
Minnesota Life, KPERS' life insurance provider, has a quick calculator that can help. It takes into account your age, marital status and life stage to help estimate your insurance needs.
The Kansas Public Employees Retirement System’s board of trustees has named Alan D. Conroy as KPERS’ new executive director. In his new post, Conroy is responsible to the board for all aspects of the Retirement System's daily operations.
Conroy was previously director of the Kansas Legislative Research Department, the non-partisan research and fiscal agency for the Kansas Legislature, where he worked since 1983.
Earlier in his career, he worked for the division of budget in the Kansas Department of Administration. Conroy has over 30 years of experience in state government and fiscal analysis in both the legislative and executive branches. He served as an ex-officio member of the recent KPERS study commission and has provided staff support for the Legislature’s joint committee on pensions, investments and benefits (the legislative committee charged with ongoing KPERS oversight) over the last 20 years.
Conroy assumed his new position February 13. He replaces Glenn Deck, who retired in September 2011.
In Topeka: 296-6166