Kansas Public Employees Retirement System • September 2012 — VOL. 2
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Inside This Issue
- Letter From New Executive Director
- Legislature Has Pieces in Place to Strengthen Benefit Funding
- You Could Be on the KPERS Board
- KPERS and the Cottonwood Leaf
- Returning to Work After You Retire
- Investments Solid Over the Long-Term
- Keep Your Life Insurance, Even If You Quit
- Borrowing and Interest on Your Account
Letter From New Executive Director
Greetings from KPERS. I’m Alan Conroy, your new executive director, and I’m pleased to be here. Many challenges are ahead of us, but your KPERS staff is dedicated to moving forward with enthusiasm and teamwork.
I may be new at KPERS, but I am definitely not new to KPERS. I previously served for ten years as director of the non-partisan Kansas Legislative Research Department, where I worked in various positions since 1983. There we provided staff support for the Legislature’s Joint Committee on Pensions, Investments and Benefits, the committee charged with KPERS oversight. I also served as an ex-officio member of the recent KPERS Study Commission. All told, I’ve been working in state government, fiscal analysis and pension public policy for over 30 years.
This year, the Legislature passed Sub House Bill 2333. The legislation includes several items to help address KPERS’ unfunded liability. Long-term funding is clearly our #1 challenge, and the “ball is now in our court” to make this new plan work. Through it all, we will remain focused on why we are here, to serve our members and continue delivering benefits as promised. We are a fiduciary, which is the highest standard of care and accountability. That means we put the interest of our members first. Always. You can count on us to be a trusted partner now and throughout your retirement.
Member input is valuable, and we always welcome your comments and suggestions. Please feel free to contact me anytime at 785-296-1019 or aconroy@kpers.org.
Legislature Has Pieces in Place to Strengthen Benefit Funding
In response to KPERS’ long-term funding shortfall, the Legislature has passed Sub House Bill 2333 that affects new hires, current members and employers. This bill has been signed into law by the Governor. These changes are necessary to make KPERS more sustainable and to pay promised benefits long term.
- Increases employer contributions.
- Increases current member contributions or decreases benefits.
- Creates a Tier 3 cash balance retirement plan for new hires beginning January 2015.
- Directs some money from state gaming revenue and sale of state surplus real estate
toward KPERS’ unfunded liability.
More Details on Changes for Current Working Members
Cash Balance Plan for New Hires (Tier 3)
Most Significant — Employers Paying More
The change that will most help the funding shortfall is higher employer contributions. Contribution rate increases are currently capped by statute. Employers (including the State) have been paying what is legally required, but contributions over the last 17+ years have been less than what is actuarially required to properly fund the System. With the 2012 legislation, employer contributions will increase faster, providing $500 million in additional funding from employers over the next 10 years.
Now What
These changes form a cooperative solution for strengthening the Retirement System while continuing to provide dependable benefits. Members, employers and the State will all help in the solution. A more secure Retirement System benefits everyone.
There is nothing you need to do now. Watch www.kpers.org and e-mails through your employer for further updates about our long-term funding. As we prepare to implement these changes, KPERS will continue to honor our commitment as a fiduciary to serve in the best interest of our members.
You Could Be on the KPERS Board
KPERS board members serve an important role overseeing Retirement System operations and safeguarding the System’s assets. Retired and active members can run for an elected board position and get involved.
In April 2013, members will elect two board members. “School” and “non-school” members each elect their own board member.
To get on the ballot next spring, you need to collect 100 member signatures on a KPERS
candidate petition form. Completed forms
are due by November 30, 2012.
Board Responsibilities
- Review and adopt actuarial assumptions
- Recommend employer contribution rates
- Determine the appropriate investment asset allocation mix
- Establish investment policies and guidelines
- Hire the executive director and monitor performance
- Hire investment managers and monitor performance
- Hire and monitor the performance of various other service providers,
including actuaries, consultants, advisors and custodians
The new board members will serve from July 1, 2013 to June 30, 2017. The board usually meets seven times a year in Topeka, which includes committee meetings.
Election Countdown
| Now – November 2012 | Candidates collect signatures |
| November 30, 2012 | Candidate petition deadline |
| April 2013 | Voting period |
| April 30, 2013 | Voting deadline |
| May 17, 2013 | Winners announced |
| July 1, 2013 | New trustees take office |
For More Info
For more information and to download candidate forms, visit www.kpers.org or call the InfoLine at 1-888-275-5737.
KPERS and the Cottonwood Leaf
You may have noticed KPERS’ logo is a leaf from the Cottonwood tree, the state tree of Kansas. We chose to put it in our logo for a few different reasons. Trees can represent stability and security, standing strong and tall. They also have an unselfish nature about them that matches KPERS’ fiduciary commitment.
Each spring in Kansas, the Cottonwood gets our attention as its leaves float on the breeze in a sea of cotton. While it can be messy, it is also special. The seed is approximately 1mm by 4mm. It’s one of the smallest seeds, yet grows into one of the largest trees in North America.
This provides a wonderful analogy for KPERS. Members start with small contributions at the beginning of their career, and by retirement, the contributions and their investment earnings have grown into a dependable benefit that will last a lifetime.
Returning to Work After You Retire
Many of our members plan to return to work after retiring. But returning to work after retirement can affect your benefits. Generally, if you work for a non-Retirement System employer, there are no restrictions.
But if you choose to work for an affiliated employer or a third-party entity that contracts with a school employer, you could have an earnings limit. Your employer may also need to make contributions to the Retirement System for the position you are filling instead of a contributing active member. See www.kpers.org for details.
We’re Here to Help
If you’re considering returning to work, be sure to know the rules about waiting periods, earnings limits and changing employers. Licensed school member exemptions are especially complex. We encourage you to see your designated agent or contact the Retirement System.
Licensed School Member Exemptions Extended
Legislation passed this year extends certain working after retirement exemptions for licensed school members through July 1, 2015. This exemption, originally set to expire on July 1, 2012, lifts the earnings limit for some licensed school members returning to the same employer.
Investments Solid Over the Long-Term
Solid investment performance over the long-term is vital to sound funding. KPERS’ investment strategy is designed to withstand short-term market volatility and economic downturns, as well as benefit from strong market environments.
Over the last 25 years, KPERS’ investment return average stands at 8.5 percent, exceeding our 8 percent target. KPERS’ investments returned 22.6 percent for fiscal year 2011.
As of May 31, 2012, the System’s fiscal year to date total return was -2.1 percent, with a 3.1 percent calendar year-to-date total return. Returns for time periods less than one year are not annualized.
Fiscal year to date 2012 was a very difficult one for broadly-diversified institutional investors like KPERS, as global economic and political concerns created volatility in the financial markets around the world.
Expert, Experienced Management
Managing KPERS’ dynamic and diversified portfolio requires significant investment expertise and experience.
KPERS employs eight investment professionals who oversee and manage assets and external investment managers retained by the System. Each asset class is overseen by at least one investment officer. Investment officers are supported by a team of investment analysts who provide research and assistance in managing the portfolios. KPERS investment team is managed by the chief investment officer.
Our team has many decades of combined investment management experience. We also utilize three external investment consulting firms and 30 investment management firms.
Yearly returns will vary over time, as financial markets move up and down. KPERS’ portfolio is built with an investment horizon of 30 or 40 years. With an eye for the long-term, we continually assess current market conditions and look for opportunities.
KPERS currently has approximately $13 billion in assets and receives about $860 million in contributions annually. As a fiduciary, you can count on us to manage investments prudently, for the sole purpose of paying benefits. That’s why we are here.
Regular investment reports and information on our strategic asset allocation
Keep Your Life Insurance, Even If You Quit
KPERS members have valuable life insurance benefits. Basic life insurance is provided by your employer and you can purchase optional life insurance if your employer offers it.
- Basic life insurance of 150% annual salary
- Optional insurance up to $250,000
Leaving employment doesn't mean you have to give up your life insurance coverage. Instead, you can use one of two options to keep it going.
- Portable Term Life Insurance (PDF, 96KB)
- Conversion to an Individual Policy (PDF, 92KB)
Individual whole life insurance and portable term life insurance offer different features, so it's important to weigh the costs and benefits of each option. You only have 31 days after employment ends, so it pays not to delay.
Borrowing and Interest on Your Account
Can I borrow from my KPERS account?
No. Kansas law does not allow you to borrow from your account or withdraw your contributions while you are still an active member.
How much interest am I earning on my account?
- If your membership date was before July 1, 1993, you are earning 8 percent interest.
- If your membership date was July 1, 1993, or after, you are earning 4 percent interest.
- Interest is credited annually on June 30, based on your account balance on December 31
of the previous year.
How do I find out my account balance?
Each spring, you should receive an annual statement from your employer. Your statement shows your contributions and interest, years of service, current final average salary and beneficiaries.
You can log in to your account at www.kpers.org to see your account information anytime. First-time users need to enroll. After that, you can log in anytime.
Questions?
Toll-free: 1-888-275-5737
In Topeka: 296-6166
E-Mail: kpers@kpers.org
Website: www.kpers.org