KPERS: Keeping the Kansas Promise
KNEA and funding KPERS
KNEA strongly advocates that the state fund KPERS at the level that the KPERS plan deems necessary.
KNEA is one of the partners in Keeping the Kansas Promise, a statewide coalition advocating for the Kansas Public Employee Retirement System (KPERS). As Kansans we live by two basic rules: work hard and play by the rules. Kansas public employees have kept their word, never missing a contribution to their retirements. KPERS underfunding is the results of state failure.
We have worked together during the last two legislative sessions to make the state fund KPERS to keep the plan financially sound. We have advocated keeping KPERS as a Defined Benefit plan. We advocate for a safe and secure retirement for each employee enrolled in the KPERS retirement system.
KKP has been meeting with Editorial Boards across Kansas and holding Town Hall Meetings. The goals are to inform and update coalition members regarding the changes in KPERS from the last legislative session and to inform the general public of the truth about the KPERS pension plan. The results include editorials, such as this one from the Wichita Eagle ("Don't Rush on KPERS"), and increased support for working state employees by voting Kansans. Much of what has been shared statewide is included in this article by Terry Forsyth, KNEA Government Relations director.
The Basics of the KPERS System
As an education employee, teachers and school staff are enrolled in KPERS. KPERS is referred to as a Defined Benefit Retirement Plan because the plan guarantees you a set monthly income defined by formula. This means you will receive a set amount of income each month during the entirety of your retirement.
There are no surprises for you on a month to-month basis during your retirement under the current KPERS plan. Your retirement benefit is protected from the ups and downs of the market because you are enrolled in this defined benefit plan.
Your contribution rate to KPERS while working is set by the plan. The state is supposed to contribute a set amount also, and those funds are pooled and invested on the behalf of all those enrolled in KPERS. Most of the revenues that KPERS receives yearly come from investing the pooled contributions. Without the pooled contributions the revenues into KPERS decrease significantly.
2011 KPERS Legislation
As every elementary school teacher can tell you, actions have consequences. State lawmakers have consistently underfunded their portion of the KPERS contribution hoping that the system’s investments would cover their lack of funding.
We all know what has happened to the stock market during the first decade of this millennium. Actions have consequences and the consequences are now apparent. Pay into the system what is necessary now or pay a lot more as time goes forward. KPERS is sound, but the future could be questionable if funding is not improved.
The KPERS bill passed in 2011 and signed into law by the Governor begins to address the funding issue. The new law established a KPERS Commission and provided potential increases in the contribution rates for the state and for those in the KPERS system who are currently working.
The KPERS Commission began work this summer to study the funding of KPERS and draft solutions that will become a bill in the next legislative session.
The KPERS Commission and Teachers
The report from the KPERS Commission to the 2012 Legislature is due in early January. This report becomes the starting point of a bill to fix the funding for KPERS, so the decision of the commission is of great importance to you and your KPERS retirement.
The commission could decide to go to a Defined Contribution (DC) plan for future KPERS members, something KNEA opposes.
Under a defined contribution retirement plan, your monthly retirement benefit is determined by how much was invested or contributed (the participant’s defined contribution) and how well those investments have paid off. You may or may not have enough in your plan to last your entire retirement. The risk of the investment is borne by you and not the system at large. Your account contributions would come from a combination of you and the state.
Management of the investments could be done by a combination of the plan and the individual participant. There is no guaranteed retirement benefit in a defined contribution plan. Under a defined contribution plan, a participant’s benefit is subject to the ups and downs of the market. Remember that during the last economic downturn the average 401k lost on average 31% of its value. Losing 31% of your retirement would have severe consequences on your future.
To change to a Defined Contribution plan would cost the state a large sum initially. In addition, those new KPERS members in a new Defined Contribution plan would no longer be in the pool of contributors to the Defined benefit plan, in which you are currently enrolled, thereby decreasing the revenues to KPERS. A defined contribution plan is not as economical to the state as is a defined benefit plan.
KNEA believes that changing to a defined contribution plan would not benefit you, your family or the state.