Kansas Public Employees Retirement System
The Kansas Public Employees Retirement System (KPERS) provides the primary retirement income for many Kansans including public school employees. Unfortunately it has a large unfunded liability that continues to worry both legislators and KPERS members.
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.
KNEA believes that KPERS retirees need and deserve a regular cost of living adjustment and that it is incumbent upon the Kansas Legislature to find a solution to the problem of "ad hoc" adjustments. Any such solution to this problem must not have a negative impact on the system's unfunded actuarial liability.
1. The establishment of a regular cost of living adjustment for current retirees and for those active KPERS employees hired prior to July 2009.
2. Returning professional status to retirees who have returned to work.
3. Raising the employer contribution to the actuarial rate.
1. Separating subgroups of KPERS participants as a way of addressing the unfunded actuarial liability.
2. Changing from a defined benefit pension system to a defined contribution system.
Understanding the terms
Defined Benefit Retirement Plan
A defined benefit retirement plan is one under which a retiree has a guaranteed benefit set by a formula. Contributions to the plan while working are set by the plan and funds are pooled and managed as a group. The participant’s retirement benefit is guaranteed regardless of the portfolio performance. Under a defined benefit plan, participants are protected from the ups and downs of the market.
Under the current defined benefit (DB) system, contributions are pooled and invested. The combination of pooled contributions and investment earnings yields enough funds to provide a guaranteed retired benefit to current and future retirees.
Retirees drawing benefits are replaced by active employees making contributions. Active employees are partially funding the current retiree benefit and depending on future active employees to partially fund their own retirement benefit later.See the graphic below
Defined Contribution Retirement Plan
A defined contribution retirement plan is one under which the retirement benefit is determined by how much was invested or contributed (the participant’s defined contribution) and how well those investments paid off. Such contributions may come from the employer only, the employee only, or some combination – it depends on the plan. The contribution may be set by the plan or by participant choice. Management of the investments may
be done by the plan or by 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.
If the state moved to a defined contribution (DC) system for new employees, the contributions to be pooled for the defined benefit participants would shrink annually as active DB participants retire and are replaced by DC participants whose contributions must be segregated from the current system.
Retirees drawing benefits are replaced by active employees who do not make contributions to the plan. Without a major investment by the legislature, a point would eventually be reached where there was not enough money in the investment pool to pay the benefits once guaranteed to retirees.
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