Saturday, October 28, 2017
Shared on FB by retired teacher Ruby Clark, Warfield, Ky
Not sure to whom this should be attributed, but it is informative. Mrs. Clark shared it on her Facebook Saturday and is so simple to understand that we decided to share it, too.
“This post is for my many non-educator friends or those that work outside of the public sector. After several conversations and meetings the past few days, it occurred to me that there is a huge misunderstanding regarding the Kentucky Pension System.
Many (maybe the majority) of private sector employees think the system is simply a huge drain on public tax dollars. That simply isn’t true. There is a key tax component, but it is not what you think. The idea seems to be out there that all retirees’ pension benefits, health care, and cost of living adjustments are completely funded by public tax dollars since those folks were public employees.
This post is generally accurate (not intended to be specific) and the percentages have changed over the years, etc. but sharing the basic idea is what I’m trying to get out there to my friends.
Teachers pay from each paycheck 12.855% directly into the KTRS system in some form of retirement & health care payment for future use. The state (as the employer) provides a matching amount {This would be the TAX portion} (just like most private employers). This is law covered by KRS161.550. Then when the teacher retires their pension is basically calculated on 2.0% or 2.5% of their salary for each year of service. So at 27 years at 2.5%/year you should retire with 67.5% of your salary. The money that is paid in from each paycheck is invested by TRS and the earnings from those investments pay the monthly pension benefits. TRS (when separated from the other 7 state pension systems) is actually very stable. Part of what the teacher pays each paycheck is 3% to fund health care for those already retired (those retired also pay a portion). This would be the Shared Responsibility Plan passed in 2010 as House Bill 540. Teachers also pay 1.74% to “pre-fund” their cost of living adjustments (COLA) when they retire. (The COLA is 1.5% for retired educators). So they paid 1.74% to ensure a 1.5% cost of living increase each year. So YES, teachers pay for their retirement and health care just like those in the private sector, it is NOT just pure tax money, not even close.
Now the TAX component. Remember the employer (state) match required by law, KRS 161.550. Well for roughly 15 of the last 20 years; the STATE decided not to pay their part, even though it is KRS 161.550. In addition at least three times over that same time period the state moved (took) money from the TRS or Health Care funds for a total of over $200 MILLION dollars. Now that is the tax component! The state not only failed to make the required MATCHING payments, they actually took money that was NOT tax dollars; money paid in by educators was used to fund things such as heroin clinics. In the private sector that would be a crime.
Now teachers are being asked to pay 3% MORE for health care that is technically already being paid for, freeze COLA’s which are already pre-paid at a higher rate than the actual COLA (again that is not tax dollars they want to freeze, it is money paid in from teachers’ paychecks). The change in plan style to a defined contribution, change in years of services, etc. All leaves many unanswered questions.
I would totally agree that the state pension system must be addressed (for all 8 different systems); however, the current plan places virtually all of the “fix” on those public employees who made all their monthly payments, didn’t take the money that was already in the accounts. I could support (not happily but could support) parts of this plan if there was even an effort to find dedicated funding streams for all the pension systems and the law updated so that the state had to make their matching payments and could not on a whim take money paid into retirement by employees to fund drug clinics, feel good movies, or whatever.
Again, this is only meant as an overview for those outside the system that don’t understand this proposal. Many see things things like top lawmakers will lose their $100,000 pensions and think the entire plan is good for Kentucky. I personally wonder why lawmakers even receive a pension for a part time job, that is crazy.
Just my thoughts, but feel free to share.”
–From Teachers in the Know
