Tuesday, March 27, 2007

Actuary: Proposed Defined Contribution Plan won’t mean big savings for Kentucky

The Kentucky retirement system actuary says proposed legislative changes to pension benefits will accomplish very little according to this article from the Louisville Courier-Journal.

The actuary for the Kentucky retirement systems testified this morning that proposed changes in pension benefits for future state employees would not result in significant savings to the state.

“It’s surprising to me that the commonwealth is considering the comprehensive nature of the changes here in a very tight time frame,” the actuary, Tom Cavanaugh, said. “It looks like we’re doing an awful lot to gain very little.”

Cavanaugh spoke via teleconference to the House State Government Committee as the Democratic-controlled House continued to resist a Senate proposal to bail out the financially troubled retirement systems for state employees.

Early this month the Republican-controlled Senate passed a plan to issue more than $800 million in bonds to provide cash infusion for retirement programs for state and local government workers and teachers. While House leaders say they can accept that, they’ve resisted embracing a second part of the proposal — to reduce guaranteed retirement benefits for state employees hired after July 1, 2008.

The Senate plan calls for replacing the current “defined benefit” plan for future state workers with what Senate leaders call a “hybrid” plan: a smaller defined benefit, supplemented with a voluntary “defined contribution” plan that would operate like a 401(k) plan used by many private employers.