Friday, December 7, 2007

Kentucky proposals to address unfunded liability do not include benefit reductions

A Blue Ribbon Commission on State Retirement did not receive any recommendations about cutting benefits for future state employees.

Gov. Ernie Fletcher created the group to study the massive unfunded liability in the state retirement systems. They were to provide him with a final report by Dec. 1 but that deadline has been pushed back to December 18.

The work group tasked with creating a financial strategy to reinforce the pension systems met Monday. It will forward two recommendations to the board, including a review of best practices and issuing bonds that would infuse the systems with cash.

Bill Hanes, executive director of the Kentucky Retirement Systems, agreed that there is no panacea for the unfunded liability. "There is no silver bullet," he said.

Leslie Thomas, senior consultant at Gabriel Roeder Smith & Company, suggested that bonds be implemented in conjunction with a new benefits package for future state employees.

One element of a new benefits package could include higher retirement eligibility requirements, Thomas said. That would slow the growth of the unfunded liability and reduce the growth in retiree health insurance costs as well, she said.

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