AN ACT relating to pension spiking in the systems administered by the Kentucky Public Pensions Authority.

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AN ACT relating to pension spiking in the systems administered by the Kentucky 1
Public Pensions Authority. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
Section 1. KRS 61.598 is amended to read as follows: 4
(1) As used in [For purposes of] this section, "bona fide promotion or career 5
advancement": 6
(a) Means: 7
1. A professional advancement in substantially the same line of work held 8
by the employee in the four (4) years immediately prior to the final five 9
(5) fiscal years preceding retirement or a change in employment position 10
based on the training, skills, education, or expertise of the employee that 11
imposes a significant change in job duties and responsibilities to clearly 12
justify the increased compensation to the member; or 13
2. a. An increase in creditable compensation for all employees in a 14
specified class due to an increase in rate of pay authorized or 15
funded by the legislative or administrative body of the employer or 16
due to an increase in rate of pay mandated in a collective 17
bargaining agreement approved by the legislative body of the 18
employer. 19
b. Subdivision a. of this subparagraph shall be retroactive to apply 20
to any member whose effective retirement date occurred on or 21
after July 1, 2021; and 22
(b) Does not include any circumsta nce where an elected official participating in 23
the Kentucky Employees Retirement System or the County Employees 24
Retirement System takes a position of employment with a different employer 25
participating in any of the state-administered retirement systems. 26
(2) (a) For employees retiring from the Kentucky Employees Retirement System, the 27
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County Employees Retirement System, or the State Police Retirement System 1
on or after January 1, 2018, the systems shall, for each of the retiring 2
employee's last five (5) fiscal years of employment, identify any fiscal year in 3
which the creditable compensation increased at a rate of ten percent (10%) or 4
more annually over the immediately preceding fiscal year's creditable 5
compensation. The employee's creditable compensation in the fiscal year 6
immediately prior to the employee's last five (5) fiscal years of employment 7
shall be utilized to compare the initial fiscal year in the five (5) fiscal year 8
period. 9
(b) Except as limited or excluded by subsections (3) and (4) of this secti on, any 10
amount of increase in creditable compensation for a fiscal year identified 11
under paragraph (a) of this subsection that exceeds ten percent (10%) more 12
than the employee's creditable compensation from the immediately preceding 13
fiscal year shall not b e included in the creditable compensation used to 14
calculate the retiring employee's monthly retirement allowance. If the 15
creditable compensation for a specific fiscal year identified under paragraph 16
(a) of this subsection as exceeding the ten percent (10%) increase limitation is 17
not used to calculate the retiring employee's monthly retirement allowance, 18
then no reduction in creditable compensation shall occur for that fiscal year. 19
(c) If the creditable compensation of the retiring employee is reduced as pro vided 20
by paragraph (b) of this subsection, the retirement systems: 21
1. Shall refund the employee contributions and interest attributable to the 22
reduction in creditable compensation; and 23
2. Shall not refund the employer contributions paid but shall utilize t hose 24
funds to pay down the unfunded liability of the pension fund in which 25
the retiring employee participated. 26
(3) (a) In order to ensure the prospective application of the limitations on increases in 27
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creditable compensation contained in subsection (2) of this section, only the 1
creditable compensation earned by the retiring employee on or after July 1, 2
2017, shall be subject to reduction under subsection (2) of this section. 3
Creditable compensation earned by the retiring employee prior to July 1, 4
2017, shall not be subject to reduction under subsection (2) of this section. 5
(b) If the reductions in creditable compensation during a retiring member's entire 6
last five (5) years of employment results in a reduction in his or her monthly 7
retirement allowance of le ss than twenty -five dollars ($25) per month or an 8
actuarially equivalent value under the various payment options, then no 9
reduction in creditable compensation or retirement allowances shall occur 10
under subsection (2) of this section. 11
(4) Subsection (2) of this section shall not apply to: 12
(a) A bona fide promotion or career advancement as defined by subsection (1) of 13
this section; 14
(b) A lump -sum payment for compensatory time paid to an employee upon 15
termination of employment; 16
(c) A lump-sum payment made pursuant to an alternate sick leave program under 17
KRS 78.616(5) that is paid to an employee upon termination of employment; 18
(d) Increases in creditable compensation in a fiscal year over the immediately 19
preceding fiscal year, where in the immediately preceding fiscal year the 20
employer reported the employee as being on leave without pay for any reason, 21
including but not limited to sick leave without pay, maternity leave, leave 22
authorized under the Family Medical Leave Act, and any period of time 23
where the employ ee received workers' compensation benefit payments that 24
were not reported to the plan as creditable compensation; 25
(e) Increases in creditable compensation directly attributable to an employee's 26
receipt of compensation for: 27
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1. Overtime hours worked while serving as a participating employee under 1
any state or federal grant, grant pass -through, or similar program that 2
requires overtime as a condition or necessity of the employer's receipt of 3
the grant; or 4
2. The first one hundred (100) hours of mandatory overt ime hours that the 5
employee is individually required to work by the employer during a 6
fiscal year. This subparagraph shall not be construed to apply to 7
overtime hours voluntarily worked by the employee or in situations in 8
which the employee has the option to elect out of participation in 9
overtime hours. Any mandatory overtime hours exempt under this 10
subparagraph shall be in addition to any overtime hours otherwise 11
exempt under the provisions of this subsection; and 12
(f) Increases in creditable compensation d irectly attributable to an employee's 13
receipt of compensation for overtime performed during and as a result of a 14
state of emergency declared by: 15
1. The President of the United States or the Governor of the 16
Commonwealth of Kentucky; or 17
2. A local government in which the Governor authorizes mobilization of 18
the Kentucky National Guard pursuant to KRS 38.030 and 39A.950 19
during such time as the National Guard is mobilized. 20
(5) (a) For employees retiring on or after January 1, 2014, but prior to July 1, 2017, 21
the last participating employer shall be required to pay for any additional 22
actuarial costs resulting from annual increases in an employee's creditable 23
compensation greater than ten percent (10%) over the employee's last five (5) 24
fiscal years of employment th at are not the direct result of a bona fide 25
promotion or career advancement. The cost shall be determined by the 26
retirement systems. 27
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(b) Lump-sum payments for compensatory time paid to an employee upon 1
termination of employment shall be exempt from this subsection. 2
(c) The Authority shall be required to answer inquiries from participating 3
employers regarding this subsection. Upon request of the employer prior to 4
the employee's change of position or hiring, the systems shall make a 5
determination that is bind ing to the systems as to whether or not a change of 6
position or hiring constitutes a bona fide promotion or career advancement. 7
(d) For any additional actuarial costs charged to the employer under this 8
subsection, the systems shall allow the employer to pay the costs without 9
interest over a period of one (1) year from the date of receipt of the employer's 10
final invoice. 11
(6) The Authority shall determine whether increases in creditable compensation during 12
the last five (5) fiscal years of employment prior to retirement constitute a bona fide 13
promotion or career advancement and may promulgate administrative regulations in 14
accordance with KRS Chapter 13A to administer this section. All state -15
administered retirement systems shall cooperate to implement this section. 16
(7) Any employer who disagrees with a determination made by the system in 17
accordance with this section regarding whether an inc rease in compensation 18
constitutes a bona fide promotion or career advancement for purposes of subsection 19
(5) of this section may request a hearing and appeal the decision in accordance with 20
KRS 61.645(16) or 78.782(16). 21
(8) For the fiscal year beginning Ju ly 1, 2017, and subsequent years, the Kentucky 22
Retirement Systems and the County Employees Retirement System shall provide a 23
means for employers to separately report the specific exceptions provided in 24
subsection (4) of this section within the reporting sy stem utilized by the employers 25
for making employer reports under KRS 16.645, 61.675, and 78.545. The Kentucky 26
Retirement Systems and the County Employees Retirement System shall 27
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continually provide communication, instructions, training, and educational 1
opportunities for employers regarding how to appropriately report exemptions 2
established by subsection (4) of this section. 3
(9) This section shall not apply to employees participating in the hybrid cash balance 4
plan as provided by KRS 16.583, 61.597, 78.5512, and 78.5516. 5
Section 2. The Kentucky Public Pensions Authority shall review the accounts of 6
members who had an effective retirement date that occurred on or after July 1, 2021, and 7
shall retroactively adjust recipient b enefits accordingly to reflect the amendments to 8
subsection (1)(a)2. of Section 1 of this Act, including any benefits the recipient would 9
have received had the amendments to subsection (1)(a)2. of Section 1 of this Act been in 10
effect immediately prior to the member's effective retirement date. 11