AN ACT relating to retirement benefits for probationary employment.

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AN ACT relating to retirement benefits for probationary employment. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 61.552 is amended to read as follows: 3
(1) Called to Active Duty Military Service. An employee of an employer participating 4
in the system who is called to active military duty in the Armed Forces of the 5
United States shall be credited in accordance with 38 U.S.C. sec. 4318 with service 6
credit, creditable compensation, and in the case of employees participating in the 7
hybrid cash balance plan, employee contributions, employer credits, and interest 8
credits, for a period of active military duty of up to six (6) years, provided: 9
(a) The employee was cal led to active military duty in the Armed Forces of the 10
United States: 11
1. After the employee's membership date in the system and provided the 12
employee was on leave of absence from the employer and did not 13
withdraw his or her accumulated account balance; or 14
2. Prior to the employee's membership date in the system and the date the 15
employee terminated employment with his or her employer; 16
(b) The employee entered active military service within three (3) months of his or 17
her last day of paid employment; 18
(c) The employee's discharge military service was terminated in a manner other 19
than as described in 38 U.S.C. sec. 4304; 20
(d) The employee returns to work with an employer participating in the system 21
within two (2) years after completion of the period of active mil itary duty, or 22
upon the subsequent termination of any total disability which existed at the 23
expiration of the two (2) years after discharge; and 24
(e) For an employee whose membership date is on or after January 1, 2014, who 25
is participating in the hybrid ca sh balance plan under KRS 16.583, 61.597, 26
78.5512, or 78.5516, the employee pays the employee contributions on the 27
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credited compensation as provided under KRS 16.543, 61.543, and 78.615. 1
For periods of active military duty that meet the requirements of this subsection, the 2
employer shall pay the employer contributions payable under KRS 61.565, 61.702, 3
78.5536, and 78.635. 4
(2) (a) 1. Omitted Service. Any person who is entitled to service credit for 5
employment which was not reported by the employer in accordance with 6
KRS 16.543, 61.543, or 78.615 may obtain credit for the service subject 7
to the provisions of paragraphs (c) to (e) of this subsection , as 8
applicable. 9
[(b)] 2. Provided the person pays for the omitted service [with ] within six (6) 10
months of notifi cation by the system, the cost of the service shall be 11
equal to the employee contributions that would have been paid if the 12
person had been correctly reported in accordance with KRS 16.543, 13
61.543, or 78.615. 14
[(c)] 3. Any employee participating in one (1) of the state -administered 15
retirement systems entitled to service credit under [paragraph 16
(a)]subparagraph 1. of this paragraph[subsection] who has not repaid 17
the employee contributions due within six (6) months of notification by 18
the system may purchase the credit after the six (6) months by paying to 19
the system the employee contributions plus interest at the actuarially 20
assumed rate from the date of initial notification under subparagraph 2. 21
of this paragraph[ (b) of this subsection]. 22
(b) 1. Probationary Service. Any employee who served in a probationary 23
position that was ineligible for participation in the County Employees 24
Retirement System pursuant to subsection (21)(d) of Section 2 of this 25
Act may purchase service in the system subject to paragraphs (c ) to (e) 26
of this subsection, as applicable, provided the employee: 27
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a. Successfully completed the entire period of probationary service 1
with the same employer; 2
b. Averaged one hundred (100) or more hours of work per month 3
on a calendar or fiscal year basis during the period of 4
probationary employment; 5
c. Is employed by the same participating employer at the time of the 6
service purchase; and 7
d. The employee purchases the service within six (6) months of 8
successfully completing the probationary period. 9
2. The cost of the probationary service to the employee shall be equal to 10
the employee and employer contributions that would have been 11
payable if the employee had been employed in a regular full -time 12
position and reported in accordance with KRS 78.615. 13
3. An i ndividual employer may elect to pay employer contributions due 14
under subparagraph 2. of this paragraph on behalf of its employees, 15
and the system shall provide notification to the employer when the 16
employee has paid employee contributions. 17
4. Service credit shall not be credited to the member's account until both 18
the employer and employee contributions are received by the system. 19
(c)[(d)] Omitted service and probationary service purchased under this 20
subsection shall: 21
1. Be considered service credited under KRS 16.543(1), 61.543(1), or 22
78.615(1) for purposes of determining eligibility for retirement benefits 23
under KRS 78.510 to 78.852; and 24
2. Not be credited to the member's account until the employer 25
contributions due and any interest or penalties on the del inquent 26
employer contributions for the period of omitted service are received by 27
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the system. 1
(d)[(e)] Employees who begin participating on or after January 1, 2014, in the 2
hybrid cash balance plan provided by KRS 16.583 or 61.597 or 78.5512 3
or 78.5516 shal l, upon payment of the employee and employer 4
contributions due under this subsection, have their accumulated account 5
balance increased by the employee contributions, employer pay credits, 6
and interest credits that would have been credited to their member's 7
account if the contributions had been paid on time. 8
(e)[(f)] Contributions payable by the employer under this subsection [for 9
omitted service ]shall be considered delinquent: 10
1. In the case of omitted service, from the date the employee should 11
have been reported and received service credit in accordance with 12
KRS 16.543, 61.543, and 78.615; and 13
2. In the case of probationary service in which the employer has 14
elected to pay the employer contribution, three (3) months 15
following notification by the system of t he employer's cost as 16
provided in paragraph (b)3. of this subsection. 17
(3) (a) Recontribution of a Refund. Any employee participating in one (1) of the 18
state-administered retirement systems who has been refunded his or her 19
accumulated account balance under the provisions of KRS 61.625, thereby 20
losing service credit in the system, may regain the credit by paying to the 21
system the amount or amounts refunded by the system with interest at a rate 22
determined by the board. Service purchased under this subsection on or after 23
January 1, 2014, shall not be used to determine the member's member ship 24
date in the systems. 25
(b) Recontribution of a refund purchased under this subsection shall not be used 26
in determining a retirement allowance until the member has accrued at least 27
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six (6) months of service credit in a state -administered retirement syste m, 1
excluding the service purchased under this subsection. If the member does not 2
accrue at least six (6) months of service credit in a state -administered 3
retirement system, excluding service purchased under this subsection, then the 4
payment plus interest a s provided in KRS 16.560, 61.575, or 78.640 shall be 5
refunded upon retirement, death, or written request following termination of 6
employment. The service requirement shall be waived if the member dies or 7
becomes disabled as provided for by KRS 16.582, 61.600, 61.621, 78.5522, or 8
78.5524. 9
(4) (a) Summer Months. Any employee participating in one (1) of the state -10
administered retirement systems who is or has been employed by a school 11
board or community action agency participating in the County Employees 12
Retirement System or a state -operated school under KRS Chapter 167 or an 13
institution of higher learning participating in the Kentucky Employees 14
Retirement System, who receives service credit for less than twelve (12) 15
months each year, may purchase the additional months of service credit 16
needed to total one (1) year of service credit, except the amount purchased for 17
any specific year shall not exceed three (3) months. 18
(b) The cost of the summer months service credit shall be determined by the 19
formula established by subsection (10) of this section and may be purchased 20
by the employee, or the employer on behalf of the employee, or the cost may 21
be paid by both the employer and employee in which case the employer and 22
employee shall each pay fifty percent (50%) of the cost. Service credit shall 23
not be credited to the member's account until both the employer's and 24
employee's payment are received by the system. 25
(c) If the employee has purchased service credit under this subsection based on 26
months reported by the employer for the fiscal year, and an audit of the 27
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employee's account reduces the number of months of service credit for which 1
the employee is eligible to no fewer than nine (9) months, the employee shall 2
retain credit for the months purchased unless the employee is ineligible for 3
any service in the fiscal year. The employee shall be eligible to purchase the 4
additional months under this subsection to total one (1) year. 5
(d) This subsection shall not apply to members who began participating in the 6
County Employees Retirement System on or after January 1, 2014. 7
(5) Vested Service Purchases. Any employee who began participating in the County 8
Employees Retirement System, the Kentucky Employees Retirement System, or the 9
State Police Retirement System prior to January 1, 20 14, who is vested may 10
purchase service credit for: 11
(a) Past service. "Past service" means periods of employment: 12
1. Between July 1, 1956, in the case of the Kentucky Employees 13
Retirement System, or July 1, 1958, in the case of the County 14
Employees Retirement System, and the effective date of participation by 15
the employer; or 16
2. With a public agency that did not participate in the Kentucky Employees 17
Retirement System but would have been eligible to participate under 18
KRS 61.520 or a political subdivision tha t did not participate in the 19
County Employees Retirement System but would have been eligible to 20
participate under KRS 78.530, provided the public agency or political 21
subdivision has merged with or been taken over by a participating 22
employer; 23
(b) State university service, provided the university does not participate in a state-24
administered retirement system and the university service being purchased 25
was in a nonteaching position that did not participate in a defined benefit 26
retirement program; 27
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(c) 1. Up to ten (10) years of out-of-state service. "Out-of-state" means service 1
credited to a state or local government -administered public defined 2
benefit plan in another state that is not a defined benefit plan for 3
teachers. 4
2. Up to ten (10) years of out -of-state hazardous service. "Out -of-state 5
hazardous service" means service in a regular full-time position that was 6
credited to a defined benefit retirement plan administered by a state or 7
local government in another state, if the service could be certified as 8
hazardous pursuant to KRS 61.592 or 78.5520, as applicable. The 9
employee may purchase out -of-state hazardous service under this 10
subparagraph provided the employee is vested to receive benefits from 11
the State Police Retirement System or hazardous duty benefits from the 12
Kentucky Employees Retirement System or the County Employees 13
Retirement System. 14
The employee must purchase out -of-state service or out -of-state hazardous 15
service in the system in which he or she is vested based solely upon the 16
service in that system; 17
(d) Active military duty, which means periods of active military duty in the 18
Armed Forces of the United States, provided: 19
1. The employee's military service was terminated in a manner other than 20
as described in 38 U.S.C. sec. 4304; and 21
2. The service has not been credited as free military service under 22
subsection (1) of this section; 23
(e) National Guard service. An employee may purchase one (1) month of service 24
for each six (6) months of service in the National Guard or the military 25
reserves of the Uni ted States. The service shall be treated as service earned 26
prior to participation in the system; 27
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(f) Federal service. "Federal service" means service with the United States 1
government, that is not service in the Armed Forces; 2
(g) Seasonal, emergency, inter im, probationary not purchased within the time 3
established by subsection (2) of this section , or temporary employment or 4
part-time employment as provided by KRS 61.510(21) or 78.510(21) 5
averaging one hundred (100) or more hours of work per month on a calen dar 6
or fiscal year basis. If the average number of hours of work is less than one 7
hundred (100) per month, the member may purchase credit for only those 8
months he or she receives creditable compensation for one hundred (100) 9
hours of work; 10
(h) Part-time employment in a noncertified position at a school board prior to the 11
1990-91 school year which averaged eighty (80) or more hours of work per 12
month on a calendar or fiscal year basis. If the average number of hours of 13
work is less than eighty (80) per month, the noncertified employee of a school 14
board shall be allowed to purchase credit only for those months he or she 15
receives creditable compensation for eighty (80) hours of work; 16
(i) Any period of: 17
1. Authorized maternity leave without pay or sick leave without pay; 18
2. Unpaid leave authorized under the federal Family and Medical Leave 19
Act; 20
3. Approved educational leave; and 21
4. Agency-approved leave to work for a work -related labor organization if 22
the agency subsequently participated in the County Employees 23
Retirement System, but only if the board receives a favorable private 24
letter ruling from the United States Internal Revenue Service or a 25
favorable opinion letter from the United States Department of Labor; 26
(j) Non-participating employer service, which means periods of employment 27
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with the following types of agencies provided the agency does not participate 1
in a state-administered retirement system: 2
1. A regional community services program for mental health organized and 3
operated under the provisions of KRS 210.370 to 210.480; 4
2. A community action agency created under KRS 273.405 to 273.453. 5
The service provided by this subparagr aph shall be purchased in the 6
County Employees Retirement System; 7
3. An area development district created pursuant to KRS 147A.050; or 8
4. A business development corporation created pursuant to KRS 155.001 9
to 155.230, provided the system receives a favorable private letter ruling 10
from the United States Internal Revenue Service or a favorable opinion 11
letter from the United States Department of Labor; 12
(k) Urban-county government service, which means employment in an urban -13
county government position that would qualify for hazardous duty coverage 14
under KRS 61.592 or 78.5520. The provisions of this paragraph shall only be 15
applicable to vested members participating in the State Police Retirement 16
System or in a hazardous position in the Kentucky Employees Retirement 17
System or the County Employees Retirement System; 18
(l) Periods of service as assistants to officers and employees of the General 19
Assembly for persons who were unable to acquire service under KRS 20
61.510(20) for service performed after January 1, 1960; 21
(m) Service as a volunteer in the Kentucky Peace Corps, created by KRS 154.1 -22
720; and 23
(n) Employment with a vocational technical school in a noncertified part -time 24
position averaging eighty (80) or more hours per month, determined by using 25
the number of months actually worked within a calendar or fiscal year. The 26
service provided by this paragraph shall be purchased in the Kentucky 27
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Employees Retirement System. 1
(6) Non-qualified service. Provided the employee's membership date in the system is 2
prior to July 15, 2 002, and provided the employee has total service in all state -3
administered retirement systems of at least one hundred eighty (180) months of 4
service credit, the employee may purchase a combined maximum total of five (5) 5
years of service credit, known as no n-qualified service, which is not otherwise 6
purchasable under any of the provisions of KRS 16.505 to 16.652, 61.510 to 7
61.705, or 78.510 to 78.852. The service purchased under this paragraph shall not 8
be used in determining a retirement allowance until the member has accrued at least 9
two hundred forty (240) months of service, excluding service purchased under this 10
subsection. If the member does not accrue at least two hundred forty (240) months 11
of service, excluding service purchased under this subsection, upon retirement, 12
death, or written request following termination, the payment, plus interest as 13
provided in KRS 16.560, 61.575, or 78.640, as applicable, shall be refunded. 14
(7) For purposes of service purchased under subsections (2) to (6) of this section: 15
(a) Except for subsection (6) of this section, the service must qualify as regular 16
full-time as provided by KRS 61.510 and 78.510; 17
(b) No service credit may be purchased for periods already credited to the system 18
or another public defined benefit retirem ent fund, including non -qualified 19
service purchased in another state-administered retirement system; 20
(c) Except as provided by paragraph (a)2.a. of subsection (9) of this section, the 21
employee payment for service purchases shall not be picked up, as descri bed 22
in KRS 16.545(4), 61.560(4), or 78.610(4), by the employer; 23
(d) Except for service purchased under subsection (2) or (3) of this section, 24
service purchases made pursuant to this section may be purchased by the 25
entire amount of service available or by increments. Service purchases made 26
pursuant to subsections (2) and (3) of this section shall only be purchased by 27
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the entire amount of service available; and 1
(e) Service purchases as provided by subsections (5)(b), (d) to (f), and (j)1. and 2
(6) of this sec tion may be purchased in any system in which the member has 3
service credit. 4
(8) (a) Employer purchase of past service. Any employer participating in the system 5
may purchase service credit, between July 1, 1956, in the case of the 6
Kentucky Employees Retire ment System, or July 1, 1958, in the case of the 7
County Employees Retirement System, and the participation date of the 8
employer, for present employees of the county or department who have 9
elected coverage under KRS 61.525(2) or 78.540(1), provided the empl oyee 10
began participating in the system prior to January 1, 2014. 11
(b) A Kentucky Employees Retirement System employer shall pay the cost of the 12
service credit within the fiscal year the election is made to purchase the 13
service credit. A County Employees Ret irement System employer may 14
purchase the service, with interest at the rate actuarially assumed by the board, 15
over a period not to exceed ten (10) years. 16
(c) If an employer elects to purchase service under the provisions of this 17
subsection, any present emp loyee who would be eligible to receive service 18
credit under the provisions of this subsection and has purchased service credit 19
under subsection (5)(a) of this section shall have his or her payment for the 20
service credit refunded with interest at the rate p aid under KRS 61.575 or 21
78.640. 22
(d) Any payments made by an employer under this subsection shall be deposited 23
to the retirement allowance account of the system and these funds shall not be 24
considered accumulated contributions of the individual members. 25
(9) (a) An employee participating in the system may purchase service credit under 26
any of the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, or 78.510 to 27
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78.852 for which he or she is eligible to purchase, or as otherwise required by 1
38 U.S.C. ch. 43, by: 2
1. Making a lump -sum payment on a before -tax basis as provided in 3
subparagraph 3. of this paragraph, or on an after -tax basis if the 4
employee is purchasing service credit under subsection (1) or (3) of this 5
section, service available pursuant to 38 U.S .C. ch. 43 not otherwise 6
provided for in this section, or grandfathered service as defined in 7
paragraph (b) of this subsection; 8
2. Entering into an agreement to purchase service credit through an 9
installment purchase of service agreement with the systems as provided 10
by paragraph (c) of this subsection: 11
a. On a before-tax basis in which the service is purchased pursuant to 12
the employer pick-up provisions in 26 U.S.C. sec. 414(h)(2); or 13
b. On an after -tax basis if the employee is purchasing service credit 14
under subsection (1) or (3) of this section, service available 15
pursuant to 38 U.S.C. ch. 43 not otherwise provided for in this 16
section, or grandfathered service as defined in paragraph (b) of this 17
subsection; or 18
3. Transferring funds to the system through a direct trustee -to-trustee 19
transfer as permitted under the applicable sections of the Internal 20
Revenue Code and any regulations or rulings issued thereunder, through 21
a direct rollover as contemplated by and permitted under 26 U.S.C. sec. 22
401(a)(31) and any regulations or rulings issued thereunder, or through a 23
rollover of funds pursuant to and permitted under the rules specified in 24
26 U.S.C. secs. 402(c) and 408(d)(3). The system shall acc ept the 25
transfer or rollover to the extent permitted under the rules specified in 26
the applicable provisions of the Internal Revenue Code and any 27
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regulations and rulings issued thereunder. 1
(b) For purposes of this subsection, "grandfathered service" means service 2
purchases for which a member, whose membership date in the system is prior 3
to July 1, 1999, is eligible to purchase under KRS 16.505 to 16.652, 61.510 to 4
61.705, or 78.510 to 78.852, that were available for all members of the system 5
to purchase on August 5, 1997. 6
(c) 1. For service purchased under a before -tax or after -tax installment 7
purchase of service agreement as provided by paragraph (a)2. of this 8
subsection, the cost of the service shall be computed in the same manner 9
as for a lump -sum paymen t which shall be the principal, except that 10
interest compounded annually at the actuarial rate in effect at the time 11
the member elects to make the purchase shall be added for the period 12
that the installments are to be made. 13
2. Multiple service purchases m ay be combined under a single installment 14
agreement, except that no employee may make more than one (1) 15
installment purchase at the same time. 16
3. For after-tax installment purchase of service agreements, the employee 17
may elect to stop the installment payments by notifying the system; may 18
have the installment purchase recalculated to add one (1) or more 19
additional service purchases; or may pay by lump sum the remaining 20
principal or a portion of the remaining principal. 21
4. Before-tax installment purchase of service agreements shall be 22
irrevocable, and the employee shall not be able to stop installment 23
payments or to pay off the remaining balance of the purchase of service 24
agreement, except upon termination of employment or death. 25
5. One (1) year of installm ent payments shall be made for each one 26
thousand dollars ($1,000) or any part thereof of the total cost, except 27
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that the total period allowed for installments shall not be less than one 1
(1) year and shall not exceed five (5) years. 2
6. The employee shall p ay the installments by payroll deduction for after -3
tax purchase of service agreements, and the employer shall pick up 4
installments for before -tax purchase of service agreements. Upon 5
notification by the system, the employer shall report the installment 6
payments monthly continuously over each twelve (12) month period at 7
the same time as, but separate from, regular employee contributions on 8
the forms or by the computer format specified by the board. 9
7. The system shall determine how much of the total cost rep resents 10
payment for one (1) month of the service to be purchased and shall 11
credit one (1) month of service to the member's account each time this 12
amount has been paid. The first service credited shall represent the first 13
calendar month of the service to be purchased and each succeeding 14
month of service credit shall represent the succeeding months of that 15
service. 16
8. If the employee utilizing an installment purchase of service agreement 17
dies, retires, does not continue employment in a position required to 18
participate in the system, or elects to stop an after -tax installment 19
purchase of service agreement, the member, or in the case of death, the 20
beneficiary, shall have sixty (60) days to pay the remaining principal or 21
a portion of the remaining principal of t he installment purchase of 22
service agreement by lump sum, subject to the restrictions of paragraph 23
(a)1. of this subsection, or by transfer of funds under paragraph (a)3. of 24
this subsection, except that payment by the member shall be filed with 25
the system prior to the member's effective retirement date. If the 26
member or beneficiary does not pay the remaining cost, the system shall 27
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refund to the member or the beneficiary the payment, payments, or 1
portion of a payment that does not represent a full month of s ervice 2
purchased, except as provided by subsection (6) of this section. 3
9. If the employer does not report installment payments on an employee 4
for sixty (60) days for an after -tax installment purchase of service 5
agreement, except in the case of employees on military leave or sick 6
leave without pay, the installment purchase shall cease and the system 7
shall refund to the employee the payment, payments, or portion of a 8
payment that does not represent a full month of service purchased. 9
10. Installment payment s of employees on military leave or sick leave 10
without pay shall be suspended during the period of leave and shall 11
resume without recalculation upon the employee's return from leave. 12
11. If payments have ceased under subparagraph 8. or 9. of this paragrap h 13
and the member later becomes a participating employee in the County 14
Employees Retirement System, Kentucky Employees Retirement 15
System, or State Police Retirement System, the employee may complete 16
the adjusted original installment purchase by lump sum or installment 17
payments, subject to the restrictions of this subsection. If the employee 18
elects to renew the installment purchase, the cost of the remaining 19
service shall be recalculated in accordance with subsection (10) of this 20
section. 21
(d) Member payments , including interest, properly received pursuant to this 22
subsection, shall be deposited to the member's account and considered as 23
accumulated contributions of the individual member. 24
(10) (a) The cost of purchasing service credit under any provision of this section, 25
except as provided by subsections (1) to (3) of this section, shall be 26
determined by multiplying the higher of the employee's current rate of pay, 27
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final rate of pay, or final compensation as of the end of the month in which 1
the purchase is made t imes the actuarial factor times the number of years of 2
service being purchased. The actuarial factor used to determine the cost of 3
purchasing service credit shall assume the earliest date the member may retire 4
without a reduction in benefits and the cost -of-living adjustments provided to 5
members upon retirement. 6
(b) Service purchased on or after August 1, 2004, under the provisions of KRS 7
16.505 to 16.652, 61.510 to 61.705, or 78.510 to 78.852, except for service 8
purchased under subsections (1) to (3) of th is section or service purchased as 9
described by paragraph (d) of this subsection, shall not be used to determine 10
eligibility for or the amount of the monthly insurance contribution under KRS 11
61.702 or 78.5536. 12
(c) For a member whose membership date is on o r after August 1, 2004, service 13
purchased under the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, or 14
78.510 to 78.852, except for service purchased under subsections (1) to (3) of 15
this section or service purchased as described by paragraph (d) of t his 16
subsection: 17
1. Shall not be used to determine eligibility for a retirement allowance 18
under disability retirement, early retirement, normal retirement, or upon 19
death of the member under any of the provisions of KRS 16.505 to 20
16.652, 61.510 to 61.705, or 78.510 to 78.852; and 21
2. Shall only be used to determine the amount of the retirement allowance 22
of a member who is eligible for a retirement allowance under disability, 23
early retirement, normal retirement, or upon death of the member under 24
any of the prov isions of KRS 16.505 to 16.652, 61.510 to 61.705, or 25
78.510 to 78.852, based on service earned as a participating employee. 26
(d) Paragraphs (b) and (c) of this subsection shall not apply to a member who was 27
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bound by an educational contract as a conditional employee to the state of 1
Kentucky prior to December 31, 2003, regardless of membership date in the 2
system. Educational leave, seasonal service, or any other qualified service 3
purchased by a member with this classification under this section shall be 4
used to determine eligibility for benefits, membership dates, and the amount 5
of benefit for: 6
1. A retirement allowance under disability retirement, early retirement, 7
normal retirement, or death under any of the provisions of KRS 16.505 8
to 16.652, 61.510 to 61.705, and 78.510 to 78.852; and 9
2. The monthly insurance contribution under KRS 61.702 or 78.5536. 10
Section 2. KRS 78.510 is amended to read as follows: 11
As used in KRS 78.510 to 78.852, unless the context otherwise requires: 12
(1) "System" means the County Employees Retirement System created by KRS 78.510 13
to 78.852; 14
(2) "Board" means the board of trustees of the system as provided in KRS 78.782; 15
(3) "County" means any county, or nonprofit organization created and governed by a 16
county, counties, or elected county officers, sheriff and his or her employees, 17
county clerk and his or her employees, circuit clerk and his or her deputies, former 18
circuit clerks or fo rmer circuit clerk deputies, or political subdivision or 19
instrumentality, including school boards, cities, charter county governments, urban -20
county governments, consolidated local governments, or unified local governments 21
participating in the system by ord er appropriate to its governmental structure, as 22
provided in KRS 78.530, and if the board is willing to accept the agency, 23
organization, or corporation, the board being hereby granted the authority to 24
determine the eligibility of the agency to participate; 25
(4) "School board" means: 26
(a) Any board of education participating in the system by order appropriate to its 27
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governmental structure, as provided in KRS 78.530, and if the board is willing 1
to accept the agency or corporation, the board being hereby granted the 2
authority to determine the eligibility of the agency to participate; or 3
(b) A public charter school as defined in KRS 160.1590 if the public charter 4
school satisfies the criteria set by the Internal Revenue Service to participate 5
in a governmental retirement plan; 6
(5) "Examiner" means the medical examiners as provided in KRS 61.665; 7
(6) "Employee" means every regular full -time appointed or elective officer or 8
employee of a participating county and the coroner of a participating county, 9
whether or not h e or she qualifies as a regular full -time officer. The term shall not 10
include persons engaged as independent contractors, seasonal, emergency, 11
temporary, and part -time workers. Solely for the purpose of benefits payable to 12
employees who become disabled as a direct result of an act in line of duty as 13
defined in this section, or who die as a direct result of an act in line of duty as 14
defined in this section, or who die as a result of a duty-related injury as defined in 15
KRS 61.621, or who become disabled as a result of a duty -related injury as 16
defined in KRS 61.621, a person employed in a probationary position as provided 17
by subsection (21)(d) of this section shall be considered an employee. In case of 18
any doubt, the board shall determine if a person is an empl oyee within the meaning 19
of KRS 78.510 to 78.852; 20
(7) "Employer" means a county, as defined in subsection (3) of this section, the elected 21
officials of a county, or any authority of the county having the power to appoint or 22
elect an employee to office or employment in the county; 23
(8) "Member" means: 24
(a) Any employee who is included in the membership of the system or any 25
former employee whose membership has not ceased under KRS 78.535; and 26
(b) Solely for the purpose of benefits payable to employees who become 27
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disabled as a direct result of an act in line of duty as defined in this section, 1
or who die as a direct result of an act in line of duty as defined in this 2
section, or who die as a result of a duty -related injury as defined in KRS 3
61.621, or who become d isabled as a result of a duty -related injury as 4
defined in KRS 61.621, a person employed in a: 5
1. Regular full-time position; or 6
2. Probationary position as provided by subsection (21)(d) of this section; 7
(9) "Service" means the total of current service a nd prior service as defined in this 8
section; 9
(10) "Current service" means the number of years and months of employment as an 10
employee, on and after July 1, 1958, for which creditable compensation is paid and 11
employee contributions deducted, except as otherwise provided; 12
(11) "Prior service" means the number of years and completed months, expressed as a 13
fraction of a year, of employment as an employee, prior to July 1, 1958, for which 14
creditable compensation was paid. An employee shall be credited with one ( 1) 15
month of prior service only in those months he or she received compensation for at 16
least one hundred (100) hours of work. Twelve (12) months of current service in the 17
system shall be required to validate prior service; 18
(12) "Accumulated contributions" m eans the sum of all amounts deducted from the 19
compensation of a member and credited to his or her individual account in the 20
members' account, including employee contributions picked up after August 1, 21
1982, pursuant to KRS 78.610(4), together with interest credited, on the amounts, 22
and any other amounts the member shall have contributed thereto, including interest 23
credited thereon. "Accumulated contributions" shall not include employee 24
contributions that are deposited into accounts established pursuant to 2 6 U.S.C. sec. 25
401(h) within the fund established in KRS 78.520, as prescribed by KRS 26
78.5536(3)(b); 27
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(13) "Creditable compensation": 1
(a) Except as limited by paragraph (c) of this subsection, means all salary, wages, 2
and fees, including payments for compens atory time, paid to the employee as 3
a result of services performed for the employer or for time during which the 4
member is on paid leave, which are includable on the member's federal form 5
W-2 wage and tax statement under the heading "wages, tips, other 6
compensation", including employee contributions picked up after August 1, 7
1982, pursuant to KRS 78.610(4). The creditable compensation of fee officers 8
who receive salary, fees, maintenance, or other perquisites as a result of their 9
official duties is the gros s amount received decreased by the cost of salary 10
paid deputies and clerks and the cost of office supplies and other official 11
expenses; 12
(b) Includes: 13
1. Lump-sum bonuses, severance pay, or employer -provided payments for 14
purchase of service credit, which sh all be averaged over the employee's 15
service with the system in which it is recorded if it is equal to or greater 16
than one thousand dollars ($1,000); 17
2. Cases where compensation includes maintenance and other perquisites, 18
but the board shall fix the value of that part of the compensation not paid 19
in money; 20
3. Lump-sum payments for creditable compensation paid as a result of an 21
order of a court of competent jurisdiction, the Personnel Board, or the 22
Kentucky Commission on Human Rights, or for any creditable 23
compensation paid in anticipation of settlement of an action before a 24
court of competent jurisdiction, the Personnel Board, or the Kentucky 25
Commission on Human Rights, including notices of violations of state 26
or federal wage and hour statutes or violations o f state or federal 27
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discrimination statutes, which shall be credited to the fiscal year during 1
which the wages were earned or should have been paid by the employer. 2
This subparagraph shall also include lump -sum payments for reinstated 3
wages pursuant to KRS 61.569, which shall be credited to the period 4
during which the wages were earned or should have been paid by the 5
employer; 6
4. Amounts which are not includable in the member's gross income by 7
virtue of the member having taken a voluntary salary reduction provided 8
for under applicable provisions of the Internal Revenue Code; and 9
5. Elective amounts for qualified transportation fringes paid or made 10
available on or after January 1, 2001, for calendar years on or after 11
January 1, 2001, that are not includable in the gross income of the 12
employee by reason of 26 U.S.C. sec. 132(f)(4); and 13
(c) Excludes: 14
1. Living allowances, expense reimbursements, lump -sum payments for 15
accrued vacation leave, sick leave except as provided in KRS 78.616(5), 16
and other items determined by the board; 17
2. For employees who begin participating on or after Septemb er 1, 2008, 18
lump-sum payments for compensatory time; 19
3. Training incentive payments for city officers paid as set out in KRS 20
64.5277 to 64.5279; 21
4. For employees who begin participating on or after August 1, 2016, 22
nominal fees paid for services as a volunteer; and 23
5. Any salary or wages paid to an employee for services as a Kentucky 24
State Police school resource officer as defined by KRS 158.441; 25
(14) "Final compensation" means: 26
(a) For a member who begins participating before September 1, 2008, who is 27
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employed in a nonhazardous position, the creditable compensation of the 1
member during the five (5) fiscal years he or she was paid at the highest 2
average monthly rate divided by the number of months of service credit 3
during that five (5) year period multiplied by twelve (12). The five (5) years 4
may be fractional and need not be consecutive. If the number of months of 5
service credit during the five (5) year period is less than forty -eight (48), one 6
(1) or more additional fiscal years shall be used; 7
(b) For a memb er who is employed in a nonhazardous position, whose effective 8
retirement date is between August 1, 2001, and January 1, 2009, and whose 9
total service credit is at least twenty-seven (27) years and whose age and years 10
of service total at least seventy -five (75), final compensation means the 11
creditable compensation of the member during the three (3) fiscal years the 12
member was paid at the highest average monthly rate divided by the number 13
of months of service credit during that three (3) year period multipli ed by 14
twelve (12). The three (3) years may be fractional and need not be 15
consecutive. If the number of months of service credit during the three (3) 16
year period is less than twenty -four (24), one (1) or more additional fiscal 17
years shall be used; 18
(c) For a member who begins participating before September 1, 2008, who is 19
employed in a hazardous position, as provided in KRS 78.5520, the creditable 20
compensation of the member during the three (3) fiscal years he or she was 21
paid at the highest average monthly ra te divided by the number of months of 22
service credit during that three (3) year period multiplied by twelve (12). The 23
three (3) years may be fractional and need not be consecutive. If the number 24
of months of service credit during the three (3) year period is less than twenty-25
four (24), one (1) or more additional fiscal years, which may contain less than 26
twelve (12) months of service credit, shall be used; 27
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(d) For a member who begins participating on or after September 1, 2008, but 1
prior to January 1, 2014, who is employed in a nonhazardous position, the 2
creditable compensation of the member during the five (5) complete fiscal 3
years immediately preceding retirement divided by five (5). Each fiscal year 4
used to determine final compensation must contain twelve (12) months of 5
service credit. If the member does not have five (5) complete fiscal years that 6
each contain twelve (12) months of service credit, then one (1) or more 7
additional fiscal years, which may contain less than twelve (12) months of 8
service credit , shall be added until the number of months in the final 9
compensation calculation is at least sixty (60) months; or 10
(e) For a member who begins participating on or after September 1, 2008, but 11
prior to January 1, 2014, who is employed in a hazardous position as provided 12
in KRS 78.5520, the creditable compensation of the member during the three 13
(3) complete fiscal years he or she was paid at the highest average monthly 14
rate divided by three (3). Each fiscal year used to determine final 15
compensation must cont ain twelve (12) months of service credit. If the 16
member does not have three (3) complete fiscal years that each contain twelve 17
(12) months of service credit, then one (1) or more additional fiscal years, 18
which may contain less than twelve (12) months of se rvice credit, shall be 19
added until the number of months in the final compensation calculation is at 20
least thirty-six (36) months; 21
(15) "Final rate of pay" means the actual rate upon which earnings of an employee were 22
calculated during the twelve (12) month period immediately preceding the 23
member's effective retirement date, and shall include employee contributions 24
picked up after August 1, 1982, pursuant to KRS 78.610(4). The rate shall be 25
certified to the system by the employer and the following equivalent s shall be used 26
to convert the rate to an annual rate: two thousand eighty (2,080) hours for eight (8) 27
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hour workdays, one thousand nine hundred fifty (1,950) hours for seven and one -1
half (7.5) hour workdays, two hundred sixty (260) days, fifty -two (52) wee ks, 2
twelve (12) months, one (1) year; 3
(16) "Retirement allowance" means the retirement payments to which a member is 4
entitled; 5
(17) "Actuarial equivalent" means a benefit of equal value when computed upon the 6
basis of the actuarial tables adopted by the bo ard. In cases of disability retirement, 7
the options authorized by KRS 61.635 shall be computed by adding ten (10) years 8
to the age of the member, unless the member has chosen the Social Security 9
adjustment option as provided for in KRS 61.635(8), in which case the member's 10
actual age shall be used. For members who begin participating in the system prior 11
to January 1, 2014, no disability retirement option shall be less than the same option 12
computed under early retirement; 13
(18) "Normal retirement date", unles s otherwise provided in KRS 78.510 to 78.852, 14
means: 15
(a) For a member with service in a nonhazardous position, the sixty -fifth birthday 16
of a member; 17
(b) For a member with service in a hazardous position who begins participating 18
before September 1, 2008, th e first day of the month following a member's 19
fifty-fifth birthday; or 20
(c) For a member with service in a hazardous position who begins participating 21
on or after September 1, 2008, the first day of the month following a 22
member's sixtieth birthday; 23
(19) "Fiscal year" of the system means the twelve (12) months from July 1 through the 24
following June 30, which shall also be the plan year. The "fiscal year" shall be the 25
limitation year used to determine contribution and benefits limits as set out in 26 26
U.S.C. sec. 415; 27
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(20) "Agency reporting official" means the person designated by the participating 1
employer who shall be responsible for forwarding all employer and employee 2
contributions and a record of the contributions to the system and for performing 3
other administrative duties pursuant to KRS 78.510 to 78.852; 4
(21) "Regular full-time positions," as used in subsection (6) of this section, shall mean 5
all positions that average one hundred (100) or more hours per month, determined 6
by using the number of hours actu ally worked in a calendar or fiscal year, or eighty 7
(80) or more hours per month in the case of noncertified employees of school 8
boards, determined by using the number of hours actually worked in a calendar or 9
school year, unless otherwise specified, except: 10
(a) Seasonal positions, which although temporary in duration, are positions which 11
coincide in duration with a particular season or seasons of the year and that 12
may recur regularly from year to year, in which case the period of time shall 13
not exceed nine (9) months, except for employees of school boards, in which 14
case the period of time shall not exceed six (6) months; 15
(b) Emergency positions which are positions utilized by the employer during: 16
1. An emergency as determined by the employer for a period no t 17
exceeding thirty (30) working days and are nonrenewable; or 18
2. A state of emergency declared by the President of the United States or 19
the Governor of the Commonwealth of Kentucky that are created or 20
filled specifically for addressing the employer's needs during and as a 21
result of the declared emergency; 22
(c) Temporary positions that are positions of employment with a participating 23
agency for a period of time not to exceed twelve (12) months and not 24
renewable; 25
(d) Probationary positions which are positions of employment with a participating 26
employer that do not exceed twelve (12) months and that are used uniformly 27
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by the participating agency on new employees who would otherwise be 1
eligible for participation in the system. Probationary positions shall not be 2
renewable by the participating employer for the same em ployee, unless the 3
employee has not been employed with the participating employer for a period 4
of at least twelve (12) months; or 5
(e) Part-time positions that are positions that may be permanent in duration, but 6
that require less than a calendar or fiscal year average of one hundred (100) 7
hours of work per month, determined by using the number of months actually 8
worked within a calendar or fiscal year, in the performance of duty, except in 9
case of noncertified employees of school boards, the school term average shall 10
be eighty (80) hours of work per month, determined by using the number of 11
months actually worked in a calendar or school year, in the performance of 12
duty; 13
(22) "Alternate participation plan" means a method of participation in the system as 14
provided for by KRS 78.530(3); 15
(23) "Retired member" means any former member receiving a retirement allowance or 16
any former member who has on file at the retirement office the necessary 17
documents for retirement benefits and is no longer contributing to the system; 18
(24) "Current rate of pay" means the member's actual hourly, daily, weekly, biweekly, 19
monthly, or yearly rate of pay converted to an annual rate as defined in final rate of 20
pay. The rate shall be certified by the employer; 21
(25) "Beneficiary" means the person, persons, estate, trust, or trustee designated by the 22
member in accordance with KRS 61.542 or 61.705 to receive any available benefits 23
in the event of the member's death. As used in KRS 78.5536, beneficiary shall not 24
mean an estate, trust, or trustee; 25
(26) "Recipient" means the retired member, the person or persons designated as 26
beneficiary by the member and drawing a retirement allowance as a result of the 27
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member's death, or a dependent child drawing a retirement allowance. An alternate 1
payee of a q ualified domestic relations order shall not be considered a recipient, 2
except for purposes of KRS 61.623; 3
(27) "Person" means a natural person; 4
(28) "School term or year" means the twelve (12) months from July 1 through the 5
following June 30; 6
(29) "Retirement office" means the Kentucky Public Pensions Authority office building 7
in Frankfort, unless otherwise designated by the Kentucky Public Pensions 8
Authority; 9
(30) "Vested" for purposes of determining eligibility for purchasing service credit under 10
KRS 61.552 means the employee has at least forty -eight (48) months of service if 11
age sixty-five (65) or older or at least sixty (60) months of service if under the age 12
of sixty-five (65). For purposes of this subsection, "service" means service in the 13
systems administered by the Kentucky Retirement Systems and County Employees 14
Retirement System; 15
(31) "Participating": 16
(a) Means an employee is currently earning service credit in the system as 17
provided in KRS 78.615; and 18
(b) Solely for the purpose of benefits payable to employees who become 19
disabled as a direct result of an act in line of duty as defined in this section, 20
or who die as a direct result of an act in line of duty as defined in this 21
section, or who die as a result of a duty -related injury as defined in KRS 22
61.621, or who become disabled as a result of a duty -related injury as 23
defined in KRS 61.621, means a person is employed in a probationary 24
position as provided by subsection (21)(d) of this section; 25
(32) "Month" means a calendar month; 26
(33) "Membership date" means the date upon which the member began participating in 27
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the system as provided in KRS 78.615; 1
(34) "Participant" means a member, as defined by subsection (8) of this section, or a 2
retired member, as defined by subsection (23) of this section; 3
(35) "Qualified domestic relations order" means any judgment, decree, or order, 4
including approval of a property settlement agreement, that: 5
(a) Is issued by a court or administrative agency; and 6
(b) Relates to the provision of child support, alimony payments, o r marital 7
property rights to an alternate payee; 8
(36) "Alternate payee" means a spouse, former spouse, child, or other dependent of a 9
participant, who is designated to be paid retirement benefits in a qualified domestic 10
relations order; 11
(37) "Accumulated e mployer credit" means the employer pay credit deposited to the 12
member's account and interest credited on such amounts as provided by KRS 13
78.5512 and 78.5516; 14
(38) "Accumulated account balance" means: 15
(a) For members who began participating in the system pr ior to January 1, 2014, 16
the member's accumulated contributions; or 17
(b) For members who began participating in the system on or after January 1, 18
2014, in the hybrid cash balance plan as provided by KRS 78.5512 and 19
78.5516, the combined sum of the member's a ccumulated contributions and 20
the member's accumulated employer credit; 21
(39) "Volunteer" means an individual who: 22
(a) Freely and without pressure or coercion performs hours of service for an 23
employer participating in one (1) of the systems administered by Kentucky 24
Retirement Systems or the County Employees Retirement System without 25
receipt of compensation for services ren dered, except for reimbursement of 26
actual expenses, payment of a nominal fee to offset the costs of performing 27
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the voluntary services, or both; and 1
(b) If a retired member, does not become an employee, leased employee, or 2
independent contractor of the empl oyer for which he or she is performing 3
volunteer services for a period of at least twelve (12) months following the 4
retired member's most recent retirement date; 5
(40) "Nominal fee" means compensation earned for services as a volunteer that does not 6
exceed five hundred dollars ($500) per month with each participating employer. 7
Compensation earned for services as a volunteer from more than one (1) 8
participating employer during a month shall not be aggregated to determine whether 9
the compensation exceeds the f ive hundred dollars ($500) per month maximum 10
provided by this subsection; 11
(41) "Nonhazardous position" means a position that does not meet the requirements of 12
KRS 78.5520 or has not been approved by the board as a hazardous position; 13
(42) "Hazardous position" means a position that meets the requirements of KRS 78.5520 14
and has been approved by the board as hazardous; 15
(43) "Level-percentage-of-payroll amortization method" means a method of determining 16
the annual amortization payment on the unfunded actuarial accrued liability as 17
expressed as a percentage of payroll over a set period of years. Under this method, 18
the percentage of payroll shall be projected to remain constant for all years 19
remaining in the set period and the unfunded actuarially accrued liabilit y shall be 20
projected to be fully amortized at the conclusion of the set period; 21
(44) "Increment" means twelve (12) months of service credit which are purchased. The 22
twelve (12) months need not be consecutive. The final increment may be less than 23
twelve (12) months; 24
(45) "Last day of paid employment" means the last date employer and employee 25
contributions are required to be reported in accordance with KRS 16.543, 61.543, or 26
78.615 to the retirement office in order for the employee to receive current service 27
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credit for the month. Last day of paid employment does not mean a date the 1
employee receives payment for accrued leave, whether by lump sum or otherwise, 2
if that date occurs twenty-four (24) or more months after previous contributions; 3
(46) "Objective medical evidence" means reports of examinations or treatments; medical 4
signs which are anatomical, physiological, or psychological abnormalities that can 5
be observed; psychiatric signs which are medically demonstrable phenomena 6
indicating specific abnormalitie s of behavior, affect, thought, memory, orientation, 7
or contact with reality; or laboratory findings which are anatomical, physiological, 8
or psychological phenomena that can be shown by medically acceptable laboratory 9
diagnostic techniques, including but n ot limited to chemical tests, 10
electrocardiograms, electroencephalograms, X-rays, and psychological tests; 11
(47) "Hazardous disability" as used in KRS 78.510 to 78.852 means a disability which 12
results in an employee's total incapacity to continue as an emplo yee in a hazardous 13
position, but the employee is not necessarily deemed to be totally and permanently 14
disabled to engage in other occupations for remuneration or profit; 15
(48) "Act in line of duty" means, for employees in hazardous positions under KRS 16
78.5520: 17
(a) A single act occurring which was required in the performance of the principal 18
duties of the hazardous position as defined by the job description; or 19
(b) A single act of violence committed against the employee that is found to be 20
related to his or her job duties, whether or not it occurs at his or her job site; 21
(49) "Dependent child" means a child in the womb and a natural or legally adopted child 22
of the member who has neither attained age eighteen (18) nor married or who is an 23
unmarried full-time student who has not attained age twenty -two (22). Solely in the 24
case of a member who dies as a direct result of an act in line of duty as defined in 25
this section, dies as a result of a duty -related injury as defined in KRS 61.621, 26
becomes totally and permane ntly disabled as a direct result of an act in the line of 27
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duty as defined in this section, or becomes disabled as a result of a duty -related 1
injury as defined in KRS 61.621 and is eligible for the benefits provided by KRS 2
61.621(5)(a), "dependent child" al so means a naturally or legally adopted disabled 3
child of the member, regardless of the child's age, if the child has been determined 4
to be eligible for federal Social Security disability benefits or is being claimed as a 5
qualifying child for tax purposes due to the child's total and permanent disability; 6
(50) "Normal retirement age" means the age at which the member meets the 7
requirements for his or her normal retirement date as provided by subsection (18) of 8
this section; 9
(51) "Disability retirement date" means the first day of the month following the last day 10
of paid employment; 11
(52) "Monthly average pay" means: 12
(a) In the case of a member who dies as a direct result of an act in line of duty as 13
defined in KRS 16.505 or who dies as a result of a duty -related injury as 14
defined in KRS 61.621, the higher of the member's monthly final rate of pay 15
or the average monthly creditable compensation earned by the deceased 16
member during his or her last twelve (12) months of employment; or 17
(b) In the case where a membe r becomes totally and permanently disabled as a 18
direct result of an act in line of duty as defined in KRS 16.505 or becomes 19
disabled as a result of a duty -related injury as defined in KRS 61.621 and is 20
eligible for the benefits provided by KRS 61.621(5)(a) , the higher of the 21
member's monthly final rate of pay or the average monthly creditable 22
compensation earned by the disabled member during his or her last twelve 23
(12) months of employment prior to the date the act in line of duty or duty -24
related injury occurred; 25
(53) "Authority" means the Kentucky Public Pensions Authority as provided by KRS 26
61.505; 27
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(54) "Executive director" means the executive director of the Kentucky Public Pensions 1
Authority; and 2
(55) "Gainful employment" means work in any capacity that is or may be performed 3
with regularity and is or may be usually done for pay, whether pay is received or 4
not received, including seasonal, volunteer, part-time, and on-call work. 5