Meanwhile, the counties and cities continued to fully fund CERS as was requested by the Board of Trustees. This contribution is referred to as the ARC, which can have two meanings. It is often termed the annually required contribution, but can also mean the actuarial  required contribution.  An actuary is a financial expert who helps compute risks and other factors to determine how much is need to fund the various pensions.  The court's decision gave both the Governor and Ky legislature a legal out to NOT fully fund the ARC for KERS. Please recall that the investment income of the funds is the main source of funding for the benefits.

Will there be any money left when you want to retire ?

People who work in glass buildings should not...

What is the ARC+ ?  Perhaps you have heard or read about the ARC+. It is the actuarial required contribution plus an amount beyond the ARC which is designed to makeup for the underfunding by the KY budget during the past years. saveCERS.org endorses this catchup funding for KERS, SPRS and KTRS. 

  

saveCERS.org

How is your pension funded ???

Kentucky public pensions are funded by employee and employer contributions going into pension benefit and health benefit funds held by the Kentucky Retirement Systems (KRS). The employee contribution remains constant throughout the employee's career. The employer contribution, often called the employer match, is variable and changes (usually annually) based upon a variety of factors.  KRS invest these funds to grow them over time until the employee retires and draws a monthly pension and health care benefit.  Generally, the employee will have contributed about 8-9% and his employer will have contributed about 42%. This should not be confused with the ARC explained below, but is the percentage of funds contributed over an employee's tenure. The remaining 50% is designed to come from a return on the investments made by KRS, which are compounded over the employee's career.  When the employee decides to retire his pension is mostly prefunded.  The Kentucky Retirement Systems administers five major funds including: Kentucky Employees Retirement System non-hazardous (KERS-NH),         Kentucky Employees Retirement System  Hazardous      (KERS-Haz),         County Employees Retirement System non-hazardous    (CERS-NH),         County Employees Retirement System Hazardous          (CERS-Haz), &      State Police Retirement System     (SPRS). Ideally KRS should have 100% of the assets available to pay their liabilities, which are the pension benefits and health coverage promised to the employees.    KRS has what is termed a fiduciary duty to protect and wisely grow the assets of these funds.

​Information provided by saveCERS.org is for educatinal purposes only and is not investment or legal advice

There's trouble right here in river city !!!!

Storm clouds gather over Capitol

This section was suppose to be about how your pension is funded. You can see by the answer that it has not been properly funded and/or has not been properly administered. The question, will there be enough funds left when you want to retire remains to be determined. KRS readily admits it can not invest KERS out of its situation. CERS prospects are relatively better but are subject to the investment performance of its assets.  The end of a defined benefit pension and transition to 401k plan would likely ensure even fewer assets were available for those retirees & vested members of KERS, SPRS & CERS. Keep in mind that the Kentucky Teachers Retirement System (KTRS) is only 50% funded and you may begin to understand the enormity of the pension crisis in the Commonwealth.  Chasing the pot of gold at the end of the rainbow will not support Kentucky's retirees nor will political posturing produce a solution.  

           As of June 30, 2016, KY needed $32,600,000,000.00 to fully fund its PUBLIC  PENSIONS

What is the ARC?  The ARC is neither a large boat constructed by Noah nor something used by welders. Quite simply it is the Actuarial Required Contribution required of your employer to keep the pension fund healthy. Like the unicorn, the Commonwealth has frequently missed the ARC. Cities and counties have made their ARC, sometimes with difficulty.

So in 2018 we can see the results of the Kentucky legislature and multiple Governors not fully funding the actuarially required contribution (ARC) to KERS and SPRS.  These funds currently have 13.6% and 27% of the assets required to pay pension benefits to state employees and state troopers, while the CERS which received its full ARC have funding levels of 52.8% and 48.1%.  **note the KERS Haz has a funding level above all of these funds.**  None of the 5 listed retirement systems has 100% funding, which KRS states in the above policy is its goal.  By failing to fully fund the ARC for several years, KERS & SPRS members were denied the investment income which was necessary for retirement security. Pension liabilities grew while pension assets dwindled.  Even with full ARC contributions, CERS' percentage of funding took a nose dive.  KERS, SPRS and CERS were adversely affected by a variety of factors. This short list includes; granting cost of living adjustments (COLAs) without the necessary funding to support them, failure to control pension spiking by its members, an overly optimistic assumed rate of return on investments and reliance on "alternative investments" with their expensive (undisclosed) fees. Top this short list with the Great Recession of 2008 and the result is the under funding crisis KY  now faces.  Investment in hedge funds and private equities became a significant part of KRS as the need for higher return on investments pressured the fund trustees.  Only recently, have KERS assets been moved to more readily available investments, so that they are available to pay benefits. In fiscal year 2015 the net loss for all five of the pension systems was $ 363,219,320.  Of this amount, $248,380,401 was to worst funded system,KERS.  Investment expenses were a whopping $ 80,140,000 to achieve the $363,219,320 loss. 

The Kentucky River meanders through Frankfort on its way to meet the Ohio River at Carrollton. Trouble in the river city, Frankfort, began to brew in 1992. The Board of Trustees of KRS set an employer contribution rate for the Commonwealth, which we know from the above explanation varies to meet the need to keep KERS funded. Well, the 1992 budget bill contained a rate different than requested by the Trustees. You can probably guess. It was not a higher rate.  In their fiduciary capacity to protect KERS, the Trustees filed a suit in Franklin Circuit Court against Governor Brereton Jones.  The Hon. William Graham invalidated the parts of the budget bill which would impose a different contribution rate than that set by the Board of Trustees.  Governor Jones then appealed Franklin Circuit Court decision.  On November 22nd, 1995 the Kentucky Supreme Court reversed Judge Graham's ruling. The Supreme Court's decision both helped and hurt KERS members. It contained a provision which stated, "Creation by statute of KERS created inviolable contract between KERS members and state for provision of retirement benefits." At the same time it provided, "Board of Trustees of KERS had no power to mandate rates of contribution and require their adoption. "