Some Important Facts about the KPERS Retirement System

 AKA - The Five Myths of KPERS
“Working Today for a Secure Tom orrow”
Facts about a Cost-of-Living Increase

The Kansas Coalition of Public Retirees believes that the Kansas Public Employees Retirement System, KPERS is, for the most part, working well for retirees.  However, some legal modifications are needed.  The following concerns are cited;

1.  “Retirees need and deserve a Cost-of-Living increase”.  TRUE .

The last adjustment in retiree benefits was in 1998, more than 10 years ago.  Since 1998 inflation has increased by 29.5 percent, yet in the face of these rising costs, KPERS benefits remain trapped at 1998 levels.  Most would agree that the threat of inflation poses a serious threat to the health, welfare and financial security of retirees.  The KPERS motto is “Working Today for a Secure Tom orrow”.  We believe periodic COLA adjustments are critical to help obtain that security by countering the serious consequences of inflation.

2.  “A KPERS COLA is too costly”.  FALSE.

The Governor’s 2008 COLA proposal would have cost $6.4 Million.  No such COLA proposal was offered by the Governor during the 2009 Legislative Session.  While any cost-of-living increase will present challenges, funding will come from the State General fund and will not represent a direct outlay from KPERS reserves.  According to the KPERS Annual Report (page 130), the KPERS fund earned over 18.0 percent or $2.2 Billion during FY 2007.  A COLA of $6.4 Million represents two tenths of one percent of that $2.2 Billion in earnings.  In recent months the financial markets have recorded significant downturns, including the KPERS fund.  Even with these losses however, the KPERS fund remains financially solvent with sound reserves sufficient to meet requirements of a $6.4 Million COLA.

3.  “No COLA increase is possible since KPERS is a “Defined Benefit Plan”.  “Therefore benefits are forever “Fixed” at the time of retirement”.  FALSE.

This is a widely held misconception.  It is true that benefits are determined by a benefit formula based on years of service and salary at the time of retirement.  Cost-of-Living adjustments, however, remain a completely separate issue, distinct from benefit formula factors.  In fact, the Legislature has granted a “base increase” 17 times and a “bonus” four times in years past.  The argument that benefits are forever fixed ignores reason and simply doesn’t make any sense.  The Coalition believes that periodic COLA’s must be granted to help with inflation.

4.  “A COLA cannot be granted until the KPERS unfunded actuarial liability issue is resolved”.  FALSE.

As originally designed, the KPERS system was to be financed by payroll contributions with equal amounts coming from the employer and the employee.  The employees have lived up to that agreement by making all required contributions to the fund.  The employer has not and, over the years, has chosen to reduce or curtail contributions to the fund.  Yet the retirees, now in desperate need of a COLA, are being asked to forego any increase due to the employer’s failure to meet conditions of the original financing agreement.  The fact of the matter is, even with the lapse in employer funding, the KPERS reserves could easily withstand and meet the $6.4 Million in costs for a COLA.   We urge passage of a KPERS COLA!

5.  “The Reason that KPERS has a short fall in the Unfunded Actuarial Liability is because the original Kansas Teachers Retirement System was merged with KPERS.”  INACCURATE ASSUMPTION.

The former Kansas Teachers Retirement System was merged with KPERS in 1971.  In 1972 a 5% COLA was given, followed by a major COLA increase in 1973 (If the retiree had been retired for over 11 years, the COLA was a 32% increase).  If the system was in such bad shape because of the entry of the Kansas Teachers Retirement System, why would they ever consider a COLA?