January 25, 2012

Dear Friends,

• Note that everyone who receives this by email will receive two identical copies of this update, One in PDF Format and one in Word Format.  If you still are having trouble opening or printing these, let Ernie know at eclaudel1@comcast.net.

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• Just a reminder, that this email is an official report of the Kansas Coalition of Public Retirees.  If Ron and I editorialize, we will indicate that fact.

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• We would extend an invitation to anyone who is interested in the work of the Coalition to attend our monthly meetings.  Their date and location are always available on the website.

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We have been back in Topeka observing some of the legislative committees.  We are aware that your curiosity in running high so we thought you would appreciate a report.

We are going to limit our observations to what we have the most expertise; KPERS.  We do not feel qualified to comment on the Governor’s tax proposals or school funding. 

Subscribing to “Under the Dome” through KNEA, with no cost or obligation is a great way to keep up with the daily happening on all three areas of possible interest.  This publication does include daily reports on KPERS, which will be of interest to you all.

For purposes of clarification, the proposal that came out of the KPERS Commission has become known as the “King Plan”.  It is also now known as Senate Bill 338 and House Bill 2545 .

A quick summary:  The charge given to the Study Commission was to develop a viable plan to insure the long-term sustainability of the system.  In order to adequately address this issue, obviously the UAL : must be taken into account and greatly reduced to a manageable level.  Because there seems to be a great deal of confusion, even amongst Study Commission members, about the components of the King Plan, it was necessary for the minority to express its views.   After 10 meetings the Study Commission voted on a proposal which has become known as the “King Plan.” This summary will not detail the bill, as it is likely too soon for that, but we will tell you that it is our opinion, as stated in the Minority Report, that the KPERS Commission failed in its charge.  We have formed this opinion after hearing hours and hours of testimony that a DC component does absolutely nothing to reduce the UAL .  Confusion has reined from the beginning because not enough detail emerged to be sure even of what was voted on.  It has been pointed out repeatedly that the proposal was introduced during the 9^th of the 10 meetings, and it was not completely discussed or “run” by the actuary at that time.  The report on possible out-comes was not presented until January 25^th.  It should also be noted that when Senator King began, on the 19^th, to explain the majority report from the Commission, we wondered if we were in the same meeting as he attended.

The Minority Report states; “The King Plan increases costs to the system and reduces employee benefits while doing nothing to address the UAL .  Accordingly, we do not believe the King Plan fulfills the charge the Study Commission was given to recommend a viable plan to insure the long-term sustainability of the KPERS system.”*  We are in total agreement!

1. The actuary, Patrice (Pat) Beckham of Cavanaugh Macdonald Consulting, LLC, today repeatedly reminded the combined Senate and House Committees on KPERS that the UAL is a “Legacy Expense” which must be paid!  (Legacy Expense means that the UAL is an expense that has not been paid.  It will not go away until it is paid in full.)  The present proposal, i.e., the “King Plan,” and “it is also now known as Senate Bill 338 and House Bill 2545,” will cost more in the long run than the present solution under HB2194. 
2. The retirement benefit, under the new proposal, because of any lack of guarantee, cannot be calculated or even estimated, but it will certainly be less than the present plan.
3. According to the Actuary, the following was reported:  “One of the recommendations of the KPERS Study Commission was to transfer all legislators to the new Tier 3 plan effective January1, 2014.  Since many of the legislators will be vested KPERS members at the time of transfer, either the retirement benefit they have earned in the current KPERS defined benefit plan must remain in that plan or the benefit must be converted to a lump sum value and then transferred to the new Tier 3 plan.”  The unforeseen outcome was that some of the legislators, through no fault of their own, would receive as much as $600,000!  Please recall that we pointed out that the end result was not known, or this recommendation would probably have never been made in the first place.
4. The unfairness described in the reprint below is still not being addressed!!

Please note one correction from the last update.  It is reprinted here.  We previously stated that it would take a new custodian 5 years to reach the maximum State contribution.  This is in error; it will take more nearly 8.  This is reprinted properly below with the correction highlighted.

Adopting “The King Plan” (the recommendation from the KPERS Study Commission) would lead to even further discrimination in the State’s retirement systems.  If the Study Commission’s recommendations pass the Kansas Legislature this year, the following scenario will exist:  A custodian beginning work at one of our State universities on July 1, 2013, or after, will receive for the first year 1% state contribution for his/her retirement while a professor at the same university on the same day will receive 8.5% contribution of his/her salary into a retirement account immediately.  This same custodian will have to wait eight full years before receiving a full 5% percent payment from the State into his retirement account (1/2 % annual increase state contribution until it reaches 5%).  At the same time, said custodian will be required to contribute 6% of his monthly paycheck while the professor will be required to pay in only 5.5% to receive his/her 8.5% State contribution. 

Some favorable news:  Alan Conroy has been hired as the new Administrator of KPERS.  Alan was Director of Kansas Legislative Research and has 30 years of experience with the State of Kansas .  Alan is highly respected and we personally have nothing but the highest regard for his professionalism and devotion to duty.

Please contact your legislators, and implore them to adopt HB2194 rather than the “King Proposal!”

Note that we are still concerned about all of KPERS, not just the new hires and non tenured.  While we have been told repeatedly, and even by the Governor in his State of the State address, that current retiree’s benefits will not be affected by any changes. However, at the outset of the KPERS Study Commission meetings it was announced that “everything was on the table”.  Hopefully the attitudes have changed, but we still remain cautious.  Because of numerous callous statements, our level of confidence and trust with the legislature is not what we would wish it to be!

Have a great weekend!

*The Minority Report was submitted by Commissioner William Buchannan, Senator Laura Kelly, Commissioner Rebecca Proctor, Commissioner Michael Ryan, and Representative Ed Trimmer.