Kentucky's Pension Reform Proposals - UPDATED

Last November on this blog, my office gave a brief rundown of the significant proposals being made to reform Kentucky's public retirement systems. Four months later, it's worth checking in on these efforts again, which I've done below:

Revised pension reform bill released and headed to committee in the Kentucky Legislature. After pulling back their original bill and removing, or making more palatable for some,  certain provisions related to cost-of-living adjustments (COLAs) under the Kentucky Teachers’ Retirement System (KTRS); the implementation of substitute defined contribution plans, similar to 401(k)s (albeit minus the opportunity for SSDI accruals/benefits, as pointed out in our November blog post); among other varyingly dramatic cost-reduction measures, Kentucky Senate and House leaders released their ‘Proposed Senate Substitute’ (PSS) to Senate Bill 1 this week. The full, 293-page text of the proposal has been made available on the State Legislature’s web site, here. It’s hard to know what might stay or go in this revised version; the original draft legislation was itself the product of untold numbers of revisions in the months elapsed from its announcement to its filing on February 20th. And beyond that: I’m not a politics reporter, I just have a thing for retirement systems.

Takeaways from the past two weeks’ developments in Frankfort, for family law attorneys and their clients:

  1. Future clients, who would likely be affected the most by the systemic changes originally included in the plan (more than, say, a participant and former spouse with an already lengthy service record), are likely to keep their defined benefit plans after all, as the switch to 401(k)s appears to have been scrapped due to its unexpected costs.

  2. Future clients are not entirely out of the woods, however, as the current bill’s switch to/integration of a ‘cash balance’ formula to supplement (in some cases) and succeed (in others) the Kentucky Teachers' Retirement Systems’ traditional pension formula may necessitate two separate QDROs, in the event of divorce/dissolution, for the two distinct benefit formulas.

  3. None of this may matter, as leaders from both chambers are facing substantial pressure from constituents who stand to have their benefits reduced or frozen under the proposals, and to whom appeals for consideration of the state’s enormous unfunded pension liabilities (estimated to be somewhere in the range of $40 Billion) understandably ring hollow.

  4. 293 pages is a lot of pension reading, even for me, so I skimmed in both reading and retelling. If you’ve found something within the new text that you think I missed, or would like me to discuss here, or just find interesting and need someone to talk about it with, send me an email and we’ll talk!

As soon as things begin to settle, and we can start to form a clearer picture of what changes may be at hand for Kentucky's public retirement systems and their members, I hope to write another update, this time detailing any specific changes which might affect benefits division in a divorce/dissolution. In the interim, Kentucky Retirement Systems (KRS) is providing detailed daily updates on its web page, here, alongside a number of tools which track the bill's progress and the changes made to its provisions.


  • Of additional interest: Kentucky Attorney General, Andy Beshear, released this 6-page letter to the Legislature, arguing what his office deemed were at least 21 instances of illegality within the new bill itself.