Commission to Recommend DC Plan for Kansas State Workers

December 8, 2011 ( – A commission set up to study pension reform for Kansas state workers has approved a plan to offer a defined contribution retirement plan to teachers and other government employees.

The Kansas Public Employees Retirement System (KPERS) Study Commission, set up by legislation passed in May (see KS Senate Approves Pension Reform with no DC Plan) approved a plan to close the state’s traditional pension plan to teachers and other state and local government workers hired after July 1, 2013, and instead enroll them in a 401(k)-style plan to which they would contribute 6% of their salary. The proposed new retirement accounts would be portable.  

According to the Kansas Reporter, employers, including school districts, local governments and state agencies, would match that amount with a 1% contribution paid with state general fund and local tax revenue. The matching contributions would increase to 5% over the next eight years, said state Senator Jeff King, a study commission co-chairman.  

The news report said commission members are working on a plan to recommend to the legislature for filling an officially estimated $8.3 billion gap between the retirement benefits promised to more than 250,000 working and retired KPERS members between now and 2033 and the assets the system will have by then to pay those benefits.  

The proposal also includes a small pension feature for workers. state, local or school district contributions in the accounts when workers leave the public payroll would be converted into an annuity that would provide lifetime income, King said.  

Workers who save regularly will benefit, however, said House pension committee chairman Representative Mitch Holmes who is also the study commission’s co-chairman. Applying the proposed contribution rates to the same projected salary increases and investment results that KPERS actuaries use now, a state prison guard making $25,000 a year could retire with more than a half million dollars under the new KPERS plan, Holmes said. A worker making $50,000 a year could save $400,000 in 20 years and as much as $1.1 million in 30 years, he said.  

However, Rebecca Proctor, an Independence, Missouri, attorney who represents the Kansas Organization of State Employees, the state workers’ labor union argued: “I think we’re kidding ourselves if we think this will provide a livable retirement. Real world experience shows that many state employees don’t have the risk tolerance needed to make investments needed to achieve the 8% return that KPERS uses.”