KS Employee Groups Contemplate Pension Change Lawsuit

May 31, 2011 (PLANSPONSOR.com) - Retiree and public employee groups in Kansas are contemplating a lawsuit challenging a new law that would force teachers and government workers to make concessions on their pensions.

The Associated Press reports the law would force most employees covered by the Kansas Public Employees Retirement System to choose between paying a higher percentage of their salaries toward their pensions and having their future benefits reduced (see KS Senate Approves Pension Reform with no DC Plan). Workers hired after June 2009 wouldn’t face higher contributions, but they’d be required to choose one of two alternatives for cutting their benefits.  

According to the AP, retiree and public employee groups already have consulted with attorneys, said Jane Carter, executive director of the Kansas Organization of State Employees, which is part of a coalition on pension issues, Keeping the Kansas Promise.  

The new law, signed last week by Governor Sam Brownback, puts part of the burden of closing the long-term pension shortfall on taxpayers by increasing the state’s annual contribution to KPERS, starting in July 2013. Over four years, it phases in a $95 million increase.  

The measure also establishes a study commission to examine whether the state should start a 401(k)-style plan for new public employees.   

The news report said about 131,500 teachers and government workers covered by KPERS pay 4% of their salaries to the pension fund. Under the new law, they’d be given the choice next year of increasing their contributions to 6% by 2015, with a small bump in future benefits. If they didn’t take that option, their future benefits would be cut significantly.  

An additional 20,000 employees hired after June 2009 already pay 6% of their salaries into KPERS, and they’ve been promised annual cost-of-living adjustments in their benefits after they retire. Under the new law, they could either give up the adjustments or keep the adjustment but have their base benefits cut.  

Because KPERS is governed by federal Internal Revenue Service rules, the IRS must sign off on those choices. If the IRS doesn’t, then workers hired before July 2009 will pay more toward their pensions and get a bump in benefits, and the other workers will lose their future cost-of-living adjustments.