In a 20-20 vote, the Senate rejected a proposal to put new teachers and state employees on a 401(k)-style retirement plan on Thursday.
The move, offered by Sen. Jeff King, R-Independence, would have required employees to contribute 6 percent of their salaries to the Kansas Public Employees Retirement System and ratcheted up the state’s contribution from 1 percent to 5 percent over eight years.
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That would have made employees’ investments subject to the ebb and flow of the stock market, but it would have guaranteed that they got back at least as much as they put into the plan.
But the amendment was viewed as problematic to the underlying proposal offered by Senate President Steve Morris, R-Hugoton, and Sen. Laura Kelly, D-Topeka.
Their proposal, approved by the Senate in a 32-8 vote, would create a “cash balance” system in which employees pitch in 6 percent and the state adds 4 percent. The state would guarantee employees’ investments earn 6 percent. Employees would be vested after five years.
At the heart of the KPERS reform debate is an $8.3 billion gap between what the system owes employees and what it is projected to bring in through 2033. That unfunded liability has put the state in a precarious financial position.
KPERS investments have generated 8.3 percent over the past 40 years. The bill approved by the Senate would use the difference between the 6 percent guarantee and the 8.3 percent return to pay off the state’s unfunded liability.
“This particular system would get us down the road of having less risk for the state and give employees reasonable retirement,” Morris said.
Sen. Roger Reitz, R-Manhattan, was among those who decried the state’s failure to fully fund the state employee retirement system. The state hasn’t fully funded it since 1973, he said. That has left the system 62 percent funded.
“It was a promise made, a promise not kept,” Reitz said.
King said the state’s past failures have left the state with tough decisions.
“No plan is perfect,” he said. “And especially no plan is perfect when you’re 62 percent funded.”