Recipients who were drawing a benefit as of June will receive a 2.2% increase on their July retirement allowance. The increase will be given automatically.
Cost of living adjustments are based on the percentage increase in the annual average of the Consumer Price Index for all urban consumers and applied to benefits each July.
Next year, employees, inactive members and retired members of the County Employees Retirement System will vote for two individuals to serve on the Board of Trustees.
Per KRS 61.645, the Board may place three names on the ballot for each position to be filled. The Board of Trustees is asking for names of members who would be interested in running for the two CERS trustee positions.
To be eligible a person must be a member or retired member of CERS. The full board meets a minimum of five times per year. In addition, members appointed to certain committees may have monthly committee meetings to attend. Board members do not receive a salary. Members receive a per diem of $190 and necessary travel expenses. Members are fiduciaries of the fund. They are required to act solely in the best interest of all of the members and beneficiaries of the retirement systems. Board members are responsible for investing the assets of the system.
The Board of Trustees will select six names (three for each position) assuming enough resumes are submitted at the August meeting. These names will appear on the ballot to be mailed in January 2001.
Governor Paul Patton reappointed John Balbach and Walter Pagan to the Board of Trustees for four-year terms beginning April 1, 2000.
Mr. Balbach is employed at the firm of Cotton and Allen, PSC, in Louisville. This is his second term on the Board.
Mr. Pagan is employed at Southbank Partners in Newport. This is his third term on the Board.
We know you have had difficulties in the past reaching someone who could answer your questions. To meet your needs better, we created the Division of Membership Support. The division has established a "call center" to improve response time to your calls, help you obtain services or forms or just answer your questions about the retirement system.
In addition, our automated phone service has been streamlined. When you call in, you will be asked to select from just four options. If you have a touchtone telephone, you may elect from the following options.
If you have a rotary dial telephone, stay on the line and your call will be transferred to an operator.
You should be connected directly to a counselor or operator. If the line is busy, you will be directed to voice mail. Please leave your name, complete phone number (including area code) and Social Security number. If calling about a retired member's account, be sure to give the retired member's Social Security number. You do not need to leave a lengthy message. It is more important that you speak slowly and clearly and leave a complete name and phone number.
All calls are tracked and will be returned within one working day. In most cases, a counselor will return your call the same day. You do not need to call again if you have already left one message within the past 24 hours.
We hope that this will significantly improve our service to you and welcome your comments.
The 2000 General Assembly made changes to many retirement provisions.
As is normal following a legislative session, there will be a big demand for information and counseling. It is essential that we give top priority to those members who will be retiring in the near future. We will get to everyone's request, but we must make sure that we give priority to members who are leaving employment to retire. As a general rule, we base your request on the date it is received. However, most of the legislative changes do not become effective until the middle of July. So if we receive your request prior to the law's effective date, your request can only be considered after the effective date of the provision.
We recommend you submit your Notification of Retirement about 60 days before your intended retirement date to allow time to complete and submit all of the required forms and documents. This should also be ample time to obtain copies of your birth certificates and consider your payment option.
Please keep this newsletter as a record of the changes made by the 2000 General Assembly. We have tried to describe the changes in easy to read language, but if there is a conflict between the description in this newsletter and the language in the statute, the statute will prevail.
If you want to buy a copy of a particular bill, contact the Bill Room at (502) 564-8100 or visit the Legislative Research Commission web site at www.lrc.state.ky.us. The Kentucky Retirement Systems cannot supply copies of legislation. We must purchase our copies from the Legislative Research Commission.
Please note that these descriptions are based on an initial interpretation of the individual bills passed by the 2000 General Assembly. Before making any retirement decisions, please contact a benefits counselor.
For members who retired August 1, 1998 and after, if you are reemployed in a position contributing to the same retirement system from which you retired, you contribute to a second retirement account. There are new limitations on your reemployment and your rights in your second retirement account.
The General Assembly authorized the Board of Trustees to establish a medical insurance reimbursement plan for eligible recipients who live outside of Kentucky and who are not eligible for the same level of medical and hospital benefits as recipients living in Kentucky.
The provision will allow the retirement system to reimburse out-of-state recipients who pay their own medical insurance premiums because they are not given the same coverage as in-state recipients. This will not apply to Medicare eligible individuals because the Board contracts for coverage which is available throughout the United States. Recipients may be reimbursed up to the amount that the systems would have contributed toward insurance coverage through the state group medical insurance program based on the retired member's total service credit.
Eligible recipients will need to submit proof of payment. The retirement office will issue reimbursement payments once each quarter. If the information is not received in time to be reimbursed in one quarter, it will be paid the following quarter.
The Board will be preparing the administrative regulation for the plan to be effective for insurance premiums paid by retirees for July 2000 and after.
In April, the Senior Citizens'; Freedom to Work Act of 2000, passed by Congress, was signed into law. This Act changed the current $1 reduction in Social Security benefits for every $3 a recipient age 65-69 earns above the maximum earnings ($17,000 in 2000).
The legislation does not change the earnings limit applicable to individuals who take early retirement benefits from Social Security. People age 62 through 64 continue to be subject to a strict earnings limit, losing $1 in benefit for every $2 in earnings above $10,080 a year.
However, for Social Security recipients who become age 65 in 2000, the application of the limit is changed. The individual is allowed to earn up to $17,000 between January 1 and the end of the month before the individual becomes age 65 with no reduction in benefits. From age 65 on, there is no earnings limitation.
If the person earns more than $17,000 between January 1 and the month before the individual becomes 65, the individual would owe $1 for ever $3 above the $17,000 limit.
Legislation was enacted to base the contribution paid toward certain CERS hazardous recipients on both hazardous and nonhazardous service. To be eligible the individual must meet the following requirements:
In order to determine eligibility, the retirement office will need to obtain verification of the service in the position from the employer. This applies to current qualifying retirees as well as employees. The retirement office will be identifying affected retirees and employees.
The General Assembly approved legislation authorizing the establishment of excess benefit plans for KERS, CERS and SPRS. Excess benefit plans allow the systems to pay the portion of any benefit which exceeds the federal pension limitations contained in Section 415 of the Internal Revenue Code.
Most members of the Kentucky Retirement Systems are not affected by the Section 415 pension limits. Only the employer provided portion of the pension is subject to the limit. The portion of the benefit resulting from after tax contributions and service purchases which do not exceed the annual contribution limit is not considered when determining the amount subject to the maximum. In addition, the limits are high for members at or near normal retirement age. The annual pension limit at age 65 is $135,000 for fiscal year 2000-2001. However, younger retirees whose annual salaries are above average are most likely to be affected.
If the portion of the member's monthly retirement allowance subject to the limit exceeds the limit, the amount that is above the limit would be paid from the excess benefit plan.
Benefits paid from the excess benefits plan are treated as earned income for federal income tax purposes. Benefits from the Excess Benefit Plan are subject to federal income tax and FICA withholding, if your service credit was earned while working in a position that was covered for FICA purposes. These payments may also be subject to Medicare taxes.
This provision is retroactive to July 1, 1998.
Effective July 14, 2000, you may not file your Notification of Retirement (Form 6000) more than six months in advance of your anticipated retirement date.
Members who file within two months of retirement are given priority over those filing more than two months in advance.
Generally, filing your Notification of Retirement about two months before your termination date gives plenty of time to obtain birth certificates and complete the necessary paper work. There are two reasons why you do not want to file your Notification of Retirement more than a few months before your termination date:
First, when you file your Notification of Retirement, the beneficiary named on that form supercedes your previous designation. If you and the beneficiary named on your Notification of Retirement should die, your estate would become your beneficiary.
Second, your estimated retirement allowance will be based on your salary and leave balances at the time you file your Notification. This estimated retirement allowance may not be changed until the final audit is performed on your account some time after your retirement. Your salary and leave balances could change between the date you file your Notification of Retirement and the date that the final audit is conducted.
Effective July 14, 2000, a person may apply for disability retirement up to six months prior to termination and up to 24 months after his last day of paid employment in a regular full time position. Previously a person could not apply more than 12 months after his last day of paid employment.
A person who is denied disability benefits may reapply within the 24 month period on the same claim if the person can submit new objective medical evidence related to the claim. Note: For disability, the last day of paid employment is the last day for which creditable compensation was received and which qualified for retirement service credit. It is not the last date that the person received a check. Employers frequently pay some days or weeks after the date actually worked.
Recipients who begin receiving a retirement allowance August 1, 2000, or later from the Kentucky Retirement Systems will be required to apply for direct deposit unless they can show good cause for receiving a payment by check. Current recipients who receive benefits by check will not be affected.
Exceptions will be made for recipients who do not have an account at a financial institution or whose financial institution does not participate in the electronic funds transfer program.
Both the recipient and the retirement system gain from direct deposit. The recipient benefits because retirement allowances are deposited on the 14th day of each month--the same day checks are mailed. Recipients choosing direct deposit have their funds sooner than those who receive theirs by check and they do not have to wait for their funds because of unforeseen delays at the Post Office.
Current recipients may change to direct deposit at any time by requesting an Authorization for Deposit form from the retirement office.
Effective August 1, 2000, "final compensation" for members of SPRS and CERS and KERS hazardous positions means the three fiscal years in which the member had the highest average monthly salary. The minimum number of months in the three fiscal years was changed to 24 months of service. This change will allow hazardous members to retire earlier in the fiscal year, August 1st for example, without requiring the use of four or more fiscal years of salary in the final compensation.
As part of this legislation KERS hazardous employees will contribute 8% of salary beginning July 16, 2000. The KERS hazardous employee contribution rate was not increased in 1998 when the original legislation was passed, although both CERS hazardous and SPRS employees contribution rate increased to 8% of salary.
KRS 61.520 was amended to make it clear that when an agency participates in KERS by Executive Order of the Governor, positions which are included in KERS must continue to participate in KERS so long as they exist.
"Creditable compensation" was amended to clearly read that payments for compensatory time and amounts paid to the employee on paid leave are includable in the employee's salary. It also states that lump sum bonuses, severance pay or an employer provided payment for purchase of service is includable but will be averaged over the employee's service with that employer. The definition was also amended to make it clear that living allowances, expense reimbursements and payments received after termination for accrued vacation are not includable.
"Interim" was defined as a position not to exceed nine months and which is not eligible for participation in KERS.
"Last day of paid employment" was amended to make it clear payments for unused leave, which are made two or more years after previous contributions ceased, do not change the person's last day of paid employment.
"Month" was defined as meaning a calendar month.
Classified employees of local school boards will have service credit determined differently for school years beginning July 1, 2000.
Employees who are contracted for 185 or more days per year will receive 12 months of credit if they work at least 180 days of the contract. Employees must average 80 or more hours of work per month.
If the employee is contracted to work at least 185 days but actually works fewer than 180 days of the contract, the employee may purchase any additional months of service to complete the year in accordance with the regulation that will be promulgated by the Board of Trustees.
Employees who are contracted for fewer than 185 days will receive a percentage of a year determined by dividing the actual days worked by 185 and then multiplying the percentage times 12. Employees who are contracted to work fewer than 185 days may still purchase service to complete the school year under KRS 61.545. This is the current provision that allows employees to purchase up to three "summer months" by paying the employer and employee contributions that would have been paid.
Your June 30, 2000 annual statement which will be mailed in August will contain a description of the benefits you are entitled to, including the changes enacted by the General Assembly. Please note that the statements provide estimates of your benefits as of June 30, 2000. The benefits are based on your service and salary as of June 30, 2000, as if you had ceased working. They do not project benefits you may be entitled if you continue working.
The Plan Description contained in your annual statement will be updated to reflect the legislative changes.
A revised Summary Plan Description Booklet will be available later this fall. To reserve a copy, simply send a written request for the 2000 Summary Plan Description Booklet with your signature and Social Security number to the retirement office at the following address:
The Summary Plan Description on our web site (www.kyret.com ) will also be updated.
Last Updated: 7/11/2002