Recipients who were drawing a benefit as of June will receive a 2.3% 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.
Bobby D. Henson, Frankfort, and Susan Smith Horne, Versailles, were elected to the Board of Trustees by members of KERS. They are serving four-year terms which expire March 31, 2002.
Mr. Henson is retired from the Kentucky Transportation Cabinet where he held the position of Executive Director, Office of Policy and Budget, responsible for the $1 billion annual agency budget. He currently operates a farm in Franklin County.
Ms. Horne is retired from KERS. She last served as assistant Fayette County Attorney. She is currently in private law practice.
A total of 12,206 members submitted valid ballots in the election.
The election for the member of SPRS to serve on the Board of Trustees will be held in 1999. The Board of Trustees is seeking resumes for individuals interested in having their names placed on the ballot for the SPRS election.
The individual must have an account in SPRS or be retired from SPRS. Resumes should be submitted to the retirement office by July 31, 1998. Resumes should include the member's Social Security number.
Capt. Randy Overstreet, Commander of Post 4 in Elizabethtown, is the current SPRS member. His term expires March 31, 1999.
If you have funds in the 401(k) plan administered by the Kentucky Employees Deferred Compensation Plan, you can rollover the funds from your 401(k) to the retirement office to purchase service credit in KERS, CERS or SPRS upon separation of service, retirement (including disability) or after reaching age 59 ½. Because the funds are directly rolled over between qualified plans, they are not subject to tax at the time of the rollover.
Please consult with Deferred Compensation employees prior to making a decision on whether to rollover funds. Remember to consider the potential benefit you might receive from your 401(k) plan if you do not make the rollover.
Many of you are aware of the limitations on the amount of service credit you can purchase in any one year (excluding refunds and omitted service) that are imposed by Section 415 of the Internal Revenue Code. That limitation has been 25% of salary earned during the fiscal year or $30,000 whichever was the lesser. For purposes of applying the federal provisions the fiscal year is the "plan year" (see definitions under Legislative Changes).
Effective July 1, 1998, for the new plan year, the 25% limitation will no longer apply. Following is a simplified explanation of the new provisions:
If your purchase when added to your regular employee contribution to the system does not exceed $30,000 in a plan year, the full value of the service purchase will be includable for determining your retirement benefit unless you exceed the Section 415 pension limit before the purchase.
If your purchase does exceed $30,000 in a plan year, you may still make the purchase. You should be aware that if your pension at the time of retirement exceeds the Section 415 pension limits, you may not be allowed full credit for all service purchases. In other words, if you make a lump sum payment in excess of $30,000 and at the time of your retirement this service causes your pension benefit to exceed the federal pension limit, you would not receive more than the federal pension limit imposed by Section 415 of the Internal Revenue Code.
The Section 415 pension limits will not affect most employees. For example, the limit at age 59 for a regular member is currently $105,047. For a hazardous member the limit is $130,000 at any age. If you are in a nonhazardous position and retire early, though, the limit is much smaller. At age 43 the limit is $38,220; assuming a CERS member had 25 years of service and purchased 5 years of nonqualified service for a total of 30 years, that would mean the member could exceed the limit if his final compensation was $57,909.
If you purchase the service over a number of years in order to stay below the $30,000 limit, your service purchases will not count against your pension limit at retirement.
Only if you exceed the $30,000 limit will the service count against your pension limit at retirement. If it does and you are not allowed to draw more than the federal pension limit, your service purchase cannot be refunded to you. So if you are in a position where the purchase might cause you to exceed the limit, you may wish to consider other investment alternatives. Note that transfers of 401(k) funds do not count against the $30,000 limit in a plan year.
If you are planning on retiring within the next year, make sure you have a copy of your birth certificate and a copy of your beneficiary's birth certificate. Kentucky law requires you to have your birth certificate on file prior to issuance of your retirement check. Failure to obtain a birth certificate before your intended retirement date could result in your check and insurance coverage being delayed.
The 1998 General Assembly made changes to many retirement provisions. Nearly all of the 210,000 members are affected in some way, as you will learn by reading this newsletter.
If you do not intend to retire within the next 12 months or if you do not intend to make a service purchase in the next 12 months, we ask that you wait until next year to request estimates for the future. There will be a very big demand placed on our employees. It is essential that we give top priority to those members who will be retiring. Members who intend to make service purchases in the immediate future will be served next. We will get to everyone's request, but we must make sure that we give priority to members who are leaving employment to retire.
If you intend to retire, we recommend you submit your Notification of Retirement at least 60 days before your intended retirement date. If possible, arrange to see a benefits counselor. You must make an appointment to visit with one of our counselors.
Please keep this newsletter as a record of these changes. We have tried to describe the changes in easy to read language. To buy a copy of the actual 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 interpretation of the individual bills passed by the 1998 General Assembly. In some cases further research is necessary to determine compliance with other state and federal requirements. Before making any retirement decisions, please contact a benefits counselor.
Effective July 15, 1998, if you are a retired member of KERS, CERS or SPRS who is drawing a benefit based on at least 48 months of service, the benefit paid upon your death will be $5,000 rather than $2,500. This applies to all members currently retired and drawing benefits on at least 48 months of service and to future retirees who draw a benefit based on at least 48 months. No additional forms are required to receive the higher benefit; it will be paid to the beneficiary you have on file.
Two bills were passed affecting employment after retirement with an agency participating in the same retirement system from which you are drawing a check. While final codification of the statutes is not yet complete, we believe the two bills will have the following effect.
Effective July 15, 1998, if you have been retired at least one month and return to work with an agency participating in the same retirement system from which you are drawing a retirement allowance, your retirement allowance will not be stopped. You will continue to draw your monthly benefit. You cannot terminate at the end of the month and return to work the first day of the following month. In order to meet the definition of a "retired member" for this section, you must be drawing a retirement allowance or have filed the necessary papers and have ceased to contribute. If you return to employment immediately, your employment will be considered to have continued and your retirement will be voided.
Assuming you have been a retiree for a period of at least one month and return to work with a different employer, the agency employing you will treat you the same as a new employee for retirement purposes. If you are in a full-time position, you will have to contribute to a new retirement account. This new account can never be combined with the previous account in any way. If you want to purchase a type of service that requires you to have 60 months of service, such as military service, you cannot add service to your former account and will have to contribute to your new account for 60 months before you can purchase the service. If you wish to draw a benefit from your new employment, you will have to work long enough to vest for a benefit from that employment based on your age.
If you are a retiree who is in reemployment status on July 15, 1998 in the same retirement system from which you retired, you will have the opportunity to elect to remain under the provisions of KRS 61.637(1)-(4) and to have your benefit recalculated using the additional service and salary of your employment. You may elect to be covered under the new law. If you do not make an election by September 15, 1998, you will be treated as having elected to be covered by the new law.
NOTICE: Federal requirements related to this issue are being studied. You are advised not to resign with the expectation of returning to work within 12 months with the same employer in the same or similar position from which you retired.
Effective July 15, 1998, if you are retired from a CERS or KERS hazardous position and you are elected to a city or county office, you will continue to draw your hazardous benefit, but you will not contribute to the retirement system. You will earn no retirement benefits from your period of service in the elected city or county office.
Effective July 15, 1998, "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. There must be at least 28 months of service in the three fiscal years or an additional fiscal year must be used.
If you are a State Trooper or a CERS or KERS hazardous duty member and want to take full advantage of this provision, you may want to plan to retire November 1.
By retiring November 1, you have four months in the current fiscal year. With only two more fiscal years of salary, you can meet the 28 month minimum required by the provision. If you retire August 1, you will have to use the current fiscal year (1 month) and three additional fiscal years (a total of 37 months) in order to have 28 or more months in your final compensation.
As part of this legislation CERS hazardous employees and SPRS employees will contribute 8% of salary beginning August 1, 1998. The KERS hazardous employee contribution rate was not increased.
If you have KERS nonhazardous service, you may be eligible for a higher benefit factor on that service. In order to be eligible, you must earn service credit in one of the state administered retirement systems from January 1, 1998 through January 1, 1999 (13 months of continuous service for the period) and retire between February 1, 1999 and January 31, 2009. If you plan to retire February 1, 1999, it would be to your advantage to stay on the payroll through January 31, 1999, for both the service and the effect on your final compensation.
If you do not earn service credit for the full 13-month period or if you are employed anytime after January 1, 1998, your benefits will be calculated at the 1.97% factor.
If you participate from January 1, 1998 through January 1, 1999 and retire between February 1, 1999 and January 31, 2009 with less than 20 years, your benefit will be based on a 2% benefit factor.
If you participate from January 1, 1998 through January 1, 1999 and retire after January 31, 2009, your benefit will be based on a 2% factor.
If you participate from January 1, 1998 through January 1, 1999, and retire February 1, 1999 through January 31, 2009, and have at least 240 months of service, your benefit will be calculated at a 2.2% factor.
In other words, all members hired after January 1, 1998 or who do not gain service for all 13 months in the period will have benefits calculated at 1.97%.
For example, John Doe, who works for Transportation, has received 5% raises each July 1. He was considering retirement August 1, 1998 with 27 years service . With passage of Senate Bill 142, he decides to wait until February 1, 1999. On the following page is a comparison of his benefits:
| August 1, 1998 | February 1, 1999 | ||
|---|---|---|---|
| HIGHEST 5 YEARS | MOS. SVC. | HIGHEST 5 YEARS | MOS. SVC. |
| $2,833.33 | 1 | $19,833.31 | 7 |
| $32,400.00 | 12 | $32,400.00 | 12 |
| $30,800.00 | 12 | $30,800.00 | 12 |
| $29,400.00 | 12 | $29,400.00 | 12 |
| $28,000.00 | 12 | $ 28,000.00 | 12 |
| $123,433.33 | 49 | $140,433.31 | 55 |
| $123,433.33 / 49 x 12 = $30,228.57 | $140,433.31 / 55 x 12 = $30,639.99 | ||
| $30,228.57 x 1.97% x 27 yrs. / 12 | $30,639.99 x 2.20% x 27.5 yrs./ 12 | ||
| = $1,339.88 / mo. Basic Option | = $1,544.77 / mo. Basic Option | ||
By waiting and working through January 31, 1999, his benefit is increased $204.89 per month. Of course, John may want to consider the effect that waiting until August 1 of 1999 might have on his final compensation by going into another fiscal year. So long as he retires no later than January 1, 2009, he will be entitled to the 2.2% factor.
Funding for Senate Bill 142 was deferred until the 2000-2002 Biennial Budget.
Effective August 1, 1998, or later, a member participating in KERS, CERS or SPRS who has at least 240 months of service credit may purchase up to five years credit for "nonqualified" service. Nonqualified service is service not otherwise allowed under other provisions of the statutes. Because it does not have to meet any qualifications, no proof of service is required; you do not have to show employment.
If you are an employee participating in KERS, CERS or SPRS and have 240 months service, you may purchase additional credit in 12-month increments not to exceed a total of five years.
A cost above $1,000 is eligible for installment purchase. You may purchase the service on an installment basis if you are participating in KERS or SPRS or if you are participating in CERS and your agency allows for installment payments.
You pay the full actuarial cost of the service. The cost of the service is determined by multiplying an actuarial factor based on your age times the higher of your annual salary or final compensation at the time of purchase. Age is "age nearest" for actuarial purposes. So if you make the purchase within 6 months of your next birthday, your cost will be calculated using your age at your next birthday.
On the following pages are tables which give actuarial factors for every year of age from age 40 through age 65. To estimate the cost of a year of nonqualified service, use the following formula and refer to the appropriate table for the Age Factor:
Annual Salary X Age Factor = Cost of one year
_____________ X ____________ = _________________
Annual salary equals your current monthly salary x 12. For the age factor, pick the age factor closest to what your age will be at the time of purchase. (Note, actuarial factors increase whenever benefits increase and may change in future years if the actuarial assumptions of the system, including assumed rate of return and life expectancy, are modified.)
NOTE: Do not send any money for purchase of service until you have received an official written calculation of the cost from the retirement office. Checks for which calculations have not been done will be returned.
Use this table if
You are making a purchase in a KERS nonhazardous account
AND You were a participant in one of the state administered retirement systems January 1, 1998
AND You will continue to participate through January 1, 1999
AND You are projecting a nonqualified service purchase cost before February 1, 1999
OR
You were hired after January 1, 1998
AND You are projecting your future cost
| Age | Factor |
|---|---|
| 40 | 0.08980 |
| 41 | 0.09136 |
| 42 | 0.09296 |
| 43 | 0.09459 |
| 44 | 0.09626 |
| 45 | 0.09798 |
| 46 | 0.09974 |
| 47 | 0.10156 |
| 48 | 0.10343 |
| 49 | 0.10536 |
| 50 | 0.10735 |
| 51 | 0.10940 |
| 52 | 0.11153 |
| 53 | 0.11373 |
| 54 | 0.11600 |
| 55 | 0.11836 |
| 56 | 0.12081 |
| 57 | 0.12336 |
| 58 | 0.12601 |
| 59 | 0.12878 |
| 60 | 0.13168 |
| 61 | 0.13472 |
| 62 | 0.13792 |
| 63 | 0.14131 |
| 64 | 0.14492 |
| 65 | 0.14877 |
Use this table if
You are making a purchase in a KERS nonhazardous account
AND You were a participant in one of the state administered retirement systems January 1, 1998
AND You will continue to participate through January 1, 1999
AND You are projecting a nonqualified service purchase cost after February 1, 2009
| Age | Factor |
|---|---|
| 40 | 0.09117 |
| 41 | 0.09276 |
| 42 | 0.09437 |
| 43 | 0.09603 |
| 44 | 0.09773 |
| 45 | 0.09947 |
| 46 | 0.10126 |
| 47 | 0.10311 |
| 48 | 0.10500 |
| 49 | 0.10696 |
| 50 | 0.10898 |
| 51 | 0.11107 |
| 52 | 0.11323 |
| 53 | 0.11546 |
| 54 | 0.11777 |
| 55 | 0.12017 |
| 56 | 0.12265 |
| 57 | 0.12524 |
| 58 | 0.12793 |
| 59 | 0.13074 |
| 60 | 0.13368 |
| 61 | 0.13677 |
| 62 | 0.14002 |
| 63 | 0.14346 |
| 64 | 0.14712 |
| 65 | 0.15104 |
Use this table if
You were a participant in one of the state administered retirement systems January 1, 1998
AND You will continue to participate through January 1, 1999
AND You are projecting a nonqualified service purchase cost after February 1, 1999 and before February 1, 2009
| Age | Factor |
|---|---|
| 40 | 0.10029 |
| 41 | 0.10203 |
| 42 | 0.10381 |
| 43 | 0.10564 |
| 44 | 0.10750 |
| 45 | 0.10942 |
| 46 | 0.11139 |
| 47 | 0.11342 |
| 48 | 0.11550 |
| 49 | 0.11766 |
| 50 | 0.11988 |
| 51 | 0.12218 |
| 52 | 0.12455 |
| 53 | 0.12701 |
| 54 | 0.12955 |
| 55< | 0.13218 |
| 56 | 0.13492 |
| 57 | 0.13776 |
| 58 | 0.14072 |
| 59 | 0.14381 |
| 60 | 0.14705 |
| 61 | 0.15044 |
| 62 | 0.15402 |
| 63 | 0.15781 |
| 64 | 0.16184 |
| 65 | 0.16614 |
Use this table if
You are making a purchase in a CERS nonhazardous account
| Age | Factor |
|---|---|
| 40 | 0.10029 |
| 41 | 0.10203 |
| 42 | 0.10381 |
| 43 | 0.10564 |
| 44 | 0.10750 |
| 45 | 0.10942 |
| 46 | 0.11139 |
| 47 | 0.11342 |
| 48< | 0.11550 |
| 49 | 0.11766 |
| 50 | 0.11988 |
| 51 | 0.12218 |
| 52 | 0.12455 |
| 53 | 0.12701 |
| 54 | 0.12955 |
| 55 | 0.13218 |
| 56 | 0.13492 |
| 57 | 0.13776 |
| 58 | 0.14072 |
| 59 | 0.14381 |
| 60 | 0.14705 |
| 61 | 0.15044 |
| 62 | 0.15402 |
| 63 | 0.15781 |
| 64 | 0.16184 |
| 65 | 0.16614 |
Use this table if
You are making a purchase in a CERS hazardous account
| Age | Factor |
|---|---|
| 40 | 0.16867 |
| 41 | 0.17165 |
| 42 | 0.17471 |
| 43 | 0.17786 |
| 44 | 0.18109 |
| 45 | 0.18442 |
| 46 | 0.18786 |
| 47 | 0.19142 |
| 48 | 0.19511 |
| 49< | 0.19894 |
| 50 | 0.20292 |
| 51 | 0.20707 |
| 52 | 0.21138 |
| 53 | 0.21588 |
| 54 | 0.22058 |
| 55< | 0.22548 |
| 56 | 0.22245 |
| 57 | 0.21926 |
| 58 | 0.21591 |
| 59 | 0.21238 |
| 60 | 0.20868 |
| 61 | 0.20481 |
| 62 | 0.20077 |
| 63 | 0.19658 |
| 64 | 0.19225 |
| 65 | 0.18780 |
Use this table if
You are making a purchase in a KERS hazardous account
| Age | Factor |
|---|---|
| 40 | 0.16800 |
| 41 | 0.17097 |
| 42 | 0.17402 |
| 43 | 0.17715 |
| 44 | 0.18037 |
| 45 | 0.18368 |
| 46 | 0.18711 |
| 47 | 0.19066 |
| 48 | 0.19433 |
| 49 | 0.19815 |
| 50 | 0.20211 |
| 51 | 0.20624 |
| 52 | 0.21054 |
| 53 | 0.21502 |
| 54 | 0.21970 |
| 55 | 0.22458 |
| 56 | 0.22156 |
| 57 | 0.21839 |
| 58 | 0.21505 |
| 59 | 0.21153 |
| 60 | 0.20785 |
| 61 | 0.20399 |
| 62 | 0.19997 |
| 63 | 0.19579 |
| 64 | 0.19148 |
| 65 | 0.18705 |
Use this table if
You are making a purchase in a SPRS account
| Age | Factor |
|---|---|
| 40 | 0.16867 |
| 41 | 0.17165 |
| 42 | 0.17471 |
| 43 | 0.17786 |
| 44 | 0.18109 |
| 45 | 0.18442 |
| 46 | 0.18786 |
| 47 | 0.19142 |
| 48 | 0.19511 |
| 49 | 0.19894 |
| 50 | 0.20292 |
| 51 | 0.20707 |
| 52 | 0.21138 |
| 53 | 0.21588 |
| 54 | 0.22058 |
| 55 | 0.22548 |
| 56 | 0.22245 |
| 57 | 0.21926 |
| 58 | 0.21591 |
| 59 | 0.21238 |
| 60 | 0.20868 |
| 61 | 0.20481 |
| 62 | 0.20077 |
| 63 | 0.19658 |
| 64 | 0.19225 |
| 65 | 0.18780 |
For example, an employee age 54 in KERS (nonhazardous) with 25 years service August 1 who earns $2,700 per month ($32,400 annually) would have an approximate cost of $32,400 x .11600 x 1 = $3,758. Five years would cost approximately $18,792. He must purchase before February 1, 1999 to buy it at this cost because the KERS factor will increase for him February 1, 1999.
Is it worth it? Let's assume the employee in our example works two more years after making the purchase and his final compensation will be $33,000. He retires August 1, 2000. He will have a total of 32 years credit and be age 56. Without the 5 years he purchased, he would have only had 27 years credit.
Total benefit at 27 years = 27 X 2.2% X $33,000 = $19,602 per year or $1,633.50 per month. Total benefit at 32 years = 32 X 2.2% X $33,000 = $23,232 per year or $1,936.00 per month, $302.50 more per month. To recover the $18,792 it will take him 62 months or 5.2 years, not counting cost of living increases.
Effective July 15, 1998, if you are an employee in KERS or SPRS and have service in the National Guard or Reserves, you may purchase one month credit for each six months you served in the National Guard or Reserves. You must have at least 60 months retirement service (48 months if you are age 65 or older) before you are eligible. The cost of the service is the full actuarial cost, as explained in the section on Nonqualified Service. You will need your latest annual statement of service from the Guard or Reserves, as proof of your service, or your DD-214, if no longer a member of the Guard or Reserves. There is no limit to amount of service that may be purchased, and service may be purchased in increments of 12 months.
Previously, only CERS members were allowed to purchase out-of-state hazardous service. Effective July 15, 1998, any employee participating in one of the state administered retirement systems who is vested in SPRS or in a CERS or KERS hazardous position (60 months service) may purchase out of state hazardous service. The service must be from previous full-time employment in a position that would qualify under the definition of hazardous service, it must have been credited under a state or local government administered defined benefit plan and you must not be eligible for a benefit from the service under the defined benefit plan. If you have out of state service, contact the retirement office for the form for verifying the service. Cost of the service is determined at the full actuarial cost, as noted in Nonqualified Service.
Previously, you could only purchase out of state nonhazardous service in KERS. Effective July 15, 1998, you may purchase out of state nonhazardous service in either KERS or CERS so long as you have a vested account (60 months service). The service must be from previous full-time employment, it must have been credited under a state or local government administered defined benefit plan and you must not be eligible for a benefit from the service under the defined benefit plan. If you have out of state service, contact the retirement office for the form for verifying the service. Cost of the service is determined at the full actuarial cost, as noted in Nonqualified Service.
KRS 61.552 did not provide for purchase of service with agencies that did not participate in KERS or CERS but became participating agencies when they were merged with or taken over by another public agency. Effective July 15, 1998, this provision has been changed to allow employees of the agency that was merged or taken over to purchase past service credit.
If the retirement office discovers that an employer failed to report contributions for a period of service (called omitted service), the retirement office notifies you of your right to pay the employee contributions on the wages and gain credit for the service. Effective July 15, 1998, a procedure has been added to the statutes to allow purchase of omitted service without interest if you make the purchase within six months after you are first notified by the retirement office.
If a retired member pays the contributions within the six months, his benefit will be recalculated using the added service. If the retired member does not make the purchase within six months, he cannot purchase the service credit at a later date.
An employee participating in one of the state administered retirement systems can purchase omitted service after the six months by paying the contributions plus interest. The omitted service may also be purchased through the installment purchase plan if available through the employer. The cost must be more than $1,000 to be eligible for installments. Retired members must pay the cost in a lump sum.
Effective July 15, 1998, if you participate with an agency in CERS that provides for sick leave credit for up to six months service, that agency may elect to split the cost of sick leave in excess of six months with the employee or pay the entire cost of sick leave in excess of six months. If the agency elects to pay half or all of the cost of the sick leave, it must elect to do so for all employees.
Effective July 15, 1998, SPRS employees may convert nonhazardous service to hazardous service for employment in positions that have since been approved for hazardous coverage. SPRS employees previously could not make hazardous conversions.
Members who retire on disability have been required to undergo an annual financial and medical review. Effective July 15, 1998, the Medical Examiners may determine a less frequent review schedule for disability recipients. Each recipient will be reviewed at least once every five years. Disability retirees approved after July 15, 1998, will be notified of the frequency of their review at the time of approval. Current disability recipients will be notified if their review will be changed from an annual to a less frequent review at the next annual review.
Current employees who have 25 or more years service and who are approved for disability receive additional service credit up to a maximum of 30 years credit. Employees hired on or after July 15, 1998 who will have 25 or more years of service and are approved for disability will receive service up to a maximum of 27 years.
A disease or condition which existed prior to an employee's membership in the system or reemployment may not be considered for disability retirement unless the condition was substantially aggravated by an injury or accident arising out of the course of employment unless the employee has 16 years service credit in KERS, CERS or SPRS.
Effective July 15, 1998, this provision has been clarified so that an employee who changes full-time jobs between employers participating in KERS, CERS or SPRS without a break in service will not be considered as being "reemployed" for this provision. In other words, if an individual begins participating in KERS, leaves state employment to take a position in CERS without a break in service, a condition which may have begun while working in the KERS position but which did not become serious until the employee was in CERS would not be considered as preexisting the employee's date of membership in CERS.
The disability provisions in Chapters 16 and 61 relating to both hazardous and nonhazardous members of KERS, CERS and SPRS were amended to make it clear that an employee who is denied benefits on the basis of a disability application has the right, if still employed, to file a second disability application if the employee develops a new condition, injury or disease which was not considered in the original application. In other words, if you apply for disability retirement on a claim related to back pain and are denied, but continue to work, you would have the right to apply again for disability if you developed a new condition unrelated to the previous disability application. Effective July 15, 1998.
The disability provisions related to filing of applications, medical information and appeal requests have been amended effective July 15, 1998, to make it clear that no application, medical information or appeal request can be considered until it has been received at the retirement office.
Effective July 15, 1998, an employee participating in KERS, CERS or SPRS who has prior service in a position in a Commonwealth Attorney's office may receive credit for that service if the employee has at least 15 years current service in CERS and notifies the retirement office of eligibility for the service prior to January 1, 1999. Prior service is service prior to July 1956 for KERS members or prior to July 1958 for CERS and SPRS members.
The following definitions have been added or amended as indicated by the bold type effective July 15, 1998:
"Act in line of duty" means an act occurring...which was required in the performance of the duties specified in KRS 16.060 (for SPRS members) or... the principal duties of the position as defined by the job description (for KERS and CERS hazardous).
"Creditable compensation" means all salary, wages, tips...and fees paid to the employee as a result of service performed for the employer which are includable on the member's federal form W-2 wage and tax statement... This is to clarify that payments from Workers' Compensation do not constitute creditable compensation. Note, lump sum payments for vacation and sick leave at the time of termination or retirement do not constitute salary or wages for work performed and are not included in creditable compensation.
"Fiscal year" means... the plan year. It was necessary to define plan year because federal regulations refer to the plan year of the system.
"Participating" means an employee is currently earning service credit in the system.... This definition was needed because under certain circumstances an employee may cease to contribute but still earn service credit through employment with a participating agency. Service purchases are generally allowed if the employee is "participating" in the retirement system.
"Temporary" also referred to as probationary... This change makes it clear that initial probationary periods are the same as "temporary." Full-time temporary service may be purchased.
Effective July 15, 1998, the statutes include a description of the procedure for determining the amount of service credit given in each system where the employee is simultaneously participating in more than one system or in a hazardous and nonhazardous position within the same system. No member can gain credit for more than 12 months of service credit in any one year.
If you are simultaneously contributing to two retirement systems, you receive a total of 12 months service credit divided between the systems based on percentage of salary earned in each system. For example, county attorneys are paid from both state funds and local government funds. As a result, a county attorney participates in both KERS and CERS. If 2/3 of the salary is paid from state funds, then the county attorney would receive 2/3 of the year's service, or 8 months, in KERS and the remaining 1/3, or 4 months, in CERS.
Over a 30-year period the county attorney would receive 20 years of credit in KERS and 10 years of credit in CERS. Each system would pay benefits based on the service in the individual system, but total service would be used to determine eligibility for benefits. The salaries paid from both the state and local government funds would be combined to determine final compensation.
The same procedure is used where a member is simultaneously contributing to the same system in both a hazardous and nonhazardous position.
Effective July 15, 1998, a member who has earned service credit in a retirement system, other than Teachers' Retirement System, sponsored by a Kentucky institution of higher education or the Higher Education Assistance Authority, may count the service toward qualifying for a reduced benefit at 25 years of service or for an unreduced benefit at 27 years of service. This includes service in TIAA. The member must have at least 15 years service in KERS, CERS, SPRS, Teachers' Retirement System or Legislators' Retirement Plan to be eligible.
Benefits paid by the retirement system are based on the actual service in the retirement system. The service in TIAA is not used to calculate the actual monthly benefit, only to determine eligibility for drawing a reduced or unreduced benefit.
Effective July 15, 1998, all service with one of the state administered retirement systems may be combined for determining eligibility for medical insurance benefits. This includes service with KERS, CERS, SPRS, Kentucky Teachers' Retirement System, Legislators' Retirement Plan and the Judicial Retirement Plan. The reciprocal arrangement only applies toward the single premium amount set by the respective board.
For hazardous members retiring after July 15, 1998, who have both hazardous service and nonhazardous service, the amount contributed toward spouse or family medical insurance coverage will be based on the actual amount of hazardous service. In other words, if you retire on October 1, 1998 and have 20 years hazardous service, the retirement system will pay the full monthly contribution (currently $431.55) toward spouse and dependent coverage. If you have only 15 years hazardous service but also have 10 years nonhazardous service, the retirement system will pay the full amount for single coverage ($194.50 in 1998) because you have 20 years combined service and 75% of the additional cost of family coverage because you have 15 years hazardous service. A member retiring with fewer than 48 months of hazardous service will receive no contribution toward spouse and dependent coverage. This provision does not apply to hazardous members retired before July 15, 1998, who are already receiving a contribution toward spouse and dependent coverage.
The General Assembly made changes to the way service will be credited to employees of local school districts. These changes only apply to the school years beginning after July 1, 1996.
The key requirement for service credit has not changed--employees of local school districts must average 80 or more hours per month over the period worked. If the employee completes the employment contract the employee receives service by dividing the number of days worked in the contract by 20 and rounding to the nearest whole month. A 185 day employee receives 9 months credit because 185 divided by 20 equals 9.25 months. Rounding to the nearest whole month equals 9. Any employee who does not average at least 80 hours of work per month will only receive credit in those months in which 80 or more hours were actually worked.
For the school years 1996-1997 and 1997-1998, HB 36 provides that employees whose service credit for those years was rounded down to the nearest whole month will have their service credit rounded up to the next month. For example, a full-time employee who worked 9.25 months in 1996-1997 and received credit for 9 months will now receive 10 months credit for 1996-1997. Cost for this service has been provided through a special appropriation by the General Assembly of $512,800 in state and local funds over the biennium.
For school years 1998-99 and after, service will be calculated by rounding to the nearest whole month. At the time of retirement, the individual will have all service recalculated and rounded up to the next whole month, the same as for the 1996-1997 and 1997-1998 school years. The school board where the employee worked at the time of the service will pay the cost of the additional months given under the rounding up. If the employee worked for more than one school board, the individual school boards will only pay for the rounded months that were earned in their employment.
The employee will receive the added months upon death, disability or retirement. Any rounded months after July 1998 that the employee is entitled to will be noted on the Annual Statements issued in 1999 and after. If the employee wishes to purchase the "summer months," the employee will not have to purchase a month that will be rounded up at the time of retirement.
If the employee terminates and takes a refund, the employee will forfeit the months after July 1998 that would have rounded up unless the employee pays the cost of the month of service. Any summer months that are lost due to a refund could not be repurchased until the rounded month in the year of the summer months is purchased.
If you are a retired member who worked for a school board and who earned service during the 1996-1997 or 1997-1998 school years, you will be given credit for months that would have rounded up by applying the new provision, and your pension will be adjusted.
HB 36 also contains a requirement that the Kentucky Education Support Personnel Association be notified of meetings of the Board of Trustees.
Effective July 15, 1998, local school boards may elect to share the cost of purchasing summer months with employees who are eligible. Under the provision, school boards may elect to pay the employer contribution plus any interest due while employees would pay the employee contributions plus interest due. Interested school boards may contact the Employer Services Division in the retirement office.
Membership was amended to refer to an employee "participating" in the system, meaning earning service credit. Membership was amended to allow for participation by legislators or judges who are no longer contributing to the Legislators' Retirement Plan or Judicial Retirement Plan. Membership was also amended to provide an option for KERS members transferring to the new Kentucky Community and Technical College system to elect continued participation in KERS or in a plan offered by the Kentucky Community and Technical College system.
The following changes contained in HB 234 relate to administration of the systems:
Your June 30, 1998 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 1998 General Assembly. Please note that the statements provide estimates of your benefits as of June 30, 1998. The benefits reflected on the statement will not reflect the changes enacted by the 1998 General Assembly because those changes do not become effective until after June 30, 1998.
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 1998 Summary Plan Description Booklet with your signature and Social Security number to the retirement office at the following address:
Last Updated: 7/05/2002