Brief(1)
S.B. 41, as introduced, would modify current law passed by the 1998 Legislature that requires local units of government to pay any actuarial cost resulting from the use of sick, annual or vacation leave, severance pay, or any other payments to KPERS or KP&F members that increases final average salary by more than 15 percent. Local units, including individual school districts, are assessed all of the additional actuarial cost for any amount in excess of a 15 percent increase in retirement benefits. Current law requires a lump sum payment of the excess cost. The proposed modification in S.B. 41 would allow payment either as a lump sum or in 15-year installment amounts.
Background
The Executive Director of the League of Kansas Municipalities asked the Joint Committee on Pensions, Investments, and Benefits to address this issue that affects several Kansas governmental units. It was pointed out that the new 15 percent cap on inflating final average salary has had, and will continue to have as more employees retire, an adverse financial impact on some local units of government. The Personnel Director, United Government of Wyandotte County/Kansas City, Kansas, reported that Price, Waterhouse, Coopers had calculated the potential liability of the change to be $1,839,811 in 1998 if all 74 eligible employees retired, and $338,114 in 1999 if all 25 employees retired.
During the 1998 interim, the Joint Committee considered the KPERS actuary's recommendations of several methods for paying the liability in a manner other than the present lump sum method which places a budget burden on some local units of government. The preferred method would allow the local units of government which incur a cost to pay the liability over 15 years as an increase in the actuarial contribution rate, according to the KPERS actuary.
The Joint Committee recommended introduction of S.B. 41 to allow a special local employer contribution rate to be established when the 15 percent cap is exceeded and for the amortization period to be 15 years. The present lump sum payment method was retained as an option.
The Executive Director of the League appeared before the Senate Ways and Means Committee to support the proposal in S.B. 41. KPERS staff noted that only employees hired prior to July 1, 1993, can use supplemental salary payments to boost their final average salary. Newer hired public employees cannot use such final payments from their employers when computing final average salary for KPERS retirement benefits.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html.