Brief (1)
Senate Sub. for HB 2624 is the Ways and Means Committee's designated Kansas Public Employees Retirement System (KPERS) omnibus bill for the 2000 Session. In addition to including the original provisions of HB 2624 as passed by the House, the Senate Committee added a number of other KPERS provisions.
KP&F Lump Sum Death Benefit. This item from the original bill would provide a lump sum death benefit equal to 100 percent of a Kansas Police and Fireman's Retirement System (KP&F) member's salary (less amounts of accumulated contributions) when any KP&F member dies without a wife or children as beneficiaries. The fiscal note indicates an actuarial calculation estimates the cost to the state to be an additional $29,000 annually and the local units an additional $193,000 annually to pay for this benefit.
Lump Sum Payment. This item would provide a lump sum payment option at retirement, or upon death of a member, that would reduce defined benefits by no more than 50 percent for life. Up to 50 percent of the actuarially calculated benefit could be taken as a lump sum amount under this option for members covered by the following plans: regular KPERS, KP&F, or the Judges Retirement System. The implementation date would be delayed until July 1, 2001 in order to give KPERS adequate lead-in time to implement this change. The fiscal note for administrative costs is $100,000.
Public Elected Officials Retirement. New provisions would allow certain legislative and other local public officials to retire from a second KPERS participating employer and be able to continue serving in an elective position. Current KPERS law requires a member, in order to retire, to be off the payroll of all KPERS participating employers for at least 30 days, thus requiring that a member resign from both participating employers. The first provision added to the bill would permit members of the Legislature, who also are employed by another KPERS participating employer, to retire and to continue to serve in the Legislature. The other provision would allow local elected officials to retire from a KPERS participating employer and to continue to serve as an elected public official.
Payment of Benefit Enhancements. This provision would require that any benefit increases, such as cost-of-living adjustments or an increase in the $4,000 death benefit or other enhancement to death or disability benefits, would be recognized immediately and any required payments to amortize the actuarial costs of such enhancements would begin in the fiscal year immediately after the Legislature or the Board grants a benefit enhancement that has an actuarial cost.
Vesting. Under current law, KPERS members who become eligible for another retirement plan, such as the Regents defined contribution plan, or who become ineligible for the KPERS plan because of reduced hours, cannot withdraw the employee KPERS contributions until employment is terminated with a KPERS participating employer. This provision would vest such persons in a KPERS benefit, regardless of the number of years of service, so that withdrawal of contributions would no longer be an issue. Until a person is vested, after five years under current law, accounts of inactive members stop earning interest. This proposal also incorporates SB 573 that pertains only to Regents employees, but the Committee amendment applied the concept to all of state government in order for other employees, such as those who become eligible for the 8.0 percent deferred compensation plan, also may be vested in KPERS if they have less than ten years of service.
Taxation of Death Benefits. Under current law, KPERS death benefits (except those related to service connected deaths) are fully taxable as income by both the federal and state government. This change would give the KPERS death benefits the characteristics of life insurance which would allow such benefits to be tax free.
Session Employees. The 1996 legislation addressing retirement benefits of legislative session employees provides some of them with life insurance, long-term disability, and service-connected death benefits that generally are available only to full-time employees covered by the 8.0 percent deferred compensation plan. This change would correct the situation since these employees are part-time and other temporary legislative employees who do not participate in the 8.0 percent plan are not eligible for those benefits.
Correction of Errors. Current law requires KPERS to correct errors and collect all overpayments. This provision would limit the amount of overpayment to be collected. The correction of erroneous KPERS benefit calculations would be required, but collection of overpayments would be limited to only those overpayments that were made within the most recent five years. Any overpayments made more than five years would be waived, unless there were some indication of fraud. Regardless of actuarial projections, a corrected benefit would not be reduced by more than 10 percent in order to collect past overpayments. In regard to mistakes with any calculations made in conjunction with the 1993 COLA, the Subcommittee adds the recommendation that the Board shall waive 75 percent of any amounts paid in error. This would address a concern found in SB 649 that would waive 100 percent of amounts paid in error. There are three known instances where errors were made by KPERS and have been identified for the 1993 COLA calculations.
Purchase of Service Statutes. There are four sections of the KPERS law that contain language that is identical to language that was eliminated from numerous sections in 1998 with passage of the federal compliance revisions to KPERS statutes. The language in these four statutes was not amended in 1998 and this correction would make them consistent with other statutes.
Indexing. A technical correction would clarify that the current policy of indexing final average salary or indexing the current annual rate for disabled KPERS members will commence when the employee leaves the payroll, not on the last day at work. This change would correct the potential double counting of annual salary increases.
Conflict Resolution. Resolve a conflict of laws relating to the real estate provisions where the same section of law was amended twice in the same year and is repeated twice in the statute books because one bill did not amend the language in the other bill.
Authority to Charge Fees. KPERS would be authorized to assess fees for any services provided in regard to activities not exclusively for the benefit of its members. This recommendation would authorize KPERS to recoup its costs in conjunction with SB 660 and previous legislation that assigned the KPERS Board additional duties and responsibilities for managing investments of nonretirement moneys.
VISTA Service Purchases. New authorization is added to allow the purchase of service credit for periods of work in the Volunteers in Service to America (VISTA). All service purchases must be at the actuarial rate and may be purchased either in a lump sum or over time. The value of the service credit selected may be either 1.0 percent or 1.75 percent, with a higher actuarial cost for the latter. These provisions apply to regular KPERS members and members of the Retirement System for Judges.
Background
The Senate Ways and Means Subcommittee on KPERS issues held a public hearing on KPERS issues and bills, received reports from the KPERS Board of Trustees, and reviewed a number of recommendations from the KPERS Board and in House and Senate bills that propose legislative adjustments for KPERS issues.
Representatives of the Kansas Retired Teachers Association (KRTA) and the Kansas Association of Public Employees expressed concern about the Governor's proposed "freeze" on the KPERS retirement contribution rate. Representatives of KRTA and the State Employees Association of Kansas requested consideration of SB 437 which would provide additional retirement benefits amounting to $1.00 per year of credited service. Two conferees spoke in favor of the original provisions of HB 2624 that would make KP&F death benefits the same as those currently authorized for KPERS members when there is no spouse or minor children. The General Counsel for the Board of Regents spoke in favor of SB 573. A representative of the City of Topeka asked for consideration of the concept in HB 3029 that would allow public elected officials to continue uninterrupted service after retiring from a KPERS participating employer. KPERS staff presented the Board of Trustees requests for legislation.
The Senate Committee of the Whole added three amendments, two of which concerned elected public officials and one which concerned service credit purchases by members of KPERS and the Retirement System for Judges.
HB 2624 as passed by the House would provide a lump-sum payment of 100.0 percent of the member's current annual salary to the beneficiary, which would be reduced by the amount of the member's contributions as in current law. Under current law, only the member's contributions are returned to the beneficiary at the time of a KP&F member's death prior to retirement, when no benefits are otherwise payable and if the member has no spouse or minor children. Representative Tom Sloan, one of the sponsors of the bill, testified in favor of the bill. Sheriff Loren Anderson of Douglas County also testified in favor of the bill when appearing before the Kansas Select 2000 Committee.
Fiscal Note
Two items have anticipated fiscal impact on KPERS and participating employers. The fiscal note for HB 2624 as passed by the House indicates that there would be required additional employer contributions of 0.8 percent of the covered payroll to pay for the KP&F death benefit change. The effect of the rate increase would first be realized in FY 2003, requiring additional annual state employer contributions of $29,000 and additional annual local government employer contributions of $193,000 beginning in CY 2003. The other item was noted by KPERS staff for an administrative cost of $100,000 to implement the proposed new lump sum KPERS payment option. Most of the cost would be associated with computer programming. *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