Brief ⁽¹⁾

The bill includes a number of provisions related to the Kansas Public Employees Retirement System (KPERS), the Kansas Police and Firemen's (KP&F) Retirement System, and the Judges Retirement System. The various provisions would:

1. Grant a one-time bonus payment equal to one-half of a monthly benefit, to be paid on October 1, 2001, to all eligible retirees, their beneficiaries, and disabled members under KPERS, KP&F, and Judges Retirement System.
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3. Provide that any former member of the Kansas School Retirement System (KSRS) who retired prior to January 1, 1971, and had 20 years of KSRS service credit would begin receiving a three-year phased-in retirement benefit adjustment beginning July 1, 2001, with a $500 initial minimum benefit increasing to $750 in year three.
   
   
4. Allow repurchase of KP&F service credit by Tier I members at an actuarially determined amount, either as a lump sum or over time through payroll deductions.
   
   
5. Change the title of Executive Secretary to Executive Director to conform with the title of most other public pension plan chief executive officers and with the title of many state agency heads.
   
   
6. Allow KPERS members flexibility to prearrange funerals by allowing assignment to funeral homes of the current $4,000 death benefit paid after a retired member dies.
   
   
7. Change with respect to the new lump sum option, in which a retiring member may take up to 50 percent of a benefit as a single payment, to require a spouse's consent ratifying the selection of this option.
   
   
8. Amend current law by providing that if a member chooses a lump sum payment and a survivor option, and if the joint annuitant dies first, then the retired member's benefit would popup to the maximum monthly benefit had not the survivor option been selected.
   
   
9. Make technical amendments to current law, treating certain lump sum payments like life insurance. The amendments would clarify that lump sum payments are to be treated like life insurance in order to gain favorable tax treatment.
   
   
10. Allow the Board to waive the current two-year requirement time period allowed for filing applications to receive KP&F disability benefits. The Board would be given authority to waive this requirement if evidence indicated that the time limit for applications should be extended.
    
    
11. Limit the minor-children benefits to children born, conceived, or adopted prior to the commencement of a disability for KP&F Tier I members, effective for disabilities that commence on or after July 1, 2001.
    
    
12. Provide that a designated KPERS beneficiary can receive a deceased member's last check if there is no surviving spouse. Current law provides that only the surviving spouse may receive the last month's retirement check. If there is no surviving spouse, KPERS is required to use the statutory line of descendants even though the member may have selected a beneficiary who is not in that line.
    
    
13. Delete references to KSA 74-4911(b) which has been repealed.
    
    
14. Provide that after a KPERS participating employer certifies final contribution information of a retiring member, upon which results KPERS makes a retirement benefit calculation, KPERS could take certain actions after discovery of errors in the final report. The bill lists responses that would be followed by KPERS if errors were found, with different actions relative to situations involving either an overpayment or an underpayment of retirement benefits.
    
    
15. Add a provision to allow any judge who has retired under the Retirement System for Judges and who continued working in the Senior Judges Program to be eligible to buy service credit at full actuarial costs for the senior judge service years.
16. Allow lump sum payments to purchase KPERS service credit for waiting periods during which any currently active, contributing member of KPERS was eligible for assistance by the Board of Regents for a defined contribution plan, but had to wait one or two years before Regents assistance could begin.

Background

The House Budget Committee on KPERS issues recommended incorporating a number of House bills into House Sub. for Senate Sub. for SB 330. The four bills were previously recommended by the House Appropriations Committee, namely HB 2363, HB 2523, HB 2538, and HB 2542. The House Appropriations Committee merged the four bills and included an additional amendment addressing the Retirement System for Judges.

Background for HB 2363. The proposal as amended by House Appropriations Committee includes two provisions that would grant post-retirement benefit increases. Items 1 and 2 above are brief descriptions of the two benefit enhancement proposals.

The first provision would authorize payment of a one-time bonus equal in value to one-half of a monthly benefit check and would designate as eligible recipients all retirees (or their beneficiaries) and disabled members who retired or became disabled prior to July 1, 2000. The fiscal note indicates that a one-time bonus payment has an actuarial cost of $21.7 million that would increase the unfunded liability of the KPERS Fund if the cost were not prepaid. An additional cost of $1.0 million from the Group Insurance Reserve Fund is estimated to pay disabled members the one-time bonus. The FY 2002 fiscal impact would be to increase KPERS State/School retirement contributions by $960,000, State KP&F by $15,000, Judges by $18,000, Regents TIAA by $80,000, and local units by $324,000. The Group Insurance Reserve Fund has sufficient reserves to pay $1.0 million in FY 2002 which is the total unfunded liability for disabled KPERS members to receive the bonus payment. The one-time bonus would provide an average benefit payment of $388 to retirees and their beneficiaries, based on the July 2000 average payment estimated at $776 for eligible recipients. However, the bill would require the calculation to be based on the July 1, 2001, payments. A House floor amendment would exempt this provision's fiscal impact from being first recognized in FY 2002 and not require an additional amount above a statutory 0.2 percent increase to be paid.

The other provision would increase the monthly benefit payment for anyone with 20 or more years of credited KSRS service and would raise the minimum monthly benefit to $500 in FY 2002, $625 in FY 2003, and $750 in FY 2004, provided that retirement commenced prior to January 1, 1971. The fiscal note indicates that the KSRS enhancement would increase the unfunded actuarial liability by $1.2 million, resulting in an increase of the employer contribution rate for State/School by 0.01 percent if the cost were not prefunded. This would result in additional State-paid employer contributions on a 32-year basis, beginning with a payment of $96,000 from the State General Fund in FY 2002.

Background for HB 2523 as recommended by House Appropriations Committee would allow any former KP&F member who withdraws contributions after leaving covered KP&F employment, and then reenters covered KP&F employment, to purchase any forfeited service credit at an actuarially determined amount, either by paying a lump sum contribution or by making additional contributions through payroll deductions. A representative of the Kansas Fire Service Alliance spoke in favor the HB 2523 in order to allow repurchases of service credit through payroll deduction, as currently allowed for regular KPERS repurchases. HB 2523 would have a positive actuarial impact since current law allows lump sum purchases that are not based on an actuarially determined amount. The bill would clarify that all purchases must be based upon actuarially determined payments, whether as a lump sum or over time. Item 3 above is a brief description of the proposal.

Background HB 2538 as amended by the House Appropriations Committee would give KPERS certain authority in correcting mistakes. Under current law, KPERS must seek recovery of over payments from the retired member. For underpayments, KPERS recalculates the corrected retirement benefit. The fiscal impact would be shifted to the participating employer since the change in law would require payments to KPERS after errors are detected in the amount of contributions certified. The KPERS Executive Secretary spoke in favor of this proposal that was requested by the Board of Trustees. Item 13 above is a brief description of the proposal. A House floor amendment would end any future overpayments once an error was detected, and require the employer who made the mistake to notify the retired employee.

Background for HB 2542 as recommended by House Appropriations Committee contains a number of provisions requested by the KPERS Board of Trustees to clarify or correct current retirement laws. This bill includes those items, many of which are technical in nature. In general, these proposals would have no actuarial fiscal impact. The KPERS Executive Secretary spoke in favor of this proposal that was requested by the Board of Trustees. Items 4 to12 are brief descriptions of each of the proposals.

Background for Judges Retirement. An amendment regarding a judge making additional service credit purchases after retirement was included after discussion in the House Appropriations Committee. It was indicated in a letter to KPERS by Ice Miller, compliance attorneys for KPERS, that the amendment would not be in conflict with the Internal Revenue Code, so long as any benefit is distributed consistently with section 401(a)(9) and the accompanying regulations. Item 14 above is a brief description of the proposal.

Background for Service Credit Purchase. A House floor amendment added item 15. The new provision would supplement KSA 2000 Supp. 74-4919m that pertains to purchases of KPERS participating service by previous Regents employees who were eligible for participation in a defined contribution plan.

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/fulltext.cgi