Brief ⁽¹⁾

Senate Sub. for HB 2040 includes a number of retirement-related provisions, including amendments to the Kansas Public Employees Retirement System (KPERS), to the Judges Retirement System, to state tax law for retirees of Washburn University, and to local police and fire pension plans.

Tax Exemption. The bill would exempt from Kansas income tax the retirement benefits of retirees from Washburn University who are covered by the Teachers Insurance Annuity Association-College Retirement Equities Fund (TIAA-CREF) retirement plan. The implementation of this legislation would be effective January 1, 2003.

Judges Retirement Age. The bill would fix the retirement age for judges at age 75.

Local Pension Plans. The bill would change the minimum contribution rate for cities that maintain local police and fire pension plans. It would provide that the minimum contribution rate shall be the sum of the normal cost rate plus the amortization of any unfunded actuarial liability over a rolling 20-year period. It also would eliminate the current requirement that until the plan has no unfunded actuarial liability, the local unit of government must contribute an amount not less than the total amount of pension payments paid in the prior plan year.

KPERS Legislation. The bill would amend a number of KPERS statutes and would:

• 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.
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• 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.
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• 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.
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• 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 pop up to the maximum monthly benefit had not the survivor option been selected.
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• 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.
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• 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.
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• 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.
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• 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.
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• Delete references to KSA 74-4911(b) which has been repealed.
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• Clarify 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 provision was amended to clarify that the participating employer in the case of educational institutions would be the local authority, not the state.
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Background

A Senate Subcommittee on KPERS issues held public hearings and reviewed the different retirement-related Senate bills assigned for study. KPERS staff also addressed specific requests for legislation from the Board of Trustees that were introduced in several House bills that had not passed the other chamber. Conferees appeared in support of four Senate bills assigned: SB 12, SB 17, SB 46, and SB 340. The Senate Subcommittee recommended and the Senate Ways and Means Committee concurred with the merging of three Senate bills and several House bills into Senate Sub. for HB 2040. The bills that were incorporated are referenced below.

Background for SB 12. This measure would assist retirees of Washburn University by removing state income tax from retirement benefits. It was noted that this action would make tax treatment for Washburn retirees' pension benefits consistent with the state tax treatment of pension payments for retirees who had been in the unclassified service at Regents institutions and participated in a similar 403(b) defined contribution plan commonly referred to as TIAA-CREF. The annual impact was estimated between $45,517 and $83,335 in lost revenue to the State General Fund. The President of Washburn University appeared in support of SB 12.

Background for SB 46. The bill would provide that members of the Retirement System for Judges must retire upon attaining age 75. Under current law, a judge can continue as an active judge through the term in which age 70 is reached. The retirement age can range from 70 to 74 based on present statutory language. There would be no fiscal impact. A spokesperson for the Office of Judicial Administration spoke in favor of SB 46.

Background for SB 340. The proposal would give the City of Wichita flexibility in annual budgeting for an actuarially fully funded (113 percent) local Police and Fire pension plan. The bill would impact only local pension plans, and would not impact the Kansas Police and Firemen's (KP&F) Retirement System. There would be no actuarial or administrative cost for KPERS. The City of Wichita could realize cost savings in its annual budgeting for retirement contributions. The pension administrator for the City of Wichita appeared in support of SB 340.

Background for HB 2542. The KPERS Board of Trustees requested a number of items to clarify or correct current retirement laws. This bill included those items, many of which are technical in nature. The first nine items under KPERS Legislation are brief descriptions of each of the proposals. In general, these proposals would have no actuarial or fiscal impact.

Background for HB 2538. Under current law, KPERS must seek recovery of overpayments 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. The last item under KPERS Legislation is a brief description of this proposal. For certain situations, KPERS would be given authority to take the following actions.

First, if the final amount certified results in an overpayment to a retired member, then the participating employer would be held responsible for making the correct contribution based upon the amount previously certified. The retirement benefit would not be reduced by KPERS even though incorrect contribution information might have inflated the final average salary in such a case.

Second, if the final amount certified results in an underpayment to a retired member, then the participating employer would be responsible for reporting the correct amount and remitting the correct contribution. In such a case, the retirement benefit would be adjusted by KPERS, which would recalculate the corrected final average salary of the retired member to determine a higher monthly benefit.

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