SESSION OF 2023
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2195
As Amended by House Committee on Financial
Institutions and Pensions
Brief*
HB 2195, as amended, would modify the Kansas Public
Employees Retirement System (KPERS or Retirement
System) working after retirement provisions pertaining to
employer contributions by raising the threshold for the 30.0
percent employer contribution from $25,000 per calendar
year to $50,000 per calendar year and temporarily waiving
the 30.0 percent contribution rate for an 18-month window.
During this time, KPERS-participating employers would only
make statutory contributions on all KPERS retirant
compensation.
Temporary Modification to Contribution Rates Paid for
Covered Positions
The bill would require participating employers (State,
School, and Local) to pay only the statutory employer
contribution rate on retirant compensation earned during the
period of July 1, 2023, through December 31, 2024.
Under current law, participating employers are required
to pay a 30.0 percent “assessment” on compensation
exceeding the $25,000 threshold amount. [Note: Employers
are required to make contributions to KPERS to help finance
the Retirement System. The working after retirement law
requires employers to pay the statutory contribution rate for
the first $25,000 of the retirant’s salary and a 30.0 percent
____________________
*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.kslegislature.org contribution rate (“assessment”) on earnings over the
$25,000 threshold.]
Retirant Compensation Threshold Amount
The bill would also increase the retirant compensation
threshold that is subject to the statutory KPERS employer
contribution rate from the first $25,000 of a retirant’s
compensation earned in a calendar year to $50,000 per
calendar year. [Note: This threshold is not subject to the
temporary provisions described above.]
Technical Changes
The bill would also make technical updates to remove
previous working after retirement exceptions that expired
January 1, 2018.
Background
The bill was introduced by the House Committee on
Financial Institutions and Pensions at the request of
Representative Xu.
House Committee on Financial Institutions and Pensions
In the House Committee hearing, proponent testimony
was provided by the Chair Pro Tem of the Sedgwick County
Board of Commissioners, a former state representative, and
representatives of the Kansas National Education Association
and State Board of Education. The proponents highlighted
challenges in filling vacancies from the perspectives of a local
employer experiencing critical vacancies to education
shortages that could be better addressed with the removal of
the assessment on participating employers.
2- 2195 Neutral information provided by the Executive Director of
KPERS outlined the working after retirement experience in
the Retirement System and the working after retirement rules,
noting employer contributions are not considered under the
Internal Revenue Code (e.g., requiring a bona fide retirement,
waiting period, no prearrangement to return to work). The
Executive Director addressed the actuarial cost implications
of the bill’s enactment (described later in this supplemental
note). The information presented notes that increasing the
threshold amount for the 30.0 percent contribution rate would
make it more attractive for employers to rehire employees,
rather than seeking to fill the position with a new employee.
Retirement behavior changes, such as members retiring
earlier, could create additional actuarial costs.
The House Committee amended the bill to increase the
retirant compensation threshold amount from $25,000
(current law) to $50,000. [Note: This amount had been
increased from $25,000 to $35,000, in the bill, as introduced.]
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the KPERS actuary
notes the two main areas of cost associated with enactment
of the bill would be the loss of expected employer
contributions, as well as the potential to change the pattern of
retirement behavior by altering the working after retirement
rules.
Compensation Threshold. Based on the data for the
calendar year 2021, there were about 4,700 KPERS working
after retirement members. Total employer contributions for
calendar year 2021, based on the existing $25,000 threshold,
were approximately $15.6 million. If the compensation limit for
the 30.0 percent employer contribution rate had been
increased to $35,000, total contributions would have been
reduced to $14.2 million, or by $1.4 million (or 10.0 percent).
The reduction in employer contributions would have
3- 2195 approximately the same fiscal effect in FY 2024 under the bill.
This reduction in employer contributions would directly lower
the value of KPERS assets and would increase the
Retirement System’s unfunded actuarial liability. Given the
total KPERS unfunded actuarial liability of $8.7 billion (State,
School, and Local), KPERS indicates the loss of $1.4 million
annually would have a negligible effect on the long-term
funding of KPERS. [Note: A fiscal note was not immediately
available on the increase to this threshold amount included in
the bill, as amended.]
Temporary Waiver of Assessment. The fiscal note also
addresses the statutory employer contribution rate (and
waiver of the assessment), which would be assessed on all
compensation paid to retirants who return to work in covered
employment from July 1, 2023, through December 31, 2024.
Based on available data, the estimated loss of contributions
for this 18-month period would be $5.5 million. Since this
would be a time-limited window, the long-term impact on the
funding of the plan would be considered negligible.
Administrative Costs. KPERS also indicates that the bill
would require additional administrative expenses, including
updating printed materials and minor changes to the KPERS
IT systems; however, any additional administrative costs
would be negligible. Any fiscal effect associated with the bill is
not reflected in The FY 2024 Governor’s Budget Report.
Retirement System; KPERS; working after retirement; employer contributions;
retirant compensation threshold; assessment waiver
4- 2195