Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 http://budget.kansas.gov
Adam C. Proffitt, Director Laura Kelly, Governor
Division of the Budget
February 6, 2025
The Honorable Brenda Dietrich, Chairperson
Senate Committee on Financial Institutions and Insurance
300 SW 10th Avenue, Room 546-S
Topeka, Kansas 66612
Dear Senator Dietrich:
SUBJECT: Fiscal Note for SB 202 by Senator Shane, et al.
In accordance with KSA 75-3715a, the following fiscal note concerning SB 202 is
respectfully submitted to your committee.
SB 202 would transfer teachers who are KPERS Tier 3 members to KPERS Tier 2 for all
prior and future service on January 1, 2026. If a current KPERS Tier 3 member would receive a
higher benefit under KPERS Tier 3 at the time of the transfer than under KPERS Tier 3, then the
member would remain in KPERS Tier 3. The bill would provide that the cost of the transfer would
be paid from employer contributions and would have no cost to the member. In addition, all future
teachers would become a member of KPERS Tier 2. For the provisions of the bill, a teacher would
be defined as “any professional employee who is required to hold a certificate to teach in any
school district and any teacher or instructor in any technical college or community college.”
For administrative costs, KPERS indicates that reopening the KPERS Tier 2 plan for
teachers would have a significant effect on plan administration. Because KPERS does not track
position data, the total number of affected teachers is unknown. However, using teacher counts
from Department of Education data, KPERS estimates that there are 43,593 total teachers,
including 19,096 current KPERS Tier 3 members. This estimate does not include inactive teacher
members who would also convert to KPERS 2.
Implementing SB 202 would require both technical updates to the pension administration
system and extensive data collection on teachers, which KPERS does not currently track.
Additionally, the transition would involve educational and communication efforts for affected
members. While the KPERS Tier 2 technical structure currently remains in the pension
administration system, converting members from KPERS Tier 3 to KPERS Tier 2 would require
major system changes to accurately establish salary and service time for KPERS Tier 2 benefit
calculations. The system would also have to be modified to allow the agency to compare KPERS
Tier 2 and KPERS Tier 3 benefits, ensuring that no member would receive a lower benefit due to
this transition.
KPERS estimates a cost of $1.0 million in FY 2026 from the KPERS Trust Fund in
technical system updates and testing, requiring six months to complete. Additional staffing would The Honorable Brenda Dietrich, Chairperson
Page 2—SB 202
be needed for identifying teacher members and assisting with member education. The agency
estimates expenditures for 5.00 temporary positions for FY 2026 and FY 2027, including 2.00
Benefits Representatives and 3.00 Benefit Analysts. FY 2026 salaries and benefits costs are
estimated to be $373,158 in FY 2026 and $389,211 in FY 2027.
For the actuarial cost estimate, the KPERS actuary reports moving the KPERS Tier 3
teacher members to KPERS Tier 2 would increase the unfunded actuarial liability UAL for those
members by approximately $220.0 million because of the difference in the benefit plan design,
along with an increased normal cost of the system for the increased benefits. Because the proposed
changes would affect the benefit amounts for future retirees, the actuary utilized an amortization
period of 20 years for the increase in the UAL.
The actuary reports that the bill would increase the normal cost of employer contributions
by 0.42 percent for the State/School Group. In addition, there would be an employer contribution
rate increase to fund the UAL totaling 0.31 percent for the State School Group. In total, the bill
would increase the actuarial contribution rate by 0.73 percent, beginning in FY 2026, going from
11.68 percent to 12.41 percent, excluding KPERS Death and Disability Fund contributions.
KPERS estimates an employer contribution increase totaling $43.0 million in FY 2026 and $44.0
million in FY 2027 for the KPERS State/School Group. The Division of the Budget estimates that
approximately 85.0 percent of the State/School group employer contributions would be financed
from the State General Fund, with $36.6 million in FY 2026 and $37.4 million in FY 2027.
KPERS notes that the $220.0 million UAL cost could be funded with a one-time
appropriation from the State General Fund in FY 2026. If this would occur, the actuary reports
that this would eliminate the 20-year amortization of the UAL, with eliminating the corresponding
rate increase of 0.31 percent; however, the normal cost increase of 0.42 percent would remain.
This assumption of paying off the UAL in its entirety would result in a FY 2026 employer
contribution for the State/School Group of 12.1 percent. This increase without the UAL factored
in would be approximately $24.8 million in FY 2026. The Division of the Budget estimates that
of this amount, $21.1 million would be from the State General Fund.
The Division of the Budget estimates that this policy change could increase the number of
people entering in the field of teaching with a greater retirement benefit than is currently available.
In addition, teachers may remain in service for a longer period of time than under the current
KPERS Tier 3 structure. However, the number of additional teachers or change in retirement
behavior cannot be estimated. Any experience change by teachers is not factored into the cost
estimate for SB 202. Any fiscal effect associated with SB 202 is not reflected in The FY 2026
Governor’s Budget Report.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Jarod Waltner, KPERS