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AN ACT relating to pension spiking in the Kentucky Public Pensions Authority. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
ď˘Section 1. KRS 61.598 is amended to read as follows: 3
(1) For purposes of this section, "bona fide promotion or career advancement": 4
(a) Means: 5
1. A professional advancement in substantially the same line of work held 6
by the employee in the four (4) years immediately prior to the final five 7
(5) fiscal years preceding retirement or a change in employment position 8
based on the training, skills, education, or expertise of the employee that 9
imposes a significant change in job duties and responsibilities to clearly 10
justify the increased compensation to the member; or 11
2. An increase in creditable compensation for all employees in a 12
specified class due to an increase in rate of pay authorized or funded 13
by the legislative or administrative body of the employer or due to an 14
increase in rate of pay mandated in a collective bargaining agreement 15
approved by the legislative body of the employer; and 16
(b) Does not include any circumstance where an elected official participating in 17
the Kentucky Employees Retirement System or the County Employees 18
Retirement System takes a position of employment with a different employer 19
participating in any of the state-administered retirement systems. 20
(2) (a) For employees retiring from the Kentucky Employees Retirement System, the 21
County Employees Retirement System, or the State Police Retirement System 22
on or after January 1, 2018, the systems shall, for each of the retiring 23
employee's last five (5) fiscal years of employment, identify any fiscal year in 24
which the creditable compensation increased at a rate of ten percent (10%) or 25
more annually over the immediately preceding fiscal year's creditable 26
compensation. The employee's creditable compensation in the fiscal year 27 UNOFFICIAL COPY 25 RS HB 30/GA
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immediately prior to the employee's last five (5) fiscal years of employment 1
shall be utilized to compare the initial fiscal year in the five (5) fiscal year 2
period. 3
(b) Except as limited or excluded by subsections (3) and (4) of this section, any 4
amount of increase in creditable compensation for a fiscal year identified 5
under paragraph (a) of this subsection that exceeds ten percent (10%) more 6
than the employee's creditable compensation from the immediately preceding 7
fiscal year shall not be included in the creditable compensation used to 8
calculate the retiring employee's monthly retirement allowance. If the 9
creditable compensation for a specific fiscal year identified under paragraph 10
(a) of this subsection as exceeding the ten percent (10%) increase limitation is 11
not used to calculate the retiring employee's monthly retirement allowance, 12
then no reduction in creditable compensation shall occur for that fiscal year. 13
(c) If the creditable compensation of the retiring employee is reduced as provided 14
by paragraph (b) of this subsection, the retirement systems: 15
1. Shall refund the employee contributions and interest attributable to the 16
reduction in creditable compensation; and 17
2. Shall not refund the employer contributions paid but shall utilize those 18
funds to pay down the unfunded liability of the pension fund in which 19
the retiring employee participated. 20
(3) (a) In order to ensure the prospective application of the limitations on increases in 21
creditable compensation contained in subsection (2) of this section, only the 22
creditable compensation earned by the retiring employee on or after July 1, 23
2017, shall be subject to reduction under subsection (2) of this section. 24
Creditable compensation earned by the retiring employee prior to July 1, 25
2017, shall not be subject to reduction under subsection (2) of this section. 26
(b) If the reductions in creditable compensation during a retiring member's entire 27 UNOFFICIAL COPY 25 RS HB 30/GA
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last five (5) years of employment results in a reduction in his or her monthly 1
retirement allowance of less than twenty-five dollars ($25) per month or an 2
actuarially equivalent value under the various payment options, then no 3
reduction in creditable compensation or retirement allowances shall occur 4
under subsection (2) of this section. 5
(4) Subsection (2) of this section shall not apply to: 6
(a) A bona fide promotion or career advancement as defined by subsection (1) of 7
this section; 8
(b) A lump-sum payment for compensatory time paid to an employee upon 9
termination of employment; 10
(c) A lump-sum payment made pursuant to an alternate sick leave program under 11
KRS 78.616(5) that is paid to an employee upon termination of employment; 12
(d) Increases in creditable compensation in a fiscal year over the immediately 13
preceding fiscal year, where in the immediately preceding fiscal year the 14
employer reported the employee as being on leave without pay for any reason, 15
including but not limited to sick leave without pay, maternity leave, leave 16
authorized under the Family Medical Leave Act, and any period of time 17
where the employee received workers' compensation benefit payments that 18
were not reported to the plan as creditable compensation; 19
(e) Increases in creditable compensation directly attributable to an employee's 20
receipt of compensation for: 21
1. Overtime hours worked while serving as a participating employee under 22
any state or federal grant, grant pass-through, or similar program that 23
requires overtime as a condition or necessity of the employer's receipt of 24
the grant; or 25
2. The first one hundred (100) hours of mandatory overtime hours that the 26
employee is individually required to work by the employer during a 27 UNOFFICIAL COPY 25 RS HB 30/GA
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fiscal year. This subparagraph shall not be construed to apply to 1
overtime hours voluntarily worked by the employee or in situations in 2
which the employee has the option to elect out of participation in 3
overtime hours. Any mandatory overtime hours exempt under this 4
subparagraph shall be in addition to any overtime hours otherwise 5
exempt under the provisions of this subsection; and 6
(f) Increases in creditable compensation directly attributable to an employee's 7
receipt of compensation for overtime performed during and as a result of a 8
state of emergency declared by: 9
1. The President of the United States or the Governor of the 10
Commonwealth of Kentucky; or 11
2. A local government in which the Governor authorizes mobilization of 12
the Kentucky National Guard pursuant to KRS 38.030 and 39A.950 13
during such time as the National Guard is mobilized. 14
(5) (a) For employees retiring on or after January 1, 2014, but prior to July 1, 2017, 15
the last participating employer shall be required to pay for any additional 16
actuarial costs resulting from annual increases in an employee's creditable 17
compensation greater than ten percent (10%) over the employee's last five (5) 18
fiscal years of employment that are not the direct result of a bona fide 19
promotion or career advancement. The cost shall be determined by the 20
retirement systems. 21
(b) Lump-sum payments for compensatory time paid to an employee upon 22
termination of employment shall be exempt from this subsection. 23
(c) The Authority shall be required to answer inquiries from participating 24
employers regarding this subsection. Upon request of the employer prior to 25
the employee's change of position or hiring, the systems shall make a 26
determination that is binding to the systems as to whether or not a change of 27 UNOFFICIAL COPY 25 RS HB 30/GA
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position or hiring constitutes a bona fide promotion or career advancement. 1
(d) For any additional actuarial costs charged to the employer under this 2
subsection, the systems shall allow the employer to pay the costs without 3
interest over a period of one (1) year from the date of receipt of the employer's 4
final invoice. 5
(6) The Authority shall determine whether increases in creditable compensation during 6
the last five (5) fiscal years of employment prior to retirement constitute a bona fide 7
promotion or career advancement and may promulgate administrative regulations in 8
accordance with KRS Chapter 13A to administer this section. All state-9
administered retirement systems shall cooperate to implement this section. 10
(7) Any employer who disagrees with a determination made by the system in 11
accordance with this section regarding whether an increase in compensation 12
constitutes a bona fide promotion or career advancement for purposes of subsection 13
(5) of this section may request a hearing and appeal the decision in accordance with 14
KRS 61.645(16) or 78.782(16). 15
(8) For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky 16
Retirement Systems and the County Employees Retirement System shall provide a 17
means for employers to separately report the specific exceptions provided in 18
subsection (4) of this section within the reporting system utilized by the employers 19
for making employer reports under KRS 16.645, 61.675, and 78.545. The Kentucky 20
Retirement Systems and the County Employees Retirement System shall 21
continually provide communication, instructions, training, and educational 22
opportunities for employers regarding how to appropriately report exemptions 23
established by subsection (4) of this section. 24
(9) This section shall not apply to employees participating in the hybrid cash balance 25
plan as provided by KRS 16.583, 61.597, 78.5512, and 78.5516. 26