Kentucky House Bill HB638 Introduced / Bill

                    UNOFFICIAL COPY  	25 RS BR 802 
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AN ACT relating to the Teachers' Retirement System. 1 
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2 
Section 1.   KRS 161.220 is amended to read as follows: 3 
As used in KRS 161.220 to 161.716 and 161.990: 4 
(1) "Retirement system" means the arrangement provided for in KRS 161.220 to 5 
161.716 and 161.990 for payment of allowances to members; 6 
(2) "Retirement allowance" means the amount annually payable during the course of 7 
his or her natural life to a member who has been retired by reason of service; 8 
(3) "Disability allowance" means the amount annually payable to a member retired by 9 
reason of disability; 10 
(4) "Member" means the commissioner of education, deputy commissioners, associate 11 
commissioners, and all division directors in the State Department of Education, 12 
employees participating in the system pursuant to KRS 196.167(3)(b)1., and any 13 
full-time teacher or professional occupying a position requiring certification or 14 
graduation from a four (4) year college or university, as a condition of employment, 15 
and who is employed by public boards, institutions, or agencies as follows: 16 
(a) Local boards of education and public charter schools if the public charter 17 
school satisfies the criteria set by the Internal Revenue Service to participate 18 
in a governmental retirement plan; 19 
(b) Eastern Kentucky University, Kentucky State University, Morehead State 20 
University, Murray State University, Western Kentucky University, and any 21 
community colleges established under the control of these universities; 22 
(c) State-operated secondary area vocational education or area technology 23 
centers, Kentucky School for the Blind, and Kentucky School for the Deaf; 24 
(d) Other public education agencies as created by the General Assembly and 25 
those members of the administrative staff of the Teachers' Retirement System 26 
of the State of Kentucky whom the board of trustees may designate by 27  UNOFFICIAL COPY  	25 RS BR 802 
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administrative regulation; 1 
(e) Regional cooperative organizations formed by local boards of education or 2 
other public educational institutions listed in this subsection, for the purpose 3 
of providing educational services to the participating organizations; 4 
(f) All full-time members of the staffs of the Kentucky Association of School 5 
Administrators, Kentucky Education Association, Kentucky Vocational 6 
Association, Kentucky High School Athletic Association, Kentucky 7 
Academic Association, and the Kentucky School Boards Association who 8 
were members of the Kentucky Teachers' Retirement System or were 9 
qualified for a position covered by the system at the time of employment by 10 
the association in the event that the board of directors of the respective 11 
association petitions to be included. The board of trustees of the Kentucky 12 
Teachers' Retirement System may designate by resolution whether part-time 13 
employees of the petitioning association are to be included. The state shall 14 
make no contributions on account of these employees, either full-time or part-15 
time. The association shall make the employer's contributions, including any 16 
contribution that is specified under KRS 161.550. The provisions of this 17 
paragraph shall be applicable to persons in the employ of the associations on 18 
or subsequent to July 1, 1972; 19 
(g) Employees of the Council on Postsecondary Education who were employees 20 
of the Department for Adult Education and Literacy and who were members 21 
of the Kentucky Teachers' Retirement System at the time the department was 22 
transferred to the council pursuant to Executive Order 2003-600; 23 
(h) The Office of Career and Technical Education; 24 
(i) The Office of Vocational Rehabilitation; 25 
(j) The Kentucky Educational Collaborative for State Agency Children; 26 
(k) The Governor's Scholars Program; 27  UNOFFICIAL COPY  	25 RS BR 802 
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(l) Any person who is retired for service from the retirement system and is 1 
reemployed by an employer identified in this subsection in a position that the 2 
board of trustees deems to be a member, except that any person who becomes 3 
a member on or after January 1, 2022, and subsequently draws a monthly 4 
lifetime retirement allowance, shall upon reemployment after retirement not 5 
earn a second retirement account; 6 
(m) Employees of the former Cabinet for Workforce Development who are 7 
transferred to the Kentucky Community and Technical College System and 8 
who occupy positions covered by the Kentucky Teachers' Retirement System 9 
shall remain in the Teachers' Retirement System. New employees occupying 10 
these positions, as well as newly created positions qualifying for Teachers' 11 
Retirement System coverage that would have previously been included in the 12 
former Cabinet for Workforce Development, shall be members of the 13 
Teachers' Retirement System; 14 
(n) Effective January 1, 1998, employees of state community colleges who are 15 
transferred to the Kentucky Community and Technical College System shall 16 
continue to participate in federal old age, survivors, disability, and hospital 17 
insurance, and a retirement plan other than the Kentucky Teachers' Retirement 18 
System offered by Kentucky Community and Technical College System. New 19 
employees occupying positions in the Kentucky Community and Technical 20 
College System as referenced in KRS 164.5807(5) that would not have 21 
previously been included in the former Cabinet for Workforce Development, 22 
shall participate in federal old age, survivors, disability, and hospital 23 
insurance and have a choice at the time of employment of participating in a 24 
retirement plan provided by the Kentucky Community and Technical College 25 
System, including participation in the Kentucky Teachers' Retirement System, 26 
on the same basis as faculty of the state universities as provided in KRS 27  UNOFFICIAL COPY  	25 RS BR 802 
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161.540 and 161.620; 1 
(o) Employees of the Office of General Counsel, the Office of Budget and 2 
Administrative Services, and the Office of Quality and Human Resources 3 
within the Office of the Secretary of the former Cabinet for Workforce 4 
Development and the commissioners of the former Department for Adult 5 
Education and Literacy and the former Department for Technical Education 6 
who were contributing to the Kentucky Teachers' Retirement System as of 7 
July 15, 2000; 8 
(p) Employees of the Kentucky Department of Education only who are graduates 9 
of a four (4) year college or university, notwithstanding a substitution clause 10 
within a job classification, and who are serving in a professional job 11 
classification as defined by the department; 12 
(q) The Governor's School for Entrepreneurs Program; 13 
(r) Employees of the Office of Adult Education within the Department of 14 
Workforce Development in the Education and Labor Cabinet who were 15 
employees of the Council on Postsecondary Education, Kentucky Adult 16 
Education Program and who were members of the Kentucky Teachers' 17 
Retirement System at the time the Program was transferred to the cabinet 18 
pursuant to Executive Orders 2019-0026 and 2019-0027;[ and] 19 
(s) Employees of the Education Professional Standards Board who were 20 
members of the Kentucky Teachers' Retirement System at the time the 21 
employees were transferred to the Kentucky Department of Education 22 
pursuant to Executive Order 2020-590; and 23 
(t) WeLeadCS, the virtual computer science career academy established in 24 
KRS 158.809; 25 
(5) "Present teacher" means any teacher who was a teacher on or before July 1, 1940, 26 
and became a member of the retirement system created by 1938 (1st Extra. Sess.) 27  UNOFFICIAL COPY  	25 RS BR 802 
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Ky. Acts ch. 1, on the date of the inauguration of the system or within one (1) year 1 
after that date, and any teacher who was a member of a local teacher retirement 2 
system in the public elementary or secondary schools of the state on or before July 3 
1, 1940, and continued to be a member of the system until he or she, with the 4 
membership of the local retirement system, became a member of the state Teachers' 5 
Retirement System or who becomes a member under the provisions of KRS 6 
161.470(4); 7 
(6) "New teacher" means any member not a present teacher; 8 
(7) "Prior service" means the number of years during which the member was a teacher 9 
in Kentucky prior to July 1, 1941, except that not more than thirty (30) years' prior 10 
service shall be allowed or credited to any teacher; 11 
(8) "Subsequent service" means the number of years during which the teacher is a 12 
member of the Teachers' Retirement System after July 1, 1941; 13 
(9) "Final average salary" means the average of the five (5) highest annual salaries 14 
which the member has received for service in a covered position and on which the 15 
member has made contributions, or on which the public board, institution, or 16 
agency has picked-up member contributions pursuant to KRS 161.540(2), or the 17 
average of the five (5) years of highest salaries as defined in KRS 61.680(2)(a), 18 
which shall include picked-up member contributions. Additionally, the board of 19 
trustees may approve a final average salary based upon the average of the three (3) 20 
highest salaries for individuals who become members prior to January 1, 2022, who 21 
are at least fifty-five (55) years of age and have a minimum of twenty-seven (27) 22 
years of Kentucky service credit. However, if any of the five (5) or three (3) highest 23 
annual salaries used to calculate the final average salary was paid within the three 24 
(3) years immediately prior to the date of the member's retirement for individuals 25 
who become members prior to January 1, 2022, or within the five (5) years 26 
immediately prior to the date of the member's retirement for individuals who 27  UNOFFICIAL COPY  	25 RS BR 802 
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become members on or after January 1, 2022, the amount of salary to be included 1 
for each of those three (3) years or five (5) years, as applicable, for the purpose of 2 
calculating the final average salary shall be limited to the lesser of: 3 
(a) The member's actual salary; or 4 
(b) The member's annual salary that was used for retirement purposes during each 5 
of the prior three (3) years or five (5) years, as applicable, plus a percentage 6 
increase equal to the percentage increase received by all other members 7 
employed by the public board, institution, or agency, or for members of 8 
school districts, the highest percentage increase received by members on any 9 
one (1) rank and step of the salary schedule of the school district. The increase 10 
shall be computed on the salary that was used for retirement purposes. The 11 
board of trustees may promulgate an administrative regulation in accordance 12 
with KRS Chapter 13A to establish a methodology for measuring the 13 
limitation so that the combined increases in salary for each of the last three (3) 14 
full years of salary prior to retirement shall not exceed the total permissible 15 
percentage increase received by other members of the employer for the same 16 
three (3) year period. 17 
 For individuals who became members of the retirement system prior to July 1, 18 
2021, this limitation shall not apply if the member receives an increase in salary in a 19 
percentage exceeding that received by the other members, and this increase was 20 
accompanied by a corresponding change in position or in length of employment. 21 
The board of trustees may promulgate an administrative regulation in accordance 22 
with KRS Chapter 13A to provide definitions for a corresponding change in 23 
position or in length of employment. This limitation shall also not apply to the 24 
payment to a member for accrued annual leave if the individual becomes a member 25 
before July 1, 2008, or accrued sick leave which is authorized by statute and which 26 
shall, for individuals subject to KRS 161.155(10) who became nonuniversity 27  UNOFFICIAL COPY  	25 RS BR 802 
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members of the system prior to January 1, 2022, be included as part of a retiring 1 
member's annual compensation for the member's last year of active service; 2 
(10) "Annual compensation" means the total salary received by a member as 3 
compensation for all services performed in employment covered by the retirement 4 
system during a fiscal year. Annual compensation shall not include payment for any 5 
benefit or salary adjustments made by the public board, institution, or agency to the 6 
member or on behalf of the member which is not available as a benefit or salary 7 
adjustment to other members employed by that public board, institution, or agency. 8 
Annual compensation shall not include the salary supplement received by a member 9 
under KRS 157.197(2)(c), 158.6455, or 158.782 on or after July 1, 1996. Under no 10 
circumstances shall annual compensation include compensation that is earned by a 11 
member while on assignment to an organization or agency that is not a public 12 
board, institution, or agency listed in subsection (4) of this section. In the event that 13 
federal law requires that a member continue membership in the retirement system 14 
even though the member is on assignment to an organization or agency that is not a 15 
public board, institution, or agency listed in subsection (4) of this section, the 16 
member's annual compensation for retirement purposes shall be deemed to be the 17 
annual compensation, as limited by subsection (9) of this section, last earned by the 18 
member while still employed solely by and providing services directly to a public 19 
board, institution, or agency listed in subsection (4) of this section. The board of 20 
trustees shall determine if any benefit or salary adjustment qualifies as annual 21 
compensation. For an individual who becomes a member on or after July 1, 2008, 22 
annual compensation shall not include lump-sum payments upon termination of 23 
employment for accumulated annual or compensatory leave;  24 
(11) "Age of member" means the age attained on the first day of the month immediately 25 
following the birthdate of the member. This definition is limited to retirement 26 
eligibility and does not apply to tenure of members; 27  UNOFFICIAL COPY  	25 RS BR 802 
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(12) "Employ," and derivatives thereof, means relationships under which an individual 1 
provides services to an employer as an employee, as an independent contractor, as 2 
an employee of a third party, or under any other arrangement as long as the services 3 
provided to the employer are provided in a position that would otherwise be 4 
covered by the Kentucky Teachers' Retirement System and as long as the services 5 
are being provided to a public board, institution, or agency listed in subsection (4) 6 
of this section; 7 
(13) "Regular interest" means: 8 
(a) For an individual who becomes a member prior to July 1, 2008, interest at 9 
three percent (3%) per annum;[:] 10 
(b) For an individual who becomes a member on or after July 1, 2008, but prior to 11 
January 1, 2022, interest at two and one-half percent (2.5%) per annum for 12 
purposes of crediting interest to the teacher savings account or any other 13 
contributions made by the employee that are refundable to the employee upon 14 
termination of employment; and 15 
(c) For an individual who becomes a member on or after January 1, 2022, the 16 
rolling five (5) year yield on a thirty (30) year United States Treasury bond as 17 
of the end of May prior to the most recently completed fiscal year, except 18 
that: 19 
1. Once the member has at least sixty (60) months of service in the system 20 
it shall mean interest at two and one-half percent (2.5%) per annum for 21 
purposes of crediting interest to employee contributions in the 22 
foundational benefit component or any other contributions made by the 23 
employee to the foundational benefit component that are refundable to 24 
the employee upon termination of employment; and 25 
2. The board shall have the authority to adjust the regular interest rate for 26 
individuals who become members on or after January 1, 2022, in 27  UNOFFICIAL COPY  	25 RS BR 802 
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accordance with KRS 161.633 and 161.634; 1 
(14) "Accumulated contributions" means the contributions of a member to the teachers' 2 
savings fund, including picked-up member contributions as described in KRS 3 
161.540(2), plus accrued regular interest; 4 
(15) "Annuitant" means a person who receives a retirement allowance or a disability 5 
allowance; 6 
(16) "Local retirement system" means any teacher retirement or annuity system created 7 
in any public school district in Kentucky in accordance with the laws of Kentucky; 8 
(17) "Fiscal year" means the twelve (12) month period from July 1 to June 30. The 9 
retirement plan year is concurrent with this fiscal year. A contract for a member 10 
employed by a local board of education may not exceed two hundred sixty-one 11 
(261) days in the fiscal year; 12 
(18) "Public schools" means the schools and other institutions mentioned in subsection 13 
(4) of this section; 14 
(19) "Dependent" as used in KRS 161.520 and 161.525 means a person who was 15 
receiving, at the time of death of the member, at least one-half (1/2) of the support 16 
from the member for maintenance, including board, lodging, medical care, and 17 
related costs; 18 
(20) "Active contributing member" means a member currently making contributions to 19 
the Teachers' Retirement System, who made contributions in the immediate[next] 20 
preceding fiscal year, for whom picked-up member contributions are currently 21 
being made, or for whom these contributions were made in the immediate[next] 22 
preceding fiscal year; 23 
(21) "Full-time" means employment in a position that requires services on a continuing 24 
basis equal to at least seven-tenths (7/10) of normal full-time service on a fiscal 25 
year basis; 26 
(22) "Full actuarial cost," when used to determine the payment or payments that a 27  UNOFFICIAL COPY  	25 RS BR 802 
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member must pay for service credit means the actuarial value of all costs associated 1 
with the enhancement of a member's benefits or eligibility for benefit 2 
enhancements, including health insurance supplement payments made by the 3 
retirement system. The board may promulgate administrative regulations in 4 
accordance with KRS Chapter 13A to provide the methodology for the assessment 5 
of and procedures for the payment and collection of the full actuarial cost of the 6 
purchased service. The actuary for the retirement system shall determine the full 7 
actuarial value costs and actuarial cost factor tables as provided in KRS 161.400; 8 
(23) "Last annual compensation" means the annual compensation, as defined by 9 
subsection (10) of this section and as limited by subsection (9) of this section, 10 
earned by the member during the most recent period of contributing service, either 11 
consecutive or nonconsecutive, that is sufficient to provide the member with one (1) 12 
full year of service credit in the Kentucky Teachers' Retirement System, and which 13 
compensation is used in calculating the member's initial retirement allowance, 14 
excluding bonuses, retirement incentives, payments for accumulated sick leave, 15 
annual, personal, and compensatory leave, and any other lump-sum payment. For 16 
an individual who becomes a member on or after July 1, 2008, payments for annual 17 
or compensatory leave shall not be included in determining the member's last 18 
annual compensation; 19 
(24) "Participant" means a member, as defined by subsection (4) of this section, or an 20 
annuitant, as defined by subsection (15) of this section; 21 
(25) "Qualified domestic relations order" means any judgment, decree, or order, 22 
including approval of a property settlement agreement, that: 23 
(a) Is issued by a court or administrative agency; and 24 
(b) Relates to the provision of child support, alimony payments, or marital 25 
property rights to an alternate payee; 26 
(26) "Alternate payee" means a spouse, former spouse, child, or other dependent of a 27  UNOFFICIAL COPY  	25 RS BR 802 
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participant, who is designated to be paid retirement benefits in a qualified domestic 1 
relations order; 2 
(27) "University member" means an individual who becomes a member through 3 
employment with an employer specified in subsection (4)(b) and (n) of this section; 4 
(28) "Nonuniversity member" means an individual who becomes a member through 5 
employment with an employer specified under subsection (4) of this section, except 6 
for those members employed by an employer specified in subsection (4)(b) and (n) 7 
of this section; 8 
(29) "Accumulated employer contribution" means the employer contribution deposited 9 
to a member's account through the supplemental benefit component and regular 10 
interest credited on such amounts as provided by KRS 161.635 for nonuniversity 11 
members and KRS 161.636 for university members;  12 
(30) "Accumulated account balance" means: 13 
(a) For members who began participating in the system prior to January 1, 2022, 14 
the member's accumulated contributions; or 15 
(b) For members who began participating in the system on or after January 1, 16 
2022, the combined sum of the member's accumulated contributions and the 17 
member's accumulated employer contributions;  18 
(31) "Foundational benefit component" means the benefits provided by KRS 161.220 to 19 
161.716 to individuals who become members on or after January 1, 2022, except 20 
for the supplemental benefit component and retiree health benefits set forth in KRS 21 
161.675; and 22 
(32) "Supplemental benefit component" means:  23 
(a) The benefit established pursuant to KRS 161.635 for individuals who become 24 
nonuniversity members on or after January 1, 2022; or  25 
(b) The benefit established pursuant to KRS 161.636 for individuals who become 26 
university members on or after January 1, 2022. 27  UNOFFICIAL COPY  	25 RS BR 802 
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Section 2.   KRS 161.230 is amended to read as follows: 1 
The Teachers' Retirement System is established as of July 1, 1940, for the purpose of 2 
providing retirement allowances for teachers, their beneficiaries, and survivors under the 3 
provisions of KRS 161.155 and 161.220 to 161.714. The Teachers' Retirement System of 4 
the State of Kentucky shall be an independent agency and instrumentality of the 5 
Commonwealth and this status shall only be amended or changed by the General 6 
Assembly. It shall have the powers and the privileges of a corporation and shall be known 7 
as the "Teachers' Retirement System of the State of Kentucky." Its business shall be 8 
transacted, its funds invested, and its cash and securities held in that name, or in the name 9 
of its nominee or title holding organization provided that its nominee or title holding 10 
organization is authorized by board of trustees' resolution solely for the purpose of 11 
facilitating the transfer of securities or acquiring and holding title to real property. The 12 
board of trustees may designate a nominee as provided in KRS 286.3-225; or it may 13 
name as nominee a partnership composed of selected trustees and employees of the 14 
system, and formed for the sole purpose of holding legal or registered title of such 15 
securities, and for the transfer of securities in accordance with directions of the board of 16 
trustees. 17 
Section 3.   KRS 161.250 is amended to read as follows: 18 
(1) (a) The general administration and management of the retirement system, and the 19 
responsibility for its proper operation and for making effective provisions of 20 
KRS 161.155 and 161.220 to 161.714 are vested in a board of trustees to be 21 
known as the "Board of Trustees of the Teachers' Retirement System of the 22 
State of Kentucky." 23 
(b) The board of trustees shall consist of the following: 24 
1. The chief state school officer; 25 
2. The State Treasurer; 26 
3. Two (2) trustees, appointed by the Governor of the Commonwealth, 27  UNOFFICIAL COPY  	25 RS BR 802 
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subject to Senate confirmation in accordance with KRS 11.160 for each 1 
appointment or reappointment. These two (2) trustees shall have 2 
investment experience. For purposes of this subparagraph, a trustee with 3 
"investment experience" means an individual who does not have a 4 
conflict of interest, as provided by KRS 161.460, and who has at least 5 
ten (10) years of experience in one (1) of the following areas of 6 
expertise: 7 
a. A portfolio manager acting in a fiduciary capacity; 8 
b. A professional securities analyst or investment consultant; 9 
c. A current or retired employee or principal of a trust institution, 10 
investment or finance organization, or endowment fund acting in 11 
an investment-related capacity; 12 
d. A chartered financial analyst in good standing as determined by 13 
the CFA Institute; or 14 
e. A university professor, teaching investment-related studies; and 15 
4. Seven (7) other trustees elected as provided in KRS 161.260. Four (4) of 16 
the elective trustees shall be members of the retirement system, to be 17 
known as teacher trustees, two (2) shall be persons who are not 18 
members of the teaching profession, to be known as the lay trustees, and 19 
one (1) shall be an annuitant of the retirement system to be known as the 20 
retired teacher trustee. One (1) teacher trustee shall be elected annually 21 
for a four-year term. The retired teacher trustee shall be elected every 22 
four (4) years. The chief state school officer and the State Treasurer are 23 
considered ex officio members of the board of trustees and may 24 
designate in writing a person to represent them at board meetings. 25 
(c) 1. Elective trustees shall not serve more than three (3) consecutive four (4) 26 
year terms. An elective trustee who has served three (3) consecutive 27  UNOFFICIAL COPY  	25 RS BR 802 
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terms may be elected again after an absence of four (4) years from the 1 
board of trustees. 2 
2. The term limits established by subparagraph 1. of this paragraph shall 3 
apply to elective trustees serving on or after July 1, 2012, and all terms 4 
of office served prior to July 1, 2012, shall be used to determine if the 5 
elective trustee has exceeded the term limits provided by subparagraph 6 
1. of this paragraph. 7 
(d) 1. Each appointed trustee shall serve a term of four (4) years. An appointed 8 
trustee shall not serve more than three (3) consecutive four (4) year 9 
terms. An appointed trustee who has served three (3) consecutive terms 10 
may be appointed again after an absence of four (4) years from the 11 
board of trustees. 12 
2. Any vacancy that occurs in an appointed position shall be filled in the 13 
same manner that provides for the selection of the trustee; however, any 14 
vacancy shall be filled only for the duration of the unexpired term. 15 
(2) A member, retired member, or designated beneficiary may appeal the retirement 16 
system's decisions that materially affect the amount of service retirement allowance, 17 
amount of service credit, eligibility for service retirement, or eligibility for 18 
survivorship benefits to which that member, retired member, or designated 19 
beneficiary claims to be entitled. All appeals must be in writing and filed with the 20 
retirement system within thirty (30) days of the claimant's first notice of the 21 
retirement system's decision. For purposes of this section, notice shall be complete 22 
and effective upon the date of mailing of the retirement system's decision to the 23 
claimant at the claimant's last known address. Failure by the claimant to file a 24 
written appeal with the retirement system within the thirty (30) day period shall 25 
result in the decision of the retirement system becoming permanent with the effect 26 
of a final and unappealable order. The deadline to file a written appeal shall not be 27  UNOFFICIAL COPY  	25 RS BR 802 
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subject to the jurisdiction of any court or appeal process, nor shall it otherwise be 1 
tolled or waived. Appeals may include a request for an administrative hearing 2 
which shall be conducted in accordance with the provisions of KRS Chapter 13B. 3 
The board of trustees may establish an appeals committee whose members shall be 4 
appointed by the chairperson and who shall have the authority to act upon the report 5 
and recommendation of the hearing officer by issuing a final order on behalf of the 6 
full board of trustees. A member, retired member, or designated beneficiary who 7 
has filed a timely, written appeal of a decision of the retirement system may, 8 
following the administrative hearing and issuance of the final order by the board of 9 
trustees, appeal the final order of the board of trustees to the Franklin Circuit Court 10 
in accordance with the provisions of KRS Chapter 13B. 11 
(3) The board of trustees shall establish a formal trustee education program for all 12 
trustees of the board. The program shall include but not be limited to the following: 13 
(a) A required orientation program for all new trustees to the board. The 14 
orientation program shall include training on: 15 
1. Benefits and benefits administration; 16 
2. Investment concepts, policies, and current composition and 17 
administration of retirement system investments; 18 
3. Laws, bylaws, and administrative regulations pertaining to the 19 
retirement system and to fiduciaries; and 20 
4. Actuarial and financial concepts pertaining to the retirement system. 21 
 If a trustee fails to complete the orientation program within one (1) year from 22 
the beginning of his or her first term on the board, the retirement system shall 23 
withhold payment of the per diem and travel expenses due to the board 24 
member under KRS 161.290 until the trustee has completed the orientation 25 
program; 26 
(b) Annual required training for trustees on the administration, benefits, 27  UNOFFICIAL COPY  	25 RS BR 802 
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financing, and investing of the retirement system. If a trustee fails to complete 1 
the annual required training during the calendar or fiscal year, the retirement 2 
system shall withhold payment of the per diem and travel expenses due to the 3 
board member under KRS 161.290 until the board member has met the annual 4 
training requirements; and 5 
(c) The retirement system shall incorporate by reference in an administrative 6 
regulation, pursuant to KRS 13A.2251, the trustee education program. 7 
(4) In order to improve public transparency regarding the administration of the system, 8 
the board of trustees shall adopt a best practices model by posting the following 9 
information to the retirement system's website and shall make available to the 10 
public: 11 
(a) Meeting notices and agendas for all meetings of the board. Notices and 12 
agendas shall be posted to the retirement system's website at least seventy-two 13 
(72) hours in advance of the board or committee meetings, except in the case 14 
of special or emergency meetings as provided by KRS 61.823; 15 
(b) The Annual Comprehensive Financial Report with the information as follows: 16 
1. A general overview and update on the retirement system by the 17 
executive secretary; 18 
2. A listing of the board of trustees; 19 
3. A listing of key staff; 20 
4. An organizational chart; 21 
5. Financial information, including a statement of plan net assets, a 22 
statement of changes in plan net assets, an actuarial value of assets, a 23 
schedule of investments, a statement of funded status and funding 24 
progress, and other supporting data; 25 
6. Investment information, including a general overview, a list of the 26 
retirement system's professional consultants, a total net return on 27  UNOFFICIAL COPY  	25 RS BR 802 
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retirement system investments over a historical period, an investment 1 
summary, contracted investment management expenses, transaction 2 
commissions, and a schedule of investments; 3 
7. The annual actuarial valuation report on the pension benefit and the 4 
medical insurance benefit; and 5 
8. A general statistical section, including information on contributions, 6 
benefit payouts, and retirement system demographic data; 7 
(c) All external audits; 8 
(d) All board minutes or other materials that require adoption or ratification by 9 
the board of trustees. The items listed in this paragraph shall be posted within 10 
seventy-two (72) hours of adoption or ratification of the board; 11 
(e) All bylaws, policies, or procedures adopted or ratified by the board of 12 
trustees; 13 
(f) The retirement system's summary plan description; 14 
(g) The retirement system's law book; 15 
(h) A listing of the members of the board of trustees and membership on each 16 
committee established by the board, including any investment committees; 17 
(i) All investment holdings in aggregate, fees, and commissions for each fund 18 
administered by the board, which shall be updated on a quarterly basis for 19 
fiscal years beginning on or after July 1, 2017. The system shall request from 20 
all managers, partnerships, and any other available sources all information 21 
regarding fees and commissions and shall, based on the requested information 22 
received: 23 
1. Disclose the dollar value of fees or commissions paid to each individual 24 
manager or partnership; 25 
2. Disclose the dollar value of any profit sharing, carried interest, or any 26 
other partnership incentive arrangements, partnership agreements, or 27  UNOFFICIAL COPY  	25 RS BR 802 
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any other partnership expenses received by or paid to each manager or 1 
partnership; and 2 
3. As applicable, report each fee or commission by manager or partnership 3 
consistent with standards established by the Institutional Limited 4 
Partners Association (ILPA). 5 
 In addition to the requirements of this paragraph, the system shall also 6 
disclose the name and address of all individual underlying managers or 7 
partners in any fund of funds in which system assets are invested; 8 
(j) An update of net of fees investment returns, asset allocations, and the 9 
performance of the funds against benchmarks adopted by the board for each 10 
fund, for each asset class administered by the board, and for each manager. 11 
The update shall be posted on a quarterly basis for fiscal years beginning on 12 
or after July 1, 2017; 13 
(k) All contracts or offering documents for services, goods, or property purchased 14 
or utilized by the system; 15 
(l) A searchable database of the system's expenditures and a listing of each 16 
individual employed by the system along with the employee's salary or wages. 17 
In lieu of posting the information required by this paragraph to the system's 18 
website, the system may provide the information through a website 19 
established by the executive branch to inform the public about executive 20 
branch agency expenditures and public employee salaries and wages; and 21 
(m) All proxy vote reports as provided by KRS 161.430(8). 22 
(5) Notwithstanding the requirements of subsection (4) of this section, the retirement 23 
system shall not be required to furnish information that is protected under KRS 24 
161.585, exempt under KRS 61.878, or that, if disclosed, would compromise the 25 
retirement system's ability to competitively invest in real estate or other asset 26 
classes, except that no provision of this section or KRS 61.878 shall exclude 27  UNOFFICIAL COPY  	25 RS BR 802 
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disclosure and review of all contracts, including investment contracts, by the board, 1 
the Auditor of Public Accounts, and the Government Contract Review Committee 2 
established pursuant to KRS 45A.705 or the disclosure of investment fees and 3 
commissions as provided by this section. If any public record contains material 4 
which is not excepted under this section, the system shall separate the excepted 5 
material by removal, segregation, or redaction, and make the nonexcepted material 6 
available for examination. 7 
(6) For any benefit improvements the General Assembly has authorized the board of 8 
trustees to establish under KRS 161.220 to 161.716 and that require formal 9 
adoption by the board, the board shall establish the benefits by promulgation of 10 
administrative regulations in accordance with KRS Chapter 13A. 11 
Section 4.   KRS 161.430 is amended to read as follows: 12 
(1) (a) The board of trustees shall be the trustee of the funds of the retirement system 13 
and shall have full power and responsibility for the purchase, sale, exchange, 14 
transfer, or other disposition of the investments and moneys of the retirement 15 
system. The board shall, by administrative regulation, establish investment 16 
policies and procedures to carry out their responsibilities. 17 
(b) 1. The board shall contract with experienced competent investment 18 
managers to invest and manage assets of the system. The board may also 19 
employ qualified investment staff to advise it on investment matters and 20 
to invest and manage assets of the system not to exceed fifty percent 21 
(50%) of the system's assets. The board may contract with one (1) or 22 
more general investment consultants, as well as specialized investment 23 
consultants, to advise it on investment matters. 24 
2. All internal investment staff and investment consultants shall adhere to 25 
the Code of Ethics and Standards of Professional Conduct, and all board 26 
trustees shall adhere to the Code of Conduct for Members of a Pension 27  UNOFFICIAL COPY  	25 RS BR 802 
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Scheme Governing Body, promulgated by the CFA Institute. Investment 1 
managers shall comply with the federal Investment Advisers Act of 2 
1940, as amended, and the rules and regulations promulgated thereunder 3 
and shall comply with all other applicable federal securities statutes and 4 
related rules and regulations that apply to investment managers. 5 
3. No investment manager shall manage more than forty percent (40%) of 6 
the funds of the retirement system. 7 
(c) The board may appoint an investment committee to act for the board in all 8 
matters of investment, subject to the approval of the board of trustees. The 9 
board of trustees, in keeping with their responsibilities as trustees and 10 
wherever consistent with their fiduciary responsibilities, shall give priority to 11 
the investment of funds in obligations calculated to improve the industrial 12 
development and enhance the economic welfare of the Commonwealth. 13 
Toward this end, the board shall develop procedures for informing the 14 
business community of the potential for in-state investments by the retirement 15 
fund, accepting and evaluating applications for the in-state investment of 16 
funds, and working with members of the business community in executing in-17 
state investments which are consistent with the board's fiduciary 18 
responsibilities. The board shall include in the criteria it uses to evaluate in-19 
state investments their potential for creating new employment opportunities 20 
and adding to the total job pool in Kentucky. The board may cooperate with 21 
the board of trustees of Kentucky Retirement Systems in developing its 22 
program and procedures, and shall report to the Legislative Research 23 
Commission annually on its progress in placing in-state investments. The first 24 
report shall be submitted by October 1, 1991, and subsequent reports shall be 25 
submitted by October 1 of each year thereafter. The report shall include the 26 
number of applications for in-state investment received, the nature of the 27  UNOFFICIAL COPY  	25 RS BR 802 
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investments proposed, the amount requested, the amount invested, and the 1 
percentage of applications which resulted in investments. 2 
(2) (a) For the purposes of this subsection: 3 
1. "Solely in the interest of the members and beneficiaries" shall be 4 
determined using only pecuniary factors and shall not include any 5 
purpose to further a nonpecuniary interest; 6 
2. "Pecuniary factor" means a consideration having a direct and material 7 
connection to the financial risk or financial return of an investment; 8 
3. A "material connection" is established if there is a substantial likelihood 9 
that a reasonable investor would consider it important in determining the 10 
financial risk or the financial return of an investment; 11 
4. "Nonpecuniary interest" includes but is not limited to an environmental, 12 
social, political, or ideological interest which does not have a direct and 13 
material connection to the financial risk or financial return of an 14 
investment; and 15 
5. "Investment manager" and "investment consultant" shall have the same 16 
definition attributed to "investment adviser" under the federal 17 
Investment Advisers Act of 1940, 15 U.S.C. sec. 80b-2. 18 
(b) The board members, investment managers, investment consultants, or other 19 
fiduciaries, and proxy advisers shall discharge their duties with respect to the 20 
assets of the system solely in the interests of the active contributing members 21 
and annuitants and: 22 
1. For the exclusive purpose of providing benefits to members and 23 
annuitants and defraying reasonable expenses of administering the 24 
system; 25 
2. With the care, skill, prudence, and diligence under the circumstances 26 
then prevailing that a prudent person acting in a like capacity and 27  UNOFFICIAL COPY  	25 RS BR 802 
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familiar with these matters would use in the conduct of an enterprise of 1 
a like character and with like aims; 2 
3. By diversifying the investments of the plan so as to minimize the risk of 3 
large losses, unless under the circumstances it is clearly prudent not to 4 
do so; and 5 
4. In accordance with the federal, state, and common laws, administrative 6 
regulations, and other instruments governing the system and fiduciaries. 7 
(c) Evidence that a fiduciary has considered or acted on a nonpecuniary interest 8 
shall include but is not limited to: 9 
1. Statements, explanations, reports, or correspondence; 10 
2. Communications with portfolio companies; 11 
3. Statements of principles or policies, whether made individually or 12 
jointly; 13 
4. Votes of shares or proxies; or 14 
5. Coalitions, initiatives, agreements, or commitments to which the 15 
fiduciary is a participant, affiliate, or signatory. 16 
(3) (a) In choosing and contracting for professional investment management and 17 
consulting services, the board shall do so prudently and in the interest of the 18 
members and annuitants. Any contract that the board makes with an 19 
investment manager shall set forth policies and guidelines of the board with 20 
reference to standard rating services and specific criteria for determining the 21 
quality of investments. Expenses directly related to investment management 22 
and consulting services shall be financed from the guarantee fund in amounts 23 
approved by the board. 24 
(b) An investment manager or consultant appointed under this section shall 25 
acknowledge in writing his or her fiduciary responsibilities to the fund. To be 26 
eligible for appointment, an investment manager, consultant, or an affiliate, 27  UNOFFICIAL COPY  	25 RS BR 802 
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shall be: 1 
1. Registered under the Federal Investment Advisers Act of 1940; or 2 
2. A bank as defined by that Act; or 3 
3. An insurance company qualified to perform investment services under 4 
the laws of more than one (1) state. 5 
(c) Proxy advisers and proxy voting services shall comply with all applicable 6 
provisions of the Investment Advisers Act of 1940, as amended, and the rules 7 
and regulations promulgated thereunder, and shall comply with all other 8 
federal statutes and related rules and regulations that apply to proxy advisers 9 
and proxy voting services. 10 
(d) No contract or agreement, whether made in writing or not, shall in any 11 
manner waive, restrict, or limit a fiduciary's liability as to any of the duties 12 
imposed by this section. Any agreement shall specify that it is made in the 13 
Commonwealth and governed by the laws of the Commonwealth, unless the 14 
agreement is in commingled investments or real property outside the 15 
Commonwealth, in which case the agreements may be made in or governed 16 
by laws outside of the Commonwealth provided that the other requirements 17 
of this section are met. 18 
(4) No investment or disbursement of funds shall be made unless authorized by the 19 
board of trustees, except that the board, in order to ensure timely market 20 
transactions, shall establish investment guidelines and may permit its staff and 21 
investment managers who are employed or under contract with the board pursuant 22 
to this section to execute purchases and sales of investment instruments within 23 
those guidelines without prior board approval. 24 
(5) In discharging his or her administrative duties under this section, a trustee shall 25 
strive to administer the retirement system in an efficient and cost-effective manner 26 
for the taxpayers of the Commonwealth of Kentucky. 27  UNOFFICIAL COPY  	25 RS BR 802 
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(6) Notwithstanding any other provision of KRS 161.220 to 161.716, no funds of the 1 
Teachers' Retirement System, including fees and commissions paid to an 2 
investment manager, private fund, or company issuing securities, who manages 3 
systems assets, shall be used to pay fees and commissions to placement agents. For 4 
purposes of this subsection, "placement agent" means a third-party individual, who 5 
is not an employee, or firm, wholly or partially owned by the entity being hired, 6 
who solicits investments on behalf of an investment manager, private fund, or 7 
company issuing securities. 8 
(7) All contracts for the investment or management of assets of the system shall not be 9 
subject to KRS Chapters 45, 45A, 56, and 57. Instead, the board shall conduct the 10 
following process to develop and adopt an investment procurement policy with 11 
which all prospective contracts for the investment or management of assets of the 12 
system shall comply: 13 
(a) On or before July 1, 2017, the board shall consult with the secretary of the 14 
Finance and Administration Cabinet or his or her designee to develop an 15 
investment procurement policy, which shall be written to meet best practices 16 
in investment management procurement; 17 
(b) Thirty (30) days prior to adoption, the board shall tender the preliminary 18 
investment procurement policy to the secretary of the Finance and 19 
Administration Cabinet or his or her designee for review and comment; 20 
(c) Upon receipt of comments from the secretary of the Finance and 21 
Administration Cabinet or his or her designee, the board shall choose to adopt 22 
or not adopt any recommended changes; 23 
(d) Upon adoption, the board shall tender the final investment procurement policy 24 
to the secretary of the Finance and Administration Cabinet or his or her 25 
designee; 26 
(e) No later than thirty (30) days after receipt of the investment procurement 27  UNOFFICIAL COPY  	25 RS BR 802 
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policy, the secretary or his or her designee shall certify whether the board's 1 
investment procurement policy meets or does not meet best practices for 2 
investment management procurement; and 3 
(f) Any amendments to the investment procurement policy shall adhere to the 4 
requirements set forth by paragraphs (b) to (e) of this subsection. 5 
(8) (a) The board shall adopt written proxy voting guidelines which are consistent 6 
with the fiduciary duties and other requirements of this section. 7 
(b) The board shall not adopt the recommendations of a proxy adviser or proxy 8 
voting service and shall not allow such proxy adviser or proxy voting service 9 
to vote on behalf of the system, unless the proxy adviser or proxy voting 10 
service acknowledges in writing and accepts under contract its duties under 11 
this section and commits to follow the board-adopted proxy voting guidelines 12 
when voting the system's shares in order to comply with the board's fiduciary 13 
duties and other responsibilities under this section. 14 
(c) All shares held by or on behalf of the system, and which the system is entitled 15 
to vote under state, federal, or common laws, shall be voted according to the 16 
proxy voting guidelines adopted by the board and subject to the fiduciary 17 
duties and other requirements of this section by: 18 
1. The board, the investment committee of the board, or an employee or 19 
employees of the system who are fiduciaries under this section and are 20 
appointed or otherwise authorized by the board; or 21 
2. A proxy adviser or proxy voting service that acknowledges in writing 22 
and accepts under contract its duties under this section and commits to 23 
follow the board-adopted proxy voting guidelines when voting the 24 
system's shares in order to comply with the board's fiduciary duties and 25 
other responsibilities under this section.  26 
(d) All proxy votes shall be reported at least quarterly to the board. For each vote, 27  UNOFFICIAL COPY  	25 RS BR 802 
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the report shall provide: 1 
1. The vote caption; 2 
2. The date of the vote; 3 
3. The company's name; 4 
4. The vote cast for the system; 5 
5. The recommendation of the company's management; and 6 
6. If applicable, the recommendation of the proxy adviser or proxy voting 7 
service. 8 
Section 5.   KRS 161.470 is amended to read as follows: 9 
(1) The membership of the retirement system shall consist of all new members, all 10 
present teachers, and all persons participating under the retirement system as of 11 
June 30, 1986, except as provided in Acts 1938 (1st Ex. Sess.), Ch. 1, paragraph 29. 12 
The board of trustees of the Teachers' Retirement System shall be responsible for 13 
final determination of membership eligibility and may direct employers to take 14 
whatever action that may be necessary to correct any error relating to membership. 15 
(2) Service credit shall be forfeited upon withdrawal. If a member again enters service 16 
it shall be as a new member, except that any teacher who withdraws by claiming his 17 
or her deposits may repay the system the amount withdrawn plus interest and 18 
reestablish his or her service credit as provided in subsection (3) of this section. 19 
(3) Effective July 1, 1988, and thereafter, an active contributing member of the 20 
retirement system with contributing service equal to one (1) year may regain service 21 
credit by depositing in the teachers' savings fund the amount withdrawn with 22 
interest at the rate to be set by the board of trustees, and computed from the first of 23 
the month of withdrawal and including the month of redeposit. 24 
(4) Effective July 1, 1974, any active contributing member with at least two (2) years 25 
of contributing service credit who declined membership as provided in Acts 1938 26 
(1st Ex. Sess.), Ch. 1, paragraph 29, may secure service credit for prior service, and 27  UNOFFICIAL COPY  	25 RS BR 802 
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for any subsequent service prior to date of membership, by depositing in the 1 
teachers' savings fund contributions for each year of subsequent service prior to 2 
date of membership, with interest at the rate of eight percent (8%) compounded 3 
annually to the date of deposit. 4 
(5) Membership in the retirement system shall be terminated: 5 
(a) By retirement for service; 6 
(b) By death; 7 
(c) By withdrawal of the member's accumulated account balance; 8 
(d) When a member, having less than five (5) years of Kentucky service is absent 9 
from service for more than three (3) consecutive years; or 10 
(e) For persons whose membership begins on or after August 1, 2000, when a 11 
member is convicted, in any state or federal court of competent jurisdiction, of 12 
a felony related to his or her employment as provided in subparagraphs 1. and 13 
2. of this paragraph. 14 
1. Notwithstanding any provision of law to the contrary, a person whose 15 
membership begins on or after August 1, 2000, who is convicted, in any 16 
state or federal court of competent jurisdiction, of a felony related to his 17 
or her employment shall forfeit rights and benefits earned under the 18 
retirement system, except for the return of his or her accumulated 19 
contributions and interest credited on those contributions through the 20 
date of conviction. 21 
2. The payment of retirement benefits ordered forfeited shall be stayed 22 
pending any appeal of the conviction. If the conviction is reversed on 23 
final judgment, no retirement benefits shall be forfeited. 24 
 Except for paragraph (e) of this subsection, upon termination of member accounts 25 
under this subsection, funds in the account shall be transferred to the guarantee 26 
fund. Inactive members may apply for refunds of these funds at any time. The 27  UNOFFICIAL COPY  	25 RS BR 802 
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terminated service shall be reinstated, if not withdrawn by the member, in the event 1 
that the member returns to active contributing service. 2 
(6) In case of withdrawal from service prior to eligibility for retirement, the board of 3 
trustees shall on request of the member return all of his or her accumulated account 4 
balance, including any payments made by the member to the state accumulation 5 
fund, but the member shall have no claim on any contributions made by the state or 6 
employer with a view to his or her retirement, except as provided by KRS 161.635 7 
and 161.636, or to contributions made to the medical insurance fund. A member 8 
who is withdrawing from service prior to retirement eligibility shall be entitled to a 9 
refund following sixty (60) days after his or her last day of employment. If the 10 
member is eligible for an immediate service retirement allowance as provided in 11 
KRS 161.600, no withdrawal and refund shall be permitted, unless the allowance 12 
would prohibit the member from qualifying for Social Security benefits or the 13 
member elects to withdraw part or all of his or her service for the purpose of 14 
obtaining service credit in another retirement plan. Requests for refund of 15 
contributions by the member must be filed on forms prescribed by the Teachers' 16 
Retirement System and the employer shall be financially responsible for all 17 
information that is certified on the prescribed form. A member may not withdraw 18 
any part of his or her accumulated account balance in the retirement system except 19 
as provided by this subsection. 20 
(7) Except as provided in KRS 161.520 and 161.525, in case of death prior to 21 
retirement, the board of trustees shall pay to the estate of the deceased member, 22 
unless a beneficiary was otherwise applicably designated by the deceased member, 23 
then to the beneficiary, all of his or her accumulated account balance, including any 24 
payments made by the member to the state accumulation fund, but the estate or 25 
beneficiary shall have no claim on any contributions made by the state or employer 26 
with a view to the retirement of the member, except as provided by KRS 161.635 27  UNOFFICIAL COPY  	25 RS BR 802 
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and 161.636, or to contributions made to the medical insurance fund. 1 
(8) Any active contributing member of the Kentucky Employees Retirement System, 2 
the County Employees Retirement System, the State Police Retirement System, or 3 
the Judicial Retirement System may use service, under that retirement system for 4 
the purpose of meeting the service requirement of subsections (3) and (4) of this 5 
section. 6 
Section 6.   KRS 161.585 is amended to read as follows: 7 
(1) Each member's or annuitant's account shall be administered in a confidential 8 
manner, and specific data regarding a member or annuitant shall not be released for 9 
publication, except that: 10 
(a) The member or annuitant may authorize the release of his or her account 11 
information; 12 
(b) The board of trustees may release member or annuitant account information to 13 
the employer or to other state and federal agencies as it deems necessary or in 14 
response to a lawful subpoena or order issued by a court of law; or 15 
(c) 1. Upon request by any person, the system shall release the following 16 
information from the accounts of any member or annuitant of the 17 
Kentucky Teachers' Retirement System, if the member or annuitant is a 18 
current or former officeholder in the Kentucky General Assembly: 19 
a. The first and last name of the member or annuitant; 20 
b. The status of the member or annuitant, including but not limited to 21 
whether he or she is a contributing member, a member who is not 22 
contributing but has not retired, a retiree receiving a monthly 23 
retirement allowance, or a retiree who has returned to work 24 
following retirement with an agency participating in the system; 25 
c. If the individual is an annuitant, the monthly retirement allowance 26 
that he or she was receiving at the end of the most recently 27  UNOFFICIAL COPY  	25 RS BR 802 
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completed fiscal year; 1 
d. If the individual is a member who has not yet retired, the estimated 2 
monthly retirement allowance that he or she is eligible to receive 3 
on the first date he or she would be eligible for an unreduced 4 
retirement allowance, using his or her service credit, accumulated 5 
account balance, and final average salary at the end of the most 6 
recently completed fiscal year; and 7 
e. The current or last participating employer of the member or 8 
annuitant, if applicable. 9 
2. No information shall be disclosed under this paragraph from an account 10 
that is paying benefits to a beneficiary due to the death of a member or 11 
annuitant. 12 
(2) The release of information under subsection (1)(c) of this section shall not 13 
constitute a violation of the Open Records Act, KRS 61.870 to 61.884. 14 
(3) Medical records which are included in a member's or annuitant's file maintained by 15 
the Teachers' Retirement System are confidential and shall not be released unless 16 
authorized by the member or annuitant in writing or as otherwise provided by law 17 
or in response to a lawful subpoena or order issued by a court of law. A member 18 
appealing the denial of a disability retirement application and his or her legal 19 
counsel shall be entitled to all written recommendations and reports submitted by 20 
the medical review committee to the Teachers' Retirement System under KRS 21 
161.661(14). Such recommendations and reports shall otherwise be maintained in 22 
a confidential manner and shall not be subject to release under any conditions, 23 
including in response to a subpoena or order issued by a court of law 24 
notwithstanding any other statute to the contrary. 25 
(4) (a) When a subpoena is served upon any employee of the Kentucky Teachers' 26 
Retirement System requiring the production of any data, information, or 27  UNOFFICIAL COPY  	25 RS BR 802 
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records, it is sufficient if the employee of the Kentucky Teachers' Retirement 1 
System charged with the responsibility of being custodian of the original, or 2 
his or her designated staff, delivers[ within five (5) working days by certified 3 
mail or by personal delivery to the person specified in the subpoena] either of 4 
the following: 5 
1. Legible and durable copies of records certified by the employee or 6 
designated staff; or 7 
2. An affidavit stating the information required by the subpoena. 8 
(b) The production of records or an affidavit shall be in lieu of any personal 9 
testimony of any employee of the Kentucky Teachers' Retirement System 10 
unless, after the production of records or an affidavit, a separate subpoena is 11 
served upon the retirement system specifically directing the testimony of an 12 
employee of the retirement system. When a subpoena is served on any 13 
employee of the retirement system requiring the employee to give testimony 14 
or produce records for any purpose, in the absence of a court order requiring 15 
the testimony of or production of records by a specific employee, the system 16 
may designate an employee to give testimony or produce records upon the 17 
matter referred to in the subpoena. The board of trustees may promulgate an 18 
administrative regulation for the recovery of reasonable travel and 19 
administrative expenses for those occasions when an employee of the 20 
retirement system is required to travel from his or her home or office to 21 
provide testimony or records. Recoverable expenses may include the travel 22 
expenses, wages, salary, and overtime paid to the employee by the retirement 23 
system for the period of time that the employee is away from the office. The 24 
cost of these expenses shall be borne by the party issuing the subpoena 25 
compelling the employee's travel. The board of trustees may also promulgate 26 
an administrative regulation establishing a reasonable fee for the copying, 27  UNOFFICIAL COPY  	25 RS BR 802 
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compiling, and mailing of requested records. 1 
(c) The certification required by this subsection shall be signed before a notary 2 
public by the employee and shall include the full name of the member or 3 
annuitant, the last four digits of the Social Security number of the member or 4 
annuitant[ identification number assigned to the member or annuitant by the 5 
retirement system], and a legend substantially to the following effect: "The 6 
records are true and complete reproductions of the original, microfiched, or 7 
electronically stored records which are housed in the retirement system's 8 
office. This certification is given in lieu of the undersigned's personal 9 
appearance."[ 10 
(d) When an affidavit or copies of records are personally delivered, a receipt shall 11 
be presented to the person receiving the records for his or her signature and 12 
shall be immediately signed and returned to the person delivering the records. 13 
When an affidavit or copies of records are sent via certified mail, the receipt 14 
used by the postal authorities shall be sufficient to prove receipt of the 15 
affidavit or copies of records.] 16 
(d)[(e)] When the affidavit or copies of records are delivered to a requesting 17 
party for use in deposition they shall, after termination of the deposition, be 18 
delivered by the requesting party personally or by certified mail to the clerk 19 
of the court or other body before which the action or proceeding is pending. 20 
(e)[(f)] Upon completion of delivery by the retirement system of copies of 21 
records by their deposit in the mail or by their personal delivery to the 22 
requesting party, the retirement system shall cease to have any responsibility 23 
or liability for the records and their continued maintenance in a confidential 24 
manner. 25 
(f)[(g)] Records of the Kentucky Teachers' Retirement System that are 26 
susceptible to reproduction may be proved as to foundation, identity, and 27  UNOFFICIAL COPY  	25 RS BR 802 
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authenticity without preliminary testimony, by use of legible and durable 1 
copies, certified in accordance with the provisions of this subsection. 2 
(g)[(h)] The provisions of this subsection shall not be construed to prohibit the 3 
Kentucky Teachers' Retirement System from asserting any exemption, 4 
exception, or relief provided under the Kentucky Rules of Civil Procedure or 5 
other applicable law. 6 
(5) For purposes of this section, "records" includes retirement estimates, affidavits, and 7 
other documents prepared by or in the possession of the Kentucky Teachers' 8 
Retirement System in response to information requested in a lawful subpoena or 9 
order issued by a court of law. 10 
Section 7.   KRS 161.600 is amended to read as follows: 11 
(1) An individual who becomes a member of the retirement system prior to January 1, 12 
2022, may qualify for service retirement by meeting one (1) of the following 13 
requirements: 14 
(a) Attainment of age sixty (60) years and completion of five (5) years of 15 
Kentucky service; 16 
(b) 1. For an individual who becomes a member before July 1, 2008, 17 
attainment of age fifty-five (55) years and completion of a minimum of 18 
five (5) years of Kentucky service with an actuarial reduction of the 19 
basic allowance of five percent (5%) for each year the member's age is 20 
less than sixty (60) years or for each year the member's years of 21 
Kentucky service credit is less than twenty-seven (27), whichever is the 22 
lesser number; and 23 
2. For an individual who becomes a member on or after July 1, 2008, 24 
attainment of age fifty-five (55) years and completion of a minimum of 25 
ten (10) years of Kentucky service with an actuarial reduction of the 26 
basic retirement allowance of six percent (6%) for each year the 27  UNOFFICIAL COPY  	25 RS BR 802 
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member's age is less than sixty (60) years or for each year the member's 1 
years of Kentucky service credit is less than twenty-seven (27), 2 
whichever is the lesser number; 3 
(c) Completion of twenty-seven (27) years of Kentucky service. Out-of-state 4 
service earned in accordance with the provisions of KRS 161.515(2) may be 5 
used to meet this requirement; or 6 
(d) Completion of the necessary years of service under provisions of KRS 7 
61.559(2)(c) if the member is retiring under the reciprocity provisions of KRS 8 
61.680. A member retiring under this paragraph who has not attained age 9 
fifty-five (55) shall incur an actuarial reduction of the basic allowance 10 
determined by the system's actuary for each year the member's service credit 11 
is less than twenty-seven (27). 12 
(2) An individual who becomes a member of the retirement system on or after January 13 
1, 2022, shall, except as adjusted by the board pursuant to KRS 161.633 or 161.634, 14 
as applicable, be eligible to retire upon attainment of:  15 
(a) Age sixty-five (65) and completion of a minimum of five (5) years of 16 
Kentucky service; 17 
(b) Age sixty (60) and completion of a minimum of ten (10) years of Kentucky 18 
service; 19 
(c) Age fifty-seven (57) and completion of a minimum of thirty (30) years of 20 
Kentucky service; or 21 
(d) Age fifty-seven (57) and completion of a minimum of ten (10) years of 22 
Kentucky service with an actuarial reduction of the basic retirement allowance 23 
of six percent (6%) for each year the member's age is less than sixty (60) 24 
years or for each year the member's years of Kentucky service credit is less 25 
than thirty (30), whichever is the lesser number. 26 
(3) Any person who has been a member in Kentucky for twenty-seven (27) years or 27  UNOFFICIAL COPY  	25 RS BR 802 
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more and who withdraws from covered employment may continue to pay into the 1 
fund each year until the end of the fiscal year in which he or she reaches the age of 2 
sixty-five (65) years, the current contribution rate based on the annual 3 
compensation received during the member's last full year in covered employment, 4 
less any payment received for accrued sick leave or accrued leave from an 5 
employer. The member shall be entitled to receive a retirement allowance as 6 
provided in KRS 161.620 at any time after withdrawing from covered employment 7 
and payment of contributions under this subsection. No member shall make 8 
contributions as provided for in this subsection if the member is at the same time 9 
making contributions to another retirement system in Kentucky supported wholly or 10 
in part by public funds. 11 
(4) Service credit in the Kentucky Employees Retirement System, the State Police 12 
Retirement System, the Legislators' Retirement Plan, the County Employees 13 
Retirement System, or the Judicial Retirement System may be used in meeting the 14 
service requirements of subsections (1)(a) to (c) and (2) of this section, provided the 15 
service is subsequent to July 1, 1956.  16 
(5) Upon death, disability, or service retirement, a member's accounts under all state 17 
supported retirement systems shall be consolidated, as provided by this section and 18 
by KRS 61.680, for the purpose of determining eligibility and amount of benefits, 19 
which shall include medical benefits. Upon determination of benefits, each system 20 
shall pay the applicable percentage of total benefits. The effective date of retirement 21 
under this subsection shall be determined by each retirement system for the portion 22 
of the payments that will be made. 23 
(6) No retirement annuity shall be effective until written application and option election 24 
forms are filed with the retirement office in accordance with administrative 25 
regulations of the board of trustees. A member may withdraw his or her retirement 26 
application, postpone his or her effective retirement date, or change his or her 27  UNOFFICIAL COPY  	25 RS BR 802 
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retirement option if these elections are made no later than the fifteenth day of the 1 
month in which the member has made application for retirement. The deadline for 2 
making these changes shall not be subject to the jurisdiction of any court or 3 
appeal process, nor shall it otherwise be tolled or waived. 4 
(7) The surviving spouse of an active contributing member, if named as beneficiary of 5 
the member's account, may purchase retirement credit that the member was eligible 6 
to purchase prior to the member's death. 7 
Section 8.   KRS 161.624 is amended to read as follows: 8 
The employees of the Teachers' Retirement System shall endeavor to provide full and 9 
complete information to all inquiries presented by members or beneficiaries of members. 10 
The members or beneficiaries of the members shall assume full responsibility for 11 
obtaining adequate and sufficient information concerning their eligibility for retirement 12 
benefits, for selection of the type of benefit available to them, filing and other deadlines, 13 
and for adherence to the employment restrictions applicable to retired members. 14 
Section 9.   KRS 161.630 is amended to read as follows: 15 
(1) (a) A member, upon retirement, shall receive a retirement allowance in the form 16 
of a life annuity, with refundable balance, as provided in KRS 161.620, unless 17 
an election is made before the effective date of retirement to receive 18 
actuarially equivalent benefits under options which the board of trustees 19 
approves. 20 
(b) An individual who is participating in the supplemental benefit component as 21 
provided by KRS 161.635 or 161.636 may, before the effective date of 22 
retirement, elect to receive his or her accumulated account balance accrued in 23 
the supplemental benefit component annuitized into a monthly payment under 24 
one (1) of the actuarial equivalent payment options approved by the board of 25 
trustees. 26 
(c) No option shall provide for a benefit with an actuarial value at the age of 27  UNOFFICIAL COPY  	25 RS BR 802 
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retirement greater than that provided in KRS 161.620, 161.635(5)(a), or 1 
161.636(5)(a), as applicable. This section does not apply to disability 2 
allowances as provided in KRS 161.661(1). 3 
(2) The retirement option chosen by a retiree at the time of service retirement shall 4 
remain in force unless the retiree elects to make a change under the following 5 
conditions: 6 
(a) A divorce, annulment, or marriage dissolution following retirement shall, at 7 
the election of the retiree, cancel any optional plan selected at retirement that 8 
provides indefinitely continuing benefits to a spousal beneficiary and return 9 
the retiree to a single lifetime benefit equivalent as determined by the board; 10 
or 11 
(b) Following marriage or remarriage, or the death of the designated beneficiary, 12 
a retiree may elect a new optional plan of payment based on the actuarial 13 
equivalent of a single lifetime benefit at the time of the election, as 14 
determined by the board. The plan shall become effective the first of the 15 
month following receipt of an application on a form approved by the board. 16 
(3) Except as otherwise provided in this section, a beneficiary designation shall not be 17 
changed after the effective date of retirement except for retirees who elect the life 18 
annuity with refundable balance or the predetermined years certain and life 19 
thereafter option. A member may remove a beneficiary at any time, but shall not 20 
designate a substitute beneficiary. If a member elects to remove a beneficiary, the 21 
member's retirement allowance shall not change regardless of the retirement option 22 
selected by the member, even if the removed beneficiary predeceases the member. 23 
A member who is subject to the beneficiary designation restriction of this 24 
subsection shall only be allowed to name a new beneficiary when experiencing a 25 
qualifying event under subsection (2) of this section, and shall make this change 26 
within the deadline established in subsection (4) of this section. 27  UNOFFICIAL COPY  	25 RS BR 802 
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(4) A member who experiences a qualifying event under subsection (2) of this section 1 
and who elects a new optional plan of payment shall make that election within sixty 2 
(60) days of the qualifying event. The deadline for electing a new optional plan of 3 
payment or for changing a beneficiary shall not be subject to the jurisdiction of 4 
any court or appeal process, nor shall it otherwise be tolled or waived. 5 
Section 10.   KRS 161.635 is amended to read as follows: 6 
(1) An individual who becomes a nonuniversity member of the Teachers' Retirement 7 
System on or after January 1, 2022, shall receive the retirement benefits provided 8 
by this section in addition to the retirement benefits provided under KRS 161.620. 9 
The retirement benefits provided by this section shall be known as the supplemental 10 
benefit component. 11 
(2) The supplemental benefit component shall provide a benefit based upon a member's 12 
accumulated account balance which shall include: 13 
(a) Mandatory contributions made by the member as provided by KRS 14 
161.540(1)(c)2.; 15 
(b) Voluntary contributions made by the member, which may include lump-sum 16 
payments; 17 
(c) Mandatory contributions made by the employer as provided by KRS 18 
161.550(1)(d)2.; 19 
(d) Voluntary employer contributions; and 20 
(e) Regular interest, which shall be credited to the member's account annually on 21 
June 30 of each fiscal year, by multiplying the member's accumulated account 22 
balance in the supplemental benefit component on June 30 of the preceding 23 
fiscal year by the regular interest rate. 24 
(3) (a) Member contributions and employer contributions as provided by subsection 25 
(2)(a) to (d) of this section shall be credited to the member's account at least 26 
monthly as contributions are reported and posted to the system in accordance 27  UNOFFICIAL COPY  	25 RS BR 802 
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with KRS 161.560. 1 
(b) No employer contributions or interest shall be provided to a member who has 2 
taken a refund of his or her accumulated account balance as provided by KRS 3 
161.470 or who has retired and annuitized his or her accumulated account 4 
balance as authorized by this section. 5 
(4) (a) Upon termination of employment, a member who has less than five (5) years 6 
of service credited under KRS 161.500, who elects to take a refund of his or 7 
her accumulated account balance as provided by KRS 161.470, shall forfeit 8 
the accumulated employer contribution, and shall only receive a refund of his 9 
or her accumulated contributions.  10 
(b) Upon termination of employment, a member who has five (5) or more years 11 
of service credited under KRS 161.500, who elects to take a refund of his or 12 
her accumulated account balance as provided by KRS 161.470, shall receive a 13 
full refund of his or her accumulated account balance. 14 
(5) A nonuniversity member eligible to retire under KRS 161.600(2) may upon 15 
retirement, in addition to the other benefits provided by KRS 161.620, elect to: 16 
(a) Have all or a portion of his or her accumulated account balance in the 17 
supplemental benefit component annuitized into a lifetime monthly retirement 18 
allowance by the system in accordance with the actuarial assumptions and 19 
actuarial methods adopted by the board for the supplemental benefit 20 
component and in effect on the member's retirement date; 21 
(b) Receive the actuarial equivalent of his or her retirement allowance calculated 22 
under paragraph (a) of this subsection payable under one (1) of the options 23 
established by the board pursuant to KRS 161.630; 24 
(c) Take a distribution of the accumulated account balance in the supplemental 25 
benefit component over a period certain as authorized by the board; or 26 
(d) Take a full or partial refund of his or her accumulated account balance as 27  UNOFFICIAL COPY  	25 RS BR 802 
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provided by KRS 161.470. 1 
 A member participating in the supplemental benefit component shall not be 2 
required to take a distribution or annuitize his or her accumulated account balance 3 
in the supplemental benefit component when he or she begins drawing a retirement 4 
allowance from the foundational benefit component and may instead choose to 5 
begin drawing a distribution or annuitize his or her accumulated account balance in 6 
the supplemental benefit component at any date following his or her retirement date 7 
from the foundational benefit component. 8 
(6) This section only applies to individuals who become nonuniversity members of the 9 
Teachers' Retirement System on or after January 1, 2022. 10 
(7) The board of trustees shall have the authority to utilize or establish any plan or 11 
plans authorized under the Internal Revenue Code to provide the benefits set forth 12 
in this section. 13 
Section 11.   KRS 161.636 is amended to read as follows: 14 
(1) An individual who becomes a university member of the Teachers' Retirement 15 
System on or after January 1, 2022, shall receive the retirement benefits provided 16 
by this section in addition to the retirement benefits provided under KRS 161.620. 17 
The retirement benefits provided by this section shall be known as the supplemental 18 
benefit component. 19 
(2) The supplemental benefit component shall provide a benefit based upon a member's 20 
accumulated account balance which shall include: 21 
(a) Mandatory contributions made by the member as provided by KRS 22 
161.540(1)(d)2.; 23 
(b) Voluntary contributions made by the member, which may include lump-sum 24 
payments; 25 
(c) Mandatory contributions made by the employer as provided by KRS 26 
161.550(1)(e)2.; 27  UNOFFICIAL COPY  	25 RS BR 802 
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(d) Voluntary employer contributions; and 1 
(e) Regular interest, which shall be credited to the member's account annually on 2 
June 30 of each fiscal year, by multiplying the member's accumulated account 3 
balance in the supplemental benefit component on June 30 of the preceding 4 
fiscal year by the regular interest rate. 5 
(3) (a) Member contributions and employer contributions as provided by subsection 6 
(2)(a) to (d) of this section shall be credited to the member's account at least 7 
monthly as contributions are reported and posted to the system in accordance 8 
with KRS 161.560. 9 
(b) No employer contributions or interest shall be provided to a member who has 10 
taken a refund of his or her accumulated account balance as provided by KRS 11 
161.470 or who has retired and annuitized his or her accumulated account 12 
balance as authorized by this section. 13 
(4) (a) Upon termination of employment, a member who has less than five (5) years 14 
of service credited under KRS 161.500, who elects to take a refund of his or 15 
her accumulated account balance as provided by KRS 161.470, shall forfeit 16 
the accumulated employer contribution, and shall only receive a refund of his 17 
or her accumulated contributions.  18 
(b) Upon termination of employment, a member who has five (5) or more years 19 
of service credited under KRS 161.500, who elects to take a refund of his or 20 
her accumulated account balance as provided by KRS 161.470, shall receive a 21 
full refund of his or her accumulated account balance. 22 
(5) A university member eligible to retire under KRS 161.600(2) may upon retirement, 23 
in addition to the other benefits provided by KRS 161.620, elect to: 24 
(a) Have all or a portion of his or her accumulated account balance in the 25 
supplemental benefit component annuitized into a lifetime monthly retirement 26 
allowance by the system in accordance with the actuarial assumptions and 27  UNOFFICIAL COPY  	25 RS BR 802 
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actuarial methods adopted by the board for the supplemental benefit 1 
component and in effect on the member's retirement date; 2 
(b) Receive the actuarial equivalent of his or her retirement allowance calculated 3 
under paragraph (a) of this subsection payable under one (1) of the options 4 
established by the board pursuant to KRS 161.630; 5 
(c) Take a distribution of the accumulated account balance in the supplemental 6 
benefit component over a period certain as authorized by the board; or 7 
(d) Take a full or partial refund of his or her accumulated account balance as 8 
provided by KRS 161.470. 9 
 A member participating in the supplemental benefit component shall not be 10 
required to take a distribution or annuitize his or her accumulated account balance 11 
in the supplemental benefit component when he or she begins drawing a retirement 12 
allowance from the foundational benefit component and may instead choose to 13 
begin drawing a distribution or annuitize his or her accumulated account balance in 14 
the supplemental benefit component at any date following his or her retirement date 15 
from the foundational benefit component. 16 
(6) This section only applies to individuals who become university members of the 17 
Teachers' Retirement System on or after January 1, 2022. 18 
(7) The board of trustees shall have the authority to utilize or establish any plan or 19 
plans authorized under the Internal Revenue Code to provide the benefits set forth 20 
in this section. 21 
Section 12.   KRS 161.661 is amended to read as follows: 22 
(1) (a) Any member who is accredited by the Teachers' Retirement System for five 23 
(5) or more years of service in Kentucky after July 1, 1941, may retire for 24 
disability and be granted a disability allowance if found to be eligible as 25 
provided in this section. Application for disability benefits shall be made 26 
within one (1) year of the last contributing service in Kentucky, and the 27  UNOFFICIAL COPY  	25 RS BR 802 
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disability must have occurred during the most recent period of employment in 1 
a position covered by the Teachers' Retirement System and subsequent to the 2 
accreditation by the Teachers' Retirement System of five (5) years of 3 
retirement system service credit in Kentucky. The deadline for filing an 4 
application for disability benefits shall not be subject to the jurisdiction of 5 
any court or appeal process, nor shall it otherwise be tolled or waived. A 6 
disability occurring during the regular vacation immediately following the last 7 
period of active service in Kentucky or during an official leave for which the 8 
member is entitled to make regular contributions to the retirement system, 9 
shall be considered as having occurred during a period of active service.  10 
(b) The annual disability allowance shall be equal to sixty percent (60%) of the 11 
member's final average salary.  12 
(c) The following individuals shall not be eligible for disability benefits under 13 
this section: 14 
1. Members with twenty-seven (27) or more years of service credit; and 15 
2. Individuals who become members on or after July 1, 2021, who are 16 
eligible for an unreduced benefit under KRS 161.600(1)(b)2. or (d). 17 
(2) The provisions of KRS 161.520, 161.525, and subsections (3), (4), and (5) of this 18 
section shall not apply to disability retirees whose benefits were calculated on the 19 
service retirement formula nor to survivors of these members. 20 
(3) Members shall earn one (1) year of entitlement to disability retirement, at sixty 21 
percent (60%) of the member's final average salary, for each four (4) years of 22 
service in a covered position, but any member meeting the service requirement for 23 
disability retirement shall be credited with no less than five (5) years of eligibility. 24 
(4) A member retired by reason of disability shall continue to earn service credit at the 25 
rate of one (1) year for each year retired for disability. This service shall be credited 26 
to the member's account at the expiration of entitlement as defined in subsection (3) 27  UNOFFICIAL COPY  	25 RS BR 802 
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of this section, or when the member's eligibility for disability benefits is terminated 1 
upon recommendation of a medical review committee, and this service shall be 2 
used in calculating benefits as provided in subsection (5) of this section, but under 3 
no circumstances shall this service be used to provide the member with more than 4 
twenty-seven (27) years of total service credit. The service credit shall be valued at 5 
the same level as service earned by active members as provided under KRS 161.600 6 
or 161.620. 7 
(5) Any member retired by reason of disability and remaining disabled at the expiration 8 
of the entitlement period shall have his or her disability benefits recalculated using 9 
the service retirement formula with service credit earned as set out in subsection (4) 10 
of this section. The retirement allowance shall be calculated as set forth in KRS 11 
161.620, except that those persons less than sixty (60) years of age shall be 12 
considered as sixty (60) years of age. Members having their disability benefits 13 
recalculated under this subsection shall not be entitled to a benefit based upon an 14 
average of their three (3) highest salaries as set forth in KRS 161.220(9), unless 15 
approved otherwise by the board of trustees. 16 
(6) Members who have their disability retirement allowance recalculated at the 17 
expiration of the entitlement period shall continue to have coverage under the post-18 
retirement medical insurance program. Restrictions on employment shall remain in 19 
effect until the member attains age seventy (70) or until the member's eligibility is 20 
discontinued. KRS 161.520 and 161.525 shall not apply to survivors of disability 21 
retirees whose retirement allowances have been recalculated at the expiration of the 22 
entitlement period. Members who have their disability retirement allowance 23 
recalculated at the expiration of their entitlement period shall be entitled to a 24 
minimum monthly allowance of five hundred dollars ($500) as the basic straight 25 
life annuity. The minimum allowance shall be effective July 1, 1992, and shall 26 
apply to those members who have had their allowance recalculated prior to that date 27  UNOFFICIAL COPY  	25 RS BR 802 
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and to disability retirees who will have their benefit allowance recalculated on or 1 
after that date. For individuals who become members on or after July 1, 2021, 2 
disability retirement payments and any other recurring payments payable by any 3 
other state-administered retirement system shall be applied to reduce, on a dollar-4 
for-dollar basis, the minimum monthly disability retirement allowance payable 5 
under this subsection. 6 
(7) Effective July 1, 1992, members retired for disability prior to July 1, 1964, shall be 7 
entitled to a minimum monthly allowance of five hundred dollars ($500) as their 8 
basic straight life annuity and their surviving spouse shall be eligible for survivor 9 
benefits as provided in KRS 161.520(1)(a) and (b). 10 
(8) Any member retired by reason of disability may voluntarily waive disability 11 
benefits and [return to teaching or ]any member, who is immediately eligible for 12 
service retirement[age sixty (60) years or older], may elect to waive disability 13 
benefits and retire for service on the basis of service credited to the member on the 14 
effective date of the disability retirement. 15 
(9) In order to qualify for retirement by reason of disability a member must suffer from 16 
a physical or mental condition presumed to be permanent in duration and of a 17 
nature as to render the member incapable of being gainfully employed in a covered 18 
position. The incapability must be revealed by a competent examination by a 19 
licensed physician or physicians and must be approved by a majority of a medical 20 
review committee. 21 
(10) A member retired by reason of disability shall be required to undergo periodic 22 
examinations at the discretion of the board of trustees to determine whether the 23 
disability allowance shall be continued. When examination and recommendation of 24 
a medical review committee indicate the disability no longer exists, the allowance 25 
shall be discontinued. Failure to undergo examinations and provide the Teachers' 26 
Retirement System with requested medical documentation shall result in a 27  UNOFFICIAL COPY  	25 RS BR 802 
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suspension of disability benefits. 1 
(11) Eligibility for payment shall begin on the first day of the month following receipt of 2 
the application in the Teachers' Retirement System office, or the first of the month 3 
next following the last payment of salary or sick leave benefits by the employer, 4 
whichever is the later date. 5 
(12) No person who receives a disability allowance may be employed in a position that 6 
entails duties or qualification requirements similar to positions subject to 7 
participation in the retirement system either within or without the State of 8 
Kentucky. So doing shall constitute a misdemeanor and shall result in loss of the 9 
allowance from the first date of this service. For purposes of this subsection and 10 
subsection (13) of this section, "employment" and "occupation," and derivatives 11 
thereof, mean any activity engaged in by the member receiving disability allowance 12 
from which income is earned. A member who applies for and is approved for 13 
disability retirement on or after July 1, 2002, and whose annual disability benefit is 14 
less than forty thousand dollars ($40,000) may earn income in any occupation other 15 
than covered employment only to the extent that the annual income from the other 16 
employment when added to the annual disability benefit does not exceed forty 17 
thousand dollars ($40,000). For any member who exceeds this limit as a result of 18 
income from other employment, the Kentucky Teachers' Retirement System shall 19 
reduce the member's disability benefit on a dollar-for-dollar basis for each dollar 20 
that the member's combined annual disability benefit and annual income from other 21 
employment exceeds forty thousand dollars ($40,000). The board of trustees may 22 
annually increase the forty thousand dollar ($40,000) limit by the percentage 23 
increase in the annual average of the consumer price index for all urban consumers 24 
for the most recent calendar year as published by the Federal Bureau of Labor 25 
Statistics, not to exceed five percent (5%). The retirement system may require 26 
income and employment verification from the member, including but not limited to 27  UNOFFICIAL COPY  	25 RS BR 802 
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copies of tax returns and federal forms W-2 and W-4P. Failure to provide the 1 
Teachers' Retirement System with requested income and employment verification 2 
documentation shall result in a suspension of disability benefits. Submission of 3 
false or fraudulent documentation shall, in addition to criminal penalties, result 4 
in disqualification of all disability benefits from the date the fraudulent 5 
documentation was submitted. 6 
(13) All members who applied for disability retirement before July 1, 2002, and were 7 
approved as a result of that application shall be subject to the income limitations as 8 
they existed on June 30, 2002, until July 1, 2006. Effective July 1, 2006, the 9 
twenty-seven thousand dollar ($27,000) limitation shall be increased to forty 10 
thousand dollars ($40,000) and may be adjusted by the board of trustees by the 11 
consumer price index in the manner described in subsection (12) of this section. 12 
The recipient of a disability allowance who engages in any gainful occupation other 13 
than covered employment must make a report of the duties involved, compensation 14 
received, and any other pertinent information required by the board of trustees. The 15 
retirement system may require income and employment verification from the 16 
member, including but not limited to copies of tax returns and federal forms W-2 17 
and W-4P. Failure to provide the Teachers' Retirement System with requested 18 
income and employment verification documentation shall result in a suspension 19 
of disability benefits. Submission of false or fraudulent documentation shall, in 20 
addition to criminal penalties, result in disqualification of all disability benefits 21 
from the date the fraudulent documentation was submitted. 22 
(14) The board of trustees shall designate medical review committees, each consisting of 23 
three (3) licensed physicians. A medical review committee shall pass upon all 24 
applications for disability retirement and upon all applicant statements, medical 25 
certifications, and examinations submitted in connection with disability 26 
applications. The disposition of each case shall be recommended by a medical 27  UNOFFICIAL COPY  	25 RS BR 802 
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review committee in writing to the retirement system. Members of a medical review 1 
committee shall follow administrative regulations regarding procedures as the board 2 
of trustees may enact and shall be paid reasonable fees and expenses as authorized 3 
by the board of trustees in compliance with the provisions of KRS 161.330 and 4 
161.340. The retirement system may secure additional medical examinations and 5 
information as it deems necessary. A member may appeal any final agency decision 6 
denying his or her disability retirement application pursuant to the provisions of 7 
KRS 161.250(2). In the event of such an appeal, the member and his or her legal 8 
counsel shall be entitled to all written recommendations and reports submitted by 9 
the medical review committee to the Teachers' Retirement System. Such 10 
recommendations and reports shall otherwise be maintained in a confidential 11 
manner and shall not be subject to release under any conditions including in 12 
response to a subpoena or order issued by a court of law notwithstanding any 13 
other statute to the contrary. 14 
(15) A disability may be presumed to be permanent if the condition creating the 15 
disability may be reasonably expected to continue for one (1) year or more from the 16 
date of application for disability benefits. 17 
(16) Any member who has voluntarily waived disability benefits or whose disability 18 
benefits have been discontinued on recommendation of a medical review 19 
committee, may apply for reinstatement of disability benefits. The application for 20 
reinstatement must be made to the retirement system within twelve (12) months of 21 
the date disability benefits terminated. If the termination of benefits were voluntary, 22 
the reinstatement may be made without medical examination if application is made 23 
within three (3) months of the termination date. Other applications for reinstatement 24 
will be processed in the same manner as new applications for benefits. 25 
(17) No person who is receiving disability benefits under this section may be employed 26 
in a position which qualifies the person for membership in a retirement system 27  UNOFFICIAL COPY  	25 RS BR 802 
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financed wholly or in part with public funds. Employment in a position prohibited 1 
by this subsection shall result in disqualification for those disability benefits from 2 
the date of employment in the prohibited position. 3 
(18) Any person who is receiving benefits and becomes disqualified from receiving 4 
those benefits under this section, or becomes disqualified from receiving a portion 5 
of those benefits due to income from other than covered employment, shall 6 
immediately notify the Teachers' Retirement System of this disqualification in 7 
writing and shall return all benefits paid after the date of disqualification. Failure to 8 
comply with these provisions shall create an indebtedness of that person to the 9 
Teachers' Retirement System. Interest at the rate of eight percent (8%) per annum, 10 
beginning on the date the written notice of disqualification is sent, shall be 11 
charged if the debt is not repaid within sixty (60) days after the date of written 12 
notice of disqualification. Failure to repay this debt creates a lien in favor of the 13 
Teachers' Retirement System upon all property of the person who improperly 14 
receives benefits and does not repay those benefits. The Teachers' Retirement 15 
System may, in order to collect an outstanding debt, reduce or terminate any benefit 16 
that a member is otherwise entitled to receive. 17 
(19) Notwithstanding any other provision of this section to the contrary, individuals who 18 
become members on or after January 1, 2022, shall be eligible for an actuarially 19 
determined disability benefit as prescribed by the board of trustees via 20 
administrative regulations promulgated by the board. The board of trustees shall 21 
arrange by appropriate contract or on a self-insured basis a disability plan to 22 
provide the disability benefits and may adjust the benefits in accordance with KRS 23 
161.633(3) or 161.634(3). 24 
Section 13.   KRS 161.680 is amended to read as follows: 25 
(1) If any change or error in a record results in any individual receiving from the 26 
retirement system more or less than the individual was entitled to receive as 27  UNOFFICIAL COPY  	25 RS BR 802 
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determined by the board of trustees or staff of the Teachers' Retirement System, 1 
the board of trustees or staff shall, when the error is discovered, correct the error, 2 
and as far as practicable adjust the payments so that the actuarial equivalent of the 3 
benefit to which the individual was entitled shall be paid. 4 
(2) The Teachers' Retirement System shall take all practicable and cost-effective steps 5 
to collect overpayments from a member's or retiree's account. Methods of 6 
correction of overpayments from any member's or retiree's account shall include but 7 
are not limited to reclamation of the overpayment from the member's or retiree's 8 
account at the depository bank, the deduction of moneys from account refunds, 9 
deduction from the retirement allowance or joint and survivor annuity payable from 10 
the account, and deduction of moneys from the life insurance benefit. Collection of 11 
overpayments shall be initiated regardless of the designated beneficiary for any 12 
amounts payable from the account. 13 
Section 14.   KRS 56.8605 is amended to read as follows: 14 
As used in KRS 56.860 to 56.869: 15 
(1) "Authorized project" means: 16 
(a) Any project approved by the General Assembly and included in an enacted 17 
budget; or 18 
(b) Any project approved by the General Assembly that is certified by the 19 
secretary of the Finance and Administration Cabinet in accordance with the 20 
provisions of KRS 56.870, to be of a type that will independently produce 21 
revenues or will be payable from receipts of federal transportation funds that 22 
are projected by the commission to be sufficient to fully meet debt service, 23 
issuance costs, reserve fund requirements, insurance premiums, or any other 24 
expenditures necessary for financing so that no appropriation of state funds is 25 
required; 26 
(2) "Cabinet" means the Finance and Administration Cabinet; 27  UNOFFICIAL COPY  	25 RS BR 802 
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(3) "Commercial paper" means obligations that by their terms mature not more than 1 
three hundred sixty-six (366) days from the date of their issuance and that may be 2 
refunded; 3 
(4) "Commission" means the Kentucky Asset/Liability Commission; 4 
(5) "Estimated revenues" means the official revenue estimates established pursuant to 5 
KRS 48.120 on or before the dates on which tax and revenue anticipation notes are 6 
awarded to the purchaser; 7 
(6) "Financial agreements" means interest rate swaps, options, or other agreements 8 
between two (2) parties to exchange or have the conditional right to exchange 9 
interest rate exposure from fixed rate to variable rate or from variable rate to fixed 10 
rate, or to provide other economic benefit to an issuance of notes or a portfolio of 11 
notes, or to hedge the net interest margin of the Commonwealth; 12 
(7) "Financing agreement" means an agreement between the commission and the 13 
cabinet, or between the cabinet and a state agency, relating to the funding of 14 
projects or items associated with projects as described in KRS 56.867(3), a 15 
judgment against a state agency or the Commonwealth, or the finance or refinance 16 
of obligations owed under KRS 161.550(2)[ or 161.553(2)]. The provisions of a 17 
financing agreement shall require either the cabinet to make payments to the 18 
commission relating to the commission's issuance of notes, or the state agency to 19 
make payments to the cabinet reimbursing the cabinet for its payments to the 20 
commission on the agency's behalf. The obligations of the cabinet or the state 21 
agency under a financing agreement shall be contingent upon appropriations by the 22 
General Assembly to the cabinet or to the agency for the payment of those 23 
obligations; 24 
(8) "Fixed-rate obligations" means obligations on which the interest rate remains 25 
constant to maturity; 26 
(9) "Funding notes" means notes issued under the provisions of KRS 56.860 to 56.869 27  UNOFFICIAL COPY  	25 RS BR 802 
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by the commission for the purpose of funding: 1 
(a) Judgments, with a final maturity of not more than ten (10) years; and 2 
(b) The finance or refinance of obligations owed under KRS 161.550(2)[ or 3 
161.553(2)]; 4 
(10) "Interest-sensitive assets" means tangible and intangible property held by the 5 
Commonwealth whose market value is dependent upon the level of interest rates; 6 
(11) "Interest-sensitive liabilities" means interest-bearing debts or other obligations of 7 
the Commonwealth or a state agency; 8 
(12) "Multimodal obligations" means obligations for which the time period for 9 
establishing the rate of interest may be selectively determined and altered; 10 
(13) "Net interest margin" means the net income or expense associated with the 11 
difference between the Commonwealth's interest-sensitive assets and interest-12 
sensitive liabilities; 13 
(14) "Project notes" means notes issued under the provisions of KRS 56.860 to 56.869 14 
by the commission with a final maturity of not more than twenty (20) years for the 15 
purpose of funding authorized projects, which may include bond anticipation notes; 16 
(15) "State agency" means any state administrative body, agency, department, or 17 
division as defined in KRS 42.005, and set out in KRS Chapter 12, or any board, 18 
commission, institution, state university, or division exercising any function of the 19 
Commonwealth; 20 
(16) "Tax and revenue anticipation notes" means notes that are issued under the 21 
provisions of KRS 56.860 to 56.869 by the commission with a final maturity that is 22 
no later than the last day of the fiscal year during which the tax and revenue 23 
anticipation notes are issued and that are issued in anticipation of estimated 24 
revenues to be received in that fiscal year; and 25 
(17) "Variable-rate demand obligations" means obligations on which the rate of interest 26 
is set by reference to a predetermined index or formula, by auction, by an agent 27  UNOFFICIAL COPY  	25 RS BR 802 
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that, in the sole judgment of the commission, has the financial expertise to establish 1 
market interest rates, or by similar means. 2 
Section 15.   KRS 56.868 is amended to read as follows: 3 
(1) The commission may issue and sell funding notes for the purposes of funding 4 
judgments against the Commonwealth or any state agency and financing or 5 
refinancing obligations owed under KRS 161.550(2)[ or 161.553(2)]. Funding notes 6 
may be sold and issued in a manner and have terms relating to the payment of 7 
interest, principal, and premiums or discounts as market conditions warrant. 8 
(2) Appropriations requests for payment of principal and interest on funding notes shall 9 
be made by the state agency against which a judgment has been rendered or, in the 10 
case of financing or refinancing obligations owed under KRS 161.550(2)[ or 11 
161.553(2)], to the Kentucky Teachers' Retirement System. Funding notes, together 12 
with interest thereon, shall be repaid from payments received by the commission 13 
from the cabinet under a financing agreement. 14 
(3) Funding notes may be issued for the following purposes: 15 
(a) To pay for judgments, which shall include legal settlements, court-ordered 16 
actions against the Commonwealth or any state agency, and any part of any 17 
expense or cost incidental to legal settlements or court-ordered actions against 18 
the Commonwealth or any state agency; 19 
(b) To finance or refinance obligations owed under KRS 161.550(2)[ or 20 
161.553(2)]; and 21 
(c) To refund outstanding issues of funding notes. 22 
(4) The issuance of funding notes shall be subject to KRS 56.870, to approval by the 23 
State Property and Buildings Commission, and to review by the Capital Projects 24 
and Bond Oversight Committee pursuant to KRS 45.810. 25 
(5) The cabinet, in providing for the expenditure of funds for any of the purposes 26 
mentioned in this section, may provide by a financing agreement with the state 27  UNOFFICIAL COPY  	25 RS BR 802 
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agency so affected for the funding of the Commonwealth's or that state agency's 1 
judgment, and the state agency so affected is authorized to enter into a financing 2 
agreement with the cabinet for that purpose. 3 
(6) Funding notes shall not constitute a debt of the Commonwealth or any political 4 
subdivision thereof or a pledge of the faith and credit of the Commonwealth or any 5 
political subdivision, but the notes shall be payable solely from payments received 6 
under the financing agreement relating to the funding notes. 7 
Section 16.   KRS 161.550 is amended to read as follows: 8 
(1) Each employer, except as provided under KRS 161.555, shall contribute annually to 9 
the Teachers' Retirement System a permanent employer contribution rate on behalf 10 
of each employee it employs equal to: 11 
(a) Thirteen and one hundred five thousandths percent (13.105%) of the total 12 
annual compensation of nonuniversity members who become members prior 13 
to July 1, 2008. Of this permanent employer contribution rate: 14 
1. Twelve and three hundred fifty-five thousandths percent (12.355%) of 15 
the total annual compensation shall be used to fund pension and life 16 
insurance benefits; and  17 
2. Three-quarters of a percent (0.75%) of annual compensation shall be 18 
used to provide funding to the medical insurance fund as provided under 19 
KRS 161.420(5). If the board of trustees establishes a trust fund under 20 
26 U.S.C. sec. 115, the board may deposit the employer contribution 21 
provided in this subparagraph in that trust fund;  22 
(b) Fourteen and one hundred five thousandths percent (14.105%) of the total 23 
annual compensation of nonuniversity members who become members on or 24 
after July 1, 2008, but prior to January 1, 2022. Of this permanent employer 25 
contribution rate: 26 
1. Thirteen and three hundred fifty-five thousandths percent (13.355%) of 27  UNOFFICIAL COPY  	25 RS BR 802 
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the total annual compensation shall be used to fund pension and life 1 
insurance benefits; and  2 
2. Three-quarters of a percent (0.75%) of annual compensation shall be 3 
used to provide funding to the medical insurance fund as provided under 4 
KRS 161.420(5). If the board of trustees establishes a trust fund under 5 
26 U.S.C. sec. 115, the board may deposit the employer contribution 6 
provided in this subparagraph in that trust fund; 7 
(c) Thirteen and sixty-five hundredths percent (13.65%) of the total annual 8 
compensation of university members who become members prior to January 9 
1, 2022. Of this permanent employer contribution rate: 10 
1. Ten and eight hundred seventy-five thousandths percent (10.875%) of 11 
the total annual compensation shall be used to fund pension and life 12 
insurance benefits; and 13 
2. Two and seven hundred seventy-five thousandths percent (2.775%) of 14 
annual compensation shall be used to provide funding to the medical 15 
insurance fund as provided under KRS 161.420(5). If the board of 16 
trustees establishes a trust fund under 26 U.S.C. sec. 115, the board may 17 
deposit the employer contribution provided in this subparagraph in that 18 
trust fund; 19 
(d) Ten and three-quarters percent (10.75%) of the total annual compensation of 20 
nonuniversity members who become members on or after January 1, 2022. Of 21 
this permanent employer contribution rate: 22 
1. Eight percent (8%) of the total annual compensation shall be used to 23 
fund pension and life insurance benefits. The contribution provided by 24 
this subparagraph shall not be used to fund the supplemental benefit 25 
account as provided by KRS 161.635;  26 
2. Two percent (2%) of the total annual compensation shall be used to fund 27  UNOFFICIAL COPY  	25 RS BR 802 
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the mandatory employer contribution of the supplemental benefit 1 
component, except that the board may direct these contributions on a 2 
prospective basis into the pension and life insurance funds to contain 3 
costs within the provisions of KRS 161.633; and  4 
3. Three-quarters of one percent (0.75%) of annual compensation shall be 5 
used to provide funding to the medical insurance fund as provided under 6 
KRS 161.420(5). If the board of trustees establishes a trust fund under 7 
26 U.S.C. sec. 115, the board may deposit the employer contribution 8 
provided in this subdivision in that trust fund; and 9 
(e) Nine and seven hundred seventy-five thousandths percent (9.775%) of total 10 
annual compensation of university members who become members on or after 11 
January 1, 2022. Of this permanent employer contribution rate: 12 
1. Five and seven hundred seventy-five thousandths percent (5.775%) of 13 
the total annual compensation shall be used to fund pension and life 14 
insurance benefits. The contribution provided by this subparagraph shall 15 
not be used to fund the supplemental benefit account as provided by 16 
KRS 161.636; 17 
2. Two percent (2%) of the total annual compensation shall be used to fund 18 
the mandatory employer contribution of the supplemental benefit 19 
component, except that the board may direct these contributions on a 20 
prospective basis into the pension and life insurance funds to contain 21 
costs within the provisions of KRS 161.634; and 22 
3. Two percent (2%) of annual compensation shall be used to provide 23 
funding to the medical insurance fund as provided under KRS 24 
161.420(5). If the board of trustees establishes a trust fund under 26 25 
U.S.C. sec. 115, the board may deposit the employer contribution 26 
provided in this subparagraph in that trust fund. 27  UNOFFICIAL COPY  	25 RS BR 802 
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(2) In addition to the required contributions in subsection (1) of this section, the state 1 
shall contribute annually to the Teachers' Retirement System a percentage of the 2 
total salaries of the state-funded and federally funded members it employs to pay 3 
the cost of health insurance coverage for retirees who are not eligible for Medicare 4 
and who retire on or after July 1, 2010, less the amounts that are otherwise required 5 
to be paid by the retirees under KRS 161.675. The board shall deposit funds in the 6 
medical insurance fund unless the board of trustees has established a trust fund 7 
under 26 U.S.C. sec. 115 for this purpose. In this case, the board may deposit the 8 
employer contribution in that trust fund. This contribution shall be known as the 9 
state medical insurance fund stabilization contribution. The percentage to be 10 
contributed by the state under this subsection: 11 
(a) Shall be determined by the retirement system's actuary for each biennial 12 
budget period; 13 
(b) May be suspended or adjusted by the General Assembly if in its judgment the 14 
welfare of the Commonwealth so demands; and 15 
(c) Shall not exceed the lesser of the actual benefit cost for retirees not eligible 16 
for Medicare who retire on or after July 1, 2010, or the amount contributed by 17 
employers under subsection (3) of this section. 18 
(3) All employers who employ nonuniversity members shall make a contribution for 19 
each payroll on behalf of their active employees who participate in the Teachers' 20 
Retirement System in an amount equal to three percent (3%) of payroll of those 21 
active employees. The contribution specified by this subsection shall be used to 22 
fund retiree health benefits. 23 
(4) When the medical insurance fund established under KRS 161.420(5) achieves a 24 
sufficient prefunded status as determined by the Teachers' Retirement System's 25 
actuary, the board of trustees shall recommend to the General Assembly that the 26 
contributions required under subsections (1)(c)2. and (e)3. and (3) of this section 27  UNOFFICIAL COPY  	25 RS BR 802 
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shall, in an actuarially accountable manner, be either decreased, suspended, or 1 
eliminated.  The decrease, suspension, or elimination in contributions required 2 
under subsection (1)(c)2. of this section shall not exceed two and twenty-five 3 
thousandths percent (2.025%) of annual compensation. The decrease, suspension, 4 
or elimination in contributions required under subsection (1)(e)3. of this section 5 
shall not exceed one and twenty-five hundredths percent (1.25%) of annual 6 
compensation. 7 
(5) Each employer shall remit the required employer contributions to the retirement 8 
system under the terms and conditions specified for member contributions under 9 
KRS 161.560. The state shall provide annual appropriations based upon estimated 10 
funds needed to meet the requirements of KRS 161.155, 161.168, 161.507(4), 11 
161.515, 161.545,[ 161.553,] 161.605, 161.612, and 161.620(1), (3), (5), (6), and 12 
(7). In the event an annual appropriation is less than the amount of these 13 
requirements, the state shall make up the deficit in the next biennium budget 14 
appropriation to the retirement system. Employer contributions to the retirement 15 
system are for the exclusive purpose of providing benefits to members and 16 
annuitants and these contributions shall be considered deferred compensation to the 17 
members. This subsection shall not apply to costs applicable to individuals who 18 
become members on or after January 1, 2022. 19 
Section 17.   The following KRS section is repealed: 20 
161.553  Funding of past statutory benefit improvements -- Schedules for appropriations 21 
-- Cost-of-living increases.    22