Gov. Matt Bevin and Republicans revealed a pension reform plan yesterday in Frankfort that includes a 3 percent pay cut to teachers’ salaries to fund the retiree health insurance program, according to the proposal.

“Keeping the Promise,” as it has been called, protects many of the benefits for current retirees but changes some of the benefits for current and future employees. The reform also includes a gradual transfer to a defined contribution plan instead of the current plan.

In a defined contribution plan, the employee, the employer or both contribute money to the employee’s individual account, according to the U.S. Department of Labor. The amount contributed is oftentimes a set rate, and a 401(k) is an example of this type of plan.

If the reform is approved, employees under the Teachers’ Retirement System of Kentucky will have to contribute an additional 3 percent of their salaries to fund the retiree health insurance program. Current employees will be allowed to stay on the present plan, but future employees will be transferred to a defined contribution plan.

Employees under the Kentucky Employees Retirement System: Non-Hazardous employees plan will be allowed to stay on their current plan, but future employees will be required to participate in the defined contribution plan.

Current tier 3 employees in KERS-NH will also have to switch to the defined contribution plan. Current employees under the Kentucky Employees Retirement System: Hazardous employees plan, including members of the WKU Police, would continue in the present system, but new members would have the option to stay with the present system or to switch to the defined contribution plan. 

The retirement age for all employees will not change.

The full extent of the changes will not be known until legislation has been written and made available for review, Tony Glisson, director of human resources, said in an email to faculty and staff. He said Bevin has indicated he will give the public time to provide feedback about the legislation before the General Assembly is called into special session. He said WKU’s human resources and other administrative officials will keep faculty and staff updated as the discussion continues.

“Finally, all of the above information is being provided based on our understanding of things today,” Glisson said in an email. “Obviously, there could be gaps that are unknown as of this message. We would appreciate your holding questions and responses until we have more details and view the actual bill.”

Kentucky’s pension system is currently underfunded by over $64 billion, and KERS-NH is expected to run out of money by 2022, according to pensions.ky.gov. The reform is expected to save the pension system in the next 30 years, Bevin said in a press conference.

If passed, the law would go into effect July 1, 2018