The Coalition for Keeping the Kansas Promise (KKP) remains committed to opposing House Bill 2311 — the proposed defined contribution bill for KPERS. KKP submitted a thorough examination and review of the benefits offered by defined benefit plans that cannot be offered by defined contribution plans.
Namely, defined benefit plans are better for Kansas public employees and public employee retirees and Kansas taxpayers, because:
- Defined benefit plans require substantially less in employer and employee contributions than defined contribution plans and, therefore, reduce the obligation of Kansas taxpayers to fund Kansas’ public employee retirements;
- State and local governments are exempt from the federal Employee Retirement Income Security Act (ERISA) Pension Benefit Guaranty Corporation (PBGC) tax, which creates a competitive advantage for state and local governments offering defined benefit plans over defined benefit plans offered by private industry;
- The KPERS defined benefit plan assures a source of retirement income security for Kansas public employee retirees that will not be available under any defined contribution plan by reducing the likelihood of those retirees and future retirees relying on public assistance during retirement; and
- The KPERS defined benefit plan offers longevity risk pooling unavailable in defined contribution plans and, therefore, produces superior investment returns at less operational and management cost than a defined contribution system.
Please refer to our House Bill 2311 page for more information as well as KKP’s testimony submitted in opposition to House Bill 2311.
On Monday, March 7, the House Pensions and Benefits Committee received testimony on House Bill 2311, which would create a defined contribution system for new employees hired after July 2013, and House Bill 2333, which would increase the age of retirement for Tier I KPERS members from the current 85-point system to 95-points, effectively adding five-to-six years to the service requirement.
Appearing in favor of House Bill 2311 were Ken Daniel with the Topeka Independent Business Association and Dave Trabert with the Kansas Policy Institute, a think tank funded predominantly by contributions by Koch Industries.
Testimony received by the committee by Ken Daniel was largely uninformed, with Mr. Daniel attempting to compare public sector defined benefit plans with private defined benefit plans. Keeping the Kansas Promise testimony submitted to the House Pensions committee on March 7 repeated the warning of KPERS consulting actuary, Ms. Pat Beckham, that any attempt to compare public sector DB plans with private sector DB plans is not comparing “apples-to-apples.” The significant difference is that private DB plans are taxed in order to fund the Pension Benefit Guaranty Corporation (PBGC), which serves as an insurance fund for private pensions that become insolvent. Public sector DB plans are not taxed under the Employee Retirement Income Security Act of 1975 (ERISA) and are, likewise, not covered by the insurance of the PBGC (public DB plans are analogous to self-insured insurance plans for their public employee pensions).
Dave Trabert with the Kansas Policy Institute issued a “hot of the presses” report to committee members that was written by Barry Poulson (the Godfather of the Taxpayers’ Bill of Rights, or TABOR). Instead of using the unfunded actuarial liability of the KPERS fund, Trabert encouraged committee to use the unfunded market liability of the KPERS fund, contrary to the unfunded liability determination uniformly used by pension actuaries throughout the United States under the Government Accounting Service Board (GASB) accounting rules.
Fundamentally, neither Mr. Daniel nor Mr. Trabert offered any solution for resolving the current $7.7 billion unfunded actuarial liability of the KPERS fund. Moreover, neither of these gentlemen fully explained that a shift to the type of defined contribution plan proposed by HB 2311 would accelerate the insolvency of the KPERS fund from a date of FY 2033 to a more immediate date in the future.
Committee also heard from the KKP Coalition in opposition to House Bill 2311. The testimony is available here.
News Media Coverage of the House Pensions & Benefits Committee Hearings of HB 2311 & 2333:
- 401(k)-style pensions issue for Kan. House panel, Associated Press (March 7, 2011)
Tweets from the March 7, 2011 House Pensions & Benefits Committee by @ProtectKPERS:
Opposed to HB 2311: puts the retirement security of 280k Kansans at risk & puts burden on KS taxpayers. http://bit.ly/fUOaxl #ksleg #kpers
Not surprisingly, Dave Traebert w/ Koch Industries is here to testify in favor of HB 2311, the defined contribution bill. #ksleg
Today, House Pensions & Benefits is hearing HB 2311, the DC bill. Here’s our testimony against it: http://bit.ly/fUOaxl #ksleg #kpers
Chair M. Holmes starting House Pensions, skipping over HB 2311 until proponent in favor of 2311 can be reached by phone. #ksleg #kpers
Somebody from a builders’ association here testifying in favor of 2311, even though we’re not on that bill. #ksleg #kpers
Builders’ assn [Topeka Independent Business Association] rep says we need to get rid of DB plans, but fails to note ERISA tax differences b/w public & private DB plans. #ksleg #kpers
ERISA requires private industry to pay a Pension Benefit Guaranty Corp (PBGC) tax on DB plans; state & local govs are exempt. #ksleg #kpers
The representative speaking from Glenn Beck talking points, printed directly off Glenn Beck website. #ksleg #kpers
Rep. Ruiz asking builders’ rep if he’s aware of #SCOTUS ruling that if contributions increase, so must benefits? #ksleg #kpers
Rep. Ruiz asks if builder rep if he’s aware that KS public employees are payed 30% than private sector employees? He wasn’t. #ksleg #kpers
Rep. Hill asks Mr. Allen, the builders’ rep, if he’s got any suggestions to fix the existing #KPERS UAL. #ksleg #kpers
Mr. Daniel says that HB 2311 is his solution, but he fails to note that HB 2311 does nothing to solve existing #KPERS UAL. #ksleg
This is extremely difficult subject matter that requires more than Glenn Beck talking points. Requires understanding. #ksleg #kpers
Rep. Kelly asking if Mr. Daniel has a problem with an employer match under a DC plan. Says he has no problem with that. #ksleg #kpers
W. Virginia shifted away from it’s defined cont plan in 2005 (created it in 1991), b/c it was too expensive for taxpayers. #ksleg #kpers
Correction: Rep. Ruiz asks how many states have DC plans. Mr. Daniel said he’s “talking above my head right now.” #ksleg #kpers
Committee now waiting for Paula Gierenan, who is not here but was supposed to be at urging of Builders’ Assn. #ksleg #kpers
Dave Trabert with Koch Industries now testifying, says they released a report just this morning. #ksleg #kpers
Like they usually do, Dave Trabert try to give a higher unfunded number than provided by Glenn Deck with #KPERS. #ksleg
Neither Mr. Allen nor Trabert w/ Koch mention that breaking up investments increases risk & decreases fund earnings. #ksleg #kpers
Defined contributions break up the current pooled investments of the #KPERS defined benefit plan, decreasing investment earnings. #ksleg
Trabert says there needs to be contributions equaling 15.9% of payroll. W. Virg DC plan required 22.9% of payroll. #ksleg #kpers
Good thing we brought our boots today. It’s getting pretty deep in here. #ksleg #kpers
Trabert w/ Koch says that KS public employee retirees have high benefits. We disprove that here: most benefits between $1,100 & $1,499 monthly:
Here’s what most #KPERS earn from a monthly retirement benefit: http://bit.ly/fUOaxl #ksleg #kpers
Updated at 9:32 am– Dave Trabert with Koch Industries testifies before committee saying that statement that most Kansas public employee retirees around $1100 per month is “false.” We pulled the KPERS FY 2010 financial report for you to see that the majority of KPERS members fit within the $1100 monthly benefit range (see page 126 of the report here).
Rep. Hill is reviewing the report submitted, noting the “robust research capabilities.” #ksleg #kpers
Rep. Johnson asking some questions of Trabert. #ksleg #kpers
Johnson: Asks if Trabert has any input on solving the existing unfunded actuarial liability. Trabert doesn’t, says he rely on #KPERS. #ksleg
Trabert wants to base his analysis on “market value” of #KPERS instead of actuarial value as #KPERS does. #ksleg
Trabert saying #KPERS has said a lot of things that #KPERS hasn’t actually said in any committee this session. #ksleg
Because Dave Trabert’s mother is 75 & still working at the bank, everybody’s mother should work to 75. #ksleg #kpers
Dave Trabert noting the high levels of overtime earnings in some areas of state gov. The result of understaffing, folks. #ksleg #kpers
Rep. Kelly — if biggest area of concern is teacher group, then overttime isn’t really a concern there, b/c they are salary. #ksleg #kpers
Keeping the Kansas Promise presenting opposition testimony to HB 2311 now to House Pensions. #ksleg #kpers
“HB 2311 does nothing to correct unfunded actuarial liability. Creates another weak pension system.” #ksleg #kpers
It is noted that KS ranks 49th nationally in terms of pay for public employees, avgof $3300 less / year. #ksleg #kpers http://usat.ly/fI5BRT
HB 2311 does nothing to address $7.7 BN UAL, meaning taxpayers could be forced to pay if new employees are taken out of DB system. #ksleg
KPERS actuary said: Step 1 is raise the contribution cap (HB 2086, not blessed on turnaround): http://bit.ly/gmIGpp #ksleg #kpers
Chair Holmes referencing risk managed investing of TIAA-CREF, but doesn’t know how much they lost. #ksleg #kpers
Holmes asking if KKP would look at hybrid DB/DC plan — we agree to look at it, but 2311 is not a hybrid system. #ksleg #kpers
Johnson asking why DB plan costs less: larger pooled investments & lower administrative costs. #ksleg #kpers
Kansas Coalition of Public Employee Retirees now testifying against HB 2311. DC plan puts their retirements at risk. #ksleg #kpers
KCPER is online at http://www.ksretirees.org/
Testimony on HB 2311 closes. Chair M. Holmes agrees that HB 2311 doesn’t solve the existing #KPERS UAL. #ksleg
Grange comparing private & public DB plans; cannot compare. Privates are taxed & insured; public pensions are not. #ksleg #kpers
Hearing closed on HB 2311 & now we’re on 2333, increasing the age of retirement for KS public employees. #ksleg #kpers
Terry Forsyth with @KNEANews testifying against. #ksleg #kpers
Diane Gjerstad w/ USD 259 now appearing in opposition to HB 2333. #ksleg #kpers
Unique having Gjerstad appear before Committee w/ Rep. Flaharty from 98th Dist. Gjerstad held 98th Dist. seat from ’85 to ’92. #ksleg #kpers
Grange says that he thinks 2333 is too complex & burdensome. Prefers just to piggyback #KPERS retirement on SS retirement. #ksleg #kpers
Committee asking questions about a bill that wasn’t scheduled for hearing today. #ksleg #kpers
Hearing on HB 2333 is closed. #ksleg #kpers Chair M. Holmes advises to watch e-mail for possible committee changes. Committee adjourned.