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Kansas public pensions

Kansas public pensions
Pension system
Number of pension systems 1
State pension systems: • Kansas Public Employees Retirement System
System type: Retirement, defined contribution plans, defined benefit
Local pensions
Number of local pension systems 7
Pension health
Estimated liabilities:* $21,138,206,000 (2011 PEW study)
Percent funded: 64%
Unfunded liabilities: $7,609,755,000 ($7.6 billion)
State employees
Number of state public employees: 54,727
Total pension fund members (active and inactive): 204,155
Beneficiaries receiving payments: 73,164


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Kansas Public Pensions are administered by the Kansas Public Employees Retirement System. The system administers plans for the Kansas Public Employees Retirement System, the Kansas Police and Firemen's Retirement System, and the Kansas Retirement System for Judges. Kansas has 54,727 total public employees as of 2010.[1]

In Fiscal Year 2010, the state has a total of 204,155 active and inactive pension fund members, with 73,164 receiving periodic benefit payments. [2]

KPERS covers approximately 260,000 teachers, workers and retirees, with more than 150,000 active members with an average salary of $40,024. The retirement system serves 25,737 state employees, 84,438 school district workers and 40,307 local government employees.[3]

A recent study by economists Joshua Rauh of the Kellogg School of Management at Northwestern University and Robert Novy-Marx of the University of Chicago Booth School of Business concluded that the Kansas pension fund will run out of money in 2021.[4] Should the Kansas Public Employees Retirement System (KPERS) funds run out of money then, the cost the following year would be $2.5 billion, which would be 23 percent of state revenue.[5]

According to the United States Census Bureau, the state has 7 locally-administered pension systems.[6]

Pension plans

Plan Current Value Percentage funded Unfunded liabilities Total state employees Avg. pension
Kansas Public Employees Retirement Fund [7] $13.38 billion 55 percent $9.2 billion 155,054 active members $20,262
State Employees Retirement Fund [8] $2.79 billion 57 percent $1.12 billion 23,917 active members $12,734
Teachers Plan Fund [9] $6.3 billion 52.1 percent $5.8 billion 84,183 active members $13,736
Kansas Police and Fireman's Plan [10] $1.71 billion 70 percent $739 million 7,143 active members $27,696
Judicial Retirement Plan [11] $126 million 82.5 percent $27 million 264 active members $37,367
Local Retirement Plan [12] $2.44 billion 61.2 percent $1.5 billion 39,547 active members $9,781

KPERS

KPERS provides three statewide defined-benefit retirement plans for state and local public employees:

  • Kansas Public Employees Retirement System
  • Kansas Police and Firemen's Retirement System
  • Kansas Retirement System for Judges

The System also oversees the State's Deferred Compensation Plan, a voluntary 457(b) savings plan.

Funding levels

The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States[13], the American Enterprise Institute[14] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.[15]

In Thousands
PEW AEI Kellogg (2009)
$8,279,168 $21,827,991 $20,100,000

Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":

State Pension Funding Levels 2008 (figures are in thousands)[16]
Latest liability Latest unfunded liability Annual required contribution Latest actual contribution
$20,106,787 $8,279,168 $607,662 $395,588
State Retiree Health Care and Other Non-Pension Benefits Funding 2008 (figures are in thousands)[16]
Latest liability Latest unfunded liability Annual required contribution Latest actual contribution
$316,640 $316,640 416,039 $5,105
Underfunded pension liabilities
Number of pension plans Pension assets ($bn) Stated liabilities ($bn) Funding status (% of tax revenue)
1 $10.3 $20.1 -372%

This data is based on projected data from 2008 census data.[17] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.

Research conducted by State Budget Solutions shows the extent to which the state has funded or underfunded its Annual Required Contribution:[18]

Kansas Public Pension Contributions
FY 2002-2011 Total Annual Required Contribution $4.9 billion
FY 2002-2011 Actual Contributions $3.1 billion
Difference -$1.5 billion

In December 2011, the KPERS Study Commission approved a recommendation to switch new and not-yet-vested employees to a defined-benefit pension plan, which is similar to a 401(k) plan found in the private sector. Under the recommendation, new KPERS employees would be required to direct 6 percent of their wages to the plan. The state would contribute 1 percent the first year and increase its contribution by half a percent each year until it reaches 5 percent in the ninth year of work. Then, it would remain at 5 percent until the employee quit.[3]

The Kansas legislature approved a new financing plan for KPERS, and the governor is expected to sign it into law. The plan requires teachers, state and local government workers,and other plan participants in 2013 to choose between contributing larger shares of their salaries to their KPERS pensions or settling for a less generously calculated pension when they retire. [19]

Kansas legislators are moving closer to dedicating revenues from state-owned casinos to pensions for teachers and government workers as part of a broader bill that bolsters the long-term financial health of the state's retirement system. The idea has bipartisan support and the backing of Republican Gov. Sam Brownback. The state already has committed $10.5 million a year in casino revenues through 2021 to boost state universities' engineering programs. Davis' proposal, embraced by the House, would dedicate 75 percent of the remaining revenues to KPERS, starting in July 2013. There are no solid estimates of how much that would be, but Davis has predicted it could be several billion dollars over the next 20 years. For the fiscal year beginning July 1, the casinos are expected to generate $80 million in revenues for the state, but that figure is expected to climb in the future. [20]

Rate of return

Kansas presumes a 8 percent return rate on its pension investments.[16]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has 7 locally-administered pension systems.[6]

Transparency

Main articles: Public pension disclosure and Governmental Accounting Standards Board

Data availability

Financial reports, benefits details, and other information is posted on the fund's website.[21]

Names of pension recipients and amounts disbursed to recipients are not available.[22] Under state law, the release of any confidential information requires authorization in writing by the member of the pension system.[23]

Fund performance data

Investment performance data, including performance by asset allocation and a ten year history of annual rates of return, is available on both an investment page on fund's website and in annual financial reports.[24][25]

Rate of return

An assumed rate of return of 8 percent is listed in each year's Comprehensive Annual Financial Report.[26]

Unfunded liabilities

Unfunded liabilities are listed in the actuarial section of each year's Comprehensive Annual Financial Report.[26]

Oversight

Laws are in place regulating gifts and hospitality by board members and pension fund managers. Board members and managers are required to submit financial disclosure information, although those filings are not required to be audited externally.[27]

An external auditor's report is included in each Comprehensive Annual Financial Report.[26]

See also


External Links

References

  1. ↑ 2010 Annual Survey of Public Employment and Payroll, Census 2010
  2. ↑ 2010 Annual Survey of Public Employment and Payroll--Membership by State, Census 2010
  3. ↑ 3.0 3.1 The Wichita Eagle "Retirement plans for state’s hires may change" Dec. 8, 2011
  4. ↑ New Mexico, Study: NM state pension plan will run out of money in 13 years, Sept. 9, 2010
  5. ↑ Yahoo! Finance “11 state Pension Funds That May Run Out of Money Oct. 18, 2010
  6. ↑ 6.0 6.1 "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010", United States Census Bureau, April 30, 2012
  7. ↑ 2011 Valuation
  8. ↑ 2011 Valuation
  9. ↑ 2011 Valuation
  10. ↑ 2011 Valuation
  11. ↑ 2011 Valuation
  12. ↑ 2011 Valuation
  13. ↑ "State Pensions and Retiree Healthcare Benefits: The Trillion Dollar Gap,” Pew Center on the States, accessed January 4, 2011
  14. ↑ Biggs, Andrew, “The Market Value of Public-Sector Pension Deficits,” AEI Outlook Series, no. 1 (2010)
  15. ↑ Novy-Marx, Robert and Joshua Rauh, 2010, "Public Pension Promises: How Big Are They and What Are They Worth," Journal of Finance (forthcoming)
  16. ↑ 16.0 16.1 16.2 Pew Center on the States "The Trillion Dollar Gap" Feb. 2010
  17. ↑ Northwestern University, The Liabilities and Risks of State-Sponsored Pension Plans, May 2010
  18. ↑ State Budget Solutions, "How States Underfund Public Pensions," November 2, 2012
  19. ↑ KansasReporter.com "Kansas pension reform bill goes to governor" May 10, 2011
  20. ↑ Hutchinson Kansas News, Kan. closer to using casinos to support pensions, May 14, 2012
  21. ↑ KPERS.org
  22. ↑ Sunshine Review, Public Pension Disclosure
  23. ↑ KSA 74-4909
  24. ↑ Investment Performance
  25. ↑ Reports
  26. ↑ 26.0 26.1 26.2 Reports
  27. ↑ Kansas, State Pension Fund Management, State Integrity Investigation
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Public pensions
Pension context

Public pension eligibility • Public pension disclosure • State government pension liabilities
Local government public pensions • Public pension crisis • Public employee benefits • State budgets

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