TOPEKA, Kan. — A proposal to start a new 401(k)-style pension plan for new Kansas teachers and government workers and a competing plan to boost the benefits of public retirees failed Monday to clear a committee in the state House.
The House Pensions and Benefits Committee's voice votes on the measure suggested that many lawmakers aren't enthusiastic about major changes to policies they've enacted in recent years to improve the long-term financial health of the Kansas Public Employees Retirement System.
The pension system is projecting a gap of nearly $10.3 billion between anticipated revenues and its commitments to retirees through June 2033, but it also expects the shortfall to melt away because of laws enacted in 2011 and 2012.
Changes in recent years boosted state contributions to public pensions and even committed profits from state-owned casinos. The state revised benefit plans for existing employees and created a new one for workers hired starting next year that moves away from traditional plans that guarantee benefits up front, based on an employee's salary and years of service. But the alterations stop short of creating a 401(k)-style plan, in which benefits are tied to investment earnings.
"We need to stay the course," said Rep. John Barker, an Abilene Republican.
The House last week approved a bill, 94-26, to revise parts of the pension plan for workers hired starting next year, and the Senate established a special committee to look at the changes. But legislators in both parties have said they see little appetite to go further.
GOP legislators who've pushed for a new, 401(k)-style plan note that they're common among private companies. They argue that tying retirees' benefits to investment earnings eventually eliminates the risk that taxpayers will have to cover a long-term funding shortfall.
"When you're in a hole, the first thing you've got to do is stop digging," said Rep. John Rubin, a Shawnee Republican.
But retiree and public employee groups have long argued that 401(k)-style plans won't result in as generous benefits as traditional pension plans. Also, KPERS officials estimated that starting up a new plan would cost $3 billion over two decades, with the state still having to close the funding gap for its existing plans.
"That, all of a sudden, will open your eyes," said Rep. Dan Hawkins, a Wichita Republican.
The long-term cost of the boost in retirement benefits was a relatively modest $70 million, with people retiring between July 2004 and July 2009 receiving an increase of 0.5 percent. People retiring on or before July 1, 1984, would have received a 3 percent increase.
The last cost-of-living adjustment for public retirees in Kansas was in 1997, though the state gave extra, one-time checks in 2000, 2007 and 2008. On Friday, the House rejected a proposal, offered as an amendment to the pensions bill it passed, to give retirees an extra one-time bonus of $300.
"It would be difficult for me to go ahead and look at an adjustment until we're in a better position going forward," said Rep. Jim Kelly, an Independence Republican.
Supporters of a boost in benefits said retirees have waited too long for an adjustment.
"This is not that great a hit to the system," said Rep. Ed Trimmer, a Winfield Democrat.