KPPA Estimates Lower CERS Nonhazardous Rates for FY 23

County Employees Retirement System (CERS) employers could see their first drop in employer contribution rates in several years this July. The Kentucky Public Pensions Authority (KPPA) testified at Tuesday’s Public Pension Oversight Board (PPOB) that the nonhazardous duty rate for Fiscal Year 2023 should decrease slightly from what was anticipated ‒ 0.02% lower than what cities are currently paying.

KPPA Executive Director David Eager testified that the projected total employer contribution rate in FY 2023 for CERS nonhazardous duty employees is expected to be 26.93%. Employers are currently paying 26.95% for FY 2022.

The estimated figure is 5% less than projections made after legislators passed Senate Bill 249 in the 2020 session. That measure, a KLC initiative, reset the amortization period.

FY 2023 is expected to be the final year of the nonhazardous duty employer contribution rate phase-in provided with House Bill 362, a KLC initiative legislators passed in the 2018 session. Further, the FY 2023 estimated nonhazardous duty contribution rate marks the first reduction for employers since 2016. The rates should continue to decline slightly through the next few decades if the system meets or exceeds its actuarial assumptions.

Eager said that the estimates result from a good year for the retirement systems. FY 2021 included investment gains of around 25% for CERS pension and insurance funds.

CERS hazardous duty employer contribution rates for FY 2023 are estimated to be 49.65%, the amount initially expected after the passage of SB 249. That includes the 12% increase in the employer contribution rate provided for in the phase-in legislation. Those rates should be fully phased in after FY 2023 and slightly decline thereafter.