KPPA Presents Lawmakers CERS Valuation

The Kentucky Public Pension Authority presented a positive valuation of its plans to the Kentucky Public Pension Oversight Board on Monday.

The 2023 actuarial valuation of the County Employee Retirement System showed $600 million more in fund assets than anticipated ($420M pension and $180M insurance) and $44 million in asset gains recognized this year ($33 million pension and $11 million insurance).

A $328 million loss for both CERS retirement funds combined was caused by salary increases. Active membership increased in both hazardous and non-hazardous plans. (Eight percent increase in non-hazardous membership payroll, 9 percent increase in hazardous membership payroll).

CERS employer contribution rates will be 19.71% for nonhazardous and 36.49% for hazardous, continuing a decreasing trend as the funding ratio climbs. However, the CERS non-hazardous plan is just 56.1% funded, and the hazardous plan is 51.4% funded, continuing a positive trajectory.

“Everything is moving toward getting more healthy; everything is moving toward fully funded in 2049 if our assumptions are all met,” Executive Director of the Kentucky Public Pensions Authority, David Eager, said.

The 2023 actuarial valuation included the following information:

The CERS Board adopted new assumptions in May 2023:

– Investment Return Assumption: Increased to 6.50% for all funds.

– Mortality: Update the base mortality assumption to reflect recent experience (data dependent).

– Update the improvement assumption based on more recent published reports (anticipated trend). Increase disability mortality. No change to pre-retirement mortality.

– Termination/Withdrawal: Increase the rates of termination before retirement age.

– Disability Incidence: Decrease the rate of disability incidence.

– Individual Salary Increases: Increase assumption at certain service intervals.

– Cash Balance Interest Credit: Increased to 6.75%.

A 2020 KLC initiative lawmakers adopted created an independent CERS Board of Trustees to manage the local pension system, which has seen increased fund performance. 

Click here for the complete CERS Valuation Results.

The KPPA boards are expected to approve the valuations in December. New contribution rates will go into effect on July 1, 2024 – (the beginning of fiscal year 2025.)

Watch the testimony on YouTube here.