Kentucky’s public pension, which was at risk of benefit cuts, may be saved

Kentucky has one of the worst public pension plans in the country, but it’s just been saved from getting even worse.

The state’s Supreme Court ruled against a reform law that would have cut benefits for public employees, including teachers, law enforcement, firefighters, social workers and government workers. Under the law, workers hired between 2003 and 2008 would have to pay 1% of their salaries for retiree health insurance and future teachers would no longer have a promised benefit from retirement to death. The court ruled the law, which had been folded into a sewage services bill, had not gotten public comment or testimony, nor had the state lawmakers enough time to consider it before it was passed.

Kentucky isn’t the only state with pension woes. The funding gap between state pension system assets and benefits promised to workers nationwide hit $1.4 trillion in 2016, according to Pew Charitable Trusts, and states and municipalities are scrambling to get their plans better equipped to meet retirees’ needs. The average funded ratio in 2016 was 66%, and the total amount in liabilities (what is owed to current employees, retirees and dependents) for all of these plans was $4 trillion.

States also have to worry about market returns, which naturally affect their pensions’ investment portfolios, especially for some underfunded pension funds that may have turned to equities to make up the funding gap. The good news: an impending downturn could inspire these plans to rebalance their portfolios, which will get them allocated properly.

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