This SUMMARY PLAN DESCRIPTION is not intended to be a full and complete description of the governing law -- exceptions may apply. If you have specific questions about your retirement benefit, you should contact the System's office.
All members of the General Assembly, elected to a term commencing on or after January 1, 2014, are eligible for membership. Membership is not automatic, but is attained by executing an Election to Participate. The election must be filed within thirty (30) days after taking office and is effective to establish membership in the Plan as of the date of taking office. The election made when first taking office, either to participate or not to participate in the Plan, is binding as to all future terms, whether or not consecutive. If the election is not to participate in the Plan, the legislator will automatically become a member of the Kentucky Employees Retirement System. Membership continues only so long as the member holds an office qualifying him/her for membership.
An election establishes membership in the Hybrid Cash Balance Plan which provides a retirement benefit based upon the member’s accumulated account balance.
MEMBER’S ACCUMULATED ACCOUNT BALANCE
The member’s accumulated account balance includes member’s contributions, employer pay credits, and interest thereon. Each member receives an annual statement after the close of the plan year (June 30) which shows contributions and interest for the year.
Member’s Contribution Rate. Members make contributions to the Plan throughout the period of their membership. The total contribution rate is 6.00% of the member’s creditable compensation, of which 5.00% represents the member’s retirement benefit contribution. The remaining 1.00% represents a medical insurance contribution and is not a part of the member’s accumulated account balance.
Employer Pay Credit. An employer pay credit of 4.00% of creditable compensation is credited for each month the member contributes to the Hybrid Cash Balance Plan.
Interest Credits. Annual interest will be credited on June 30 to the member’s account, provided the member made his/her member contributions to the Plan during the preceding fiscal year. The interest shall include four percent of the member’s accumulated account balance based on the preceding year-end balance, plus seventy-five percent of the Plan’s geometric average net investment return in excess of a four percent rate of return.
REFUND OF ACCUMULTED ACCOUNT BALANCE
Refund. A member with less than five years of service is entitled to a refund of the member’s contributions of 5.00% and forfeits the employer credit of 4.00%. A member with more than five years of service is entitled to a refund of the member’s prior month-end cash balance account which includes the member’s contributions of 5.00%, the employer credit of 4.00%, and applicable interest. One of the refund options is that the accumulated account is payable directly to the member – in that event, applicable federal taxes are withheld by the Plan. A tax-free rollover of the accumulated account to another qualified retirement plan is the other refund option.
Repurchase. A repurchase of the service credit a member previously had with the Legislators Retirement Plan is available to a former member who subsequently becomes a member of one of the state-supported retirement systems, including the Plan. The repurchase shall include the amount of the refund, plus interest at six percent (6.00%) per annum.
VESTING FOR RETIREMENT ELIGIBILITY
To be eligible for retirement benefits, a member of the Plan must be vested, as follows: (a) at age sixty-five (65) with accumulation of five years of active service credit in the Plan and any other state-supported retirement system of the Commonwealth; or (b) at least age fifty-seven (57) and the member’s accumulated active service credit in the Plan and any other state-supported retirement system of the Commonwealth plus his/her age is at least eighty-seven (87).
If a member leaves office without being vested in the Plan, and subsequently earns credit for nonlegislative service in one of the other state-supported retirement systems of the Commonwealth, service credit in the Plan may be subsequently combined with service credit in the other system for vesting purposes. Vesting will not be achieved unless the member’s accumulated account balance was left in the Plan, or, if the accumulated account balance was withdrawn, the member has repaid the refund with interest while holding membership in the other system.
Service credit is allowable only for service as a state legislator. The month in which a period of service began, and the month in which it ends, each will be counted as a full month of service without regard to the number of days served.
A vested member of the Plan may elect one of the following benefit options:
(a) To receive a monthly retirement allowance payable for life by having his or her accumulated account balance annuitized in accordance with the actuarial assumptions and methods adopted by the Board of Trustees and the member’s age at the time of retirement.
(b) To receive an optional monthly retirement allowance for life that shall include potential survivor’s benefits to a qualified spouse or dependent child. The options shall include survivorship 100%, survivorship 66-2/3%, or survivorship 50%. The annuity shall be calculated in accordance with the actuarial assumptions and methods adopted by the Board of Trustees and the ages of the member and the qualified survivor at the time of retirement. A dependent child means a child who is less than twenty-one (21) years or age or a disabled child who is eligible for Social Security disability benefits.
(c) To receive a refund.
Pre-retirement. If a member dies prior to drawing a retirement allowance, the surviving spouse may elect a refund of the member’s accumulated account balance or accumulated contributions, as applicable. Or, if the member had at least five years of service at the time of death, the spouse may elect to receive a monthly benefit for life based on the member’s accumulated account balance using the 100% survivorship option as if the member retired immediately prior to his/her date of death. In lieu of these spousal benefits, the member may elect to have survivor benefits paid to a dependent child by completing forms provided by the Plan.
Post-retirement. If a member dies after drawing a retirement allowance, then survivor benefits depend on the member’s election for an optional retirement allowance – namely, survivorship 100%, survivorship 66-2/3%, or survivorship 50%. In lieu of benefits provided to a surviving spouse, the member may elect prior to retirement to have survivor’s benefits paid to a dependent child by completing forms provided by the plan.
A Designation of Beneficiary form is available at the Plan’s office. Absent a designation by the member or if a beneficiary is not surviving, the applicable refund shall be paid to the member’s estate.
A member, prior to retirement, and who has completed five years of legislative service may, under conditions specified in the statute, retire for disability, In such case, the member will be entitled to a disability retirement allowance equal to the higher of twenty percent (20%) of the member’s monthly final rate of pay or the monthly retirement allowance payable for life by having his or her accumulated account balance annuitized in accordance with the actuarial assumptions and methods adopted by the Board of Trustees. The disability retirement allowance will continue for the duration of the disability. Periodic physician’s examinations may be required for continued receipt of disability benefits. If the disability terminates, the member shall be entitled thereafter to the retirement allowance that would have been payable if the member took normal retirement on the date of retirement for disability.
Each July 1, a recipient of a monthly pension benefit from the Plan shall receive a benefit increase of 1.50% cost-of-living adjustment (pro-rated for the first year, if the recipient has been retired for less than one year, if 1) the funding level of the Plan is greater than 100% and subsequent legislation authorizes the use of any surplus actuarial assets to provide for the benefit increase; or 2) the Kentucky General Assembly appropriates sufficient funds to fully prefund the increase.
Only a recipient of a retirement allowance with at least fifteen (15) years of service credit in the Plan and any other state-supported retirement system of the Commonwealth shall be eligible for a monthly insurance benefit. The health insurance benefit is ten dollars ($10.00) for each year of legislative service earned as a Plan participant. The minimum service requirement is waived for a member who is disabled in the line of duty. In that event, the member is assumed to have accumulated 20 years of legislative service as a Plan participant. The minimum service requirement is also waived if killed in the line of duty. In that event, the member’s spouse and eligible dependents shall be entitled to a monthly benefit based on the member’s assumed 20 years of legislative service as a Plan participant. The retiree’s monthly insurance benefit shall be increased July 1 of each year by 1.50%. The increase shall also apply to the survivor’s benefit in the event of death in the line of duty.
Income Tax Treatment. Member’s contributions will be deducted from salary payments, but, for federal and state income tax purposes, the amounts of the contributions will be deemed to have been paid by the state and will not be considered to be current income; they will, however, count as income for purposes other than taxation. If a member elects to take a refund of contributions, the amount received must be reported for federal income tax purposes unless the member chooses a tax-free rollover of the refund.
Federal Income Tax. Plan benefits are subject to federal income tax. A benefit recipient may designate that such amount per month as is desired (or no amount) be withheld for Federal income tax purposes. In the absence of such a designation, the Plan is required to withhold the amount specified in the withholding tables for a married person claiming three exemptions. The 1099-R statement of retirement income is prepared by the Plan and timely mailed to the retiree.
Kentucky Income Tax. Plan benefits are subject to Kentucky income tax; however, Kentucky excludes from taxation a certain amount of retirement income. See Schedule P in the Kentucky Income Tax forms for the exclusion amount and calculation.
Reduction of Benefits
Benefits can be amended, suspended or reduced by legislative action of the Kentucky General Assembly. However, the amount of benefits the member has accrued at the time of amendment, suspension or reduction shall not be affected.
Distribution of Benefit Payments
Monthly benefit checks are directly deposited (via wire transfer) to the recipient’s designated financial institution.
Benefits are not affected by or keyed to Social Security.
CIRCUMSTANCES WHICH WOULD RESULT IN DISQUALIFICATION, INELIGIBILITY, DENIAL OR LOSS OF BENEFITS
- A member, or former member, convicted of a felony relating to his/her duties as a legislator, in any state or federal court, shall forfeit rights and benefits earned after September 16, 1993. The member, or former member, however, shall be enitled to a return of his/her accumulated contributions and interest thereon.
- The lack of sufficient service to meet the vesting requirement will result in ineligibility and denial of benefits.
- A denial of benefits for disability will result if the statutory requirements are not met. A loss of disability benefits will result if the disability ceases to exist.
AGENT FOR SERVICE OF LEGAL PROCESS
Donna S. Early, Executive Director of the System, is the agent for service of legal process.
PROCEDURES FOR PRESENTING CLAIMS AND REMEDIES FOR REDRESS OF DENIED CLAIMS
Claims for benefits are to be presented to the office of the System. That office on request will supply the necessary forms. The Executive Director of the System will determine routine claims. The Board of Trustees of the System (on reference by the Executive Director) will determine extraordinary or questionable claims.
Action taken by the Executive Director can be appealed to the Board of Trustees by written request.
SOURCES OF FINANCING RETIREMENT BENEFITS
The sources of financing retirement benefits are (1) members’ contributions, (2) legislative appropriations and (3) proceeds of investments.
STATUTORY REQUIREMENT FOR FUNDING AND FUNDING REQUIREMENT STATEMENT
The statutory formula for retirement funding is set forth in KRS 21.525. The most recent actuarial valuation of the Plan, as of July 1, 2017, calculated the amount of state contributions required for the 2018-2020 fiscal biennium to continue to meet funding requirements. No funding was appropriated by the 2018 General Assembly to the Kentucky Legislators Retirement Plan in accordance with the statutory formula for fiscal year 2018-2019 or fiscal year 2019-2020.