2017 Kentucky Revised Statutes CHAPTER 61 - GENERAL PROVISIONS AS TO OFFICES AND OFFICERS -- SOCIAL SECURITY FOR PUBLIC EMPLOYEES -- EMPLOYEES RETIREMENT SYSTEM .598 Limitations and exclusions on increases in creditable compensation in last five years of service for employees retiring on or after January 1, 2018 -- Exceptions -- Employer to pay actuarial costs resulting from certain increases in creditable compensation -- Inquiries from employers -- Hearing and appeal -- Reporting of exemptions -- Inapplicability to hybrid cash balance plan participants.
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61.598 Limitations and exclusions on increases in creditable compensation
in last five years of service for employees retiring on or after January 1,
2018 -- Exceptions -- Employer to pay actuarial costs resulting from
certain increases in creditable compensation -- Inquiries from employers
-- Hearing and appeal -- Reporting of exemptions -- Inapplicability to
hybrid cash balance plan participants.
(1)
(2)
For purposes of this section, "bona fide promotion or career advancement":
(a) Means a professional advancement in substantially the same line of work
held by the employee in the four (4) years immediately prior to the final
five (5) fiscal years preceding retirement or a change in employment
position based on the training, skills, education, or expertise of the
employee that imposes a significant change in job duties and
responsibilities to clearly justify the increased compensation to the
member; and
(b) Does not include any circumstance where an elected official participating
in the Kentucky Employees Retirement System or the County Employees
Retirement System takes a position of employment with a different
employer participating in any of the state-administered retirement
systems.
(a) For employees retiring from the Kentucky Employees Retirement System,
the County Employees Retirement System, or the State Police Retirement
System on or after January 1, 2018, the systems shall, for each of the
retiring employee's last five (5) fiscal years of employment, identify any
fiscal year in which the creditable compensation increased at a rate of ten
percent (10%) or more annually over the immediately preceding fiscal
year's creditable compensation. The employee's creditable compensation
in the fiscal year immediately prior to the employee's last five (5) fiscal
years of employment shall be utilized to compare the initial fiscal year in
the five (5) fiscal year period.
(b) Except as limited or excluded by subsections (3) and (4) of this section,
any amount of increase in creditable compensation for a fiscal year
identified under paragraph (a) of this subsection that exceeds ten percent
(10%) more than the employee's creditable compensation from the
immediately preceding fiscal year shall not be included in the creditable
compensation used to calculate the retiring employee's monthly
retirement allowance. If the creditable compensation for a specific fiscal
year identified under paragraph (a) of this subsection as exceeding the
ten percent (10%) increase limitation is not used to calculate the retiring
employee's monthly retirement allowance, then no reduction in creditable
compensation shall occur for that fiscal year.
(c) If the creditable compensation of the retiring employee is reduced as
provided by paragraph (b) of this subsection, the retirement systems:
1.
Shall refund the employee contributions and interest attributable to
the reduction in creditable compensation; and
2.
Shall not refund the employer contributions paid but shall utilize
those funds to pay down the unfunded liability of the pension fund in
which the retiring employee participated.
(3)
(4)
(5)
In order to ensure the prospective application of the limitations on increases in
creditable compensation contained in subsection (2) of this section, only the
creditable compensation earned by the retiring employee on or after July 1,
2017, shall be subject to reduction under subsection (2) of this section.
Creditable compensation earned by the retiring employee prior to July 1, 2017,
shall not be subject to reduction under subsection (2) of this section.
Subsection (2) of this section shall not apply to:
(a) A bona fide promotion or career advancement as defined by subsection
(1) of this section;
(b) A lump-sum payment for compensatory time paid to an employee upon
termination of employment;
(c) A lump-sum payment made pursuant to an alternate sick leave program
under KRS 78.616(5) that is paid to an employee upon termination of
employment;
(d) Increases in creditable compensation in a fiscal year over the
immediately preceding fiscal year, where in the immediately preceding
fiscal year the employer reported the employee as being on leave without
pay for any reason, including but not limited to sick leave without pay,
maternity leave, leave authorized under the Family Medical Leave Act,
and any period of time where the employee received workers'
compensation benefit payments that were not reported to the plan as
creditable compensation;
(e) Increases in creditable compensation directly attributable to an
employee's receipt of compensation for overtime hours worked while
serving as a participating employee under any state or federal grant, grant
pass-through, or similar program that requires overtime as a condition or
necessity of the employer's receipt of the grant; and
(f) Increases in creditable compensation directly attributable to an
employee's receipt of compensation for overtime performed during a state
of emergency declared by the President of the United States or the
Governor of the Commonwealth of Kentucky.
(a) For employees retiring on or after January 1, 2014, but prior to July 1,
2017, the last participating employer shall be required to pay for any
additional actuarial costs resulting from annual increases in an
employee's creditable compensation greater than ten percent (10%) over
the employee's last five (5) fiscal years of employment that are not the
direct result of a bona fide promotion or career advancement. The cost
shall be determined by the retirement systems.
(b) Lump-sum payments for compensatory time paid to an employee upon
termination of employment shall be exempt from this subsection.
(c) Kentucky Retirement Systems shall be required to answer inquiries from
participating employers regarding this subsection. Upon request of the
employer prior to the employee's change of position or hiring, the systems
shall make a determination that is binding to the systems as to whether or
not a change of position or hiring constitutes a bona fide promotion or
career advancement.
(d)
(6)
(7)
(8)
(9)
For any additional actuarial costs charged to the employer under this
subsection, the systems shall allow the employer to pay the costs without
interest over a period of one (1) year from the date of receipt of the
employer's final invoice.
The Kentucky Retirement Systems shall determine whether increases in
creditable compensation during the last five (5) fiscal years of employment prior
to retirement constitute a bona fide promotion or career advancement and may
promulgate administrative regulations in accordance with KRS Chapter 13A to
administer this section. All state-administered retirement systems shall
cooperate to implement this section.
Any employer who disagrees with a determination made by the system in
accordance with this section regarding whether an increase in compensation
constitutes a bona fide promotion or career advancement for purposes of
subsection (5) of this section may request a hearing and appeal the decision in
accordance with KRS 61.645(16).
For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky
Retirement Systems shall provide a means for employers to separately report
the specific exceptions provided in subsection (4) of this section within the
reporting system utilized by the employers for making employer reports under
KRS 16.645, 61.675, and 78.545. The Kentucky Retirement Systems shall
continually provide communication, instructions, training, and educational
opportunities for employers regarding how to appropriately report exemptions
established by subsection (4) of this section.
This section shall not apply to employees participating in the hybrid cash
balance plan as provided by KRS 16.583 and 61.597.
Effective:March 27, 2017
History: Amended 2017 Ky. Acts ch. 125, sec. 3, effective March 27, 2017. -Created 2013 Ky. Acts ch. 120, sec. 10, effective July 1, 2013.
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