2021 Kentucky Revised Statutes Chapter 61 - General provisions as to offices and officers -- social security for public employees -- employees retirement system 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 and money purchase 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 and money
purchase 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
(3)
(4)
(5)
the retiring employee participated.
(a) 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.
(b) If the reductions in creditable compensation during a retiring member's entire
last five (5) years of employment results in a reduction in his or her monthly
retirement allowance of less than twenty-five dollars ($25) per month or an
actuarially equivalent value under the various payment options, then no
reduction in creditable compensation or retirement allowances shall occur
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)
(6)
(7)
(8)
(9)
Lump-sum payments for compensatory time paid to an employee upon
termination of employment shall be exempt from this subsection.
(c) The Authority 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) 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 Authority 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) or 78.782(16).
For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky
Retirement Systems and the County Employees Retirement System 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 and the County Employees Retirement System 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, 61.597, 78.5512, and 78.5516.
Effective: June 29, 2021
History: Amended 2021 Ky. Acts ch. 96, sec. 6, effective June 29, 2021; and ch. 102,
sec. 60, effective April 1, 2021. -- Amended 2018 Ky. Acts ch. 107, sec. 85, effective
July 14, 2018. -- Amended 2017 Ky. Acts ch. 125, sec. 3, effective March 27, 2017. - Created 2013 Ky. Acts ch. 120, sec. 10, effective July 1, 2013.
Legislative Research Commission Note (6/29/2021). This statute was amended by 2021
Ky. Acts chs. 96 and 102, which do not appear to be in conflict and have been
codified together.
Legislative Research Commission Note (12/13/2018). On December 13, 2018, the
Kentucky Supreme Court ruled that the passage of 2018 SB 151 (2018 Ky. Acts ch.
107), did not comply with the three-readings rule of Kentucky Constitution Section
46 and that the legislation is, therefore, constitutionally invalid and declared void.
That ruling applies to changes made to this statute in that Act.
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