Kentucky Teachers’ Retirement System

March 17, 2010

Information for

Kentucky Kentucky Educational Educational Development Development CorporationCorporation

Gary L. Harbin, CPAExecutive Secretary

Millions

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Primary Funding for Medical Insurance Fund

$ 125m

$ 62m$ 73m

$29m

$ 139m $ 134m

$335m

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

200.0

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

State Match Equals member contribution

Redirected Retirement Contributions

Redirected Contributions to be Repaid

Member Contribution¾ of 1% of member salary

$562m

~ Kentucky Teachers’ Retirement System ~

-$6.0m

-$14.0m-$12.0m

-$9.0m

Contributions Repaid by Commonwealth

=$20.0 =$48.0 =$61.0 =$119.0

$897m - $41m = $ 856m

Less payments of $ 41m

Chart 1 for Discussion of

Funding of Retiree Health Care

* Current annual cost of retiree health care includes both the supplement paid directly by KTRS for members and the required Medicare Part B premiums paid directly by members age 65+

House Bill 1 - Active Teachers +1% for

new hires after June 30, 2008$0.9 m

These charts show two opposite ends of the health care funding spectrum. They are for discussion purposes only. They are not proposed as potential solutions. The KTRS actuary is working on a range of alternative options for the active members, retirees and constituency groups to consider. Any solution would be phased in over a period of four to six years in the near future and would require legislative action.

LEGEND FOR CHART 1 & CHART 2

Funding needed for retiree health care

Amount needed to cover short-fall

Not contributing to retiree health care

Base funding required by statute

System generated funding

Directly paid by retirees age 65+

Added cost of teachers working longer

Cost shifted directly to retirees

These charts show two opposite ends of the health care funding spectrum. They are for discussion purposes only. They are not proposed as potential solutions. The KTRS actuary is working on a range of alternative options for the active members, retirees and constituency groups to consider. Any solution would be phased in over a period of four to six years in the near future and would require legislative action.

Chart 2for Discussion of

Funding of Retiree Health Care

LEGEND FOR CHART 1 & CHART 2

Funding needed for retiree health care

Amount needed to cover short-fall

Not contributing to retiree health care

Base funding required by statute

System generated funding

Directly paid by retirees age 65+

Added cost of teachers working longer

Cost shifted directly to retirees

House Bill 1 - Active Teachers

+1% for new hires after June

30, 2008$0.9 m

Indirect Impact

Education Community’s Long Term Plan of Shared Responsibility for Funding Retired Teachers’ Health Care

Medical Insurance Fund FY 2010-11 FY 2011-12

Projected covered payroll (000,000s) $ 3,452.0 $ 3,556.0

Active Teachers  

FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17

Currently at .75% (1.75% hired on or after July 1, 2008) Rates will match for FY 2013 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 25.9 26.7

Increase medical contribution (Note: 1% increase is less than 1 months premium) 0.25% 0.50% 1.00% 1.50% 2.25% 3.00% 8.6 17.8

1.00% 1.25% 1.75% 2.25% 3.00% 3.75%

Retired Teachers  

Retirees under Medicare eligible age estimated monthly cost CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 16,600 16,400

110.50 121.00 131.00 141.00 150.00 158.00 166.00    

Pay equivalent to the Medicare Part B Premium paid by retirees age 65+    

phase in starting July 1, 2010 37.00 81.00 131.00

141.00

150.00 158.00 166.00 11.8 20.9

Employers  

School districts and other employers FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Phase into paying a medical contribution for retirees 0.25% 0.50% 1.00% 1.50% 2.25% 3.00% 8.6 17.8

State    

Pick up net health care cost for new retirees under Medicare eligible age CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 1,800 3,600

Current KEHP premium and future estimated premium 589.14 645.00 700.00 753.00 802.00 846.00 888.00 Less projected Medicare equivalent premiums paid by retirees 37.00 81.00 131.00 141.00 150.00 158.00 166.00

Net cost for State per new retiree starting July 1, 2010 552.14 564.00 569.00 612.00 652.00 688.00 722.00 12.1 24.5

Amount State redirects to fund retiree health care to be repaid over 10 years at 7.5% 128.0 88.0

$ 169.1 $ 169.0                            

Our Members Our Members Come First!Come First!

Reach us at . . .

1.800.618.1687

502.848.8500

www.ktrs.ky.gov

of the State of

Kentucky

Teachers’ Retirement

System

Teachers’ Retirement System Teachers’ Retirement System of the State of Kentuckyof the State of Kentucky

Protecting & Preserving Teachers’ Retirement Benefits