Major decisions coming on future of Kansas' retirement system

Stateline Midwest Vol. 20, No. 11: November 2011

Change is coming to Kansas’ pension plan for public employees. But what form it takes remains uncertain, as a study commission of lawmakers and non-government officials readies recommendations for legislative consideration in 2012.

According to The Topeka Capital-Journal, some kind of defined-contribution system — either for all new workers, or a “stack plan” that puts worker salaries above a certain level into a 401 (k)-style plan — will likely be proposed. Earlier this year, the Legislature approved higher contribution rates for public employers and workers. Those changes would take effect in 2014, but are contingent on the Legislature voting on the commission’s recommendations.

Like most states, Kansas currently employs a defined-benefit model, tying retirement benefits to a worker’s years of service and salary. One exception in the Midwest is Michigan, which uses a defined-contribution plan. According to the National Association of State Retirement Administrators, Indiana and Ohio have hybrid defined-benefit/defined-contribution plans for state employees. Nebraska, which once had a defined-contribution system, now uses a “cash balance” plan: Each worker has a retirement account and is guaranteed a 5 percent return on investment. Upon retirement, the worker can set up an annuity or get a lump-sum payment.