DA Memo–May 30, 2008

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New Tier for KPERS Retirement Benefits

New employee contribution rate
Impact on current employees
What you’ll need to do soon
Additional information

Last year the legislature added a new benefit structure to KPERS. Employees hired July 1, 2009 , and after will be part of this new structure. Current employees and those hired between now and July 1, 2009 , will keep the current benefits, along with two improvements.

New benefits are more than a year away, but we’d like to begin getting ready. This memo covers information we think you’ll need for early steps in preparation and to get a basic understanding of how the changes affect employers and employees.

1. New Employee Contribution Rate

Employees with the current benefits will continue to contribute 4 percent of their gross compensation. Employees in
the new benefit structure will contribute 6 percent. With the increased contribution, they will have faster vesting and a regular cost-of-living adjustment in retirement.

The rate you pay as an employer will be the same for both.

Please plan for whatever changes your employer needs to make in order to deduct two employee contribution rates next year.

2. Impact on Current Employees and Those Hired Before July 2009

Right now state and local employees work one year to become members and vest after ten years of service. School employees become members when first employed in KPERS-covered positions. They do not work one year before becoming members and vest after ten years of service.

Shift to First-Day Membership (for state and local)
State and local employees hired July 1, 2008 , through June 30, 2009 , will all become members July 1, 2009 . They will not need to finish a full “year of service” for membership. That means someone hired June 30, 2009 , will only work one day to become a member while someone hired July 1, 2008 , will work the full year first. Employees with partial years of service will be able to buy that service. Our Communications department is developing a fact sheet for you to give to new hires beginning July 2008.

As we get closer to July 2009, we will let you know when to begin deducting employee contributions for this group and details about completing enrollment for these members as well.

Shift to Five-Year Vesting (for school, state and local)
Beginning July 1, 2009 , all active members will vest with five years of service. This includes members with the current benefits. Any active member with five to ten years of service in the current plan will vest that day. The rest of the active members in the current benefit structure will vest as they reach five years of service credit. A half year of service rounds to one year, just like it does now (4.5 rounds to 5).

Inactive members are not included in this change to five-year vesting. Someone must be an active member to receive this improvement.

What About Inactive Members?
Throughout this transition, some employees will leave employment and become inactive members. And you may have inactive members return to KPERS-covered positions and become active again. Here are a few of the scenarios that should affect you the soonest. We will create a comprehensive table to include all the member benefit situations we anticipate in the future.

An important point to make with non-vested members leaving employment is that they will not be eligible for the five-year vesting change as an inactive member. And if they return to work after June 30, 2009 , they will vest with five years of service, but will have the new benefits.

Situation	Current Benefits	New Benefits
Active– vested Leaves KPERS service anytime	x
Active – to vest July 1, 2009 Leaves KPERS service after July 1, 2009	x
Active – not vested Leaves KPERS service before July 1, 2009		x (if return July 2009 or after)
Active – not vested Leaves KPERS service after July 1, 2009		x (if return July 2009 or after)
Inactive – vested Returns to work anytime	x
Inactive – not vested Returns to work before July 1, 2009	x
Inactive – not vested Returns to work after July 1, 2009		x

3. What You’ll Need to Do Soon

Plan information system and procedure changes to handle two different employee
contribution rates.
Educate current members leaving employment about how it affects their KPERS benefits.
Educate employees hired July 1, 2008 , through June 30, 2009 , about their partial “year of service,” their membership date and when they’ll begin making contributions. KPERS will provide a fact sheet in late June.

4. Additional Information and Resources

We are currently developing an implementation and communications plan for the coming year. We will continue to provide information as we all move toward the July 1, 2009, implementation date.

Questions?

If you have any questions, please contact the KPERS InfoLine.