KERS Contribution Rates 90% 83.0% 80% 70% 60% 49.0% 49.0% - - PowerPoint PPT Presentation

TIER 1Members participating prior to 9/1/08 INFORMATION & FEEDBACK SESSION

October 2020

KERS Contribution Rates

27.0% 39.0% 39.0% 49.0% 49.0% 49.0% 49.0% 49.0% 83.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

KERS Contribution Amounts

$11.0M $14.9M $14.1M $16.5M $16.6M $16.1M $16.8M $17.4M $30.8M $0 $5 $10 $15 $20 $25 $30 $35

Millions

*FY14-FY20 Actuals, FY21 Budgeted, FY22 Projected

2020 General Assembly: Final Action

• Senate Bill 249 passed
• All decisions regarding the pension system delayed by one year
• Our contribution rates are frozen at current levels through 6/30/21
• HB 1 options available:
• Hard Freeze Exit (pay off in lumpsum or installments)
• Soft Freeze Exit (pay off in lumpsum or installments)
• Status Quo (remain in the KERS system)
• Requires decision by January 1, 2021
• Recommendation to Board at December meeting

Pension Impact Summary FY22 & Beyond

Year 1 Payments Total Debt Service Employee Impact Benefit Impact

Hard Freeze Lump Sum $13.1M $294.4M (30 yrs) All employees exit KERS Tier 1 – most see a loss in retirement benefits Tier 2 – most see a loss in retirement benefits Tier 3 – Most benefit from DC plan Hard Freeze Installment $21.6M with 1.5% escalator $314.2M (16 yrs) All employees exit KERS Same as above Soft Freeze Lump Sum $16.1M $442.2M (30 yrs) All Tier 1 & 2 stay in KERS, Tier 3 exits No impact to Tier 1 & 2 Tier 3 – Most benefit from DC plan Soft Freeze Installment $19.6M with 1.5% escalator $591.1M (27 yrs) All Tier 1 & 2 stay in KERS, Tier 3 exits Same as above Status Quo (83% contribution rate) $30.8M N/A All employees stay in KERS No impact to Tier 1 & 2 Tier 3 – Most would lose benefits than in DC plan

NKU currently pays $16.4M based on a 49% contribution rate

Overview of Options

• Status quo – Contributions would increase over $14M in the first year and

likely continue to increase in future years.

• Hard Freeze Installment – First year payment would be over $5M more

than current with annual 1.5% increases. Overall debt service would be over $314M (versus $294M for lump sum).

• Soft Freeze Installment – First year payment would be over $3M more than

current with annual 1.5% increases. Overall debt service would be nearly $600M (versus $442M for lump sum).

• Based on the above, the Hard Freeze and Soft Freeze lump sum options are

the most financially viable options

Tier 1 Soft Freeze

All Tier 1 participants will continue in the KERS DB plan

• No change in KERS Pension
• Will continue to accrue service time
• Eligible to retire with unreduced benefit
• at age 65 or older with at least 1 month of service credit.
• At any age with 27+ years of service credit.
• Eligible to retire with reduced benefit
• Prior to age 65 with 25 years of service
• Age 55 with at least 5 years of service

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Tier 1 Hard Freeze

KERS You will retain the KERS service time earned as of 6/30/2021 At retirement, you will receive your monthly pension benefit based on service time through 6/30/2021. Sick time service credit will be based on your sick bank balance as of 6/30/2021.

Service time in KERS will stop accruing as of 7/1/2021

TIAA - Adjusted Effective 7/1/2021, you will be enrolled in NKU’s defined contribution pension plan with TIAA. NKU’s TIAA plan requires that you contribute 5% and NKU will contribute 10% to your TIAA pension plan. In addition to the 10% NKU will contribute an age adjusted % to better align your total pension benefit at the time of retirement with your projected soft freeze KERS pension benefit. Employees have a choice of over 35 different investment options through TIAA. At retirement, the TIAA funds remaining in your account will continue to be invested.

TIAA

• The TIAA-CREF Lifecycle Index Funds are one of the top performing target date mutual funds series

relative to their Morningstar peers over the 3-, 5- and 10-year time periods.

• Morningstar reports for the moderate balanced mutual fund peer group, median returns of 5.41%
• ver 5 years (558 funds) and 7.99% over 10 years (412 funds) for the category as of 6/30/20.

2050 2045 2040 2035 2030 2025 2020 2015 2010 Birth year 1984-1988 1979-1983 1974 - 1978 1969 - 1973 1964 - 1968 1959 - 1963 1954 - 1958 1949 - 1953 Earlier - 1948 Average Annual Total Returns 1 Year 3.89% 3.95% 4.46% 5.03% 5.42% 5.74% 6.06% 6.22% 6.29% 10 year 10.67% 10.63% 10.59% 10.28% 9.69% 9.06% 8.43% 7.82% 7.28% Lifecyle Index Fund

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Sample Employee Tier 1

Cessation Date 7/1/2021 Pension Tier 1 Age at cessation 55 Service at cessation 20 Estimated Final Average Salary at cessation $50,000 Age 65 Retirement Estimated service at retirement 30 Estimated future service 10 Estimated Final Average Salary at retirement $55,500 Accumulated value of DC restoration plan $172,600 Estimated retirement benefit from KERS $2,700 Frozen KERS Benefit $1,600 Annuitized Defined Contribution Benefit $1,100 Total Benefit $2,700 Total Benefit Won/(lost) $ $ Total Benefit Won/(lost) % 0.0% Assumptions Salary Growth 1.5% Investment Return 5.0% Contribution percent (includes employees 5%) 25.0%

Current Plan Retiree Insurance Comparisons

Tier 1A hired Prior to 7/1/2003 All employees hired after 6/30/2003

Eligibility

Receiving a KERS annuity Receiving a KERS annuity

Vesting

N/A 120 months if hired prior to August 1, 2008, 180 months otherwise

Insurance Benefit

Medical plan and premiums chosen by KERS 15-19 years 75% 20 or more years 100% $13.78 per year of service

Cost-of-Living-Adjustment (COLA):

Medical inflation included in KERS premium 1.5% per year

Additional employee contributions

None 1.0% to 401(h) account

With a hard freeze, a member will receive retiree medical benefits based on service on 7/1/2021

• Tier 1A individuals who will not have attained 20 years of service as of 6/30/2021 will be eligible

to receive medical coverage through KERS with a 75% premium subsidy. This creates a 25% shortfall if they would have achieved 20 years of service in KERS without cessation

• Tier 1B (hired 7/1/2003-8/31/2008), Tier 2 (hired 9/1/2008-12/31/2013) and Tier 3 (hired

1/1/2014 or later), would have earned $13.78 x years of service, with a 1.5% COLA. For these participants, they would lose the benefit of service accruals from 7/1/2021 thru the year they retire reflecting the vesting rules above

Accessing KERS Benefits Information

• Internet
• Member Self Service (MSS):

Myretirement.ky.gov

• KRS website: Kyret.ky.gov
• Telephone: 800-928-4646
• Mail
• Email: krs.mail@kyret.ky.gov

Email is not secure

What can you do with your online account?

• Contact Information
• Account History
• Account Balance Letter
• Account Summary
• Benefit Estimate
• Service Purchase Estimator
• Annual Statement

Pension Central

Pension Reform Information Hub

Latest news and updates Pension Benefits FAQs Pension Talk Videos Information on Tiers 2020 Timeline

Pension@NKU.edu

Key Pension Timeline Dates

• Information sessions with various tiers of staff

Beginning the Week of October 12, 2020

• Segal refining, updating, and analyzing tools for

employees Through the Month of October, 2020

• Consultants work on potential capital market execution

plan Beginning the Week of October 12, 2020

• Employee support, tools and resources

Beginning the Week of Nov 2, 2020

• President Vaidya’s Fall Forum with the campus community

November 20, 2020

• Special BOR meeting to vote on Presidential

Recommendation December 2, 2020

• Deadline to inform KERS of NKU’s pension decision

January 1, 2021

• NKU’s Hard Freeze or Soft Freeze Cessation from

KERS July 1, 2021

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