Bill would let state employees name special-needs trusts as retirement beneficiaries

Senator Robin Webb introduced Senate Bill 58, which would allow state employees to designate a special-needs trust as a beneficiary of their retirement benefits. Webb said the change would help state employees protect the eligibility of special-needs relatives for federal programs such as Supplemental Security Income (SSI) and Medicaid.

"Several state employees have brought this to my attention through the last few years," Webb told the committee. She said the bill references federal law governing special-needs trusts and that the draft is lengthy only because it must address procedures across each retirement system.

Webb said she was awaiting an actuarial analysis; she told members she had been advised that preliminary indications from the pension authority suggested the bill could be revenue neutral. Representatives of the Kentucky Public Pensions Authority (KPPA) were present for committee questions and discussed a technical request to allow electronic transfers to trusts rather than written checks.

Committee members asked whether the trusts would be revocable and how the bill would interact with federal rules. Webb said the bill adopts federal eligibility language and contains notice provisions and repayment mechanisms for overpayments. Auditor Allison Ball recommended that the sponsor consider including language to permit STABLE accounts as an additional option for people who do not have a full special-needs trust, saying that could be easier for some employees.

No committee vote was taken on SB 58 during the meeting; Webb said she would provide the actuarial work to the committee when it is available.

Ending

Webb told members she would follow up with actuarial information and staff memos addressing technical questions raised during the hearing.