Bill would raise CERS retiree health subsidy; proponents say it will aid recruitment while triggering employer/employee cost sharing

Senator Robbie Mills introduced draft legislation to increase the fixed-dollar retiree health subsidy for members of the County Employees Retirement System (CERS), proposing higher monthly payments per year of service and contribution triggers tied to each health trust’s funded status.

Mills said the draft would raise the nonhazardous career retiree subsidy from $14.63 per month per year of service to $40 per month per year of service, and increase the hazardous-duty subsidy from $21.94 per month per year of service to $50 per month per year of service. "The goal is to better align their benefits with the cost of an 65-year-old health plan," Mills told the committee.

Mills said the bill includes provisions that would vary employee contribution rates depending on the funded status of each health fund over time. He summarized tentative contribution triggers during his presentation; he also acknowledged that the committee would receive a preliminary actuarial analysis and that some draft language still may be adjusted. Mills said the current funded ratios are about 22.3% for the nonhazardous fund and about 0.5% for the hazardous fund.

Supporters from public safety and local government told the committee the increase would help recruit, retain and rehire employees who currently find the existing subsidy inadequate. Jerry Wagner, retired sheriff and executive director of the Sheriff’s Association, said the change would "help us to hire and retain, and, also, it would help us to be able to rehire retired employees." Jeff Taylor, legislative affairs director for the Kentucky Professional Firefighters, told the committee the subsidy has not kept pace with plan costs and that the proposal would return control of health benefits to employees considering retirement.

JD Cheney, executive director of the Kentucky League of Cities, said municipal employers had negotiated the shared-cost approach and supported the draft while noting measured employer risk. Cheney described a five-year forward-looking measurement intended to stabilize any changes in employee contributions.

Mills and witnesses told members they have a bill draft and a preliminary actuarial analysis; Mills asked that those materials be distributed to co-chairs and the committee when finalized. Mills also discussed how the subsidy interacts with rehired retirees and existing law; committee members sought clearer, written answers on how the subsidy is applied when a retiree returns to work or obtains coverage through a private employer.

Committee members pressed for clarification about the draft’s details and possible tweaks if a fund’s funded status exceeded certain thresholds; Mills said those points were under discussion and that the fiscal impacts were preliminary. He cited preliminary estimates that the change would add roughly $121,000,000 in unfunded liability to the nonhazardous fund over the amortization period and about $101,000,000 to the hazardous fund.

No formal committee vote was recorded on the draft during the meeting; staff and sponsors said actuarial materials and any revised bill language would be provided to members ahead of further committee consideration.

Ending

Senator Mills invited committee members to contact him with questions and thanked witnesses for attending. Committee staff said the actuarial analysis would be shared when ready.