KPERS officials tell committee trust is about 74% funded; officials cite bond proceeds and recent payments

The Kansas Public Employees Retirement System told the Committee on Financial Institutions and Pensions that the pension trust’s funded ratio stood at about 74% and that the system held roughly $28 billion in assets.

KPERS representative Alan Conroy said the system’s 20-year return is about 7.3% and that the board uses a 7% assumed rate of return in actuarial work. "We're a staff of over a hundred and we administer those defined benefit plans for public employees," Conroy told the committee, describing KPERS’ role and scale.

Why it matters: The funded ratio and investment performance determine employer contribution requirements and the system’s ability to pay lifetime benefits to public employees, retirees and beneficiaries. Conroy told members that state payments and three rounds of pension obligation bonds have been central to recent improvements in the fund’s status.

Key points from the presentation

- Size and membership: KPERS manages benefits for roughly 330,000 current, inactive and retired members; about 154,000 are active members. The system pays about $220 million in annual retirement benefits to retirees in Kansas and processes roughly 140,000 retirement benefit payments each year.

- Plan structure: KPERS administers multiple plans: the regular KPERS plans historically labeled KPERS 1 and KPERS 2 (closed to new general memberships) and the hybrid KPERS 3 (a cash-balance defined-benefit design established in 2015). Police and fire and judges participate in separate plans with different multipliers and retirement ages. Employee contribution rates are statutory: 6% for most KPERS members and 7.15% for police and fire, Conroy said.

- Funding and investments: Conroy said investments contribute roughly half of trust inflows, employers about one-third and members the remainder. The board’s long-term asset allocation targets about 47% to equities with additional allocations to fixed income, real assets and private equity. Conroy said investment fees on the fund are about 0.336% of assets.

- Recent measures that improved funding: The presenter said the legislature has, in recent years, paid actuarially required contributions and that the state issued pension obligation bonds in three separate actions; combined with targeted cash infusions, those moves and recent market gains raised the funded ratio from a low near 56% (circa 2012) to roughly 74% today. Conroy said a $1 billion one-time payment would increase the funded ratio by roughly 3.8 percentage points and, on the state/school employer side, could lower employer contributions by about $72 million per year under current actuarial assumptions.

- Risks and governance: Conroy described the board as fiduciaries operating under a "prudent expert" standard and noted that the assumed rate of return is reviewed periodically (statutorily every 3–5 years); the last review was several years ago. He also noted that diversification (timber, real estate, corporate credit) is intended to reduce downside risk but that severe market downturns can still materially reduce returns.

What the committee asked and next steps

Committee members asked about the carve-out that places correctional officers in the KPERS 2 tier; Conroy said that status was statutory and was originally adopted to aid recruitment and retention in correctional services. Members also asked whether a one-time state payment would meaningfully change the funded ratio; Conroy provided the 3.8% and $72 million annual contribution-savings estimates. When asked about the system’s projected date to reach 100% funding, Conroy gave an estimate stated in the transcript as "02/39," which the transcript did not clarify further.

The committee chair announced that the committee will take up several KPERS-related bills next week and listed HB2086 and HB2130 by number; one bill number given during the meeting was not specified in the transcript. The chair said the three bills will be heard together to save time.

Ending

Conroy closed by offering to answer further questions and provided contact information to committee members. Committee members thanked KPERS staff for the presentation and set the next agenda items for bill hearings on KPERS matters.