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KPERS reports record trust-fund value and ongoing IT modernization during budget presentation
Summary
KPERS told the Committee on General Government Budget that its trust fund reached a record high and that investment-management fees rose because fees are percentage-based on assets and performance; KPERS also described an ongoing pension-administration modernization project and said the committee should concur with the LBC budget recommendations.
KPERS staff briefed the Committee on General Government Budget on the agency’s FY2025 and FY2026 operating budgets, investment-related expenses, and a multi-year pension-administration modernization project. The committee later concurred with the Legislative Budget Committee recommendation for KPERS’ budgets.
Trust-fund size and investment fees: testimony said KPERS manages trust-fund assets of about $26–28 billion (trust‑fund asset figures were presented as a range) and that the operating budget uses a small portion of trust assets to fund administration. KPERS reported higher investment-management fees relative to the prior fiscal year because fees are paid on a percentage basis tied to the size and performance of the portfolio; as assets grow, reported management fees increase. KPERS testified that investment-management fees are approximately 0.18 percent of assets, a relatively low percentage enabled by the trust fund’s scale.
Modernization project: KPERS described an ongoing pension‑administration modernization contract (Tegret Software Ventures) with a five‑year timeline and a total cost estimate cited in testimony at approximately $74.9 million. KPERS plans to finance the modernization from trust-fund assets; the committee was presented with FY2025 and FY2026 estimated modernization expenditures (about $12 million in FY2025 and about $14 million in FY2026). KPERS staff said earlier preparatory work had occurred in prior years and that the current phases involve active implementation.
Pension funding and bonds: KPERS executive testimony traced funding history and said the system’s funded ratio is about 75 percent. KPERS’ executive also described pension-obligation bonds and related investment returns: testimony said that three pension bonds and associated invested proceeds have so far produced net investment gains (after debt service) of about $1.1 billion relative to debt-service costs, a result KPERS characterized as positive to date. KPERS noted an actuarial unfunded liability figure of about $6.2 billion tied to historical underpayments and that the actuarial schedule assumes continued employer contributions and long-term investment returns to reach full funding by 2039 under current assumptions.
Committee action: the committee voted to concur with the Legislative Budget Committee recommendations for KPERS’ FY2025 and FY2026 operating budgets; no amendments to the KPERS operating request were adopted during the meeting.
Ending: KPERS said it will continue to proceed with the modernization project and monitor investment and actuarial results; committee members acknowledged improved pension funding and the recent investment performance.
