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Committee advances TRS change limiting state reimbursement for annual-leave payouts

Kentucky Senate State and Local Government Committee · February 18, 2026

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Summary

Senate Bill 127 (committee substitute) would limit the state’s reimbursement in final-compensation calculations to five annual-leave days per year for eligible TRS participants and shift actuarial costs for additional days to local school systems; the committee passed the substitute 6–1–2.

Senate Bill 127, as amended by a committee substitute, would change how accrued annual leave factors into Teacher Retirement System (TRS) final-compensation calculations and who pays for it. Sponsor Senator Higdon said the General Assembly has made large contributions since 2016 but that funding ratios have improved only modestly and annual negative cash flows have been sizable. The bill limits the state to counting up to five days per year of annual leave for state reimbursement purposes going forward; school districts may continue more generous leave policies but would bear the actuarial cost of counting extra days toward final compensation.

The sponsor gave examples of large payouts and the current treatment of annual leave and sick leave in final-pay computations and said the change is meant to curb growing payout liabilities. The committee approved SB127 as amended by the committee substitute with a favorable expression (recorded as 6 yays, 1 no, and 2 pass).