FRANKFORT, KY – The Kentucky Public Pensions Authority has released its Annual Comprehensive Financial Report (ACFR) for the Fiscal Year (FY) ended June 30, 2022. The report, and the accompanying Summary Annual Financial Report (SAFR), serve as resources for understanding the structure, financial status, investments, and governance of the funds operated by KPPA. As such they are critical components of KPPA’s effort to maintain transparency for all stakeholders.
Record investment returns in FY 2021 gave way to negative returns across the board in FY 2022. Collectively, all funds operated by KPPA earned an investment return of -5.7% net of fees for the Fiscal Year. The returns for each of the 10 pension and insurance funds were below their actuarial assumptions, which are 5.25% for the Kentucky Employees Retirement System (KERS) Nonhazardous and State Police Retirement System (SPRS) pension funds and 6.25% for all other pension and insurance funds.
Nevertheless, thanks to increased contributions compared with the previous fiscal year and additional appropriations granted by the General Assembly, actuarial valuations conducted by KPPA’s actuary, GRS, show that the funded status of each of the plans improved in FY 2022. In particular, in addition to providing full funding for KERS and SPRS actuarially determined pension and insurance contributions, the General Assembly during the 2022 Regular Session approved additional appropriations totaling $695 million, including $215 million in FY 2022 for the SPRS pension.
The SPRS appropriation was particularly significant, increasing the plan’s funded status to 52.5% from 30.7%. The bulk of the additional appropriations to the KERS Nonhazardous pension plan will be allocated in FY 2023 and FY 2024, and the positive effects will be seen in the June 30, 2023, actuarial valuation.
GRS projects that all pension and insurance plans will be fully funded in Fiscal Year 2049, provided KPPA receives the full Actuarially Determined Contribution (ADC) each year and all actuarial assumptions are met.
The report also shows that the systems operated by KPPA paid out $2.3 billion in monthly pension payments in FY 2022, 93% of which went to Kentucky residents. These payments represent a consistent revenue stream for all local economies.
The KERS Hazardous plan saw a 5.3% decrease in active employees from FY 2021. The KERS Nonhazardous plan workforce shrunk by 2.2%, with retirements likely slowing compared with recent years due to increases in state worker pay approved by the General Assembly. The number of active County Employees Retirement System (CERS) Nonhazardous members declined 0.14% during FY 2022. CERS Hazardous and SPRS reversed trends of declining active membership, with SPRS growing 8.9% and the CERS Hazardous workforce increasing its active employee count by 0.12%. Pay raises for State Police, approved by the General Assembly, may also have played a role in reversing the decline of State Police employment.
The FY 2022 report can be found on the Annual Reports page on the KPPA website. The FY 2022 Summary Annual Financial Report, which highlights key points from the ACFR, can be found on the Summary Annual Reports page.
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The Kentucky Public Pensions Authority is responsible for the investment of funds and administration of pension and health insurance benefits for over 410,000 active and retired state and local government employees, state police officers, and nonteaching staff of local school boards and regional universities.
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https://kyret.ky.gov