SESSION OF 2024
SUPPLEMENTAL NOTE ON SENATE SUBSTITUTE FOR
HOUSE BILL NO. 2646
As Recommended by Senate Committee on
Education
Brief*
Senate Sub. for HB 2646 would reopen the closed
KPERS 2 plan to certain teachers who will become members
on July 1, 2024. The bill would also provide that teachers who
are currently KPERS 3 members would convert to KPERS 2
members by January 1, 2025. The bill would also make a
statement acknowledging the Legislature’s continuous review
of the Kansas Public Employees Retirement System
(KPERS) and its intention to continue such review in order to
make necessary changes, which could include transfer of
additional employee groups from KPERS 3 to KPERS 2.
Legislative Declaration
The bill would make the following statement in law:
In light of the Legislature’s continuous review
of the Kansas Public Employees Retirement
System, including the audit report by the
Kansas Legislative Division of Post Audit
published in February 2024, titled “Reviewing
the KPERS 3 Retirement Plan,” the Legislature
intends to continue such review in order to
make changes as necessary to [KPERS] to
ensure such system serves the purposes as
provided in KSA 74-4901, and amendments
thereto. Such changes may include
transferring additional employee groups from
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
the Kansas Public Employees Retirement
System Act of 2015 [KPERS 3] to the Kansas
Public Employees Retirement System Act of
2009 [KPERS 2].
“Teacher” Defined
The bill would define “teacher” to mean any professional
employee who is required to hold a certificate to teach in any
school district and any teacher or instructor in any technical
college, community college, or the Institute of Technology at
Washburn University.
KPERS 2 Membership—Teachers; July 1, 2024
The bill would provide that any teacher who is first
employed by a KPERS participating employer on or after July
1, 2024, would be a member of the Retirement System under
the provisions of the KPERS Act of 2009 (KPERS 2).
KPERS 2 Membership—Conversion from KPERS 3;
January 1, 2025
The bill would transfer all active and inactive teacher
members enrolled in the KPERS Act of 2015 (KPERS 3) to
the KPERS 2 membership group on and after January 1,
2025. The bill would further provide transfer instructions
pertaining rights and benefits of members, employer
contributions and interest, and qualification requirements for
government plans under the federal Internal Revenue Code.
Provisions pertaining to teacher membership in and
conversion of teacher members to KPERS 2 would be made
part of the KPERS 2 Act.
2- 2646
Exemption from KPERS Act of 2015
The bill would amend the KPERS Act of 2015 (KPERS 3
Act) to exempt teachers from this act.
Background
The Senate Committee on Education recommended a
substitute bill incorporating provisions pertaining to the
reopening of the KPERS 2 plan to teachers and the transfer
of certain teachers who are currently KPERS 3 members to
KPERS 2. (These provisions were originally contained in SB
479, as modified by the Senate Committee on Education.)
The contents of HB 2646 (as recommended by the House
Committee on Education), which would amend the Kansas
Hero’s Scholarship Act, were included in Senate Sub. for HB
2645.
Senate Committee on Education
In the Senate Committee informational hearing on
March 5, 2024, about provisions pertaining to the re-opening
of KPERS 2 and transfer of teachers from KPERS 3 (the
subject of SB 479), Representative Essex and
representatives of the Kansas Association of School Boards
and the Kansas PTA provided proponent testimony.
Proponents generally stated SB 479 would help address
teacher recruitment and retention challenges. These
conferees noted an improved retirement benefit could bring
individuals to the profession and help retain more
experienced teachers.
Written-only proponent testimony was submitted by the
Superintendent of USD 233 (Olathe Public Schools) and a
representative of USD 501 (Topeka Public Schools).
The Executive Director of KPERS provided an
informational briefing that outlined the current plan design for
3- 2646
the three groups within KPERS (KPERS 1, 2, and 3) and
each group’s plan design and calculation of benefits. KPERS
3 is a cash balance plan where members’ lifetime benefits are
based on contributions and interest earned throughout their
careers. KPERS 3 members contribute 6 percent to notional
accounts that earn a guaranteed 4 percent interest each year
and a possible dividend interest credit based on a statutory
formula that is tied to the 5-year net average rate of return.
Members also have employer pay credits that are credited at
3–6 percent of pay based on the member’s years of service.
At retirement, the members’ account balances are converted
to lifetime annuities. Employer contributions are at the same
actuarial contribution rate for KPERS 3 members as they
contribute for KPERS 1 and KPERS 2 members.
In Committee discussion, the KPERS conferee provided
data from the December 31, 2022, actuarial valuation
regarding the estimate for teachers who are currently KPERS
3 members. KPERS estimates there are about 40,000
teacher positions employed in Kansas USDs, with about
15,000 being KPERS 3 members. This total, however, does
not include positions that would also be deemed “teachers”
under the bill’s definition, which includes community and
technical college teachers and instructors. KPERS is not able
to estimate the number of inactive teacher members that
would be affected by the conversion to KPERS 2.
The KPERS conferee noted the two key implementation
dates of SB 479 and requested consideration for a delay in
the implementation date of January 1, 2025, that is
prescribed for the conversion of the existing KPERS 3
teacher members, citing the time needed to complete the
associated administrative work. [Note: Additional information
detailing actuarial costs, administrative costs, and financing of
plan design changes is detailed in the “Fiscal Information.”]
Neutral testimony was provided by a representative of
the Kansas Association of Chiefs of Policy, Kansas Sheriffs
Association, and Kansas Peace Officers Association (law
enforcement agencies); Kansas Coalition of Public Retirees
4- 2646
and Kansas Association of Retired School Personnel; Kansas
National Education Association (KNEA); Kansas Organization
of State Employees; and USA-Kansas and Kansas School
Superintendents’ Association (KSSA). Neutral conferees
generally indicated the KPERS 3 plan provides less adequate
benefits than KPERS 2 and acknowledged other employees
also receiving retirement benefits under KPERS 3. The law
enforcement agencies’ representative requested
consideration for inclusion of county and municipal
employees (i.e., support staff in county jails and dispatch
centers) in KPERS 2. The KNEA and USA-Kansas/ KSSA
representatives requested consideration for inclusion of other
education support professionals (i.e., paraprofessionals,
school counselors, speech therapists, school nurses, bus
drivers, and other supporting staff).
Written-only neutral testimony was submitted by
Keeping the Kansas Promise Coalition, League of Kansas
Municipalities, Northeast Johnson County Cities (Prairie
Village, Mission, Merriam, Roeland Park, and Westwood
Hills), and a retired teacher.
No other testimony was provided.
The Senate Committee adopted a balloon amendment
incorporating the provisions of SB 479. The amendment
added provisions acknowledging the Legislature’s continuous
review of the Retirement System, including a Legislative
Division of Post Audit report on the KPERS 3 plan, and
stating the Legislature’s intentions to continue such review of
the Retirement System and KPERS 3 and possible future
employee group transfers to KPERS 2.
Fiscal Information
The fiscal note prepared by the Division of the Budget
on SB 479, as introduced, addresses items detailed in the
Executive Director’s neutral information described above and
also addresses administrative and actuarial costs and
5- 2646
financing of plan design changes. These estimates are
described below.
Administrative Costs
Pension Administration System
Enactment of the bill would require both technical
changes to the KPERS pension administration system as well
as work to collect additional data on “teachers” that KPERS
does not currently possess. In addition, education and
communication efforts would be needed for the affected
members. The agency notes KPERS 2 is a fundamentally
different plan than the KPERS 3 cash balance plan. While the
technical structure for KPERS 2 remains in place in the
pension administration system, the conversion of members
from KPERS 3 to KPERS 2 would require substantial coding
changes to calculate the proper salary and service time
information that will be required for KPERS 2 benefit
calculations. KPERS estimates the cost for the technical work
on the pension administration system and testing to total
approximately $950,000 from the KPERS Fund and would
take approximately six months to complete.
Staffing
Additional KPERS staffing would be required for the
identification of teacher members and for providing education
and resources to members. The agency would require 5.00
temporary FTE (full-time equivalent) positions and salaries
and wages expenditures totaling $362,111 (including fringe
benefits) in FY 2025 for 3.00 temporary Benefit Analysts and
2.00 temporary Benefits Representatives. For FY 2026,
expenditures for these 5.00 temporary positions would total
$377,528 (including fringe benefits). KPERS indicates these
temporary positions would no longer be needed two to three
years after the changes in the bill would be in effect.
6- 2646
Actuarial Costs; Funding Mechanism
For estimating the actuarial costs to KPERS associated
with the enactment of the bill, the actuary reports that moving
the KPERS 3 teacher members to KPERS 2 would increase
the unfunded actuarial liability (UAL) for those members by
$134.0 million as a result of the difference in the benefit plan
design. The proposed changes affect the benefit amounts for
future retirees, so the actuary used an amortization period of
20 years for the increase in the UAL. The amortization
payments would be determined using the same methodology
used in the actuarial valuation, which is the level-percent of
payroll. The increase in the UAL, normal cost rate, and total
actuarial contribution rate (which includes both the increase in
the normal cost rate and the UAL rate), are summarized in
the following table:
KPERS–STATE/SCHOOL GROUP
(Dollars in Millions)
Baseline SB 479 Change
Actuarial Liability $ 24,290 $ 24,424 $ 134
Actuarial Value of Assets 18,029 18,029 -
UAL $ 6,261 $ 6,395 $ 134
Funded Ratio 74.20 % 73.80 % (0.40)%
Normal Cost Rate 8.89 % 9.15 % 0.26 %
UAL Contribution Rate 8.53 8.73 0.20
Actuarial Contribution Rate 17.42 % 17.88 % 0.46 %
Member Rate 6.00 % 6.00 % -%
Employer Contribution Rate 11.42 11.88 0.46
Unfunded Actuarial Liability; Contribution Rate Increase
As detailed in the above table, the bill would increase
the normal cost rate by 0.26 percent of payroll of the
State/School Group. In addition, there would also be a
contribution rate increase to fund the increase in the UAL
over 20 years totaling 0.20 percent for the State/School
Group. This payment on the UAL would be over a fixed period
and would stop after 20 years of payments. The increase of
7- 2646
0.46 percent in the State/School Group rate is estimated to
increase expenditures by approximately $25.1 million in FY
2025 and $26.1 million in FY 2026. The Division of the
Budget estimates that 85.0 percent of employer contributions
for the State/School Group is funded from the State General
Fund (SGF). As a result, of the total increased employer
contributions, $21.3 million would be from the SGF in FY
2025 and $22.2 million in FY 2026.
Funding Mechanism for Plan Design Changes
KPERS notes the bill does not include a funding
mechanism for the plan design changes. Based on current
law (KSA 74-4920) and with the enactment of the bill, KPERS
would recertify the employer contribution rate to the Division
of the Budget for FY 2025, which would increase the
employer contribution rate from 11.42 percent to 11.88
percent, exclusive of the KPERS Death and Disability
Insurance rate. KPERS also notes that the $134.0 million
increase in the UAL could be funded with a one-time
appropriation by the Legislature. Under this scenario, this
would eliminate the 20-year amortization of the UAL increase,
reducing the change in the FY 2025 employer contribution
rate from 0.46 percent to 0.26 percent, or from an increase of
$25.1 million to an increase of $14.2 million, with the same
assumption that 85.0 percent of employer contributions from
the State/School Group is funded from the SGF.
Any fiscal effect associated with the bill is not reflected
in The FY 2025 Governor’s Budget Report.
Retirement; education; teachers; Kansas Public Employees Retirement System;
KPERS 2 defined benefit plan; KPERS 3 cash balance plan; Legislature
8- 2646
Statutes affected: As introduced: 75-4364
Version 2: 74-49, 74-4901