Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 larry.campbell@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Larry L. Campbell, Director Laura Kelly, Governor

March 13, 2019

The Honorable Jim Kelly, Chairperson
House Committee on Financial Institutions and Pensions
Statehouse, Room 581-W
Topeka, Kansas 66612
Dear Representative Kelly:
SUBJECT: Fiscal Note for HB 2217 by House Committee on Financial Institutions and
Pensions
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2217 is
respectfully submitted to your committee.
HB 2217 would enact the Kansas Thrift Savings Plan Act, which would create a defined
contribution plan effective on and after July 1, 2022. The Thrift Savings Plan would be available
to all retirement groups, which includes Kansas Public Employees Retirement System (KPERS),
Kansas Police and Firemen’s Retirement System (KP&F) and the Retirement System for Judges
(Judges). The bill would require the KPERS Board of Trustees to establish a separate Thrift
Savings Plan under sections 401(a) and 414(d) of the Federal Internal Revenue Code. The plan
would be required to have a Roth contribution option for members. KPERS would be allowed to
enter into contracts with insurers, investment managers, private firms or other parties for
investment and administrative services for the plan. The bill would allow costs for administration
of the plan to be recovered through service charges to participants or credit allowances or
reimbursements from contracted firms.
New employees would be allowed to make a one-time irrevocable election to become a
member of the Thrift Savings Plan within 14 days of the start of employment. Current active
members of all retirement groups would be allowed to make a one-time irrevocable election to
become a member of the Thrift Savings Plan within a 90-day period to be determined by the Board.
Active members could not become members of the Thrift Savings Plan until the Board of Trustees
receives approved from the Internal Revenue Service. An election of an active retirement group
member to become a member of the Thrift Savings Plan would be for all the member’s credited
service. An election to become a member of the Thrift Savings Plan would terminate active
membership in the defined benefit plan. KPERS would be required to calculate the actuarial
present value of a member’s accrued retirement benefit for all service prior to July 1, 2022 and
transfer the lump sum amount to the member’s Thrift Savings Plan account. Members would be
allowed to rollover contributions in other retirement plans into the member’s Thrift Savings Plan
account.
The employee contribution rate for Thrift Savings Plan members would be 3.0 percent and
the employer contribution rate would be 4.0 percent. However, if the employee contributes 4.0
The Honorable Jim Kelly, Chairperson
Page 2—HB 2217

percent, the employer rate would increase to 4.5 percent. If the employee contributes 5.0 percent,
the employer would also contribute 5.0 percent. The bill specifies the type of investments that
would be offered to members. There would be a default investment option for any member who
does not select and investment direction. The bill also outlines procedures for distributions,
termination of service and beneficiaries.
According to KPERS, the precise actuarial effect from HB 2217 cannot be determined
because it is unknown how many employees would choose to become members of the Thrift
Savings Plan. While KPERS does not expect many KP&F or Judges members to become members
of the Thrift Savings Plan, KPERS estimates the plan may appeal to a high number of KPERS
members as a result of the lower employee contribution rate. Currently, KPERS members
contribute 6.0 percent of their salary. A large number of KPERS member elections into the Thrift
Savings Plan would reduce the number of members in the defined benefit plan. This would affect
the long-term funding of the KPERS Trust Fund.
The bill does not require employers to continue making contributions to the unfunded
actuarial liability if employees join the Thrift Savings Plan. This would reduce the payroll base of
the defined benefit plan, which would result in an increase in employer contribution rates.
Additionally, KPERS estimates long-term employer costs would be higher under the Thrift
Savings Plan than under the current KPERS 3 Cash Balance Plan.
KPERS notes that movement of employees from the defined benefit plan to the Thrift
Savings Plan has the potential to affect KPERS Trust Fund cash flow. Any reduction in cash flow
would increase the gap between benefits and contributions. In order to meet cash flow needs, the
KPERS portfolio asset allocation would have to shift to more liquid investments, which could
reduce the rate of return. Any reduction to the rate of return would require increases to employer
contributions.
KPERS estimates the bill would require additional salaries and wages expenditures of
$825,000 for 16.00 new FTE positions for start-up costs in FY 2021, FY 2022 and FY 2023.
Beginning in FY 2024, KPERS indicates ongoing salaries and wages expenditures would be
reduced to $565,000 for 7.00 FTE positions. Additionally, the agency estimates there would be
additional information technology expenditures of $200,000 in FY 2022. In general, KPERS
expects additional expenditures for actuarial services; defined contribution plan, investment and
audit services; legal services; communications; third-party recordkeeping, trust and investment
services; and contract monitoring. Any fiscal effect associated with HB 2217 is not reflected in
The FY 2020 Governor’s Budget Report.

Sincerely,

Larry L. Campbell
Director of the Budget
cc: Jarod Waltner, KPERS