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


January 28, 2020


The Honorable Carolyn McGinn, Chairperson
Senate Committee on Ways and Means
Statehouse, Room 545-S
Topeka, Kansas 66612
Dear Senator McGinn:
SUBJECT: Fiscal Note for SB 274 by Senate Committee on Financial Institutions and
Insurance
In accordance with KSA 75-3715a, the following fiscal note concerning SB 274 is
respectfully submitted to your committee.
Under current law, when a KPERS retiree returns to work for a participating KPERS
employer, the employer is required to pay the statutory employer contribution rate on the first
$25,000 of compensation, and 30.0 percent on compensation above $25,000. SB 274 would
eliminate all KPERS employer contributions, if the KPERS employer first hired the retiree after
the retiree has reached age of 65. The employer contribution requirement would remain for a
retiree who first returned to work prior to age of 65 and continues to work after attaining age 65.
KPERS indicates that exempting retirees hired after the age of 65 from the statutory
employer contribution rate would reduce contributions to the KPERS system. Using the latest data
available, KPERS reports that approximately 14.0 percent of the State/School contributions
received for working after retirement members were attributable to members hired on or after the
age of 65, or approximately $1.2 million, or 0.22 percent of total KPERS State/School employer
contributions in FY 2018.
If in future years the proportion of contributions of KPERS members working after
retirement remains similar, KPERS would estimate the enactment of SB 274 would result in a loss
of approximately $1.2 million in reduced employer contributions each year. Based upon the
agency’s analysis, the present value of the reduced contributions over 30 years would be
approximately between $20.0 million and $25.0 million. The agency notes that if SB 274 would
create an incentive for employers to hire more retirees after reaching the age of 65, the amount of
reduced employer contributions would be greater than $1.2 million each year, as the revenue from
those hired before the age of 65 would decline.
The Honorable Carolyn McGinn, Chairperson
Page 2—SB 274

In addition, KPERS reports that a large portion of the statutory KPERS employer
contribution rate is attributed to the unfunded actuarial liability payment. Without contributions
on the total payroll of all KPERS covered positions, the UAL would increase as the actuarial
valuation assumes new members would be hired to replace members leaving covered employment.
KPERS indicates that the enactment of SB 274 would also affect the KPERS Local Group
in a similar way of the KPERS State/School Group. The fiscal effect cannot be estimated;
however, any changes would ultimately be reflected in future employer contribution rates. Any
fiscal effect associated with SB 274 is not reflected in The FY 2021 Governor’s Budget Report.


Sincerely,

Larry L. Campbell
Director of the Budget


cc: Jarod Waltner, KPERS


Statutes affected:
As introduced: 74-4937, 74-4914