KRS § 61.598 — KY Code / Title VIII / Chapter 61 / Section 61.598
61.598 Limitations and exclusions on increases in creditable compensation in last five years of service for employees retiring on or after January 1, 2018 -- Exceptions -- Employer to pay actuarial costs resulting from certain increases in creditable compensation -- Inquiries from employers -- Hearing and appeal -- Reporting of exemptions -- Inapplicability to hybrid cash balance and money purchase plan participants
Status: in_force

61.598 Limitations and exclusions on increases in creditable compensation in last

five years of service for employees retiring on or after January 1, 2018 --

Exceptions -- Employer to pay actuarial costs resulting from certain increases

in creditable compensation -- Inquiries from employers -- Hearing and appeal

-- Reporting of exemptions -- Inapplicability to hybrid cash balance and money

purchase plan participants.

(1) For purposes of this section, "bona fide promotion or career advancement":

(a) Means:

1. A professional advancement in substantially the same line of work held

by the employee in the four (4) years immediately prior to the final five

(5) fiscal years preceding retirement or a change in employment position

based on the training, skills, education, or expertise of the employee that

imposes a significant change in job duties and responsibilities to clearly

justify the increased compensation to the member; or

2. An increase in creditable compensation for all employees in a specified

class due to an increase in rate of pay authorized or funded by the

legislative or administrative body of the employer or due to an increase

in rate of pay mandated in a collective bargaining agreement approved

by the legislative body of the employer; and

(b) Does not include any circumstance where an elected official participating in

the Kentucky Employees Retirement System or the County Employees

Retirement System takes a position of employment with a different employer

participating in any of the state-administered retirement systems.

(2) (a) For employees retiring from the Kentucky Employees Retirement System, the

County Employees Retirement System, or the State Police Retirement System

on or after January 1, 2018, the systems shall, for each of the retiring

employee's last five (5) fiscal years of employment, identify any fiscal year in

which the creditable compensation increased at a rate of ten percent (10%) or

more annually over the immediately preceding fiscal year's creditable

compensation. The employee's creditable compensation in the fiscal year

immediately prior to the employee's last five (5) fiscal years of employment

shall be utilized to compare the initial fiscal year in the five (5) fiscal year

period.

(b) Except as limited or excluded by subsections (3) and (4) of this section, any

amount of increase in creditable compensation for a fiscal year identified

under paragraph (a) of this subsection that exceeds ten percent (10%) more

than the employee's creditable compensation from the immediately preceding

fiscal year shall not be included in the creditable compensation used to

calculate the retiring employee's monthly retirement allowance. If the

creditable compensation for a specific fiscal year identified under paragraph

(a) of this subsection as exceeding the ten percent (10%) increase limitation is

not used to calculate the retiring employee's monthly retirement allowance,

then no reduction in creditable compensation shall occur for that fiscal year.

(c) If the creditable compensation of the retiring employee is reduced as provided

by paragraph (b) of this subsection, the retirement systems:

1. Shall refund the employee contributions and interest attributable to the

reduction in creditable compensation; and

2. Shall not refund the employer contributions paid but shall utilize those

funds to pay down the unfunded liability of the pension fund in which

the retiring employee participated.

(3) (a) In order to ensure the prospective application of the limitations on increases in

creditable compensation contained in subsection (2) of this section, only the

creditable compensation earned by the retiring employee on or after July 1,

2017, shall be subject to reduction under subsection (2) of this section.

Creditable compensation earned by the retiring employee prior to July 1,

2017, shall not be subject to reduction under subsection (2) of this section.

(b) If the reductions in creditable compensation during a retiring member's entire

last five (5) years of employment results in a reduction in his or her monthly

retirement allowance of less than twenty-five dollars ($25) per month or an

actuarially equivalent value under the various payment options, then no

reduction in creditable compensation or retirement allowances shall occur

under subsection (2) of this section.

(4) Subsection (2) of this section shall not apply to:

(a) A bona fide promotion or career advancement as defined by subsection (1) of

this section;

(b) A lump-sum payment for compensatory time paid to an employee upon

termination of employment;

(c) A lump-sum payment made pursuant to an alternate sick leave program under

KRS 78.616(5) that is paid to an employee upon termination of employment;

(d) Increases in creditable compensation in a fiscal year over the immediately

preceding fiscal year, where in the immediately preceding fiscal year the

employer reported the employee as being on leave without pay for any reason,

including but not limited to sick leave without pay, maternity leave, leave

authorized under the Family Medical Leave Act, and any period of time

where the employee received workers' compensation benefit payments that

were not reported to the plan as creditable compensation;

(e) Increases in creditable compensation directly attributable to an employee's

receipt of compensation for:

1. Overtime hours worked while serving as a participating employee under

any state or federal grant, grant pass-through, or similar program that

requires overtime as a condition or necessity of the employer's receipt of

the grant; or

2. The first one hundred (100) hours of mandatory overtime hours that the

employee is individually required to work by the employer during a

fiscal year. This subparagraph shall not be construed to apply to

overtime hours voluntarily worked by the employee or in situations in

which the employee has the option to elect out of participation in

overtime hours. Any mandatory overtime hours exempt under this

subparagraph shall be in addition to any overtime hours otherwise

exempt under the provisions of this subsection; and

(f) Increases in creditable compensation directly attributable to an employee's

receipt of compensation for overtime performed during and as a result of a

state of emergency declared by:

1. The President of the United States or the Governor of the

Commonwealth of Kentucky; or

2. A local government in which the Governor authorizes mobilization of

the Kentucky National Guard pursuant to KRS 38.030 and 39A.950

during such time as the National Guard is mobilized.

(5) (a) For employees retiring on or after January 1, 2014, but prior to July 1, 2017,

the last participating employer shall be required to pay for any additional

actuarial costs resulting from annual increases in an employee's creditable

compensation greater than ten percent (10%) over the employee's last five (5)

fiscal years of employment that are not the direct result of a bona fide

promotion or career advancement. The cost shall be determined by the

retirement systems.

(b) Lump-sum payments for compensatory time paid to an employee upon

termination of employment shall be exempt from this subsection.

(c) The Authority shall be required to answer inquiries from participating

employers regarding this subsection. Upon request of the employer prior to

the employee's change of position or hiring, the systems shall make a

determination that is binding to the systems as to whether or not a change of

position or hiring constitutes a bona fide promotion or career advancement.

(d) For any additional actuarial costs charged to the employer under this

subsection, the systems shall allow the employer to pay the costs without

interest over a period of one (1) year from the date of receipt of the employer's

final invoice.

(6) The Authority shall determine whether increases in creditable compensation during

the last five (5) fiscal years of employment prior to retirement constitute a bona fide

promotion or career advancement and may promulgate administrative regulations in

accordance with KRS Chapter 13A to administer this section. All state-

administered retirement systems shall cooperate to implement this section.

(7) Any employer who disagrees with a determination made by the system in

accordance with this section regarding whether an increase in compensation

constitutes a bona fide promotion or career advancement for purposes of subsection

(5) of this section may request a hearing and appeal the decision in accordance with

KRS 61.645(16) or 78.782(16).

(8) For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky

Retirement Systems and the County Employees Retirement System shall provide a

means for employers to separately report the specific exceptions provided in

subsection (4) of this section within the reporting system utilized by the employers

for making employer reports under KRS 16.645, 61.675, and 78.545. The Kentucky

Retirement Systems and the County Employees Retirement System shall

continually provide communication, instructions, training, and educational

opportunities for employers regarding how to appropriately report exemptions

established by subsection (4) of this section.

(9) This section shall not apply to employees participating in the hybrid cash balance

plan as provided by KRS 16.583, 61.597, 78.5512, and 78.5516.