Shown verbatim: the complete text as captured from the official PDF posted by the Kentucky General Assembly, fetched 2026-09-25. Page and line markers are part of the official record; nothing is edited or removed. This is the current version. The official bill page.
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1 AN ACT relating to pension spiking in the systems administered by the Kentucky
2 Public Pensions Authority.
3 Be it enacted by the General Assembly of the Commonwealth of Kentucky:
4 Section 1. KRS 61.598 is amended to read as follows:
5 (1) As used in[For purposes of] this section, "bona fide promotion or career
6 advancement":
7 (a) Means:
8 1. A professional advancement in substantially the same line of work held
9 by the employee in the four (4) years immediately prior to the final five
10 (5) fiscal years preceding retirement or a change in employment position
11 based on the training, skills, education, or expertise of the employee that
12 imposes a significant change in job duties and responsibilities to clearly
13 justify the increased compensation to the member; or
14 2. a. An increase in creditable compensation for all employees in a
15 specified class due to an increase in rate of pay authorized or
16 funded by the legislative or administrative body of the employer or
17 due to an increase in rate of pay mandated in a collective
18 bargaining agreement approved by the legislative body of the
19 employer.
20 b. Subdivision a. of this subparagraph shall be retroactive to apply
21 to any member whose effective retirement date occurred on or
22 after July 1, 2021; and
23 (b) Does not include any circumstance where an elected official participating in
24 the Kentucky Employees Retirement System or the County Employees
25 Retirement System takes a position of employment with a different employer
26 participating in any of the state-administered retirement systems.
27 (2) (a) For employees retiring from the Kentucky Employees Retirement System, the
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1 County Employees Retirement System, or the State Police Retirement System
2 on or after January 1, 2018, the systems shall, for each of the retiring
3 employee's last five (5) fiscal years of employment, identify any fiscal year in
4 which the creditable compensation increased at a rate of ten percent (10%) or
5 more annually over the immediately preceding fiscal year's creditable
6 compensation. The employee's creditable compensation in the fiscal year
7 immediately prior to the employee's last five (5) fiscal years of employment
8 shall be utilized to compare the initial fiscal year in the five (5) fiscal year
9 period.
10 (b) Except as limited or excluded by subsections (3) and (4) of this section, any
11 amount of increase in creditable compensation for a fiscal year identified
12 under paragraph (a) of this subsection that exceeds ten percent (10%) more
13 than the employee's creditable compensation from the immediately preceding
14 fiscal year shall not be included in the creditable compensation used to
15 calculate the retiring employee's monthly retirement allowance. If the
16 creditable compensation for a specific fiscal year identified under paragraph
17 (a) of this subsection as exceeding the ten percent (10%) increase limitation is
18 not used to calculate the retiring employee's monthly retirement allowance,
19 then no reduction in creditable compensation shall occur for that fiscal year.
20 (c) If the creditable compensation of the retiring employee is reduced as provided
21 by paragraph (b) of this subsection, the retirement systems:
22 1. Shall refund the employee contributions and interest attributable to the
23 reduction in creditable compensation; and
24 2. Shall not refund the employer contributions paid but shall utilize those
25 funds to pay down the unfunded liability of the pension fund in which
26 the retiring employee participated.
27 (3) (a) In order to ensure the prospective application of the limitations on increases in
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1 creditable compensation contained in subsection (2) of this section, only the
2 creditable compensation earned by the retiring employee on or after July 1,
3 2017, shall be subject to reduction under subsection (2) of this section.
4 Creditable compensation earned by the retiring employee prior to July 1,
5 2017, shall not be subject to reduction under subsection (2) of this section.
6 (b) If the reductions in creditable compensation during a retiring member's entire
7 last five (5) years of employment results in a reduction in his or her monthly
8 retirement allowance of less than twenty-five dollars ($25) per month or an
9 actuarially equivalent value under the various payment options, then no
10 reduction in creditable compensation or retirement allowances shall occur
11 under subsection (2) of this section.
12 (4) Subsection (2) of this section shall not apply to:
13 (a) A bona fide promotion or career advancement as defined by subsection (1) of
14 this section;
15 (b) A lump-sum payment for compensatory time paid to an employee upon
16 termination of employment;
17 (c) A lump-sum payment made pursuant to an alternate sick leave program under
18 KRS 78.616(5) that is paid to an employee upon termination of employment;
19 (d) Increases in creditable compensation in a fiscal year over the immediately
20 preceding fiscal year, where in the immediately preceding fiscal year the
21 employer reported the employee as being on leave without pay for any reason,
22 including but not limited to sick leave without pay, maternity leave, leave
23 authorized under the Family Medical Leave Act, and any period of time
24 where the employee received workers' compensation benefit payments that
25 were not reported to the plan as creditable compensation;
26 (e) Increases in creditable compensation directly attributable to an employee's
27 receipt of compensation for:
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1 1. Overtime hours worked while serving as a participating employee under
2 any state or federal grant, grant pass-through, or similar program that
3 requires overtime as a condition or necessity of the employer's receipt of
4 the grant; or
5 2. The first one hundred (100) hours of mandatory overtime hours that the
6 employee is individually required to work by the employer during a
7 fiscal year. This subparagraph shall not be construed to apply to
8 overtime hours voluntarily worked by the employee or in situations in
9 which the employee has the option to elect out of participation in
10 overtime hours. Any mandatory overtime hours exempt under this
11 subparagraph shall be in addition to any overtime hours otherwise
12 exempt under the provisions of this subsection; and
13 (f) Increases in creditable compensation directly attributable to an employee's
14 receipt of compensation for overtime performed during and as a result of a
15 state of emergency declared by:
16 1. The President of the United States or the Governor of the
17 Commonwealth of Kentucky; or
18 2. A local government in which the Governor authorizes mobilization of
19 the Kentucky National Guard pursuant to KRS 38.030 and 39A.950
20 during such time as the National Guard is mobilized.
21 (5) (a) For employees retiring on or after January 1, 2014, but prior to July 1, 2017,
22 the last participating employer shall be required to pay for any additional
23 actuarial costs resulting from annual increases in an employee's creditable
24 compensation greater than ten percent (10%) over the employee's last five (5)
25 fiscal years of employment that are not the direct result of a bona fide
26 promotion or career advancement. The cost shall be determined by the
27 retirement systems.
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1 (b) Lump-sum payments for compensatory time paid to an employee upon
2 termination of employment shall be exempt from this subsection.
3 (c) The Authority shall be required to answer inquiries from participating
4 employers regarding this subsection. Upon request of the employer prior to
5 the employee's change of position or hiring, the systems shall make a
6 determination that is binding to the systems as to whether or not a change of
7 position or hiring constitutes a bona fide promotion or career advancement.
8 (d) For any additional actuarial costs charged to the employer under this
9 subsection, the systems shall allow the employer to pay the costs without
10 interest over a period of one (1) year from the date of receipt of the employer's
11 final invoice.
12 (6) The Authority shall determine whether increases in creditable compensation during
13 the last five (5) fiscal years of employment prior to retirement constitute a bona fide
14 promotion or career advancement and may promulgate administrative regulations in
15 accordance with KRS Chapter 13A to administer this section. All state-
16 administered retirement systems shall cooperate to implement this section.
17 (7) Any employer who disagrees with a determination made by the system in
18 accordance with this section regarding whether an increase in compensation
19 constitutes a bona fide promotion or career advancement for purposes of subsection
20 (5) of this section may request a hearing and appeal the decision in accordance with
21 KRS 61.645(16) or 78.782(16).
22 (8) For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky
23 Retirement Systems and the County Employees Retirement System shall provide a
24 means for employers to separately report the specific exceptions provided in
25 subsection (4) of this section within the reporting system utilized by the employers
26 for making employer reports under KRS 16.645, 61.675, and 78.545. The Kentucky
27 Retirement Systems and the County Employees Retirement System shall
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1 continually provide communication, instructions, training, and educational
2 opportunities for employers regarding how to appropriately report exemptions
3 established by subsection (4) of this section.
4 (9) This section shall not apply to employees participating in the hybrid cash balance
5 plan as provided by KRS 16.583, 61.597, 78.5512, and 78.5516.
6 Section 2. The Kentucky Public Pensions Authority shall review the accounts of
7 members who had an effective retirement date that occurred on or after July 1, 2021, and
8 shall retroactively adjust recipient benefits accordingly to reflect the amendments to
9 subsection (1)(a)2. of Section 1 of this Act, including any benefits the recipient would
10 have received had the amendments to subsection (1)(a)2. of Section 1 of this Act been in
11 effect immediately prior to the member's effective retirement date.
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