HOUSE BILL 1

MAJOR LEGISLATIVE CHANGES

TO THE KENTUCKY RETIREMENT SYSTEMS,

INCLUDING

REEMPLOYMENT AFTER RETIREMENT

On June 27, 2008, Gov. Steve Beshear signed House Bill 1, Kentucky’s pension reform legislation into law. This legislation makes significant changes to state retirement laws in many areas affecting local governments. This brief discussion attempts to focus on changes in the law with respect to the reemployment of those employees who previously retired from state or local government.

The Kentucky Retirement Systems (KRS) has prepared a pamphlet outlining the significant changes found in House Bill 1. The publication, entitled 2008 Legislative Changes, House Bill 1: Pension Reform appears on the KRS website at the following web address: http://www.kyret.com/Employers/2008SessionChangesEmployers.pdf. While this publication provides important guidance for local governments, it is very important that an interpretation of the reemployment provisions of House Bill 1 be received from the retirement system, prior to making the final decision to hire a state or local government retiree.

Here are some of the important changes in the law to keep in mind.

A THREE MONTH BREAK IN SERVICE IS REQUIRED IN MOST REEMPLOYMENT SITUATIONS: Generally speaking, after Sept.1, 2008, the new law requires a three month break in service prior to rehiring a retired member of the Kentucky Employees Retirement System (KERS), the County Employees Retirement System (CERS) or the State Police Retirement System (SPRS). This break in service applies whether or not the employee is returning to a regular full time position or to a seasonal, part-time, temporary or interim position.

A ONE MONTH BREAK IN SERVICE IS REQUIRED FOR REEMPLOYMENT OF CERTAIN HAZARDOUS DUTY POSITIONS: Recognizing the need for employers to be able to recruit qualified personnel for hazardous duty positions, the new law provides for a one month break in service for an employee retiring from a full time hazardous duty position and returning to a participating hazardous duty position. (KRS should be contacted before making the determination that an employee qualifies for the one month break in service as additional special rules may apply.)

A BONA FIDE SEPARATION FROM SERVICE IS REQUIRED: In virtually all cases where a retiree returns to employment in a regular full-time position with an agency participating in KRS, the agency and the retiree must certify under penalty of perjury that there was no prearranged agreement to hire the employee prior to his or her retirement. This certification must be made on KRS Form 6751, “Member and Employer Certification Regarding Reemployment” at the time of reemployment.

If an employee is returning to a non-participating position, (i.e. seasonal, part-time, temporary or interim) a prearranged agreement may or may not be prohibited. If the employee is returning to the “same employer” then a prearranged agreement is prohibited. If however, the employee is returning to a different employer, then the prearranged agreement is not prohibited. (KRS should be contacted to determine who constitutes the “same employer,” whether a prearranged agreement is prohibited, and whether KRS Form 6751 must be completed. A retiree from the County Employees Retirement System, who after initial retirement is hired by the county from which the member retired, shall be considered to have been hired by the same employer. This would also include being hired in any office or department within that same county from which the employee retired.)

Failure to abide by the appropriate break in service requirements will result in the employee’s retirement being voided and all previous benefits being repaid to KRS. The employee will then continue to contribute to the appropriate retirement system.

EMPLOYERS MUST MAKE EMPLOYER CONTRIBUTIONS TO KRS. If a retiree returns to a full time position covered by KRS after Sept. 1, 2008, employer contributions will be made to the retirement system; however, no additional service credit or retirement benefits will accrue to the employee for the period of reemployment.

HEALTH INSURANCE REQUIREMENTS UNDER THE NEW LAW:

If a retiree began participating in KRS prior to Sept. 1, 2008, is reemployed on or after that date in a participating position, and has elected health insurance coverage through KRS, the employer will be required to reimburse KRS for the contribution made for single coverage health insurance for the retiree.

NOTIFICATION OF KRS IS REQUIRED PRIOR TO REEMPLOYMENT: It is important to know that state law requires that the retiree and employer notify the systems if the retiree is going to accept employment with an agency participating in KRS, including the acceptance of employment in a non-participating position or as an independent contractor.

The changes to Kentucky’s retirement law found in House Bill 1 are comprehensive and far reaching. It is impossible to provide an analysis of the provisions of House Bill 1, in this limited format, that will answer all the questions that have arisen. The KRS website, www.kyret.com, contains valuable information for employers and employees regarding the interpretation of the new law. It is important that local officials contact the retirement system concerning the interpretation of House Bill 1, especially as it relates to the hiring of employees that have previously retired from state or local government.