Payout data obtained from the Kansas Public Employees Retirement System for 2014 shows there at least 1,477 state and local government retirees who will collect more than $1 million in taxpayer-funded pension benefits in their first twenty years of retirement. This same analysis last year found 1,229 pension ‘millionaires.’ Kansas Policy Institute collects the data annually and makes it available to the public at KansasOpenGov.org.
Twenty-one retirees will collect more than $2 million over their first twenty years of retirement. Retirees can elect to take a one-time lump sum payment upon retirement and receive reduced annual payments thereafter. KPERS retirees receive benefits for life and those payments are exempt from state income taxes, although retirees did pay income tax on their personal contributions to the plan; employer contributions and the earnings on all contributions are never subject to state income tax.
There certainly is a discussion of fairness to be had about LLCs not being taxed on pass through income, but if ‘fairness’ is the issue, then all fairness issues should be on the table. State and local government pensions have been exempt for decades but private sector retiree pensions and 401(k) payments are fully taxable. Even if taxable, government retirees receive benefits multiple times greater than those of the private sector. Fairness aside, the latest KPERS valuation shows an unfunded liability of $9.8 billion. The real unfunded liability could approach $15 billion if calculated on a more realistic rate of investment return.”
Some may think that a 2012 reform putting new hires in a cash-balance plan took care of the problem, but it didn’t even come close. Burgeoning pension costs will increasingly crowd out spending on other services until real reforms are implemented for current and future employees. Another recession like 2008 could even jeopardize payments to existing retirees.
The Legislature will eventually have to stand up to the government unions and other special interests to deal with the serious pension crisis in Kansas and Kansas Policy Institute will be ready to help. We’re developing options to deal with the funding and the fairness issues in ways that will reduce the long term cost to taxpayers and still provide a very good retirement benefit for employees.
