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Kentucky initiates pension reform

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April 15, 2013

Kentucky

By Matthew Schmidgall

FRANKFORT, Kentucky: On April 4, 2013, Steve Beshear, the Governor of Kentucky, signed into law the pension reforms passed by the Kentucky General Assembly on March 26, 2013. These reforms will require the state to fully fund its underfunded pension plan by fiscal year 2015, at a cost of $100 million a year, which will be obtained through a re-structuring of state income taxes. This is a significant change from the manner in which the pension programs have been funded in previous years, when often only half of the Actuarially Required Contribution, a time adjusted estimate of the amount required from the state to meet its pension obligations, would be contributed. This chronic level of underfunding led the rating agency Moody's Investors Service to list Kentucky as having one of the worst funded pension programs in the country, with the sixth highest unfunded pension liability in the United States.[1]

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