Historical Kansas pension information

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The historical Kansas pension information below applies to prior calendar years. The tabs below may contain information from several different fiscal years; for example, the tab labeled "As published 2015" contains information from fiscal years 2013 and 2012 (the most recent data available at the time of initial publication). For more current information regarding Kansas' pension system, click here.

As published 2016

Kansas information (2015)

Total contributions: $1,181,468,000

Employee contributions: $401,212,000

Government contributions: $780,256,000

Total payments: $1,756,164,000

Total cash and investment holdings: $18,291,114,000

Number of state and local pension systems: 4

Active membership: 157,483

Inactive membership: 47,953

Key terms

Actuarial value of assets (AVA) • Unfunded actuarial accrued liability (UAAL) • Annual required contribution (ARC) • Discount rate • Funded ratio • Rate of return • Active member • Inactive member • OPEB

Hover over the above terms for definitions.

Note: This page utilizes information from a variety of sources. The information presented on this page reflects the most recent data available as of August 2016.

Kansas public pensions are the state mechanism by which state and many local government employees in Kansas receive retirement benefits.

According to the United States Census Bureau, there were four public pension systems in Kansas as of 2015. Of these, four were state-level programs, while data for locally administered systems was unavailable. As of fiscal year 2015, membership in Kansas' various pension systems totaled 205,436. Of these, 157,483 were active members.

HIGHLIGHTS

In fiscal year 2015, the most recent year for which information is available, total contributions of $1.2 billion were made to Kansas' state and local pension systems. Of this amount, $401.2 million came from employees.

In fiscal year 2015, Kansas' state and local pension systems made payments totaling $1.8 billion.

As of fiscal year 2015, Kansas' state and local pension systems held $18.3 billion in total cash and investment holdings.

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

State pension systems can vary in their organization, management, and accounting principles, making them difficult to compare. The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2015.

General information

See also: Pension data, U.S. Census

According to the U.S. Census Bureau, Kansas had four state pension plans as of 2015:

1. Kansas Public Employee Retirement System
2. Kansas Retirement System for Judges
3. Kansas State Elected Officials Retirement System
4. Kansas Police and Fire Retirement System

Data for locally administered systems was unavailable.

The table below provides general pension system information for Kansas and surrounding states.

General pension system information, 2015
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Kansas	4	N/A	205,436	157,483	76.66%	47,953	23.34%
Missouri	12	78	388,454	288,204	74.19%	100,250	25.81%
Nebraska	5	26	105,866	75,456	71.28%	30,410	28.72%
Oklahoma	7	14	189,703	160,292	84.50%	29,411	15.50%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Contributions

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2015, the most recent year for which information is available, total contributions of $1.2 billion were made to Kansas' state and local pension systems. Of this amount, $401.2 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Kansas and surrounding states in fiscal year 2015.

Pension contributions, fiscal year 2015 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Kansas	$1,181,468	$401,212	33.96%	$780,256	66.04%	$740,133
Missouri	$3,049,574	$966,078	31.68%	$2,083,496	68.32%	$4,090,531
Nebraska	$747,612	$297,019	39.73%	$450,593	60.27%	$785,570
Oklahoma	$1,768,454	$473,684	26.79%	$1,294,770	73.21%	$1,019,033
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Payments

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2015, Kansas' state and local pension systems made payments totaling $1.8 billion. The table below provides pension payment information for Kansas and surrounding states in fiscal year 2015. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Pension payments, fiscal year 2015 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Kansas	$1,756,164	$1,610,783	$67,203	$78,177
Missouri	$5,336,873	$4,585,567	$113,833	$637,474
Nebraska	$955,070	$850,318	$89,160	$15,591
Oklahoma	$2,304,808	$2,172,346	$56,459	$76,004
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Other post-employment benefits

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Kansas was reported to have about $278 million in unfunded liabilities for OPEBs. This was equal to about 0.06 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Kansas and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Kansas	$48	0.06%
Missouri	$2,671	0.54%
Nebraska	$0	0.00%
Oklahoma	$4	0.00%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Cash and investment holdings

See also: Pension data, U.S. Census

Investments are a crucial part of the pension process. The goal is that, by investing pension contributions, the pensioner will receive more money when he or she retires than he or she and the employer were able to contribute. These investments can come in the form of cash investments, short-term investments, securities, or other investments. Cash investments are usually low-risk, short-term investments that have a lower rate of return than other types of investments. Other short-term investments are riskier than cash investments, but have the potential for greater returns. Securities can refer to stocks, bonds, or other types of financial certificates that hold some sort of financial value. As the values of these securities change, they can be traded to make a profit. While there are other applications of securities investments, this represents one of the most common practices.

As of fiscal year 2015, Kansas' state and local pension systems held $18.3 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Kansas and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Total cash and investment holdings, fiscal year 2015 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Kansas	$18,291,114	$209,701	$15,964,937	$2,116,476
Missouri	$72,371,692	$3,877,135	$56,595,843	$11,898,714
Nebraska	$15,734,220	$331,825	$7,066,264	$8,336,131
Oklahoma	$30,936,744	$842,958	$28,435,116	$1,658,670
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year), and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets), and its five-year rate of return was 7.53 percent.

The table below presents the information collected by MPPI for Kansas and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, Kansas had the second lowest total net assets.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as a percentage of total net assets	Five-year rate of return
Kansas	2012	$13,468,852,806	$13,105,811,851	$42,225,662	0.31%	1.80%
Missouri	2012	$43,421,121,472	$43,142,177,174	$407,748,659	0.94%	1.60%
Nebraska	2011	$8,203,974,912	$9,617,727,238	$2,221,958	0.03%	NA
Oklahoma	2012; 2011	$17,208,667,211	$18,979,092,225	$45,745,016	0.27%	2.75%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure." Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

As published 2015

Public pensions in Kansas

General information (2013)

Total contributions: $969,933,000

Employee contributions: $321,481,000

Government contributions: $648,452,000

Total payments: $1,549,576,000

Total cash and investment holdings: $15,918,274,000

Number of state and local pension systems: 8 (1 state system, 7 local systems)

Active membership: 159,068

Inactive membership: 43,479

Pension health (2012)

Assets: $13,278,490,000

Actuarial accrued liability (AAL): $23,531,423,000

Unfunded actuarial accrued liability (UAAL): $10,252,933,000

Funded ratio: 56.4%

UAAL per capita: $3,650

Public pensions in the states

Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming

Public pensions • State public pension plans • Kansas state budget and finances

Note: This page utilizes information from a variety of sources. As such, the currency of the information varies somewhat. The information presented on this page reflects the most recent data available as of March 2015.

Kansas public pensions are the state mechanism by which state and many local government employees in Kansas receive retirement benefits.

According to the United States Census Bureau, there were eight public pension systems in Kansas as of 2013. Of these, one was a state-level program, while the remaining seven were administered at the local level. As of 2013, membership in Kansas' various pension systems totaled 202,547. Of these, 159,068 were active members.

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

HIGHLIGHTS

Between fiscal years 2008 and 2012, the funded ratio of Kansas' state-administered pension plans decreased from 58.8 percent to 56.4 percent. The state paid 67 percent of its annual required contribution, and for fiscal year 2012 the pension system's unfunded accrued liability totaled $10.2 billion. This amounted to $3,650 in unfunded liabilities per capita.

Background

The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2013. Also included are comparative data from three different reports, which looked at the states' Comprehensive Annual Financial Reports (CAFRs).

General information

See also: Pension data, U.S. Census

According to the U.S. Census, Kansas had one state pension plan as of 2013:

1. Kansas Public Employee Retirement System

In addition to the aforementioned state-level pension systems, there were seven locally administered pension systems in Kansas.

The table below provides general pension system information for Kansas and surrounding states.

General pension system information, 2013
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Kansas	1	7	202,547	159,068	78.53%	43,479	21.47%
Iowa	4	5	243,064	169,987	69.94%	73,077	30.06%
Minnesota	8	137	524,577	290,747	55.43%	233,831	44.58%
Missouri	10	56	330,705	266,395	80.55%	64,310	19.45%
Nebraska	5	8	99,724	71,322	71.52%	28,402	28.48%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Contributions

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2013, total contributions of nearly $970 million were made to Kansas' state and local pension systems. Of this amount, $321.5 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Kansas and surrounding states in fiscal year 2013.

Pension contributions, fiscal year 2013 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Kansas	$969,933	$321,481	33.14%	$648,452	66.86%	$1,995,590
Iowa	$1,136,626	$447,065	39.33%	$689,561	60.67%	$2,723,164
Minnesota	$1,863,559	$849,422	45.58%	$1,014,137	54.42%	$8,124,504
Missouri	$2,665,322	$907,805	34.06%	$1,757,518	65.94%	$9,005,066
Nebraska	$665,669	$275,362	41.37%	$390,307	58.63%	$1,464,704
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Payments

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2013, Kansas' state and local pension systems made payments totaling $1.5 billion. The table below provides pension payment information for Kansas and surrounding states in fiscal year 2013. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Pension payments, fiscal year 2013 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Kansas	$1,549,576	$1,431,143	$58,393	$60,040
Iowa	$1,951,837	$1,841,468	$43,842	$66,527
Minnesota	$4,012,990	$3,876,893	$69,626	$66,471
Missouri	$4,781,070	$4,003,664	$101,554	$675,855
Nebraska	$837,538	$765,354	$30,773	$41,411
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Cash and investment holdings

See also: Pension data, U.S. Census

As of fiscal year 2013, Kansas' state and local pension systems held $15.9 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Kansas and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Total cash and investment holdings, fiscal year 2013 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Kansas	$15,918,274	$284,744	$13,579,191	$2,054,339
Iowa	$27,525,334	$814,794	$24,006,383	$2,704,157
Minnesota	$53,136,559	$1,302,010	$43,933,076	$7,901,473
Missouri	$58,748,518	$3,131,578	$45,429,297	$10,187,644
Nebraska	$12,748,146	$310,731	$11,811,507	$625,908
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Pension health

Pension health is a term used to describe the overall state of pension systems. It can be difficult to gauge pension health in each state, but many studies use calculations to determine the average liabilities, unfunded liabilities, funded ratio and other data. Most experts believe that pension systems need to be funded at least 80 percent to be considered healthy. This information is then used to provide a snapshot of the state's overall pension health. This section provides information from three studies regarding the health of pensions in Kansas and neighboring states. They found the following:

• According to the Pew Charitable Trusts, Kansas paid 67 percent of its required contribution and its funded ratio was only 56 percent in fiscal year 2012.
• According to Morningstar, the state had a per capita pension debt of $3,650 and a funded ratio of 56.4 percent in fiscal year 2012.
• According to State Budget Solutions, which assumed a lower rate of return, Kansas had a per capita pension debt of $12,762 and a funded ratio of 28 percent in fiscal year 2013.

Pew research

See also: Pew Charitable Trusts pensions study, 2014

According to a 2014 report by the Pew Charitable Trusts, “many states are seeing their pension debt continue to increase, despite reform efforts, because of missed contributions and the continued impact of investment losses.” The funding gap between what state pension systems have promised in benefits (liabilities) and current funding (assets) increased by $158 billion from 2010 to 2012 (14 percent), leaving state-run retirement systems with $915 billion in unfunded liabilities. Only 15 states made at least 95 percent of the annual required contributions (ARCs) for their pensions between 2010 and 2012; the aggregate shortfall in funding for all state plans was $21 billion. Data on these state pensions come from the Comprehensive Annual Financial Reports (CAFRs) that each state’s pension plan prepared for fiscal year 2012; these reports include actuarial valuations based on “the expected rate of return on investments and estimates of employee life spans, retirement ages, salary growth, retention rates, and other demographic characteristics.”

All dollar amounts displayed should be multiplied by 1,000,000 (e.g., $240,000 is equal to $240,000,000,000).

Pension health metrics from the Pew Charitable Trusts report, 2010-2012 (dollars in millions)
State	2012			Funded ratio			Percent of ARC paid
	Liability	Unfunded	ARC	2010	2011	2012	2010	2011	2012
Kansas	$23,531	$10,253	$843	62%	59%	56%	72%	74%	67%
Iowa	$30,097	$6,156	$593	81%	80%	80%	89%	82%	97%
Minnesota	$62,720	$15,609	$1,160	80%	79%	75%	65%	84%	81%
Missouri	$56,986	$12,523	$1,295	77%	82%	78%	89%	93%	96%
Nebraska	$11,484	$2,426	$249	84%	82%	79%	100%	91%	91%
Totals in the U.S.	$3,298,643	$914,653	$87,213	75%	74%	72%	78%	77%	77%
Source: The Pew Charitable Trusts, "The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow"

Morningstar report

See also: Pension data, 2013 Morningstar report

In 2013, independent investment research firm Morningstar released "The State of State Pension Plans 2013," a report detailing various metrics of pension system health in all 50 states. Morningstar found a $1.2 trillion gap in 2012 for the largest 100 U.S. public pension plans (according to the actuarial firm Milliman). Based on two key drivers in Morningstar’s analysis—the funded ratio and the unfunded actuarial accrued liability (UAAL) per capita—the fiscal solvency and management of these plans varied greatly. Overall, the firm found that "more than half of all states fall below Morningstar’s fiscally sound threshold of a 70 percent funded ratio" and all state plans combined were "72.6 percent funded with a UAAL per capita of roughly $2,600.”

According to Morningstar's research, Kansas' state pension system was funded at a rate of 56.4 percent in fiscal year 2012. The table below provides state pension system health metrics for Kansas and surrounding states in fiscal year 2012. Figures in the columns labeled "Assets," "AAL," and "UAAL" are rendered in thousands of dollars (for example, $2,400,000 translates to $2,400,000,000). Figures in the remaining columns have not been abbreviated. To view the full report, click here.

Pension health metrics from the Morningstar report, fiscal year 2012
State	Assets	Liabilities (AAL)	Unfunded liabilities (UAAL)	Funded ratio	Unfunded liabilities per capita
Kansas	$13,278,490	$23,531,423	$10,252,933	56.4%	$3,650
Iowa	$23,940,276	$30,096,586	$6,156,310	79.5%	$2,041
Minnesota	$28,188,567	$37,594,728	$9,406,161	75%	$3,197
Missouri	$38,543,470	$50,101,293	$11,557,824	76.9%	$1,952
Nebraska	$8,777,117	$11,186,879	$2,409,761	78.5%	$1,339
Totals in the U.S.	$2,157,578,916	$2,979,267,860	$821,688,945	72.40%	N/A
Source: Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013

State Budget Solutions report

See also: Pension data, State Budget Solutions report

State Budget Solutions is "a nonpartisan, nonprofit, national public policy organization with the mission to change the way state and local governments do business." It should be noted that although the organization is technically nonpartisan, its ideology and mission have conservative leanings. In November 2014, the organization released a research report that used a fair market valuation based on a discount rate of 2.743 percent to determine the unfunded liabilities of public pension plans. The group concluded that "state public pension plans were underfunded by $4.7 trillion in 2014, up from $4.1 trillion in 2013. Overall, the combined plans' funded status ... dipped 3 percentage points to 36 percent. Split among all Americans, the unfunded liability [was] over $15,000 per person."

According to the State Budget Solutions report, Kansas' pension plans were funded at a rate of 28 percent. To read the full report, click here.

Note that all dollar amounts displayed (excluding those under the "Unfunded liability per capita" column) should be multiplied by 1,000 (e.g., $240,000 is equal to $240,000,000).

Pension health metrics from the State Budget Solutions report, fiscal year 2013 (dollars in thousands)
State	Assets	Market liability*	Funding ratio	Unfunded liability	Unfunded liability per capita	Unfunded liability as % of 2013 gross state product
Kansas	$14,562,765	$51,494,605	28%	$36,931,840	$12,762	26%
Iowa	$27,018,839	$66,592,672	41%	$39,573,833	$12,807	24%
Minnesota	$48,822,058	$140,704,151	35%	$91,882,093	$16,952	29%
Missouri	$50,188,100	$135,964,067	37%	$85,775,967	$14,192	31%
Nebraska	$9,581,947	$25,257,965	38%	$15,676,018	$8,387	14%
Totals in the U.S.	$2,679,831,466	$7,416,319,293	36%	$4,736,487,827	$15,052	29%
Source: State Budget Solutions, "Promises Made', Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion"

Other factors

Rate of return

According to a 2012 analysis by the Pew Center for the States, most state pension plans assumed an 8 percent rate of return on investments at that time. Proponents argued that an 8 percent rate of return would bear out over the long-term (15-30 years). Critics asserted that this assumption was unrealistic, citing changing market conditions and lower investment returns across the board in preceding years.

Assuming a lower rate of return to predict investment earnings increases current plan liabilities, thereby lowering the percent funded ratio and requiring increased employer contributions (ARCs). This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities. For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion. Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.

Financial crisis

In the wake of the 2008 recession, proponents of a lower assumed rate of return argued that the standard 8 percent assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Jeffrey Friedman, a senior market strategist at MF Global, said, "To target 8 percent means some aggressive trading. Ten-year Treasury [bonds] are yielding around 2 percent, economists say we are headed for a double-dip, and house prices aren't getting back to 2007 levels for the next decade, maybe.".

Advocates of the 8 percent return rate argued that the dip following the 2008 financial crisis did not prove that there was a long-term downward trend in investment returns. According to Chris Hoene, executive director of the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."

The National Association of State Retirement Administrators researched the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20- and 25-year periods ending in 2013 and found it was 7.9 percent over the 20-year period, and exceeded 8 percent for the 1-, 3- and 25-year periods. It is important to note that the NASRA data reported the median returns, which means that median annualized returns of investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.

Studies and reports

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year), and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets), and its five-year rate of return was 7.53 percent.

The table below presents the information collected by MPPI for Kansas and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as a percentage of total net assets	Five-year rate of return
Kansas	2012	$13,468,852,806	$13,105,811,851	$42,225,662	0.31%	1.80%
Iowa	2012	$23,082,133,000	$23,243,541,000	$50,174,760	0.22%	3.18%
Minnesota	2012	$53,069,265,000	$52,887,392,000	$64,886,000	0.12%	2.30%
Missouri	2012	$43,421,121,472	$43,142,177,174	$407,748,659	0.94%	1.60%
Nebraska	2011	$8,203,974,912	$9,617,727,238	$2,221,958	0.03%	NA
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure." Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

Other post-employment benefits

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Kansas was reported to have about $278 million in unfunded liabilities for OPEBs. This was equal to about 0.06 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Kansas and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Kansas	$278	0.06%
Iowa	$526	0.11%
Minnesota	$652	0.13%
Missouri	$2,671	0.54%
Nebraska	$0	0.00%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Public pensions in 2012

The data in the table below were collected from Kansas' 2012 Actuarial Valuation Report, which measured fund status as of December 31, 2012. Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds. The Kansas Public Employee Retirement System (KPERS) Valuation Reports for 2010, 2011, and 2012 were produced by Cavanaugh MacDonald Consulting, LLC, a Georgia-based firm. The columns for "SBS figure" refer to market liability calculations of the fund by the nonprofit organization State Budget Solutions. This analysis used a rate of return of 3.225 percent, based upon the 15-year Treasury bond yield. The organization called this a "risk-free" rate of return, which they said would make it easier for states to hit their pension requirements in the future. Beginning in 2006, all private sector corporate pension plans incorporated market costs into their funding schemes.

Basic pension plan information -- Kansas Public Employee Retirement System (KPERS)
Plans	Current value	Percentage funded		Unfunded liabilities		Membership
		State figure	SBS figure	State figure	SBS figure
Kansas Public Employees Retirement System**	$11,400,000,000	55 percent		$9,400,000,000		148,608 active members
Kansas Police and Fireman's Plan	$1,716,000,000	66.5 percent		$866,000,000		7,187 active members
Judicial Retirement Plan	$127,000,000	81.4 percent		$29,000,000		261 active members
TOTALS	$13,278,490,000	56 percent	29 percent	$10,252,933,000	$32,889,201,000	156,053 active members
**There are three sub-plans that comprise the Kansas Public Employees Retirement System. For specific details on those plans, see the table below.

Kansas Public Employees Retirement System -- Sub-plans
Sub-plan**	Current Value	Percentage funded	Unfunded liabilities	Membership
State Employees Retirement Fund	$2,724,000,000	67.8 percent	$1,292,000,000	23,826 active members
Teachers Plan Fund	$6,220,000,000	49.4 percent	$6,366,000,000	85,428 active members
Local Retirement Plan	$2,491,000,000	59.5 percent	$1,699,000,000	39,351 active members
TOTALS	$11,400,000,000	55 percent	$9,400,000,000	148,608 active members
**These three sub-plans comprise the Kansas Public Employees Retirement System.

The percent funded figure was calculated by comparing the current actuarial value of the fund and the total liabilities. The current actuarial value was generated with the assumed rate of return of 8 percent. While a percent funded ratio of 80 percent is commonly cited by institutions such as the Government Accountability Office (GAO) and Pew Research Center as the threshold for a "healthy" pension fund, the American Academy of Actuaries suggested that all pension systems "should have a strategy in place to attain or maintain a funded status of 100 percent or greater."

Annual Required Contribution

According to the 2009 and 2012 Valuation Reports, in the nine years from fiscal year 2005 to fiscal year 2013, the ARC grew from $381.8 million to $819.3 million, while the state's actual contributions grew from $261.9 million to $614.5 million. Over that period, the state contributed only 69.1 percent of the ARC.

Schedule of employer contributions
Fiscal Year	Annual Required Contribution	Actual Contribution	Percent Contributed
2005	$381,791,085	$261,908,684	68.6%
2006	$471,424,006	$298,882,820	63.4%
2007	$531,292,151	$339,495,685	63.9%
2008	$607,662,300	$395,588,157	65.1%
2009	$660,833,664	$449,366,892	68.0%
2010	$682,062,413	$491,767,000	72.1%
2011	$709,964,322	$526,083,563	74.1%
2012	$843,361,836	$568,425,877	67.4%
2013	$819,325,098	$614,493,824	75.0%
Total, 2005-2013	5,707,716,875	$3,946,012,501	69.1%

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014. As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants were instructed to use an actuarially determined contribution or a statutory contribution for reporting purposes.

Public pensions in 2011

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.54 percent for Kansas) instead of the state reported assumed rates of return (8 percent for Kansas).

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 (Nebraska) percent to 241 (Illinois) percent of governmental revenues in fiscal year 2011.

The adjusted net pension liability for Kansas' pension system in fiscal year 2011 was ranked 42nd. The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Alabama
	Governmental revenue*	Personal income	State GDP	Per capita
State findings	23.1 percent	2.4 percent	2.2 percent	$988
National ranking	40th	40th	40th	41st
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.

Historical pension plan data

According to estimates from the Center for State and Local Government Excellence, in the 11 years between 2001 and 2012 the funding level for all KPERS plans fell from 85.0 percent to 56.7 percent. Between 2007 and 2012, the five plans managed by KPERS gained more than $4.5 billion in liabilities, but lost more than $154 million in value. This poor fund performance and management increased the collected unfunded liability by more than $4.7 billion, reducing the funded ratio of the plans by 14 percentage points.

Historical pension plan data
Year	Value of Assets	Accrued Liability	Unfunded Liability	Funded Ratio
2004	$10,971,427,000	$15,714,092,000	$4,742,666,000	70%
2005	$11,339,293,000	$16,491,762,000	$5,152,469,000	69%
2006	$12,189,197,000	$17,552,791,000	$5,363,593,000	69%
2007	$13,433,115,000	$18,984,915,000	$5,551,800,000	71%
2008	$11,827,619,000	$20,106,787,000	$8,279,168,000	59%
2009	$13,461,221,000	$21,138,206,000	$7,676,985,000	64%
2010	$13,589,658,000	$21,853,783,000	$8,264,125,000	62%
2011	$13,379,020,000	$22,607,170,000	$9,228,150,000	59%
2012	$13,278,490,000	$23,531,423,000	$10,252,933,000	56%
Change from 2004-2012	$2,307,063,000	$7,817,331,000	$5,510,268,000	-14%

Reforms

Enacted reforms

2013

HB 2213: On June 7, 2013, Governor Sam Brownback signed into law HB 2113. While merely technical changes were made to KPERS, more substantive changes were made to the Judges and Police and Fire plans. Pension payments were calculated by a formula that uses the retiree's final average salary (usually the average of the retiree's final three years of employment), his or her years of service, and a service multiplier (a percentage multiplied by years of service, usually between 1.5 percent and 2.5 percent). For Police and Fire plan members, the plan had previously capped annual pension benefits at 80 percent of final average salary, but HB 2213 increased the cap to 90 percent. The employee contribution rate was raised from 7.0 percent to 7.15 percent. Also, employees would be allowed to contribute a lump sum before or on their retirement date to increase their annual pension benefit upon retirement. A final change applied to both Judges and Police and Fire plans. If the retiree were to divorce after retirement, the court could order the cancellation of the retiree's joint annuitant option. Designating a joint annuitant reduced a retiree's annual benefit, but allowed for all or a portion of benefits to continue to the retiree's surviving spouse upon the retiree's death.

HB 2333: HB 2333 was set in motion due to the first primary component of HB 2194 (see below), which established a study commission to examine possible pension reforms. In order for the rest of HB 2194 to become active, the findings of the KPERS Study commission were required to be introduced as bills in both houses of the Kansas State Legislature and voted upon by each house.

Following the recommendations of the KPERS Study Commission, Governor Sam Brownback signed HB 2333 into law on June 1, 2012. Effective January 1, 2015, Tier 2 joined Tier 1 and was closed to new members, replaced by a Tier 3 plan. This cash-balance plan had the following key characteristics:

• Each employee would have an individual account.
• Employees would contribute 6 percent of their salary and employers would contribute between 3 percent and 6 percent, depending on the employee's years of service.
• KPERS would continue to handle the investment of all accounts. Employees would have no say in how funds were invested.
• Employees were guaranteed 5.25 percent returns on the investments. If investment returns made it possible, the employee would receive an additional contribution.
• Upon retirement, account balances would be annuitized, but employees could elect to withdraw up to 30 percent of their balance in a lump sum.

HB 2461: On April 12, 2013, Governor Sam Brownback signed into law HB 2461. This law allowed for up to 15 percent of the KPERS investment portfolio to be put into "alternative investments, such as "private equity, private credit, hedge funds, infrastructure [and] commodities." Additionally, the law required that the KPERS Board of Trustees study the impact of the alternative investments and submit a report to the Joint Committee on Pensions, Investments and Benefits on the impact of alternative investments on fund performance.

2012

HB 2460: On March 9, 2012, Governor Sam Brownback signed into law HB 2460, which mainly included technical changes to conform state laws regulating KPERS to IRS code.

2011

HB 2194: On June 1, 2011, Governor Sam Brownback signed HB 2194. This legislation ushered in several changes to KPERS benefits and funding. First, the law established the KPERS Study Commission, dedicated to studying and proposing alternative retirement plans. The Commission's recommendations must be introduced as legislation in both the Kansas House of Representatives and the Kansas State Senate. No other provisions of the bill could become active until both houses of the Kansas State Legislature voted on the Commission's recommendations.

Kansas had previously capped the employer contribution rate paid into the pension funds at 0.6 percent. Annual Required Contributions are calculated annually and they are a sum of two different calculations. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. This cap on annual contributions had prevented jurisdictions from paying the amount actuarially required to maintain responsible funding levels, and therefore contributed to the poor overall funding of pension systems in Kansas. The second major component of HB 2194 doubled the allowed contribution rate to 1.2 percent by FY2017 (January 1, 2017, for political subdivisions participating in the system) to allow for better appropriate pension funding.

The third key part of the HB 2194 modifications was a set of benefit options given to pension fund members. Tier 1 pension members (employees hired before July 1, 2009) would have two options. The first option would include an increased employee contribution from 4.0 percent to 6.0 percent and an increased service multiplier from 1.75 percent to 1.85 percent for subsequent years. For an employee who contributed to the plan for 15 years before the change and 10 years after, retiring with a $50,000 salary, this change would mean a $500 (2.2 percent) annual increase in pension payments in exchange for an additional 2 percent contribution in annual salary for the years following the pension change. The second option would include freezing the employee contribution rate at 4.0 percent and reducing the service multiplier for subsequent years from 1.75 percent to 1.4 percent. For an employee who contributed to the plan for 15 years before the change and 10 years after, retiring with a $50,000 salary, this change would mean a $1,750 (8.7 percent) annual decrease in pension payment in exchange for maintaining a 4 percent contribution in annual salary.

Tier 2 pension members (employees hired after July 1, 2009) also had two options. The first option would include freezing the employee contribution rate at 6.0 percent and eliminating the annual post-retirement cost-of-living adjustment (COLA) meant to increase pension income, since inflation and other factors increase the cost of living over the course of retirement. The second option would include reducing the future service multiplier from 1.75 percent to 1.4 percent while retaining the COLA. As COLAs fluctuate from year to year, calculating the concrete cost of either option is complex.

The final major component of the legislation directed 80 percent of the proceeds from the sale of surplus state property into KPERS in an effort to improve funding levels.

Proposed reforms

2013

HB 2403: On March 18, 2013, the House Committee on Appropriations introduced HB 2403, which would have issued $1.5 billion in pension obligation bonds to cover part of the KPERS unfunded liability. The Senate Committee on Ways and Means recommended the bill be passed by the full chamber on April 5, 2013.

HB 2301: On February 12, 2013, the House Committee on Pensions and Benefits introduced HB 2301. This bill would have reduced the guaranteed 5.25 percent returns on the investments for Tier 3 retirees enacted in HB 2333 to 5.0 percent.

2012

SB 259: On January 9, 2012, Kansas House Minority Leader Paul Davis proposed SB 259, dedicating revenues from state-owned casinos to pensions for teachers and government workers as part of a broader bill that aimed to bolster the long-term financial health of the state's retirement system. The idea had bipartisan support and the backing of Republican Gov. Sam Brownback. The state had already committed $10.5 million a year in casino revenues through 2021 to boost state universities' engineering programs. Davis' proposal, embraced by the House, would have dedicated 75 percent of the remaining revenues to KPERS, starting in July 2013. There were no solid estimates of how much that would be, but Davis predicted it could be several billion dollars over the next 20 years. For the fiscal year beginning July 1, 2013, the casinos were expected to generate $80 million in revenues for the state, but that figure was expected to climb. The bill died in conference on June 1, 2012, as the conference committee could not reconcile the different versions of the bill passed by the House and the Senate.

See also

• Public pensions in the United States
• Kansas state budget and finances
• Tax policy in Kansas
• Pension statistics
• Public pension health by state
• Public pensions

External links

• Pension Tsunami
• Pension Calculator from Public Sector Inc.
• Center for Retirement Research at Boston College, "How did state/local plans get so underfunded?"
• Kansas Public Employees Retirement System Annual Report (2012)

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