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Kan. House panel ends push for 401(k)-style plan

By JOHN HANNA

AP Political Writer

TOPEKA -- A proposal for issuing $1.5 billion in bonds to boost the long-term health of Kansas' public pension system advanced Thursday in the state Legislature, but Republican lawmakers who want to put new government employees into a 401(k)-style plan abandoned an effort to pass such a bill this year.

The GOP-controlled House Pensions and Benefits Committee approved a bill authorizing the bonds on a 7-6 vote, sending it to the entire House for debate. But on a voice vote, it tabled a separate measure to start the 401(k)-style plan for state and local government workers hired after 2014, as well as a separate, non-traditional plan for new teachers.

The measures followed two years' worth of legislation overhauling the retirement system for teachers and state and local government employees. The committee faced skepticism from retiree groups and public employee unions that lawmakers needed to consider additional changes this year.

The Kansas Public Employees Retirement System projects that previous changes -- which include boosting state contributions and setting aside state casino profits to pensions -- would eliminate a projected $9.3 billion gap between revenues and benefits promised to workers by 2033. But many GOP lawmakers believe such a gap will occur again if the state isn't more aggressive in moving away from traditional plans that guarantee benefits upfront, based on a worker's salary and years of service.

"They look at it and say, 'Why would you ever want to put the state in that position?"' said committee Chairman Steve Johnson, an Assaria Republican.

The bill authorizing bonds is designed to give KPERS a quick infusion of cash, so that the percentage of its obligations covered by its assets, now 53 percent, would jump to 61 percent in 2015 and grow more quickly than it would under current law. Also, the state wouldn't have to boost its annual contributions to KPERS as aggressively.

Both Republicans and Democrats were split over how much financial risk the move involves and whether it does enough to improve the retirement system's financial footing.

Putting new government workers into a 401(k)-style plan would base their retirement benefits on investment earnings. In their new plan, teachers would contribute part of their salaries to tax-free annuities paying out once they retired, with multiple options for the riskiness and potential benefits from their investments.

Public employee and retiree groups believe all of the potential options will result in less secure pensions because of the potential volatility of financial markets.

Lisa Ochs, president of the Kansas chapter of the American Federation of Teachers, said legislators have studied such changes in depth and concluded previously that they come with costs while sacrificing benefits.

"We have an obligation to each other in a civilized society to make sure that we're doing what we can to make sure that our public servants have a retirement they can depend on, have a dignified retirement and that we're not creating generations of indigent elderly," she said.

Most committee members said they needed more time to consider the bill. Lawmakers expect to wrap up most of their work for the year on April 5, and tabling the pensions measure means they won't consider it until next year.

"We just don't have the time to really spend another month, basically, to come up with the best plan," said Rep. Jim Howell, a Derby Republican and the committee's vice chairman. "I do agree that this is the right thing to do today, but we've got to get back into it."

Republican legislators and GOP Gov. Sam Brownback's administration worked quietly for weeks on the measure for a 401(k)-style plan. They unveiled it with a big splash this week in a hearing featuring Nobel Prize winner Robert Merton and Bill Bradley, the former Democratic presidential candidate and U.S. senator from New Jersey who also used to be a New York Knicks standout.

Both Bradley and Merton, a finance professor at the Massachusetts Institute of Technology, advise an Austin, Texas, company that manages private-sector 401(k) plans. The measure called for having private companies manage the new plans.

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The pension bonding bill is HB 2403.

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Online:

Kansas Legislature: http://www.kslegislature.org

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Follow John Hanna on Twitter at www.twitter.com/apjdhanna