Teachers Retirement System of the State of Kentucky

Teachers’ Retirement System of the State of Kentucky Budget Review Subcommittee on Personnel, Public Retirement and Finance Gary L. Harbin, CPA Feb. 27, 2020 Executive Secretary

2018 -20 Additional Funding Summary TRS Requested $1. 09 B 100% Approved $1. 09 B State paid nearly all contributions recommended by the actuary for FY 2017 & 2018.

Who Are TRS Members? 172 school districts 17 Department of Education agencies KCTCS Five universities § 95% of TRS members employed by non-university and benefit replaces Social Security § 5% employed by university and benefit supplements Social Security

Actuarial Status As of June 30, 2019 Dollars in billions Pension Assets Liabilities Unfunded Percent $ 20. 2 $ 34. 7 $ 14. 5 58. 1%

Investment Performance Retirement Annuity Trust Returns as of Dec. 31, 2019 (unaudited) Quarter FYTD Gross Benchmark Aon Index TRS Aon Rank Net 6. 92% 6. 06% 5% Top 2% 6. 84% 7. 69% 7. 11% N/A 7. 62% 1 -year 3 -year 21. 92% 21. 02% 17. 1% Top 4% 21. 57% 11. 27% 10. 76% 9. 6% Top 3% 10. 96% 5 -year 8. 25% 9. 51% 6. 26% 8. 22% 9. 3% N/A 7. 2% 8. 5% N/A Top 5% N/A 7. 98% 9. 27% 6. 06% 30 -year compounded gross return 8. 15% 10 -year 20 -year

Investment Performance Retirement Annuity Trust Since Great Recession TRS’s investment performance above the average pension plan from 2008 to 2019 resulted in an additional $3. 6 billion. Billion $ 15 12 9 6 3 0 TRS Average Pension

Importance of Investment Income Schedule of Funds Available for Retirement Benefits In billions Beginning Balance as of July 1, 1985 $ 1. 8 Member & Other Contributions Employer Contributions Investment Income Benefit Payments & Refunds Administrative Expenses 7. 6 14. 6 27. 5 (30. 9) (0. 2) Ending Balance as of June 30, 2019 $20. 4

2020 -22 Budget • For both years of the next biennium, the additional funding request is in line with recent requests. • Governor’s recommendation fully funds retired teachers’ pensions and the state’s share of the KEHP single premium cost for retirees. • Agency request contained optional line items. • A pension appropriation to show the cost of shortening amortization period, in response to a legislative request. • Non-single subsidy cost State paid nearly all contributions recommended by the actuary for FY 2017 & 2018.

2020 -22 Budget Summary Request for 2020 -2021: $730 million Excludes SEEK Includes $551. 1 million in additional pension funding Includes $61. 7 million for state’s share of KEHP single premium Request for 2021 -2022: $769. 7 million Excludes SEEK Includes $579. 2 million in additional funding Includes $68. 4 million for state’s share of KEHP single premium

TRS Health Insurance Trust Funded Status 100% 90% 80% 70% 60% 50% 46. 0% Shared Responsibility Becomes law 40% 36. 3% 30% 20% 10% 2. 4% 2. 9% 3. 5% 2007 2008 2009 7. 5% 8. 6% 9. 4% 2010 2011 2012 11. 7% 15. 9% 18. 1% 21. 9% 26. 7% 0% 2013 2014 2015 2016 2017 2018 2019

TRS Health Insurance Funding Sources 1. Current costs for over-65 coverage • Teachers contribute 3. 75% • School districts 3% • State contributes 0. 75% 2. Under-65 coverage costs • Retired teachers pay about $195 a month • State pays balance of about $515 a month

Our Members Come First! 800 -618 -1687 8 a. m. – 5 p. m. ET Monday – Friday info@trs. ky. gov https: //trs. ky. gov Protecting & Preserving Teachers’ Retirement Benefits