Kentucky’s health departments have another year to figure out if their workers will stay in the state retirement system or exit, following the passage of Gov. Matt Bevin’s pension bill on Wednesday. But the decision won’t be an easy one, and it may not even be feasible for many health departments to leave the system.
For years county health department workers got a pension — a guaranteed benefit retirement account. Employees hired since 2014 have already been moved into 401k-type plans. And now older workers are at risk of having their pension benefits frozen if the health departments they work for choose to exit the pension system under Bevin’s bill.
Health departments might be inclined to do that in order to reduce their pension costs. They currently pay the equivalent of 49 percent of the salaries of employees to the pension system. But that was set to skyrocket to 84 percent of the salaries this month.
Now, that big increase has been pushed off for another year. Health departments can continue to pay the lower rate in the future if they decide to exit the pension system and pay a lump sum or make slowly increasing payments over the next 30 years.
Health departments could allow current workers to stay in the pension system and put new employees into a 401k, but will receive a discount from the state if they move all workers into 401ks.
Traditionally an employer puts money into a 401k for workers, but unlike a pension which is typically guaranteed throughout the employee’s life, a 401k is a set pot of money that’s dependent on the stock market and eventually runs out. For decades, many private employers have stopped offering pensions because of the costs.
Allison Adams, the president of the Kentucky Public Health Association and director at the Buffalo Trace District Health Department, said she’s relieved health departments have another year to figure out what’s financially feasible.
“We just needed one more year to really understand our resources and make sure that we had the right staffing and to meet this higher costs for our pension,” Adams said.
But health departments also might not have the money to exit the system and move employees to 401ks, according to Scott Lockard, the director of the Kentucky River District Health Department in southeast Kentucky.
“I’m not aware of any health department that can afford to get out under the lump sum deal, paying it all up front,” Lockard said.
He also said taking the 30-year option might not be possible. That’s because his district, for instance, mainly relies on grants to keep programs running. Paying off a pension over a period of years might be considered debt, which grants won’t pay for. There don’t seem to be any good options.
“If we don’t receive some kind of relief, then we would have health departments that would go bankrupt,” Lockard said. “And we would have employees that would be losing their jobs anyway and getting pushed out of the system because our agencies cannot afford to keep the doors open.”
But Lockard and the other agencies haven’t run the numbers yet, and there are still details to be ironed out. In the meantime, he said he’s held off on filling positions left open by workers who are leaving or retiring. He also recently laid off a nurse that worked at the district’s home health agency because there was a drop in patients.
“Previously if we’d been in solid financial footing, I would have waited a couple months — three, four months — to see if caseload would have went back up,” Lockard said. “But, you know, we just don’t have that luxury.”
Lockard said remaining nurses are picking up additional home health patients. If more patients sign up for services he might hire that nurse back. He said his district has also stopped providing some services for expectant mothers. But he’s keeping family planning services for teenagers.
“My concern about family planning services, if we get out altogether, is young teenagers who are reluctant to go to their primary care provider for family planning,” will not get access to birth control supplies, pap smears and counseling to keep teenagers from becoming parents, Lockard said.
There is some hope, however, that there could be new revenue to help health departments with financial resources. Just this week legislators announced a bill that will tax e-cigarettes and vaping devices, which currently don’t have an excise tax in Kentucky. Part of that new revenue, Lockard said, could go to public health department’s pension expenses.
Capitol Reporter Ryland Barton contributed to this story.