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Cash Balance Plan

​​​​The Cash Balance Plan is Tier Three within our defined benefit pension plan. This benefit tier is for members who began participation on or after January 1, 2014. A Cash Balance Plan is known as a hybrid plan because it has characteristics of both a defined benefit plan and a defined contribution plan.  A Cash Balance Plan resembles a defined contribution plan because it determines the value of benefits for each participant based on individual accounts. However, the assets of the plan remain in a single investment pool like a traditional defined benefit plan. A Cash Balance Plan resembles a defined benefit plan since it uses a specific formula to determine benefits. The Hybrid Cash Balance plan was established as part of Senate Bill 2, which was enacted by the Kentucky General Assembly during its 2013 Regular Session.


All regular full-time employees who began participation with KPPA on or after January 1, 2014 contribute to the Cash Balance Plan. Your participation in the plan is mandatory unless you are a non-participating employee. Employment classifications that are non-participating include part-time, seasonal, temporary, probationary (CERS only), interim, emergency, and independent contractors. 

How Does It Work? 

Members and employers contribute a specified amount into the member’s account. The account earns a guaranteed amount of interest at the end of each fiscal year. If the member has participated in the plan during the fiscal year, there may be an additional interest credit added to the member’s account depending on KPPA’s investment returns. All interest is paid on the preceding year’s balance so there is no interest paid in the member’s first year.

When a member is eligible to retire, the benefit is calculated based on the member’s accumulated account balance. A member earns service credit for each month they contribute to the Cash Balance Plan. Once a member obtains 60 months of service credit the member is considered vested. Being vested changes the level of benefits to which you are entitled.

Accounts Earn Interest and Grow 

Your account earns 4% interest annually on both the member contributions and the Employer Pay Credit balance. Interest is credited to your account each June 30, based on your account balance from the preceding June 30. New members do not see interest credited in their first year since there is no prior year balance. 

Over time, the value of your account can increase a great deal because of compounding interest. You can view your account balance online at

Upside Sharing ​​Interest Earned and Credited to
"Tier 3 Hybrid Cash Balance" Accounts

Upside Sharing Interest Earned and Credited to "Tier 3 Hybrid Cash Balance" Accounts
CERS Nonhazardous6.54%5.13%4.97%8.76%5.68%
CERS Hazardous6.75%5.34%5.15%8.90%5.79%
KERS Nonhazardous6.00%4.58%4.57%7.96%5.28%
KERS Hazardous6.65%5.21%5.07%8.74%5.70%

Examples of How Accounts Grow

The following examples are fictitious.  
  • Real world numbers may vary. Other factors not included here are: service purchased, pay raises, inflation, and market performance.    
  • Both examples are based on a yearly salary for $35,000 with only a Base Interest. No Upside Sharing Interest is included.  

If John is currently 65 years old and Nonhazardous (and he started work at 40 years old)....

Tier 3 How your account grows 1
YearMember ContributionMember InterestEmployer Pay CreditEmployer InterestAccumulated Account Balance as of 6/30

 If John is currently 45 years old and Hazardous (and he started work at 20 years old)....
Tier 3 How your account grows 2
YearMember ContributionMember InterestEmployer Pay CreditEmployer InterestAccumulated Account Balance as of 6/30

Am I Eligible for a Refund of My Account if I Quit My Job?

At the time of termination, the member is eligible to either take a refund of the accumulated account balance if vested (five or more years of service), or annuitize the account balance, if eligible for retirement. If the member terminates employment and requests a refund prior to vesting, the member is eligible only for the member’s contributions and associated interest, and forfeits the employer pay credit and associated interest. Learn more about refund of contributions.

Do Sick Leave and Compensatory Payments Enhance my Benefit?

Any accumulated sick leave, annual leave, or compensatory time payments earned by the employee will not be used in calculating retirement benefits.

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