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Member Pension Spiking Frequently Asked Questions

2017 Regular Session Kentucky General Assembly

Member Pension Spiking for Employees Retiring on or after January 1, 2018

During the 2017 regular session of the General Assembly, Senate Bill 104 was enacted creating new pension spiking rules for members retiring on or after January 1, 2018. For retirement dates of July 1, 2021 and after, the 10% cap on creditable compensation growth will not apply when it results in a benefit change of less than $25 per month. If there is a benefit change of $25 or more per month due to pension spiking, the member's creditable compensation will be reduced by the appropriate amount to meet the new $25 monthly threshold.

SB 104 creates new pension spiking rules for members retiring on or after 1/1/2018. While only considering creditable compensation earned on or after 7/1/2017, the new law reviews the last five (5) fiscal years of employment to determine if one or more spikes occurred. An increase in creditable compensation greater than 10% when compared to the prior fiscal year’s creditable compensation will not be used when calculating the member’s retirement benefit. KPPA will refund all employee contributions and interest attributable to the reduction in creditable compensation to the employer for disbursement to the member. KPPA will retain the employer contributions as required by this provision.

Yes, fiscal years prior to 7/1/2017 will be exempt from reduction.  Additional exemptions are as follows:

a)   An increase caused by a bona fide promotion or career advancement;
b)   An increase caused by a lump sum payout from compensatory time at termination only;
c)   An increase caused by a lump sum payout for alternate sick leave payments;
d)   Increases in years where the employee was on leave without pay in the prior fiscal year;
e)   Increases due to overtime work and pay required by a state or federal grant, grant pass-through or a similar program that requires overtime as a condition or necessity of the employer's receipt of the grant, or the first one hundred (100) hours of mandatory overtime that an employee is required to work by the employer during a fiscal year; and
f)   Increases due to overtime work and pay required by a state of emergency declared by the President of the United States or the Governor of the Commonwealth of Kentucky, or a local government-declared emergency in which the Governor authorizes the mobilization of the Kentucky National Guard.​ KPPA will not make this determination.​

SB 104 clarifies that existing pension spiking calculations will continue to apply for employees retiring through 6/30/2017. In those cases, it is the employer that is required to pay for the spike and there is no change to the employee’s creditable compensation. 

No, SB 104 specifically exempts participants in Tier 3 from pension spiking provisions.

No, lump sum payments for compensatory time at termination are listed in SB 104 as exempt from pension spiking.

 


No, lump sum payments for alternate sick leave are listed in SB 104 as exempt from pension spiking.

Yes, creditable compensation reported to KPPA by multiple employers is subject to the pension spiking statute. 

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