What is the 2010 Shared Responsibility Law? This law established a new investment fund to be managed by the Teacher’s Retirement System (TRS). Active teachers are required to pay 3.75 percent of their salary, retired teachers under the age of 65 are required to pay the equivalent of the monthly cost of Medicare Part B, and school districts are required to contribute 3 percent of their gross payroll to the fund. The Commonwealth’s contribution to the Medical Insurance Fund is 0.75 percent of payroll annually. The Commonwealth’s contribution to the plan flows through TRS to the Kentucky Employee Health Plan (KEHP) to pay for the single subsidy of retired teachers under the age of 65.
What was the purpose of the law? In 2010, the education community called upon our elected officials in Frankfort to come up with a solution that would ease the burden of healthcare liabilities on Kentucky’s taxpayers and ensure affordable access to healthcare for current and future retired teachers.
The law has been a success. Thanks to strong investment performance by TRS, lower than expected medical inflation, the extension of the Federal Government’s Medicare Advantage Plan, and 10 years of uninterrupted economic growth, the Medical Insurance Fund has grown to over 1.3 billion and is now 61.7 percent funded.
In 2021, the KY General Assembly neglected its financial obligation to the Medical Insurance Fund as required by HB540, the 2010 Shared Responsibility Law. When the medical insurance fund was established, the following assumptions were made:
• 30-year repayment schedule
• Annualized eight percent investment return
• Medical inflation trend – 7.25 percent pre-Medicare and 5.25 percent Medicare.
Current teachers, retired teachers, school districts, and the Commonwealth are required to pay a fixed payment to the Medical Insurance Fund. Original assumptions were based on a 30-year repayment, however, payments were fixed by design to shore up unfunded healthcare liabilities as soon as possible.
Education pay cuts extended. While working-class teachers continue to sacrifice their pay, the General Assembly opted to forgo its contribution. Frankfort politicians commissioned an audit on only the State’s contributions to the Medical Insurance Fund. Politicians claim that because the fund is on track to be fully funded before the original 30-year assumption, that it has been “overfunding” the Medical Insurance Fund.
If a true audit was performed, it would find that all parties – including current and retired teachers, school districts – have “overfunded” the insurance fund. Kentucky’s failure to contribute to the Medical Insurance Fund ensures:
After failing to contribute its required contribution in 2021, members of the KRTA legislative advocacy team worked diligently to educate Kentucky House and Senate Members about the importance of consistent funding and how the fund is critical to affordable access to health care for thousands of retired teachers. As a result, the Kentucky General Assembly fully funded the Medical Insurance Fund, in accordance with the 2010 Shared Responsibility Plan for the next two years.