Budget & Taxes (Pensions)

Appropriate $43,827,000 from the budget reserve trust fund account in fiscal year 2026-2027 to the Kentucky Public Pensions Authority to fund one-time supplemental payments on July 1, 2026, to recipients of a retirement allowance who have been retired for at least 12 months from the Kentucky Employees Retirement System (KERS) and the State Police Retirement System (SPRS); specify that the one-time supplemental payment shall be equal to the monthly payment received by the recipient in the month of June 2026, not to exceed $1,000; APPROPRIATION; EMERGENCY.

Amend KRS 161.540 to specify payment obligations for the inclusion of annual leave payments in a retiring member's pension benefits from the Teachers' Retirement System (TRS) by requiring the state to pay the actuarial costs for annual leave accrued through July 31, 2026, and the last employer pay the actuarial costs for annual leave accrued on or after August 1, 2026.

HB 183 increases Kentucky's tax exclusion for retirement income from $31,110 to $41,110 annually for tax years beginning January 1, 2027. It directly affects Kentucky residents receiving retirement distributions from pension plans, annuities, or retirement accounts by allowing more income to be tax-free. The key change raises the threshold at which these distributions become subject to state income tax. This policy adjustment applies automatically to qualifying retirement income without requiring additional filings or eligibility checks.

Appropriate $221.4 million, $18.7 million, and $16 million in fiscal year 2026-2027 for the Kentucky Employees Retirement System (KERS) nonhazardous pension fund, the KERS hazardous pension fund, and the State Police Retirement System pension fund, respectively, to provide a one-time 2% COLA effective July 1, 2026; APPROPRIATION; EMERGENCY.

Appropriate $96 million from the Kentucky Permanent Pension Fund in fiscal year 2026-2027 to the Kentucky Public Pensions Authority to fund 1-time supplemental payments on July 1, 2026, to recipients of a retirement allowance who have been retired for at least 12 months from the Kentucky Employees Retirement System (KERS) and the State Police Retirement System (SPRS); allow the Board of Trustees of the County Employees Retirement System to, by board decision, provide a one-time supplemental payment to recipients of a retirement allowance who have been retired at least 12 months by increasing employer contribution rates over a one-year or two-year period; specify that the 1-time supplemental payment shall be equal to the monthly payment received by the recipient in the month of June 2026; APPROPRIATION; EMERGENCY.