1. Kentucky Teachers’ Retirement System March 17, 2010 Information for Kentucky Educational Development Corporation Gary L. Harbin, CPA Executive Secretary

2. Millions Primary Funding for Medical Insurance Fund $ 125m $ 62m $ 73m $ 29m $ 139m $ 134m $ 335m 1998-991999-002000-012001-022002-032003-042004-052005-062006-072007-082008-092009-10 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 State Match Equals member contribution Redirected Retirement Contributions Redirected Contributions to be Repaid Member Contribution ¾ of 1% of member salary $ 562m ~ Kentucky Teachers’ Retirement System ~ - $ 6.0m - $ 14.0m - $ 12.0m - $ 9.0m Contributions Repaid by Commonwealth =$20.0=$48.0=$61.0=$119.0 $ 897m - $41m = $ 856m Less payments of $ 41m

3. Chart 1 for Discussion of Funding of Retiree Health Care * Current annual cost of retiree health care includes both the supplement paid directly by KTRS for members and the required Medicare Part B premiums paid directly by members age 65+ House Bill 1 - Active Teachers +1% for new hires after June 30, 2008 $0.9 m These charts show two opposite ends of the health care funding spectrum. They are for discussion purposes only. They are not proposed as potential solutions. The KTRS actuary is working on a range of alternative options for the active members, retirees and constituency groups to consider. Any solution would be phased in over a period of four to six years in the near future and would require legislative action. LEGEND FOR CHART 1 & CHART 2 Funding needed for retiree health care Amount needed to cover short-fall Not contributing to retiree health care Base funding required by statute System generated funding Directly paid by retirees age 65+ Added cost of teachers working longer Cost shifted directly to retirees

4. These charts show two opposite ends of the health care funding spectrum. They are for discussion purposes only. They are not proposed as potential solutions. The KTRS actuary is working on a range of alternative options for the active members, retirees and constituency groups to consider. Any solution would be phased in over a period of four to six years in the near future and would require legislative action. Chart 2 for Discussion of Funding of Retiree Health Care LEGEND FOR CHART 1 & CHART 2 Funding needed for retiree health care Amount needed to cover short-fall Not contributing to retiree health care Base funding required by statute System generated funding Directly paid by retirees age 65+ Added cost of teachers working longer Cost shifted directly to retirees House Bill 1 - Active Teachers +1% for new hires after June 30, 2008 $0.9 m Indirect Impact

5. Education Community’s Long Term Plan of Shared Responsibility for Funding Retired Teachers’ Health Care Medical Insurance Fund FY 2010-11FY 2011-12 Projected covered payroll (000,000s) $ 3,452.0 $ 3,556.0 Active Teachers FY 2010-11FY 2011-12FY 2012-13FY 2013-14FY 2014-15FY 2015-16FY 2016-17 Currently at.75% (1.75% hired on or after July 1, 2008) Rates will match for FY 20130.75% 25.9 26.7 Increase medical contribution (Note: 1% increase is less than 1 months premium)0.25%0.50%1.00%1.50%2.25%3.00% 8.6 17.8 1.00%1.25%1.75%2.25%3.00%3.75% Retired Teachers Retirees under Medicare eligible age estimated monthly cost CY 2010CY 2011CY 2012CY 2013CY 2014CY 2015CY 2016 16,600 16,400 110.50 121.00 131.00 141.00 150.00 158.00 166.00 Pay equivalent to the Medicare Part B Premium paid by retirees age 65+ phase in starting July 1, 2010 37.00 81.00 131.00 141.00 150.00 158.00 166.00 11.8 20.9 Employers School districts and other employers FY 2010-11FY 2011-12FY 2012-13FY 2013-14FY 2014-15FY 2015-16 Phase into paying a medical contribution for retirees0.25%0.50%1.00%1.50%2.25%3.00% 8.6 17.8 State Pick up net health care cost for new retirees under Medicare eligible age CY 2010CY 2011CY 2012CY 2013CY 2014CY 2015CY 2016 1,800 3,600 Current KEHP premium and future estimated premium 589.14 645.00 700.00 753.00 802.00 846.00 888.00 Less projected Medicare equivalent premiums paid by retirees 37.00 81.00 131.00 141.00 150.00 158.00 166.00 Net cost for State per new retiree starting July 1, 2010 552.14 564.00 569.00 612.00 652.00 688.00 722.00 12.1 24.5 Amount State redirects to fund retiree health care to be repaid over 10 years at 7.5% 128.0 88.0 $ 169.1 $ 169.0

6. Our Members Come First! Reach us at... 1.800.618.1687 502.848.8500 www.ktrs.ky.gov of the State of Kentucky Teachers’ Retirement System Teachers’ Retirement System of the State of Kentucky Protecting & Preserving Teachers’ Retirement Benefits