NOTE 9 – DEFINED BENEFIT PENSION PLANS (Continued)

Tier 1 Participation Prior to September 1, 2008Tier 2 Participation September 1, 2008 through December 31, 2013Tier 3 Participation January 1, 2014
Reduced Retirement BenefitAny age with 25 years of service. Age 55 with 5 years of service.Age 60 with 10 years of service. Excludes purchased service (exception: refunds, omitted, free military).No reduced retirement benefit.
Hazardous
Benefit FormulaFinal Compensation X BenefitFactor X Years of ServiceCash Balance Plan
Final CompensationHighest 3 fiscal years (must contain at least 24 months). Includes lump-sum compensation payments (before and at retirement).3 highest salaries; each year must contain 12 months. Lump-sum compensation payments (before and at retirement) are not to be included in creditable compensation.No Final Compensation
Benefit Factor2.49%10 years or less = 1.30%. Greater than 10 years, but no more than 20 years = 1.50%. Greater than 20 years, but no more than 26 years = 2.25%. Greater than 25 years = 2.50%.No benefit factor. A life annuity can be calculated in accordance with actuarial assumptions and methods adopted by the board based on member's accumulated account balance.
Cost of Living Adjustment (COLA)No COLA unless authorized by the Legislature. If authorized, the COLA is limited to 1.5%. This impacts all retirees regardless of Tier.
Unreduced Benefit RetirementAny age with 20 years of service. Age 55 with 60 months of service.Any age with 25 years of service. Age 60 with 60 months of service.Any age with 25 years of service. Age 60 with 60 months of service.
Reduced Benefit RetirementAge 50 with 15 years of service.Age 50 with 15 years of service.No reduced retirement benefit.

Contributions - Benefit and contribution rates are established by state statute. Per Kentucky Revised Statute 61.565(3) contribution requirements of the active employees and the participating organizations are established and may be amended by the KRS Board. For the fiscal year ended June 30, 2020, University non-hazardous and hazardous employees were required to contribute 5 percent of their annual covered salary for retirement benefits for the year ended June 30, 2020. Non-hazardous and hazardous employees with a participation date after September 1, 2008 were required to contribute an additional 1 percent of their covered salary for retiree healthcare benefits. The University was contractually required to contribute 49.47 percent (41.06 percent allocated to pension and 8.41 percent allocated to OPEB) of annual covered payroll for non-hazardous pay and 36.85 percent (34.39 percent allocated to pension and 2.46 percent allocated to OEPB) for hazardous pay to the pension plan for the year ended June 30, 2020. These amounts were

(Continued)

33.