Retaining and recruiting teachers for Kentucky classrooms won’t be easier after lawmakers this year reneged on a promise made in 2010. (Getty Images)
Kentucky teachers took an undeserved financial hit from the Kentucky legislature during the 2025 session.
For background, the “Shared Responsibility” law (House Bill 540) was passed in 2010. The Kentucky Teachers Retirement System (TRS) board and education community members, including active and retired teachers, school board members, superintendents and experts, collaborated to find a solution.
The bill established the TRS retiree health fund (health insurance trust), which exists independently from the Kentucky Teachers’ Retirement Fund. At the time, although suggested and requested due to a history of underfunding by the state, the legislature refused to include increased matching contributions by the state into the Kentucky Teachers’ Retirement Fund to begin addressing its much-publicized unfunded liability.
The funding structure of HB 540 required active teachers to pay 3.75% of their salary, retired teachers under the age of 65 to pay the equivalent of the monthly cost of Medicare Part B, and school districts to contribute 3% of their gross payroll to the health insurance trust.
Notably, HB 540 included a provision stating that once the health insurance fund achieved sufficient prefunding, as determined actuarially, the 3.75% contribution from active teachers shall be “decreased, suspended, or eliminated.” The same was true for the amount school systems paid in.
While receiving widespread praise for its collaborative development, the Shared Responsibility bill passed through the Kentucky House and Senate without any opposing votes. Gov. Steve Beshear signed it into law on April 13, 2010.
Overall, the bill was a significant step towards securing financial support for retired teachers’ health care. It reflected a commitment to the education community while relieving Kentucky taxpayers of a $5 billion liability.
Sounds good? Right? Not so fast. The 2025 Kentucky legislature put the brakes on the “shall, in an actuarially accountable manner, be either decreased, suspended, or eliminated” part related to active teachers’ and school systems’ contributions to the health insurance trust.
Now that the retiree health insurance trust is nearly 100% funded, lawmakers voted to renege on the deal that was made in 2010 by passing House Bill 694 (AN ACT relating to Teachers’ Retirement System benefit funding).
To paraphrase the new law, when the Teachers’ Retirement Fund and the health insurance trust are fully funded, the 3.75% presently going to the health insurance trust may be decreased, suspended, or eliminated. In addition, the school funding for the retiree health insurance trust will be diverted to the Teachers’ Retirement Fund.
According to the actuarial analysis of HB 694, the Teachers’ Retirement Fund will not be 100% funded until 2047. This means teachers will have to wait many more years than initially legislated to have a reduction in the 3.75% deducted from their paycheck. Heavy sigh.
Gov. Andy Beshear vetoed HB 694. In his veto message, he stated, “House Bill 694 breaks a promise made to teachers in 2010 and does so without even giving them an opportunity for input.” That’s right; the education community was left out of the bill-making process this time around.
Beshear went on to mention that teachers would “need to pay much longer than the law calls for” and that “breaking this promise is unfair to the teachers we rely on to guide our children and the future of the Commonwealth.”
Disappointingly, 67 members of the House and 29 members of the Senate voted to override Beshear’s veto, basically on partisan lines, with the overwhelming majority of the “yea” votes coming from Republicans.
No doubt, this legislation takes money right out of the pockets of hard-working teachers.
Like many others across Kentucky, teachers have children to raise, student loan obligations to meet, car and mortgage payments to make, utility bills to pay and groceries to buy, all on a limited budget. In addition, teachers purchase school supplies, necessities and extras for their classrooms.
The 3.75% deducted from Kentucky teachers’ paychecks equals approximately $1,400 to $2,800 annually. This amount adds up over time while straining teachers’ monthly budgets. This move does nothing to retain and recruit Kentucky teachers at a time when teachers are becoming harder to find.
It is the job of those in power in the legislature to fulfill their obligations to teachers. Transparent and authentic commitments supporting teachers that ensure fair compensation and benefits are vital in creating sustainable educational environments. Before passing legislation that hurts educators’ financial bottom line, lawmakers would be wise to keep in mind that our Kentucky public school teachers have the future of the commonwealth in their classrooms.