Politics
3:25 pm
Wed June 25, 2014

KRS Chief: State Could Be Stuck with Paying $2.5 Billion in Unpaid Pension Liabilities

Kentucky lawmakers are mulling over ways to deal with a lawsuit between quasi-governmental agencies and their financial relationship to the beleaguered Kentucky Retirement System.

Last year, Seven Counties Services, a mental health nonprofit that contracts with state government, filed for bankruptcy over its pension debt. When a federal judge ruled last month that the nonprofit didn’t have to pay those obligations to the Kentucky Retirement System, KRS executive director Bill Thielen said his organization would appeal the decision.

If that effort fails, the remaining employers in the pension system could foot a $2.4 billion tab to cover the cost of the added liabilities. 

Thielen says he supports legislation like that crafted by Republican Sen. Chris McDaniel that would require groups like Seven Counties who voluntarily withdraw from the retirement system to pay off their pension obligations.

“They would only be able to withdraw having fully paid their obligation, and that’s what we believe should be the case, otherwise all the other participating employers are going to have to pick up the tab,” Thielen told lawmakers Wednesday.

McDaniel’s bill died in the House this year, but lawmakers say they’ll continue studying their options as the appeal in the case drags on for the next couple of years.