pensions

J. Tyler Franklin

The former chairman of the beleaguered Kentucky Retirement Systems is heading to court to challenge his removal by Republican Gov. Matt Bevin.

Thomas Elliott has sued Bevin for removing him as chairman of the Kentucky  Retirement Systems board of trustees. Bevin's attorneys say he has the authority to remove Elliott. But Elliott says his term is set by state law and cannot be altered by the governor. A hearing is scheduled for Tuesday at 1 p.m.

The lawsuit is one of several challenging Bevin's reorganization of state boards and commissions. Labor unions are challenging the makeup of the Workers Compensation Nominating Commission and Attorney General Andy Beshear is challenging Bevin's decision to replace the University of Louisville board of trustees.

The Kentucky Retirement System has unfunded liabilities of more than $19 billion.

Rebecca Schimmel

Miners in Kentucky, Ohio, and West Virginia who helped keep the country’s lights on are worried that their retirement benefits could go dark as a result of a wave of bankruptcies in the coal industry. They hope Congress will approve a bill called the Miner’s Protection Act to shore up the pensions and health benefits promised to union miners.

The bill has been bottled up in the Senate’s Finance Committee but Hill sources say Senate leaders have promised a committee vote before Congress breaks for the summer on July 15.

Joe Holland has been with the United Mine Workers of America for four decades. He worked 10 years as an underground miner for Peabody Energy in Muhlenberg County, in western Kentucky. Born in a company-owned house, Holland is a fourth generation coal miner. His grandmother kept two pictures on the mantle; Jesus and the UMWA’s legendary leader John L. Lewis.“Without Christ y’know they thought they was going to hell, and without John L. Lewis they was going to starve to death,” Holland said.

KRS

Kentucky Governor Matt Bevin used state police officers to prevent the ousted chairman of the retirement system board from participating in a meeting Thursday.

Governor Matt Bevin removed chairman Thomas Elliott from the board last month.

But Elliott had refused to vacate his seat, saying Bevin could not remove him before his term expires.

Elliott attended Thursday's board meeting, but sat in the audience while state police officers stood nearby.

Elliot said the governor's office told him he would be arrested and charged with disrupting a public meeting if he participated.

Bevin spokeswoman Amanda Stamper said Elliot was not threatened with arrest. She said he was reminded he is not a board member and would be disrupting the meeting if he tried to participate, which is a misdemeanor under state law.

KRS

The chairman of the Kentucky Retirement Systems Board of Trustees is presiding at a meeting in defiance of Gov. Matt Bevin’s order removing him from the board.

Thomas K. Elliott took his seat at the head of the board table at Thursday’s regularly-scheduled board meeting, a day after Bevin issued the executive order to oust him. The board was scheduled to elect its leaders, but delayed that vote until the next meeting.

KRS Executive Director William Thielen said Bevin does not have the authority to remove Elliott. Board members voted to request an attorney general’s opinion on whether Bevin exceeded his authority by removing Elliott.

In removing Elliott Wednesday, Bevin said KRS needs a “fresh start” and said the board was opposed to transparency under Elliott’s leadership. Elliott was reappointed to the board by former Democratic Governor Steve Beshear last year and his term does not expire until 2019.

Kentucky Retirement Systems is among the worst funded systems in the country. It has an unfunded liability of more than $19 billion.

Thinkstock

A bill that would have enacted transparency measures for Kentucky’s ailing pension systems failed to pass this legislative session, despite a last-minute push.

Some lawmakers say the systems need more scrutiny from the legislature. They’ve criticized hefty fees paid to investment managers and devotion to so-called “alternative investments,” which they’ve said are too risky.

Chris Tobe, a former Kentucky Retirement Systems trustee who has been critical of the system, said investment managers should compete to manage Kentucky’s pension assets in public view.

“We need to have open contracts and some kind of documentation and bidding process. Secret backroom deals is not good government,” he said.

The bill would have revealed how much and to whom the pension systems pay to invest pension funds. Kentucky law exempts the investments from open records laws.

LRC Public Information

Lawmakers’ state-run retirement funds would be subject to open records requests under a bill that a House committee approved Wednesday morning.

Legislators have drawn criticism because their pension system — the Kentucky Judicial Form Retirement System — is significantly better funded than the retirement funds for teachers, most state employees and state police.

The legislation would require state retirement systems to disclose pension payments to current and former members of the legislature.

Sen. Chris McDaniel, a Republican from Covington and sponsor of the bill, said lawmakers should open up their pensions to the public.

“Dedicated public servants, and our teachers, and our state police, and everyone else has a right to know — as do the taxpayers — whether we’ve got any kind of a conflict or whether we personally benefit,” he said.

The Kentucky Chamber of Commerce says citizens need to understand of  scope of the state’s public pension crisis. 

Governor Matt Bevin's proposed budget makes a down payment on what could be a 20 to 30-year effort. 

The $36 billion shortfall in Kentucky’s public pension plans is more than three-and-a-half times the total general fund tax money the state collected last year. 

Kentucky Chamber of Commerce President Dave Adkisson says it will take decades to fix the problem after years of neglect, but the effort must start in the current legislative session.  He adds that the drain on state coffers poses a threat to essential services.

Kentucky LRC

A top state pension executive told legislators on Wednesday that a bill requiring greater transparency of the pension systems for Kentucky’s public employees would be harmful to his agency.

Regardless, a Senate committee unanimously approved the bill.

The bill would make the pension systems for state workers, teachers and state officials subject to open records requests. Pension managers would also have to disclose investment holdings, fees and manager commissions.  Investment contracts would be subject to review by the state auditor and legislative committees.

State Sen. Joe Bowen, a Republican from Owensboro, said the changes have been demanded by Kentucky residents.

“They want accountability, they want transparency and they want us to have the capacity to be proactive on these challenges that we’re facing in today’s world, as opposed to being reactive,” Bowen said.

Flickr/Creative Commons/BES Photos

Foiled in state court, a Jefferson County Public Schools teacher filed a federal court suit Monday claiming the Kentucky Teachers’ Retirement System illegally raised teachers’ share of pension contributions to shore up a retirement plan that is only half-funded.

Randolph “Randy” Wieck, a history teacher at DuPont Manual High School, launched the legal battle last November by filing suit in Jefferson County Circuit Court. The case was dismissed with a recommendation that it be refiled in Franklin County, he said.

Instead, Wieck filed the lawsuit in U.S. District Court in Louisville. As before, Wieck is asking that the roughly 141,000 teachers and school system retirees in Kentucky be allowed to participate in the suit. He is joined in the suit by Manual English teacher Betsey Bell and retired Manual librarian and English teacher Jane Norman.

Kentucky’s active and retired teachers are apprehensive about the solvency of their state-funded retirement. As of its last audited annual financial report on June 30, 2014, KTRS was only 53.6 percent funded with $16.2 billion in assets and $30.2 billion in obligations. A bill calling for the sale of $3.3 billion in bonds, which would have raised the KTRS funding level to 66 percent, failed in the 2015 legislative session.

Kentucky LRC

Analysts say Kentucky will need to hire more state employees or have them pay more into the retirement system in order to reverse the state’s pension crisis, painting a grim portrait of Kentucky’s main public pension system.

Ryan Sullivan says the state will not be able to “invest its way out” of the pension crisis.

“The unfunded liability will actually increase for the first couple of years until salaries can grow fast enough to where this payment grows larger and actually starts to pay down this unfunded liability," Sullivan said.

State Sen. Joe Bowen, a Republican from Owensboro, says that there aren’t many solutions to the crisis.

“There’s obviously only two ways we can do that: employ a bunch more people or require our current employees to pay more,” Bowen said.

In order to remain financially solvent, the state’s annual contribution will have to increase from $560 million in 2015 to $1.4 billion in 2034.

In 2013, lawmakers passed pension reforms which moved new state workers onto 401(k)-style plans and tweaked the tax code to generate more money for the system.

But pension officials say the system still needs more money.

The state has hired another firm to conduct an actuarial audit of Kentucky Retirement Systems.

Kentucky’s teacher pension policies are receiving near-failing grades in a new report.

The National Council of Teacher Quality gives the pension plan a D-, and points out that 48-percent of the Kentucky Teacher Retirement System consists of unfunded liabilities.

Council Vice President Sandi Jacobs says the vast majority of taxpayer funds going into the system isn’t being invested in the future retirement of current employees.

“Only 23 cents on the dollar—less than the national average—is going towards the cost of the system. About 77 cents are going toward the debt.”

KTRS currently has over $13 billion in unfunded liabilities. The state budget passed by lawmakers last year provided about half the money needed to bring KTRS into the black.

Jacobs says her group also considers the system’s five-year vesting period a negative feature.

“If you leave before five years you’re not eligible for future benefits. That’s a long time to wait.”

You can see the NCTQ’s report card on Kentucky’s teacher pension policy here.

The LaRue County Republican Party has passed a resolution urging state lawmakers to fund and fix Kentucky’s underfunded pension system, which commands tens of billions of dollars worth of debt. The action is the latest example of growing statewide concern over the issue.

From a mental health nonprofit in Louisville, to a small northern Kentucky city, the LaRue County GOP is the latest in a line of concerned groups actively trying to get Frankfort to do something about the state’s pension system, which has been underfunded by the General Assembly for years, causing liabilities to swell and threatening their abilities to pay public employees.

“An overlooked, underappreciated major financial problem statewide in Kentucky,” said Gil Myers, the LaRue County GOP Secretary. “One that affects every resident, every hard working family, every business and farm, now and in the future.”

The resolution expresses support for a bipartisan task force to examine the issue, which was championed by GOP Floor Leader Rep. Jeff Hoover this year, but died in the Democratic- controlled House of Representatives.

New pension accounting standards could place Kentucky's teachers' retirement system among the worst-funded in the U.S.

The new standard from the Governmental Accounting Standards Board, set to go into effect this year, will take a more holistic approach to government pension accounting. As a result, the state will be required to provide a more accurate accounting of its various pensions' liabilities.

As a result, the new standards will place the funding ratio of the KTRS pension to about 40-percent funded, said Chris Tobe, a Democratic candidate for state treasurer and former Kentucky Retirement Systems board member. 

The current unfunded liability of the Kentucky Teachers Retirement System stands at 51.9 percent, which works out to about $14 billion in unfunded retirement moneys. Under the new federal standards, that liability will increase to about $22 billion, said KTRS legal counsel Beau Barnes.

A group of Louisville teachers plans to file a class-action lawsuit claiming the governor and Kentucky General Assembly violated a contractual obligation by deliberately underfunding the teachers' retirement fund by billions of dollars.

Lebanon attorney Theodore Lavit said the lawsuit will name Governor Steve Beshear, Senate President Robert Stivers and House Speaker Greg Stumbo as defendants in the suit. The potential plaintiffs will seek $11 billion  to restore money to the underfunded Kentucky Teachers Retirement System, which covers about 140,000 teachers across the state, according to sources familiar with the prospective case.

"Some experts believe that in four, maybe five years, at the present funding rate, that it'll be impossible to recapture what's needed," Lavit told Kentucky Public Radio. "There are quite a few teachers upset about the present state of affairs."

Currently, the KTRS pension is funded at about 50 percent, placing it well below what experts say is a pension's proper balance of its assets to its unfunded liabilities—the difference between how much money it has on-hand versus how much it has to pay out in benefits.

Put another way: It's the difference between how much money a household has in its bank account versus how much it owes on its credit card bills. KTRS has about $13.9 billion in such unfunded liabilities—a number that is expected to swell exponentially to about $23 billion in 2015 when new federal accounting standards kick in, according to the most recent numbers.

Chris Tobe is a man who is currently playing the role of “bearer of bad news.”

He worked as a trustee with the Kentucky Retirement Systems from 2008 to 2012, where he got an up-close-and-personal look at how the state’s pension systems were being underfunded. Tobe is also the author of the book Kentucky Fried Pensions, and he makes presentations around the state detailing the crisis facing the commonwealth’s pension programs.

While Gov. Steve Beshear and state lawmakers from both parties have hailed pension reform efforts passed in 2013, Tobe says it’s a drop in the bucket compared to what is needed to fix the underfunding issue.

Compared to the rest of the nation, Tobe believes “Kentucky is probably second worst to Illinois” when it comes to the health of its public pension programs.

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