Kentucky Public Pensions Authority

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The Kentucky Public Pensions Authority
FormerlyKentucky Retirement System
IndustryPension fund
Websitekyret.ky.gov/Pages/index.aspx

The Kentucky Public Pensions Authority (KPPA), formerly known as The Kentucky Retirement Systems (KRS),[1] is the administrator of defined-benefit pension and insurance plans for most of Kentucky's state and county employees and retirees.[2][3][4][5] KPPA oversees Kentucky's three separate retirement systems: Kentucky Employee Retirement System (KERS), County Employee Retirement System (CERS) and State Police Retirement System (SPRS).[2][6] CERS and KERS are multiple-employer, cost-sharing defined-benefit pension plans with Non-Hazardous and Hazardous members.[2] SPRS is a single-employer, defined-benefit pension plan with Hazardous members. Each system covers regular full-time members employed by the participating agencies.[7] Kentucky's public employee pension system has been ranked one of the most underfunded public pension systems in the country.[8][9][10][11][12][13][14]

Membership[edit]

KPPA members include over 386,000 active, inactive and retired state and local government employees, state police officers, and non-teaching staff of local school boards and regional universities.[15][16][2]

Organization[edit]

KPPA is governed by a 8-member Board of Trustees consisting of the chairs of the KRS and CERS board, the chairs of their respective investment committees, an elected member from each board and an appointed member of each board.[17][2]

Funding[edit]

As of June 30, 2020, the KPPA total assets stood at $18.2 billion, composed of $12.7 billion in the pension funds and $5.5 billion in the insurance funds.[18][19] The total unfunded liabilities range from $40 billion to $60 billion, an amount that is four to six times the size of Kentucky's General Fund Budget.[9][20] As of 2021, the KPPA was only 33% funded across all its funds, and only 14% funded for its primary state government fund, making it one of the worst-funded pension plans in the U.S.[21][22][23]

Controversies[edit]

In December 2017 a lawsuit was filed in Franklin County KY Circuit Court by eight individual defined-benefit plan beneficiaries of KPPA (formerly known as KRS) who purported to sue derivatively on behalf of KRS, and as taxpayers on behalf of the Commonwealth of Kentucky.[24][25] The lawsuit sought monetary damages arising from allegations that defendant hedge fund managers KKR, Prisma Capital Partners, Blackstone Group and PAAMCO (PAAMCO), created and sold unsuitable, high-risk, high-fee hedge funds to KRS.[24][26] Other defendants in the suit include a number of former KRS trustees and officials, who are accused of fumbling the hedge fund investment decisions, as well as KRS’ investment consulting firm RVK (formally R.V. Kuhns and Associates)/[27] was also exposed for having encouraged similar decisions at the Pennsylvania State Pension and Retirement System (SERS). The State's Treasurer, Joe Torsella, revealed that RVK's recommendations contributed to an estimated $5.5 billion in waste. It was also reported that despite the 11-member board's awareness of the problem, they "quietly approved another 10-year investment plan, developed by RVK Inc., that would continue to focus on the alternative investments" that produced the waste. Finally, the KPPA's actuarial advisers are accused of providing the pension system's Board of Trustees with inaccurate information.[24][25]

On July 9, 2020, the Kentucky Supreme Court ruled the lawsuit should be dismissed because the public worker plaintiffs lacked standing to sue on behalf of KRS.[28][29] Shortly thereafter, the Kentucky Attorney General Daniel Cameron successfully revived and expanded the lawsuit joining as a plaintiff seeking damages on behalf of the Commonwealth of Kentucky.[29][30] On April 14, 2023, the Kentucky Court of Appeals affirmed the trial court's dismissal of the original complaint and vacated the order allowing the Kentucky attorney general to intervene.[31]

See also[edit]

Public employee pension plans in the United States

References[edit]

  1. ^ Cheves, John (April 7, 2021). "New look, same old debt: KY's state pension rebrands itself, as lawmakers ordered". Lexington Herald Leader. Retrieved July 13, 2021.
  2. ^ a b c d e "About KPPA". Kentucky Public Pensions Authority. Retrieved July 9, 2021.
  3. ^ "CHAPTER 61.525 Membership". Retrieved November 24, 2020.
  4. ^ Kozlowski, Rob (March 27, 2020). "Kentucky OKs bill to separate county pension plan administration from state system". Pensions&Investments. Retrieved July 12, 2021.
  5. ^ Sonka, Joe (May 14, 2021). "Long-awaited report on Kentucky pension system investments is in". The Courier Journal. Retrieved July 13, 2021.
  6. ^ Barnett, Chip (June 3, 2021). "S&P: Kentucky's pension funding ratios weak despite improvements". The Bond Buyer. Retrieved July 14, 2021.
  7. ^ "KRS Summary Financial Report 2019" (PDF). Retrieved November 24, 2020.
  8. ^ Suneson, Grant (December 11, 2020). "Retirement warning signs? Pension crisis hits states. Here's the biggest, smallest funding shortfalls". USA Today. Retrieved July 9, 2021.
  9. ^ a b "Pension Reform". Kentucky Chamber of Commerce. Retrieved July 9, 2021.
  10. ^ Pinchin, Karen (December 10, 2019). "As a New Governor Takes Office, Kentucky Pensions Still on the Brink". PBS Frontline. Retrieved July 9, 2021.
  11. ^ Burnham, Christopher (June 29, 2018). "Kentucky Retirement Systems: A Case Study Of Politicizing Pensions". Forbes. Retrieved July 13, 2021.
  12. ^ Bauer, Elizabeth (July 9, 2020). "Public Pensions Update: How Are The Bottom Four Responding To The Covid Recession?". Forbes. Retrieved July 13, 2021.
  13. ^ Mooney, Attracta (June 10, 2016). "Kentucky, home to the worst-funded pension plan in the US". Financial Times. Retrieved July 13, 2021.
  14. ^ Mennis, Greg (July 11, 2020). "The State Pension Funding Gap". PEW. Retrieved July 13, 2021.
  15. ^ "61.505 Kentucky Public Pensions Authority - Purpose". Kentucky Revised Statutes. Retrieved July 10, 2021.
  16. ^ "CHAPTER 61.515 - Retirement System Established". Retrieved November 24, 2020.
  17. ^ Kozlowski, Rob (April 16, 2020). "Kentucky governor signs bill to split oversight of state pension funds". Pensions&Investments. Retrieved July 10, 2021.
  18. ^ "KRS Finishes FY 2020 With Slight Gain, Beating Benchmarks". Retrieved November 24, 2020.
  19. ^ Katz, Michael (August 19, 2020). "Kentucky Retirement Systems Returns 1.2% for Fiscal 2020". Chief Investment Officer. Retrieved July 9, 2021.
  20. ^ Gaviria, Marcela (October 23, 2018). "The Pension Gamble". PBS Frontline. Retrieved July 13, 2021.
  21. ^ Marriner, Katie (June 29, 2021). "These public pension systems used to have too much money. Now they're in crisis. What happened?". MarketWatch. Retrieved July 9, 2021.
  22. ^ Riquier, Andrea (July 13, 2021). "He runs the worst-funded public pension in the country. Here's his 'good news' story". Market Watch. Retrieved July 14, 2021.
  23. ^ Cheves, John (September 21, 2021). "Kentucky pension systems expect to need $4.6 billion from next two-year state budget". Lexington Herald Leader. Retrieved October 21, 2021.
  24. ^ a b c "VERIFIED COMPLAINT" (PDF). WFLP.org. Retrieved July 10, 2021.
  25. ^ a b Loftus, Tom (December 27, 2017). "Lawsuit: Retirement systems gambled on hedge funds, concealed its financial mess". The Courier Journal. Retrieved July 10, 2021.
  26. ^ Cheves, John (April 23, 2021). "KY pension agency must release report on possible improper activities, judge orders". Lexington Herald Leader. Retrieved July 13, 2021.
  27. ^ RVK, Inc.
  28. ^ "Opinion of the Kentucky Supreme Court" (PDF). Kentucky Courts. July 9, 2020. Retrieved July 10, 2021.
  29. ^ a b Bennet, Jared (July 23, 2020). "Attorney General Revives Lawsuit Against State Pension Officials and Hedge Funds". Kentucky Center for Investigative Reporting. Retrieved July 10, 2021.
  30. ^ Cheves, John (July 23, 2020). "Cameron wants to join lawsuit over Kentucky pension system's 'secretive' hedge funds". Lexington Herald-Leader - MSN. Retrieved July 10, 2021.
  31. ^ Jones, Michael (April 27, 2023). "Kentucky Court of Appeals rules against attorney general in long-running pension case". Louisville Business First. Retrieved June 7, 2023.
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