S&P: Kentucky’s pension funding ratios weak despite improvements

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202106031046SM______BNDBUYER_00000179-ce04-d125-a17f-ce353e9b0000_110.1

Excerpt:

Kentucky has taken action to shore up its pension system, but it?s going to take time to reverse the adverse effects of past funding shortfalls, according to S&P Global Ratings.

Kentucky has one of the poorest funded pension systems among all U.S. states, with an aggregate funded ratio of 44% as of fiscal 2019, S&P said. The state?s general obligations are rated A by S&P with a stable outlook.

The state?s Public Pensions Authority is responsible for the Kentucky Employees Retirement System (KERS) and State Police Retirement System (SPRS) while counties and cities are responsible for the County Employees Retirement System (CERS). The Teachers Retirement System is a seperate system with its own board.

The funded ratios for the systems are 14.01% for the KERS non-hazardous and 55.18% for the KERS hazardous, 58.27% for the TRS, 28.02% for the SPRS and 47.81% for CERS non-hazardous and 44.11% for the CERS hazardous.

Author(s): Chip Barnett

Publication Date: 3 June 2021

Publication Site: Fidelity Fixed Income

Decisions Finally Coming in Long-Running Battle with Hedge Fund Titans in Kentucky Pension Case, Mayberry v. KKR

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Excerpt:

You can find all the major filings at Kentucky Pension Case. The two below are over the most heated current issue: whether the Tier 3 Plaintiffs can move forward. Judge Shepherd said effectively that he needed to see what the attorney general planned to do before he decided that.

Given that the justification for the attorney general repeated extension requests was to wrap his mind around the case, and the Calcaterra report looked like Kentucky Retirement Systems hiring an outside firm to brief the attorney general, the new filing is entirely old hat. It has not only has no new arguments, it is even more openly cribbed from older plaintiff filings that the original attorney general intervention, where his office at least re-wrote a fair bit of the material into white shoe tall building lawyer style. Here, nearly all of the filing is a cut and paste, including the charts.

Author(s): Yves Smith

Publication Date: 4 June 2021

Publication Site: naked capitalism

Alternative Investment Looting Is Destroying Pension Funds

Link: https://www.forbes.com/sites/edwardsiedle/2021/05/21/alternative-investment-looting-is-destroying-pension-funds/?sh=1e71137979c1

Excerpt:

Forensic investigations in Rhode Island, North Carolina, Kentucky and Ohio reveal that gambling 30 percent or more on high-cost, high-risk, secretive alternative investments has exposed pensions to massively greater risks and reduced net returns. The time is ripe for legislators, regulators, and law enforcement to act to stop the looting.

A recent New York Times NYT -3% article revealed that putting more than half of the $62 billion Pennsylvania state teachers’ retirement fund’s assets into risky alternative investments hadn’t worked out well for the pension and had spurred an investigation by the FBI. The FBI is investigating reporting fraud—returns allegedly falsified to avoid increased worker contributions to the pension.

Law enforcement investigations into public pension funds that lie about their returns are long, long overdue.

Author(s): Edward Siedle

Publication Date: 21 May 2021

Publication Site: Forbes

The New Kentucky Investment Chief Just Got a 41% Pay Boost

Link: https://www.ai-cio.com/news/new-kentucky-investment-chief-just-got-41-pay-boost/

Excerpt:

The new investment chief at the Kentucky Public Pensions Authority (KPPA) has received a 41% boost to his base salary. The hike comes after the plan’s board members this week approved a motion to lift the pay ceiling for top investment officials at the retirement system. 

Board members are hoping the compensation changes will help the underfunded pension plan hold on to KPPA CIO Steven Herbert. He started in January at the $20 billion retirement system, just as it is undergoing a complete rebranding and overhaul of its operations. KPPA was formerly known as the Kentucky Retirement Systems. 

Starting this month, Herbert can earn $235,000 annually, not including incentive pay, up from $167,000 per year. Steve M. Willer, the deputy executive director of investments, who is effectively the DCIO, can earn $190,000 per year, up from $165,000 annually. 

Author(s): Sarah Min

Publication Date: 9 April 2021

Publication Site: ai-CIO

Kentucky legislature overrides teacher pension veto, putting new hires on ‘hybrid’ plan

Link: https://www.courier-journal.com/story/news/politics/ky-general-assembly/2021/03/29/kentucky-general-assembly-overrides-teachers-pension-reform-veto/6997915002/

Excerpt:

Kentucky lawmakers have overridden Gov. Andy Beshear’s veto of a bill that would change pension benefits for future teachers.

In what some Republican legislators hope will be the beginning of larger pension reform, the House and Senate voted to override the veto of House Bill 258 Monday. 

The House voted 63-31, followed by a 25-13 vote in the Senate.

Beginning in 2022, new Kentucky teachers will be placed on a “hybrid” pension plan that combines elements of defined contribution and defined benefit plans.

Author(s): Olivia Krauth

Publication Date: 29 March 2021

Publication Site: Courier-Journal

Kentucky Lawmakers Override Pension Bill Veto

Link: https://www.ai-cio.com/news/kentucky-lawmakers-override-pension-bill-veto/

Excerpt:

The GOP-run Kentucky state legislature has overridden Democratic Gov. Andy Beshear’s veto of a pension reform bill that will place new teachers in a hybrid pension plan that incorporates aspects of a defined contribution (DC) and a defined benefit (DB) plan.

Under House Bill 258, new teachers are required to contribute more to their retirement plans than current teachers do, and they will have to work for 30 years instead of 27 to earn their maximum benefits. The new rules will become effective at the beginning of 2022.

The bill had been passed by large majority of both chambers of the legislature earlier this year, with the House passing it by a vote of 68 to 28 and the Senate passing it by a count of 63 to 34. Because the state’s Republicans have a supermajority in both the House and Senate, they didn’t have much difficulty in overriding the veto, which was one of 24 vetoes passed down by Beshear, a Democrat, that were overridden in one day.

Author(s): Michael Katz

Publication Date: 1 April 2021

Publication Site: ai-CIO

Legislators override veto of bill reforming pensions for future Kentucky teachers

Link: https://www.wdrb.com/news/education/legislators-override-veto-of-bill-reforming-pensions-for-future-kentucky-teachers/article_7cce8d94-90e7-11eb-99ba-d74ac0b11b3d.html

Excerpt:

Kentucky lawmakers voted Monday to override Gov. Andy Beshear’s veto of a bill that would change future teachers’ pension benefits. 

The House and Senate, both with GOP supermajorities, voted to override Beshear’s veto of House Bill 258, which would create a “hybrid” pension tier blending defined benefit and contribution components for new Kentucky teachers hired starting in 2022. 

That means teachers hired starting next January would be required to pay more toward their retirement and work longer before they can earn full benefits.

Author(s): Associated Press

Publication Date: 29 March 2021

Publication Site: WDRB

KRS APPROVES NEW INVESTMENTS

Excerpt:

The Kentucky Retirement Systems (KRS) Board of Trustees held a special meeting Thursday morning to approve more than $170 million in investments. The move comes just one week before a new County Employees Retirement System (CERS) Board of Trustees takes control of the local pension system and its investments; the timing was not lost on several board members who questioned why they needed to act before the April 1 separation. CERS elected representative Betty Pendergrass pointed out that a majority of the money being allocated was CERS funds, which account for 76% of KRS pension assets.

Publication Date: 25 March 2021

Publication Site: KLC City Limit

Bottom Line: Changes could be coming to the pension system for Kentucky’s teachers

Excerpt:

Legislation to change the pension plan for future teachers in Kentucky moves to the full Senate in the final days of the 2021 session.

House Bill 258, sponsored by Rep. Ed Massey, would create a new tier in the Kentucky Teachers’ Retirement System (KTRS) for any newly hired teachers in the state that would be partially defined benefit plan like the existing pension plan and part defined contribution plan, more like a 401(k).

The bill serves as a retirement plan as well as social security replacement plan, as teachers in Kentucky do not pay into social security and do not receive the benefit in retirement. The new system would provide a supplemental plan with two percent paid in by both the employee and the state, which is portable to allow an employee to take those benefits with them should they leave the teaching profession, unlike the existing KTRS pension plan.

Author(s): Jacqueline Pitts

Publication Date: 15 March 2021

Publication Site: Lane Report

Mayberry v. KKR: Pitched Battle as Attorney General and Defendants Try to Block “Tier 3 Plaintiffs” Pursuing Claims Aggressively

Excerpt:

One noteworthy feature of these filings is that they are regularly shrill, ranging from pissy to screechy (the Attorney General’s filing is a bit different in instead adopting the tone of royalty having to stoop to dismiss an annoying subject).

And the reason for the all too evident frustration among the various opponents is that the legal team targeting the hedge fund abuses was supposed to have gone away by now.

As the Background describes in more detail, they were supposed to be over after their initial case was dismissed by the Kentucky Supreme Court on standing grounds. Recall that the defeat came as a result of rulings in Kentucky and by the US Supreme Court that found that Federal Article 3 standing rules (which Kentucky has adopted but not other states such as California) means that defined benefit plan participants have to have suffered an actual (“particularlized”) loss, as in not be getting benefits or only be receiving reduced benefits, to be able to lodge a claim. Since the Kentucky Retirement System, even at its stunningly depleted 13% funding level, is still anticipated to pay out until 2027 (and we are supposed to believe the State of Kentucky will step up and make good on the pensions until it turns out otherwise), the defined benefit pensioners can take no action until then.

Author(s): Yves Smith

Publication Date: 12 March 2021

Publication Site: naked capitalism

Hoist on His Own Petard? Kentucky Attorney General’s Apparent Plan to Settle Landmark Pension Case Mayberry v. KKR Likely to be Undermined by Discovery

Excerpt:

Cameron’s filing was almost entirely dependent on the original plantiffs’ documents. It’s become increasingly evident that Cameron never intended to litigate. The best guess is that Cameron needed a distraction from bad Brionna Taylor headlines, and also saw the Mayberry v. KKR case as an opportunity to engage in a little shakedown by making a potentially explosive case go away via a cost-of-doing-business settlement.

But Cameron appears to have badly underestimated his opponents, led by the formidable attorney Michelle Lerach and her husband, the disbarred but still very much feared Bill Lerach, who acts as a consultant. A quick and cheap settlement can occur only if the defendants can escape what they fear most, discovery. But the latest order from Judge Philip Shepherd shows he is moving forward with the reconfigured case, now involving “Tier 3” beneficiaries in a hybrid plan that does not have a state guarantee. That upsets Cameron’s plans to settle the case before the Tier 3 plaintiffs go going, which would allow his to go lowball based on public information and the limited discovery to date.

Author(s): Yves Smith

Publication Date: 19 February 2021

Publication Site: naked capitalism

Kentucky Legislature Considers Changes to Teacher Retirement Plan

Excerpt:

The Kentucky House recently passed a state bill that would place newly-hired Kentucky teachers into a new “hybrid” retirement plan design. The new hybrid plan would blend a “foundational” defined benefit pension plan with a “supplemental” defined contribution plan as a means of de-risking the Kentucky Teachers’ Retirement System, which is only 58.4 percent funded today.

The legislation, which is now before the Senate’s State and Local Government Committee, ultimately seeks to control future employee, retiree and taxpayer costs. The Teachers’ Retirement System of Kentucky already has nearly $15 billion in unfunded liabilities.

An actuarial analysis of the bill, House Bill 258, projects that it would save Kentucky $3.57 billion over 30 years. While the legislation is not a panacea, if enacted, it would be a positive step in the right direction for Kentucky’s overall public pension challenges, which rank among the most difficult in the nation.

Author(s): Alix Ollivier

Publication Date: 19 February 2021

Publication Site: Reason