Kentucky Retirement Systems seeks to move appeal to higher court

06/25/2014 06:25 PM

The Kentucky Retirement Systems executive director told lawmakers in Frankfort that they’re filing a motion to move proceedings into the 6th District Circuit Court of Appeals, where currently Detroit’s on-going bankruptcy case is being heard.

The Kentucky Retirement Systems Board of Trustees unanimously voted two weeks ago to seek an appeal of last month’s federal bankruptcy judge’s ruling that would allow the non-profit Seven Counties Services to pull out of the public employees’ pension fund.

A judge ruled in the end of May the mental health center in the Louisville region could get bankruptcy protection, thus, allowing the agency to exit the Kentucky Employees Retirement System and leave the costs of the center’s retirees behind for the pension fund to cover. Leaders for Seven Counties have argued that the center couldn’t afford the rising retirement contribution rates, which would eat up 40 percent of the payroll budget starting next month.

Bill Thielen, the executive director of the Kentucky Retirement System, told members of the interim State Government Committee in Frankfort Wednesday that U.S. Bankruptcy Judge Joan Lloyd denied a motion for a stay in the case on Tuesday.

The decision to deny the stay set off a chain-reaction from the retirement system’s attorney’s who will now file a motion to bypass the U.S. District Court and have the appeal heard by the U.S. 6th Circuit Court.

“They currently have the Detroit bankruptcy actions so it’s possible they would like to have both of these together…and maybe decide both cases,” Thielen said.

Thielen told lawmakers that if the courts decide not to overturn the initial ruling, and allows Seven Counties leave the retirement system that actuaries expect a $90 million hit to the pension system, increasing the contribution rate 2.5 percent for other members.

If other quasi-governmental mental health agencies follow suit and leave the pension system, Thielen said that the retirement system would take a $2.4 billion hit to other employers in the system over 20-years, an increased contribution rate of 6.5 percent.

The numbers are troubling to lawmakers as the Kentucky Employees Retirement System has become the most precariously positioned pension fund in the country with only 23.2 percent of assets needed to cover the benefits of current and future retired workers in the system.

Rep. Brad Montell, R-Shelbyville, made a “strong suggestion” to committee members on Wednesday urging them to work on legislation over the interim months to craft a bill to protect from other entities looking to withdraw from the pension system.


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