Kentucky Governor Signs Measure to Revamp Local Pension Boards

Kentucky Gov. Andy Beshear recently signed legislation creating a separate nine-member board of trustees for the County Employees Retirement System (CERS).

The measure establishes the Kentucky Public Pensions Authority, which would oversee the new board of trustees for CERS. The new pensions authority would also oversee a nine-member board of trustees to manage the Kentucky Employees Retirement System (KERS) and the State Police Retirement System (SPRS).

Another bill Beshear signed temporarily freezes employer contribution rates and resets the amortization period for KERS, CERS, and SPRS to a new 30-year span.

The pensions authority will hire an actuary for both boards and provide day-to-day services such as benefit counseling, legal services, and benefit payments. An executive director will be the chief administrative officer for the pension authority, CERS and the Kentucky Retirement System (KRS). Four members of the CERS board and four from the KRS board will review personnel and administrative expenses for the Kentucky Public Pensions Authority.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

A provision in the bill also prohibits the governor from reorganizing, replacing, amending, or abolishing the KRS board of trustees. While that provision takes effect immediately, a CERS board of trustees is not required to be in place until April 2021.

According to the Kentucky League of Cities, which was a strong proponent of the board change, CERS accounts for 76% of the pension assets managed by the KRS and 64% of the membership, but has only 35% representation on the KRS board of trustees and has no representative on the KRS investment committee.

Under the new law, both the CERS board and KRS board will have decision-making authority. The CERS board will be comprised of three representatives elected by members, two of whom will represent non-hazardous members, with one representing hazardous duty members.

The remaining six members will be appointed from lists provided to the governor by the Kentucky League of Cities, the Kentucky Association of Counties, and the Kentucky School Boards Association. The appointed members will be required to be experts in their field, with at least 10 years of experience in either investments or retirement management.

The KRS board will also have three representatives elected by members—two from KERS and one from SPRS—and six gubernatorial appointees from the current KRS board. The bill requires Kentucky Senate confirmation for all appointees.

In March, KRS Executive Director David Eager told CIO that board overhaul “increases the complexity of managing the five main retirement and health care plans.” He said that, under the law, KRS will be required to serve three boards, not one, which he said could mean preparing for more than 70 board and committee meetings compared with just 30 today.

“Our costs will no doubt increase, which will ultimately have to be borne by taxpayers,” he said.