By Tom Latek
Kentucky Today
It was good news and bad news Monday as officials with the Kentucky Retirement Systems and the Teachers Retirement System updated the Public Pension Oversight Board.
David Eager, executive director of the KRS, told the panel he believes his pension systems have bottomed out.
Kentucky Retirement Systems David Eager speaks to the committee
“Overall, the funded status dropped by .07 percent, which is teeny, compared to the prior year when it dropped by five percent,” he said. “That’s good news in a way. The insurance status increased significantly.”
He told the board the outlook is positive.
“But I caution you these are projections and are based on payroll contributions, and that is a huge red flag,” he said. “We can’t continue on that basis. The number of employees went down five percent and the payroll went down 3.9 percent. It’s unsustainable.”
Eager said the pension reforms under Senate Bill 151 were not included in their projections, as its constitutionality has not yet been decided by the Kentucky Supreme Court, which is expected to hand down its ruling next month.
“If the Supreme Court overrules the Franklin Circuit Court decision, and/or if the General Assembly re-enacts the bill, we’re prepared for it,” he said.
Eager told lawmakers investment returns for both the pensions and insurance have exceeded forecasts. “We have $410 million more than we expected, using the assumptions that are in place.”
He also told members the change in active membership is a serious problem. “Active members are declining in all five systems, going down by the thousands,” Eager said. “So, maintaining or increasing the contributions for the Kentucky Employees Retirement System is critical. If we were to receive no contributions and no investment income, they would be insolvent in two years.”
At the same time, Eager emphasized the unfunded liability has dropped, although it still stands at $42.7 billion.
Beau Barnes, deputy executive director and General Counsel for the Teachers Retirement System, testified to the PPOB that their assets increased to $19.496 billion, up nearly a billion dollars from a year ago, and their funding rose from 56.4 to 57.7 percent. He projects their assets to increase another billion during this fiscal year.
