Audit Of Kentucky Retirement Systems May Spur Needed Reforms. Great.
Legislature may act on heels of retirement audit
By ROGER ALFORD
FRANKFORT, Ky. (AP) -- A newly released audit that criticizes oversight of the state's $13 billion pension fund could provide the impetus needed to get the legislature to act, leading lawmakers said Wednesday.
Republican Sen. Damon Thayer of Georgetown and Democratic Rep. Mike Cherry of Princeton, co-chairmen of the Joint Committee on State Government, have been stymied in the past in their efforts to get pension reforms through the General Assembly.
But they will have new ammunition when the legislature convenes in January - the audit that documented management problems within the Kentucky Retirement Systems that serves some 330,000 employees and retirees.
The retirement plan isn't in immediate danger of collapsing, but it has been consistently underfunded, a point that state Auditor Crit Luallen made to lawmakers on Wednesday, just as she had to reporters at a news conference a day earlier.
"One overarching concern I want to emphasize is that the long-term viability of this retirement system has been dramatically impacted by the state's consistent underfunding of its employer contributions since 2003," she said.
Luallen was called on to perform the audit because of concerns about how some financial middlemen, known as placement agents, were selected. While no evidence of wrong-doing was found, Luallen said her staff did find instances where the board that oversees the pension plan could improve accountability, transparency and communication.
Luallen said the review found that one placement agent had an unusually close working relationship with the pension plan's former chief investment officer and received a high percentage of the investment contracts. That agent participated in seven of the 13 investment agreements in which placement agents were used, more than all the other agents combined.
Some of the information regarding placement agents will be forwarded to the U.S. Securities and Exchange Commission to determine if further investigation is needed. The SEC previously opened an "informal inquiry" into investments made by the state's retirement system on Sept. 9. That inquiry was described in a letter by an SEC staff attorney as a "non-public, fact-finding inquiry" which "should not be construed as an indication that any violation of law has occurred."
Luallen presented the audit findings at a meeting of the state government committee on Wednesday afternoon, prompting Thayer to call for a fresh look at a bill Cherry sponsored in a legislative session earlier this year. That bill failed after being passed by the House and overhauled in the Senate.
"I think that this audit will help us take Rep. Cherry's bill from last session and strengthen it even more and give more credence to the need for its passage," Thayer said during the legislative hearing on Wednesday.
Recommendations for strengthening accountability and transparency regarding the pension plan have widespread support, even from the board that oversees the state's retirement plan.
One of the key recommendations calls for closer monitoring of investments, limiting the terms of the chairs and vice chairs of the board that oversees pension investments, and to develop a procedure for employees and citizens to report concerns anonymously.
Board Chairwoman Jennifer Elliott on Wednesday called the audit `thorough and thoughtful" and said that its recommendations were being implemented.
Gov. Steve Beshear said he was pleased Luallen's audit found the retirement fund investments to be secure, and that he is encouraged that managers already have agreed to take actions to improve accountability and transparency.
© 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.
By ROGER ALFORD
FRANKFORT, Ky. (AP) -- A newly released audit that criticizes oversight of the state's $13 billion pension fund could provide the impetus needed to get the legislature to act, leading lawmakers said Wednesday.
Republican Sen. Damon Thayer of Georgetown and Democratic Rep. Mike Cherry of Princeton, co-chairmen of the Joint Committee on State Government, have been stymied in the past in their efforts to get pension reforms through the General Assembly.
But they will have new ammunition when the legislature convenes in January - the audit that documented management problems within the Kentucky Retirement Systems that serves some 330,000 employees and retirees.
The retirement plan isn't in immediate danger of collapsing, but it has been consistently underfunded, a point that state Auditor Crit Luallen made to lawmakers on Wednesday, just as she had to reporters at a news conference a day earlier.
"One overarching concern I want to emphasize is that the long-term viability of this retirement system has been dramatically impacted by the state's consistent underfunding of its employer contributions since 2003," she said.
Luallen was called on to perform the audit because of concerns about how some financial middlemen, known as placement agents, were selected. While no evidence of wrong-doing was found, Luallen said her staff did find instances where the board that oversees the pension plan could improve accountability, transparency and communication.
Luallen said the review found that one placement agent had an unusually close working relationship with the pension plan's former chief investment officer and received a high percentage of the investment contracts. That agent participated in seven of the 13 investment agreements in which placement agents were used, more than all the other agents combined.
Some of the information regarding placement agents will be forwarded to the U.S. Securities and Exchange Commission to determine if further investigation is needed. The SEC previously opened an "informal inquiry" into investments made by the state's retirement system on Sept. 9. That inquiry was described in a letter by an SEC staff attorney as a "non-public, fact-finding inquiry" which "should not be construed as an indication that any violation of law has occurred."
Luallen presented the audit findings at a meeting of the state government committee on Wednesday afternoon, prompting Thayer to call for a fresh look at a bill Cherry sponsored in a legislative session earlier this year. That bill failed after being passed by the House and overhauled in the Senate.
"I think that this audit will help us take Rep. Cherry's bill from last session and strengthen it even more and give more credence to the need for its passage," Thayer said during the legislative hearing on Wednesday.
Recommendations for strengthening accountability and transparency regarding the pension plan have widespread support, even from the board that oversees the state's retirement plan.
One of the key recommendations calls for closer monitoring of investments, limiting the terms of the chairs and vice chairs of the board that oversees pension investments, and to develop a procedure for employees and citizens to report concerns anonymously.
Board Chairwoman Jennifer Elliott on Wednesday called the audit `thorough and thoughtful" and said that its recommendations were being implemented.
Gov. Steve Beshear said he was pleased Luallen's audit found the retirement fund investments to be secure, and that he is encouraged that managers already have agreed to take actions to improve accountability and transparency.
© 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.
Labels: Keeping them honest, Kentucky politics
posted by KYJurisDoctor at 5:05 PM
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