Review of Legislative Public Pension Oversight Board Meeting November 24, 2014 Minutes for the October 21, 2014 meeting were approved. Prior to the agenda items being taken up, Bill Thielen, KRS Executive Director, invited all Oversight Board (PPOB) members to the next KRS Board meeting on December 4th. He noted important agenda items to be covered at that meeting and provided a preview of the FY14 financials. In discussing KERS, Thielen did encourage the PPOB to seek out additional funding, saying that it probably would be a “couple of years” before funding the full ARC would show results. David Peden, Chief Investment Officer, provided the committee with an investment update through the end of October. Some asset classes declined while others showed positive results. Overall, the unaudited figures showed an improvement of +.83% with YTD figures still negative at -.59%. The remaining eight months of the fiscal year will have to show strong performance to reach the investment return goal of 7.75%. During some general questioning, Sen. Jimmy Higdon asked about revenue received from invoicing for pension spiking per SB2. Invoices have totaled $1.3 million from 639 employers. Rep. Brent Younts commented that there were several bills filed/to be filed to fine-tune the original provisions. Thielen remarked that the employer contribution rate for the FY15/16 budget was 38.77% and, since the amount is now figured in two-year increments instead of annual, the figure for the FY17/18 budget will be a few points higher. He commented that KERS lost about $70 million in assets in the first quarter of this year and that we can’t invest our way out of the KERS problem. Previewing the recommendations PPOB would be including in its report, Sen. Joe Bowen asked Thielen to have a KRS Board member attend each of their meetings during 2015. Meeting schedule is set for the 4th Monday in each month. Next meeting will be December 15th. With that, PPOB moved to discuss the recommendations to be included in their report to the Legislature Administrative Recommendations (not requiring legislative approval): 1. KRS should engage an independent actuarial firm, different from the current actuarial firm, to perform an actuarial audit on the assumptions findings (an audit of the audit); report to KRS and PPOB. 2. Regarding the Actuarial Experience Study, KRS Board should (a) consider the results of said audit before adoption; (b) evaluate cash flow needs of KERS Non-Haz as it relates to assumptions; (c) move quickly on adoption of study. 3. KRS should take more action in publicizing KRS Board meetings via electronic communication to employee, retiree, and other interested groups. 4. In 2015, PPOB shall (a) received quarterly cash flow statements from KRS and study cash flow issues; (b) study KRS administrative expenses; (c) study investment oversight of other public pension funds; (d) study personnel and compensation system of KRS; (e) study investment fees, expenses, required disclosures of other public pension funds. 5. Regarding the 2016-2018 Executive Branch budget, Governor should include the actuarial required contribution rate as require for KERS and SPRS. Legislative Recommendations (requiring legislative approval): 6. KRS “housekeeping” bill, similar to HB324 from the 2014 Regular Session (14RS) should be enacted. 7. Regarding pension “spiking” (a) enact legislation similar to SB142 (14RS) and/or (b) enact legislation that adjusts the “spike” threshold from the current 10% to 15%. 8. Enact legislation to add oversight of the Kentucky Teachers Retirement System, the Legislators’ Retirement Plan, and the Judicial Retirement Plan similar to HB323 (14RS). 9. Enact legislation that requires actuarial experience studies be performed every five years in each of the state-administrated pension plans. 10. General Assembly should secure additional funding to avert insolvency of KERS. (Emphasis added.) 11. PPOB supports measures that would provide additional funding for KRS pension plans, KERS in particular. 12. Enact legislation to address voluntary and involuntary cessation of participation in KRS, similar to SB216 (14RS). 13. Enact legislation to require KRS to incorporate sensitivity analysis into its annual actuarial valuation on key assumptions and the impact on plan funding statistics and requirements. A voice vote was taken on each recommendation as presented and PPOB approved each of these for inclusion in its report. Meeting was adjourned. LPT
Posted on: Tue, 25 Nov 2014 00:19:11 +0000
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