The Kentucky Chamber of Commerce has called on state Auditor Adam Edelen to conduct a performance audit of the Kentucky Retirement System to ensure the financial stability of the system.
In a call with members of the press Thursday morning, Kentucky Chamber of Commerce President Dave Adkisson said the Chamber’s Board of Directors has voted to call for the independent, non-partisan audit.
“We all want the system to be strong and we all agree that we need to honor the retirement promises the state has made to public employees,” Adkisson said on the call. “We are not attacking the system, we simply want to put the system under a magnifying glass and compare its practices to other states.”
Adkisson mentioned the legislative oversight board on the pension system and some of the suggestions that have been forth but added that the Chamber’s request for a comprehensive audit of the system goes further and could hopefully add some momentum to the recommendations of the oversight board.
The Chamber believes a comprehensive performance audit of KRS is needed to examine a number of important factors, including:
- How the system’s investment performance compares to other state pension funds and the reasons for any underperformance.
- How the investment fees paid by KRS compare to those in other states and whether those fees are reasonable.
- The accuracy of the assumptions made by the system’s actuary about current liabilities and the amount of the actuarially required contribution compare to actual experience (including the accuracy of assumptions about: the rate of return on investments; salary increases for public employees; the cost of health insurance; the rate at which employees are retiring; and other factors).
After the public call, Auditor Edelen released a statement thanking the Chamber for their request and concern with the system.
“We appreciate and share the Kentucky Chamber’s concerns about the Kentucky Retirement Systems. At least three major reviews of the public pension system have been conducted in recent years, including one by this office. For this proposed exam to add value and bring about real fixes to the system, it will require broad, bipartisan support and additional resources for our office to conduct the highly-technical work,” Edelen said in the statement. “We have begun discussing the matter with stakeholders. No final decision has been made at this time.”
Adkisson said it is important that the Chamber’s request not become a “political football,” adding that the Chamber has reached out to all three current gubernatorial candidates to discuss the call for an examination as the audit would likely take months to do.
3 reasons Why Edelen will not Audit KRS
Any real audit especially on investment fees and performance like the Chamber demands would most likely contradict the 2012 Luallen Audit which said nothing was wrong.
Any real audit especially on fees and performance would require transparency of the alternative investment contracts. Currently these contracts are secret from KRS trustees, Legislative Contract Review and the State Auditors office.
Edelen’s last audit was conflicted because the fee was negotiated with KRS and paid for by KRS. KRS by threatening not to pay was able get Edelen to agree to overlook fees and performance of investments in the 2013 audit of his office.