Pension Oversight Committee gets overview of KRS, discusses Chamber audit request

As problems in the Kentucky Retirement System persist, members of the Pension Oversight Committee met Monday to get an update on the system from KRS officials. The group also discussed the possibility of an audit of the system requested by the Kentucky Chamber of Commerce.

KRS Executive Director Bill Thielen told the committee Monday the KERS non-hazardous fund is currently 21 percent funded, a more than two percent drop from June 2013.

As for where the system will stand in coming years, Theilen told committee members the pension plan will hit bottom at 14 percent in the coming years. If all funding requirements are met and KRS meets assumed investment returns over the next 20 years, Theilen said the plan is estimated to be only 32.4 percent funded.

Theilen said the recommendations of the oversight committee were well received by KRS, also noting the actuarial audit suggested by the committee. Theilen added that they have been too busy to have an actuarial audit in past years but said he believes it is a good practice and they plan to have that conducted next year.

In response to those remarks, Public Pension Oversight Board Co-Chair Sen. Joe Bowen, R-Owensboro, asked Theilen if he had positive feelings about the request by the Kentucky Chamber of Commerce asking state Auditor Adam Edelen to do a comprehensive performance audit of the system. Theilen said the group would comply with whatever decision is made on the request but implied the group does not believe the audit should be done.

“I’d say my thoughts on that are mixed,” Theilen said. “We will cooperate fully with whatever state auditor Adam Edelen decides to do as a result of that request. And I might say that we have over the last several years done exactly that.”

Theilen then pointed to an audit performed by former state auditor Crit Luallen, calling it a “comprehensive governance operations” audit. The KRS official also noted a financial statement audit done by Edelen. However, the Chamber has called for a performance audit of the system that would be far more comprehensive than past audits. The state auditor has the power to compel more information and could offer an independent view of information that heretofore has only been presented to legislators by the Kentucky Retirement System.

Still, Theilen argued that their organization has spent a lot of money and time complying with past reviews and suggested that an audit of investments and below-average performance would not be necessary.

“Kentucky businesses and taxpayers deserve a more comprehensive review of the system than what has been done in the past,” Chamber senior vice president of public affairs Bryan Sunderland said. “The state will not be able to solve its pension problems without thorough review that identifies issues and solutions. The Chamber’s goal in calling for a performance audit is to ensure the financial stability of the system, and only the auditor has the ability to dig deep enough to conduct a proper examination.”