Since Kentucky's retirement funds had been recognized as the nation's worst-funded state pension, it is now pushing back a bill requiring them to disclose performance fees pad outside asset managers. They also vowed to use more transparent methods when selecting those managers.
According to Bloomberg, Kentucky's worker retirement plan has been recognized as U.S.'s worst-funded state pension. The pension is hitting its downfall even after a three-year rally in stocks.
A 15.5 percent return in 2014 was not allegedly good enough to boost Kentucky Employees Retirement System, which serves 119,735 workers and retirees. Officials have also been diverting the cash elsewhere, leaving KRS with only 21% of funds, which is needed to pay the promised benefits in 2014 as distributions went beyond the revenue.
Reuters reported that the disclosure bill has already been passed by the state Senate. The two pension plans, the Kentucky Teachers Retirement System or KTRS and the Kentucky Retirement System or KRS, have made their stand against the bill.
The two systems dispute about more disclosure and additional conditions could slow down the investment process. They also put off the idea of outside fund managers doing business, and leave funds at a disadvantage.
Moreover, the bill specifies that advisors doing business with Kentucky's pension funds would be required to adhere to a strict code of conduct. But it will also be requiring them to divulge the potential conflicts of interest, including referral fees paid by the third parties.
Transparency is becoming the main issue in the severely deficient $3.5 trillion U.S. public pension sector fund. The current methods mean some contracts are not available to state auditors or other oversight bodies, which includes the legislature.
But the bill would make the state's public pension systems more transparent in the transactions made unanimously passed in the state Senate and Local Government Committee. CN2 claimed that the Senate Bill 2, which is sponsored by Senator Joe Bowen, R-Owensboro, would also hold the pension systems more accountable in how they handle contracts with third parties for services. It would also ensure that the governing boards have the investment experience needed to lead the organizations effectively.
Meanwhile, Kentucky's transparency legislation stalled before a House committee. But there are certain concerns that the bill would die quietly prior to getting a vote.
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