FRANKFORT, Ky. (WYMT) -- Kentucky Auditor Mike Harmon's office released a special examination of the Kentucky Retirement System and the Teachers' Retirement System Tuesday, our sister station WYMT reports.
Kentucky Auditor Mike Harmon's office released a special examination of the Kentucky Retirement System and the Teachers' Retirement System Tuesday, our sister station WYMT reports. (Source: WSAZ)
According to Harmon's report, the retirement systems failed to comply with a law passed two years ago requiring increased transparency in the state's public retirement systems.
“With the tremendous amount of attention that has been given in recent years to our public retirement systems, stakeholders and taxpayers have a right to know how funds are being invested, and who is investing them,” said Auditor Harmon in Frankfort. “That is why Senate Bill 2 passed in a bipartisan manner. Yet, KRS and TRS have failed to fully keep with the spirit of SB 2, which requires the retirement systems to operate in a more transparent manner.”
Listed below are some of the issues Harmon's office found:
- Both KRS and TRS have fallen drastically short of what Senate Bill 2 required on the public posting of investment contracts.
- Additionally, KRS provided inconsistent data that made it impossible to calculate the exact percentage of unposted contracts.
- Based on data provided on August 13, 2019, KRS has failed to post 86 percent of 281 investment contracts.
- At TRS, roughly 81 percent, or 136 contracts, of the total investment contracts TRS had as of July 24, 2019, were not posted for public review on the TRS website.
- KRS allows external investment managers to control access to public information, which includes letting investment managers redact information including conflicts of interest, expenses and fees, incentive allocation, and management fees. KRS management admitted they do not redact anything from the contracts, but instead allows individual managers to redact anything they consider a “trade secret.”
- KRS started a so-called “gating process” for all investment contracts with the system from April 2017 going forward to meet SB 2 requirements. However, investment managers redacted fee terms, and KRS has made no effort to ensure that information is disclosed to the public.
- TRS has a process in place to handle redaction requests in writing from managers/vendors, but TRS is also redacting other information without requests.
- Both KRS and TRS failed to post side letters that contain information relating to the agreement between KRS, TRS and their vendors. Many of the items KRS and TRS deemed as potentially proprietary are required to be disclosed under SB 2.
- KRS has $16.1 million in delinquent balances from state agencies, the only one of Kentucky’s three retirement systems to have delinquencies. The Kentucky State Police (KSP) has the highest unpaid balance to KRS at $6.1 million. The top unpaid invoice type to KRS is for standard sick leave, which totals more than $9 million.
“Simply put, it is vital for the retirement systems to meet all requirements of Senate Bill 2, not just some. Our employees, retirees and taxpayers deserve nothing less,” Auditor Harmon said. “I urge the leadership and boards for all three of Kentucky’s public pension systems to take transparency seriously and follow the recommendations made in our exam report.”
You can read the entire report in WYMT's article.