Recently, before a gathering of hundreds of state and local government officials at the Governor’s Local Issues Conference in Louisville, Gov. Matt Bevin discussed Kentucky’s public pension crisis.
Bevin stated in his address: “The former head of KERS (Kentucky Employees Retirement Systems), the director who oversaw this is a guy named Bill Thielen . . . Bill Thielen should be in jail and that is a fact. And I don’t know who’s here from the media but if this was a private company, if this was a private pension plan, he would be.”
He went on to state, “It has been criminal, criminal what was done.” These allegations were widely published in print and on-air media throughout Kentucky.
The governor’s statements are completely without foundation, totally irresponsible and defamatory. I served as chief operations officer for Kentucky Retirement Systems from July 2006 until April 2011. From April 2011 through August 2016, I served as the executive director of KRS.
The KRS executive director is the chief administrative officer of the system and is directly responsible to the board of trustees. The board, in open public meetings, makes all key decisions for KRS, including the hiring of independent actuaries, attorneys and other experts. The board also establishes the level of contributions to be paid by participating employers. The board’s Investment Committee and the KRS chief investment officer are responsible for making investment decisions.
The executive director does not make investment decisions.
At the end of fiscal year 2000, each of the retirement plans administered by KRS was 100 percent or better funded. Now, 17 years later, the KERS nonhazardous fund, which covers the great majority of state employees, is only about 14 percent funded. In other words, it has only about 14 percent of the funds “in the bank” needed to pay retirement benefits that have already been earned by retirees and active state employees.
The drastic deterioration in funding over the past 17 years was caused by three main reasons:
▪ Failure of the governors and the General Assembly in 15 out of 22 years from 1992 through 2014 to pay the actuarially required contribution (ARC) into the system, as established by the KRS actuaries and adopted by the KRS Board of Trustees.
▪ The negative impact on investment returns due to the 2001-2002 and 2008-2009 recessions.
▪ Annual cost-of-living adjustments (COLAs) granted to retirees by the Kentucky General Assembly which were not pre-funded and simply added to the unfunded liability.
While the KERS nonhazardous plan which covers most state employees is only 14 percent funded, it should be noted that the County Employees Retirement System (CERS) nonhazardous plan is about 60 percent funded. The only significant difference between these two plans is that local government officials contributed 100 percent of the ARC over the years, while the governors and General Assembly failed to do so.
In fact, the governors budgeted and the General Assembly appropriated far less than 50 percent of the ARC in many years from 1992-2014.
I have experienced an unblemished legal and administrative career of over 40 years serving federal, state and local governments. But now, my reputation and service at KRS have been tarnished by the unfounded public allegations of Bevin.
Instead of defaming individuals, blaming the KRS Board of Trustees and active state workers and retirees, and playing politics, Bevin should focus on developing and recommending a realistic plan to remedy the situation that does not vilify and punish those who are serving and have served the commonwealth well.
William A. Thielen is former executive director of Kentucky Retirement Systems.