Lexington owes $86M to police, fire pension. Will the city pay it?
Two retired police officers who successfully sued the city of Lexington alleging missed payments to the police and fire pension say the city owes the pension system $86 million.
In an April 6 demand letter, Tommy Puckett and Mario Russo, who filed a lawsuit more than a decade ago alleging the city failed to pay a 2011 contribution, said the city owes the Police and Fire Retirement Fund $86 million, which includes the amount originally owed to the pension fund plus interest. A copy of the demand letter was provided to the Lexington Herald-Leader.
Puckett and Russo sued the city in 2013 alleging the city never paid the pension fund a $28 million contribution in 2011. Police and fire pay 12% of their paychecks into the fund. The city’s contribution is determined by an actuarial analysis conducted each year.
As of July 1, 2025, 1,531 retired police and fire officials receive pensions or disability pensions from the fund, and 1,165 police and firefighters are currently paying into the fund, according to the most recent actuarial analysis. Its funded ratio, the amount it has versus the amount it needs to pay all beneficiaries, is 72% as of July 1.
The $58 million in additional funds is from interest, according to a certified public accountant hired by Puckett and Russo.
“My clients demand that the City 1.) provide a written schedule within fourteen (14) business days detailing how and when the remaining $86,099,949.00 will be transferred to the Fund and 2.) cease any further underfunding practices that violate the City’s statutory obligations which may violate the rights of my clients and the rights of other members of the fund,” wrote Bradley Hawkins, a lawyer for Puckett and Russo, in the April 6 letter.
The city disputes it owes the fund $86 million. “We are in process of drafting a response and disputing the amount of the claim,” said Susan Straub, a spokeswoman for the city.
If the two sides can’t come to an agreement, it’s likely the issue will go back to court.
“If LFUCG fails to agree to make the statutorily mandated 2011 contribution, Mr. Puckett and Mr. Russo will seek a Court Order consistent with the Court of Appeals opinion,” Hawkins wrote.
Lawsuit challenging city’s contribution to pension fund is decades-long fight
A 2013 agreement between the fund and the city changed how the pension was funded in an effort to address chronic underfunding. That included multiple city payments in 2013.
At issue is whether that 2013 agreement also included payments the city was supposed to make in 2011. City lawyers argued that the 2013 agreement covered all prior city contributions, including the 2011 payment. Former Mayor Jim Gray was in office at the time of the now-controversial 2013 agreement.
A Fayette Circuit Court judge originally sided with the city. In 2016, the Kentucky Court of Appeals sided with Puckett and Russo and ordered the 2011 contribution be paid. The city appealed, but the state Supreme Court declined to hear the case and let the Court of Appeals ruling stand.
Puckett said part of the delay in determining how much the city should pay for the 2011 payment was due to the original lawyer on the case dying. Puckett and Russo also struggled to find another attorney and a CPA who were qualified to take the case.
This is not the first time the city has been accused of shorting the pension fund.
Lexington city officials gave the fund an additional $700,000 in 2016 after realizing that the city shorted the fund due to some accounting and other errors. The shortfall was discovered after a Lexington police officer on the pension board asked the city for a breakdown of the city’s contribution into the fund over the past three years.
In 2020, another shortfall of about $3.6 million over 10 years was also discovered. That shortfall involved retiree health care benefits.
The city was supposed to pay for supplemental insurance for police and fire retirees eligible for Medicare — sometimes referred to as Medicare Part B, an insurance plan that covers costs Medicare does not. Retirees were paid the benefit. But starting in 2010, the cost of those Medicare Part B payments was deducted from the pension fund instead of from the city’s general fund. The city had to transfer $3.6 million to the pension fund to cover the oversight.
Puckett, who has served on the pension board for decades, said the pension board has consistently struggled to track how much the city is supposed to pay and whether those payments were made. The board is made up of current and retired police and fire officials and city staff.
“There is no transparency at all,” Puckett said.
Puckett said he hopes the city will sit down and discuss the 2011 payment soon. Further delays will only add more interest to the original amount, he said.
“This could be $100 million if they kick this down the road,” Puckett said.
