FRANKFORT — A House committee unanimously approved a bill Thursday that bans any state government pension fund from paying middlemen known as "placement agents."
But the sponsor of House Bill 480, House State Government chairman Mike Cherry, D-Princeton, removed a provision that would impose term limits for members of the boards, which oversee billions of dollars held by the Kentucky Retirement Systems, the Kentucky Teachers Retirement System and the Judicial Form Retirement System.
He also deleted a requirement that the state auditor review the retirement systems every five years.
Cherry said he removed those provisions because he wants to see what recommendations State Auditor Crit Luallen may have after she is finished with her review of the Kentucky Retirement Systems.
Chris Tobe, a member of the Kentucky Retirement Systems board, said he was disappointed that the committee dropped term limits. He said four of the nine board members also were upset that Kentucky Retirement Systems executive director Mike Burnside contacted Cherry about removing the provision.
But Cherry said he made the initial contact with Burnside to find out Kentucky Retirement Systems' sentiments.
The main part of the bill, Cherry said, deals with the use of placement agents. Their use is the subject of an "informal inquiry" in Kentucky by the U.S. Securities and Exchange Commission.
In September, the SEC opened an inquiry into the Kentucky Retirement Systems' use of placement agents after an internal review disclosed nearly $15 million in agent fees, angering several of the system's board trustees, who called the fees excessive or unnecessary.
Placement agents are middlemen — often politically connected — who help private investment companies sell their products to public pension systems. Their fees are paid by the investment companies, which then are paid by the pension systems. Cherry's bill would prohibit placement agents from being paid with state funds either directly or indirectly.
Placement agents have led to pay-to-play scandals in other states, although the SEC has not alleged wrongdoing in Kentucky.
The House committee also unanimously approved House Resolution 147, which urges Gov. Steve Beshear to stop more furloughs of executive branch employees.
The legislature last year gave Beshear permission to impose furloughs for six days to balance the state budget. Three furlough days already have taken place.
Some legislators have changed their minds about furloughs, but have not identified how to cut the millions of dollars in the state budget that would be saved by furloughs.