Kentucky Retirement Systems to appeal ruling that allows mental health agency to exit plan

The Kentucky Retirement Systems board of trustees voted Wednesday to appeal a judge's recent ruling that threatens to prompt a rush for the exits among plan participants.

U.S. Bankruptcy Judge Joan Lloyd decided last month that Seven Counties Services, a Louisville-area mental health provider, could exit KRS through the bankruptcy process. Although Seven Counties is publicly financed, Lloyd said it could be considered a private, nonprofit corporation rather than an arm of government, potentially setting a precedent for dozens of other "quasi-governmental" employers enrolled in KRS.

At the time, Seven Counties said the decision would let it reorganize "to protect the business operations, including discharging any past or future obligation to the Kentucky Retirement Systems."

Seven Counties has argued that it faces soaring pension contribution costs in KRS, which is struggling with many billions of dollars in unfunded liability. Bluegrass.org, the Lexington area mental health provider, is suing KRS in state court to shift some of its employees out of the state retirement system, also citing the rise in pension costs.

The KRS board voted unanimously to file an appeal of Lloyd's decision in U.S. District Court in Louisville, KRS executive director Bill Thielen said. State law has prevented KRS participants from quitting the system in the past, and there is no legal mechanism to settle their liability to the system for current and future retirees if they do leave.

This story was originally published June 11, 2014 at 2:50 PM with the headline "Kentucky Retirement Systems to appeal ruling that allows mental health agency to exit plan."