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AN ACT relating to internal audit functions at public pension funds. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
ď˘Section 1. KRS 61.505 is amended to read as follows: 3
(1) There is created an eight (8) member Kentucky Public Pensions Authority whose 4
purpose shall be to administer and operate: 5
(a) A single personnel system for the staffing needs of the Kentucky Retirement 6
Systems and the County Employees Retirement System; 7
(b) A system of accounting that is developed by the Authority for the Kentucky 8
Retirement Systems and the County Employees Retirement System; 9
(c) Day-to-day administrative needs of the Kentucky Retirement Systems and the 10
County Employees Retirement System, including but not limited to: 11
1. Benefit counseling and administration; 12
2. Information technology and services, including a centralized Web site 13
for the Authority, the Kentucky Retirement Systems, and the County 14
Employees Retirement System; 15
3. Legal services; 16
4. Employer reporting and compliance; 17
5. Processing and distribution of benefit payments, and other financial, 18
investment administration, and accounting duties as directed by the 19
Kentucky Retirement Systems board of trustees or the County 20
Employees Retirement System board of trustees; 21
6. All administrative actions, orders, decisions, and determinations 22
necessary to carry out benefit functions required by the Kentucky 23
Retirement Systems and the County Employment Retirement System 24
statutes, including but not limited to administration of reduced and 25
unreduced retirement benefits, disability retirement, reemployment after 26
retirement, service purchases, computation of sick-leave credit costs, 27 UNOFFICIAL COPY 23 RS BR 1466
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correction of system records, qualified domestic relations orders, and 1
pension spiking determinations; and 2
7. Completing and compiling financial data and reports; 3
(d) Any jointly held assets used for the administration of the Kentucky 4
Retirement Systems and the County Employees Retirement System, including 5
but not limited to real estate, office space, equipment, and supplies; 6
(e) The hiring of a single actuarial consulting firm who shall serve both the 7
Kentucky Retirement Systems and the County Employees Retirement System; 8
(f) The hiring of a single external certified public accountant who shall perform 9
audits for both the Kentucky Retirement Systems and the County Employees 10
Retirement System; 11
(g) The promulgation of administrative regulations as an authority or on behalf of 12
the Kentucky Retirement Systems and the County Employees Retirement 13
System, individually or collectively, provided such regulations are not 14
inconsistent with the provisions of this section and KRS 16.505 to 16.652, 15
61.505, 61.510 to 61.705, and 78.510 to 78.852, necessary or proper in order 16
to carry out the provisions of this section and duties authorized by KRS 17
16.505 to 16.652 and 61.510 to 61.705; 18
(h) A system of contracting management for administrative services; and 19
(i) Other tasks or duties as directed solely or jointly by the boards of the 20
Kentucky Retirement Systems or the County Employees Retirement System. 21
(2) The eight (8) member Kentucky Public Pensions Authority shall be composed of 22
the following individuals: 23
(a) The chair of the Kentucky Retirement Systems board of trustees; 24
(b) The chair of the County Employees Retirement System board of trustees; 25
(c) The investment committee chair of the Kentucky Retirement Systems board 26
of trustees, unless the investment committee chair is also the chair of the 27 UNOFFICIAL COPY 23 RS BR 1466
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board of trustees in which case the chair of the Kentucky Retirement Systems 1
shall appoint an individual who serves on the investment committee; 2
(d) The investment committee chair of the County Employees Retirement System 3
board of trustees, unless the investment committee chair is also the chair of 4
the County Employees Retirement System board of trustees in which case the 5
chair of the County Employees Retirement System shall appoint an individual 6
who serves on the investment committee; 7
(e) Two additional (2) trustees of the Kentucky Retirement Systems board of 8
trustees selected by the chair of the Kentucky Retirement Systems board of 9
trustees of which one (1) shall be a trustee who was elected by the 10
membership of one (1) of the systems administered by Kentucky Retirement 11
Systems and one (1) shall be a trustee of Kentucky Retirement Systems who 12
was appointed by the Governor; and 13
(f) Two additional (2) trustees of the County Employees Retirement System 14
board of trustees selected by the chair of the County Employees Retirement 15
System board of trustees of which one (1) shall be a trustee who was elected 16
by the membership of the County Employees Retirement System and one (1) 17
shall be a trustee of the County Employees Retirement System who was 18
appointed by the Governor. 19
(3) The Kentucky Public Pensions Authority is hereby granted the powers and 20
privileges of a corporation, including but not limited to the following powers: 21
(a) To sue and be sued in its corporate name; 22
(b) To make bylaws not inconsistent with the law and in accordance with its 23
duties as provided by this section; 24
(c) To conduct the business and promote the purposes for which it was formed; 25
(d) To carry out the obligations of the Authority subject to KRS Chapters 45, 26
45A, 56, and 57; 27 UNOFFICIAL COPY 23 RS BR 1466
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(e) To purchase fiduciary liability insurance; and 1
(f) The Kentucky Public Pensions Authority shall reimburse any Authority 2
member, officer, or employee for any legal expense resulting from a civil 3
action arising out of the performance of his or her official duties. The hourly 4
rate of reimbursement for any contract for legal services under this paragraph 5
shall not exceed the maximum hourly rate provided in the Legal Services 6
Duties and Maximum Rate Schedule promulgated by the Government 7
Contract Review Committee established pursuant to KRS 45A.705, unless a 8
higher rate is specifically approved by the secretary of the Finance and 9
Administration Cabinet or his or her designee. 10
(4) Any vacancy which may occur in an appointed position on the Kentucky Public 11
Pensions Authority shall be filled in the same manner which provides for the 12
selection of the particular member of the Authority. No person shall serve in more 13
than one (1) position as a member of the Authority and if a person holds more than 14
one (1) position as a member of the Authority, he or she shall resign a position. 15
(5) (a) Membership on the Authority shall not be incompatible with any other office 16
unless a constitutional incompatibility exists. No Authority member shall 17
serve in more than one (1) position as a member of the Authority. 18
(b) An Authority member shall be removed from office upon conviction of a 19
felony or for a finding of a violation of any provision of KRS 11A.020 or 20
11A.040 by a court of competent jurisdiction. 21
(c) A current or former employee of the County Employees Retirement System, 22
Kentucky Retirement Systems, or the Kentucky Public Pensions Authority 23
shall not be eligible to serve as a member of the Authority. 24
(6) Kentucky Public Pensions Authority members who do not otherwise receive a 25
salary from the State Treasury shall receive a per diem of eighty dollars ($80) for 26
each day they are in session or on official duty, and they shall be reimbursed for 27 UNOFFICIAL COPY 23 RS BR 1466
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their actual and necessary expenses in accordance with state administrative 1
regulations and standards, except that the members shall not receive a per diem or 2
receive reimbursements on the same day they receive a per diem or reimbursements 3
for service to the Kentucky Retirement Systems board of trustees or County 4
Employees Retirement Systems board of trustees. 5
(7) (a) The Authority shall meet at least once in each quarter of the year and may 6
meet in special session upon the call of the chair or the executive director of 7
the Authority. 8
(b) The Authority shall elect a chair and a vice chair. The chair shall not serve 9
more than four (4) consecutive years as chair or vice chair of the Authority. 10
The vice chair shall not serve more than four (4) consecutive years as chair or 11
vice chair of the Authority. A member who has served four (4) consecutive 12
years as chair or vice chair of the Authority may be elected chair or vice chair 13
of the Authority after an absence of two (2) years from the positions. 14
(c) A majority of the Authority members shall constitute a quorum and all actions 15
taken by the Authority shall be by affirmative vote of a majority of the 16
Authority members present. 17
(d) The Authority shall post on the Authority's Web site and shall make available 18
to the public: 19
1. All meeting notices and agendas of the Authority. Notices and agendas 20
shall be posted to the Authority's Web site at least seventy-two (72) 21
hours in advance of the Authority's meetings, except in the case of 22
special or emergency meetings as provided by KRS 61.823; 23
2. All Authority minutes or other materials that require adoption or 24
ratification by the Authority. The items listed in this subparagraph shall 25
be posted within seventy-two (72) hours of adoption or ratification of 26
the Authority; 27 UNOFFICIAL COPY 23 RS BR 1466
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3. All bylaws, policies, or procedures adopted or ratified by the Authority; 1
and 2
4. A listing of the members of the Authority and membership on each 3
committee established by the Authority. 4
(8) (a) The Kentucky Public Pensions Authority shall appoint or contract for the 5
services of an executive director and an internal auditor and fix the 6
compensation and other terms of employment for these positions[this 7
position] without limitation of the provisions of KRS Chapter 18A, 45A, and 8
KRS 64.640. The executive director shall be the chief administrative officer 9
of the Authority, the Kentucky Retirement Systems board of trustees, and the 10
County Employees Retirement System board of trustees. The internal auditor 11
shall report directly to the trustees of the Kentucky Public Pensions 12
Authority to perform internal audit functions as directed by the Authority. 13
The executive director and internal auditor shall work cooperatively with the 14
chief executive officers of the Kentucky Retirement Systems and the County 15
Employees Retirement System. The Authority shall annually conduct a 16
performance evaluation of the executive director and internal auditor. 17
(b) The Kentucky Public Pensions Authority shall authorize the executive 18
director, or the internal auditor in the case of employees under the direct 19
supervision of the internal auditor, to appoint the employees deemed 20
necessary to transact the duties of the Authority for the purposes outlined in 21
subsection (1) of this section. After April 14, 2022, approval by the Authority 22
shall be required for a petition to the secretary of the Personnel Cabinet for the 23
creation of any new unclassified position pursuant to KRS 18A.115(1)(e), (g), 24
(h), and (i). 25
(c) Effective April 1, 2021, the Kentucky Public Pensions Authority shall assume 26
responsibility of administering the staff of the Kentucky Retirement Systems 27 UNOFFICIAL COPY 23 RS BR 1466
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in order to provide the services established by this section. 1
(d) 1. All employees of the Kentucky Public Pensions Authority, except for 2
the executive director and no more than six (6) unclassified employees 3
of the Office of Investments employed pursuant to KRS 18A.115(1)(e), 4
(g), (h), and (i), shall be subject to the state personnel system established 5
pursuant to KRS 18A.005 to 18A.204 and shall have their salaries 6
determined by the secretary of the Personnel Cabinet. 7
2. The employees exempted from the classified service under this 8
paragraph shall not be subject to the salary limitations specified in KRS 9
64.640(2) and (3). 10
3. The Kentucky Public Pensions Authority shall adopt a written salary and 11
classification plan fixing a range of compensation and written terms of 12
employment for any of the unclassified employees of the Office of 13
Investments it authorizes under this paragraph. The Authority shall 14
authorize the executive director to appoint up to six (6) unclassified 15
employees of the Office of Investments subject to the compensation 16
ranges and terms of employment the Authority has established. The 17
Authority may amend the written salary and classification plan adopted 18
under this paragraph at any time. 19
(e) The Authority shall annually review, approve, and submit a report to the 20
Public Pension Oversight Board detailing the number of employees of the 21
Authority, the salary paid to each employee, and the change in the salaries of 22
each individual employed by the Authority over the prior year. 23
(f) The Authority shall require the executive director and the employees as it 24
thinks proper to execute bonds for the faithful performance of their duties 25
notwithstanding the limitations of KRS Chapter 62. 26
(g) Notwithstanding any other provision of statute to the contrary, including but 27 UNOFFICIAL COPY 23 RS BR 1466
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not limited to any provision of KRS Chapter 12, the Governor shall have no 1
authority to change any provision of this section by executive order or action, 2
including but not limited to reorganizing, replacing, amending, or abolishing 3
the membership of the Kentucky Public Pensions Authority. 4
(9) All employees of the Authority shall serve during its will and pleasure. 5
Notwithstanding any statute to the contrary, employees shall not be considered 6
legislative agents under KRS 6.611. 7
(10) The Attorney General, or an assistant designated by him or her, may attend each 8
meeting of the Authority and may receive the agenda, board minutes, and other 9
information distributed to Authority members upon request. The Attorney General 10
may act as legal adviser and attorney for the Authority, and the Authority may 11
contract for legal services, notwithstanding the limitations of KRS Chapter 12 or 12
13B. 13
(11) (a) 1. All expenses incurred by or on behalf of the Kentucky Public Pensions 14
Authority shall be paid by the systems administered by the Kentucky 15
Retirement Systems or the County Employees Retirement System and 16
shall be prorated, assigned, or allocated to each system as determined by 17
Kentucky Public Pensions Authority. 18
2. Until June 30, 2024, any additional initial costs determined by the 19
Authority to be attributable solely to establishing a separate County 20
Employees Retirement System board and the Kentucky Public Pensions 21
Authority as provided by this section and KRS 78.782 shall be paid by 22
the County Employees Retirement System. Until June 30, 2024, any 23
additional ongoing annual administrative and investment expenses that 24
occur after the establishment of a separate County Employees 25
Retirement System board and the Kentucky Public Pensions Authority 26
that are determined by the Authority to be a direct result of establishing 27 UNOFFICIAL COPY 23 RS BR 1466
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a separate County Employees Retirement System board and the 1
Kentucky Public Pensions Authority shall be paid by the County 2
Employees Retirement System. Beginning on and after July 1, 2024, any 3
annual administrative and investment expenses shall be prorated, 4
assigned, or allocated to each system as determined by the Kentucky 5
Public Pensions Authority as provided by subparagraph 1. of this 6
paragraph but without attribution to the establishment of a separate 7
County Employees Retirement System board and the Kentucky Public 8
Pensions Authority. 9
3. In order to evaluate the results of establishing a separate County 10
Employees Retirement System board and the Kentucky Public Pensions 11
Authority, on or before November 15, 2022, and on or before November 12
15 following the close of each successive fiscal year, the Kentucky 13
Public Pensions Authority shall report to the Public Pensions Oversight 14
Board the annual administrative and investment expenses of the 15
Kentucky Retirement Systems and the County Employees Retirement 16
System. The report shall include but not be limited to the process or 17
manner the Authority used to prorate, assign, or allocate to each system 18
its share of the expenses, the amount of expenses prorated, assigned, or 19
allocated to each system itemized by category, and any efforts by the 20
systems or the Authority to reduce administrative costs and staffing 21
needs. 22
(b) Any other statute to the contrary notwithstanding, authorization for all 23
expenditures relating to the administrative operations of the Kentucky Public 24
Pensions Authority, the Kentucky Retirement Systems, and the County 25
Employees Retirement System shall be contained in the biennial budget unit 26
request, branch budget recommendation, and the financial plan adopted by the 27 UNOFFICIAL COPY 23 RS BR 1466
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General Assembly pursuant to KRS Chapter 48. The Kentucky Public 1
Pensions Authority shall approve the biennial budget unit request prior to its 2
submission by the Authority. The request from the Kentucky Public Pensions 3
Authority shall include any specific administrative expenses requested by the 4
Kentucky Retirement Systems board of trustees or the County Employees 5
Retirement System board of trustees pursuant to KRS 61.645(13) or 6
78.782(13), as applicable, that are not otherwise expenses specified by 7
paragraph (a) of this subsection. 8
(12) (a) An Authority member shall discharge his or her duties as a member of the 9
Authority, including his or her duties as a member of a committee of the 10
Authority: 11
1. In good faith; 12
2. On an informed basis; and 13
3. In a manner he or she honestly believes to be in the best interest of the 14
County Employees Retirement System and the Kentucky Retirement 15
Systems, as applicable. 16
(b) An Authority member discharges his or her duties on an informed basis if, 17
when he or she makes an inquiry into the business and affairs of the 18
Authority, system, or systems or into a particular action to be taken or 19
decision to be made, he or she exercises the care an ordinary prudent person 20
in a like position would exercise under similar circumstances. 21
(c) In discharging his or her duties, an Authority member may rely on 22
information, opinions, reports, or statements, including financial statements 23
and other financial data, if prepared or presented by: 24
1. One (1) or more officers or employees of the Authority whom the 25
Authority member honestly believes to be reliable and competent in the 26
matters presented; 27 UNOFFICIAL COPY 23 RS BR 1466
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2. Legal counsel, public accountants, actuaries, or other persons as to 1
matters the Authority member honestly believes are within the person's 2
professional or expert competence; or 3
3. A committee of the Authority of which he or she is not a member if the 4
Authority member honestly believes the committee merits confidence. 5
(d) An Authority member shall not be considered as acting in good faith if he or 6
she has knowledge concerning the matter in question that makes reliance 7
otherwise permitted by paragraph (c) of this subsection unwarranted. 8
(e) Any action taken as a member of the Authority, or any failure to take any 9
action as an Authority member, shall not be the basis for monetary damages 10
or injunctive relief unless: 11
1. The Authority member has breached or failed to perform the duties of 12
the member's office in compliance with this section; and 13
2. In the case of an action for monetary damages, the breach or failure to 14
perform constitutes willful misconduct or wanton or reckless disregard 15
for human rights, safety, or property. 16
(f) A person bringing an action for monetary damages under this section shall 17
have the burden of proving by clear and convincing evidence the provisions of 18
paragraph (e)1. and 2. of this subsection, and the burden of proving that the 19
breach or failure to perform was the legal cause of damages suffered by the 20
Kentucky Retirement Systems or County Employees Retirement System, as 21
applicable. 22
(g) In discharging his or her administrative duties under this section, an Authority 23
member shall strive to administer the systems in an efficient and cost-24
effective manner for the taxpayers of the Commonwealth of Kentucky and 25
shall take all actions available under the law to contain costs for the trusts, 26
including costs for participating employers, members, and retirees. 27