A high school teacher in Louisville, Ky., filed a lawsuit against the Kentucky Teachers’ Retirement System, charging the Frankfort-based system with failing to adequately address its “dire” funded status.
Randolph Wieck filed the class-action lawsuit in a Jefferson County Circuit Court on Monday on behalf of all participants in the $18.1 billion retirement system.
The lawsuit alleges the KTRS board of trustees failed in its fiduciary duty by not “aggressively and publicly demanding the full funding they need to stay solvent,” by not informing members of the system’s “dire funding status,” and by not “aggressively exposing flawed and biased research in the Legislature’s pension reform process.”
Additionally, the lawsuit alleges KTRS has inappropriately invested in “high-risk alternative investments” such as hedge funds, along with firms that have been identified by the American Federation of Teachers as managers that “work against teacher funding nationwide.” The lawsuit asks that KTRS “amend its investment guidelines to allow investments only appropriate for fiduciaries,” invest with managers that follow state ethics requirements and exclude managers on the American Federation of Teachers watchlist.
KTRS’ funding ratio was 51.9% as of June 30, 2013, court documents show.
“(KTRS) is so poorly funded at the moment,” said Mr. Wieck, in a telephone interview. “It doesn’t seem that the Legislature is going to do anything, especially in (the 2015) session.”
Over the last five years, KTRS has been “shorted” more than $1.8 billion in pension payments by the state Legislature, the lawsuit alleges.
The lawsuit demands KTRS communicate its “severe” underfunding to its participants, “demand full funding from the General Assembly in a public forum” and “initiate an aggressive lobbying campaign involving and informing all KTRS members.”
The lawsuit also demands that if the Legislature does not provide full funding within a year, that KTRS “support publicly and financially legal action on behalf of its members against the General Assembly.”
“We’re very worried as a class (of teachers) … we’re concerned this (retirement system) is going down the tubes,” Mr. Wieck said.
Earlier this year, Mr. Wieck and a group of Louisville teachers considered filing a lawsuit against the state Legislature and Gov. Steve Beshear for not meeting its pension payments.
“That is an option and remains (an option),” Mr. Wieck said.
Beau Barnes, attorney and managing agent for KTRS, and Gary Harbin, executive secretary, said they have not been served with the lawsuit and could not comment.