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Kentucky Supreme Court to hear pension reform lawsuit in September

A lawsuit filed over Kentucky's 2018 pension reform law will be heard by the state's Supreme Court on Sept. 20, according to the court's website.

On Aug. 10, Gov. Matt Bevin — a defendant in the lawsuit — appealed a June ruling in Franklin County Circuit Court that struck down the pension reform law.

Shortly after Mr. Bevin filed his appeal and a motion to bypass the state Court of Appeals, the state's Supreme Court agreed to hear the case.

On April 11 — one day after the pension reform package was signed into law by Mr. Bevin — Attorney General Andy Beshear's office filed a lawsuit in Franklin County Circuit Court against Mr. Bevin and legislative leaders, arguing that the measure violated an "inviolable contract" by reducing workers' rights and benefits. Mr. Beshear's lawsuit also condemned lawmakers for passing a bill that lacked an actuarial analysis at the time and was not subject to public comment or testimony, and for not allowing sufficient time to fully digest the changes before the bill went to a vote. The pension reforms had been tacked onto a bill that initially dealt with wastewater-related services.

In the June ruling, Judge Phillip Shepherd sided with Mr. Beshear, in part, writing that the manner in which the pension reform law was passed violated the state constitution and was unenforceable.

Violations included failing to receive "a majority vote" of all members of the Kentucky House of Representatives (a requirement for spending bills or bills that create debt) and failing to receive three readings on three separate dates, Mr. Shepherd wrote.

Mr. Shepherd did address the attorney general's inviolable contract claim because the bill's legislative process violated the state constitution, he wrote.

Under the pension reform law, teachers hired after Jan. 1, 2019, would have been enrolled in a cash balance plan instead of the existing defined benefit plan at the $18.1 billion Kentucky Teachers' Retirement System, Frankfort.

Other changes under the law include a reset of the 30-year amortization period to pay off the unfunded liabilities of the $17.4 billion Kentucky Retirement Systems, Frankfort; a change to the way unfunded liabilities are paid off (a level-dollar amortization method would be used rather than a percentage of payroll); and a prohibition on putting unused sick days toward retirement. KRS employees also would have been able to choose between participating in their existing cash balance plan or a new 401(a) plan.

In October, Mr. Bevin's office had pegged total unfunded liabilities for KRS, KTRS and the $327 million Kentucky Judicial Form Retirement System, Frankfort, at $64 billion.

"Our pension system is already dangerously close to collapsing," said Steve Pitt, Kentucky's general counsel, in a news release Aug. 10. "Without the reforms in SB 151, the system will continue to decline and remain the worst funded in the nation. These are weighty issues that will impact every Kentuckian. They must be decided by our state's highest court and not based on the highly suspect ruling of a single judge. It is also imperative that the Supreme Court resolve the legislative process issues on which the Circuit Court based its decision, so that the General Assembly has every tool at its disposal to advance important legislative priorities."

Mr. Beshear said in a separate news release that Mr. Bevin's decision to wait until Aug. 10 to appeal the lawsuit "has continued to cause anxiety to our teachers, police officers, firefighters, social workers and public servants who deserve better."

"Our public servants and their families deserve a quick and final decision that protects the retirements they were promised," Mr. Beshear said.