Louisville Teachers File Federal Lawsuit Against State Over Underfunded Pensions
Foiled in state court, a Jefferson County Public Schools teacher filed a federal court suit Monday claiming the Kentucky Teachers’ Retirement System illegally raised teachers’ share of pension contributions to shore up a retirement plan that is only half-funded.
Randolph "Randy" Wieck, a history teacher at DuPont Manual High School, launched the legal battle last November by filing suit in Jefferson County Circuit Court. The case was dismissed with a recommendation that it be refiled in Franklin County, he said.
Instead, Wieck filed the lawsuit in U.S. District Court in Louisville. As before, Wieck is asking that the roughly 141,000 teachers and school system retirees in Kentucky be allowed to participate in the suit. He is joined in the suit by Manual English teacher Betsey Bell and retired Manual librarian and English teacher Jane Norman.
Kentucky’s active and retired teachers are apprehensive about the solvency of their state-funded retirement. As of its last audited annual financial report on June 30, 2014, KTRS was only 53.6 percent funded with $16.2 billion in assets and $30.2 billion in obligations. A bill calling for the sale of $3.3 billion in bonds, which would have raised the KTRS funding level to 66 percent,failed in the 2015 legislative session.
"Teachers feel they've been betrayed by Quislings in the destruction of their retirement," Wieck wrote in an e-mailed statement. "Teachers are not eligible for Social Security."
The condition of the pension plan could be even worse. New federal accounting rules could retroactively lower the KTRS funding level to 45.6 percent, said Beau Barnes, KTRS’ deputy executive secretary and general counsel.
And on Monday, a state pension oversight board heard testimony that KTRS will need an additional $520.4 million in state contributions to be fully funded next fiscal year, according to a Legislative Research Commission release.
That would be on top of about $380 million paid into KTRS from the state General Fund this fiscal year, state Deputy Budget Director John Hicks told the Public Pension Oversight Board. All of the money would be needed to help KTRS meet 100 percent of its so-called annual required contribution.
Barnes said late Monday afternoon that he had not yet seen the lawsuit and could not comment on it.
Wieck’s lawsuit cites a2007 U.S. General Accounting Office report saying that “a funded ratio of 80 percent or more is within the range that many public sector experts, union officials and advocates view as a healthy pension system.”
The lawsuit claims that KTRS’ board of trustees overstepped their authority in 2010 by docking teachers at a rate of 13 percent of their pay for pension contributions, higher than the historical 9 percent rate. It accuses the board of violating its fiduciary duty by investing pension money in “high-risk alternative investments” while refusing to disclose "secret" contracts with investment firms for teachers to see.
Reporter James McNair can be reached at firstname.lastname@example.org and (502) 814-6543. This story was reported by Louisville Public Media’s Kentucky Center for Investigative Reporting.