Step up, Kentucky!
Move over Illinois: The Kentucky Retirement System reported a funding ratio of 24.5% today, according to a former trustee.
At a board meeting today, the Kentucky Retirement Systems (KRS) announced that its funded ratio is now 24.5%, according to former KRS trustee Christopher Tobe, beating out Illinois’ as the lowest in nation.
From 2007 to the fiscal year-end of 2011 (the latest date for which data is available), KRS’ total assets dropped by more than a third, from $6.44 billion to $3.97 billion. In KRS’ 2011 annual report, Chief Operations Officer William Thielen acknowledged the dwindling funding ratio, and attributed it to a variety of causes.
Tobe attributes KRS’ sorry state to other factors.
“This 24% is unique,” he wrote in an email. “Unlike Illinois, most Kentucky officials were not aware of the extent of this underfunding. This is primarily due to complete lack of transparency. KRS held back disclosing this level for nearly a month from their normal November meeting.”
That's some performance you've got there.
While Illinois has seen its own asset death spiral, KRS' performance is pretty bad. I wouldn't be surprised to hear that they had to liquidate assets to cover pension payments.
As for that lack of transparency, an earlier article from aiCIO may indicate that lack of transparency is par for the course, but I want to you pay close attention to the numbers:
(October 12, 2011) — The US Securities and Exchange Commission (SEC) is investigating officials at the Kentucky Retirement Systems (KRS), which manages about $14 billion in assets for retirement programs for about 330,000 active and retired employees of state and local governments.
According to Kentucky's Courier Journal, the federal agency sent subpoenas last week to one current and two former staff members to attend depositions. The US regulator told attorneys for the retirement systems that it wants to talk to all individuals who have served on the KRS board of trustees since 2007.
William Thielen, interim executive director of Kentucky Retirement Systems, told the newspaper that the subpoena for the current staff member — whom he declined to identify — ordered a deposition on October 25 in New York City, adding that in total, the SEC aims to speak with about 15 people, including board members.
To date, the SEC has revealed that they are solely interested in the use of placement agents.
Wait wait wait…. $14 billion in assets a year ago, and now $4 billion? Is that right?
Let's find last year's financials: the CAFR and the audited financial statements that were released dated November 2011, and are as of June 30, 2011.
Yup, $14 billion, about.
So…. is this the same number being bruited about as above?
They mention the 2007 plan assets, so let me look at that: CAFR
…hmmm, that's about $14 billion as well.
So, no it's not the same number. Looking at what it probably is, is a subset – the KERS plan, which had about $6.3 billion in net assets in 2007 and $4.1 billion in 2011. Okay, so this shouldn't necessarily have been unexpected.
Of course, that's on the asset side, how does the liability side compare?
For KERS, pension liabilities were valued at around $11.7 billion in 2011. That's a 35% funded ratio…seriously, there's nothing all that surprising about this abysmal ratio for that particular plan. Yes, it got worse over 2012 by quite a lot, but it pretty much sucked the year before.
And what was the oh-so-great funded ratio in 2007? 63%
No, not abysmal, but remember that was the top of the market.
Your pension plan is funded at 63% when times are good? That's not a good ratio.