Consultants to Kentucky Pension: You Can’t Invest Your Way Out of Funding Hole


An investment firm hired in a consultancy role by the Kentucky Retirement Systems said this week that there is no way the state could invest its way out of its funding crisis.

KRS’ funding situation has become so untenable, according to a report produced by the consultants, that the only funding solution is higher contributions from the state and employees.

From the State-Journal:

The investment firm said after conducting the study it found the plan would undergo financial hurdles in the next 20 years based on the current contribution rate.

Those hurdles included “persistent funding shortfalls, elevated contribution levels, unsustainable payout ratios and in the worst-case scenario, the potential for complete depletion of the asset base.”

In its key conclusions, the study candidly summed up the information based on the last actuarial valuation (June 30, 2014) that no “reasonable investment strategy available to KERS non-hazardous plan would allow the plan to invest its way to significantly improved financial status,” and would not improve without also “courting substantial risk to the already diminished asset base.”


Overall, the rate of return on investments would have to consistently yield a 11.3 percent return for the next 10 years to bring the plan to full funding and that isn’t realistic for the state’s pension system.

The KERS non-hazardous fund is the worst-funded public pension system in the country; the system was funded at 21 percent as of December.


Photo credit: “Ky With HP Background” by Original uploader was HiB2Bornot2B at en.wikipedia – Transferred from en.wikipedia; transfer was stated to be made by User:Vini 175.. Licensed under CC BY-SA 2.5 via Wikimedia Commons

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One Response to “Consultants to Kentucky Pension: You Can’t Invest Your Way Out of Funding Hole”

  1. Doug Price says:

    Regrading increased contributions by the State and the Employee: the employees contribute about $100 Million/year. So if the employees contribute twice as much then barring any economic downturns we should be at full funding in only 90 YEARS!

    The real problem is that the Governors/Legislators failed to fund the full ARC for many years between 1992-2012 to the tune of $2.6 BILLION dollars. I have calculated we would have approximately $3.4 BILLION more in the fund which would translate to a funded ratio of 55%.

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