KRS § 21.540 — KY Code / Title IV / Chapter 21 / Section 21.540
21.540 Duties of board of trustees -- Qualified domestic relations orders -- Intent to conform with federal law -- Availability of information on website -- Conflicts of interest -- Prohibition against fees for unregulated placement agents -- Investment procurement policy -- Release of certain information from accounts of current or former legislators -- Proxy voting guidelines
Status: in_force

21.540 Duties of board of trustees -- Qualified domestic relations orders -- Intent to

conform with federal law -- Availability of information on website -- Conflicts

of interest -- Prohibition against fees for unregulated placement agents --

Investment procurement policy -- Release of certain information from

accounts of current or former legislators -- Proxy voting guidelines.

(1) (a) Except as provided in KRS 21.550, 21.560, and subsections (3) and (7) of this

section, the board of trustees of the Judicial Form Retirement System shall be

charged with the administration of KRS 6.500 to 6.577 and 21.350 to 21.510.

(b) The Judicial Form Retirement System shall have all powers necessary to

administer KRS 6.500 to 6.577 and 21.350 to 21.510 including the power to

promulgate all reasonable administrative regulations, pass upon questions of

eligibility and disability, make employments for services, to contract for

fiduciary liability insurance, investment counseling, and actuarial, auditing,

and other professional services subject to the limitations of KRS Chapters 45,

45A, 56, and 57.

(c) 1. The administrative expenses shall be paid out of an administrative

account which shall be funded by transfers of the necessary money, in

appropriate ratio, from the funds provided for in KRS 21.550 and

21.560.

2. Authorization for all administrative expenses relating to the operations

of the Judicial Form Retirement System shall be contained in the

biennial budget unit request, branch budget recommendations, and the

financial plan adopted by the General Assembly pursuant to KRS

Chapter 48.

3. The request from the Judicial Form Retirement System shall include any

specific administrative expenses requested by the board of trustees that

are not otherwise specified by this subsection.

(2) (a) A qualified domestic relations order issued by a court or administrative

agency shall be honored by the Judicial Form Retirement System if the order

is in compliance with the requirements established by the retirement system.

(b) Except in cases involving child support payments, the Judicial Form

Retirement System may charge reasonable and necessary fees and expenses to

the participant and the alternate payee of a qualified domestic relations order

for the administration of the qualified domestic relations order by the

retirement system. All fees and expenses shall be established by

administrative regulations promulgated by the board of trustees of the

retirement system. The qualified domestic relations order shall specify

whether the fees and expenses provided by this subsection shall be paid:

1. Solely by the participant;

2. Solely by the alternate payee; or

3. Equally shared by the participant and alternate payee.

(c) For purposes of this subsection, a "qualified domestic relations order" shall

mean any judgment, decree, or order, including approval of a property

settlement agreement, that:

1. Is issued by a court or administrative agency; and

2. Relates to the provision of child support, alimony payments, or marital

property rights to a spouse, former spouse, child, or other dependent of a

member.

(3) Notwithstanding any other evidence of legislative intent, it is hereby declared to be

the controlling legislative intent that the provisions of KRS 21.345 to 21.580 and

6.500 to 6.577 shall conform with federal statutes or regulations and meet the

qualification requirements under 26 U.S.C. sec. 401(a), applicable federal

regulations, and other published guidance, and the board shall have the authority to

promulgate administrative regulations, with retroactive effect if required under

federal law, to conform the Legislators' Retirement Plan and the Judicial Retirement

Plan with federal statutes and regulations and to meet the qualification requirements

under 26 U.S.C. sec. 401(a).

(4) In order to improve public transparency regarding the administration of the

Legislators' Retirement Plan and the Judicial Retirement Plan, the board of trustees

of the Judicial Form Retirement System shall adopt a best-practices model by

posting the following information to the system's website and shall make it

available to the public:

(a) Meeting notices and agendas for all meetings of the board. Notices and

agendas shall be posted to the system's website at least seventy-two (72) hours

in advance of the board or committee meetings, except in the case of special

or emergency meetings as provided by KRS 61.823;

(b) A list of the members of the board of trustees and membership on each

committee established by the board, including any investment committees;

(c) A list of system staff and each staff's salary;

(d) A list of the fund's professional consultants and their respective fees and

commissions paid by the system;

(e) A list of the system's expenditures;

(f) The annual financial audit of the system, which shall include but not be

limited to a statement of plan net assets, a statement of changes in plan net

assets, an actuarial value of assets, a schedule of investments, a statement of

funded status and funding progress, and other supporting data;

(g) All external audits;

(h) The annual actuarial valuation report of pension and retiree health benefits of

each retirement plan administered by the system, which shall include a

general statistical section and information on contributions, benefit payouts,

and retirement plan demographic data;

(i) All board minutes or other materials that require adoption or ratification by

the board of trustees or committees of the board. The items listed in this

paragraph shall be posted within seventy-two (72) hours of adoption or

ratification by the board or committees;

(j) All bylaws, policies, or procedures adopted or ratified by the board of trustees

or by committees of the board;

(k) The summary plan description for each plan administered by the system;

(l) A document or a link to documents containing an unofficial copy of the

statutes governing the plans administered by the Judicial Form Retirement

System;

(m) Investment information, including all investment holdings in aggregate, fees,

and commissions for each fund administered by the board, which shall be

updated on a quarterly basis for fiscal years beginning on or after July 1,

2017. The system shall request from all managers, partnerships, and any other

available sources all information regarding fees and commissions and shall,

based on the requested information received:

1. Disclose the dollar value of fees and commissions paid to each

individual manager or partnership;

2. Disclose the dollar value of any profit sharing, carried interest, or any

other partnership incentive arrangements, partnership agreements, or

any other partnership expenses received by or paid to each manager or

partnership; and

3. As applicable, report each fee or commission by manager or partnership

consistent with standards established by the Institutional Limited

Partners Association (ILPA).

In addition to the requirements of this paragraph, the system shall also

disclose the name and address of all individual underlying managers or

partners in any fund of funds in which system assets are invested;

(n) An update of net investment returns, asset allocations, and the performance of

the funds against benchmarks adopted by the board for each fund, for each

asset class administered by the board, and for each manager over a historical

period. The update shall be posted on a quarterly basis for fiscal years

beginning on or after July 1, 2017;

(o) All contracts or offering documents for services, goods, or property purchased

or utilized by the system. Notwithstanding KRS 61.878, all contracts,

including investment contracts, shall be subject to review by the board, the

Auditor of Public Accounts, and the Government Contract Review Committee

established pursuant to KRS 45A.705. If any public record contains material

which is not excepted under KRS 61.878, the system shall separate the

excepted material by removal, segregation, or redaction, and make the

nonexcepted material available for examination;

(p) Information regarding the system's financial and actuarial condition that is

easily understood by the members, retired members, and the public; and

(q) All proxy vote reports as provided by subsection (9) of this section.

Nothing in this subsection shall require or compel the Judicial Form Retirement

System to disclose information specific to the account of an individual member of

the Legislators' Retirement Plan or the Judicial Retirement Plan.

(5) No trustee or employee of the board shall:

(a) Have any interest, direct or indirect, in the gains or profits of any investment

or transaction made by the board, provided that the provisions of this

paragraph shall not prohibit a member or retiree of one (1) of the retirement

plans administered by the system from serving as a trustee;

(b) Directly or indirectly, for himself or herself or as an agent, use the assets of

the system, except to make current and necessary payments authorized by the

board;

(c) Become an endorser, surety, or obligor for moneys loaned by or borrowed

from the board;

(d) Have a contract or agreement with the retirement system, individually or

through a business owned by the trustee or the employee;

(e) Use his or her official position with the retirement system to obtain a financial

gain or benefit or advantage for himself or herself or a family member;

(f) Use confidential information acquired during his or her tenure with the

systems to further his or her own economic interests or that of another person;

or

(g) Hold outside employment with, or accept compensation from, any person or

business with which he or she has involvement as part of his or her official

position with the system. The provisions of this paragraph shall not prohibit:

1. A trustee from serving as a judge or member of the General Assembly;

or

2. A trustee from serving on the board if the compensation is de minimus

and incidental to the trustee's outside employment. If the compensation

is more than de minimus, the trustee shall disclose the amount of the

compensation to the other trustees and recuse himself or herself from

any matters involving hiring or retaining a person or a business from

whom more than de minimus amounts are received by the trustee. For

purposes of this section, "de minimus" means an insignificant amount

that does not raise a reasonable question as to the trustee's objectivity.

(6) Notwithstanding any other provision of KRS 6.500 to 6.577 and 21.345 to 21.580

to the contrary, no funds of the Legislators' Retirement Plan or the Judicial

Retirement Plan, including fees and commissions paid to an investment manager,

private fund, or company issuing securities, who manages systems assets, shall be

used to pay fees and commissions to placement agents. For purposes of this

subsection, "placement agent" means a third-party individual, who is not an

employee, or firm, wholly or partially owned by the entity being hired, who solicits

investments on behalf of an investment manager, private fund, or company issuing

securities.

(7) All contracts for the investment or management of assets of the system shall not be

subject to KRS Chapters 45, 45A, 56, and 57. Instead, the board shall conduct the

following process to develop and adopt an investment procurement policy with

which all prospective contracts for the investment or management of assets of the

system shall comply:

(a) On or before July 1, 2017, the board shall consult with the secretary of the

Finance and Administration Cabinet or his or her designee to develop an

investment procurement policy, which shall be written to meet best practices

in investment management procurement;

(b) Thirty (30) days prior to adoption, the board shall tender the preliminary

investment procurement policy to the secretary of the Finance and

Administration Cabinet or his or her designee for review and comment;

(c) Upon receipt of comments from the secretary of the Finance and

Administration Cabinet or his or her designee, the board shall choose to adopt

or not adopt any recommended changes;

(d) Upon adoption, the board shall tender the final investment procurement policy

to the secretary of the Finance and Administration Cabinet or his or her

designee;

(e) No later than thirty (30) days after receipt of the investment procurement

policy, the secretary or his or her designee shall certify whether the board's

investment procurement policy meets or does not meet best practices for

investment management procurement; and

(f) Any amendments to the investment procurement policy shall adhere to the

requirements set forth by paragraphs (b) to (e) of this subsection.

(8) (a) 1. Upon request by any person, the Judicial Form Retirement System shall

release the following information from the accounts of any member or

retiree of the Legislators' Retirement Plan or the Judicial Retirement

Plan, if the member or retiree is a current or former officeholder in the

Kentucky General Assembly:

a. The first and last name of the member or retiree;

b. The plan or plans in which the member has an account or from

which the retiree is receiving a monthly retirement allowance;

c. The status of the member or retiree, including but not limited to

whether he or she is a contributing to the plans but has not retired,

or a retiree drawing a monthly retirement allowance;

d. If the individual is a retiree, the monthly retirement allowance that

he or she was receiving at the end of the most recently completed

fiscal year; and

e. If the individual is a member who has not yet retired, the estimated

monthly retirement allowance that he or she is eligible to receive

on the first date he or she would be eligible for an unreduced

retirement allowance, using his or her service credit, final

compensation, and accumulated account balance at the end of the

most recently completed fiscal year.

2. No information shall be disclosed under this paragraph from an account

that is paying benefits to a beneficiary due to the death of a member or

retiree.

(b) The release of information under paragraph (a) of this subsection shall not

constitute a violation of the Open Records Act, KRS 61.870 to 61.884.

(9) (a) The board shall adopt:

1. Written proxy voting guidelines which are consistent with the fiduciary

duties and other requirements of KRS 21.450; or

2. The proxy voting guidelines of a sole investment manager under

contract with the board to act as a fiduciary in compliance with the

duties and other requirements of KRS 21.450.

(b) The board shall not adopt the recommendations of a proxy adviser or proxy

voting service and shall not allow such proxy adviser or proxy voting service

to vote on its behalf, unless the proxy adviser or proxy voting service

acknowledges in writing and accepts under contract its duties under KRS

21.450 and commits to follow the board-adopted proxy voting guidelines

when voting the system's shares in order to comply with the board's fiduciary

duties and other responsibilities under this section and KRS 21.450.

(c) All shares held by or on behalf of the system, and which the system is entitled

to vote under state, federal, or common laws, shall be voted according to the

proxy voting guidelines adopted by the board and subject to the fiduciary

duties and other requirements of this section by:

1. The board or investment committee of the board who are fiduciaries

having the authority to make investments under KRS 21.450; or

2. A proxy adviser, proxy voting service, or sole investment manager that

acknowledges in writing and accepts under contract its duties under

KRS 21.450 and commits to follow the proxy voting guidelines adopted

by the board when voting the system's shares in order to comply with

the board's fiduciary duties and other responsibilities under this section.

(d) All proxy votes shall be reported at least quarterly to the board. For each vote,

the report shall provide:

1. The vote caption;

2. The date of the vote;

3. The company's name;

4. The vote cast for the system;

5. The recommendation of the company's management; and

6. If applicable, the recommendation of the proxy adviser or proxy voting

service.