KRS § 78.782 — KY Code / Title IX / Chapter 78 / Section 78.782
78.782 County Employees Retirement System board of trustees -- Appointed and elected membership, vacancies, compensation, duties, and meetings -- Board granted powers and privileges of corporation -- Chief executive officer and general counsel -- Annual Comprehensive Financial Report -- Expenses -- Action for damages -- Appeals -- Transparency -- Limitations on use of funds
Status: in_force

78.782 County Employees Retirement System board of trustees -- Appointed and

elected membership, vacancies, compensation, duties, and meetings -- Board

granted powers and privileges of corporation -- Chief executive officer and

general counsel -- Annual Comprehensive Financial Report -- Expenses --

Action for damages -- Appeals -- Transparency -- Limitations on use of funds.

(1) The County Employees Retirement System shall be administered by the board of

trustees composed of nine (9) members, who shall be selected as follows:

(a) Three (3) trustees, who shall be members or retired from the County

Employees Retirement System, elected by the members and retired members

of the County Employees Retirement System, of which:

1. Two (2) shall have a majority of his or her service credit earned in the

County Employees Retirement System in a nonhazardous position; and

2. One (1) shall have a majority of his or her service credit earned in the

County Employees Retirement System in a hazardous position;

(b) Six (6) trustees appointed by the Governor, subject to Senate confirmation in

accordance with KRS 11.160 for each appointment or reappointment. Of the

six (6) trustees appointed by the Governor:

1. One (1) trustee with retirement experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky League of Cities;

2. One (1) trustee with investment experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky League of Cities;

3. One (1) trustee with retirement experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky Association of

Counties;

4. One (1) trustee with investment experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky Association of

Counties;

5. One (1) trustee with retirement experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky School Boards

Association; and

6. One (1) trustee with investment experience shall be appointed from a list

of three (3) applicants submitted by the Kentucky School Boards

Association.

Notwithstanding the provisions of KRS 12.070(3), the Governor shall appoint

each individual trustee described by subparagraphs 1. to 6. of this paragraph

solely from each corresponding individual list required to be submitted by the

Kentucky League of Cities, the Kentucky Association of Counties, or the

Kentucky School Boards Association as provided by subparagraphs 1. to 6. of

this paragraph, and the Governor shall not be able to reject the list of

applicants submitted, request that another list be provided, or use a list

different from the one (1) individual list required to be submitted for each

specific appointment or reappointment;

(c) For purposes of paragraph (b) of this subsection, a trustee with "investment

experience" means an individual who does not have a conflict of interest, as

provided by KRS 61.655, and who has at least ten (10) years of experience in

one (1) of the following areas of expertise:

1. A portfolio manager acting in a fiduciary capacity;

2. A professional securities analyst or investment consultant;

3. A current or retired employee or principal of a trust institution,

investment or finance organization, or endowment fund acting in an

investment-related capacity;

4. A chartered financial analyst in good standing as determined by the

CFA Institute; or

5. A university professor, teaching investment-related studies; and

(d) For purposes of paragraph (b) of this subsection, a trustee with "retirement

experience" means an individual who does not have a conflict of interest, as

provided by KRS 61.655, and who has at least ten (10) years of experience in

one (1) of the following areas of expertise:

1. Experience in retirement or pension plan management;

2. A certified public accountant with relevant experience in retirement or

pension plan accounting;

3. An actuary with relevant experience in retirement or pension plan

consulting;

4. An attorney licensed to practice law in the Commonwealth of Kentucky

with relevant experience in retirement or pension plans; or

5. A current or former university professor whose primary area of

emphasis is economics or finance.

(2) The board is hereby granted the powers and privileges of a corporation, including

but not limited to the following powers:

(a) To sue and be sued in its corporate name;

(b) To make bylaws not inconsistent with the law;

(c) To conduct the business and promote the purposes for which it was formed;

(d) Except as provided in KRS 78.790(6), to contract for investment counseling,

auditing, medical, and other professional or technical services as required to

carry out the obligations of the board subject to the provisions of KRS

Chapters 45, 45A, 56, and 57. Actuarial consulting services shall be provided

by a firm hired by the Kentucky Public Pensions Authority;

(e) To purchase fiduciary liability insurance;

(f) Except as provided in KRS 78.790(6), to acquire, hold, sell, dispose of,

pledge, lease, or mortgage, the goods or property necessary to exercise the

board's powers and perform the board's duties subject to KRS Chapters 45,

45A, and 56; and

(g) The board shall reimburse any trustee, officer, or employee for any legal

expense resulting from a civil action arising out of the performance of his or

her official duties. The hourly rate of reimbursement for any contract for legal

services under this paragraph shall not exceed the maximum hourly rate

provided in the Legal Services Duties and Maximum Rate Schedule

promulgated by the Government Contract Review Committee established

pursuant to KRS 45A.705, unless a higher rate is specifically approved by the

secretary of the Finance and Administration Cabinet or his or her designee.

(3) Notwithstanding the provisions of subsection (1) of this section, each trustee shall

serve a term of four (4) years or until his or her successor is duly qualified except as

otherwise provided in this section. An elected or appointed trustee shall not serve

more than three (3) consecutive four (4) year terms. An elected or appointed trustee

who has served three (3) consecutive terms may be elected or appointed again after

an absence of four (4) years from the board.

(4) (a) The trustees selected by the membership of the system shall be elected by

ballot. For each trustee to be elected, the board may nominate, not less than

six (6) months before a term of office of a trustee is due to expire, three (3)

constitutionally eligible individuals.

(b) Individuals may be nominated by the system members by presenting to the

executive director, not less than four (4) months before a term of office of a

trustee is due to expire, a petition, bearing the name, last four (4) digits of the

Social Security number, and signature of no less than one-tenth (1/10) of the

number voting in the last election by the system members.

(c) Within four (4) months of the nominations made in accordance with

paragraphs (a) and (b) of this subsection, the executive director shall cause to

be prepared an official ballot. The ballot shall carry the name, address, and

position title of each individual nominated by the board and by petition.

Provision shall also be made for write-in votes.

(d) Except as provided by paragraph (j) of this subsection, the ballots shall be

distributed to the eligible voters by mail to their last known residence address

on file with the Kentucky Public Pensions Authority. Ballots shall not be

distributed by mail to member addresses reported as invalid to the Kentucky

Public Pensions Authority.

(e) The ballots shall be addressed to the County Employees Retirement System in

care of a predetermined box number at a United States Post Office or

submitted electronically or by telephone as provided by paragraph (j) of this

subsection. Access to this post office box shall be limited to the board's

contracted firm. The individual receiving a plurality of votes shall be declared

elected.

(f) The eligible voter shall cast his or her ballot by selecting the candidate of his

or her choice. He or she shall sign and mail the ballot or cast the ballot online,

by telephone, or by any other electronic means made available by the

Authority at least thirty (30) days prior to the date the term to be filled is due

to expire. The latest mailing date, or date to cast telephonic or electronic

ballots, shall be provided on the ballot.

(g) The board's contracted firm shall report in writing the outcome to the chair of

the board of trustees. Costs of an election shall be payable from the funds of

the system.

(h) For purposes of this subsection, an eligible voter shall be a person who was a

member of the system on December 31 of the year preceding the election

year.

(i) Each individual who submits a request to be nominated by the board under

paragraph (a) of this subsection and each individual who is nominated by the

membership under paragraph (b) of this subsection shall:

1. Complete an application developed by the system which shall include

but not be limited to a disclosure of any prior felonies and any conflicts

of interest that would hinder the individual's ability to serve on the

board;

2. Submit a resume detailing the individual's education and employment

history and a cover letter detailing the member's qualifications for

serving as trustee to the board; and

3. Authorize the system to have a criminal background check performed.

The criminal background check shall be performed by the Department

of Kentucky State Police.

(j) In lieu of the ballots mailed to members and retired members as provided by

this subsection, the systems may by promulgation of administrative regulation

pursuant to KRS Chapter 13A conduct trustee elections using electronic

ballots or by telephone, except that the systems shall mail a paper ballot upon

request of any eligible voter.

(5) (a) Any vacancy which may occur in an appointed position during a term of

office shall be filled in the same manner which provides for the selection of

the particular trustee, and any vacancy which may occur in an elected position

during a term of office shall be filled by appointment by a majority vote of the

remaining elected trustees; however, any vacancy shall be filled only for the

duration of the unexpired term. In the event of a vacancy of an elected trustee

during a term of office, the system shall notify members of the vacancy and

the opportunity to be considered for the vacant position. Any vacancy shall be

filled within ninety (90) days of the position becoming vacant.

(b) Any appointments or reappointments to an appointed position on the board

shall be made at least thirty (30) days prior to an appointed member's term of

office ending. The Governor's Office shall, with each appointment or

reappointment, request lists to be submitted and base selections on those lists

solely under the procedures and requirements provided by subsection (1)(b) of

this section.

(6) (a) Membership on the board of trustees shall not be incompatible with any other

office unless a constitutional incompatibility exists. No trustee shall serve in

more than one (1) position as trustee on the board and, if a trustee holds more

than one (1) position as trustee on the board, he or she shall resign a position.

(b) A trustee shall be removed from office upon conviction of a felony or for a

finding of a violation of any provision of KRS 11A.020 or 11A.040 by a court

of competent jurisdiction.

(c) A current or former employee of the County Employees Retirement System,

Kentucky Retirement Systems, or the Kentucky Public Pensions Authority

shall not be eligible to serve as a member of the board.

(7) Trustees who do not otherwise receive a salary from the State Treasury shall

receive a per diem of eighty dollars ($80) for each day they are in session or on

official duty, and they shall be reimbursed for their actual and necessary expenses

in accordance with state administrative regulations and standards.

(8) (a) The board shall meet at least once in each quarter of the year and may meet in

special session upon the call of the chair or the chief executive officer.

(b) The board shall elect a chair and a vice chair. The chair shall not serve more

than four (4) consecutive years as chair or vice chair of the board. The vice

chair shall not serve more than four (4) consecutive years as chair or vice

chair of the board. A trustee who has served four (4) consecutive years as

chair or vice chair of the board may be elected chair or vice chair of the board

after an absence of two (2) years from the positions.

(c) A majority of the trustees shall constitute a quorum, and all actions taken by

the board shall be by affirmative vote of a majority of the trustees present.

(9) (a) The board of trustees shall appoint or contract for the services of a chief

executive officer and general counsel and fix the compensation and other

terms of employment for these positions without limitation of the provisions

of KRS Chapters 18A and 45A and KRS 64.640. The chief executive officer

shall serve as the legislative and executive adviser to the board. The general

counsel shall serve as legal adviser to the board. The chief executive officer

and general counsel shall work with the executive director of the Kentucky

Public Pensions Authority to carry out the provisions of KRS 78.510 to

78.852. The executive director of the Kentucky Public Pensions Authority

shall be the chief administrative officer of the board.

(b) The board shall require the chief executive officer and may require the general

counsel to execute bonds for the faithful performance of his or her duties

notwithstanding the limitations of KRS Chapter 62.

(c) The board shall have a system of accounting established by the Kentucky

Public Pensions Authority.

(d) The board shall do all things, take all actions, and promulgate all

administrative regulations, not inconsistent with the provisions of KRS 78.510

to 78.852, necessary or proper in order to carry out the provisions of KRS

78.510 to 78.852. Notwithstanding any other evidence of legislative intent, it

is hereby declared to be the controlling legislative intent that the provisions of

KRS 78.510 to 78.852 conform with federal statute or regulation and meet the

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

regulations, and other published guidance. Provisions of KRS 78.510 to

78.852 which conflict with federal statute or regulation or qualification under

26 U.S.C. sec. 401(a), applicable federal regulations, and other published

guidance shall not be available. The board shall have the authority to

promulgate administrative regulations to conform with federal statute and

regulation and to meet the qualification requirements under 26 U.S.C. sec.

401(a), including an administrative regulation to comply with 26 U.S.C. sec.

401(a)(9).

(e) Notwithstanding any other provision of statute to the contrary, including but

not limited to any provision of KRS Chapter 12, the Governor shall have no

authority to change any provision of KRS 78.510 to 78.852 by executive order

or action, including but not limited to reorganizing, replacing, amending, or

abolishing the membership of the County Employees Retirement System

board of trustees.

(10) The chief executive officer and general counsel of the board shall serve during its

will and pleasure. Notwithstanding any statute to the contrary, the chief executive

officer shall not be considered a legislative agent under KRS 6.611.

(11) The Attorney General, or an assistant designated by him or her, may attend each

meeting of the board and may receive the agenda, board minutes, and other

information distributed to trustees of the board upon request. The Attorney General

may act as legal adviser and attorney for the board, and the board may contract for

legal services, notwithstanding the limitations of KRS Chapter 12 or 13B.

(12) (a) The Kentucky Public Pensions Authority shall publish an annual financial

report showing all receipts, disbursements, assets, and liabilities for the

systems. The annual report shall include a copy of an audit conducted in

accordance with generally accepted auditing standards. Except as provided by

paragraph (b) of this subsection, the board may select the independent

certified public accountant hired by the Kentucky Public Pensions Authority

or the Auditor of Public Accounts to perform the audit. If the audit is

performed by an independent certified public accountant, the Auditor of

Public Accounts shall not be required to perform an audit pursuant to KRS

43.050(2)(a), but may perform an audit at his or her discretion. All

proceedings and records of the board shall be open for inspection by the

public. The Kentucky Public Pensions Authority shall make copies of the

audit required by this subsection available for examination by any member,

retiree, or beneficiary in the offices of the County Employees Retirement

System and in other places as necessary to make the audit available to all

members, retirees, and beneficiaries. A copy of the annual audit shall be sent

electronically to the Legislative Research Commission no later than ten (10)

days after receipt by the board.

(b) At least once every five (5) years, the Auditor of Public Accounts shall

perform the audit described by this subsection, and the system shall reimburse

the Auditor of Public Accounts for all costs of the audit. The Auditor of

Public Accounts shall determine which fiscal year during the five (5) year

period the audit prescribed by this paragraph will be completed.

(13) All expenses incurred by or on behalf of the system and the board in the

administration of the system during a fiscal year shall be paid from the retirement

allowance account, including any administrative expenses for the Kentucky Public

Pensions Authority that are assigned to the County Employees Retirement System

by KRS 61.505. The board shall submit any administrative expenses that are

specific to the County Employees Retirement System that are not otherwise covered

by KRS 61.505(11)(a).

(14) Except as provided under subsection (16) of this section or KRS 61.665, any person

adversely affected by a decision of the board involving KRS 78.510 to 78.852 may

appeal the decision of the board to the Franklin Circuit Court within sixty (60) days

of the board action.

(15) (a) A trustee shall discharge his or her duties as a trustee, including his or her

duties as a member of a committee:

1. In good faith;

2. On an informed basis; and

3. In a manner he or she honestly believes to be in the best interest of the

County Employees Retirement System.

(b) A trustee discharges his or her duties on an informed basis if, when he or she

makes an inquiry into the business and affairs of the system or into a

particular action to be taken or decision to be made, he or she exercises the

care an ordinary prudent person in a like position would exercise under

similar circumstances.

(c) In discharging his or her duties, a trustee may rely on information, opinions,

reports, or statements, including financial statements and other financial data,

if prepared or presented by:

1. One (1) or more officers or employees of the system or Authority whom

the trustee honestly believes to be reliable and competent in the matters

presented;

2. Legal counsel, public accountants, actuaries, or other persons as to

matters the trustee honestly believes are within the person's professional

or expert competence; or

3. A committee of the board of trustees of which he or she is not a member

if the trustee honestly believes the committee merits confidence.

(d) A trustee shall not be considered as acting in good faith if he or she has

knowledge concerning the matter in question that makes reliance otherwise

permitted by paragraph (c) of this subsection unwarranted.

(e) Any action taken as a trustee, or any failure to take any action as a trustee,

shall not be the basis for monetary damages or injunctive relief unless:

1. The trustee has breached or failed to perform the duties of the trustee's

office in compliance with this section; and

2. In the case of an action for monetary damages, the breach or failure to

perform constitutes willful misconduct or wanton or reckless disregard

for human rights, safety, or property.

(f) A person bringing an action for monetary damages under this section shall

have the burden of proving by clear and convincing evidence the provisions of

paragraph (e)1. and 2. of this subsection, and the burden of proving that the

breach or failure to perform was the legal cause of damages suffered by the

system.

(g) In discharging his or her administrative duties under this section, a trustee

shall strive to administer the system in an efficient and cost-effective manner

for the taxpayers of the Commonwealth of Kentucky and shall take all actions

available under the law to contain costs for the trusts, including costs for

participating employers, members, and retirees.

(16) When an order by the system substantially impairs the benefits or rights of a

member, retired member, or recipient, except action which relates to entitlement to

disability benefits, or when an employer disagrees with an order of the system as

provided by KRS 61.598, the affected member, retired member, recipient, or

employer may request a hearing to be held in accordance with KRS Chapter 13B.

The board may establish an appeals committee whose members shall be appointed

by the chair and who shall have authority to act upon the recommendations and

reports of the hearing officer on behalf of the board. The member, retired member,

recipient, or employer aggrieved by a final order of the board following the hearing

may appeal the decision to the Franklin Circuit Court, in accordance with KRS

Chapter 13B. The board may establish a joint administrative appeals committee

with the Kentucky Retirement Systems and may also establish a joint disability

appeals committee with the Kentucky Retirement Systems.

(17) The board shall establish a formal trustee education program for all trustees of the

board. The program shall include but not be limited to the following:

(a) A required orientation program for all new trustees elected or appointed to the

board. The orientation program shall include training on:

1. Benefits and benefits administration;

2. Investment concepts, policies, and current composition and

administration of system investments;

3. Laws, bylaws, and administrative regulations pertaining to the system

and to fiduciaries; and

4. Actuarial and financial concepts pertaining to the system.

If a trustee fails to complete the orientation program within one (1) year from

the beginning of his or her first term on the board, the system shall withhold

payment of the per diem and travel expenses due to the board member under

this section until the trustee has completed the orientation program;

(b) Annual required training for board members on the administration, benefits,

financing, and investing of the system. If a trustee fails to complete the annual

required training during the calendar or fiscal year, the retirement system shall

withhold payment of the per diem and travel expenses due to the board

member under this section until the board member has met the annual training

requirements; and

(c) The system shall incorporate by reference in an administrative regulation,

pursuant to KRS 13A.2251, the trustee education program.

(18) In order to improve public transparency regarding the administration of the system,

the board of trustees shall adopt a best practices model by posting the following

information to the Kentucky Public Pensions Authority's website and shall make

available to the public:

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

agendas shall be posted to the Kentucky Public Pensions Authority'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) The Annual Comprehensive Financial Report with the information as follows:

1. A general overview and update on the system by the executive director;

2. A listing of the board of trustees;

3. A listing of key staff;

4. An organizational chart;

5. Financial information, including 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;

6. Investment information, including a general overview, a list of the

system's professional consultants, a total net of fees return on system

investments over a historical period, an investment summary, contracted

investment management expenses, transaction commissions, and a

schedule of investments;

7. The annual actuarial valuation report on the pension benefit and the

medical insurance benefit; and

8. A general statistical section, including information on contributions,

benefit payouts, and retirement system demographic data;

(c) All external audits;

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

the board of trustees. The items listed in this paragraph shall be posted within

three (3) business days of adoption or ratification of the board;

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

trustees;

(f) The system's summary plan description;

(g) A document containing an unofficial copy of the statutes governing the

system;

(h) A listing of the members of the board of trustees and membership on each

committee established by the board, including any investment committees;

(i) 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, 2021. 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;

(j) An update of net of fees 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.

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

or after July 1, 2021;

(k) A searchable database of the system's expenditures and a listing of each

individual employed by the system along with the employee's salary or wages.

In lieu of posting the information required by this paragraph to the Kentucky

Public Pensions Authority's website, the system may provide the information

through a website established by the executive branch to inform the public

about public employee salaries and wages;

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

or utilized by the system for contracts or offering documents entered into on

or after July 1, 2021;

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

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

(n) All proxy vote reports as provided by KRS 78.790(7).

(19) Notwithstanding the requirements of subsection (18) of this section, the system

shall not be required to furnish information that is protected under KRS 61.661,

exempt under KRS 61.878, or that, if disclosed, would compromise the system's

ability to competitively invest in real estate or other asset classes, except that no

provision of this section or KRS 61.878 shall exclude disclosure and review of all

contracts, including investment contracts, by the board, the Auditor of Public

Accounts, and the Government Contract Review Committee established pursuant to

KRS 45A.705 or the disclosure of investment fees and commissions as provided by

this section. If any public record contains material which is not excepted under this

section, the system shall separate the excepted material by removal, segregation, or

redaction, and make the nonexcepted material available for examination.

(20) Notwithstanding any other provision of KRS 78.510 to 78.852 to the contrary, no

funds of the County Employees Retirement System, 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.