Screen Shot 2014-11-10 at 11.29.22 AMManual High School history teacher Randolph Wieck filed a class-action lawsuit this morning against the Kentucky Teachers’ Retirement System, alleging their administrators have been negligent in protecting teachers’ pensions from chronic underfunding by the state and bad investments that now place it among the worst-funded teachers’ pension systems in the country.

The class-action suit was filed on behalf of the more than 140,000 teachers who have paid into KTRS, which as of last year was only 52 percent funded and $14 billion in the red. Due to new accounting standards set by the federal government, this underfunding now is assumed to have jumped to $22 billion, which would place the pension’s funding under 50 percent. A decade ago, KTRS funding was over 80 percent.

Wieck was one of the founders of the Teacher Retirement Legal Fund, a group of Louisville teachers formed this spring that had planned on suing state government over the chronic underfunding of KTRS in the last five years, which amounted to $1.8 billion below the level requested by KTRS. But instead of launching a suit against Gov. Steve Beshear and the Kentucky General Assembly, Wieck’s suit targets KTRS for not being an aggressive advocate on behalf of teachers and making poor investment decisions with the funds they have received.

When asked about the change in the suit’s target, Wieck told Insider Louisville he may follow up this lawsuit with more legal action.

“It’s a fluid situation,” said Wieck. “This may not be the only suit. But this is the shot across the bow. (Suing) the others is still an option.”

Besides accusing the KTRS administration of failing to “lobby the general assembly aggressively” for their full funding, the suit also accuses KTRS of failing their fiduciary duties by keeping their membership in the dark about the pension system’s poor financial footing.

“The board, on its website and in its regular communications with participants, has not discussed this issue, and it can be argued, has covered up the fact that KTRS is one of the worst funded teacher pension plans in the country,” reads the lawsuit. “They have not disclosed to the broader teacher population in a meaningful way the ongoing $400 million-a-year underfunding, and the extremely damaging impact of this underfunding on the solvency of the plan.”

Wieck’s suit also accuses KTRS of “not aggressively exposing flawed and biased research in the legislature’s pension reform process,” particularly that of the Arnold Foundation, whose recommendations guided the legislature’s pension reform bill of 2013. The National Education Association and American Federation of Teachers have targeted the Arnold Foundation as enemies of teachers’ pensions, in addition to various Democrats in the state House that year. The suit also claims KTRS’s main investment consultant and one of their investment managers — Enis Knupp-AON and Highbridge, respectively — are on an AFT “caution list” for working against teacher pension funding nationwide.

Additionally, the suit accuses KTRS of inappropriately investing in high-risk alternative investments, such as hedge funds and private equity, also noting that KTRS has not publicly supported legislation that requires full disclosure of contracts on such investments and has refused to provide the contracts for such investment managers.

The plaintiff demands that KTRS “communicate fully and honestly to its members” on the severe state of its underfunding, “immediately demand full funding from the General Assembly in a public forum” and “initiate an aggressive lobbying campaign,” and that it “amend its investment guidelines to allow only investments appropriate for fiduciaries,” requiring investment managers to follow state ethics requirements and exclude those on the AFT watch list.

KTRS attorney Beau Barnes told Insider Louisville he has not seen the lawsuit and did not have any immediate comment.

In the past, Wieck has been very critical of the lack of support for his effort from the Jefferson County Teachers Association, whose union represents Louisville-area teachers. He said it’s odd that teachers unions in other states such as Illinois and New Jersey have joined legal fights on the underfunding of their pensions, but those in Kentucky have chosen the stay on the sidelines.

“Their belief is there is no standing until participants have a benefits check reduced, and also this would damage their access to the legislature,” said Wieck. “And my response is that if they had such open access, our retirement wouldn’t be in such dismal shape. The numbers speak for themselves.”

JCTA president Brent McKim told Insider Louisville in an email that his organization “respects Mr. Wieck’s right to litigate the issue, but does not believe suing the people in charge of funding the system is the best approach to solving the problem.” McKim adds that “this is fundamentally a legislative problem that requires a legislative solution. Even in the very unlikely event Mr. Wieck’s lawsuit were successful, it would only mean the Supreme Court would have found KTRS funding unconstitutional. It would still be up to the legislature to fix the problem.”

The full lawsuit, which is in Jefferson Circuit Court’s 9th Division before Judge Judith McDonald-Burkman, can be read below:

KTRS suit

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Joe Sonka is a staff writer at Insider Louisville focusing on government, politics, education and public safety. He is a former news editor and staff writer at LEO Weekly and has also freelanced for The Nation and ThinkProgress. He has won first place awards from the Louisville Metro chapter of the Society of Professional Journalists in the categories of Health Reporting, Enterprise Reporting, Government/Politics, Minority/Women’s Affairs Reporting, Continuing Coverage and Best Blog. Email him at [email protected]


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