Kentucky Retirement Systems
Seven Counties Update
On October 10, 2014 the Board of Trustees of the Kentucky Retirement Systems (“KRS”) filed a Petition for direct appeals to the United States Court of Appeals for the Sixth Circuit (“Court of Appeals”) of the United States Bankruptcy Court’s May 30, 2014 Order permitting Seven Counties Services, Inc. (“Seven Counties”) to cease its participation in the Kentucky Employees Retirement System (“KERS”). Although the Court of Appeals agreed with KRS that the appeals involve “matters of public importance,” on December 30, 2014 it determined that a direct appeal was not warranted “at this time.” Consequently, the appeal of the May 30, 2014 Order will proceed to the United States District Court for the Western District of Kentucky.
Additionally, on Tuesday, January 6, 2015 the United States Bankruptcy Court issued Orders and oral findings of fact and conclusions of law confirming Seven Counties’ First Amended Plan of Reorganization in the Chapter 11 proceeding. KRS objected to the confirmation, principally on the grounds that it was improper to consider the proposed Plan until the appeals of the May 30, 2014 Order were concluded. Seven Counties’ desire to withdraw from KERS was the sole reason for the bankruptcy. The total amount of unsecured claims in the bankruptcy was only about $262,000. In comparison, as a result of the May 30, 2014 Order, Seven Counties was permitted not to pay more than $10 million in employer contributions since April 2013 and an estimated $90 million unfunded liability has been effectively transferred to the other employers participating in KERS and ultimately the taxpayers of the Commonwealth. KRS executive staff and legal counsel will review the Orders confirming Seven Counties’ Plan of Reorganization to determine appropriate further proceedings to support KRS’ appeal of the May 30, 2014 Order.