LOUISVILLE, KY (WAVE) – In a landmark ruling, a judge decided Seven Counties Services is a non-government agency and can move forward with filing Chapter 11 bankruptcy and its efforts to leave the Kentucky Retirement System (KRS).
It was April 4, 2013 when Seven Counties filed for Chapter 11 bankruptcy with the United States Bankruptcy Court, Western District of Kentucky, because of rising pension costs.
On Friday, Judge Joan Lloyd issued a ruling that gives Seven Counties the ability to leave KRS, which the agency called an unsustainable financial burden in a press release Saturday.
According to the KRS website, the current employer contribution rate for the KERS Non-Hazardous system, which Seven Counties paid into, is 26.8%. That is scheduled to rise to 38.6% starting in July.
"Seven Counties contributed over $360,000 bi-weekly," the press release reads. "These are dollars that are desperately needed to maintain and expand the services our 31,000 clients need to live to their fullest potentials."
The agency made clear they transferred all their employees to a 403(b) retirement plan.
With the state retirement system already underfunded, the withdrawal of Seven Counties is cause for concern for government agencies paying into the system.
This ruling may also set a precedent for similar agencies paying into KRS to be classified as non-governmental.
"We are deeply disappointed that Seven Counties Services has been granted the authority to walk away from its pension obligation and further imperil the stability of the fragile Kentucky Employees Retirement System non-hazardous pension fund. As stakeholders, we are counting on the Kentucky Retirement Systems board to appeal this ruling."