Request By:
James E. Ruth, President
City of Covington Police and
Fire Retirement Fund
Room 204
3rd and Court Streets
Covington, Kentucky 41001
Opinion
Opinion By: Steven L. Beshear, Attorney General; Walter C. Herdman, Assistant Deputy Attorney General
As President of the Covington Police and Fire Retirement Fund you request a clarification of KRS 95.859 which provides for a cost of living increase in pension annuities "as may be supported on an actuarial basis by the fund." With respect to this statute you relate the following facts and questions:
"In 1976, it was determined that our fund had an unfunded prior service liability of some $11,000,000. An actuarial determination, to be made in 1981, will most probably continue to show an unfunded liability. Thus our question is: Based on the wording of KRS 95.859, does the Board of Trustees have the power to grant this cost of living increase, in spite of the unfunded liability?"
In answer to your question KRS 95.859 must be read in conjunction with KRS 95.872(6). The initial statute provides in part that within six months after the performance of the actuarial study required by KRS 95.872(6) the rate of retirement annuities shall be increased by an amount determined by the study to reflect so much of the increase in the cost of living of such annuities as may be supported on an actuarially sound basis by the fund. KRS 95.872(6) provides for the Board to employ actuarial assistance from time to time and at least every five years an actuarial survey and investigation shall be made of the operational expenses of the fund including a study of rates, mortalities, disabilities, retirements, separation from service and other essential factors. This subsection further provides the following:
"The actuarial shall recommend all mortalities and interest tables to be adopted by the board and shall recommend, if appropriate, cost of living increases as provided in KRS 95.859." [Emphasis added].
In the event such survey is not taken any member of the fund may obtain an injunction or mandamus requiring such survey and investigation.
Under the terms of the above-referred to statute it is clear the cost of living increases in pension annuities are to be based upon an actuarial study and it would be up to the actuary employed for this purpose to determine whether or not a cost of living increase would be feasible under the circumstances. As a consequence this office cannot make such a determination with respect to the unfunded liability to which you refer.