Request By:
Mr. John A. Bankemper
City Attorney
130 N. Ft. Thomas Ave.
Ft. Thomas, Kentucky 41075
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of October 27, 1980, in which you refer to OAG 80-355 concerning the investment of pension funds of police and firemen in cities of the 4th class, and ask that we reconsider the conclusions reached in this opinion in view of a 1980 amendment to KRS 95.772 effective July 15, 1980, which was subsequent to the opinion.
In OAG 80-355 we took the position, as you know, that no specific authorization exists that would permit the board of trustees of the pension fund to divest itself of the handling of said fund by contracting with an investment company or counselor. We also cited previous opinions holding to the same view. This opinion was based upon the plain language of KRS 95.769 declaring that the board shall have the exclusive control and management of the fund. At the time OAG 80-355 was issued, KRS 95.772 concerning the investment of pension funds, contained no language that would in any way alter the mandate of KRS 97.769, and as a matter of fact still does not under the 1980 amendment in our opinion.
The 1980 amendment to KRS 95.769 presumedly now gives the board the power to invest the pension funds in its name or in a "nominee name as provided by KRS 287.225." KRS 287.225 authorizes the appointment of a nominee or nominees by a fiduciary such as in this case, the board of trustees, to handle and personally invest the trust or pension fund in his or its own name, with liability for any loss incurred by the nominee to be that of the Board.
Though the language of the 1980 amendment to KRS 95.772 is not completely clear, it does suggest that the board of trustees could contract with an investing counseling firm or counselor to handle the investment of the funds; however, the board cannot relinquish its overall control and management of the fund which is clearly dictated by KRS 95.769. Such a dual procedure which appears to be permitted may however, be difficult to comply with.
As an example of a clearly stated statute on the subject of investing pension funds, we call your attention to the language found in a 1980 amendment to KRS 95.873 pertaining to second class cities which reads as follows:
"The board may, at its own cost, employ or engage consultants to provide investment advice to aid the board in its determinations."
We believe that a legislative clarification of these statutes is definitely needed. In the meantime OAG 80-355 is modified as indicated above.