Bill Would Ban Use of Placement Agents by KY Retirement Systems

February 15, 2011 ( – Kentucky lawmakers have proposed a bill to ban the use of assets of state retirement systems from paying placement agents.

HB 480 would prohibit assets of the Kentucky Retirement System, Kentucky Teachers’ Retirement System, and Judicial Form Retirement System from being used to pay placement agents. Under the legislation, conflict-of-interest provisions applicable to trustees and employees of the systems would be established.  

The measure requires that the Auditor of Public Accounts audit the systems at least once every five years with the systems paying all costs of the audit. The systems would have to make system expenditures and employee salaries available on a Web site.  

The bill would also limit the number of terms system members can serve and would limit the chair of each retirement system from serving more than six consecutive years.  

Chris Tobe, a trustee for the Kentucky Retirement Sytem, expressed strong support for the bill, and said in a statement: “KRS needs placement agents like a dog needs ticks.” He makes the point that larger state plans like KRS have national Independent Consultants and professional staff to find the best managers.  

Last year, an audit found that money managers doing business with the Kentucky Retirement System have paid almost $13 million since 2004 to placement agents (see KY Pension Officials Release Placement Agent Audit).