161.420 Funds of retirement system. - Kentucky Statutes

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161.420 Funds of retirement system. All of the assets of the retirement system are for the exclusive purpose of providing
benefits to members and annuitants and defraying reasonable expenses of administering
the system. The board of trustees shall be the trustee of all funds of the system and shall
have full power and responsibility for administering the funds. It is hereby declared that
the restrictions and rights provided herein shall not be subject to reduction or impairment
by alteration, amendment, or repeal. All the assets of the retirement system shall be
credited according to the purpose for which they are held to one (1) of the following
funds:
(1) The expense fund shall consist of the funds set aside from year to year by the board of trustees to defray the expenses of the administration of the retirement system.
Each fiscal year an amount not greater than four percent (4%) of the dividends and
interest income earned from investments during the immediate past fiscal year shall
be set aside into the expense fund or expended for the administration of the
retirement system; (2) The teachers' savings fund shall consist of the contributions paid by members of the retirement system into this fund and regular interest assigned by the board of
trustees from the guarantee fund. A member may not borrow any amount of his or
her accumulated contributions to this fund, or any interest earned thereon. The
accumulated contributions of a member returned to him upon his withdrawal or
paid to his estate or designated beneficiary in the event of his death shall be paid
from the teachers' savings fund. Any accumulated contributions forfeited by a
failure of a teacher or his estate to claim these contributions shall be transferred
from the teachers' savings fund to the guarantee fund. The accumulated
contributions of a member shall be transferred from the teachers' savings fund to the
allowance reserve fund in the event of retirement by reason of service or disability; (3) The state accumulation fund shall consist of funds appropriated by the state for the purpose of providing annuities and survivor benefits, including any sums
appropriated for meeting unfunded liabilities, together with regular interest assigned
by the board of trustees from the guarantee fund. At the time of retirement or death
of a member there shall be transferred from the state accumulation fund to the
allowance reserve fund an amount which together with the sum transferred from the
teachers' savings fund will be sufficient to provide the member a retirement
allowance and provide for benefits under KRS 161.520 and 161.525; (4) The allowance reserve fund shall be the fund from which shall be paid all retirement allowances and benefits provided under KRS 161.520 and 161.525. In addition,
whenever a change in the status of a member results in an obligation on this fund,
there shall be transferred to this fund from the teachers' savings fund and the state
accumulation fund, the amounts as may be held in those funds for the account or
benefit of the member; (5) (a) The medical insurance fund, which is an account established according to 26 U.S.C. sec. 401(h), shall consist of amounts accumulated for the purpose of
providing benefits as provided in KRS 161.675, including: 1. For individuals who become members before July 1, 2008, one and one-
half percent (1.5%) of the gross annual payroll of all members shall be
deposited to this fund. Of this amount, three-quarters of a percent
(0.75%) shall derive from member contributions as provided by KRS
161.540 and three-quarters of a percent (0.75%) from a state
appropriation; 2. For individuals who become members on or after July 1, 2008, two and
one-half percent (2.5%) of the gross annual payroll of all members shall
be deposited to this fund. Of this amount, one and three-quarters percent
(1.75%) shall derive from member contributions as provided by KRS
161.540 and three-quarters of a percent (0.75%) from a state
appropriation; 3. Effective July 1, 2010, the member contributions required under KRS
161.540(1)(c); 4. Effective July 1, 2010, local board of education, agency, and
organization contributions required under KRS 161.550(3), unless the
board of trustees establishes a trust fund under 26 U.S.C. sec. 115 for
health care purposes, in which case the board may direct those
contributions to that trust fund; 5. Employer medical insurance fund stabilization contributions as set forth
in KRS 161.550, unless the contributions are made to a trust fund under
26 U.S.C. sec. 115 established by the board for this purpose; and 6. Interest income from the investments of the fund from contributions
received by the fund under subparagraphs 1. to 5. of this paragraph, and
from income earned on those investments. (b) All claims for benefits under KRS 161.675 shall be paid from this fund or from any trust fund under 26 U.S.C. sec. 115 as established by the board for
this purpose. Any amounts deposited to the fund that are not required to meet
current costs shall be maintained as a reserve in the fund for these benefits.
The board shall take the necessary and appropriate steps, including
promulgating administrative regulations and procedures to maintain the status
of the medical insurance fund as an account subject to 26 U.S.C. sec. 401(h); (6) The guarantee fund shall be maintained to facilitate the crediting of uniform interest on the amounts of the other funds, except the expense fund, to finance operating
expenses directly related to investment management services, and to provide a
contingent fund out of which special requirements of any of the other funds may be
covered. All income, interest, and dividends derived from the authorized deposits
and investments shall be paid into the guarantee fund. Any funds received from
gifts and bequests, which the board is hereby authorized to accept and expend
without limitation in a manner either expressed by the donor or deemed to be in the
best interest of the membership, shall be credited to the guarantee fund. Any funds
transferred from the teachers' savings fund by reason of lack of claimant or because
of a surplus in any fund and any other moneys whose disposition is not otherwise
provided for, shall also be credited to the guarantee fund. The interest allowed by the board of trustees to each of the other funds shall be paid to these funds from the
guarantee fund. Any deficit occurring in any fund that would not be automatically
covered shall be met by the payments from the guarantee fund to that fund; (7) The school employee annuity fund shall consist of those funds voluntarily contributed under the provisions of Section 403(b) of the Internal Revenue Code by
a retired member of the Teachers' Retirement System with accounts that existed on
or after July 1, 1996. The contributions shall not be picked up as provided in KRS
161.540(2). Separate member accounts shall be maintained for each member. The
board of trustees may promulgate administrative regulations pursuant to KRS
Chapter 13A to manage this program; (8) The supplemental retirement benefit fund shall consist of those funds contributed by the employer for the purpose of constituting a qualified government excess benefit
plan as described in Section 415 of the Internal Revenue Code for accounts that
existed on or after July 1, 1996. The board of trustees shall promulgate
administrative regulations pursuant to KRS Chapter 13A to administer this
program; and (9) The life insurance benefit fund shall consist of amounts accumulated for the purpose of providing benefits provided under KRS 161.655. The board of trustees
may allocate to this fund a percentage of the employer and state contributions as
provided under KRS 161.550. The allocation to this fund will be in an amount that
the actuary determines necessary to fund the obligation of providing the benefits
provided under KRS 161.655. Effective: July 1, 2010
History: Amended 2010 Ky. Acts ch. 159, sec. 2, effective July 1, 2010. -- Amended 2008 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 31, effective June 27, 2008. -- Amended
2004 Ky. Acts ch. 121, sec. 4, effective July 1, 2004. -- Amended 2002 Ky. Acts
ch. 275, sec. 8, effective July 1, 2002. -- Amended 2000 Ky. Acts ch. 498, sec. 8,
effective July 1, 2000. -- Amended 1998 Ky. Acts ch. 515, sec. 5, effective July 1,
1998. -- Amended 1994 Ky. Acts ch. 369, sec. 4, effective July 1, 1994.