Will this lawsuit cause Kentucky's state pension fund to collapse?

Kentucky’s beleaguered $2 billion pension fund for state workers, which has only 13% of the assets it needs for future obligations, faces a potential ticking time bomb in the courtroom.

The Kentucky Supreme Court has been asked to decide if Centerstone — the regional mental-health nonprofit in Louisville formerly known as Seven Counties Services — should get to use a bankruptcy reorganization to walk away from its estimated $130 million in liabilities to the Kentucky Retirement Systems, which manages the pension fund. Judges in other courts so far have approved it.

While $130 million is a hefty sum, an even bigger concern for state officials is whether the dozen regional mental-health nonprofits remaining in KRS would use bankruptcy as their own escape route if the Supreme Court permits it for Centerstone. Several have been fighting with KRS in court for years, attempting different strategies to move employees out of the state retirement system and cut their pension contribution costs. But no one else has tried bankruptcy — yet.

Those regional mental-health nonprofits represent about $1 billion of the total $15 billion in unfunded liabilities faced by the state pension fund, known as the Kentucky Employees Retirement System, or KERS. They were among the “quasi-governmental” entities allowed to join KRS over the years, despite some controversy because they are independently run, not part of state government.

Read more: https://www.kentucky.com/news/politics-government/article219101045.html