FRANKFORT, Ky.-One question that remains unanswered is how did Commonwealth Credit Union come to be a participant in a pension fund set up for employees of the state of Kentucky.
There is a personal relationship between some individuals at the credit union and the pension fund. Gary Harbin, the husband of Commonwealth CEO Karen Harbin, runs the Kentucky Teachers Retirement Systems as executive secretary. In addition, Randy Overstreet sits on the board of both CCU and KRS.
However, those relationships were established long after the CU was granted enrollment in KRS in 1974. No one has alleged any illegality in those relationships.
"So Commonwealth gets special consideration and is allowed into the state pension program," said Chris Tobe, a pension program consultant who heads Stable Value Consultants in Louisville, Ky. "By underfunding the pension each year, and not accounting for that, the credit union has several million more dollars in cash flow each year. Look at their capital. That money could have been given out in higher deposit rates, spread raises to all employees . . . Is it possible the higher earnings, which often affect salary and bonus decisions, could have been used to pay higher bonuses and salaries to senior management?"
A source close to the state retirement programs who also asked for anonymity told Credit Union Journal that it is very "odd" for a credit union to be part of a state pension program. The source pointed out that the second-largest CU in the state, Kentucky Employees CU, which also serves state employees, does not participate in a state pension program. KECU's FOM includes any public sector employee, employees of independent Kentucky colleges and universities, members of the Bluegrass ADD, and Kentuckiana Regional Planning & Development Agency. CCU's FOM covers employees of the Kentucky state retirement systems.
Tobe added that the IRS is starting to look at non-government entities in government plans.
He said the state is also fighting employer groups that now, due to the shortfall and impending individual employer liability, are trying to leave KERS and stick the state with the unfunded liability.