{"data":{"id":"us-ky/krs-21.450","jurisdiction":"us-ky","citation":"KRS 21.450","heading":"Funding of benefits -- Trustee -- Duties of board members, investment","body":"manager or other fiduciary, or proxy advisor -- Accrual of benefits --\nStandards of conduct.\n(1) The benefits provided by KRS 21.350 to 21.510 to be paid shall be funded  through\ncontract with a reputable life insurance company authorized to do business in this\nstate, or through investment and reinvestment of funds in securities which, at the\ntime of making the investment, are by law permitted for the investment of funds b y\nfiduciaries in this state, or through a combination of such methods. To the extent\nthat funding is provided through insurance contract, no contributions, payments or\npremiums shall be subject to any tax on insurance premiums or annuity\nconsiderations. The investment committee for the judicial retirement fund shall be\ntrustee of any and all funds contributed or appropriated to the retirement system,\nand shall have sole authority to make insurance contracts or investments.\n(2) (a) For the purposes of this subsection:\n1. \"Solely in the interest of the members and beneficiaries\" shall be\ndetermined using only pecuniary factors and shall not include any\npurpose to further a nonpecuniary interest;\n2. \"Pecuniary factor\" means a consideration having a direct and m aterial\nconnection to the financial risk or financial return of an investment;\n3. A \"material connection\" is established if there is a substantial likelihood\nthat a reasonable investor would consider it important in determining the\nfinancial risk or the financial return of an investment;\n4. \"Nonpecuniary interest\" includes but is not limited to an environmental,\nsocial, political, or ideological interest which does not have a direct and\nmaterial connection to the financial risk or financial return of an\ninvestment;\n5. \"Investment manager\" shall have the same definition attributed to\n\"investment adviser\" under the federal Investment Advisers Act of 1940,\n15 U.S.C. sec. 80b-2;\n6. \"Shareholder-sponsored proposal\" means a proposal by a shareholder\nincluded in the proxy statement of an issuer of securities pursuant to 17\nC.F.R. sec. 240.14a-8;\n7. \"Economic analysis\" means a written analysis of the economic impact of\na shareholder-sponsored proposal, which shall include, at a minimum:\na. The subject matter of the shareholder-sponsored proposal;\nb. Whether the board of directors of the issuer of secu rities opposes\nthe shareholder-sponsored proposal and the stated reasons for the\nopposition;\nc. Whether the shareholder-sponsored proposal is consistent with the\ninvestment policy of the retirement system;\nd. The economic benefits and costs of implementing  the shareholder-\nsponsored proposal, as written, in the long and short term;\ne. The quantifiable impact of the shareholder -sponsored proposal, as\nwritten, on the investment returns of the funds of the retirement\nsystem; and\nf. An explanation of the modeling, procedures, and processes used to\ncomplete the economic analysis; and\n8. a. \"Proxy adviser\" means any person who is engaged in the business\nof providing advice, research, analysis, ratings, or\nrecommendations specifically with respect to proxy voting an d\nwho has entered into an agreement or contracted with the board of\ntrustees of the retirement system to receive compensation for those\npurposes.\nb. \"Proxy adviser\" does not include an investment manager as\ndefined in this paragraph.\n(b) The board members,  any investment manager or other fiduciary, or proxy\nadviser shall discharge their duties with respect to the funds of the retirement\nsystem solely in the interest of the members and beneficiaries and:\n1. For the exclusive purposes of providing benefits to  members and their\nbeneficiaries and defraying reasonable expenses of administering the\nplan;\n2. With the care, skill, prudence, and diligence under the circumstances\nthen prevailing that a prudent person acting in a like capacity and\nfamiliar with such matters would use in the conduct of an enterprise of a\nlike character and with like aims; and\n3. In accordance with the federal, state, and common laws, regulations and\nother instruments governing the funds and fiduciaries.\n(c) Evidence that a fiduciary has considered or acted on a nonpecuniary interest\nshall include but is not limited to:\n1. Statements, explanations, reports, or correspondence;\n2. Communications with portfolio companies;\n3. Statements of principles or policies, whether made individually or\njointly;\n4. Votes of shares or proxies; or\n5. Coalitions, initiatives, agreements, or commitments to which the\nfiduciary is a participant, affiliate, or signatory.\n(d) When exercising or recommending a vote on a shareholder -sponsored\nproposal, a proxy advis er that has entered into an agreement or contracted\nwith the board of trustees of the retirement system acts solely in the interest of\nthe members and beneficiaries under this subsection if:\n1. The proxy adviser's vote or recommendation is consistent with the\nrecommendation of the board of directors of the issuer of the shares,\nprovided:\na. The board of directors of the issuer of the shares is composed of a\nmajority of independent directors; and\nb. The recommendation of the board of directors is not for the\npurpose of furthering a nonpecuniary interest; or\n2. The proxy adviser's vote or recommendation is inconsistent with the\nrecommendation of the board of directors of the issuer of the shares,\nprovided the proxy adviser conducts and documents an economic\nanalysis demonstrating that the vote or recommendation is solely in the\ninterest of the members and beneficiaries.\n(3) Any accrual of benefits provided under this or any other applicable statute shall be\nno less than the benefit adjustment provided for in KR S 21.405(4) from the date of\nthe last establishment of that benefit.\n(4) The board shall establish ethics  policies and procedures by promulgation of\nadministrative regulations in accordance with the provisions of KRS Chapter 13A.\nThe ethics policies shall include but not be limited to annual financial and conflict\nof interest disclosure requirements which mus t be completed by all board members\nand made available to the public upon request.\n(5) In addition to the standards of conduct prescribed by subsection (2) of this section:\n(a) Investment managers shall comply with all applicable provisions of the\nInvestment Advisers Act of 1940, as amended, and the rules and regulations\npromulgated thereunder, and shall comply with all other applicable federal\nsecurities statutes and related rules and regulations that apply to investment\nmanagers; and\n(b) Proxy advisers an d proxy voting services shall comply with all applicable\nprovisions of the Investment Advisers Act of 1940, as amended, and the rules\nand regulations promulgated thereunder, and shall comply with all other\nfederal statutes and related rules and regulations  that apply to proxy advisers\nand proxy voting services.\n(6) No contract or agreement, whether made in writing or not, shall in any manner\nwaive, restrict, or limit a fiduciary's liability as to any of the duties imposed by this\nsection. Any agreement shal l specify that it is made in the Commonwealth of\nKentucky and governed by the laws of the Commonwealth of Kentucky.","path":["KRS Chapter 21"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56401","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:48:41Z","sha256":"95207e65a5e29e823f7d0468894cbbacdb9fce7328658c9b56fe0274cf3c4e7a","source_id":"us-ky","stale":false,"prev":"us-ky/krs-21.440","next":"us-ky/krs-21.455"},"notice":"GroundRules: Original legal text. Not legal advice."}