2005 Idaho Code - 59-1326 — PROCEDURE FOR COMPLETE OR PARTIAL WITHDRAWAL OF POLITICAL SUBDIVISIONS FROM THE SYSTEM -- CALCULATION OF WITHDRAWAL LIABILITY -- INDEMNIFICATION

                                  TITLE  59
                          PUBLIC OFFICERS IN GENERAL
                                  CHAPTER 13
                      PUBLIC EMPLOYEES RETIREMENT SYSTEM
    59-1326.  PROCEDURE FOR COMPLETE OR PARTIAL WITHDRAWAL OF POLITICAL
SUBDIVISIONS FROM THE SYSTEM -- CALCULATION OF WITHDRAWAL LIABILITY --
INDEMNIFICATION. (1) A political subdivision, through its governing body, may
by resolution adopted by two-thirds (2/3) of the members of the governing
body, declare its intent to withdraw completely from the system and to submit
the question of withdrawing from the system to the active members of the
political subdivision. The political subdivision shall notify its employees
and the retirement board, in writing, of its action, and shall advise the
active members of their right to vote for or against withdrawal, as provided
in subsection (2) of this section. A political subdivision shall automatically
be considered to have requested a complete withdrawal from the system the date
the political subdivision permanently ceases to employ active members. A
withdrawing political subdivision shall be required to make withdrawal
liability payments as provided in this section.
    (2)  All active members of the withdrawing political subdivision shall be
allowed to vote by secret ballot for or against allowing the political
subdivision to completely withdraw from the system. More than fifty percent
(50%) of the withdrawing political subdivision's active members must approve
the complete withdrawal at least thirty (30) days before the effective
withdrawal date. All active members of the withdrawing political subdivision
who are on the political subdivision's payroll thirty (30) days before the
effective withdrawal date shall be allowed to vote. If more than fifty percent
(50%) of the withdrawing political subdivision's active members fail to vote
for complete withdrawal, the political subdivision shall not be allowed to
withdraw. Fifteen (15) days before the effective withdrawal date the governing
board of the withdrawing political subdivision shall certify to the retirement
board the results of the voting by the active members.
    (3)  Partial withdrawal occurs for a political subdivision when its
average membership declines from one fiscal year to the next by more than
twenty-five (25) members and twenty-five percent (25%) of the average
membership in the earlier year. The effective date of partial withdrawal is
the first day after the end of the later year.
    "Average membership" for a fiscal year shall equal one-twelfth (1/12) of
the sum of the number of active members employed during each month of that
year.
    (4)  Complete withdrawal by a political subdivision shall be the first day
of the month following the date the political subdivision ceases to employ
active members or the first day of the month following sixty (60) days from
the date the board receives the political subdivision's written request to
withdraw. However, the complete withdrawal date shall not occur before the
withdrawal liability is determined, as provided in subsection (7) of this
section.
    (5)  After complete withdrawal, all employees of the withdrawing political
subdivision shall be ineligible to accrue future benefits with the system due
to employment with the withdrawing political subdivision. The withdrawing
political subdivision shall be ineligible to request to be included in the
system, as provided in section 59-1321, Idaho Code, for five (5) years after
its complete withdrawal date.
    (6)  All active or inactive members of the political subdivision shall be
eligible for benefits accrued with the system up to the complete withdrawal
date. However, no retirement allowance or separation benefit shall be paid
until the member actually separates from service with the withdrawing
political subdivision, and there is no guarantee of right to re-employment
made by the withdrawing political subdivision. If the person returns to
employment with the same withdrawing political subdivision within ninety (90)
days, any separation benefit or retirement allowance paid to the person shall
be repaid to the system.
    (7)  On the date of complete withdrawal, the withdrawal liability of an
employer is (a) multiplied by the ratio of (b) to (c) as follows:
    (a)  The excess of the actuarial present value of the vested accrued
    benefits of the system's members over the fair value of its assets, both
    as of the date of the last actuarial valuation adopted by the board prior
    to the complete withdrawal date based on the assumption that thirty
    percent (30%) of all terminating employees will eventually return to
    employment covered by the system and that future cost-of-living allowances
    as provided in section 59-1355, Idaho Code, will be at a rate of two
    percent (2%) per year;
    (b)  The total present value of accrued benefits of all active members of
    the withdrawing political subdivision as of the last actuarial valuation
    adopted by the board prior to the complete withdrawal date;
    (c)  The total present value of accrued benefits of all active members of
    the system as of the last actuarial valuation adopted by the board prior
    to the complete withdrawal date.
    The actuarial costs to determine the amount described in subsection (7)(b)
of this section shall be paid by the withdrawing political subdivision.
    (8)  On the date of partial withdrawal, the withdrawal liability of an
employer is the same as if complete withdrawal had occurred, multiplied by one
(1) minus the ratio of (a) to (b) as follows:
    (a)  The average membership of the employer estimated by the board for the
    year commencing on such date;
    (b)  The average membership of the employer during the second complete
    fiscal year prior to such date.
    (9)  The withdrawing political subdivision shall enter into a contract
with the system which establishes terms for the political subdivision's
payment of its withdrawal liability. The contract shall use an interest rate
equal to the interest rate used in the actuarial valuation adopted by the
board prior to the withdrawal date, net of actuarially assumed investment
expenses. The contract shall not extend the duration of the withdrawal
liability payments beyond ten (10) years or the end of the current
amortization period whichever is less. The contract shall be a financial
obligation of the withdrawing political subdivision and any of its successors
and assigns. "Current amortization period" means the period over which the
amortization payment rate times the actuarial present value of the projected
salaries is equivalent to the unfunded actuarial liability, all determined by
the current valuation last adopted by the board prior to the complete
withdrawal date.
    (10) Upon the complete withdrawal of the political subdivision, the system
shall have no further legal obligation to the political subdivision or its
employees, nor shall the system be held accountable for the continued future
accrual of any retirement benefit rights to which such employees may be
entitled beyond the complete withdrawal date. Any litigation regarding the
forfeiture of any benefits because of the political subdivision's complete
withdrawal from the system shall be the sole legal responsibility of the
withdrawing political subdivision and the withdrawing political subdivision
shall indemnify and hold harmless the system, its board, its employees and the
state of Idaho, from any claims, losses, costs, damages, expenses, and
liabilities, including without limitation, court costs and reasonable
attorney's fees, asserted by any person or entity as a result of the political
subdivision's withdrawal from the system.