2017 Kentucky Revised Statutes CHAPTER 61 - GENERAL PROVISIONS AS TO OFFICES AND OFFICERS -- SOCIAL SECURITY FOR PUBLIC EMPLOYEES -- EMPLOYEES RETIREMENT SYSTEM .522 Definitions -- Voluntary and involuntary cessation of participation by employer in retirement system -- Effects of on employees, employers, and system.
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61.522 Definitions -- Voluntary and involuntary cessation of participation by
employer in retirement system -- Effects of on employees, employers, and
system.
Notwithstanding any other provision of KRS 61.510 to 61.705 or 78.510 to 78.852 to
the contrary:
(1) For purposes of this section:
(a) "Active member" means a member who is participating in the system;
(b) "Employer" means the governing body of a department, as defined by
KRS 61.510, or a county as defined by KRS 78.510;
(c) "Employer's effective cessation date" means the last day of the system's
plan year in the year in which the employer has elected to cease
participation in the system, provided the employer has met the
requirements of this section and has given the Kentucky Retirement
Systems sufficient notice as provided by administrative regulations
promulgated by the systems; and
(d) "Inactive member" means a member who is not participating with the
system;
(2) Any employer participating in the Kentucky Employees Retirement System or
the County Employees Retirement System on July 1, 2015, except as limited
by subsection (6) of this section, may:
(a) Voluntarily cease participation in its respective retirement system subject
to the requirements and restrictions of this section; or
(b) Be required to involuntarily cease participation in the system under the
provisions of this section if the board has determined the employer is no
longer qualified to participate in a governmental plan or has failed to
comply with the provisions of KRS 61.510 to 61.705 or 78.510 to 78.852;
(3) (a) If an employer desires to voluntarily cease participation in the Kentucky
Employees Retirement System or the County Employees Retirement
System as provided by subsection (2)(a) of this section:
1.
The employer shall adopt a resolution requesting to cease
participation in the system and shall submit the resolution to the
board for its approval;
2.
The cessation of participation in the system shall apply to all
employees of the employer;
3.
The employer shall pay for all administrative costs of an actuarial
study to be completed by the Kentucky Retirement Systems'
consulting actuary and for any other administrative costs for
discontinuing participation in the system as determined by the board
and as provided by this section;
4.
The employer shall provide an alternative retirement program for
employees who will no longer be covered by the system, which may
include a voluntary defined contribution plan;
5.
If the alternative retirement program established by the employer
meets the qualification requirements under 26 U.S.C. sec. 401(a)
and is capable of accepting trustee-to-trustee transfers of both
(4)
(5)
pre-tax and post-tax contributions, employees of the employer
ceasing participation may seek to transfer his or her account
balance to the employer's qualified alternate retirement program
within sixty (60) days of the employer's effective cessation date. An
employee's election to transfer his or her account balance within
sixty (60) days of the employer's effective cessation date is an
irrevocable waiver of the right to obtain service credits in the system
for the time worked for the employer ceasing participation; and
6.
The employer shall pay by lump sum to the system the full actuarial
cost of the benefits accrued by its current and former employees in
the system as determined separately for the pension fund and the
insurance fund by the actuarial study required by subparagraph 3. of
this paragraph. The full actuarial cost shall not include any employee
who seeks a transfer of his or her account balance within sixty (60)
days of the employer's effective cessation date as provided by
subparagraph 5. of this paragraph. The actuarial cost shall be fixed,
and the employer shall not be subject to any increases or
subsequent adjustments, once the lump sum is paid.
(b) If the board determines an employer must involuntarily cease
participation in the system as provided by subsection (2)(b) of this
section:
1.
The cessation of participation in the system shall apply to all
employees of the employer;
2.
The employer shall pay for all administrative costs of an actuarial
study to be completed by the Kentucky Retirement Systems'
consulting actuary and for any other administrative costs for
discontinuing participation in the system as determined by the board
and as provided by this section; and
3.
The employer shall pay by lump sum to the system the full actuarial
cost of the benefits accrued by its current and former employees in
the system as determined separately for the pension fund and the
insurance fund by the actuarial study required by subparagraph 2. of
this paragraph. The actuarial cost shall be fixed, and the employer
shall not be subject to any increases or subsequent adjustments,
once the lump sum is paid;
Any employee hired on or after the employer's effective cessation date by an
employer who has ceased participation in the system as provided by this
section shall not, regardless of his or her membership date in the systems
administered by Kentucky Retirement Systems, be eligible to participate in the
Kentucky Employees Retirement System or the County Employees Retirement
System through the employer that ceased participation for the duration of his or
her employment with that employer;
If an employer has ceased participation in the system as provided by this
section:
(a) The rights of recipients and the vested rights of inactive members
accrued as of the employer's effective cessation date shall not be
impaired or reduced in any manner as a result of the employer ceasing
(6)
(7)
participation in the system; and
(b) Employees of the employer ceasing participation shall accrue benefits
through the employer's effective cessation date but shall not accrue any
additional benefits in the Kentucky Employees Retirement System or the
County Employees Retirement System, including earning years of service
credit through the ceased employer, after the employer's effective
cessation date for as long as they remain employed by the employer. The
day after the employer's effective cessation date, each employee
described by this paragraph shall be considered an inactive member with
respect to his or her employment with the employer that ceased
participation and, subject to the provisions and limitations of KRS 61.510
to 61.705 and 78.510 to 78.852, shall:
1.
Retain his or her accounts with the Kentucky Employees Retirement
System or the County Employees Retirement System and have
those accounts credited with interest in accordance with KRS
61.510 to 61.705 and 78.510 to 78.852;
2.
Retain his or her vested rights in accordance with paragraph (a) of
this subsection; and
3.
Be eligible to take a refund of his or her accumulated account
balance in accordance with KRS 61.625 or any other available
distribution if eligible;
(a) Kentucky Employees Retirement System employers who are county
attorney offices, Commonwealth's attorney offices, local and district
health departments governed by KRS Chapter 212, master
commissioners, executive branch agencies whose employees are subject
to KRS 18A.005 to 18A.200, state-administered retirement systems,
state-supported universities and community colleges, property valuation
administration offices, or employers in the legislative or judicial branch of
Kentucky state government, shall not be eligible to voluntarily discontinue
participation in the Kentucky Employees Retirement System unless the
employer is a nonstock nonprofit corporation organized under KRS
Chapter 273.
(b) Only the employers in the County Employees Retirement System who are
a nonstock nonprofit corporation organized under KRS Chapter 273 may
voluntarily cease participation in the County Employees Retirement
System;
For purposes of this section, the full actuarial cost shall be determined by the
Kentucky Retirement Systems' consulting actuary separately for the pension
fund and the insurance fund using the assumptions and methodology
established by the system specifically for determining the full actuarial cost of
ceasing participation as of the employer's effective cessation date. For
purposes of determining the full actuarial cost, the assumed rate of return used
to calculate the cost shall be the lesser of the assumed rate of return utilized in
the system's most recent actuarial valuation or the yield on a thirty (30) year
United States treasury bond as of the employer's effective cessation date, but
shall in no case be lower than the assumed rate of return utilized in the
system's most recent actuarial valuation minus three and one-half percent
(8)
(9)
(3.5%);
The Kentucky Retirement Systems shall promulgate administrative regulations
pursuant to KRS Chapter 13A to administer this section; and
Any employer who voluntarily ceases participation, or who is required to
involuntarily cease participation as provided in this section, shall hold the
Commonwealth harmless from damages, attorney's fees and costs from legal
claims for any cause of action brought by any member or retired member of the
departing employer.
Effective:March 21, 2017
History: Amended 2017 Ky. Acts ch. 104, sec. 1, effective March 21, 2017. -Created 2015 Ky. Acts ch. 28, sec. 1, effective June 24, 2015.
Legislative Research Commission Note (3/21/2017). 2017 Ky. Acts ch. 104, sec.
2 provided: "Notwithstanding the provisions of Section 1 of this Act (this statute),
any employer who has filed the paperwork to voluntarily cease participation prior
to the effective date of this Act (March 21, 2017) shall have their full actuarial
cost calculated based upon the assumptions and methodology established by
the Kentucky Retirement Systems board, except that the assumed investment
return assumption, which is also the rate used to discount liabilities, shall be four
and five-tenths percent for employers paying by lump-sum and four percent for
employers paying by installments, and such employers electing to pay in
installments shall be eligible to pay the full actuarial cost in installments over a
period of time determined by the board, not to exceed 20 years, with interest at
the actuarially assumed rate of return."
Legislative Research Commission Note (3/21/2017). 2017 Ky. Acts ch. 104, sec.
3 provided: "Notwithstanding KRS 61.661, Kentucky Retirement Systems shall
provide the employer ceasing participation as provided by Section 2 of this Act,
an individual member breakdown of the actuarial cost attributable to each
current and former employee of the employer for purposes of allocating the
costs among organizational units of the employer."
Legislative Research Commission Note (6/24/2015). During codification, the
Reviser of Statutes has changed the numbering of subsections of this statute
from the way it appeared in 2015 Ky. Acts ch. 28, sec. 2. None of the text of the
subsections was changed.
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