2021 Kentucky Revised Statutes Chapter 61 - General provisions as to offices and officers -- social security for public employees -- employees retirement system 61.522 Definitions -- Voluntary and involuntary cessation of participation by employer in retirement system -- Effects of on employees, employers, and system -- Statutes and administrative regulations that prevail regarding participation.
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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 -- Statutes and administrative regulations that prevail regarding
participation.
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;
(c) "Employer's effective cessation date" means:
1.
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; or
2.
For Kentucky Employees Retirement System employers making an
election to cease participating under the provisions of subsection (8) of
this section, it shall be June 30, 2021; and
(d) "Inactive member" means a member who is not participating with the system;
(2) Any employer participating in the Kentucky 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;
(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
(c) If the employer is participating in the Kentucky Employees Retirement
System, request an estimate of the cost of voluntarily ceasing participation in
the system prior to officially making a request to cease participation. For those
Kentucky Employees Retirement System nonhazardous employers who are
considering ceasing participating in the system under the provisions of
subsection (8) of this section on June 30, 2021, the request for an estimate to
voluntarily cease participating must be made prior to December 31, 2019, and
the estimate shall be provided to that employer within sixty (60) days of the
request, except that no estimate shall be required to be provided prior to
January 31, 2020;
(3) (a) If an employer desires to voluntarily cease participation in the Kentucky
Employees Retirement System as provided by subsection (2)(a) of this
section:
1.
The employer shall adopt a resolution requesting to cease participation
2.
3.
4.
5.
6.
in the system and shall submit the resolution to the board for its
approval. The board shall not be able to deny a resolution to cease
participation in the Kentucky Employees Retirement System for any
employer who seeks to voluntarily cease participation in the system as
provided by subsection (8) of this section;
Except as provided by subsection (8)(d) of this section, the cessation of
participation in the system shall apply to all employees of the employer;
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;
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 but, for Kentucky
Employees Retirement System employers with effective cessation dates
occurring on or after June 30, 2020, the alternative retirement program
shall not include a defined benefit plan which by its nature can have an
unfunded liability;
If the alternative retirement program established by the employer meets
the qualification requirements under 26 U.S.C. sec. 401(a) or 26 U.S.C.
sec. 403(b) and is capable of accepting trustee-to-trustee transfers of
both pre-tax and post-tax contributions, employees of the employer
ceasing participation may, except for those employees continuing to
participate in the system as provided by subsection (8)(d)2. of this
section, 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;
The employer shall pay to the system by lump sum or in installments as
provided by subsection (8) of this section, if eligible, the full actuarial
cost, except as provided by subsection (8)(g)4. of this section, 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. If the
employer makes an election for employees to continue to participate in
the system as provided by subsection (8)(d)2. of this section, the cost
shall also include the present value of future normal costs of those
employees who will continue to participate in the system after the
employer's effective cessation date. 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
(b)
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 or the installment
payments have commenced; and
7.
Kentucky Employees Retirement System employers ceasing
participating under the provisions of subsection (8) of this section who
elect to pay their actuarial costs by a lump sum shall pay the entire costs,
in one (1) or more payments, so that the full actuarial costs are paid by
June 30, 2022. Interest on the unpaid principal amount of the full
actuarial costs shall begin on July 1, 2021, and accrue until the full
actuarial costs are paid. If the ceasing employer makes a payment prior
to July 1, 2021, the ceasing employer shall receive a credit against their
full actuarial costs to be determined as of June 30, 2021, that is equal to
the amount of the prior payment plus interest for the period beginning on
the date of the prior payment and ending on June 30, 2021. If a final
payment is due by June 30, 2022, for an employer who has made a
payment or payments on or before June 30, 2021, it shall be equal to any
unpaid actuarial costs due plus interest as of the date of final payment. If
the payment or payments made by the ceasing employer exceed the final
full actuarial costs of ceasing participation, the employer shall by June
30, 2022, be refunded an amount equal to the overpayment plus interest
for the period beginning on the date of the overpayment and ending on
the date the refund is paid to the employer. If the ceasing employer fails
to make the full lump-sum payment by June 30, 2022, the ceasing
employer shall make installments as provided by subsection (8)(g) of
this section, and the ceasing employer shall have the costs recalculated
based upon making installment payments as provided by this section and
shall be required to make up any missed installment payments as
determined by the system. For purposes of this subparagraph, "interest"
shall be equal to a rate of five and one-quarter percent (5.25%) per
annum for pension costs and at a rate of six and one-quarter percent
(6.25%) per annum for retiree health costs.
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
(4)
(5)
(6)
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.
A Kentucky Employees Retirement System employer who ceases participation
in the systems under this paragraph shall not establish or contribute to on
behalf of its employees a defined benefit plan which by its nature can have an
unfunded liability;
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 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 participation in the system; and
(b) Except as provided by subsection (8)(d)2. of this section, 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, 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, except as provided by subsection (8)(d)2. of this section, 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, shall:
1.
Retain his or her accounts with the Kentucky Employees Retirement
System and have those accounts credited with interest in accordance
with KRS 61.510 to 61.705;
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;
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
(7)
Kentucky state government, shall not be eligible to voluntarily discontinue
participation in the Kentucky Employees Retirement System, except that:
(a) Any employer who is a nonstock nonprofit corporation organized under KRS
Chapter 273 may voluntarily cease participation; and
(b) Local and district health departments governed by KRS Chapter 212, statesupported universities and community colleges, and the Kentucky Higher
Education Student Loan Corporation may voluntarily cease participation in
the Kentucky Employees Retirement System solely under the provisions and
requirements of subsection (8) of this section;
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:
(a) Except as provided by paragraphs (b) to (e) of this subsection, the assumed
rate of return utilized in the system's most recent actuarial valuation minus
three and one-half percent (3.5%);
(b) Four and one-half percent (4.5%) for those Kentucky Employees Retirement
System employers who voluntarily cease participation under the provisions of
subsection (8) of this section who pay the costs of ceasing participation by
lump-sum payment by June 30, 2022, and who do not make an election for
their employees to continue to participate in the system after the employer's
effective cessation date as provided by subsection (8)(d)3. of this section;
(c) Five and one-quarter percent (5.25%) for university and community college
employers or three and one-half percent (3.5%) for all other Kentucky
Employees Retirement System employers who voluntarily cease participation
under the provisions of subsection (8) of this section who pay the costs of
ceasing participation by lump-sum payment by June 30, 2022, and who do
make an election for employees to continue to participate in the system after
the employer's effective cessation date as provided by subsection (8)(d)2. of
this section;
(d) Three and one-half percent (3.5%) for those Kentucky Employees Retirement
System employers who voluntarily cease participation under the provisions of
subsection (8) of this section who pay the costs of ceasing participation by
installment payments and who do not make an election for employees to
continue to participate in the system after the employer's effective cessation
date as provided by subsection (8)(d)3. of this section; or
(e) Three percent (3%) for those Kentucky Employees Retirement System
employers who voluntarily cease participation under the provisions of
subsection (8) of this section who pay the costs of ceasing participation by
(8)
installment payments and who do make an election for employees to continue
to participate in the system after the employer's effective cessation date as
provided by subsection (8)(d)2. of this section;
Notwithstanding the provisions of this section, any Kentucky Employees
Retirement System employer who is eligible to voluntarily cease participating as
provided by subsection (6) of this section may, on or after April 1, 2020, but prior to
May 1, 2021, except in the case of university or community college employers it
shall be prior to January 1, 2021, elect to voluntarily cease participating in the
systems for its nonhazardous employees by submitting a resolution in accordance
with subsection (3)(a)1. of this section. If an employer makes an election to
voluntarily cease participation by submitting a resolution as provided by this
subsection:
(a) The board shall accept any election to cease participation on or before June
30, 2021, and the employer's effective cessation date shall be June 30, 2021.
Prior to May 1, 2021, or January 1, 2021, in the case of university or
community college employers, the employer may rescind a previously
submitted election to cease participation;
(b) Nonhazardous employees 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 through the employer that ceased
participation for the duration of his or her employment with that ceasing
employer;
(c) Nonhazardous employees hired prior to the employer's effective cessation
date, who began participating in the systems administered by Kentucky
Retirement Systems on or after January 1, 2014, and who are participating in
the hybrid cash balance plan as provided by KRS 61.597, shall continue to
contribute and earn service credit in the systems through the employer's
effective cessation date. After the employer's effective cessation date, the
employee shall participate in the alternative retirement plan established by the
employer as provided by subsection (3)(a)4. of this section. A nonhazardous
employee covered by this paragraph who elects to transfer his or her account
balance within sixty (60) days of the employer's effective cessation date as
provided by subsection (3)(a)5. of this section, shall, notwithstanding KRS
61.597, receive a transfer of the employee's accumulated account balance,
including the entire accumulated employer credit, regardless of the employee's
years of service credit;
(d) 1.
The employer shall, in the resolution submitted in accordance with
subsection (3)(a)1. of this section, make an election as to whether or not
nonhazardous employees hired prior to the employer's effective
cessation date, who began participating in the systems administered by
Kentucky Retirement Systems prior to January 1, 2014, who are
participating in the systems administered by Kentucky Retirement
(e)
(f)
(g)
Systems through the employer, will continue to participate in the system
after the employer's effective cessation date.
2.
If the employer makes an election for the employees described by this
paragraph to continue participating in the system after the employer's
effective cessation date, these employees will continue to contribute and
earn service credit in the systems for as long as they remain employed by
the employer in a regular full-time position that is eligible to participate
in the systems, except in the event the employer fails to make
installment payments as provided by KRS 61.675(4). Any costs for the
present value of future normal costs of the employees covered by this
subparagraph who will contribute and earn service in the system after
the employer's effective cessation date shall be included in the cost
calculation established by subsection (7) of this section.
3.
If the employer does not make an election for the employees described
by this paragraph to continue participating in the system after the
employer's effective cessation date, these employees shall continue to
contribute and earn service credit in the systems through the employer's
effective cessation date. After the employer's effective cessation date,
these employees shall participate in the alternative retirement plan
established by the employer as provided by subsection (3)(a)4. of this
section;
The cost of ceasing participating to an individual employer shall be equal to
the cost determined under subsection (7) of this section and shall include the
costs of those employees who continue to participate in the system as
provided by paragraph (d)2. of this subsection;
The employer may pay the full actuarial cost of ceasing participation by lumpsum payment or in installments as provided by paragraph (g) of this
subsection;
If the employer elects to pay the costs in installment payments, the cost of
ceasing participation as provided by this subsection shall be financed by the
systems using the following method:
1.
Annual payments occurring on or after July 1, 2021, shall be a set dollar
value and shall be paid in monthly installments. In fiscal year 20212022, the set dollar value shall be equal to the higher of the actual
contributions paid by the employer in fiscal year 2020-2021 or the
annualized average of the creditable compensation reported to the
systems by the ceasing employer over the last sixty (60) months
occurring prior to July 1, 2019, for which contributions were paid by the
ceasing employer, and multiplied by an employer rate of forty-nine and
forty-seven one-hundredths percent (49.47%). Annual payments, for
fiscal years occurring on or after July 1, 2022, which shall be paid
monthly, shall be increased by one and one-half percent (1.5%) annually
and shall be paid until the cost as provided by subsection (7) of this
section and as adjusted annually by subparagraphs 2. and 3. of this
(h)
paragraph are paid in full or until an employer as described by
subparagraph 4. of this paragraph has paid for thirty (30) years from the
effective cessation date;
2.
Interest shall be assigned to the principal amount annually beginning on
July 1, 2021, and for each July 1 thereafter, that is equal to a rate of five
and one-quarter percent (5.25%) per annum for pension costs and at a
rate of six and one-quarter percent (6.25%) per annum for retiree health
costs;
3.
If an employer is not projected by the systems to pay off the full
actuarial costs to cease participation with interest as provided by
subparagraph 2. of this paragraph at the conclusion of the thirty (30) year
installment period from the employer's effective cessation date, and the
employer makes an election for employees to continue to participate in
the system after the employer's effective cessation date as provided by
paragraph (d)2. of this subsection, then the systems shall adjust the base
value for the first annual payments occurring on or after July 1, 2021, in
order to keep the maximum period of installments to thirty (30) years;
and
4.
If an employer is not projected by the systems to pay off the full
actuarial costs to cease participation with interest as provided by
subparagraph 2. of this paragraph at the conclusion of the thirty (30) year
installment period from the employer's effective cessation date, and the
employer does not make an election for employees to continue to
participate in the system after the employer's effective cessation date as
provided by paragraph (d)3. of this subsection, the employer shall pay
the amount determined by subparagraph 1. of this paragraph for thirty
(30) years from the effective cessation date and no additional costs shall
be billed to a ceasing employer after the conclusion of the thirty (30)
year period nor shall the employer be subject to adjustments under
subparagraph 3. of this paragraph. The system may request in future
biennial executive branch budgets the additional funding needed on an
annual basis to fully pay off the installments at the conclusion of the
thirty (30) year period for the employers described by this paragraph,
and it is the intent of the General Assembly to pay the additional funding
needed by appropriation in the biennial executive branch budget.
An employer ceasing participation who is making installment payments as
provided by this paragraph may at any time pay off a portion of the remaining
balance or the entire remaining balance and shall not be charged any interest
for periods beyond the pay-off date for the balance that is paid off;
Kentucky Employees Retirement System employers eligible to cease
participation under the provisions of this subsection who do not make an
election to cease participation in the system prior to May 1, 2021, or prior to
January 1, 2021, in the case of university and community college employers,
shall be required to pay the full actuarially determined contributions
established by KRS 61.565 and 61.702 for fiscal years occurring on or after
July 1, 2021; and
(i) Kentucky Employees Retirement System employers who elect to cease
participation in the system as provided by this subsection who are currently
receiving a distribution of general fund appropriations in the biennial
executive branch budget under the provisions of 2018 Ky. Acts ch. 169, Part I,
G., 4., (5), 2018 Ky. Acts ch. 169, Part I, G., 5., (2), or 2018 Ky. Acts ch. 169,
Part I, G., 9., (2) to help pay employer contributions to the system shall
continue to receive the same level of distribution of general fund
appropriations to help pay the costs of ceasing participation until such time
that the employer's full actuarial costs of ceasing participation are paid off;
(9) The Kentucky Retirement Systems shall promulgate administrative regulations
pursuant to KRS Chapter 13A to administer this section;
(10) (a) Any employer who voluntarily ceases participation, or who is required to
involuntarily cease participation as provided in this section, shall hold the
Commonwealth and the Kentucky Retirement Systems, including board
members and employees of the Kentucky Retirement Systems, 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 related
to the employer's cessation of participation as set forth in this section.
(b) Any employer who is voluntarily ceasing participation under the provisions of
subsection (8) of this section shall be required to pledge any security in any
relevant real estate, chattel paper, deposit accounts, documents, goods covered
by documents, instruments, investment property, letters of credit rights, and
money to the costs of ceasing participation until all costs of ceasing
participation are paid in full; and
(11) Notwithstanding any other provision of statute to the contrary, the provisions of
KRS 61.510 to 61.705, and the administrative regulations promulgated thereunder,
shall prevail regarding any question of participation in the systems of any employer
or any employee of an employer who ceases participation in the Kentucky
Employees Retirement System.
Effective: April 1, 2021
History: Amended 2021 Ky. Acts ch. 28, secs. 1 and 2, effective March 17, 2021; and
ch. 83, secs. 3 and 4, effective March 23, 2021. -- Amended 2020 Ky. Acts ch. 79,
sec. 20, effective April 1, 2021; and ch. 82, sec. 3, effective April 8, 2020. -Amended 2019 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 1, effective July 24, 2019. -Repealed and reenacted 2018 Ky. Acts ch. 207, sec. 157, effective April 27, 2018. -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 (3/23/2021). This statute was amended by 2021
Ky. Acts chs. 28 and 83, which do not appear to be in conflict and have been codified
together.
Legislative Research Commission Note (4/8/2020). This KRS section was amended by
Section 3 of 2020 Ky. Acts ch. 82. Section 5 of that Act states, "The amendments to
Section 3 of this Act [this statute] shall be retroactive back to April 1, 2020."
Legislative Research Commission Note (7/24/2019). 2019 (1st Extra. Sess.) Ky. Acts
ch. 1, sec. 5, provides: "A Kentucky Employees Retirement System employer ceasing
participation under the provisions of subsection (8) of Section 1 of this Act [this
statute] may finance the aggregate amount necessary to pay the full actuarial cost of
ceasing participation, plus any associated transaction costs, and the amount necessary
to fund any required reserves. The financing may be undertaken by the issuance of
bonds by the ceasing employer, or its agency or instrumentality, through financing
agreements with the Kentucky Asset/Liability Commission or other available sources
of funding. The sale of any bonds or entering into of any financing agreement or
other source of funding may be by public or private negotiated sale."
Legislative Research Commission Note (4/27/2018). This statute was amended by 2018
Ky. Acts ch. 170, sec. 1 and repealed and reenacted in ch. 187, sec. 7. However,
2018 Ky. Acts ch. 207, secs. 158 and 159 provided that, notwithstanding any
statutory language to the contrary, no part of the amendments to this statute in 2018
Ky. Acts ch. 170, sec. 1 are to be codified.
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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