2013 Maryland Code
STATE PERSONNEL AND PENSIONS
§ 21-305 - Employer contributions -- Participating governmental units

§21-305.

(a) In this section, “employees’ systems” means the Employees’ Pension System and the Employees’ Retirement System.

(b) (1) Each fiscal year, on behalf of its employees who are members of one of the employees’ systems, a participating governmental unit shall pay an amount equal to or greater than the product of multiplying:

(i) the aggregate annual earnable compensation of those members; and

(ii) the sum of the normal contribution rate and the accrued liability contribution rate, as determined under §§ 21-305.1 and 21-305.2 of this subtitle.

(2) Each fiscal year, in addition to the amounts required to be paid under paragraph (1) of this subsection, a participating governmental unit shall pay:

(i) the special accrued liability contribution required by § 21-305.3 of this subtitle;

(ii) any withdrawal liability contribution required by § 21-305.5 of this subtitle;

(iii) an amount equal to 5% of the aggregate earnable compensation of its employees who are members of the Employees’ Retirement System; and

(iv) any annual deficit payment required under § 21-305.4(c) of this subtitle.

(3) Each fiscal year, a participating governmental unit shall reduce the amounts required to be paid under paragraphs (1) and (2) of this subsection by any annual credit allowed to the participating governmental unit under § 21-305.4(b) of this subtitle.

(c) (1) The amount determined under subsection (b) of this section for the employees’ systems shall be based on an actuarial determination of the amounts that are required to preserve the integrity of the accumulation fund of the employees’ systems, using:

(i) the entry-age actuarial cost method;

(ii) actuarial assumptions adopted by the Board of Trustees; and

(iii) the asset valuation method recommended by the actuary and adopted by the Board of Trustees.

(2) Except as provided in subsection (b)(2)(iii) of this section, for the purpose of making the determinations required under this section, the Employees’ Retirement System and the Employees’ Pension System shall be considered together as one State system.

(d) The actuary shall compute the contributions payable under this section.

(e) The amounts computed under this section are a charge against the participating governmental unit to be paid in accordance with § 21-309 of this subtitle.

§ 21-305 - 1. Employer contributions -- Normal contributions

(a) "Employees' systems" defined. -- In this section, "employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(b) Actuarial method. -- As part of each actuarial valuation, the actuary shall determine the normal contributions, net of member contributions, on account of members of the employees' systems who are employees of participating governmental units.

(c) Rate -- Determination. -- Except as provided in subsection (d) of this section, the normal contribution rate for participating governmental units equals the fraction that has:

(1) as its numerator, the sum of the normal contributions determined under this section; and

(2) as its denominator, the aggregate annual earnable compensation of the members of the employees' systems who are employees of participating governmental units.

(d) Rate -- Adjustments. -- On the recommendation of the actuary, the Board of Trustees may adjust the normal contribution rate to reflect:

(1) experience gains and losses;

(2) the effect of changes in actuarial assumptions; and

(3) the effect of legislation enacted after July 1, 1980.

§ 21-305 - 2. Employer contributions -- Accrued liability contributions

(a) "Employees' systems" defined. -- In this section, "employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(b) Actuarial method. -- As part of each actuarial valuation, the actuary shall determine the accrued liability contributions on account of members of the employees' systems who are employees of participating governmental units.

(c) Rate determination. -- Beginning July 1, 2001, each year the Board of Trustees shall set contribution rates for each State system that shall amortize:

(1) all unfunded liabilities or surpluses accrued as of June 30, 2000, over 20 years; and

(2) any new unfunded liabilities or surpluses that have accrued from July 1 of the preceding fiscal year over 25 years to reflect:

(i) experience gains and losses;

(ii) the effect of changes in actuarial assumptions; and

(iii) the effect of legislation effective on or after July 1, 2001.

§ 21-305 - 3. Employer contributions -- Special accrued liability contributions

(a) Definitions. --

(1) In this section the following words have the meanings indicated.

(2) "Employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(3) "Special accrued liability" means, as to any participating governmental unit, the liability of the employees' systems on account of the employees of the participating governmental unit who elect to become members under § 23-204(b) of this article.

(b) In general. -- Each participating governmental unit shall make a special accrued liability contribution on account of its participation in the employees' systems.

(c) Actuarial method. -- The special accrued liability contribution shall be determined by an actuarial valuation of the special accrued liability as of the date of approval of participation by the legislative body of the participating governmental unit.

(d) Amount. -- Except as provided in subsection (e) of this section, the annual special accrued liability contribution of each participating governmental unit shall be the level annual payment that is sufficient to liquidate, over 25 years beginning on the date of approval by the legislative body of the participating governmental unit, the amount by which the special accrued liability of the participating governmental unit exceeds the sum of:

(1) the present value, as of the date of approval, of future normal contributions, future accrued liability contributions, future contributions for members of the Employees' Retirement System required under § 21-305(b)(2)(iii) of this subtitle, future member contributions on behalf of or by members who are employees of the participating governmental unit; and

(2) any cash and securities transferred to the Employees' Pension System in accordance with § 31-113(d) of this article.

(e) Liquidation of unfunded special accrued liability. -- Subject to the approval of the Board of Trustees, a participating governmental unit may liquidate its unfunded special accrued liability:

(1) over a period not to exceed 40 years; or

(2) subject to the actuary's concurrence, by means of annual payments other than level annual payments.

(f) Prepayment. -- A participating governmental unit may prepay the special accrued liability in whole or in part at any time with interest at the annual rate established by the Board of Trustees as of the date of payment.

(g) Payment of initial valuation. -- The expense of making the initial special accrued liability actuarial valuation shall be assessed against and paid by the participating governmental unit on whose account it is necessary.

§ 21-305 - 4. Employer contributions -- Required employer contributions

(a) Definitions. --

(1) In this section the following words have the meanings indicated.

(2) "Deficit" means, as to any participating governmental unit, the lesser of:

(i) the amount, as of June 30, 1995, by which the present value of the accrued benefit of the employees of the participating governmental unit who are members of the Employees' Retirement System exceeds the actuarial value of the assets to the credit of the participating governmental unit in the Employees' Retirement System; or

(ii) 40% of the aggregate annual earnable compensation of the participating governmental unit as of June 30, 1995.

(3) "Employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(4) "Required employer contribution" means the amount payable each fiscal year under § 21-305(b)(1) and (2)(i) and (iii) of this subtitle by a participating governmental unit.

(5) "Surplus" means, as to any participating governmental unit, the amount, as of June 30, 1995, by which the actuarial value of the assets to the credit of the participating governmental unit in the employees' systems exceeds the present value of the future benefits of the employees of the participating governmental unit who are members of the employees' systems.

(b) Surplus; annual credit. --

(1) The actuary shall determine the surplus allocable to a participating governmental unit as of June 30, 1995, based on an actuarial valuation.

(2) The surplus of a participating governmental unit may not be less than zero.

(3) The annual credit of a participating governmental unit shall be the amount that is sufficient to amortize over a 25-year term commencing on July 1, 1995, the surplus allocated to a participating governmental unit as of June 30, 1995, by means of an annual credit that increases each year based on the actuarial assumptions adopted by the Board of Trustees on the recommendation of the actuary.

(4) Each fiscal year, a participating governmental unit's required employer contribution shall be reduced by the annual credit of the participating governmental unit, but not below zero.

(c) Deficit; prepayment. --

(1) The actuary shall determine the deficit allocable to a participating governmental unit as of June 30, 1995, based on an actuarial valuation.

(2) (i) Except as provided in subparagraph (ii) of this paragraph, the annual deficit payment of a participating governmental unit shall be the payment that is sufficient to liquidate over a 25-year term beginning as of July 1, 1995, the deficit allocated to the participating governmental unit by means of annual payments that increase each year based on the actuarial assumptions adopted by the Board of Trustees on the recommendation of the actuary.

(ii) If, as of July 1, 1995, the annual deficit payment of a participating governmental unit increases the participating governmental unit's required contribution by more than 2% of the aggregate annual earnable compensation of the participating governmental unit as of July 1, 1995, the participating governmental unit may liquidate the deficit over a 40-year term beginning as of July 1, 1995.

(3) (i) Subject to subparagraph (ii) of this paragraph, with the concurrence of the Board of Trustees, a participating governmental unit may prepay all or a portion of the deficit.

(ii) A participating governmental unit that elects to prepay a portion of the deficit:

1. may not prepay less than the greater of $ 100,000 or 10% of the outstanding balance of the deficit as of the payment date;

2. may not make more than 2 additional payments during any fiscal year; and

3. shall be liable for payment of the expenses incurred by the agency for the actuary to recalculate the annual deficit payments required under § 21-305(b)(2)(iv) of this subtitle.

(d) Regulations. -- On the recommendation of the actuary, the Board of Trustees shall adopt regulations that are necessary to carry out this section, and that set forth the amount of any surplus or deficit allocable to a participating governmental unit as of June 30, 1995.

§ 21-305 - 5. Employer contributions -- Withdrawal liability contribution

(a) Definitions. --

(1) In this section the following words have the meanings indicated.

(2) "Complement of the participant funding ratio" is a ratio equal to 100% minus the participant funding ratio, and may not be less than zero.

(3) "Employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(4) "Noncontributory participating governmental unit" means a participating governmental unit that did not elect to provide its employees with the contributory pension benefit or the Alternate Contributory Pension Selection as provided in § 31-116 of this article.

(5) "Noncontributory system funding ratio" means the ratio determined by the actuary as provided under subsection (e) of this section.

(6) "Participant funding ratio" means the ratio determined under subsection (d) of this section.

(7) "Transition amount" means the amount determined by the actuary as provided under subsection (i) of this section.

(b) Applicability of section. -- This section applies only to a participating governmental unit that on or after July 1, 2001, elects to withdraw from participation in the employees' systems and transfer to a local pension system all employees of the participating governmental unit who consent to the withdrawal.

(c) Contributions for employees following withdrawal of participating governmental unit. --

(1) On and after the date of a participating governmental unit's withdrawal from the employees' systems under § 31-302(1) of this article, the participating governmental unit and its employees are not required to make any further contributions to the employees' systems for those employees who elect to withdraw from the employees' systems.

(2) As of the effective date of withdrawal, the participating governmental unit shall continue to make any contributions required under § 21-305(b)(1) and (2) of this subtitle on behalf of those employees who do not elect to withdraw from the employees' systems.

(3) As of the effective date of withdrawal of a participating governmental unit, the Board of Trustees shall transfer to the administrative board of the local pension system the assets that are allocable to the employees of the participating governmental unit who elect to withdraw from the employees' systems as determined under either subsection (f) or (g) of this section.

(d) Actuarial method -- Participant funding ratio. --

(1) This subsection applies to a participating governmental unit that elected to provide its employees with the contributory pension benefit or the Alternate Contributory Pension Selection as provided in § 31-116 of this article.

(2) As of June 30 of each fiscal year, the actuary shall determine the participant funding ratio for the participating governmental units as provided in this subsection.

(3) The participant funding ratio shall be a fraction that has:

(i) as its numerator, the assets to the credit of the participating governmental units in the accumulation fund and the annuity savings fund of the employees' systems as adjusted under paragraph (4) of this subsection; and

(ii) as its denominator, the actuarial liabilities of the participating governmental units.

(4) The assets to the credit of the participating governmental units as of the valuation date shall be:

(i) increased by the sum of the outstanding balances of:

1. the special accrued liability attributable to each participating governmental unit under § 21-305.3 of this subtitle;

2. the deficit allocated to each participating governmental unit under § 21-305.4(c) of this subtitle; and

3. the withdrawal liability contribution attributable to each participating governmental unit under subsection (h) of this section; and

(ii) decreased by the sum of the outstanding balances of the surplus allocated to each participating governmental unit under § 21-305.4(b) of this subtitle.

(e) Actuarial method -- Noncontributory participant funding ratio. --

(1) This subsection applies to a noncontributory participating governmental unit.

(2) As of June 30 of each fiscal year, the actuary shall determine the noncontributory system funding ratio for the noncontributory participating governmental units as provided in this subsection.

(3) The noncontributory system funding ratio shall be a fraction that has:

(i) as its numerator, the assets to the credit of the participating governmental units in the accumulation fund and the annuity savings fund of the employees' systems as adjusted under paragraph (4) of this subsection; and

(ii) as its denominator, the actuarial liabilities of the participating governmental units calculated as if all of the participating governmental units are noncontributory participating governmental units.

(4) The assets to the credit of the participating governmental units as of the valuation date shall be:

(i) increased by the sum of the outstanding balances of:

1. the special accrued liability attributable to each participating governmental unit under § 21-305.3 of this subtitle;

2. the deficit allocated to each participating governmental unit under § 21-305.4(c) of this subtitle; and

3. the withdrawal liability contribution attributable to each participating governmental unit under subsection (h) of this section; and

(ii) decreased by the sum of the outstanding balances of the surplus allocated to each participating governmental unit under § 21-305.4(b) of this subtitle.

(f) Actuarial method -- Assets allocable to employees of participating governmental unit. --

(1) This subsection applies to a participating governmental unit that elected to provide its employees with the contributory pension benefit or the Alternate Contributory Pension Selection as provided in § 31-116 of this article.

(2) The assets that are allocable to the employees of a participating governmental unit who elect to withdraw from the employees' systems shall be computed by the actuary as provided in this subsection.

(3) If the participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit is less than 100%, the actuary shall multiply the participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit by the actuarial liability allocable to the employees of the participating governmental unit who elect to withdraw.

(4) If the participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit is 100% or greater and less than 110%, the actuary shall multiply the actuarial liability allocable to the employees of the participating governmental unit who elect to withdraw by 100%.

(5) If the participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit is 110% or greater, the actuary shall multiply the actuarial liability allocable to the employees of the participating governmental unit who elect to withdraw by the difference between the participant funding ratio and 10%.

(6) Any assets computed under paragraph (3), (4), or (5) of this subsection shall be reduced by the sum of:

(i) the outstanding balance of the deficit allocable to the participating governmental unit as of the effective date of withdrawal;

(ii) the outstanding balance of the special accrued liability contribution allocable to the participating governmental unit as of the effective date of withdrawal; and

(iii) any transition amount as determined under subsection (i) of this section.

(g) Actuarial method -- Assets allocable to employees of noncontributing participating governmental unit. --

(1) This subsection applies to a noncontributory participating governmental unit.

(2) The assets that are allocable to the employees of a noncontributory participating governmental unit who elect to withdraw from the employees' systems shall be computed by the actuary as provided in this subsection.

(3) If the noncontributory system funding ratio for the fiscal year preceding the effective date of withdrawal of the noncontributory participating governmental unit is less than 100%, the actuary shall multiply the noncontributory system funding ratio for the fiscal year preceding the effective date of withdrawal of the noncontributory participating governmental unit by the actuarial liability allocable to the employees of the noncontributory participating governmental unit who elect to withdraw.

(4) If the noncontributory system funding ratio for the fiscal year preceding the effective date of withdrawal of the noncontributory participating governmental unit is 100% or greater and less than 110%, the actuary shall multiply the actuarial liability allocable to the employees of the noncontributory participating governmental unit who elect to withdraw by 100%.

(5) If the noncontributory system funding ratio for the fiscal year preceding the effective date of withdrawal of the noncontributory participating governmental unit is 110% or greater, the actuary shall multiply the actuarial liability allocable to the employees of the noncontributory participating governmental unit who elect to withdraw by the difference between the noncontributory system funding ratio and 10%.

(6) Any assets computed under paragraph (3), (4), or (5) of this subsection shall be reduced by the sum of:

(i) the outstanding balance of the deficit allocable to the noncontributory participating governmental unit as of the effective date of withdrawal;

(ii) the outstanding balance of the special accrued liability contribution allocable to the noncontributory participating governmental unit as of the effective date of withdrawal; and

(iii) any transition amount as determined under subsection (i) of this section.

(h) Actuarial method -- Withdrawal liability contribution. --

(1) The withdrawal liability contribution of a participating governmental unit shall be computed by the actuary as provided in this subsection.

(2) The actuary shall:

(i) multiply the complement of the participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit by the actuarial liability allocable to the employees of the participating governmental unit who elect to remain members of the employees' systems; and

(ii) reduce the amount determined under subparagraph (i) of this paragraph by the outstanding balance of the surplus allocable to the participating governmental unit as of the effective date of withdrawal.

(3) The amount determined under paragraph (2) of this subsection may not be less than zero.

(4) (i) Except as provided in subparagraph (ii) of this paragraph, the annual withdrawal liability contribution of a participating governmental unit shall be the annual payment that is sufficient to liquidate, over not more than 25 years, the withdrawal liability contribution by means of annual payments that increase each year based on the actuarial assumptions adopted by the Board of Trustees on the recommendation of the actuary.

(ii) Subject to the approval of the Board of Trustees and the actuary's concurrence, a participating governmental unit:

1. may liquidate the withdrawal liability contribution by means of level annual payments or over a term of less than 25 years; or

2. prepay all or a portion of the withdrawal liability contribution.

(i) Applicability of section; transition amounts; status assumptions; regulations. --

(1) This section applies only to a participating governmental unit with a deficit as determined under § 21-305.4(c) of this subtitle.

(2) The transition amount of a participating governmental unit shall be computed by the actuary as provided in this subsection.

(3) The actuary shall determine the pre-June 30, 1995 status and the post-June 30, 1995 status of a participating governmental unit using the assumptions that:

(i) the participating governmental unit elects to withdraw from the employees' systems as of June 30, 1995;

(ii) the employees of the withdrawing participating governmental unit who are members of the Employees' Retirement System elect to remain in the employees' systems; and

(iii) the employees of the withdrawing participating governmental unit who are members of the Employees' Pension System elect to withdraw from the employees' systems.

(4) The pre-June 30, 1995 status of a participating governmental unit is an amount equal to the difference between:

(i) the assets transferable to a participating governmental unit that are allocable to the employees of the participating governmental unit who elect to withdraw from the employees' systems as determined by the actuary applying the provisions of former § 21-305(f) of this article as of June 30, 1995; and

(ii) the withdrawal liability of a participating governmental unit that is attributable to the employees of the participating governmental unit who elect to remain members of the employees' systems as determined by the actuary applying the provisions of former § 21-305(f) of this article as of June 30, 1995.

(5) The post-June 30, 1995 status of a participating governmental unit is an amount equal to the difference between:

(i) the assets transferable to a participating governmental unit that are allocable to the employees who elect to withdraw from the employees' systems as determined under subsection (d) of this section as of June 30, 1995; and

(ii) the withdrawal liability of a participating governmental unit that is attributable to the employees of the participating governmental unit who elect to remain in the employees' systems as determined under subsection (f) of this section as of June 30, 1995.

(6) (i) Subject to subparagraph (ii) of this paragraph, the transition amount of a participating governmental unit is the amount determined by the actuary as of June 30, 1995, equal to the difference between:

1. the post-June 30, 1995 status of the participating governmental unit as determined under paragraph (4) of this subsection; and

2. the pre-June 30, 1995 status of the participating governmental unit as determined under paragraph (3) of this subsection.

(ii) The transition amount of a participating governmental unit may not be less than zero.

(7) As of June 30 of each fiscal year, the transition amount of a participating governmental unit shall decrease by writing down the transition amount in equal annual installments over the 25-year term beginning on July 1, 1995.

(8) On the recommendation of the actuary, the Board of Trustees shall adopt regulations that are necessary to carry out this section, and that set forth a schedule reflecting:

(i) any transition amount allocable to a participating governmental unit; and

(ii) the outstanding balance of the transition amount each year.

§ 21-305 - 6. Employer contributions -- Partial withdrawal

(a) Definitions. --

(1) In this section the following words have the meanings indicated.

(2) "Employees' systems" means the Employees' Pension System and the Employees' Retirement System.

(3) "Partial withdrawal" means that a participating governmental unit elects to withdraw from participation in the employees' systems and transfer to a local pension system any of the following groups of employees of the participating governmental unit who consent to the withdrawal:

(i) firefighters;

(ii) law enforcement personnel; or

(iii) subject to the approval of the Board of Trustees, a homogeneous unit of at least 10 employees.

(b) Applicability of section. -- This section applies only to a participating governmental unit that elects a partial withdrawal from participation in the employees' systems.

(c) Contributions for employees following partial withdrawal of participating governmental unit. --

(1) On and after the date of a participating governmental unit's partial withdrawal from the employees' systems, the participating governmental unit and its employees are not required to make any further contributions to the employees' systems for those employees who elect to withdraw from the employees' systems.

(2) As of the effective date of the partial withdrawal, the participating governmental unit shall continue:

(i) to make any contributions required under § 21-305(b)(1) and (2) of this subtitle on behalf of those employees who do not elect to withdraw from the employees' systems; and

(ii) to reduce the amounts required to be paid under § 21-305(b)(1) and (2) of this subtitle by any annual credit allowed to the participating governmental unit under § 21-305.4(b) of this subtitle.

(3) As of the effective date of the partial withdrawal, the Board of Trustees shall transfer to the administrative board of the local pension system the assets that are allocable to the employees of the participating governmental unit who elect to withdraw from the employees' systems as determined under subsection (d) of this section.

(d) Regulations. -- On the recommendation of the actuary, the Board of Trustees shall adopt regulations that set forth the method for:

(1) computing the assets allocable to the employees of a participating governmental unit who elect to withdraw from the employees' systems;

(2) computing the withdrawal liability contribution of the participating governmental unit; and

(3) determining the portion of any surplus as determined under § 21-305.4(b) of this subtitle, deficit as determined under § 21-305.4(c) of this subtitle, or transition amount as determined under § 21-305.5(i) of this subtitle that is available to the participating governmental unit as of the effective date of the partial withdrawal to compute the assets allocable to the withdrawing employees and the withdrawal liability contribution.