2014 Tennessee Code
Title 8 - Public Officers And Employees
Chapter 36 - Retirement Benefits
Part 9 - Hybrid Retirement Plan for State Employees and Teachers
§ 8-36-922 - Annual employer contributions to the hybrid plan benefits trust account.

(a) (1) Every employer participating in the hybrid plan shall contribute to the hybrid plan benefits trust account each year a sum equal to the greater of:

(A) The normal contribution rate and the accrued liability contribution rate as determined pursuant to subsection (b), multiplied by the earnable compensation of all its participating employees; or

(B) Four percent (4%) of the earnable compensation of all its participating employees.

(2) Employer contributions for kindergarten through twelfth (K-12) grade teachers shall be paid by the respective local education agency for which the teachers are employed.

(b) The actuary of the retirement system shall compute the normal contribution rate and the accrued liability contribution rate payable to the defined benefit component of the plan for each account described in § 8-36-920(e). The computation shall be made by an actuarial valuation in the manner provided by chapter 37, part 3 of this title; provided, that the entry age actuarial cost method, as defined by the Actuarial Standards Board, shall be used in determining normal costs and contributions for unfunded accrued liabilities. Level dollar amortization of unfunded accrued liabilities shall be used over a period of time as set by the board, but not to exceed twenty (20) years. The asset valuation method shall be based on the market value of plan assets and provide for smoothing of investment gains and losses over a period of time established by the board, but not to exceed ten (10) years. In addition, the actuarial demographic assumptions shall include projections of mortality improvement.

(c) (1) Notwithstanding this part or any other law to the contrary, if the actuarial valuation as of any year establishes a normal contribution rate and an accrued liability contribution rate, combined, that exceeds four percent (4%), the following steps in the order provided below shall automatically take effect the next July 1 immediately following the actuarial valuation as determined by the actuarial valuation process:

(A) Transfer such amounts as may be necessary from the stabilization reserve trust account created in § 8-36-920 to the reserve trust account to fund the increase in the employer contribution rate;

(B) Suspend or reduce, as necessary, the three percent (3%) maximum cost-of-living adjustment as provided for in § 8-36-701(b)(1). Any such suspension or reduction shall begin on the July 1 next following the actuarial valuation;

(C) Suspend or reduce, as necessary, the amount of employer contributions required to the defined contribution component of the plan and redirect such amount to the reserve trust account to fund the increase in the employer contribution rate;

(D) Increase the employee contributions required in § 8-36-904 from five percent (5%) to six percent (6%) of the participant's earnable compensation;

(E) Reduce the retirement allowance formulas in § 8-36-907 from one percent (1.0%) and one and six-tenths percent (1.6%) to such lesser amount as is necessary to reduce the employer contribution rate to four percent (4%). The reduction in formulas shall only apply to future service accruals; and

(F) If the employer contribution rate still exceeds four percent (4%) after taking the above steps, then the hybrid plan shall be suspended for future service accruals until such time as the employer rate equals four percent (4%) or lower.

(2) If the actuarial valuation as of any year establishes a normal contribution rate and an accrued liability contribution rate, combined, that equals four percent (4%) or lower, the above steps in the reversed order as provided above shall automatically take effect the next July 1 immediately following the actuarial valuation as determined by the actuarial valuation process.

(d) (1) The actuary of the retirement system shall determine the amount of the unfunded accrued liability for the defined benefit component of the hybrid plan. If the unfunded liability exceeds the maximum unfunded liability, the following steps in the order provided in subdivisions (d)(1)(A)-(F) shall automatically apply on the effective date that the maximum unfunded liability has been reached. The unfunded liability shall be determined by the calculation of the net pension liability in accordance with the standards and other pronouncements issued by the governmental accounting standards board. For purposes of this section, "maximum unfunded liability" means with respect to state employees an unfunded liability of no greater than twelve and one-half percent (12.5%) of a five-year moving market average of the general obligation debt of the state of Tennessee, including its commercial paper. With respect to teachers, "maximum unfunded liability" means an unfunded liability of no greater than twelve and one-half percent (12.5%) of a five-year moving market average of the general obligation debt of the state of Tennessee, including its commercial paper. With respect to political subdivision employees, "maximum unfunded liability" means an unfunded liability of no greater than the amount as determined by the employees' respective employer and as shall be set forth in the political subdivision's participation resolution:

(A) Transfer such amounts as may be necessary from the stabilization reserve trust account created in § 8-36-920 to the reserve trust account to fund the increase in the maximum unfunded liability;

(B) Suspend or reduce, as necessary, the three percent (3%) maximum cost-of-living adjustment as provided for in § 8-36-701(b)(1). Any such suspension or reduction shall begin on the July 1 next following the actuarial valuation;

(C) Suspend or reduce, as necessary, the amount of employer contributions required to the defined contribution component of the plan and redirect such amount to the reserve trust account to fund the increase in the maximum unfunded liability;

(D) Increase the employee contributions required in § 8-36-904 from five percent (5%) to six percent (6%) of the participant's earnable compensation;

(E) Reduce the retirement allowance formulas in § 8-36-907 from one percent (1.0%) and one and six-tenths percent (1.6%) to such lesser amount as is necessary to reduce the unfunded liability to the maximum unfunded liability. The reduction in formulas shall only apply to future service accruals; and

(F) If the maximum unfunded liability is still exceeded, then the hybrid plan shall be suspended for future service accruals until such time as the unfunded liability equals or is less than the maximum unfunded liability.

(2) If the unfunded liability equals or is less than the maximum unfunded liability, the above steps in the reversed order as provided above shall automatically apply on the effective date that the unfunded liability equals or is less than the maximum unfunded liability.