KRS 61.565: Employer's contributions -- Computation of normal cost contribution and

accrued liability -- Contribution -- Notification of change in employer

contribution rate -- Costs for employer pay credits -- Employers to pay full

contribution.

(1) (a) Each employer participating in the State Police Retirement System as

provided for in KRS 16.505 to 16.652 and the Kentucky Employees

Retirement System as provided for in KRS 61.510 to 61.705 shall contribute

annually to the respective retirement system an amount determined by the

actuarial valuation completed in accordance with KRS 61.670 and as

specified by this section. Employer contributions for each respective

retirement system shall be equal to the sum of the "normal cost contribution"

and the "actuarially accrued liability contribution."

(b) For purposes of this section, the normal cost contribution shall be computed

as a percentage of pay and shall be an annual amount that is sufficient when

combined with employee contributions to fund benefits earned during the year

in the respective system. The amount shall be:

1. Paid as a percentage of creditable compensation reported for each

employee participating in the system and accruing benefits; and

2. The same percentage of pay for all employees who are par ticipating in

the same retirement system, except that separate percentage rates shall

be developed in each system for those employers whose employees are

participating in hazardous duty retirement coverage as provided by KRS

61.592.

(c) For purposes of thi s section, the actuarially accrued liability contribution for

all employers, except for contributions paid by nonhazardous employers in the

Kentucky Employees Retirement System on or after July 1, 2021, shall be:

1. Computed by amortizing the total unfunde d actuarially accrued liability

of each system over a closed period of thirty (30) years beginning with

the 2019 actuarial valuation using the level percentage of payroll

amortization method, except that any increase or decrease in the

unfunded actuarially accrued liability occurring after the completion of

the 2019 actuarial valuation shall be amortized over a closed period of

twenty (20) years beginning with the actuarial valuation in which the

increase or decrease in the unfunded actuarially accrued liab ility is

recognized. An increase or decrease in the unfunded actuarially accrued

liability may result from, but not be limited to, legislative changes to

benefits, changes in actuarial methods or assumptions, or actuarial gains

or losses;

2. Paid as a perc entage of payroll on the creditable compensation reported

for each employee participating in the system and accruing benefits; and

3. The same percentage of pay for all employees who are participating in

the same retirement system, except that separate per centage rates shall

be developed in each system for those employers whose employees are

participating in hazardous duty retirement coverage as provided by KRS

61.592.

(d) 1. For purposes of this section, the actuarially accrued liability contribution

for nonhazardous employers in the Kentucky Employees Retirement

System on or after July 1, 2021:

a. Shall be an annual dollar amount that is sufficient to amortize the

total unfun ded actuarially accrued liability of the system over a

closed period of thirty (30) years beginning with the 2019 actuarial

valuation using the level percentage of payroll amortization

method, except that any increase or decrease in the unfunded

actuarially accrued liability occurring after the completion of the

2019 actuarial valuation shall be amortized over a closed period of

twenty (20) years beginning with the actuarial valuation in which

the increase or decrease in the unfunded actuarially accrued

liability is recognized. An increase or decrease in the unfunded

actuarially accrued liability may result from but not be limited to

legislative changes to benefits, changes in actuarial methods or

assumptions, or actuarial gains or losses;

b. Shall be prorated to each individual nonhazardous employer in the

Kentucky Employees Retirement System by multiplying the

annual dollar amount of the actuarially accrued liability

contribution for the system as determined by subdivision a. of this

subparagraph by the ind ividual employer's percentage of the

system's total actuarially accrued liability as of the June 30, 2019,

actuarial valuation which shall be determined solely by the

system's consulting actuary and assigned to each employer based

upon the last participating employer of the member or retiree as of

June 30, 2019. The individual employer's percentage of the

system's total actuarially accrued liability as of the June 30, 2019,

actuarial valuation shall be used to determine the individual

employer's prorated do llar amount of the system's actuarially

accrued liability contribution in all future fiscal years of the

amortization period or periods, except that the employer's

percentage shall be adjusted to reflect any employer who

voluntarily or involuntarily ceases participation as provided by

KRS 61.522 and except as provided by subparagraphs 4. and 5. of

this paragraph. For purposes of this subdivision, all executive

branch departments, program cabinets and their respective

departments, and administrative bodies e numerated in KRS

12.020, and any other executive branch agencies administratively

attached to a department, program cabinet, or administrative body

enumerated in KRS 12.020, shall be considered a single individual

employer and only one (1) value shall be c omputed for these

executive branch employers. For purposes of this subdivision, all

employers of the legislative branch, including the Legislative

Research Commission and the General Assembly that covers

legislators and staff who participate in the Kentuck y Employees

Retirement System, shall be considered a single individual

employer and only one (1) value shall be computed for these

employers. For purposes of this subdivision, all employers of the

judicial branch, including the Administrative Office of the Courts,

the Judicial Form Retirement System, and all master

commissioners, shall be considered a single individual employer

and only one (1) value shall be computed for these employers.

Upon request by any nonhazardous employer covered by this

paragraph, the system shall, within ninety (90) days of the

employer's request, provide the requesting employer with any:

i. Identifying, demographic, financial, or any other information

that was provided to the system's actuary to determine the

employer's share of the system's total actuarially accrued

liability, including individual data provided to the actuary on

each member, retiree, or recipient whose cost was assigned

to the employer. The data shall also include identifying

information that will allow the emplo yer to match its records

to the members, retirees, and recipients that resulted in the

cost that has been assigned to the employer; and

ii. Calculations produced by the actuary on each member,

retiree, or recipient during the completion of the valuation

that resulted in the cost assigned to the employer under this

paragraph. The data shall include identifying information

that will allow the employer to match its records to the

members, retirees, and recipients that resulted in the cost that

has been assigned to the employer;

c. Shall be payable by an individual employer in equal monthly

dollar installments during the fiscal year in accordance with the

reporting requirements specified by KRS 61.675 so that the

individual employer pays its full prorated dolla r amount of the

actuarially accrued liability contribution as determined by

subdivision b. of this subparagraph; and

d. Notwithstanding subdivision b. of this subparagraph for those

individual participating employers who are local and district health

departments governed by KRS Chapter 212, community mental

health centers, and employers whose employees are not subject to

KRS 18A.005 to 18A.200, who received or were eligible to

receive a distribution of general fund appropriations in the 2018 -

2020 biennial e xecutive branch budget to assist in paying

retirement costs under 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), shall not, once the initial dollar amounts are

established in accordance with this paragraph, be adjusted in terms

of dollars paid by the individual employer, except that adjustments

shall be made by the system upon completion of an actuarial

investigation as provided by KRS 61.670, so long as at least four

(4) years have passed since the last adjustment to the actuarially

accrued liability contribution for these employers. The provisions

of this subdivision shall not be interpreted to mean that employers

described by this subdivision may continue paying the dollar value

of contributions or employer contribution rates established or paid

by the employer in budget periods occurring prior to July 1, 2021.

2. Individual employers, solely for purposes of collecting employer

contributions from various fund sources du ring the fiscal year, may

convert the actuarially accrued liability contribution established by this

paragraph to a percentage of pay and may adjust the percent of pay

during the fiscal year in order to pay the required dollar value of

actuarially accrued liability contribution required by this paragraph. No

provision of this subparagraph shall be construed to reduce an individual

employer's actuarially accrued liability contribution as otherwise

provided by this paragraph.

3. The provisions of this paragraph shall not apply to those employers who

cease participation as provided by KRS 61.522.

4. In the event an individual Kentucky Employees Retirement System

nonhazardous employer who is required to pay an actuarially accrued

liability contribution as provid ed by this paragraph and as calculated

from the 2019 actuarial valuation or subsequent valuations, merges with

another employer or entity, forms a new or separate employer or entity,

or splits or separates operations into multiple employers or entities, th e

system shall, except for those employers or entities who pay the costs to

cease participation as provided by KRS 61.522, have full authority to

assign a portion or all of the total actuarially accrued liability

contribution to the merged, new, split, or separate employers or entities,

regardless of whether or not the merged, new, split, or separate

employers or entities participate in the system. In the case of a district

health department established pursuant to KRS Chapter 212, which

ceases to operate o r which has a county or counties that withdraw from

the district health department, the systems shall assign the total

actuarially accrued liability contribution based upon the proportion of

taxable property of each county as certified by the Department fo r

Public Health in the Cabinet for Health and Family Services in

accordance with KRS 212.132. The system shall establish by

administrative regulations the process of assigning actuarially accrued

liability contributions as authorized by this subparagraph.

5. a. An employer who is not in the executive, legislative, or judicial

branch of Kentucky state government as enumerated in

subparagraph 1.b. of this paragraph may on or before July 1, 2021,

appeal to the board regarding any current or former employees or

retirees the employer believes should not be used to determine the

employer's percentage of the system's total actuarially accrued

liability. The only appeals that shall be submitted by the employer

or considered by the board shall be potential errors whe re the last

participating employer is in dispute, situations where employees of

the employer were hired through a contract between the executive

branch and the employer for the employee to provide services to

the executive branch, or situations where a com munity mental

health center was contracted to provide services at a facility

previously operated by the executive branch. The employer shall

submit the information required by the board to verify potential

errors or contract employees with employers.

b. The board shall review and issue a final determination regarding

any appeals by December 31, 2021. In situations where the board

determines the last participating employer was incorrect and

should be assigned to another employer, the system shall, effective

for employer contributions payable on or after July 1, 2022, assign

the cost to the executive branch until such time ownership of the

liability can be determined and assigned to the correct employer.

In situations where the board determines certain employe es of

employers were hired through a contract between the executive

branch and the employer for an employee or employees to provide

services to the executive branch, those liabilities shall, effective

for employer contributions payable on or after July 1, 2022, be

assigned to the executive branch. In situations where the board

determines the community mental health center was contracted to

provide services at a facility previously operated by the executive

branch, the liabilities for employees providing ser vices at that

facility shall, effective for employer contributions payable on or

after July 1, 2022, be assigned to the executive branch.

c. No appeal shall be submitted by the employer or considered by the

board regarding the assumptions or methodology us ed by the

actuary to determine a particular employer's percentage of the

system's total actuarially accrued liability or the use of the last

participating employer to assign liabilities to an employer, except

as otherwise provided by this subparagraph.

d. The board shall within thirty (30) days following the final

determinations submit to the Public Pension Oversight Board the

list of appeals that were approved, the number of employees

involved, and any costs that will be transferred to the executive

branch effective July 1, 2022.

(e) The employer contributions computed under this section shall be determined

using:

1. The entry age normal cost funding method;

2. An asset smoothing method that smooths investment gains and losses

over a five (5) year period; and

3. Other funding methods and assumptions established by the board in

accordance with KRS 61.670.

(2) (a) Except as limited by subsection (1)(d)1.d. of this section as it relates to the

Kentucky Employees Retirement System, normal cost contribution rates and

the actuarially accrued liability contribution shall be determined by the board

on the basis of the annual actuarial valuation last preceding the July 1 of a

new biennium.

(b) The board shall not have the authority to amend contribution rates as of Ju ly 1

of the second year of the biennium for the Kentucky Employees Retirement

System and the State Police Retirement System.

(3) (a) The system shall advise each employer prior to July 1 of any change in the

employer contribution rate.

(b) Costs for the benefits provided under KRS 16.583(2)(b)2. and 16.584 shall be

included in the employer contribution rate payable to the State Police

Retirement System but shall be reported as a separate line item in the actuarial

valuation for purposes of KRS 16.584 and i n any correspondence to the

Department of Kentucky State Police, the state budget director, and the

Legislative Research Commission regarding employer costs for the State

Police Retirement System.

(c) Based on the employer contribution rate, each employer shall include in the

budget sufficient funds to pay the employer contributions as determined by

the board under this section.

(4) All employers, including the General Assembly, shall pay the full actua rially

required contributions, as prescribed by this section, to the Kentucky Employees

Retirement System and the State Police Retirement System in fiscal years occurring

on or after July 1, 2020, except as authorized for the program established by KRS

16.583(2)(b)2. and 16.584.