KRS 78.535: Voluntary and involuntary cessation of participation -- Rights and benefits

of employees and members after cessation -- Administrative regulations --

Commonwealth held harmless -- Actions to ensure compliance. (Effective

April 1, 2021)

Notwithstanding any other provision of KRS 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 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 system suf ficient notice as provided by administrative

regulations promulgated by the system; and

(d) "Inactive member" means a member who is not participating with the system.

(2) Any employer participating in the County Employees Retirement System on July 1,

2015, may:

(a) If the employer is a nonstock nonprofit corporation organized under KRS

Chapter 273, voluntarily cease participation in the system subject to the

requirements and restrictions of this section; or

(b) Be required to involuntarily cease participati on 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 78.510 to 78.852.

(3) (a) If an employer desires to voluntarily cease participation in 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 b oard 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 County Employees Retirement System

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 pro gram 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 pre-tax and post-

tax contributions, an employee of the employer ceasing participation

may see k 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 an y employee who

seeks to transfer his or her account balance to the alternative retirement

program as provided by subparagraph 5. of this paragraph within sixty

(60) days of the employer's effective cessation date. 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 County Employees Retirement System

consulting actuary and for any other a dministrative 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.

(4) 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 membersh ip date in the County Employees

Retirement System, be eligible to participate in the County Employees Retirement

System through the employer that ceased participation for the duration of his or her

employment with that employer.

(5) 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) 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 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 78.510 to 78.852, shall:

1. Retain his or her accounts with the County Employees Retirement

System and have those accounts credited with interest in accordance

with KRS 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 ac cumulated account balance in

accordance with KRS 61.625 or any other available distribution if

eligible.

(6) For purposes of this section, the full actuarial cost shall be determined by the

County Employees Retirement System 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 (3.5%).

(7) The system shall promulgate administrative regul ations pursuant to KRS Chapter

13A to administer this section.

(8) 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.

(9) In lieu of cessation of participation of a county which fails to fully comply with the

provisions of KRS 78.510 to 78. 852, the board may file an action in the Franklin

Circuit Court to collect money owed and to attach so much of the general fund of

the delinquent county as is necessary to achieve full compliance with the provisions

of KRS 78.625.

(10) The board may utilize the provisions of KRS 78.625(3)(b) or (4) to ensure employer

compliance and payment of any amount payable by an employer under the

provisions of this section.