{"data":{"id":"us-ky/krs-78.535","jurisdiction":"us-ky","citation":"KRS 78.535","heading":"Voluntary and involuntary cessation of participation -- Rights and benefits","body":"of employees and members after cessation -- Administrative regulations --\nCommonwealth held harmless -- Actions to ensure compliance.  (Effective\nApril 1, 2021)\nNotwithstanding any other provision of KRS 78.510 to 78.852 to the contrary:\n(1) For purposes of this section:\n(a) \"Active member\" means a member who is participating in the system;\n(b) \"Employer\" means the governing body of a county as defined by KRS 78.510;\n(c) \"Employer's effective cessation date\" means the last day of the system's plan\nyear in the year in which the employer has elected to cease participation in the\nsystem, provided the employer has met the requirements of this section and\nhas given the system suf ficient notice as provided by administrative\nregulations promulgated by the system; and\n(d) \"Inactive member\" means a member who is not participating with the system.\n(2) Any employer participating in the County Employees Retirement System on July 1,\n2015, may:\n(a) If the employer is a nonstock nonprofit corporation organized under KRS\nChapter 273, voluntarily cease participation in the system subject to the\nrequirements and restrictions of this section; or\n(b) Be required to involuntarily cease participati on in the system under the\nprovisions of this section if the board has determined the employer is no\nlonger qualified to participate in a governmental plan or has failed to comply\nwith the provisions of KRS 78.510 to 78.852.\n(3) (a) If an employer desires to voluntarily cease participation in the County\nEmployees Retirement System as provided by subsection (2)(a) of this\nsection:\n1. The employer shall adopt a resolution requesting to cease participation\nin the system and shall submit the resolution to the b oard for its\napproval;\n2. The cessation of participation in the system shall apply to all employees\nof the employer;\n3. The employer shall pay for all administrative costs of an actuarial study\nto be completed by the County Employees Retirement System\nconsulting actuary and for any other administrative costs for\ndiscontinuing participation in the system as determined by the board and\nas provided by this section;\n4. The employer shall provide an alternative retirement program for\nemployees who will no longer be covered by the system, which may\ninclude a voluntary defined contribution plan;\n5. If the alternative retirement pro gram established by the employer meets\nthe qualification requirements under 26 U.S.C. sec. 401(a) and is\ncapable of accepting trustee-to-trustee transfers of both pre-tax and post-\ntax contributions, an employee of the employer ceasing participation\nmay see k to transfer his or her account balance to the employer's\nqualified alternate retirement program within sixty (60) days of the\nemployer's effective cessation date. An employee's election to transfer\nhis or her account balance within sixty (60) days of the  employer's\neffective cessation date is an irrevocable waiver of the right to obtain\nservice credits in the system for the time worked for the employer\nceasing participation; and\n6. The employer shall pay by lump sum to the system the full actuarial cost\nof the benefits accrued by its current and former employees in the\nsystem as determined separately for the pension fund and the insurance\nfund by the actuarial study required by subparagraph 3. of this\nparagraph. The full actuarial cost shall not include an y employee who\nseeks to transfer his or her account balance to the alternative retirement\nprogram as provided by subparagraph 5. of this paragraph within sixty\n(60) days of the employer's effective cessation date. The actuarial cost\nshall be fixed, and the  employer shall not be subject to any increases or\nsubsequent adjustments, once the lump sum is paid.\n(b) If the board determines an employer must involuntarily cease participation in\nthe system as provided by subsection (2)(b) of this section:\n1. The cessation of participation in the system shall apply to all employees\nof the employer;\n2. The employer shall pay for all administrative costs of an actuarial study\nto be completed by the County Employees Retirement System\nconsulting actuary and for any other a dministrative costs for\ndiscontinuing participation in the system as determined by the board and\nas provided by this section; and\n3. The employer shall pay by lump sum to the system the full actuarial cost\nof the benefits accrued by its current and former employees in the\nsystem as determined separately for the pension fund and the insurance\nfund by the actuarial study required by subparagraph 2. of this\nparagraph. The actuarial cost shall be fixed, and the employer shall not\nbe subject to any increases or subsequent adjustments, once the lump\nsum is paid.\n(4) Any employee hired on or after the employer's effective cessation date by an\nemployer who has ceased participation in the system as provided by this section\nshall not, regardless of his or her membersh ip date in the County Employees\nRetirement System, be eligible to participate in the County Employees Retirement\nSystem through the employer that ceased participation for the duration of his or her\nemployment with that employer.\n(5) If an employer has ceased participation in the system as provided by this section:\n(a) The rights of recipients and the vested rights of inactive members accrued as\nof the employer's effective cessation date shall not be impaired or reduced in\nany manner as a result of the employer ceasing participation in the system; and\n(b) Employees of the employer ceasing participation shall accrue benefits through\nthe employer's effective cessation date but shall not accrue any additional\nbenefits in the County Employees Retirement System, including earning years\nof service credit through the ceased employer, after the employer's effective\ncessation date for as long as they remain employed by the employer. The day\nafter the employer's effective cessation date, each employee described by this\nparagraph shall be considered an inactive member with respect to his or her\nemployment with the employer that ceased participation and, subject to the\nprovisions and limitations of KRS 78.510 to 78.852, shall:\n1. Retain his or her accounts with the County Employees Retirement\nSystem and have those accounts credited with interest in accordance\nwith KRS 78.510 to 78.852;\n2. Retain his or her vested rights in accordance with paragraph (a) of this\nsubsection; and\n3. Be eligible to take a refund of his or her ac cumulated account balance in\naccordance with KRS 61.625 or any other available distribution if\neligible.\n(6) For purposes of this section, the full actuarial cost shall be determined by the\nCounty Employees Retirement System consulting actuary separately for the pension\nfund and the insurance fund using the assumptions and methodology established by\nthe system specifically for determining the full actuarial cost of ceasing\nparticipation as of the employer's effective cessation date. For purposes of\ndetermining the full actuarial cost, the assumed rate of return used to calculate the\ncost shall be the lesser of the assumed rate of return utilized in the system's most\nrecent actuarial valuation or the yield on a thirty (30) year United States treasury\nbond as of the employer's effective cessation date, but shall in no case be lower than\nthe assumed rate of return utilized in the system's most recent actuarial valuation\nminus three and one-half percent (3.5%).\n(7) The system shall promulgate administrative regul ations pursuant to KRS Chapter\n13A to administer this section.\n(8) Any employer who voluntarily ceases participation, or who is required to\ninvoluntarily cease participation as provided in this section, shall hold the\nCommonwealth harmless from damages, attorney's fees, and costs from legal claims\nfor any cause of action brought by any member or retired member of the departing\nemployer.\n(9) In lieu of cessation of participation of a county which fails to fully comply with the\nprovisions of KRS 78.510 to 78. 852, the board may file an action in the Franklin\nCircuit Court to collect money owed and to attach so much of the general fund of\nthe delinquent county as is necessary to achieve full compliance with the provisions\nof KRS 78.625.\n(10) The board may utilize the provisions of KRS 78.625(3)(b) or (4) to ensure employer\ncompliance and payment of any amount payable by an employer under the\nprovisions of this section.","path":["KRS Chapter 78"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=50562","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:38Z","sha256":"5080ed4bddce3886df4d415c337dd7acba58ffe06c3d77ef2a93d4c8a8a073c4","source_id":"us-ky","stale":false,"prev":"us-ky/krs-78.534","next":"us-ky/krs-78.537"},"notice":"GroundRules: Original legal text. Not legal advice."}