61.565 Employer's contributions -- Computation of normal cost contribution and
2,351 words·~11 min read·
/ky/61-565A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
accrued liability -- Contribution -- Notification of change in employer
contribution rate -- Costs for employer pay credits -- Employers to pay full
contribution.
(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 participating 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 this 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 unfunded 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 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;
2. Paid as a percentage 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 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.
(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 unfunded 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 individual 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 dollar 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 enumerated 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 computed 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 Kentucky 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 employer 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 dollar 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 executive 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 during 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 provided 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, the
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 or 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 for
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 where 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 community 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 employees 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 services 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 used 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.
(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 July 1
of the second year of the biennium for the Kentucky Employees Retirement
System and the State Police Retirement System.
(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 in any correspondence to the
Department of Kentucky State Police, the state budget director, and the