459-009-0350 Allocation of PERS Employer Actuarial Assets and Liabilities Purpose. The purpose of this rule is to provide guidance in the drafting of agreements by employers involved in transfers of PERS-covered employees regarding the allocation of PERS employer actuarial assets and liabilities; to provide guidance to the Board in determining the allocation of such assets and liabilities when such allocation is not acceptably addressed based on the criteria of this rule in agreements between the employers involved in the transfers; to provide guidance to the Board in determining the allocation of PERS employer actuarial assets and liabilities if dissolution of an employer occurs and the allocation of these assets and liabilities is not otherwise acceptably addressed according to this rule in the dissolution; and to provide guidance to the Board when an employer is unable to amortize its PERS employer actuarial assets and liabilities as directed by the Board. All the provisions of this rule shall be applied at the discretion of the PERS Board to achieve sound actuarial funding of the system as well as full funding of the individual benefits accrued by members. This rule does not address whether or not PERS is required to pay benefits that are unfunded. (1) Definitions. For the purposes of this rule: (a) "Actuarial Funded Percentage" means the ratio, expressed as a percentage, of actuarial liabilities to actuarial assets as determined by a PERS-approved actuary. (b) "Actuarial Surplus" means the excess of the actuarial value of assets over the actuarial liability. (c) "Actuarial Valuation" means the determination by the PERS-approved actuary, as of an actuarial valuation date, of the normal cost, actuarial liability, actuarial value of assets, and related actuarial present values for a pension plan. (d) "Actuarial Valuation Date" is the date approved by the Board for which demographic and economic data has been captured and used in an actuarial valuation. (e) "Dissolution" means voluntary or involuntary corporate dissolution, extinguishment, or termination of the existence of an employer. (f) "PERS-Approved Actuary" means an actuary employed by PERS for ongoing actuarial advice or any other actuary approved in writing by the PERS executive director or designee. (g) "PERS Employer Actuarial Assets" means the assets contributed to PERS by an employer and by employees for service to that employer plus attributed earnings as determined by a PERS-approved actuary. Such assets include Benefits in Force reserve assets as determined by a PERS-approved actuary. (h) "PERS Employer Actuarial Liabilities" means the liabilities of a particular employer determined by a PERS-approved actuary that represent the actuarially determined amounts necessary to fund benefits due PERS-covered members and their beneficiaries. (i) "Receiving Employer" means an employer to which PERS-covered employees are transferred from a participating employer. (j) "Transfer" means the movement of one or more PERS-covered employees and their designated position(s) from the payroll of one employer to the payroll of another employer as the result of an agreement between the two employers. (k) "Transferring Employer" includes the following: (A) A participating employer from which PERS-covered employees are transferred; (B) A participating employer that forms one or more separate governmental entities that employ PERS-covered employees transferred from the participating employer. (l) "Unfunded Actuarial Liability" or "UAL" means the excess of the actuarial liability over the actuarial value of assets. (2) Documented and Acceptable Transfer Agreements. Transferring employers that transfer PERS-covered employees to receiving employers may address the allocation of PERS employer actuarial assets and liabilities associated with the transferring employees in a written transfer agreement. The allocation of PERS employer actuarial assets and liabilities under such an agreement must be acceptable to PERS. To be acceptable to PERS, the allocation must meet the following standards or be approved by the PERS Board: (a) Actuarial Funded Percentage. The transfer may not result in the transferring or receiving employer having an actuarial funded percentage after the transfer that is lower than the lesser of either: (A) The lowest actuarial funded percentage as determined by a PERS-approved actuary of such transferring or receiving employer as of the valuation date of the most recent PERS-adopted actuarial valuation for that employer promulgated prior to the effective date of the transfer; or (B) The PERS system-wide actuarial funded percentage as of the valuation date of the most recent PERS-adopted actuarial valuation promulgated prior to the effective date of the transfer. (b) Effective Date. The effective date of the allocation of the PERS employer actuarial assets and liabilities shall be the date of the transfer. (c) Upon petition of either the transferring or receiving employer, the Board may grant an exception to these standards if the employer can demonstrate that the transfer agreement will achieve full funding of the individual benefits accrued by the transferring employees without undue administrative burden. (d) Review of staff determination. If the transfer agreement does not meet the standards in paragraphs (2)(a) and (2)(b) above, a review of the staff determination of acceptability may be requested pursuant to OAR 459-001-0030. (3) Undocumented Transfers or Unacceptable Transfer Agreements. If an allocation of PERS employer actuarial assets and liabilities associated with the transferring employees is not documented among the transferring and receiving employers or if a transfer agreement is found by PERS to be unacceptable under the provisions of this rule, the PERS employer actuarial assets and liabilities of the transferred employees shall remain the responsibility of the transferring employer and shall be amortized under section (9) of this rule. (4) Effective Date of Allocation of PERS Employer Actuarial Assets and Liabilities in the Transfer of Employees. PERS shall allocate assets and liabilities for transferred employees as of the date of the transfer. The transferring and receiving employer's accounts will be adjusted to reflect the effective date of the allocation of assets and liabilities. Contributions received, including earnings on those contributions, before and after the effective date will be credited to the appropriate employer and member accounts in accordance with PERS policy, statutes and rules. (5) Pooled Employers. If a participating employer participates in either of the actuarial pools described in OAR 459-009-0070(2) or 459-009-0070(4) and transfers PERS-covered employees to a receiving employer that participates in either of these pools, this rule will apply only to the unfunded liabilities or surpluses accrued prior to entry into these pools. (6) Non-Participating Employer. A change in an employer's status, whether prior to or following the effective date of this rule, from a participating to a non-participating employer, will not exempt the employer from the provisions of this rule. (7) Dissolution of an Employer. If dissolution of an employer has occurred and there is no acceptable transfer agreement for any transferred employees, the dissolved employer's PERS actuarial assets and liabilities will be amortized under section (9) of this rule. (8) Mergers and Consolidations. Any employer that is a succeeding, surviving, or successor employer following a combining of entities, regardless of the name given to that combination, including but not limited to mergers and consolidations, shall, to the extent permitted by law, be required to assume all PERS actuarial assets and liabilities from the other affected entities that took part in the combination which are related to the employees whose positions are part of the new combined entity. (9) Amortization of All PERS Employer Actuarial Liabilities and Assets. (a) Amortization of Employer Actuarial Liabilities. To amortize the PERS unfunded actuarial liabilities of any employer, PERS may take one or more of the following actions as directed by the Board, until the amortization is complete. They include but are not limited to the following: (A) PERS will adjust the contribution rate of the employer as necessary either at the next date of adjustment for all PERS-covered employers or, if approved by the PERS Board, at an earlier or later date. (B) PERS will seek to obtain and recover assets of the employer other than PERS Employer Actuarial Assets, as a creditor, through a mutual agreement with the employer, or, if an agreement cannot be reached, through other legal means, as approved by the PERS Board. (C) PERS will allocate the employer actuarial liabilities: (i) Consistent with any applicable law; and (ii) Consistent with any acceptable agreement between the receiving employer and transferring employer whose employee's service generated the liability; or (iii) Consistent with any acceptable agreement among employers which through such agreement formed the employer under which the liability was created. (D) PERS will allocate the employer actuarial liabilities to the Contingency Fund as established by ORS 238.670(1). (b) Amortization of Employer Actuarial Assets. To amortize the PERS employer actuarial surplus of an employer, the following steps will be taken, in order, until the amortization is complete or the final step has been concluded: (A) PERS will allocate the employer actuarial surplus: (i) Consistent with any applicable law; and (ii) Consistent with any acceptable agreement between the receiving employer and transferring employer whose employee's service generated the surplus; or (iii) Consistent with any acceptable agreement among employers which through such agreement formed the employer under which the surplus was created. (B) PERS will adjust the contribution rate of the employer either at the next date of adjustment for all other employers of the system or, if so approved by the board, at an earlier or later date. (C) PERS will allocate the employer actuarial assets as general assets of the Fund. (10) Retroactive Application. The provisions in this rule will apply to all transfers, regardless of whether they occur prior to or after the effective date of this rule. Statutory/Other Authority: ORS 238.650 Statutes/Other Implemented: ORS 238.225, 238.605, 238.670, 238.705 & 2005 OL, 808, Sec. (12), (13) & (14) History: PERS 20-2005, f. 11-1-05, cert. ef. 11-4-05 PERS 1-2003, f. & cert. ef. 1-15-03