Quasi-Governmental Employer Cessation

Dear Quasi-Governmental Employer Representative:

In April 2020, Kentucky Retirement Systems (“the Systems”) notified quasi-governmental agencies of the effects Senate Bill 249 had on the cessation process. As a reminder, Senate Bill 249 (2020) changed the following:

• Extends the effective cessation date for quasi-governmental employers from June 30, 2020 to June 30, 2021;
• Extends the window for quasi-governmental employers to submit a resolution to cease participation from April 1, 2020 through April 30, 2021, EXCEPT universities and community colleges, which only have through December 31, 2020;
• Extends the deadline to rescind a previously submitted resolution to cease participation to April 30, 2021, EXCEPT for ceasing universities and community colleges, which only have through December 31, 2020 to rescind a resolution to cease participation;
• Extends installment payment start date from July 1, 2020 to July 1, 2021; and
• Extends the lump sum payment deadline for ceasing quasi-governmental employers from June 30, 2021 to June 30, 2022.

The Systems is sending this reminder to you that the governing body of an employer seeking to cease participation in KERS through 61.522(8), shall pass a resolution to cease participation and submit the resolution to the Systems’ Board by April 30, 2021, EXCEPT universities and community colleges which shall pass and submit the resolution by December 31, 2020. (KRS 61.522(8), KRS 61.522(3)(a)1.)

The resolution must contain all of the following:

• “An election as to whether or not nonhazardous employees hired prior to the employer’s effective cessation date, who began participating in the system administered by Kentucky Retirement Systems prior to January 1, 2014, who are participating in the systems administered by Kentucky Retirement Systems through the employer, will continue to participate in the system after the employer’s effective cessation date.” See KRS 61.522(8)(d)1.
• The following statements in accordance with 105 KAR 1:149 Section 3(2):
  • “That the employer has decided to voluntarily cease participation in KERS;”
    That the employer acknowledges it is unable to rescind the resolution to cease participation after April 30, 2021 or, for ceasing universities and community colleges, after December 31, 2020;
  • “That the employer acknowledges it is subject to the requirements and restrictions of KRS 61.522 and this administrative regulation;”
  • “That the employer acknowledges that in order to cease participation in KERS pursuant to KRS 61.522(8), the employer shall pay the actuarial cost of ceasing participation and all administrative costs associated therewith;”
  • “That the employer agrees to cooperate with the Systems to educate its employees about the effect of cessation and the employer election on the employees’ retirement accounts and the employees’ options regarding their retirement accounts;”
  • “That the employer shall not mandate, force, or require its employees to take a refund of their accumulated account balance as defined by KRS 61.510(41), or retaliate against its employees who chose not to take refunds of their accumulated account balance as defined in KRS 61.510(41);” and
  • “That the employer shall hold the Commonwealth and the Systems, including board members and employees of the Systems, 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 ceasing employer related to the cessation of the employer.”

The resolution must be accompanied by all of the following in accordance with 105 KAR 1:149 Section 4:

• “[A] completed Form 7727, Actuarial Study for Quasi-Governmental Employer Cessation (attached) [;]”
• “Documentation of the alternative retirement program created by or being created by the employer for its employees, such as the determination letter issued by the Internal Revenue Service or a written description of the alternative retirement program;”
• The employer’s most recent five (5) audited financial statements and independent auditor’s reports;”
• “The employer’s most recent five (5) Comprehensive Annual Financial Reports, if applicable[;]” and
• “[A]n encrypted electronic file in a format prescribed by the Systems listing each current and former nonhazardous employee, employed in a full-time position as defined by KRS 61.510(21), who was employed during any period the employer participated in KERS, containing:
  (a) Full name;
  (b) Last known address;
  (c) Date of birth;
  (d) Social security number or Systems member identification number;
  (e) Beginning date of employment;
  (f) Date employment ended, if applicable;
  (g) Sick leave balance;
  (h) Beginning and ending dates of any active duty military service when the employee was not employed by the employer filing the Form 7727, if available; and
  (i) Beginning and ending dates of any active duty military service when the employee was employed by the employer filing the Form 7727.”

Please be advised that most of the dates currently listed in 105 KAR 1:149 have not yet been updated to reflect the changes to the quasi-governmental agency cessation process made in Senate Bill 249 (2020). The Systems has begun the amendment process to make 105 KAR 1:149 consistent with Senate Bill 249 (2020), but these amendments are not expected to become final until early 2021. Accordingly, if you review the current version of 105 KAR 1:149, do not rely on the dates and deadlines that are inconsistent with this email or the changes made to KRS 61.522 by Senate Bill 249 (2020); however, all other information, steps, and requirements (aside from some dates and deadlines) in 105 KAR 1:149 remain accurate. If you have any questions about dates and/or deadlines for quasi-governmental cessation, please contact me at djuan.surratt@kyret.ky.gov.

Again, the resolution and accompanying documents must be submitted to the Systems by close of business December 31, 2020 for universities and community colleges. For all other quasi-governmental agencies, the resolution and accompanying documents must be submitted to the Systems by close of business April 30, 2021.

It is highly recommended that if your agency adopts a resolution to cease participation, that the resolution be scanned and sent to the Systems at the following e-mail address: djuan.surratt@kyret.ky.gov through our secure email portal.

If your agency chooses to submit the resolution via U.S. Mail (or another mail delivery service which does not have to be signed for via an in-person communication), it must be postmarked on or before December 31, 2020 for universities and community colleges or, for all other quasi-governmental agencies, on or before April 30, 2021. Please address any of your mail correspondence to: KRS Board, c/o D'Juan Surratt, 1260 Louisville Road, Frankfort, KY 40601.

If your agency chooses to fax the resolution, the transmission sheet details recorded on the transmission itself must reflect a date on or before April 30, 2021. The fax number is 502-696-8822.

If you have any questions regarding this e-mail, or the deadlines, please submit them to me at djuan.surratt@kyret.ky.gov.