51.1-124.12 - Procedure when employer required to withdraw funds.
§ 51.1-124.12. Procedure when employer required to withdraw funds.
A. As used in this section, unless the context clearly shows otherwise, thefollowing definitions shall apply.
"Replacement employer" means an employer as defined in § 51.1-124.3 whoenters into a written agreement with the Retirement System to assume allliabilities for retirement benefits, as provided herein due to a member orbeneficiary whose coverage under the Retirement System is affected by thewithdrawal of the withdrawing employer, that are attributable to service withand creditable compensation from the withdrawing employer.
"Termination date" means the effective date of a change in an employer'sstatus from an agency or political subdivision of the Commonwealth or thetermination of the employer's existence that shall cause an employerparticipating in the Retirement System to become a withdrawing employer. Ifsuch date is in question or if the advance notification required bysubsection C is not given, the termination date shall be the date determinedby the Board.
"Termination event" means an event that results in an employer whichparticipates in the Retirement System ceasing to be an agency or politicalsubdivision of the Commonwealth.
"Withdrawing employer" means an employer that is required to withdraw fromthe Retirement System under subsection B.
B. Any employer participating in the Retirement System which ceases to be anagency or political subdivision of the Commonwealth or which permanentlyceases operations shall withdraw from the Retirement System as of thetermination date. All benefit accrual for members employed by a withdrawingemployer shall automatically cease as of the termination date.
C. A withdrawing employer shall provide written notification to the Board ofits termination date. Notification shall be in the form of a certified copyof an ordinance or resolution adopted by the governing body of the employerand shall be provided to the Board at least 90 days prior to the terminationdate. Upon receipt of notification or upon the Board's determination that atermination event has occurred or will occur within 90 days, the RetirementSystem shall request its actuary to determine the present value of theRetirement System's liability to each member, retired member, or beneficiaryattributable to service with, and creditable compensation from, thewithdrawing employer. For members, such calculation shall be determined basedon the liability resulting from the present value of a service retirementallowance beginning at his normal retirement date. Such determination shallbe based on actuarial principles and assumptions consistent with those usedin the most recent actuarial valuation and financial report for theRetirement System. The expenses incurred by the Board for such actuarialdetermination report shall be the liability of the withdrawing employer.
D. If (i) no qualified retirement plan, as that term is defined in § 401(a)of the Internal Revenue Code, is established by the withdrawing employer, towhich the assets and liabilities relating to members employed by suchemployer are transferred, as described in subsection E, or (ii) if noreplacement employer has come forth within 90 days of the termination date,or within such other reasonable time as may be agreed to by the Board,benefits shall be determined as follows:
1. Each member or beneficiary whose coverage under the Retirement System isaffected by the withdrawal of the employer shall become fully vested, as ofthe termination date, in his service retirement allowance attributable tocreditable service with the withdrawing employer regardless of employmentstatus or length of service with the withdrawing employer.
2. Each member, retired member or beneficiary shall be entitled to adistribution of the greater of (i) the balance in his member contributionaccount established pursuant to § 51.1-147 or (ii) the present value of hisservice retirement allowance attributable to creditable service andcompensation with the withdrawing employer to which such member, retiredmember or beneficiary would have been entitled immediately prior to thetermination event (plus additional amounts, if any, which the withdrawingemployer may direct pursuant to subdivision 4 of this subsection). Suchmembers, retired members, and beneficiaries may elect to receive such benefiteither in the form of (i) a lump sum payment, subject to the eligiblerollover distribution rules and withholding requirements of the InternalRevenue Code or (ii) an annuity equal to the service retirement benefit atnormal retirement. The annuity shall be purchased from a private insurancecompany or companies as selected by the Board. The Board shall establishreasonable notice and election periods for the distribution made pursuant tothis subsection. The distribution provided for in this subdivision shall bein the form of a lump sum, subject to applicable withholding requirements,upon the failure of a member, retired member or beneficiary to make anelection.
3. If the assets held in the members' contribution account establishedpursuant to § 51.1-147 and in the retirement allowance account establishedfor withdrawing employer pursuant to § 51.1-148 are less than the amountneeded to pay the benefits to which all affected members, retired members,and beneficiaries are entitled, the withdrawing employer shall make acontribution to the retirement allowance account in the amount necessary tomake up any insufficiency in assets required to provide all benefits payableunder this section. If the withdrawing employer fails to make the requiredcontribution, assets held in the members' contribution account establishedpursuant to § 51.1-147 and in the retirement allowance account establishedfor the withdrawing employer pursuant to § 51.1-148 shall be distributed tomembers, retired members and beneficiaries in the manner described in §51.1-139.
4. Any assets remaining in the retirement account established for thewithdrawing employer pursuant to § 51.1-148 after full satisfaction ofliabilities to members, retired members and beneficiaries under this sectionshall be distributed on a pro rata basis (based on contributed funds withinthe immediately preceding 12 months) to any employers within the meaning of §51.1-124.3 who, within the 12 months immediately preceding the terminationdate of the withdrawing employer, directly or indirectly, by appointment ofthe governing body of the withdrawing employer, controlled the activities ofthe withdrawing employer and contributed funds or property to the withdrawingemployer; provided, however, that if there is no such employer, any remainingassets shall be used to offset expenses incurred by the Retirement System inany manner permitted by the Internal Revenue Code.
5. Upon completion of the distribution of assets held in the members'contribution account established pursuant to § 51.1-147 and in the retirementallowance account established for the withdrawing employer pursuant to §51.1-148 as provided in the section, the Retirement System shall have nofurther liability for such accounts.
E. If the withdrawing employer establishes or has established a qualifiedretirement plan, as that term is defined in § 401(a) of the Internal RevenueCode, which provides (i) for participation by members, retired members andthe beneficiaries of members and retired members, (ii) for the transfer tothe qualified retirement plan of all contributions and prior serviceattributable to creditable service with the withdrawing employer, and (iii)member benefits and vesting rights at least equal to those which each memberwould have been entitled under the Retirement System immediately before thetermination of the employer's affiliation with the Retirement System, theBoard shall transfer to such qualified retirement plan all balances in theindividual accounts of the members' contribution account established pursuantto § 51.1-147 and all balances in the retirement allowance accountestablished for such employer pursuant to § 51.1-148 and attributable tocreditable service and compensation with such employer, including allearnings through and including the date of the transfer, less the reasonableexpenses incurred by the Retirement System in connection with such transfer.Upon such transfer, all liabilities of the Retirement System for benefits, tothe extent accrued as of the date of the transfer with respect to servicewith such employer shall be assumed by such qualified retirement plan and allliabilities of the Retirement System with respect thereto shall terminate.
F. If the withdrawing employer does not establish a qualified retirementplan, as that term is defined in § 401 (a) of the Internal Revenue Code andas provided for in subsection E, but a replacement employer has come forthwithin 90 days of the termination date, or within such other reasonable timeas may be agreed to by the Board, the Board shall transfer to the retirementallowance account of such replacement employer, all balances in theretirement allowance account of the withdrawing employer, including allearnings through and including the date of the transfer. The members'contribution account established pursuant to § 51.1-147 attributable toemployees of the withdrawing employer shall be credited to membercontribution accounts with the replacement employer. Notwithstanding however,if the balance of the retirement allowance account and the membercontribution accounts exceed the actuarial present value of all liabilitieswith respect to employees of the withdrawing employer (after allowance forreimbursement to the Retirement System for reasonable expenses incurred inconnection with such transfer), any amount in excess of 105 percent of suchpresent value (including expenses) shall be paid on a pro rata basis (basedon contributed funds within the immediately preceding 12 months) to anyemployers within the meaning of § 51.1-124.3 who within the 12 monthsimmediately preceding the termination date of the withdrawing employer (i)directly or indirectly by appointment of the governing body of thewithdrawing employer controlled the activities of the withdrawing employerand (ii) contributed funds or property to the withdrawing employer.
G. If there is no replacement employer, creditable service attributable toemployment with a withdrawing employer shall be taken into consideration forpurposes of determining whether each employee of the withdrawing employermeets the five or more year requirement to be entitled to a service allowanceat normal retirement from the employment of an employer other than thewithdrawing employer. If there is no replacement employer, neither creditableservice nor creditable compensation attributable to employment with awithdrawing employer shall be taken into account for any other purpose underthe Retirement System.
H. Notwithstanding any other provisions of this section or of any other law,if the withdrawing employer is a city which reverts to town status orotherwise loses its status as a city or is a town which loses its status as atown, then the members, retired members, and beneficiaries of the former cityor town shall maintain all rights and privileges which they possess at thetime of such change in status to current or future benefits from theRetirement System.
(1999, c. 284; 2000, c. 344; 2003, c. 267.)