59-1326. PROCEDURE FOR COMPLETE OR PARTIAL WITHDRAWAL OF POLITICAL SUBDIVISIONS FROM THE SYSTEM — CALCULATION OF WITHDRAWAL LIABILITY — INDEMNIFICATION. (1) A political subdivision, through its governing body, may by resolution adopted by two-thirds (2/3) of the members of the governing body, declare its intent to withdraw completely from the system and to submit the question of withdrawing from the system to the active members of the political subdivision. The political subdivision shall notify its employees and the retirement board, in writing, of its action, and shall advise the active members of their right to vote for or against withdrawal, as provided in subsection (2) of this section. A political subdivision shall automatically be considered to have requested a complete withdrawal from the system the date the political subdivision permanently ceases to employ active members. A withdrawing political subdivision shall be required to make withdrawal liability payments as provided in this section.

(2) All active members of the withdrawing political subdivision shall be allowed to vote by secret ballot for or against allowing the political subdivision to completely withdraw from the system. More than fifty percent (50%) of the withdrawing political subdivision’s active members must approve the complete withdrawal at least thirty (30) days before the effective withdrawal date. All active members of the withdrawing political subdivision who are on the political subdivision’s payroll thirty (30) days before the effective withdrawal date shall be allowed to vote. If more than fifty percent (50%) of the withdrawing political subdivision’s active members fail to vote for complete withdrawal, the political subdivision shall not be allowed to withdraw. Fifteen (15) days before the effective withdrawal date the governing board of the withdrawing political subdivision shall certify to the retirement board the results of the voting by the active members.

(3) Partial withdrawal occurs for a political subdivision when its average membership declines from one fiscal year to the next by more than twenty-five (25) members and twenty-five percent (25%) of the average membership in the earlier year. The effective date of partial withdrawal is the first day after the end of the later year.

"Average membership" for a fiscal year shall equal one-twelfth (1/12) of the sum of the number of active members employed during each month of that year.

(4) Complete withdrawal by a political subdivision shall be the first day of the month following the date the political subdivision ceases to employ active members or the first day of the month following sixty (60) days from the date the board receives the political subdivision’s written request to withdraw. However, the complete withdrawal date shall not occur before the withdrawal liability is determined, as provided in subsection (7) of this section.

(5) After complete withdrawal, all employees of the withdrawing political subdivision shall be ineligible to accrue future benefits with the system due to employment with the withdrawing political subdivision. The withdrawing political subdivision shall be ineligible to request to be included in the system, as provided in section 59-1321, Idaho Code, for five (5) years after its complete withdrawal date.

(6) All active or inactive members of the political subdivision shall be eligible for benefits accrued with the system up to the complete withdrawal date. However, no retirement allowance or separation benefit shall be paid until the member actually separates from service with the withdrawing political subdivision, and there is no guarantee of right to re-employment made by the withdrawing political subdivision. If the person returns to employment with the same withdrawing political subdivision within ninety (90) days, any separation benefit or retirement allowance paid to the person shall be repaid to the system.

(7) On the date of complete withdrawal, the withdrawal liability of an employer is (a) multiplied by the ratio of (b) to (c) as follows:

(a) The excess of the actuarial present value of the vested accrued benefits of the system’s members over the fair value of its assets, both as of the date of the last actuarial valuation adopted by the board prior to the complete withdrawal date based on the assumption that thirty percent (30%) of all terminating employees will eventually return to employment covered by the system and that future cost-of-living allowances as provided in section 59-1355, Idaho Code, will be at a rate of two percent (2%) per year;

(b) The total present value of accrued benefits of all active members of the withdrawing political subdivision as of the last actuarial valuation adopted by the board prior to the complete withdrawal date;

(c) The total present value of accrued benefits of all active members of the system as of the last actuarial valuation adopted by the board prior to the complete withdrawal date.

The actuarial costs to determine the amount described in subsection (7)(b) of this section shall be paid by the withdrawing political subdivision.

(8) On the date of partial withdrawal, the withdrawal liability of an employer is the same as if complete withdrawal had occurred, multiplied by one (1) minus the ratio of (a) to (b) as follows:

(a) The average membership of the employer estimated by the board for the year commencing on such date;

(b) The average membership of the employer during the second complete fiscal year prior to such date.

(9) The withdrawing political subdivision shall enter into a contract with the system which establishes terms for the political subdivision’s payment of its withdrawal liability. The contract shall use an interest rate equal to the interest rate used in the actuarial valuation adopted by the board prior to the withdrawal date, net of actuarially assumed investment expenses. The contract shall not extend the duration of the withdrawal liability payments beyond ten (10) years or the end of the current amortization period whichever is less. The contract shall be a financial obligation of the withdrawing political subdivision and any of its successors and assigns. "Current amortization period" means the period over which the amortization payment rate times the actuarial present value of the projected salaries is equivalent to the unfunded actuarial liability, all determined by the current valuation last adopted by the board prior to the complete withdrawal date.

(10) Upon the complete withdrawal of the political subdivision, the system shall have no further legal obligation to the political subdivision or its employees, nor shall the system be held accountable for the continued future accrual of any retirement benefit rights to which such employees may be entitled beyond the complete withdrawal date. Any litigation regarding the forfeiture of any benefits because of the political subdivision’s complete withdrawal from the system shall be the sole legal responsibility of the withdrawing political subdivision and the withdrawing political subdivision shall indemnify and hold harmless the system, its board, its employees and the state of Idaho, from any claims, losses, costs, damages, expenses, and liabilities, including without limitation, court costs and reasonable attorney’s fees, asserted by any person or entity as a result of the political subdivision’s withdrawal from the system.

History:

[(59-1326) 1981, ch. 152, sec. 1, p. 263; am. 1984, ch. 132, sec. 2, p. 313; am. and redesig. 1990, ch. 231, sec. 22, p. 628; am. 1992, ch. 220, sec. 5, p. 664; am. 1996, ch. 251, sec. 1, p. 792.]