(a) The state treasurer shall develop and recommend to the board of trustees a funding policy with respect to the obligations of the Tennessee consolidated retirement system. The board of trustees shall adopt a funding policy which complies with this section. Such adopted funding policy shall be in effect until amended.

(b) For the purposes of this section, “actuarially determined contribution (ADC)”, formerly known as the actuarially required contribution means the actuarially determined annual required contribution that incorporates both the normal cost of benefits and the amortization of the pension plan's unfunded accrued liability.

(c) The funding policy established by the board of trustees shall include, but not be limited to the following:

(1) The ADC for the retirement system shall include the normal costs and the amortization of the unfunded accrued liability, to the extent that the retirement system has any unfunded accrued liability for a particular fiscal year;

(2) The maximum amortization period for which any unfunded accrued liabilities will be paid; and

(3) A statement that the retirement system's budget shall include funding of at least one hundred percent (100%) of the ADC.

(d) The actuarial methodology is expected to provide that projected revenues (employer contributions, employee contributions, and investment earnings), and current assets will finance all of the projected benefits (death, disability, and retirement) provided by the retirement system. In the event the retirement system has an unfunded accrued liability, then the level dollar amortization method shall be utilized for financing the unfunded accrued liability.

(e) The ADC calculated by the retirement system's actuary shall be calculated utilizing the following methodology, and in accordance with the Actuarial Standards of Practice established by the Actuarial Standards Board:

(1) Actuarial cost method allocating normal costs over a period beginning no earlier than the date of employment which should not exceed the last assumed retirement age. This method is designed to fully fund the long-term costs of promised benefits, consistent with the objective of keeping contributions relatively stable and equitably allocating the costs over the employees' period of active service. Entry age normal cost method shall be used to achieve this purpose;

(2) Actuarial value of assets calculated using a maximum ten (10) year asset smoothing period. Any smoothing period greater than five (5) years will have a maximum twenty percent (20%) market corridor. For the purposes of this subsection, the term “market corridor” means a range beyond which deviations are not smoothed;

(3) Level dollar amortization method of unfunded accrued liabilities;

(4) Mortality assumptions, which should consider the effect of expected mortality improvements, and shall be used no later than 2024;

(5) Investment earnings assumption based on the rate adopted by the board of trustees; and

(6) A closed amortization period not to exceed thirty (30) years for all unfunded accrued liabilities.

(f) In the event that an entity participating in the retirement system is funded below sixty percent (60%), such entity shall not establish benefit enhancements.