(a) For purposes of this section and §304.3 of this title (relating to Determination of Accrued Benefit):

(1) "Effective date of revocation" means the later of the date upon which the requirements listed in subsection (c) of this section are satisfied or the date upon which the revocation occurs.

(2) "Revocation" means the occurrence of one of the events listed in subsection (b) of this section.

(b) A participating department will revoke, or be deemed to have revoked, its election to participate in the pension system as provided under §862.001(b), Texas Government Code, upon the occurrence of one of the following events:

(1) a department notifies the pension system of its intent to no longer participate in the pension system;

(2) a department ceases to exist or ceases to perform emergency services;

(3) a department ceases to enroll its eligible members in the pension system or to make contributions to the pension system for eligible members as required under Chapter 865, Texas Government Code;

(4) the political subdivision associated with the department establishes a paid department and no longer funds or otherwise maintains the department; or

(5) all members of a department become ineligible to continue participating in the pension system as paid employees pursuant to §304.4(c) of this title (relating to Employees of Participating Departments) or because they are covered by another public retirement system in the state.

(c) In connection with a revocation:

(1) the governing body of the department must provide written notice of its intent to no longer participate in the pension system or the circumstances causing the revocation to occur to the executive director, the governing body of the political subdivision associated with the department, and all current members of the department at least 120 days prior to the date the revocation will occur or, if such prior notice is not possible, as soon as practicable, provided that the notice period may be shortened or waived by the executive director in his or her sole discretion;

(2) the local board of the department must certify: (A) that all individuals who have performed emergency services or support services (if applicable) for the department and were eligible to participate in the pension system during the 2 years prior to the date the revocation occurs have been properly enrolled in the pension system; and (B) the accuracy of the department's membership roster and the total amount of qualified service earned by each current and former member as of the date the revocation occurs;

(3) all affected members of the department as defined in §304.3(a) of this title will become fully vested in such affected member's accrued benefit as determined under §304.3 of this title as of the date the revocation occurs, regardless of the years of qualified service or age of such affected member as of such date, and the affected member's accrued benefit shall be nonforfeitable as of such date; and

(4) no later than 60 days after receipt of the notice required under subsection (c)(1) of this section or notice from the executive director under subsection (d) of this section, the governing body of the political subdivision associated with the department must pay, or enter into an agreement to pay in accordance with subsection (j) of this section: (A) all required contributions for each month of service performed by members prior to the date the revocation occurs that have not been paid, including, without limitation, contributions for any months of service which have not yet been invoiced by the pension system and for members of the department who were not enrolled in the pension system but should have been during the 2 years prior to the date the revocation occurs; and (B) the revocation charge as determined under subsection (h) of this section in order to maintain an actuarially sound pension system as required by §862.001(b), Texas Government Code.

(d) If the executive director becomes aware that one of the events listed in subsection (a) of this section has occurred and the governing body of a participating department has not provided notice of such event to the pension system as required under subsection (c)(1) of this section, the executive director will send written notice to the governing body of the participating department and the governing body of the political subdivision associated with the department as soon as administratively possible to inform them that a revocation of the department's election to participate in the pension system has occurred and to notify each party of its responsibilities under this section. If the parties notify the executive director within 30 days of the date of the notice provided under this subsection that the revocation was unintentional and provide evidence satisfactory to the executive director that the circumstances that caused the revocation have been cured, the revocation will be deemed to have not occurred.

(e) The executive director will notify the state board of the occurrence of any revocation under this section at the next meeting of the state board following the effective date of the revocation.

(f) As of the effective date of the revocation:

(1) the revoking department will no longer be considered a participating department in the pension system;

(2) no additional members of the department may be enrolled in the pension system;

(3) no member of the department may accrue additional qualified service or benefits in connection with the performance of emergency services or support services for the department; and

(4) the governing body of the department and the governing body of the political subdivision associated with the department will have no further financial obligations to the pension system, except as provided under an agreement entered into under subsection (c)(4) of this section.

(g) Within 90 days after the effective date of revocation, the executive director will send written notice to each current member, vested terminated member, and retiree of the department by first class mail to the person's most recent address of record on file with the pension system. Such notice will explain how the person's benefits provided under the pension system are affected by the department's revocation, including, without limitation, the immediate vesting of the member's accrued benefit as determined under §304.3 of this title (if applicable), the amount of such accrued benefit, and information related to when and how the member may commence such accrued benefit.

(h) In order to maintain an actuarially sound pension system as required under §862.001(b), Texas Government Code, the governing body of the political subdivision associated with the department that revokes its participation in the pension system will be charged an additional amount as determined by the pension system's actuary in accordance with generally accepted actuarial standards. Such revocation charge shall be an amount equal to the department's allocated share of the pension system's net pension liability. The pension system's net pension liability used to determine the revocation charge under this section is the net pension liability of the pension system as reported in the most recent audited financial report of the pension system as that term is defined by GASB Statement No. 67.

(i) For purposes of this section, the department's allocated share of the pension system's net pension liability shall be equal to the greater of (1) or (2) where:

(1) equals the average of the department's contribution allocation percentage in the 2 most recent audited reports of information required for disclosure by GASB Statement No. 68 (GASB 68); and

(2) equals the average of the department's contribution allocation percentage in the 2 most recent audited reports of information required for disclosure by GASB 68 adjusted for decreases, if any, in the department's contribution rate per month and for decreases, if any, in the number of active members in the 5 most recent plan years.

(j) The governing body of the political subdivision associated with the department may enter into a written agreement with the pension system to pay any unpaid contributions, the revocation charge determined under subsection (h) of this section, or both over a period of time not to exceed 5 years. Interest on such amount due will accrue at the assumed rate of investment return of the pension system at the time the agreement is entered into, except that interest will be waived if full payment of the amount is completed no later than the first (1st) anniversary of the effective date of revocation.

(k) Neither the pension system nor the state board, nor any employee of the pension system, including, without limitation, the executive director, shall be liable to any person for any claim or loss of benefits resulting from the revocation of a department's participation in the pension system.

(l) Notwithstanding anything to the contrary above, the state board may temporarily suspend the ability of any department to voluntarily revoke its election to participate in the pension system as described in subsection (b)(1) of this section if continuing to allow such revocations would have a negative impact on the administration or actuarial soundness of the pension system.

Source Note: The provisions of this §304.2 adopted to be effective July 19, 2020, 45 TexReg 4775