Maryland Statutes
Subtitle 3 - Funding
Section 21-306 - Employer Contributions -- Local Fire and Police System

(a)    (1)    Each fiscal year, on behalf of its employees who are members of the Local Fire and Police System, a participating governmental unit shall pay an amount equal to or greater than the product of multiplying:
            (i)    the aggregate annual earnable compensation of those members; and
            (ii)    the sum of the normal contribution rate and the accrued liability contribution rate, as determined under this section.
        (2)    Each fiscal year, in addition to the amounts required to be paid under paragraph (1) of this subsection, a participating governmental unit shall pay:
            (i)    the special accrued liability contribution required by subsection (d) of this section; and
            (ii)    any withdrawal liability contribution required by subsection (e) of this section.
        (3)    The amounts determined under paragraphs (1) and (2) of this subsection shall be based on an actuarial determination of the amounts that are required to preserve the integrity of the accumulation fund of the Local Fire and Police System, using:
            (i)    the entry-age actuarial cost method;
            (ii)    actuarial assumptions adopted by the Board of Trustees; and
            (iii)    the asset valuation method recommended by the actuary and adopted by the Board of Trustees.
        (4)    The actuary shall compute the contributions payable under this section.
        (5)    The amounts computed under this section are a charge against the participating governmental unit to be paid in accordance with § 21-309 of this subtitle.
    (b)    (1)    As part of each actuarial valuation, the actuary shall determine the normal contributions, net of member contributions, on account of members of the Local Fire and Police System.
        (2)    Except as provided in paragraph (3) of this subsection, the normal contribution rate for the Local Fire and Police System equals the fraction that has:
            (i)    as its numerator, the sum of the normal contributions determined under this subsection; and
            (ii)    as its denominator, the aggregate annual earnable compensation of the members of the Local Fire and Police System.
        (3)    On the recommendation of the actuary, the Board of Trustees may adjust the normal contribution rate determined under this section to provide for:
            (i)    experience gains and losses;
            (ii)    the effect of changes in actuarial assumptions; and
            (iii)    the effect of legislation enacted after July 1, 1989.
    (c)    (1)    The accrued liability contribution rate for the Local Fire and Police System shall be computed as the percent of the aggregate earnable compensation of the members of the Local Fire and Police System that is sufficient to liquidate over 40 years beginning July 1, 1989, the amount, as of June 30, 1989, by which the total liabilities of the Local Fire and Police System exceeded the sum of:
            (i)    the assets in the accumulation fund and the annuity savings fund of the Local Fire and Police System; and
            (ii)    the present value of future normal contributions, future special accrued liability contributions, future withdrawal liability contributions, and future member contributions.
        (2)    On the recommendation of the actuary, the Board of Trustees may adjust the accrued liability contribution rate to reflect:
            (i)    experience gains and losses;
            (ii)    the effect of changes in actuarial assumptions; and
            (iii)    the effect of legislation enacted after July 1, 1989.
    (d)    (1)    In this subsection, “special accrued liability” means, as to any participating governmental unit, the liability of the Local Fire and Police System on account of the employees of the participating governmental unit who elect to become members under § 28–202(b) of this article.
        (2)    Each participating governmental unit shall make a special accrued liability contribution on account of the participation of its employees in the Local Fire and Police System.
        (3)    The special accrued liability contribution shall be determined by an actuarial valuation of the special accrued liability as of the date of approval of participation by the legislative body of the participating governmental unit.
        (4)    Except as provided in paragraph (5) of this subsection, the annual special accrued liability contribution of each participating governmental unit shall be the level annual payment that is sufficient to liquidate, over 25 years beginning on the date of approval by the legislative body of the participating governmental unit, the amount by which the special accrued liability of the participating governmental unit exceeds the sum of:
            (i)    the present value, as of the date of approval, of future normal contributions, future accrued liability contributions, and future member contributions on behalf of or by members who are employees of the participating governmental unit; and
            (ii)    any cash and securities transferred to the Local Fire and Police System from the local pension system on or before December 31, 2004.
        (5)    Subject to the approval of the Board of Trustees, a participating governmental unit may liquidate its unfunded special accrued liability:
            (i)    over a period not to exceed 40 years; or
            (ii)    subject to the actuary’s concurrence, by means of annual payments other than level annual payments.
        (6)    The expense of making the initial special accrued liability actuarial valuation shall be assessed against and paid by the participating governmental unit on whose account it is necessary.
    (e)    (1)    (i)    In this subsection the following words have the meanings indicated.
            (ii)    “Active participant funding ratio” means the ratio determined by the actuary as provided under paragraph (3) of this subsection.
            (iii)    “Complement of the active participant funding ratio” is a ratio equal to 1 minus the active participant funding ratio.
        (2)    (i)    On and after the date of a participating governmental unit’s withdrawal from the Local Fire and Police System under § 31–302 of this article, the participating governmental unit and its employees are not required to make any further contributions to the Local Fire and Police System.
            (ii)    As of the effective date of withdrawal of a participating governmental unit from the Local Fire and Police System, the Board of Trustees shall transfer to the administrative board of the local pension system the assets that are allocable to the employees of the participating governmental unit as determined under paragraph (4) of this subsection.
        (3)    (i)    As of June 30 of each fiscal year, the actuary shall determine the active participant funding ratio for the participating governmental units as provided in this section.
            (ii)    The active participant funding ratio shall be a fraction, not to exceed 1, that has:
                1.    as its numerator, the assets to the credit of the participating governmental units in the accumulation fund and the annuity savings fund of the Local Fire and Police System as adjusted under subparagraph (iii) of this paragraph, decreased by the sum of the actuarial liabilities allocable to retirees of the Local Fire and Police System who retired from the service of the participating governmental unit and the designated beneficiaries of those retirees, former members of the Local Fire and Police System who are eligible for a vested allowance who separated from employment with the participating governmental unit, and members of the Local Fire and Police System who separated from employment with the participating governmental unit but who may become eligible to receive prior eligibility service credit under § 28–303 of this article; and
                2.    as its denominator, the actuarial liabilities that are allocable to the employees of the participating governmental units who are members of the Local Fire and Police System.
            (iii)    The assets to the credit of the participating governmental units as of the valuation date shall be increased by the outstanding balance of the special accrued liability attributable to the participating governmental units under subsection (d) of this section.
        (4)    (i)    The assets that are allocable to the employees of a participating governmental unit who withdraw from the Local Fire and Police System shall be computed by the actuary as provided in this paragraph.
            (ii)    The actuary shall first multiply the active participant funding ratio for the fiscal year preceding the effective date of withdrawal of the participating governmental unit by the actuarial liability allocable to the employees of the participating governmental unit who withdraw.
            (iii)    The actuary shall reduce the amount determined under subparagraph (ii) of this paragraph by the outstanding balance of the special accrued liability contribution attributable to the participating governmental unit as of the effective date of withdrawal.
    (f)    (1)    This subsection only applies to a former vested member, retiree, or surviving beneficiary of a deceased member, former vested member, or retiree, who while a member of the Local Fire and Police System was employed by a participating governmental unit that withdrew from the Local Fire and Police System on or before December 31, 2004.
        (2)    The Board of Trustees shall transfer to the Employees’ Pension System:
            (i)    the liabilities allocable to the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees that are accrued on or before June 30, 2005, as determined by an actuarial valuation of these liabilities as of June 30, 2005, based on assumptions that will be used in the actuarial valuation of the several systems as of June 30, 2005; and
            (ii)    the actuarial value of assets for the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees that is equal to the liabilities as of the date their employer withdrew from the Local Fire and Police System adjusted to reflect:
                1.    any benefit payments attributable to the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees; and
                2.    the actual investment experience based on the actuarial valuation of assets.
        (3)    (i)    A transfer made under paragraph (2) of this subsection shall be completed on or before December 31, 2005.
            (ii)    After the transfer has been completed, the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees shall become former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees of the Employees’ Pension System.
    (g)    (1)    This subsection applies only to a former vested member, retiree, or surviving beneficiary of a deceased member, former vested member, or retiree, who while a member of the Local Fire and Police System was employed by a participating governmental unit participating in the Local Fire and Police System on or after June 30, 2005.
        (2)    If a participating governmental unit withdraws from the Local Fire and Police System on or after June 30, 2005, as provided under § 31-302 of this article, the Board of Trustees shall transfer to the Employees’ Pension System:
            (i)    the liabilities allocable to the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees that are accrued on or before the date the participating governmental unit elects to withdraw, as determined by an actuarial valuation of these liabilities as of the date the participating governmental unit elects to withdraw, based on assumptions that will be used in the actuarial valuation of the several systems as of the date the participating governmental unit elects to withdraw; and
            (ii)    the actuarial value of assets for the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees that is equal to the liabilities as of the date the participating governmental unit elects to withdraw from the Local Fire and Police System adjusted to reflect:
                1.    any benefit payments attributable to the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees; and
                2.    the actual investment experience based on the actuarial valuation of assets.
        (3)    (i)    A transfer made under paragraph (2) of this subsection shall be completed within 1 year of the date the participating governmental unit elects to withdraw.
            (ii)    After the transfer has been completed, the former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees shall become former vested members, retirees, or surviving beneficiaries of deceased members, former vested members, or retirees of the Employees’ Pension System.