Withholding of Money From State-Shared Taxes to Be Paid to Political Subdivision's Pension Plan in Event of Failure to Pay Established Percentages

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  1. In the event the political subdivision shall fail to fund the ADC according to the percentages established in § 9-3-505, the commissioner of finance and administration, at the direction of the comptroller of the treasury, is authorized to withhold such amount or part of such amount from any state-shared taxes that are otherwise apportioned to such political subdivision. The money withheld from state-shared taxes shall be paid to the political subdivision's pension plan.
  2. The deduction shall be made as a first charge against any moneys payable to such political subdivision regardless of the source of such payment and regardless of the purpose or contemplated use of such funds.
  3. Regardless of a political subdivision's funding level of its ADC, a political subdivision may, with the recommendation of the state treasurer and the approval of the board of trustees of the Tennessee consolidated retirement system:
    1. Continue the administration of its pension plan, but have the pension plan funds co-invested with the pension plan assets for the Tennessee consolidated retirement system, but established in a separate fund from the Tennessee consolidated retirement system assets, and accounted for separately with accurate and detailed accounting records. The separate fund shall be operated in accordance with IRS Revenue Ruling 2011-1 or subsequent guidance regarding a group trust fund under Internal Revenue Code §  401(a)(24) (26 U.S.C. § 401(a)(24)). Before a political subdivision's pension plan assets are co-invested with Tennessee consolidated retirement system assets, the political subdivision shall provide the department of treasury with its plan document and a determination letter from the internal revenue service that its plan assets are qualified assets or written advice from competent counsel of the Tennessee consolidated retirement system that the plan is a qualified plan. The political subdivision shall enter into an agreement with the retirement system for the co-investment of the political subdivision's pension plan assets, which shall include a charge assessed by the retirement system against the political subdivision for services related to the co-investment of assets; or
      1. Continue the pension plan, but have the plan administered by the Tennessee consolidated retirement system and have the assets co-invested with the Tennessee consolidated retirement system pension plan assets;
      2. The political subdivision shall enter into an agreement with the Tennessee consolidated retirement system to provide billing services, participant enrollment services, participant accounts, data processing, recordkeeping, investment and other related services that are necessary or appropriate to the administration of the political subdivision's pension plan. The agreement may provide that the services be provided directly by staff of the retirement system or through contracts with other providers;
      3. Any agreement entered into under this section shall require that the political subdivision remain the responsible administrator for the political subdivision's pension plan, and that neither the state of Tennessee nor the retirement system, or any of its officers, agents, employees, or boards shall act as a trustee or be considered the trustee for the political subdivision's pension plan;
      4. The chair of the retirement system shall assess a charge to the political subdivision for the administration of the political subdivision's pension plan and co-investment of its assets, in an amount to be determined by the chair, to meet the administrative expenses of the retirement system in providing the administration and co-investment services under this section. It is the legislative intent that the state shall realize no increased cost as a result of the administration of the political subdivision's pension plan and co-investment of its assets, and that all costs associated with the administration of the pension plan, including administrative and co-investment costs, shall be the responsibility of the respective political subdivision. In the event that the political subdivision refuses or otherwise fails to satisfy this liability, such amounts shall become a lien on the property of the political subdivision and may be withheld from state-shared taxes which are otherwise apportioned to the political subdivision;
      5. As a condition of providing the services described in this section for the administration of a political subdivision's pension plan, and at any time thereafter, the chair of the retirement system may require that the political subdivision provide proof that the political subdivision's pension plan is a qualified plan and otherwise complies with the applicable provisions of the Internal Revenue Code, as amended. The chair of the retirement system may require an opinion of counsel or other assurance satisfactory to the chair that the provision of the services described in this section does not cause the retirement system, the state, or any of their agencies or employees to violate any federal or state laws or regulations;
      6. Political subdivisions shall take all actions that the retirement system, in its discretion, deems necessary for compliance by the retirement system with all applicable federal and state laws or for qualification of the retirement system for any exemptions from regulation available under those laws, including, but not limited to, the federal Securities Act of 1933, as amended, (15 U.S.C. § 77a et seq.), and the Investment Company Act of 1940, as amended, (15 U.S.C. § 80(a)-1 et seq.);
      7. The political subdivision's plan shall be administered separately from the Tennessee consolidated retirement system, and shall be administered according to the political subdivision's pension plan documents;
      8. The political subdivision's plan assets shall be established in a separate fund from the Tennessee consolidated retirement system assets, and accounted for separately with accurate and detailed accounting records. The separate fund shall be operated in accordance with IRS Revenue Ruling 2011-1 or subsequent guidance regarding a group trust fund under Internal Revenue Code §  401(a)(24). Before a political subdivision's pension plan assets are co-invested with Tennessee consolidated retirement system assets, the political subdivision shall provide the department of treasury with its plan document and a determination letter from the internal revenue service that its plan assets are qualified assets.
  4. Notwithstanding any law to the contrary, through its administration of a political subdivision's pension plan, or the co-investment of the political subdivision's pension plan assets, as set forth in subdivisions (c)(1) and (2), the Tennessee consolidated retirement system shall not be liable for the payment of any retirement allowances or other benefits on account for the political subdivision employees or their respective beneficiaries, for which reserves have not been previously created from funds contributed by the political subdivision or the political subdivision employees for such benefits.
    1. Notwithstanding any law to the contrary, to the extent that some or all of a political subdivision's pension plan assets intended to be invested pursuant to subsection (c) do not comport with the investment policy for the Tennessee consolidated retirement system:
      1. The board of trustees for the Tennessee consolidated retirement system may permit, as a written exception or amendment to the investment policy, the co-investment of the pension plan assets with the pension plan assets for the Tennessee consolidated retirement system under subsection (c). Such an exception or amendment shall contain the limitations, conditions, or restrictions on the co-investment of pension plan assets, including, but not limited to, the management strategy and timeframe for the conversion or liquidation of the pension plan assets to an investment authorized by the retirement system's investment policy within a reasonable period of time, considering the market for such investments. An exception or amendment under this subsection (e) may address multiple pension plans, a single pension plan, or be general in nature; or
      2. The state treasurer may take custody of the pension plan assets in an account separate from the Tennessee consolidated retirement system assets. The state treasurer shall invest the pension plan assets in accordance with the political subdivision's investment policy. The political subdivision's agreement for services provided under this section shall provide:
        1. The limitations, conditions, or restrictions on the investment of pension plan assets, including, but not limited to, the management strategy and timeframe for the conversion or liquidation of the pension plan assets to an investment authorized by the retirement system's investment policy within a reasonable period of time, considering the market for such investments; and
        2. A charge assessed to the political subdivision for such services.
    2. Nothing in this subsection (e) shall prohibit a portion of a political subdivision's assets from being co-invested while a portion of the political subdivision's assets are invested separately under this subsection (e).


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