not considered salary, fringe benefits or compensation – Allocation of assets – Calculation of liability. A. Participating institutions establishing an alternate retirement plan pursuant to this act shall pay an initial funding surcharge, and if applicable an additional funding surcharge to the Teachers’ Retirement System of Oklahoma in an amount to amortize the unfunded accrued liability of the members of the participating institutions in the System. B. The initial funding surcharge is intended to ensure amortization of the unfunded accrued liability of the participating institutions over a period of thirty (30) years or the amortization period of the System. The initial funding surcharge shall equal two and one-half percent (2.5%) of the regular annual compensation of the electing employees and the eligible employees, who are not participating in the System but who would have been mandated to participate in the System under the laws and rules applicable to the System in effect on June 30, 2004. The initial funding surcharge but not the additional funding surcharge, if any, shall remain in effect until the earlier of June 30, 2034, or the June 30th of the year in which the unfunded accrued liability of the participating institutions is reduced to zero. C. In addition to the initial funding surcharge described above, the participating institutions shall pay to the System an additional funding surcharge, if required, in an amount necessary to provide for amortization of the unfunded accrued liability of the participating institutions over the applicable amortization period of thirty (30) years, or the amortization period of the System, if longer. The additional funding surcharge shall be reviewed and adjusted in subsequent years based on changes in the assets and liabilities of the membership in the System of the participating institutions. The additional funding surcharge shall be determined by the Board of Trustees of the System and the participating institutions pursuant to the separate agreement of understanding provided in subsection H of this section. Any change in the additional funding surcharge indicated to be necessary by the annual actuarial valuation shall be adopted by the Board of Trustees of the System provided that such change shall become effective on July 1 of the year following such annual valuation and the participating institutions shall be notified by the System no later than January 1 of such year. Provided, the additional funding surcharge determined for any year shall not be greater than an additional funding surcharge determined under the separate agreement of understanding but using the “individual entry age normal cost method” as described in Revenue Procedure 2000-40, Approval 8, to determine the normal cost/normal cost percentage of the participating institutions. D. Any payments made to the Teachers’ Retirement System of Oklahoma pursuant to this section shall not be considered as salary, fringe benefits or compensation due to the eligible employee or electing employee for the purpose of meeting any legislative or contractual obligation of the employer of such person. E. To determine the amount of assets of the participating institutions at any point in time after June 30, 2003, the participating institutions shall have allocated to such institutions Five Hundred Ninety-two Million Nine Hundred Seventy-four Thousand Two Hundred Sixty-four Dollars ($592,974,264.00) of the assets of the Teachers’ Retirement System of Oklahoma which reflects their portion of assets in the System as of June 30, 2003, plus future employer and employee contributions including service purchases attributable to the participating institutions and its members, nine and forty-one hundredths percent (9.41%) of all federal and state funding received by the System during the applicable year and other assets contributed to the System allocable to the participating institutions subject to the limitations in this subsection, earnings on investments less distributions and expenses allocable to the participating institutions. Provided, the allocation of nine and forty-one hundredths percent (9.41%) of federal and state funding received by the System to the participating institutions shall not exceed the unfunded accrued liability and shall remain in effect until the earlier of June 30, 2034, or when the unfunded accrued liability of the participating institutions is reduced to zero. However, if for any applicable year during the thirty-year amortization period commencing July 1, 2004, there is any unfunded accrued liability allocable to the participating institutions in the System, then the allocable percentage of federal and state funding shall be nine and forty-one hundredths percent (9.41%) but not exceed the unfunded accrued liability. Provided further, after the expiration of such thirty-year amortization period, the allocation of federal and state funding to the participating institutions for any year shall equal the percentage of all such federal and state funding received by the System determined by dividing the actuarial accrued liability of the participating institutions by the actuarial accrued liability of the System, and such methodology to determine such allocation shall be made for all years thereafter. F. After June 30, 2004, the liabilities associated with the members of the participating institutions participating in the Teachers’ Retirement System of Oklahoma shall be determined on a separate basis, reflecting the level of benefits based on the actuarial methods and assumptions used by the System as applied to the participating institutions under this act. G. The actuarial methods and assumptions applicable to the participating institutions in determining an allocable share of assets, liabilities and associated costs as provided in this act shall be reviewed at least every five (5) years. H. The Board of Trustees of the Teachers’ Retirement System of Oklahoma and the participating institutions shall enter into a separate agreement of understanding which details the procedures to be applied to implement the required review and subsequent adjustments to the assets, liabilities and the additional funding surcharge attributable to the participating institutions or the actuarial methods or assumptions applied to determine the appropriate share of assets and liabilities applicable to the participating institutions. Except as otherwise provided in this act, the Board of Trustees of the System shall be the final authority to determine all actuarial methods or assumptions to be used by the System and all such actuarial methods or assumptions shall be applied on a sound actuarial basis and on a uniform, fair and consistent basis which methods and assumptions reflect the actual experience of the members of the participating institutions.
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