EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
*sb0862*
SENATE BILL 862
P6 5lr2373
CF HB 1072
By: Senator M. Jackson (Chair, Joint Committee on Pensions)
Introduced and read first time: January 28, 2025
Assigned to: Budget and Taxation
Committee Report: Favorable with amendments
Senate action: Adopted
Read second time: February 21, 2025
CHAPTER ______
AN ACT concerning 1
State Retirement and Pension System – Administrative Fees – Repeal 2
FOR the purpose of requiring the Board of Trustees for the State Retirement and Pension 3
System to certify certain employer contribution rates each fiscal year; requiring the 4
employer contribution rates to include recognition of certain administrative and 5
operational expenses; repealing a requirement that certain administrative and 6
operational expenses of the State Retirement and Pension System and the State 7
Retirement Agency be funded by charging each participating employer an 8
administrative fee for each system participant; clarifying that certain payments 9
certified by the Board of Trustees to be paid by local employers in a certain fiscal 10
year shall be paid; requiring the Board of Trustees to fund certain operating 11
expenses of the State Retirement Agency through the accumulation fund; and 12
generally relating to the funding of the administrative and operating expenses of the 13
State Retirement and Pension System and the State Retirement Agency. 14
BY repealing and reenacting, with amendments, 15
Article – State Personnel and Pensions 16
Section 21–125, 21–302, 21–303, and 21–315 17
Annotated Code of Maryland 18
(2024 Replacement Volume and 2024 Supplement) 19
BY repealing and reenacting, without amendments, 20
Article – State Personnel and Pensions 21
Section 21–301 22
Annotated Code of Maryland 23 2 SENATE BILL 862
(2024 Replacement Volume and 2024 Supplement) 1
BY repealing 2
Article – State Personnel and Pensions 3
Section 21–316 4
Annotated Code of Maryland 5
(2024 Replacement Volume and 2024 Supplement) 6
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 7
That the Laws of Maryland read as follows: 8
Article – State Personnel and Pensions 9
21–125. 10
(a) The Board of Trustees shall designate an actuary who shall: 11
(1) give technical advice to the Board of Trustees on the operation of the 12
funds of the several systems; and 13
(2) perform other related duties that the Board of Trustees requires. 14
(b) (1) On the basis of actuarial assumptions that the Board of Trustees 15
adopts, each year the actuary shall make a valuation of the assets and liabilities of the 16
funds of the several systems AND SHALL RECOMMEND THE RATES OF EMPLOYE R 17
CONTRIBUTIONS TO BE CERTIFIED BY THE BOARD OF TRUSTEES. 18
(2) (I) 1. Each year, ON THE RECOMMENDATIO N OF THE 19
ACTUARY, the Board of Trustees shall certify to the Secretary of Budget and Management 20
and to the Governor the rates of employer contributions. 21
2. EACH YEAR, ON THE RECOMMENDATIO N OF THE 22
ACTUARY, THE BOARD OF TRUSTEES SHALL CERTIF Y TO ALL OTHER PARTI CIPATING 23
EMPLOYERS THE RATES OF EMPLOYER CONTRIBU TIONS. 24
(II) THE NORMAL CONTRIBUTI ON RATE RECOMMENDED BY THE 25
ACTUARY AND CERTIFIE D BY THE BOARD OF TRUSTEES FOR ALL EMPL OYERS 26
UNDER SUBPARAGRAPH (I) OF THIS PARAGRAPH FO R EACH FISCAL YEAR S HALL 27
INCLUDE AN AMOUNT NE CESSARY FOR THE ADMI NISTRATIVE AND OPERA TIONAL 28
EXPENSES OF THE BOARD OF TRUSTEES AND THE STATE RETIREMENT AGENCY, 29
EXCLUDING THE ADMINI STRATIVE AND OPERATI ONAL EXPENSES OF THE 30
INVESTMENT DIVISION. 31
(3) For purposes of actuarial valuation, the Board of Trustees may adopt a 32
generally accepted ACTUARIAL method for determining the value of the assets held by the 33
several systems. 34 SENATE BILL 862 3
(4) For general ledger accounting and financial reporting, the Board of 1
Trustees shall use generally accepted accounting principles. 2
(c) (1) At least once in each 5–year period, the actuary shall make: 3
(i) actuarial investigations into the compensation, mortality, and 4
service experience of the participants of each of the several systems; and 5
(ii) a valuation of the assets and liabilities of the funds of each of the 6
several systems. 7
(2) The Board of Trustees shall: 8
(i) review the results of the investigations and valuations of the 9
actuary; and 10
(ii) adopt the actuarial assumptions for each of the several systems 11
as the Board of Trustees considers necessary. 12
21–301. 13
(a) In each State system, there is: 14
(1) an accumulation fund; 15
(2) an annuity savings fund; and 16
(3) an expense fund. 17
(b) The Board of Trustees shall credit the assets of each State system to the 18
appropriate fund of the State system according to the purpose for which the assets are held. 19
21–302. 20
(a) The following are obligations of the State: 21
(1) the payment of all allowances and other benefits payable under this 22
Division II; 23
(2) the creation and maintenance of reserves in the accumulation funds of 24
the several systems; AND 25
(3) the crediting of regular interest to the annuity savings funds of the 26
several systems[; and 27
4 SENATE BILL 862
(4) except as provided in § 21–316 of this subtitle, the payment of the 1
expenses for administration and operation of the several systems]. 2
(b) The assets of the several systems shall be used to pay the obligations of the 3
State specified in this section. 4
(c) Each fiscal year the State shall pay to the accumulation fund of each State 5
system at least an amount that when combined with the amount in the accumulation fund 6
of the system is sufficient to provide the allowances and other benefits payable out of the 7
fund during that fiscal year. 8
21–303. 9
(a) The Board of Trustees shall credit to the accumulation fund of each State 10
system: 11
(1) all employer contributions to the State system; 12
(2) all interest, dividends, and other income derived from the assets of the 13
State system; and 14
(3) amounts transferred under § 21–311(c) or (d) of this subtitle. 15
(b) The Board of Trustees shall pay from the accumulation fund of a State system 16
all benefits payable under that State system except for benefits payable from the annuity 17
savings fund of that State system. 18
(c) (1) Each year the Board of Trustees shall transfer from the accumulation 19
fund of each State system to each member’s account in the annuity savings fund of that 20
State system regular interest on the account as provided in this Division II. 21
(2) If a retiree who has retired because of disability is restored to 22
membership, the Board of Trustees shall transfer from the accumulation fund of the 23
appropriate State system to the annuity savings fund of that State system an amount equal 24
to the remaining portion of the retiree’s annuity reserve. 25
(d) [(1)] Each year, the Board of Trustees shall transfer from the accumulation 26
fund of each State system to the expense fund of that system the amounts required by § 27
21–315 of this subtitle. 28
[(2) On or before June 30 each year, the administrative fees that are paid 29
by participating employers as provided in § 21–316 of this subtitle for that year shall be 30
reimbursed to the accumulation fund of each State system for the amount transferred to 31
the expense fund of that system under paragraph (1) of this subsection.] 32
21–315. 33
SENATE BILL 862 5
(a) The Board of Trustees shall credit to the expense fund of each State system 1
its pro rata share of: 2
(1) the amount [provided in the annual State budget to pay the 3
administrative and operational expenses of the Board of Trustees and the State Retirement 4
Agency] ATTRIBUTABLE TO THE ADMINISTRATIVE AND O PERATIONAL EXPENSES OF 5
THE BOARD OF TRUSTEES AND THE STATE RETIREMENT AGENCY AS CERTIFIED B Y 6
THE BOARD OF TRUSTEES UNDER § 21–125 OF THIS TITLE; 7
(2) the amounts authorized by the Board of Trustees under this section for 8
investment management services, including personnel and operational expenses of the 9
Investment Division; and 10
(3) the amount authorized by the Board of Trustees to implement a closing 11
agreement with the Internal Revenue Service regarding former members of the Employees’ 12
Retirement System or the Teachers’ Retirement System who elected to become members of 13
or participate in those State systems under former Article 73B, §§ 2–206 and 3–206 of the 14
Code. 15
(b) (1) The Board of Trustees shall pay from the expense fund of each State 16
system its pro rata share of: 17
(i) the administrative and operational expenses of the Board of 18
Trustees and the State Retirement Agency, in accordance with the annual State budget; 19
(ii) the amounts as authorized by the Board of Trustees necessary 20
for investment management services, including personnel and operational expenses of the 21
Investment Division; and 22
(iii) the amounts as authorized by the Board of Trustees necessary to 23
implement a closing agreement with the Internal Revenue Service regarding former 24
members of the Employees’ Retirement System or the Teachers’ Retirement System who 25
elected to become members of or participate in those State systems under former Article 26
73B, §§ 2–206 and 3–206 of the Code. 27
(2) The amounts for the personnel and operational expenses of the 28
Investment Division shall be paid out of the accumulation fund of each State system on a 29
pro rata basis [and may not be paid by participating employers as provided in § 21–316 of 30
this subtitle]. 31
(c) Each year the Board of Trustees shall estimate the amount, not exceeding 32
0.22% of active member payroll, retiree benefits, and former member compensation, 33
necessary for the administrative and operational expenses of the Board of Trustees and the 34
State Retirement Agency. 35
6 SENATE BILL 862
(d) (1) Each quarter of the fiscal year the Board of Trustees shall estimate 1
one–fourth of an amount, not exceeding 0.5% of the market value as of the last day of the 2
preceding quarter of invested assets that are externally managed exclusive of assets 3
invested in real estate or alternative investments, necessary to procure and retain 4
investment management services other than external real estate or alternative investment 5
management services. 6
(2) The Board of Trustees is not limited in the amount of investment 7
manager fees that the Board of Trustees may pay as necessary for external real estate or 8
alternative investment management services. 9
(e) (1) The amounts estimated under subsection (c) of this section shall be paid 10
into the expense funds of the several systems during the ensuing year on a pro rata basis 11
according to the total membership of each system. 12
(2) The amounts estimated under subsection (d) of this section shall be paid 13
into the expense funds of the several systems during the ensuing year on a pro rata basis 14
according to the total assets held by each system. 15
(f) The Board of Trustees may combine the expense funds of the several systems 16
for budgetary and administrative efficiency. 17
(g) (1) (i) On or before December 31 of each year, the Board of Trustees 18
shall report to the General Assembly the actual amount spent for investment management 19
services during the preceding fiscal year. 20
(ii) The report required under subparagraph (i) of this paragraph 21
shall include the amount of carried interest on any assets of the system. 22
(2) On or before December 31 each year, the Board of Trustees shall report 23
to the General Assembly the actual amount spent for Investment Division operations 24
during the preceding fiscal year. 25
[21–316. 26
(a) (1) In this section the following words have the meanings indicated. 27
(2) “Administrative fees” means the actual administrative and operational 28
expenses incurred by the Board of Trustees and the State Retirement Agency as of June 30 29
of the second prior fiscal year. 30
(3) “Library” means a library that is established or operates under the 31
Education Article. 32
(4) “Local employer” means a participating employer other than the State. 33
SENATE BILL 862 7
(b) (1) Subject to paragraph (3) of this subsection, for each fiscal year, the 1
State and each local employer shall pay to the Board of Trustees their pro rata shares of 2
the administrative fees. 3
(2) The pro rata share of the administrative fees of the State and of each 4
local employer for each fiscal year shall be based on the number of members of the several 5
systems employed by the State or local employer as of June 30 of the second prior fiscal 6
year compared to the total membership of the several systems as of that date. 7
(3) The State shall pay the pro rata share under this section of each library. 8
(4) The administrative fees used to determine the pro rata shares under 9
this subsection may not include costs for the personnel and operational expenses of the 10
Investment Division. 11
(c) As part of its annual budget submission for a fiscal year, the Board of Trustees 12
shall certify to the Secretary of Budget and Management the percentage of the total 13
membership of the several systems that is employed by the State, the libraries, and each 14
local employer as of June 30 of the second prior fiscal year. 15
(d) (1) The Governor shall include in the budget bill an appropriation to the 16
accumulation funds of the State Retirement and Pension System that equals the authorized 17
administrative fees for the fiscal year. 18
(2) The amounts payable by the State under this section with respect to 19
members employed by each State unit shall be charged against the budget of that unit. 20
(3) The State shall pay its pro rata share of the amount of administrative 21
fees authorized in the State budget to the Board of Trustees on July 1 of the applicable 22
fiscal year. 23
(e) (1) On or before October 1 each year, the Board of Trustees shall: 24
(i) certify to each local employer other than a library the amount 25
payable by the local employer for the next fiscal year that is equal to the percentage 26
certified under subsection (c) of this section multiplied by the amount of administrative 27
fees; and 28
(ii) notify the Secretary of Budget and Management and the 29
Department of Legislative Services of the certifications sent under item (i) of this 30
paragraph. 31
(2) On or before October 1, January 1, April 16, and June 1 of the fiscal 32
year immediately following the certification required in paragraph (1) of this subsection, 33
each local employer shall pay to the Board of Trustees 25% of the amount certified to the 34
local employer by the Board of Trustees under paragraph (1) of this subsection. 35
8 SENATE BILL 862
(3) If a local employer does not pay the amounts required under this section 1
within the time required, the local employer is liable for interest on delinquent amounts at 2
a rate of 4% a year until payment. 3
(4) The Secretary of the Board of Trustees may allow a grace period not to 4
exceed 10 calendar days for payment of the amounts certified under this section. 5
(5) On notification by the Secretary of the Board of Trustees that a 6
delinquency exists, the State Comptroller immediately shall exercise the right of setoff 7
against any money due or coming due to that local employer from the State. 8
(f) On receipt of payments under this section, the Board of Trustees shall credit 9
these amounts to the accumulation fund of the appropriate State system.] 10
SECTION 2. AND BE IT FURTHER ENACTED, That, notwithstanding Section 1 of 11
this Act, on or before June 1, 2025, each local employer shall pay to the Board of Trustees 12
for the State Retirement and Pension System the amounts certified to be paid by each local 13
employer for fiscal year 2025 to the Board of Trustees in accordance with § 21–316 of the 14
State Personnel and Pensions Article in effect at the time of certification. 15
SECTION 2. 3. AND BE IT FURTHER ENACTED, That, for fiscal year 2026, the 16
amounts for the administrative and operational expenses of the Board of Trustees for the 17
State Retirement and Pension System and the State Retirement Agency shall be paid out 18
of the accumulation fund of each State system on a pro rata basis. 19
SECTION 3. 4. AND BE IT FURTHER ENACTED, That, for fiscal year 2027 and 20
each fiscal year thereafter, the administrative and operational expenses of the Board of 21
Trustees for the State Retirement and Pension System and the State Retirement Agency 22
shall be included in the employer contribution rates certified by the Board of Trustees for 23
the State Retirement and Pension System as provided in Section 1 of this Act. 24
SECTION 4. 5. AND BE IT FURTHER ENACTED, That this Act shall take effect 25
June 1, 2025. 26
Approved:
________________________________________________________________________________
Governor.
________________________________________________________________________________
President of the Senate.
________________________________________________________________________________
Speaker of the House of Delegates.