CSHB 3356 would require certain public retirement systems to adopt a funding policy designed to achieve and maintain a minimum funded ratio of 100 percent and follow the Guidelines for Actuarial Soundness adopted by the PRB. At a minimum, the bill requires the funding policy to provide for sufficient contributions to pay normal cost and amortize any unfunded actuarial accrued liability (UAAL) over a period not to exceed 25 years. Additionally, under the bill, if a retirement system's funding is insufficient to meet the funding policy requirements, the system is required to notify the plan sponsor and the PRB. Thereafter, the system is granted a period of six fiscal years to regain compliance with the funding policy. If by the end of the sixth fiscal year the system does not become compliant with the funding policy requirements, the system would be required to prepare a written corrective action plan detailing the actions to be taken to ensure that the system's amortization period does not exceed 25 years. The bill also prohibits affected retirement systems from adopting new monetary benefits or providing benefit increases, if after such changes the time required to amortize the UAAL exceeded 25 years.         

The bill requires certain public retirement systems to adopt a funding policy designed to achieve and maintain a minimum funded ratio of 100 percent. To fulfill the provisions of CSHB 3356, public retirement systems would eventually have to pay down any UAAL to achieve 100 percent funding. This would improve the actuarial soundness of most public retirement systems.

PRB Guidelines for Actuarial Soundness establishes a minimum amortization period of 40 years, with 15 to 25 years being the recommended range. CSHB 3356 would require that at a minimum the funding policy should provide for sufficient contributions to amortize any UAAL over a 25-year period or less, which would be within the recommended standards established by the PRB Guidelines. The potential effect of this provision may be that over time the amortization periods of many retirement systems would fall within the recommended range of 15 to 25 years.  

Additionally, a restriction on any action causing the amortization period to exceed 25 years is in conformity with the PRB Guidelines and would help many retirement systems to ensure benefit increase-related costs do not adversely affect their actuarial soundness.