1. (a) Subject to approval by the state board, the governing body of a department that elects to participate in the pension system shall merge into the pension system any existing defined-benefit pension plan it operates for emergency services personnel.
2. (b) The pension system actuary shall determine the prior service costs for active members as of the merger date according to generally accepted actuarial standards. The participating department shall pay the determined prior service costs not later than the 10th anniversary of the effective date of merger. Interest on the prior service costs accrues at the assumed rate of investment return at the time determination of the prior service costs is made, except that interest is waived if the department completes payment not later than the first anniversary of the effective date of merger.
3. (c) The board shall determine the discount rate for determining the liability for the monthly benefits which annuitants are being paid on the effective date of the merger and for deferred monthly benefits for inactive members who, on that date, have a vested right to a future monthly benefit upon attaining the required age. The pension system actuary shall determine the liability for these inactive members according to generally accepted actuarial standards.
4. (d) On the effective date of merger, the participating department shall transfer all assets and liabilities of the former pension plan to the pension system. The pension system shall commingle the transferred assets with other assets of the system for investment purposes, but the costs of granting prior service credit and the liability for the inactive members according to subsection (c) of this section must be determined on an actuarially sound basis for the cost-sharing pension system.
5. (e) The pension system shall begin paying benefits being paid to annuitants by the merging plan on the effective date of merger. Prior service credit and monthly benefits described in subsection (c) of this section granted as a result of a merger are based on service before the effective date of merger as if it were performed as a member of the pension system, subject to the requirements of Section 66, Article XVI, Texas Constitution.
6. (f) A department may not purchase prior service credit under §306.1 of this title (relating to Prior Service Credit for Members of Participating Departments) for any service that is credited under the terms of a merger agreement.
7. (g) The details of how the assets of the merging plan will be divided among the liability for the inactive members according to subsection (c) of this section on the effective date of the merger, the prior service costs, and future monthly contributions must be described in the merger agreement between the participating department and the pension system.

Source Note:The provisions of this §306.2 adopted to be effective January 12, 2012, 37 TexReg 67; amended to be effective August 31, 2014, 39 TexReg 6868.