N.M. Admin. Code § 11.3.400.427

Current through Register Vol. 35, No. 21, November 5, 2024

Section 11.3.400.427 - ADEQUATE RESERVE DETERMINATION

The department shall ensure that the fund sustains an adequate reserve.

A. An adequate reserve shall be determined to mean that the funds in the fund available for benefits equal the total amount of funds needed to pay between 18 and 24 months of benefits at the average of the five highest years of benefits paid in the last 25 years.

B. For the purpose of sustaining an adequate reserve, the department shall determine a reserve factor to be used when calculating an employer's contribution rate based upon a formula that will set the reserve factor in proportion to the difference between the amount of funds available for benefits in the fund, as of the computation date, and the adequate reserve, within the following guidelines:

(1) 1.0000 if, as of the computation date, there is an adequate reserve;

(2) between 0.5000 and 0.9999 if, as of the computation date, there is greater than an adequate reserve; and

(3) between 1.0001 and 4.0000 if, as of the computation date, there is less than an adequate reserve.

C. The New Mexico adequate reserve multiple (NMARM) is a measure of fund adequacy used in determining the reserve factor. The NMARM is equal to the reserve ratio divided by the average benefit cost rate. The reserve ratio is the trust fund balance, as of June 30, divided by calendar year total wages. The average benefit cost rate is the average of the state's five highest benefit cost rates, during the preceding 25 years. The benefit cost rate is calendar year benefit payments divided by the sum of total wages for the same period.

D. The formula for setting the reserve factor shall be determined as follows:

(1) If NMARM <= 0.5 then reserve factor = 4.

(2) If 0.5 < NMARM < 1.5 then reserve factor = 11/2 - 3×NMAR

(3) If 1.5 <= NMARM <= 2 then reserve factor = 1.

(4) If 2 < NMARM < 3.150 then reserve factor = 43/23 - 10/23×NMARM.

(5) If NMARM >= 3.150 then reserve factor = 0.5.

N.M. Admin. Code § 11.3.400.427

Amended by New Mexico Register, Volume XXV, Issue 19, October 15, 2014, eff. 10/15/2014, Adopted by New Mexico Register, Volume XXVII, Issue 22, November 30, 2016, eff. 11/30/2016