(a) There is established an account to be known as the “municipal pension solvency account” which shall be a separate nonlapsing account within the General Fund. The account shall contain: (1) The proceeds of notes, bonds or other obligations issued by the state for the purpose of deposit in said account and use in accordance with this section and section 7-406o; (2) payments received from any municipality in repayment of a municipal pension solvency loan; (3) interest or other income earned on the investment of moneys in said account; and (4) any additional moneys made available from any sources, public or private, for the purposes for which said account was established and for the purpose of deposit in said account.

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(b) Within the municipal pension solvency account, there shall be two subaccounts: (1) A state bond receipts subaccount into which shall be deposited the proceeds of notes, bonds or other obligations issued by the state for the purpose of deposit in said account, and (2) an additional moneys receipts subaccount into which shall be deposited any additional moneys made available from any sources, public or private, for the purposes for which said account was established and for the purpose of deposit in such subaccount. Moneys in each subaccount created under this subsection may be expended by the Treasurer for any of the purposes of the municipal pension solvency account and investment earnings of a subaccount shall be deposited in such subaccount.

(c) In addition to the subaccounts established in subsection (b) of this section, the Treasurer may establish such additional subaccounts within the municipal pension solvency account as necessary to effectuate the purposes of this section and section 7-406o, including, but not limited to, subaccounts (1) to segregate a portion or portions of the corpus of the account or as security for revenue bonds issued by the state for deposit in the account, (2) to segregate investment earnings on all or a portion of the account, or (3) to segregate moneys in the account that have previously been expended for the benefit of a loan recipient from moneys that are initial deposits in the account.

(d) Any moneys held by the Treasurer or by a trustee pursuant to an indenture of trust with respect to municipal pension solvency account bonds including pledged revenues, other pledged receipts, funds or moneys and proceeds from the sale of such municipal pension solvency account bonds, may, pending the use or application of such proceeds for an authorized purpose, be (1) invested and reinvested in such obligations, securities and investments as are set forth in subsection (f) of section 3-20, in participation certificates in the Short Term Investment Funds created under sections 3-27a and 3-27f and in participation certificates or securities of the Tax-Exempt Proceeds Fund created under section 3-24a, or (2) deposited or redeposited in such bank or banks as shall be provided in the proceedings authorizing the issuance of municipal pension solvency account bonds. Unless the proceedings provide otherwise, proceeds from investments authorized by this subsection, less amounts required under the proceedings for the payment of municipal pension solvency loan costs relating to such municipal pension solvency account bonds, shall be credited to the municipal pension solvency account.

(e) Investment earnings credited to the assets of the municipal pension solvency account and to any subaccount of said account shall become part of the assets of said account and such subaccount.

(f) (1) Amounts in the municipal pension solvency account shall be available to the Treasurer to establish a loan program to provide loans to any municipality to fund such municipality’s employee pension fund. Amounts in the municipal pension solvency account shall be used only: (A) To make loans to municipalities at an interest rate to be established pursuant to subdivision (2) of this subsection, provided such loans shall not exceed a term of twenty years and shall have principal and interest payments commencing not later than one year after the date of issuance of the loan, (B) for the payment of costs for administration and management of the municipal pension solvency account, (C) to be invested and earn interest on moneys in said account, (D) provided such amounts are not required for the purposes of said account, to pay debt service on bonds of the state issued to fund the municipal pension solvency account, or for the purchase or redemption of such bonds, and (E) for any other purpose of the municipal pension solvency account and the loan program.

(2) The interest rate on each municipal pension solvency loan shall be the same as the interest rate paid by the state on the bonds, notes or obligations issued by the state to finance such loan. Notwithstanding this interest rate provision, the payment due under the municipal pension solvency account agreement may include amounts determined by the Treasurer to include the funding of issuance costs, required reserves, carrying costs of reserves, interest penalties for late payments and other administrative costs associated with the loan and the loan program.

(g) (1) The secretary and the Treasurer shall maintain a priority list of eligible municipalities and shall establish a ranking system for making municipal pension solvency loans to municipalities. In establishing such priority list and ranking system, the secretary and the Treasurer shall consider all factors said secretary and Treasurer deem relevant, including, but not limited to, the following:

(A) The amount of a municipality’s unfunded pension liability;

(B) A municipality’s ability to eliminate, or substantially eliminate, its unfunded pension liability by taking a municipal pension solvency loan under the loan program;

(C) The state’s interest in assisting the maximum number of communities with the funds available under the loan program; and

(D) The financial management factors that caused the municipality’s unfunded pension liability and the likelihood such practices will continue in the future.

(2) Municipal pension solvency loans shall be made pursuant to a municipal pension solvency account agreement between the state, acting by and through the Treasurer, and the municipality seeking such loan. A municipal pension solvency account agreement shall be in a form prescribed by the Treasurer and the secretary and shall contain penalty provisions for municipalities that fail to repay the loan in a timely manner or make contributions to their pension funds as required under such agreement. The agreement may include, but is not limited to, the requirement for a general obligation pledge from the municipality, a tax revenue intercept of the municipality, the required funding of reserve funds or any such other credit enhancement deemed necessary by the Treasurer and the secretary. Such agreement shall also include provisions for repayment of the costs associated with administering the loan program and the loan.

(3) Any municipality may apply to the state for a municipal pension solvency loan to fund all or a portion of an unfunded past benefit obligation, as determined by an actuarial valuation, and the payment of costs related to the issuance of such bonds in accordance with the following requirements:

(A) The municipality shall, within the time and in the manner prescribed by regulations adopted by the Treasurer and the secretary, or as otherwise required by the Treasurer and the secretary, include with such application (i) the actuarial valuation, (ii) an actuarial analysis of the method by which the municipality proposes to fund any unfunded past benefit obligation not to be defrayed by the municipal pension solvency loan, (iii) an explanation of the municipality’s investment strategic plan for the pension fund, including, but not limited to, an asset allocation plan, (iv) a three-year financial plan, including the major assumptions and plan of finance for such municipal pension solvency loan, (v) a comparison of the anticipated effects of funding the unfunded past benefit obligation with the municipal pension solvency loan with the funding of the obligation through the annual actuarially recommended contribution, prepared in the manner prescribed by the secretary, and in accordance with subparagraph (D) of this subdivision, (vi) documentation of the municipality’s authorization to apply for a municipal pension solvency loan, including a certified copy of the resolution or ordinance of the municipality authorizing the application for a municipal pension solvency loan, (vii) documentation that the municipality has adopted an ordinance, or with respect to a municipality not having the authority to make ordinances, has adopted a resolution by a two-thirds vote of the members of its legislative body, requiring the municipality to appropriate funds in an amount sufficient to meet the actuarially recommended contribution and contribute such amounts to the plan as required in subdivision (3) of subsection (c) of this section, (viii) the methodology used and actuarial assumptions that will be utilized to calculate the actuarially recommended contribution, and (ix) such other information and documentation as required by the secretary or the Treasurer to carry out the provisions of this section. The secretary and the Treasurer may hire an independent actuary or such other professionals required to review the information submitted by the municipality.

(B) As long as the municipal pension solvency loan is outstanding, the municipality shall, for each fiscal year of the municipality, commencing with the fiscal year in which the loan is made, appropriate funds in an amount sufficient to meet the actuarially recommended contribution and contribute such amount to the plan, and notify the secretary annually, who shall subsequently notify the Treasurer, of the amount or the rate of any such actuarially recommended contribution and the amount or the rate, if any, of the actual annual contribution by the municipality to the pension fund to meet such actuarially recommended contribution. The municipality shall provide the secretary and the Treasurer annually with: (i) The actuarial valuation of the pension fund, (ii) a specific identification, in a format to be determined by the secretary, of any changes that have been made in the actuarial assumptions or methods compared to the previous actuarial valuation of the pension fund, (iii) the footnote disclosure and required supplementary information disclosure required by GASB Statement Number 27 with respect to the pension fund, and (iv) a review of the investments of the pension fund including a statement of the current asset allocation and an analysis of performance by asset class. In any fiscal year for which such municipality fails to appropriate sufficient funds to meet the actuarially recommended contribution in accordance with the provisions of this subdivision, an amount sufficient to meet such requirement shall be deemed appropriated, notwithstanding the provisions of any other general statute or of any special act, charter, special act charter, home-rule ordinance, local ordinance or local law.

(C) Proceeds of the municipal pension solvency loan, to the extent not applied to the payment of costs related to the issuance of such loan, shall be deposited in the pension fund of the municipality to fund the unfunded past benefit obligation for which the loan was issued and may be invested in accordance with the terms of said pension fund.

(D) The amortization schedule used to determine the actuarially recommended contribution shall be fixed and shall have a term not to exceed the longer of (i) ten years, or (ii) twenty years from the date of issuance of the municipal pension solvency loan. If the funding ratio of the pension fund, as determined immediately succeeding the deposit of the proceeds of the loan into such pension fund, is reduced by thirty per cent or more, the maximum permitted term of such amortization schedule shall be reduced by the same percentage.