California Code, Government Code - GOV § 20575

(a) Notwithstanding any other provision of this part to the contrary, upon request of a terminating agency, the board shall enter into an agreement with the governing body of a terminating agency in order to ensure that both:  the final compensation used in the calculation of benefits of its employees shall be calculated in the same manner as the benefits of employees of agencies that are not terminating, regardless of whether they retire directly from employment with the terminating agency or continue in other public service; and related necessary adjustments in the employer's contribution rate are made, from time to time, by the board prior to the date of termination to ensure that benefits are adequately funded or any other actuarially sound payment technique, including a lump-sum payment at termination, is agreed to by the governing body of the terminating agency and the board.

(b) The terminating agency that will cease to exist shall notify the board not sooner than three years nor later than one year prior to its termination date of its intention to enter into agreement pursuant to this section.

(c) The terms of the agreement shall be reflected in an amendment to the agency's contract with the board.

(d) If the board, itself, determines that it is not in the best interests of the system, it may choose not to enter into an agreement pursuant to this section.

(e) A terminating agency formed by an agreement under Chapter 5 (commencing with Section 6500 ) of Division 7 of Title 1 shall enter into an agreement with the board pursuant to subdivisions (a), (c), and (d) and its member agencies shall be liable to the system for inadequate funding of the benefits pursuant to subdivision (a).

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