S0001B0853A01354 PWK:CMD 05/22/17 #90 A01354
AMENDMENTS TO SENATE BILL NO. 1
Sponsor: SENATOR LANGERHOLC
Printer's No. 853
Amend Bill, page 1, lines 1 through 27, by striking out all
of said lines and inserting
Amending Titles 24 (Education), 51 (Military Affairs) and 71
(State Government) of the Pennsylvania Consolidated Statutes,
extensively revising pension provisions as follows:
In Title 24:
for retirement for school employees, in the areas of
preliminary provisions, of membership, contributions and
benefits, of school employees' defined contribution plan
and of administration and miscellaneous provisions; and
for health insurance for retired school employees, in
the area of preliminary provisions.
In Title 51:
for employment preferences and pensions, in the area
of military leave of absence.
In Title 71:
for boards and offices, in the area of Independent
Fiscal Office; and
for retirement for State employees and officers, in
the areas of preliminary provisions, of membership,
credited service, classes of service and eligibility for
benefits, of contributions, of benefits, of State
employees' defined contribution plan and of
administration, funds, accounts, general provisions.
Providing, as to the revisions:
for construction and administration, for
applicability, for liability, for member statements and
for suspension of provisions of the Public Employee
Retirement Study Commission Act.
Amend Bill, page 2, lines 3 through 30; pages 3 through 341,
lines 1 through 30; page 342, lines 1 through 24; by striking
out all of said lines on said pages and inserting
ARTICLE I
Section 101. The definitions of "alternate payee," "basic
contribution rate," "beneficiary," "class of service
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multiplier," "compensation," "creditable nonschool service,"
"credited service," "date of termination of service,"
"distribution," "domestic relations order," "final average
salary," "inactive member," "intervening military service,"
"irrevocable beneficiary," "leave for service with a collective
bargaining organization," "reemployed from USERRA leave,"
"required beginning date," "salary deductions," "shared-risk
contribution rate," "standard single life annuity,"
"superannuation or normal retirement age," "valuation interest"
and "vestee" in section 8102 of Title 24 of the Pennsylvania
Consolidated Statutes are amended and the section is amended by
adding definitions to read:
§ 8102. Definitions.
The following words and phrases when used in this part shall
have, unless the context clearly indicates otherwise, the
meanings given to them in this section:
* * *
"Accumulated employer defined contributions." The total of
the employer defined contributions paid into the trust on
account of a participant's school service, together with any
investment earnings and losses and adjustments for fees, costs
and expenses credited or charged thereon and reduced by any
distributions.
"Accumulated mandatory participant contributions." The total
of the mandatory pickup participant contributions paid into the
trust on account of a participant's school service, together
with any investment earnings and losses and adjustments for
fees, costs and expenses credited or charged thereon and reduced
by any distributions.
"Accumulated total defined contributions." The total of the
accumulated mandatory participant contributions, accumulated
employer defined contributions and accumulated voluntary
contributions standing to the credit of a participant in an
individual investment account in the trust.
"Accumulated voluntary contributions." The total of
voluntary contributions paid into the trust by a participant and
any amounts rolled over by a participant or transferred by a
direct trustee-to-trustee transfer into the trust, together with
any investment earnings and losses and adjustments for fees,
costs and expenses credited or charged thereon and reduced by
any distributions.
* * *
"Active participant." A school employee for whom mandatory
pickup participant contributions are being made to the trust or
for whom contributions otherwise required are not being made
solely by reason of any provision of this part relating to the
limitations under section 401(a)(17) or 415 of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17)
or 415).
* * *
"Alternate payee." Any spouse, former spouse, child or
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dependent of a member or participant who is recognized by a
domestic relations order as having a right to receive all or a
portion of the moneys payable to that member or participant
under this part.
* * *
"Basic contribution rate." For Class T-A, T-B and T-C
service, the rate of 6 1/4%. For Class T-D service, the rate of
7 1/2%. For all active members on the effective date of this
provision who are currently paying 5 1/4% and elect Class T-D
service, the rate of 6 1/2%. For Class T-E service, the rate of
7 1/2%. For Class T-F service, the rate of 10.30%. For Class T-G
service, the rate of 5.5%. For Class T-H service, the rate of
4.5%.
"Beneficiary." [The] In the case of the system, the person
or persons last designated in writing to the board by a member
to receive his accumulated deductions or a lump sum benefit upon
the death of such member. In the case of the plan, the person or
persons last designated in writing to the board by a participant
to receive the participant's vested accumulated total defined
contributions or a lump sum benefit upon the death of the
participant.
* * *
"Class of service multiplier."
Class of service Multiplier
T-A .714
T-B .625
T-C 1.000
T-D 1.000
T-E 1.000
T-F 1.000
T-G 1.000
T-H 1.000
* * *
"Compensation." Pickup contributions and mandatory pickup
participant contributions plus any remuneration received as a
school employee excluding reimbursements for expenses incidental
to employment and excluding any bonus, severance payments, any
other remuneration or other emolument received by a school
employee during his school service which is not based on the
standard salary schedule under which he is rendering service,
payments for unused sick leave or vacation leave, bonuses or
other compensation for attending school seminars and
conventions, payments under health and welfare plans based on
hours of employment or any other payment or emolument which may
be provided for in a collective bargaining agreement which may
be determined by the Public School Employees' Retirement Board
to be for the purpose of enhancing compensation as a factor in
the determination of final average salary, and excluding
payments for military leave and any other payments made by an
employer while on USERRA leave, leave of absence granted under
51 Pa.C.S. § 4102 (relating to leaves of absence for certain
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government employees), military leave of absence granted under
51 Pa.C.S. § 7302 (relating to granting military leaves of
absence), leave granted under section 1178 of the act of March
10, 1949 (P.L.30, No.14), known as the Public School Code of
1949, or other types of military leave, including other types of
leave payments, stipends, differential wage payments as defined
in IRC § 414(u)(12) and any other payments, provided, however,
that the limitation under section 401(a)(17) of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17))
taken into account for the purpose of member contributions,
including regular or joint coverage member contributions,
regardless of class of service, shall apply to each member who
first became a member of the Public School Employes' Retirement
System on or after July 1, 1996, and who by reason of such fact
is a noneligible member subject to the application of the
provisions of section 8325.1 (relating to annual compensation
limit under IRC § 401(a)(17)), and shall apply to each
participant pertaining to the participant's participation in the
plan.
* * *
"Creditable nonschool service." Service other than service
as a school employee for which an active member may obtain
credit in the system.
"Credited service." School or creditable nonschool service
for which the required contributions have been made to the fund,
or for which the contributions otherwise required for such
service were not made solely by reason of any provision of this
part relating to the limitations under section 401(a)(17) or 415
of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17) or 415), or for which salary deductions to
the system or lump sum payments have been agreed upon in
writing.
"Date of termination of service." The latest of the
following dates:
(1) The last [date] day of service for which pickup
contributions are made for an active member or[,] for which
the contributions otherwise required for service were not
made solely by reason of any provision of this part relating
to the limitations under section 401(a)(17) or 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or 415);
(2) in the case of an inactive member or an inactive
participant, the effective date of his resignation or the
date his employment is formally discontinued by his employer
or two years following the last day of service for which
contributions were made, whichever is earliest[.]; or
(3) the last day of service for which mandatory pickup
participant contributions are made for an active participant.
* * *
"Distribution." Payment of all or any portion of a person's
interest in either the Public School Employees' Retirement Fund
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or the School Employees' Defined Contribution Trust, or both,
which is payable under this part.
"Domestic relations order." Any judgment, decree or order,
including approval of a property settlement agreement, entered
on or after the effective date of this definition by a court of
competent jurisdiction pursuant to a domestic relations law
which relates to the marital property rights of the spouse or
former spouse of a member or participant, including the right to
receive all or a portion of the moneys payable to that member or
participant under this part in furtherance of the equitable
distribution of marital assets. The term includes orders of
support as that term is defined by 23 Pa.C.S. § 4302 (relating
to definitions) and orders for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages).
* * *
"Employer defined contributions." For Class T-G service,
contributions equal to 2.25% of an active participant's
compensation that are made by an employer to the trust, to be
credited in the active participant's individual investment
account. For Class T-H service and Class DC participants,
contributions equal to 2.0% of an active participant's
compensation that are made by an employer to the trust, to be
credited in the active participant's individual investment
account.
"Final average salary." [The] As follows:
(1) For purposes of calculating annuities and benefits
from the system attributable to a class of service other than
Class T-G and Class T-H, the highest average compensation
received as an active member during any three nonoverlapping
periods of 12 consecutive months with the compensation for
part-time service being annualized on the basis of the
fractional portion of the school year for which credit is
received; except, if the employee was not a member for three
such periods, the total compensation received as an active
member annualized in the case of part-time service divided by
the number of such periods of membership; in the case of a
member with multiple service credit, the final average salary
shall be determined by reference to compensation received by
him as a school employee or a State employee or both; and, in
the case of a noneligible member, subject to the application
of the provisions of section 8325.1 (relating to annual
compensation limit under IRC § 401(a)(17)). Final average
salary shall be determined by including in compensation,
payments deemed to have been made to a member reemployed from
USERRA leave to the extent member contributions have been
made as provided in section 8302(d)(2) (relating to credited
school service) and payments made to a member on leave of
absence under 51 Pa.C.S. § 4102 (relating to leaves of
absence for certain government employees) as provided in
section 8302(d)(6).
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(2) For purposes of calculating annuities and benefits
from the system attributable to Class T-G and Class T-H
service, the following shall apply:
(i) The highest average compensation received as an
active member during any five nonoverlapping periods of
12 consecutive months, with the compensation for part-
time service being annualized on the basis of the
fractional portion of the school year for which credit is
received shall be used or the calculation shall be made
in accordance with the following:
(A) If the employee was not a member for five
periods, the total compensation received as an active
member annualized in the case of part-time service
divided by the number of periods of membership.
(B) In the case of a member with multiple
service credit, the final average salary shall be
determined by reference to compensation received by
the member as a school employee or a State employee
or both.
(C) In the case of a noneligible member, subject
to the application of the provisions of section
8325.1.
(ii) Final average salary shall be determined by
including in compensation, payments deemed to have been
made to a member reemployed from USERRA leave to the
extent member contributions have been made as provided in
section 8302(d)(2) and payments made to a member on leave
of absence under 51 Pa.C.S. § 4102 as provided in section
8302(d)(6).
* * *
"Inactive member." A member for whom no pickup contributions
are being made to the fund, except in the case of an active
member for whom such contributions otherwise required for
current school service are not being made solely by reason of
any provision of this part relating to the limitations under
section 401(a)(17) or 415 of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415) or because
the member is on USERRA leave, who has accumulated deductions
standing to his credit in the fund and for whom contributions
have been made within the last two school years or a multiple
service member who is active in the State Employees' Retirement
System.
"Inactive participant." A participant for whom no mandatory
pickup participant contributions are being made to the trust,
except in the case of an active participant for whom the
contributions otherwise required for current school service are
not being made solely by reason of any provision of this part
relating to limitations under section 401(a)(17) or 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or 415), but who has vested accumulated total defined
contributions standing to the participant's credit in the trust
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and who has not filed an application for a distribution.
"Individual investment account." The account in the trust to
which are credited the amounts of the contributions made by a
participant and the participant's employer in accordance with
the provisions of this part, together with all investment
earnings after deduction for fees, costs and expenses,
investment losses and charges for distributions.
"Intervening military service." Active military service of a
member who was a school employee and an active member of the
system immediately preceding his induction into the armed
services or forces of the United States in order to meet a draft
obligation excluding any voluntary extension of such
obligational service and who becomes a school employee and an
active member of the system within 90 days of the expiration of
such service.
* * *
"Irrevocable beneficiary." The person or persons permanently
designated by a member or participant in writing to the board
pursuant to an approved domestic relations order to receive all
or a portion of the accumulated deductions, vested accumulated
total defined contributions or lump sum benefit payable upon the
death of such member or participant.
"Irrevocable successor payee." The person permanently
designated by a participant receiving distributions in writing
to the board under an approved domestic relations order to
receive one or more distributions from the plan upon the death
of such participant.
* * *
"Leave for service with a collective bargaining
organization." Paid leave granted to an active member or active
participant by an employer for purposes of working full time for
or serving full time as an officer of a Statewide employee
organization or a local collective bargaining representative
under the act of July 23, 1970 (P.L.563, No.195), known as the
Public Employe Relations Act: Provided, That greater than one-
half of the members of the employee organization are active
members of the system or active participants of the plan; that
the employer shall fully compensate the member or participant,
including, but not limited to, salary, wages, pension and
retirement contributions and benefits, employer defined
contributions, other benefits and seniority, as if he were in
full-time active service; and that the employee organization
shall fully reimburse the employer for such salary, wages,
pension and retirement contributions and benefits, employer
defined contributions and other benefits and seniority.
"Mandatory pickup participant contributions." Contributions
equal to a percentage of compensation that are made by the
employer for active participants for current school service that
are picked up by the employer and credited in the plan as
follows:
(1) For Class T-G members, 2.75%, and Class T-H members,
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3.0%.
(2) For Class DC participants, 7.5%.
* * *
"Participant." An active participant, inactive participant
or participant receiving distributions.
"Participant receiving distributions." A participant in the
plan who has commenced receiving distributions from the
participant's individual investment account, but who has not
received a total distribution of the vested interest in the
individual investment account.
* * *
"Plan." The School Employees' Defined Contribution Plan as
established by the provisions of this part and the board.
"Plan document." The documents created by the board under
section 8402 (relating to plan document) that contain the terms
and provisions of the plan and trust as established by the board
regarding the establishment, administration and investment of
the plan and trust.
* * *
"Reemployed from USERRA leave." Resumption of active
membership or active participation as a school employee after a
period of USERRA leave, if the resumption of active membership
or active participation was within the time period and under
conditions and circumstances such that the school employee was
entitled to reemployment rights under 38 U.S.C. Ch. 43 (relating
to employment and reemployment rights of members of the
uniformed services).
* * *
"Required beginning date." The [beginning] latest date by
which distributions of a member's interest or a participant's
interest in the participant's individual investment account must
commence under section 401(a)(9) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).
* * *
"Salary deductions." The amounts certified by the board,
deducted from the compensation of an active member or active
participant or the State service compensation of a multiple
service member who is an active member of the State Employees'
Retirement System and paid into the fund or trust.
* * *
"Shared-risk contribution rate." The additional contribution
rate that is added to the basic contribution rate for Class T-E
[and T-F], Class T-F, Class T-G and Class T-H members, as
provided for in section 8321(b) (relating to regular member
contributions for current service).
"Standard single life annuity." For Class T-A, T-B and T-C
credited service of a member, an annuity equal to 2% of the
final average salary, multiplied by the total number of years
and fractional part of a year of credited service of a member.
For Class T-D credited service of a member, an annuity equal to
2.5% of the final average salary, multiplied by the total number
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of years and fractional part of a year of credited service. For
Class T-E credited service of a member, an annuity equal to 2%
of the final average salary, multiplied by the total number of
years and fractional part of a year of credited service of a
member. For Class T-F credited service of a member, an annuity
equal to 2.5% of the final average salary, multiplied by the
total number of years and fractional part of a year of credited
service of a member. For Class T-G credited service of a member,
an annuity equal to 1.25% of the final average salary,
multiplied by the total number of years and fractional part of a
year of credited service of a member. For Class T-H credited
service of a member, an annuity equal to 1.0% of the final
average salary, multiplied by the total number of years and
fractional parts of a year of credited service of a member.
"State Employees' Defined Contribution Plan." The defined
contribution plan for State employees established by 71 Pa.C.S.
Pt. XXV (relating to retirement for State employees and
officers).
* * *
"Successor payee." The person or persons last designated by
a participant receiving distributions in writing to the board to
receive one or more distributions upon the death of the
participant.
* * *
"Superannuation or normal retirement age."
Class of service Age
T-A
62 or any age upon accrual of
35 eligibility points
T-B 62
T-C and T-D
62 or age 60 provided the
member has at least 30
eligibility points or any
age upon accrual of 35
eligibility points
T-E and T-F
65 with accrual of at least
three eligibility points
or a combination of age
and eligibility points
totaling 92, provided the
member has accrued at
least 35 eligibility
points
T-G 67 with accrual of at least 3
eligibility points, or a
combination of age and
eligibility points
totaling 97, provided the
member has accrued at
least 35 eligibility
points
T-H 67 with accrual of at least 3
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eligibility points
* * *
"Trust." The School Employees' Defined Contribution Trust
established under Chapter 84 (relating to School Employees'
Defined Contribution Plan).
* * *
"Valuation interest." Interest at 5 1/2% per annum,
compounded annually and applied to all accounts of the fund
other than the members' savings account.
"Vestee." A member with five or more eligibility points in a
class of service other than Class T-E, Class T-F, Class T-G or
Class T-H who has terminated school service, has left his
accumulated deductions in the fund and is deferring filing of an
application for receipt of an annuity. For Class T-E [and],
Class T-F, Class T-G and Class T-H members, a member with ten or
more eligibility points who has terminated school service, has
left his accumulated deductions in the fund and is deferring
filing of an application for receipt of an annuity.
"Voluntary contributions." Contributions made by a
participant to the trust and credited to the participant's
individual investment account in excess of the mandatory pickup
participant contributions, either by after-tax salary deductions
paid through the employer or by an eligible rollover or direct
trustee-to-trustee transfers.
Section 102. Section 8103 of Title 24 is amended by adding
subsections to read:
§ 8103. Construction of part.
* * *
(f) Exclusive source of rights and benefits.--Regardless of
any other provision of law, pension and benefit rights of school
employees shall be determined solely by this part or any
amendment thereto, or the plan document established by the
board, and no collective bargaining agreement nor any
arbitration award between the employer and the employer's
employees or the employee's collective bargaining
representatives shall be construed to do any of the following:
(1) Change any of the provisions of this part.
(2) Require the board to administer pension or
retirement benefits not set forth in this part or not
established by the board in the plan document.
(3) Require the board to modify, amend or change any of
the terms and provisions of the plan document.
(4) Otherwise require action by any other government
body pertaining to pension or retirement benefits or rights
of school employees.
(g) References to certain Federal statutes.--References in
this part to the IRC or the Uniformed Services Employment and
Reemployment Rights Act of 1994 (Public Law 103-353, 108 Stat.
3149), including administrative regulations promulgated under
the IRC or the Uniformed Services Employment and Reemployment
Rights Act of 1994, are intended to include laws and regulations
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in effect on the effective date of this section and amended,
supplemented or supplanted on and after the effective date of
this section.
(h) Construction.--This part may not be construed to mean
any of the following:
(1) That the limitations on benefits or other
requirements under IRC § 401(a) or other applicable
provisions of the IRC that are applicable to participants in
the plan do not apply to the participants or to the members
of the system and the benefits payable under this part.
(2) That an interpretation or application of a provision
of this part or benefits available to members of the Public
School Employees' Retirement System was not in accordance
with the provisions of this part or other applicable law,
including the IRC and the Uniformed Services Employment and
Reemployment Rights Act of 1994 before the effective date of
this section.
(3) That the release or publicizing of a record,
material or data that would not constitute a public record
under section 8502(e)(2) (relating to administrative duties
of board) is a violation of the fiduciary duties of the
board.
Section 103. Title 24 is amended by adding a section to
read:
§ 8103.2. Reference to Public School Employees' Retirement
System.
(a) General rule.--As of the effective date of this section,
unless the context clearly indicates otherwise, a reference to
the Public School Employees' Retirement System in a statutory
provision, other than this part and 71 Pa.C.S. Pt. XXV (relating
to retirement for State employees and officers), shall include a
reference to the plan, and a reference to the Public School
Employees' Retirement Fund shall include a reference to the
trust.
(b) Certain agreements.--The agreement of an employer to
make contributions to the fund or to enroll employees as members
in the system shall be deemed to be an agreement to make
contributions to the trust or to enroll employees in the plan.
Section 104. Section 8301 of Title 24 is amended to read:
§ 8301. Mandatory and optional membership in the system and
participation in the plan.
(a) Mandatory membership.--Membership in the system shall be
mandatory as of the effective date of employment for all school
employees except the following:
(1) Any officer or employee of the Department of
Education, State-owned educational institutions, community
colleges, area vocational-technical schools, technical
institutes, or [the] The Pennsylvania State University and
who is a member of the State Employees' Retirement System or
a member of another retirement program approved by the
employer.
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(2) Any school employee who is not a member of the
system and who is employed on a per diem or hourly basis for
less than 80 full-day sessions or 500 hours in any fiscal
year or annuitant who returns to school service under the
provisions of section 8346(b) (relating to termination of
annuities).
(3) Any officer or employee of a governmental entity who
subsequent to December 22, 1965 and prior to July 1, 1975
administers, supervises, or teaches classes financed wholly
or in part by the Federal Government so long as he continues
in such service.
(4) Any part-time school employee who has an individual
retirement account pursuant to the Federal act of September
2, 1974 (Public Law 93-406, 88 Stat. 829), known as the
Employee Retirement Income Security Act of 1974.
(b) Prohibited membership.--The school employees categorized
in subsection (a)(1) and (2) shall not have the right to elect
membership in the system and shall not be eligible to
participate in the plan.
(c) Optional membership.--The school employees categorized
in subsection (a)(3) and, if otherwise eligible, subsection (a)
(4) shall have the right to elect membership in the system. Once
such election is exercised, membership shall commence from the
original date of eligibility and shall continue until the
termination of such service.
(d) Mandatory participation in the plan.--A school employee
who is a mandatory member of either Class T-G or Class T-H shall
also be a mandatory participant in the plan as of the effective
date of membership in the system.
Section 105. Section 8302(a), (c) and (d) of Title 24 are
amended and the section is amended by adding a subsection to
read:
§ 8302. Credited school service.
(a) Computation of credited service.--In computing credited
school service of a member for the determination of benefits, a
full-time salaried school employee shall receive one year of
credit for each school year or the corresponding fraction
thereof, in accordance with the proportion of the full school
year for which the required regular member contributions have
been made to the fund, or for which such contributions otherwise
required for such service were not made to the fund solely by
reason of any provision of this part relating to the limitations
under IRC § 401(a)(17) or 415. A per diem or hourly school
employee shall receive one year of credited service for each
nonoverlapping period of 12 consecutive months in which he is
employed and for which contributions are made to the fund, or
would have been made to the fund but for such limitations under
the IRC, for at least 180 full-day sessions or 1,100 hours of
employment. If such member was employed and contributions were
made to the fund for less than 180 full-day sessions or 1,100
hours, he shall be credited with a fractional portion of a year
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determined by the ratio of the number of full-day sessions or
hours of service actually rendered to 180 full-day sessions or
1,100 hours, as the case may be. A part-time salaried employee
shall be credited with the fractional portion of the year which
corresponds to the service actually rendered and for which
contributions are or would have been made to the fund except for
the limitations under the IRC in relation to the service
required as a comparable full-time salaried employee. In no case
shall a member receive more than one year of credited service
for any 12 consecutive months or a member who has elected
multiple service receive an aggregate in the two systems of more
than one year of credited service for any 12 consecutive months.
* * *
(c) Cancellation of credited service.--All credited service
in the system shall be cancelled if a member withdraws his
accumulated deductions[.], except that a partial or total
distribution of accumulated total defined contributions to a
participant who is also a member may not cancel service credited
in the system.
(d) Credit for military service.--A school employee who has
performed USERRA leave may receive credit in the system as
follows:
(1) For purposes of determining whether a member is
eligible to receive credited service in the system for a
period of active military service, other than active duty
service to meet periodic training requirements, rendered
after August 5, 1991, and that began before the effective
date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73
(relating to military leave of absence) shall apply to all
individuals who were active members of the system when the
period of military service began, notwithstanding if the
member is not defined as an employee under 51 Pa.C.S. § 7301
(relating to definitions). School employees may not receive
service credit or exercise the options under 51 Pa.C.S. §
7306(a), (b) and (c) (relating to retirement rights) for
military leaves that begin on or after the effective date of
this subsection, except otherwise provided under this
subsection.
(2) A school employee who has performed USERRA leave may
receive credit as provided by this paragraph.
(i) A school employee who is reemployed from USERRA
leave as an active member of the system shall be treated
as not having incurred a break in school service by
reason of the USERRA leave and shall be granted
eligibility points as if the school employee had not been
on the USERRA leave. If a school employee who is
reemployed from USERRA leave as an active member of the
system subsequently makes regular member contributions,
shared-risk member contributions and any other member
contributions in the amounts and in the time periods
required by 38 U.S.C. Ch. 43 (relating to employment and
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reemployment rights of members of the uniformed services)
and IRC § 414(u) as if the school employee had continued
in his school office or employment and performed school
service and been compensated during the period of USERRA
leave, then the school employee shall be granted school
service credit for the period of USERRA leave. The
employee shall have his benefits, rights and obligations
determined under this part as if he was an active member
who performed creditable school service during the USERRA
leave in the job position that he would have held had he
not been on USERRA leave and received the compensation on
which the member contributions to receive school service
credit for the USERRA leave were determined.
(ii) For purposes of determining whether a school
employee has made the required employee contributions for
school service credit for USERRA leave, if an employee
who is reemployed from USERRA leave as an active member
of the system terminates school service or dies in school
service before the expiration of the allowed payment
period, school service credit for the USERRA leave shall
be granted as if the required member contributions were
paid the day before termination or death. The amount of
the required member contributions shall be treated as an
incomplete payment subject to the provisions of section
8325 (relating to incomplete payments). Upon a subsequent
return to school service or to State service as a
multiple service member, the required member
contributions treated as incomplete payments shall be
treated as member contributions that were either
withdrawn in a lump sum at termination or paid as a lump
sum under section 8345(a)(4) (relating to member's
options). For this purpose, the exclusion of Class T-E
and Class T-F members from electing a form of payment
under section 8345(a)(4)(iii) shall be ignored.
(iii) A school employee who is reemployed from
USERRA leave as an active member of the system and who
does not make the required member contributions or makes
only part of the required member contributions within the
allowed payment period shall not be:
(A) Granted credited service for the period of
USERRA leave for which the required member
contributions were not timely made.
(B) Eligible to subsequently make contributions.
(C) Granted either school service credit or
nonschool service credit for the period of USERRA
leave for which the required member contributions
were not timely made.
(3) A school employee who is a member of the system and
performs USERRA leave from which the employee could have been
reemployed from USERRA leave had the school employee returned
to school service in the time frames required by 38 U.S.C.
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Ch. 43 for reemployment rights, but did not do so, shall be
able to receive creditable nonschool service as
nonintervening military service for the period of USERRA
leave if the employee later returns to school service and is
otherwise eligible to purchase the service as nonintervening
military service.
(4) [A school employee] An active or inactive member
who, on or after the effective date of this subsection, is
granted a leave of absence under section 1178 of the Public
School Code, a leave of absence under 51 Pa.C.S. § 4102
(relating to leaves of absence for certain government
employees) or a military leave under 51 Pa.C.S. Ch. 73, that
is not USERRA leave shall be able to receive creditable
nonschool service as nonintervening military service should
the employee return to school service as an active member of
the system and is otherwise eligible to purchase the service
as nonintervening military service.
(5) If a member dies while performing USERRA leave, the
beneficiaries or survivor annuitants of the deceased member
shall be entitled to any additional benefits, including
eligibility points, other than benefit accruals relating to
the period of qualified military service, provided under this
part as if the member resumed and then terminated employment
on account of death.
(6) A school employee who is on a leave of absence from
his duties as a school employee and for which 51 Pa.C.S. §
4102 provides that he is not to suffer a loss of pay, time or
efficiency shall not be an active member, receive service
credit or make member contributions for the leave of absence
except as provided for in this part. Notwithstanding this
paragraph, any pay the member receives under section 1178 of
the Public School Code or 51 Pa.C.S. § 4102 shall be included
in the determination of final average salary and other
calculations in the system utilizing compensation as if the
payments were compensation under this part.
(e) Military service by a participant.--A participant who
has performed USERRA leave shall be treated and may make
contributions as follows:
(1) A participant who is reemployed from USERRA leave
may not be treated as having incurred a break in school
service by reason of the USERRA leave and shall be granted
eligibility points as if the participant had not been on
USERRA leave. If a participant who is reemployed from USERRA
leave subsequently makes mandatory pickup participant
contributions in the amounts and in the time periods required
by 38 U.S.C. Ch. 43 and IRC § 414(u) as if the participant
had continued in the participant's school employment and
performed school service and been compensated during the
period of USERRA leave, then the participant's employer shall
make the corresponding employer defined contributions. The
employee shall have contributions, benefits, rights and
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obligations determined under this part as if the employee was
an active participant who performed school service during the
USERRA leave in the job position that the employee would have
held had the employee not been on USERRA leave and received
the compensation on which the mandatory pickup participant
contributions to receive school service credit for the USERRA
leave were determined, including the right to make voluntary
contributions on such compensation as permitted by law.
(2) A participant who is reemployed from USERRA leave
and does not make the mandatory pickup participant
contributions or makes only part of the mandatory pickup
participant contributions within the allowed payment period
may not be eligible to make mandatory pickup participant
contributions and voluntary contributions at a later date for
the period of USERRA leave for which the mandatory pickup
participant contributions were not timely made.
(3) A participant who performs USERRA leave from which
the employee could have been reemployed from USERRA leave had
the school employee returned to school service in the time
frames required by 38 U.S.C. Ch. 43 for reemployment rights,
but did not do so, may not be eligible to make mandatory
pickup participant contributions or voluntary contributions
for the period of USERRA leave should the employee later
return to school service and be a participant in the plan.
(4) An active participant or inactive participant who,
on or after the effective date of this subsection, is granted
a leave of absence under 51 Pa.C.S. § 4102 or a military
leave under 51 Pa.C.S. Ch. 73 that is not USERRA leave may
not be eligible to make mandatory pickup participant
contributions or voluntary contributions during or for the
leave of absence or military leave, and may not have employer
defined contributions made during such leave, without regard
to whether or not the participant received salary, wages,
stipends, differential wage payments or other payments from
the participant's employer during the leave, notwithstanding
any provision to the contrary in 51 Pa.C.S. § 4102 or 51
Pa.C.S. Ch. 73.
(5) If a participant dies while performing USERRA leave,
then the beneficiaries or successor payees of the deceased
participant are entitled to any additional benefits, other
than benefit accruals relating to the period of qualified
military service, provided under this part had the
participant resumed and then terminated employment on account
of death.
Section 106. Sections 8303(c) and (d) and 8304(a) of Title
24 are amended to read:
§ 8303. Eligibility points for retention and reinstatement of
service credits.
* * *
(c) Purchase of previous creditable service.--Every active
member of the system or a multiple service member who is an
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active member of the State Employees' Retirement System on or
after the effective date of this part may purchase credit and
receive eligibility points:
(1) as a member of Class T-C, Class T-E [or], Class T-F,
Class T-G or Class T-H for previous creditable school service
or creditable nonschool service; or
(2) as a member of Class T-D for previous creditable
school service, provided the member elects to become a Class
T-D member pursuant to section 8305.1 (relating to election
to become a Class T-D member);
upon written agreement by the member and the board as to the
manner of payment of the amount due for credit for such service;
except, that any purchase for reinstatement of service credit
shall be for all service previously credited.
(d) Purchase of previous noncreditable service.--Class T-C
and Class T-D members who are active members on the effective
date of this subsection shall have three years from the
effective date of this subsection to file a written application
with the board to purchase any previous noncreditable school
service. Class T-C and Class T-D members who are not active
members on the effective date of this subsection but who become
active members after the effective date of this subsection and
Class T-E [and], class T-F, Class T-G and Class T-H members
shall have 365 days from entry into the system to file a written
application with the board to purchase any previous
noncreditable school service.
§ 8304. Creditable nonschool service.
(a) Eligibility.--An active member or a multiple service
member who is an active member of the State Employees'
Retirement System shall be eligible to receive Class T-C, Class
T-E [or], Class T-F, Class T-G or Class T-H service credit for
creditable nonschool service and Class T-D, Class T-E [or],
Class T-F, Class T-G or Class T-H service for intervening
military service, provided the member becomes a Class T-D member
pursuant to section 8305.1 (relating to election to become a
Class T-D member) or Class T-F member pursuant to section 8305.2
(relating to election to become a Class T-F member) or 8305
(relating to classes of service) or Class T-H service pursuant
to section 8305.3 (relating to election to become a Class T-H
member), as set forth in subsection (b) provided that he is not
entitled to receive, eligible to receive now or in the future,
or is receiving retirement benefits for such service under a
retirement system administered and wholly or partially paid for
by any other governmental agency or by any private employer, or
a retirement program approved by the employer in accordance with
section 8301(a)(1) (relating to mandatory and optional
membership), and further provided that such service is certified
by the previous employer and the manner of payment of the amount
due is agreed upon by the member, the employer, and the board.
* * *
Section 107. Section 8305(c)(1) and (d) of Title 24 are
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amended and the section is amended by adding subsections to
read:
§ 8305. Classes of service.
* * *
(c) Class T-D membership.--
(1) A person who becomes a school employee and an active
member, or a person who becomes a multiple service member who
is a State employee and a member of the State Employees'
Retirement System, on or after the effective date of this
subsection and before July 2011, shall be classified as a
Class T-D member upon payment of regular member
contributions. Any prior school service credited as Class T-C
service shall be credited as Class T-D service, subject to
the limitations contained in paragraph (4).
* * *
(d) Class T-E membership.--Notwithstanding any other
provision, a person who first becomes a school employee and an
active member, or a person who first becomes a multiple service
member who is a State employee and a member of the State
Employees' Retirement System, on or after the effective date of
this subsection and before July 1, 2019, shall be classified as
a Class T-E member upon payment of regular member contributions
and the shared-risk contributions.
* * *
(f) Class T-G membership.-- A person who first becomes a
school employee and an active member on or after July 1, 2019,
shall be classified as a Class T-G member upon payment of
regular member contributions and the shared-risk contributions.
(g) Class T-H membership or Class DC participant.--A person
who first becomes a school employee and an active member on or
after July 1, 2019, and who is eligible to become a Class T-G
member shall have the right to elect to become one of the
following:
(1) a Class T-H member, provided the person elects to
become a Class T-H member pursuant to section 8305.3
(relating to election to become a Class T-H member), upon
written election filed with the board and payment of regular
member contributions and the shared-risk contributions; or
(2) a Class DC participant, provided the person elects
to become a Class DC participant pursuant to section 8305.4
(relating to election to become a Class DC participant), upon
written election filed with the board and payment of
mandatory pickup participant contributions.
Section 107.1. Title 24 is amended by adding sections to
read:
§ 8305.3. Election to become a Class T-H member.
(a) General rule.--A person who first becomes a school
employee and an active member on or after July 1, 2019, and who
is eligible to become a Class T-G member may elect to become a
member of Class T-H.
(b) Time for making election.--A member must elect to become
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a Class T-H member by filing a written election with the board
within 90 days of notification by the board that the member is
eligible for the election. A school employee who is eligible to
elect to become a Class T-H member who begins USERRA leave
during the election period without having elected Class T-H
membership may make the election within 90 days after being
reemployed from USERRA leave.
(c) Effect of election.--An election to become a Class T-H
member shall be irrevocable and shall commence from the original
date of eligibility. A member who elects Class T-H membership
shall receive Class T-H service credit on any and all future
service, regardless of whether the member terminates service or
has a break in service.
(d) Effect of failure to make election.--If a member fails
to timely file an election to become a Class T-H member, and
does not elect to become a Class DC participant under section
8305.4 (relating to election to become a Class DC participant),
then the member shall be enrolled as a member of Class T-G, and
the member shall never be able to elect Class T-H service,
regardless of whether the member terminates service or has a
break in service.
§ 8305.4. Election to become a Class DC participant.
(a) General rule.--A person who first becomes a school
employee and an active member on or after July 1, 2019, and who
is eligible to become a Class T-G member may elect to become a
participant of Class DC.
(b) Time for making election.--A member must elect to become
a Class DC participant by filing a written election with the
board within 90 days of notification by the board that the
member is eligible for the election. A school employee who is
eligible to elect to become a Class DC participant who begins
USERRA leave during the election period without having elected
to become a Class DC participant may make the election within 90
days after being reemployed from USERRA leave.
(c) Effect of election.--An election to become a Class DC
participant shall be irrevocable and shall commence from the
original date of eligibility. A member who elects to become a
Class DC participant shall remain a Class DC participant on any
and all future service, regardless of whether the participant
terminates service or has a break in service.
(d) Effect of failure to make election.--If a member fails
to timely file an election to become a Class DC participant, and
does not elect to become a member of Class T-H under section
8305.3 (relating to election to become a Class T-H member), then
the member shall be enrolled as a member of Class T-G, and the
member shall never be able to elect to become a Class DC
participant, regardless of whether the member terminates service
or has a break in service.
§ 8305.5. Election to become Class T-G, Class T-H or Class DC.
(a) General rule.--A person who:
(1) is a Class T-C, Class T-D, Class T-E or Class T-F
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member of the system or a Class T-C, Class T-D, Class T-E or
Class T-F multiple service member who is a State employee and
a member of the State Employees' Retirement System; and
(2) on July 1, 2019, is an active member of the system
or an active member of the State Employees' Retirement System
if a multiple service member,
may elect to become a member of Class T-G, Class T-H or a
participant of Class DC.
(b) Time for making election.--The member must elect to
become a member of Class T-G or Class T-H or a participant of
Class DC by filing a written notice with the board within 90
days of notification by the board that the member is eligible to
make the election or before the termination of school service or
State service, as applicable, whichever occurs first. A school
employee who is eligible to elect to become a member of Class T-
G or Class T-H or a participant of Class DC who begins USERRA
leave during the election period without having elected the
membership may make the election within 90 days after being
reemployed from USERRA leave.
(c) Effect of election.--An election to become a member of
Class T-G or Class T-H or a participant in Class DC shall be
irrevocable. The election shall apply to all service performed
on or after January 1, 2020.
(1) Total contribution rate. A member electing
membership in Class T-G or Class T-H shall be deemed to have
accepted the basic contribution rate for the class of
membership as defined in section 8102 (relating to
definitions) in effect at the time of the election, provided
that the sum of the total contribution rate plus the
mandatory pickup participant contributions of a member who
elects membership in Class T-G or Class T-H shall not be more
or less than the total contribution rate the member would
have contributed had the member not elected such membership.
Class T-C and Class T-D members electing membership in Class
T-G or Class T-H shall not be subject to the shared-risk
contribution rate as determined by section 8321 (relating to
regular member contributions for current service).
(2) Mandatory pickup participant contributions. The
mandatory pickup participant contribution of a member
electing Class T-G or Class T-H shall be the difference
between the total contribution rate of the member's prior
class of service and the total contribution rate of the
elected class of service. A member electing participation in
Class DC shall be deemed to have accepted the mandatory
pickup participant contribution rate for Class DC equal to
the total contribution rate the member would have contributed
had the member not elected participation.
(d) Effect of failure to make election.--If the member fails
to timely file an election to become a member of Class T-G or
Class T-H or a participant of Class DC, the member shall
continue to be enrolled as a member of Class T-C, Class T-D,
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Class T-E or Class T-F as applicable and the member shall never
be able to elect membership in Class T-G or Class T-H or
participation in Class DC, regardless of whether the member
terminates service, has a break in service or refunds and
returns to service.
(e) Former members.--Class T-C, Class T-D, Class T-E and
Class T-F members, or former Class T-C, Class T-D, Class T-E and
Class T-F members who, on July 1, 2019, are not eligible to make
an election, or who return to service on or after July 1, 2019,
shall not be eligible to elect membership in Class T-G or Class
T-H or participation in Class DC.
(f) Multiple classes of service.--A member with more than
one class of service who vests the member's retirement benefits
in any class of service may not receive distributions from other
classes of service until the member's effective date of
retirement, regardless of whether the member's benefits
resulting from such other classes of service are vested or the
member is eligible to receive an annuity. A member with service
credited in more than one class of service may not separately
vest the benefits and receive annuities from different classes
of service with different effective dates.
(g) Eligibility points.--In determining whether a member,
who elects membership in Class T-G or Class T-H or participation
in Class DC, accrues the eligibility points required in sections
8102 (relating to definitions), 8305 (relating to classes of
service), 8307 (relating to eligibility for annuities), 8308
(relating to eligibility for vesting), 8345 (relating to
member's options) and 8346 (relating to termination of
annuities), eligibility points earned by performing credited
school service as a member of Class T-C, Class T-D, Class T-E,
Class T-F, Class T-G and Class T-H shall be counted in the
aggregate for eligibility purposes only. A member who elects
participation in Class DC shall earn one eligibility point for
each fiscal year in which the Class DC participant contributes
to the trust.
Section 108. Sections 8306, 8307, 8308, 8310, 8321,
8322.1(a), 8323(a), (c) and (d)(1), 8324, 8325.1(a), 8326(a) and
(c) and 8327 of Title 24 are amended to read:
§ 8306. Eligibility points.
(a) General rule.--An active member of the system shall
accrue one eligibility point for each year of credited service
as a member of the [school or State retirement system] system or
if a multiple service member, as a member of the State
Employees' Retirement System. A member shall accrue an
additional two-thirds of an eligibility point for each year of
Class D-3 credited service under the State Employees' Retirement
System. In the case of a fractional part of a year of credited
service, a member shall accrue the corresponding fractional
portion of an eligibility point.
(a.1) USERRA leave.--A member or participant who is
reemployed from USERRA leave or who dies while performing USERRA
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leave shall be granted the eligibility points that he would have
accrued had he continued in his school office or employment
instead of performing USERRA leave. If a school employee who is
reemployed from USERRA leave makes the member or mandatory
pickup participant contributions to be granted school service
credit for the USERRA leave, no additional eligibility points
may be granted.
(b) Transitional rule.--For the purposes of the transition:
(1) In determining whether a member, other than a
disability annuitant who returns to school service after June
30, 2001, upon termination of the disability annuity, who is
not a school employee or a State employee on June 30, 2001,
and July 1, 2001, and who has previous school service, has
the five eligibility points required by the definition of
"vestee" in sections 8102 (relating to definitions), 8307
(relating to eligibility for annuities), 8308 (relating to
eligibility for vesting) and 8345 (relating to member's
options), only eligibility points earned by performing
credited school service, USERRA leave or credited State
service as an active member of the State Employees'
Retirement System after June 30, 2001, shall be counted until
such member earns one eligibility point by performing
credited school service or, if a multiple service member,
credited State service after June 30, 2001, at which time all
eligibility points as determined under subsection (a) shall
be counted.
(2) A member subject to paragraph (1) shall be
considered to have satisfied any requirement for five
eligibility points contained in this part if the member has
at least ten eligibility points determined under subsection
(a).
§ 8307. Eligibility for annuities.
(a) Superannuation annuity.--An active or an inactive member
who attains superannuation age shall be entitled to receive a
superannuation annuity upon termination of service and filing of
a proper application. All members must begin receiving a
superannuation annuity by the member's required beginning date.
(b) Withdrawal annuity.--
(1) A vestee in Class T-C or Class T-D with five or more
eligibility points or an active or inactive Class T-C or
Class T-D member who terminates school service having five or
more eligibility points shall, upon filing a proper
application, be entitled to receive an early annuity.
(2) A vestee in Class T-E or Class T-F with ten or more
eligibility points or an active or inactive Class T-E or
Class T-F member who terminates school service having ten or
more eligibility points shall, upon filing a proper
application, be entitled to receive an early annuity.
(3) A vestee in Class T-G or Class T-H with ten or more
eligibility points or an active or inactive Class T-G or
Class T-H member who terminates school service having ten or
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more eligibility points shall, upon filing a proper
application, be entitled to receive an early annuity,
provided the member has attained the age of 62.
(c) Disability annuity.--An active or inactive member who
has credit for at least five years of service shall, upon filing
of a proper application, be entitled to a disability annuity if
he becomes mentally or physically incapable of continuing to
perform the duties for which he is employed and qualifies for an
annuity in accordance with the provisions of section 8505(c)(1)
(relating to duties of board regarding applications and
elections of members and participants).
§ 8308. Eligibility for vesting.
Any Class T-C or Class T-D member who terminates school
service, or if a multiple service member and an active member of
the State Employees' Retirement System who terminates State
service, with five or more eligibility points shall be entitled
to vest his retirement benefits until the member's required
beginning date. Any Class T-E [or], Class T-F, Class T-G or
Class T-H member who terminates school service, or if a multiple
service member and an active member of the State Employees'
Retirement System who terminates State service, with ten or more
eligibility points shall be entitled to vest his retirement
benefits until his required beginning date.
§ 8310. Eligibility for refunds.
Upon termination of service any active member, regardless of
eligibility for benefits, may elect to receive his accumulated
deductions by his required beginning date in lieu of any benefit
from the system to which he is entitled.
§ 8321. Regular member contributions for current service.
(a) General.--Regular member contributions shall be made to
the fund on behalf of each active member for current service
except for any period of current service in which the making of
such contributions has ceased solely by reason of any provision
of this part relating to the limitations under IRC § 401(a)(17)
or 415.
(b) Class T-E [and], Class T-F, Class T-G and Class T-H
shared-risk contributions.--
(1) Commencing with the annual actuarial valuation
performed under section 8502(j) (relating to administrative
duties of board), for the period ending June 30, 2014, and
every three years thereafter, the board shall compare the
actual investment rate of return, net of fees, to the annual
interest rate adopted by the board for the calculation of the
normal contribution rate, based on the market value of
assets, for the prior ten-year period. If the actual
investment rate of return, net of fees, is less than the
annual interest rate adopted by the board by an amount of 1%
or more, then the shared-risk contribution rate of Class T-E
and T-F members will increase by .5% and the shared-risk
contribution rate of Class T-G and Class T-H members will
increase by .75%. If the actual investment rate of return,
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net of fees, is equal to or exceeds the annual interest rate
adopted by the board[,] by less than 1%, then the shared-risk
contributions rate of Class T-E and T-F members will decrease
by .5% [. Class T-E and T-F members will contribute at the
total member contribution rate in effect when they are hired.
The] and the shared-risk contribution rate of Class T-G and
Class T-H members will decrease by .75%, provided the total
member contribution rate on the date of the actuarial
valuation is above the member's basic contribution rate. If
the actual investment rate of return, net of fees, is more
than the annual interest rate adopted by the board by an
amount of 1% or more, then the shared-risk contribution rate
of Class T-E and Class T-F members will decrease by .5% and
the shared-risk contribution rate of Class T-G and Class T-H
members will decrease by .75%. If the actual investment rate
of return, net of fees, is equal to or below the annual
interest rate adopted by the board by less than 1%, then:
(i) the shared-risk contribution rate of Class T-E and
Class T-F members will increase by .5%; and
(ii) the shared-risk contribution rate of Class T-G and
Class T-H members will increase by .75%, provided the total
member contribution rate on the date of the actuarial
valuation is below the member's basic contribution rate.
(2) Notwithstanding paragraph (1), the total member
contribution rate for Class T-E members shall not be less
than [7.5%] 5.5%, nor more than 9.5%. The total member
contribution rate for Class T-F members shall not be less
than [10.3%] 8.3%, nor more than 12.3%. The total member
contribution rate for Class T-G members shall not be less
than 2.5% nor more than 8.5%. The total member contribution
rate for Class T-H members shall not be less than 1.5% nor
more than 7.5%. Notwithstanding this subsection, if the
system's actuarial funded status is 100% or more as of the
date used for the comparison required under this subsection,
as determined in the current annual actuarial valuation, the
shared-risk contribution rate shall [be] not be greater than
zero. In the event that the annual interest rate adopted by
the board for the calculation of the normal contribution rate
is changed during the period used to determine the shared-
risk contribution rate, the board, with the advice of the
actuary, shall determine the applicable rate during the
entire period, expressed as an annual rate. The following
provisions apply:
[(1)] (i) Until the system has a ten-year period of
investment rate of return experience following the
effective date of this subsection, the look-back period
shall begin not earlier than the effective date of this
subsection.
[(2)] (ii) For any fiscal year in which the employer
contribution rate is lower than the final contribution
rate under section 8328(h) (relating to actuarial cost
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method), the total member contribution rate for Class T-E
[and T-F], Class T-F, Class T-G and Class T-H members
shall be prospectively reset to the basic contribution
rate, provided the total member contribution rate is at
or above the basic contribution rate.
[(3)] (iii) There shall be no increase in the member
contribution rate if there has not been an equivalent
increase to the employer contribution rate over the
previous three-year period.
(3) Notwithstanding paragraph (1), shared-risk member
contributions for Class T-E, Class T-F, Class T-G and Class
T-H service shall not be made in any fiscal year in which the
Commonwealth fails to make the annually required contribution
to the fund as provided under section 8328.
§ 8322.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions to the fund required to be made under sections
8321 (relating to regular member contributions for current
service), 8322 (relating to joint coverage member contributions)
and 8305 (relating to classes of service), with respect to
current school service rendered by an active member on or after
January 1, 1983, shall be picked up by the employer and shall be
treated as the employer's contribution for purposes of IRC §
414(h).
* * *
§ 8323. Member contributions for creditable school service.
(a) Previous school service, sabbatical leave and full
coverage.--The contributions to be paid by an active member or
an eligible State employee for credit in the system for
reinstatement of all previously credited school service, school
service not previously credited, sabbatical leave as if he had
been in full-time daily attendance, or full-coverage membership
shall be sufficient to provide an amount equal to the
accumulated deductions which would have been standing to the
credit of the member for such service had regular member
contributions been made with full coverage at the rate of
contribution necessary to be credited as Class T-C service,
Class T-D service if the member is a Class T-D member, Class T-E
service if the member is a Class T-E member [or], Class T-F
service if the member is a Class T-F member, Class T-G service
if the member is a Class T-G member or Class T-H service if the
member is a Class T-H member and had such contributions been
credited with statutory interest during the period the
contributions would have been made and during all periods of
subsequent school and State service up to the date of purchase.
* * *
(c) Approved leave of absence other than sabbatical leave
and activated military service leave.--The contributions to be
paid by an active member for credit for an approved leave of
absence, other than sabbatical leave and activated military
service leave, shall be sufficient to transfer his membership to
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Class T-C or to Class T-D if the member is a Class T-D member,
to Class T-E if the member is a Class T-E member [or], to Class
T-F if the member is a Class T-F member, to Class T-G service if
the member is a Class T-G member or to Class T-H service if the
member is a Class T-H member and further to provide an annuity
as a Class T-C member or Class T-D member if the member is a
Class T-D member, to Class T-E if the member is a Class T-E
member [or], to Class T-F if the member is a Class T-F member,
to Class T-G service if the member is a Class T-G member or to
Class T-H service if the member is a Class T-H member for such
additional credited service. Such amount shall be the sum of the
amount required in accordance with the provisions of subsection
(b) and an amount determined as the sum of the member's basic
contribution rate and the normal contribution rate as provided
in section 8328 (relating to actuarial cost method) during such
period multiplied by the compensation which was received or
which would have been received during such period and with
statutory interest during all periods of subsequent school and
State service up to the date of purchase.
* * *
(d) Certification and payment of contributions.--
(1) In all cases other than for the purchase of credit
for sabbatical leave and activated military service leave
beginning before the effective date of paragraph (2), the
amount payable shall be certified by the board in accordance
with methods approved by the actuary and may be paid in a
lump sum within 90 days or in the case of an active member or
an eligible State employee who is an active member of the
State Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to
such terms as the board in its sole discretion determines. In
the case of an eligible State employee who is an active
member of the State Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
* * *
§ 8324. Contributions for purchase of credit for creditable
nonschool service and noncreditable school service.
(a) Source of contributions.--The total contributions to
purchase credit as a member of Class T-C, Class T-E [or], Class
T-F, Class T-G or Class T-H for creditable nonschool service of
an active member or an eligible State employee shall be paid
either by the member, the member's previous employer, the
Commonwealth, or a combination thereof, as provided by law.
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(b) Nonintervening military service.--The amount due for the
purchase of credit for military service other than intervening
military service shall be determined by applying the member's
basic contribution rate plus the normal contribution rate as
provided in section 8328 (relating to actuarial cost method) at
the time of entry of the member into school service subsequent
to such military service to one-third of his total compensation
received during the first three years of such subsequent
credited school service and multiplying the product by the
number of years and fractional part of a year of creditable
nonintervening military service being purchased together with
statutory interest during all periods of subsequent school and
State service to date of purchase. Upon certification of the
amount due, payment may be made in a lump sum within 90 days or
in the case of an active member or an eligible State employee
who is an active member of the State Employees' Retirement
System it may be amortized with statutory interest through
salary deductions to the system in amounts agreed upon by the
member and the board. The salary deduction amortization plans
agreed to by members and the board may include a deferral of
payment amounts and statutory interest until the termination of
school service or State service as the board in its sole
discretion decides to allow. The board may limit salary
deduction amortization plans to such terms as the board in its
sole discretion determines. In the case of an eligible State
employee who is an active member of the State Employees'
Retirement System, the agreed upon salary deductions shall be
remitted to the State Employees' Retirement Board, which shall
certify and transfer to the board the amounts paid. Application
may be filed for all such military service credit upon
completion of three years of subsequent credited school service
and shall be credited as Class T-C service. In the event that a
Class T-E member makes a purchase of credit for such military
service, then such service shall be credited as Class T-E
service. In the event that a Class T-F member makes a purchase
of credit for such military service, then such service shall be
credited as Class T-F service. In the event that a Class T-G
member makes a purchase of credit for such military service,
then such service shall be credited as Class T-G service. In the
event that a Class T-H member makes a purchase of credit for
such military service, then such service shall be credited as
Class T-H service.
(c) Intervening military service.--Contributions on account
of credit for intervening military service shall be determined
by the member's basic contribution rate and compensation at the
time of entry of the member into active military service,
together with statutory interest during all periods of
subsequent school and State service to date of purchase. Upon
application for such credit the amount due shall be certified in
the case of each member by the board, in accordance with methods
approved by the actuary, and contributions may be made by one of
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the following methods:
(1) Regular monthly payments during active military
service.
(2) A lump sum payment within 90 days of certification
of the amount due.
(3) Salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by the members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service as
the board in its sole discretion decides to allow. The board
may limit salary deduction amortization plans to such terms
as the board in its sole discretion determines. In the case
of an eligible State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
(d) Other creditable nonschool service and noncreditable
school service.--
(1) Contributions on account of Class T-C credit for
creditable nonschool service other than military service
shall be determined by applying the member's basic
contribution rate plus the normal contribution rate as
provided in section 8328 at the time of the member's entry
into school service subsequent to such creditable nonschool
service to his total compensation received during the first
year of subsequent credited school service and multiplying
the product by the number of years and fractional part of a
year of creditable nonschool service being purchased together
with statutory interest during all periods of subsequent
school or State service to the date of purchase, except that
in the case of purchase of credit for creditable nonschool
service as set forth in section 8304(b)(5) (relating to
creditable nonschool service) the member shall pay only the
employee's share unless otherwise provided by law. Upon
certification of the amount due, payment may be made in a
lump sum within 90 days or in the case of an active member or
an eligible State employee who is an active member of the
State Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by the members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to
such terms as the board in its sole discretion determines. In
the case of an eligible State employee who is an active
member of the State Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the State
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Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
(2) Contributions on account of Class T-E [or], Class T-
F, Class T-G or Class T-H credit for creditable nonschool
service other than military service shall be the present
value of the full actuarial cost of the increase in the
projected superannuation annuity caused by the additional
service credited on account of the purchase. Upon
certification of the amount due, payment may be made in a
lump sum within 90 days or, in the case of an active member
or an eligible State employee who is an active member of the
State Employees' Retirement System, it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by the members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to
the terms as the board in its sole discretion determines. In
the case of an eligible State employee who is an active
member of the State Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
(3) Contributions on account of Class T-E [or], Class T-
F, Class T-G or Class T-H credit for noncreditable school
service other than military service shall be the present
value of the full actuarial cost of the increase in the
projected superannuation annuity caused by the additional
service credited on account of the purchase. Upon
certification of the amount due, payment may be made in a
lump sum within 90 days or, in the case of an active member
or an eligible State employee who is an active member of the
State Employees' Retirement System, it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by the members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to
the terms as the board in its sole discretion determines. In
the case of an eligible State employee who is an active
member of the State Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
(e) Creditable work experience.--Contributions on account of
Class T-C, Class T-E [or], Class T-F, Class T-G or Class T-H
credit for creditable work experience pursuant to section
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8304(b)(6) shall be the present value of the full actuarial cost
of the increase in the projected superannuation annuity caused
by the additional service credited on account of the purchase of
creditable work experience. The amount paid for the purchase of
credit for creditable work experience shall not be payable as a
lump sum under section 8345(a)(4)(iii) (relating to member's
options). Any individual eligible to receive an annuity,
excluding an annuity received under the Federal Social Security
Act (42 U.S.C. § 301 et seq.), in another pension system, other
than a military pension system, shall not be eligible to
purchase this service.
(f) Creditable maternity leave.--Contributions on account of
Class T-C, Class T-E or Class T-F credit for creditable
maternity leave pursuant to section 8304(b)(7) shall be
determined by applying the member's basic contribution rate plus
the normal contribution rate as provided in section 8328 at the
time of the member's return to school service to the total
compensation received during the first year of subsequent school
service and multiplying the product by the number of years and
fractional part of a year of creditable service being purchased,
together with statutory interest during all periods of
subsequent school or State service to the date of purchase. The
amount paid for the purchase of credit for creditable maternity
leave shall not be eligible for withdrawal as a lump sum under
section 8345(a)(4)(iii).
§ 8325.1. Annual compensation limit under IRC § 401(a)(17).
(a) General rule.--In addition to other applicable
limitations set forth in this part, and notwithstanding any
provision of this part to the contrary, the annual compensation
of each noneligible member and each participant taken into
account for benefit purposes under this subchapter shall not
exceed the limitation under IRC § 401(a)(17). On and after July
1, 1996, any reference in this part to the limitation under IRC
§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
compensation limit set forth in this subsection. The OBRA '93
annual compensation limit is $150,000, as adjusted by the
commissioner for increases in the cost of living in accordance
with IRC § 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any determination period
which is a period, not exceeding 12 months, over which
compensation is determined, beginning in such calendar year. If
a determination period consists of fewer than 12 months, the
OBRA '93 compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period and the denominator of which is 12.
* * *
§ 8326. Contributions by the Commonwealth.
(a) Contributions on behalf of active members.--The
Commonwealth shall make contributions into the fund on behalf of
all active members and participants, including members and
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participants on activated military service leave, in an amount
equal to one-half the amount certified by the board as necessary
to provide, together with the members' contributions, annuity
reserves on account of prospective annuities as provided in this
part in accordance with section 8328 (relating to actuarial cost
method). In case a school employee has elected membership in a
retirement program approved by the employer, the Commonwealth
shall contribute to such program on account of his membership an
amount no greater than the amount it would have contributed had
the employee been a member of the Public School Employees'
Retirement System.
* * *
(c) Contributions after June 30, 1995.--
(1) The Commonwealth shall make contributions into the
fund on behalf of all active members and participants,
including members and participants on activated military
service leave, for service performed after June 30, 1995, in
the following manner:
(i) For members and participants who are employees
of employers that are school entities, no Commonwealth
contributions shall be made.
(ii) For members and participants who are employees
of employers that are not school entities, the amount
computed under subsection (a).
(2) The Commonwealth shall make contributions into the
fund on behalf of annuitants for all amounts due to the fund
after June 30, 1995, including, but not limited to, amounts
due pursuant to section 8328(d) and (f), in the following
manner:
(i) For members and participants who are employees
of employers who are school entities, no Commonwealth
contributions shall be made.
(ii) For members and participants who are employees
of employers who are not school entities, the amount
computed under subsection (b).
* * *
§ 8327. Payments by employers.
(a) General rule.--Each employer, including the Commonwealth
as employer of employees of the Department of Education, State-
owned colleges and universities, Thaddeus Stevens College of
Technology, Western Pennsylvania School for the Deaf, Scotland
School for Veterans' Children[,] and [the] The Pennsylvania
State University, shall make payments to the fund each quarter
in an amount equal to one-half the sum of the percentages, as
determined under section 8328 (relating to actuarial cost
method), applied to the total compensation during the pay
periods in the preceding quarter of all its employees who were
members of the system during such period, including members on
activated military service leave. In the event a member on
activated military service leave does not return to service for
the necessary time or receives an undesirable, bad conduct or
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dishonorable discharge or does not elect to receive credit for
activated military service under section 8302(b.1)(3) (relating
to credited school service), the contributions made by the
employer on behalf of such member shall be returned with
valuation interest upon application by the employer.
(b) Deduction from appropriations.--
(1) To facilitate the payment of amounts due from any
employer to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from the amount of any moneys due
to any employer on account of any appropriation for schools
or other purposes amounts equal to the employer
contributions, employer defined contributions and pickup
contributions which an employer is required to pay to the
fund and the trust, as certified by the board, and as remains
unpaid on the date such appropriations would otherwise be
paid to the employer. Such amount shall be credited to the
appropriate accounts in the fund and the trust.
(2) To facilitate the payments of amounts due from any
charter school, as defined in Article XVII-A of the act of
March 10, 1949 (P.L.30, No.14), known as the Public School
Code of 1949, to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from any funds appropriated to
the Department of Education for basic education of the
chartering school district of a charter school and public
school employees' retirement contributions amounts equal to
the employer contributions, employer defined contributions
and pickup contributions which a charter school is required
to pay to the fund and the trust, as certified by the board,
and as remains unpaid on the date such appropriations would
otherwise be paid to the chartering school district or
charter school. Such amounts shall be credited to the
appropriate accounts in the fund and the trust. Any reduction
in payments to a chartering school district made pursuant to
this section shall be deducted from the amount due to the
charter school district pursuant to the Public School Code of
1949.
(c) Payments by employers after June 30, 1995, and before
June 30, 2019.--After June 30, 1995, and before June 30, 2019,
each employer, including the Commonwealth as employer of
employees of the Department of Education, State-owned colleges
and universities, Thaddeus Stevens College of Technology,
Western Pennsylvania School for the Deaf, Scotland School for
Veterans' Children and The Pennsylvania State University, shall
make payments to the fund and the trust each quarter in an
amount computed in the following manner:
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(1) For an employer that is a school entity, the amount
shall be the sum of the percentages as determined under
section 8328 applied to the total compensation during the pay
periods in the preceding quarter of all employees who were
active members of the system or active participants of the
plan during such period, including members or active
participants on activated military service leave. In the
event a member on activated military service leave does not
return to service for the necessary time or receives an
undesirable, bad conduct or dishonorable discharge or does
not elect to receive credit for activated military service
under section 8302(b.1)(3), the contribution made by the
employer on behalf of such member shall be returned with
valuation interest upon application by the employer.
(2) For an employer that is not a school entity, the
amount computed under subsection (a).
(3) For any employer, whether or not a school entity, in
computing the amount of payment due each quarter, there shall
be excluded from the total compensation referred to in this
subsection and subsection (a) any amount of compensation of a
noneligible member on the basis of which member or
participant contributions have not been made by reason of the
limitation under IRC § 401(a)(17), except as otherwise
provided in this part. Any amount of contribution to the fund
paid by the employer on behalf of a noneligible member on the
basis of compensation which was subject to exclusion from
total compensation in accordance with the provisions of this
paragraph shall, upon the board's determination or upon
application by the employer, be returned to the employer with
valuation interest. Any amount of contribution to the trust
paid by the employer on behalf of a noneligible member on the
basis of compensation that was subject to exclusion from
total compensation in accordance with the provisions of this
paragraph shall, upon the board's determination or upon
application by the employer, be returned to the employer plus
interest and investment gains or losses on such amount but
minus investment fees and administrative charges.
(d) Payments by employers after June 30, 2019.--After June
30, 2019, each employer, including the Commonwealth as employer
of employees of the Department of Education, State-owned
colleges and universities, Thaddeus Stevens College of
Technology, Western Pennsylvania School for the Deaf, Scotland
School for Veterans' Children and The Pennsylvania State
University, shall make payments to the fund and the trust each
quarter in an amount computed in the following manner:
(1) For an employer that is a school entity, the amount
shall be the sum of the percentages as determined under
section 8328 (relating to actuarial cost method) applied to
the total compensation during the pay periods in the
preceding quarter of all employees who were active members of
the system during such period, including members on activated
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military service leave and USERRA leave. In the event a
member on activated military service leave or USERRA leave
does not return to service for the necessary time or receives
an undesirable, bad conduct or dishonorable discharge or does
not elect to receive credit for activated military service
under section 8302(b.1)(3), the contribution made by the
employer on behalf of such member shall be returned with
valuation interest upon application by the employer.
(2) For an employer that is not a school entity, the
amount computed under subsection (a).
(3) For any employer, whether or not a school entity, in
computing the amount of payment due each quarter, there shall
be excluded from the total compensation referred to in this
subsection and subsection (a) any amount of compensation of a
noneligible member or participant on the basis of which
member or participant contributions have not been made by
reason of the limitation under IRC § 401(a)(17). Any amount
of contribution to the fund paid by the employer on behalf of
a noneligible member or participant on the basis of
compensation that was subject to exclusion from total
compensation in accordance with the provisions of this
paragraph shall, upon the board's determination or upon
application by the employer, be returned to the employer with
valuation interest.
(e) Agreement.--The agreement of an employer listed in the
definition of school employee under section 8102 (relating to
definitions) or any other law to make contributions to the fund
or to enroll its employees as members in the system shall be
deemed to be an agreement to make contributions to the trust or
enroll its employees in the plan.
(f) Contributions.--The employer employing a participant
shall pick up the required mandatory participant contributions
by a reduction in the compensation of the participant.
(g) Reemployed from USERRA leave.--When a school employee
reemployed from USERRA leave makes the member contributions
required to be granted school service credit for the USERRA
leave after June 30, 2019, either by actual payment or by
actuarial debt under section 8325 (relating to incomplete
payments), the employer that employed the school employee when
the member contributions are made, or the last employer before
termination in the case of payment under section 8325, shall
make the employer contributions that would have been made under
this section if the employee making the member contributions
after he is reemployed from USERRA leave continued to be
employed in his school office or position instead of performing
USERRA leave.
Section 108.1. Sections 8328(a), (b), (c), (e)(1) and (g)
and 8330 of Title 24 are amended to read:
§ 8328. Actuarial cost method.
(a) Employer contribution rate.--The amount of the total
employer contributions shall be computed by the actuary as a
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percentage of the total compensation of all active members and
active participants, as applicable, during the period for which
the amount is determined and shall be so certified by the board.
The total employer contribution rate shall be the sum of the
final contribution rate as computed in subsection (h) plus the
premium assistance contribution rate as computed in subsection
(f), plus the additional contribution rate as computed in
subsection (j). The actuarially required contribution rate shall
consist of the normal contribution rate as defined in subsection
(b), the accrued liability contribution rate as defined in
subsection (c) and the supplemental annuity contribution rate as
defined in subsection (d). Beginning July 1, 2004, the
actuarially required contribution rate shall be modified by the
experience adjustment factors as calculated in subsection (e).
The actuarially required contribution shall be no less than the
normal cost plus the cost to fully amortize the unfunded
actuarial accrued liability calculated using actuarial methods
and assumptions that are consistent with generally accepted
actuarial standards and generally accepted accounting
principles, including professional actuarial standards of
practice.
(b) Normal contribution rate.--The normal contribution rate
shall be determined after each actuarial valuation. Until all
accrued liability contributions have been completed, the normal
contribution rate shall be determined, on the basis of an annual
interest rate and such mortality and other tables as shall be
adopted by the board in accordance with generally accepted
actuarial principles, as a level percentage of the compensation
of [the average new active member] all active members, which
percentage, if contributed from the start of their employment on
the basis of [his] their prospective compensation through [the]
their entire period of active school service, would be
sufficient to fund the liability for any prospective benefit
payable to [him] them, in excess of that portion funded by [his]
their prospective member contributions, excluding the shared-
risk contributions. In no case shall the employer's normal cost
be less than zero.
(c) Accrued liability contribution rate.--
(1) For the fiscal years beginning July 1, 2002, and
ending June 30, 2011, the accrued liability contribution rate
shall be computed as the rate of total compensation of all
active members which shall be certified by the actuary as
sufficient to fund over a period of ten years from July 1,
2002, the present value of the liabilities for all
prospective benefits of active members, except for the
supplemental benefits provided in sections 8348 (relating to
supplemental annuities), 8348.1 (relating to additional
supplemental annuities), 8348.2 (relating to further
additional supplemental annuities), 8348.3 (relating to
supplemental annuities commencing 1994), 8348.4 (relating to
special supplemental postretirement adjustment), 8348.5
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(relating to supplemental annuities commencing 1998), 8348.6
(relating to supplemental annuities commencing 2002) and
8348.7 (relating to supplemental annuities commencing 2003),
in excess of the total assets in the fund (calculated by
recognizing the actuarially expected investment return
immediately and recognizing the difference between the actual
investment return and the actuarially expected investment
return over a five-year period), excluding the balance in the
annuity reserve account, and of the present value of normal
contributions and of member contributions payable with
respect to all active members on July 1, 2002, during the
remainder of their active service.
(2) For the fiscal years beginning July 1, 2003, and
ending June 30, 2011, the amount of each annual accrued
liability contribution shall be equal to the amount of such
contribution for the fiscal year, beginning July 1, 2002,
except that, if the accrued liability is increased by
legislation enacted subsequent to June 30, 2002, but before
July 1, 2003, such additional liability shall be funded over
a period of ten years from the first day of July, coincident
with or next following the effective date of the increase.
The amount of each annual accrued liability contribution for
such additional legislative liabilities shall be equal to the
amount of such contribution for the first annual payment.
(3) Notwithstanding any other provision of law,
beginning July 1, 2004, and ending June 30, 2011, the
outstanding balance of the increase in accrued liability due
to the change in benefits enacted in 2001 and the outstanding
balance of the net actuarial loss incurred in fiscal year
2000-2001 shall be amortized in equal dollar annual
contributions over a period that ends 30 years after July 1,
2002, and the outstanding balance of the net actuarial loss
incurred in fiscal year 2001-2002 shall be amortized in equal
dollar annual contributions over a period that ends 30 years
after July 1, 2003. For fiscal years beginning on or after
July 1, 2004, if the accrued liability is increased by
legislation enacted subsequent to June 30, 2003, such
additional liability shall be funded in equal dollar annual
contributions over a period of ten years from the first day
of July coincident with or next following the effective date
of the increase.
(4) For the fiscal year beginning July 1, 2011, the
accrued liability contribution rate shall be computed as the
rate of total compensation of all active members which shall
be certified by the actuary as sufficient to fund as a level
percentage of compensation over a period of 24 years from
July 1, 2011, the present value of the liabilities for all
prospective benefits calculated as of June 30, 2010,
including the supplemental benefits as provided in sections
8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and
8348.7, in excess of the actuarially calculated assets in the
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fund (calculated recognizing all realized and unrealized
investment gains and losses each year in level annual
installments over a ten-year period). In the event that the
accrued liability is increased by legislation enacted
subsequent to June 30, 2010, as a result of an increase in
benefits determined on a total plan basis, such additional
liability shall be funded as a level percentage of
compensation over a period of ten years from the July 1
second succeeding the date such legislation is enacted.
(5) For the fiscal year beginning on or after July 1,
2017, the actuarially calculated assets in the fund
determined in accordance with paragraph (4) shall be no less
than 70% and no more than 130% of market value.
* * *
(e) Experience adjustment factor.--
(1) For each fiscal year after the establishment of the
accrued liability contribution rate for the fiscal year
beginning July 1, 2011, any increase or decrease in the
unfunded accrued liability, excluding the gains or losses on
the assets of the health insurance account, due to actual
experience differing from assumed experience, changes in
actuarial assumptions, changes in contributions caused by the
final contribution rate being different from the actuarially
required contribution rate, active members making shared-risk
contributions or changes in the terms and conditions of the
benefits provided by the system by judicial, administrative
or other processes other than legislation, including, but not
limited to, reinterpretation of the provisions of this part,
shall be amortized as a level percentage of compensation over
a period of 24 years beginning with the July 1 second
succeeding the actuarial valuation determining said increases
or decreases.
* * *
(g) Temporary application of collared contribution rate.--
(1) The collared contribution rate for each fiscal year
shall be determined by comparing the actuarially required
contribution rate, calculated without regard for the costs
added by legislation, to the prior year's final contribution
rate.
(2) If, for any of the fiscal years beginning July 1,
2011, July 1, 2012, and on or after July 1, 2013, the
actuarially required contribution rate, calculated without
regard for the costs added by legislation, is more than 3%,
3.5% and 4.5%, respectively, of the total compensation of all
active members greater than the prior year's final
contribution rate, then the collared contribution rate shall
be applied and be equal to the prior year's final
contribution rate increased by 3%, 3.5% and 4.5%,
respectively, of total compensation of all active members.
Otherwise, and for all other fiscal years, the collared
contribution rate shall not be applicable. In no case shall
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the collared contribution rate be less than 4% of the total
compensation of all active members.
* * *
§ 8330. Appropriations by the Commonwealth.
(a) Annual submission of budget.--The board shall prepare
and through the Governor submit annually to the General Assembly
an itemized budget consisting of the amounts necessary to be
appropriated by the Commonwealth out of the General Fund
required to meet the separate obligations to the fund and the
trust accruing during the fiscal period beginning July 1 of the
following year.
(b) Appropriation and payment.--The General Assembly shall
make an appropriation sufficient to provide for the separate
obligations of the Commonwealth to the fund and the trust as
certified by the board. Such amount shall be paid by the State
Treasurer through the Department of Revenue into the fund or the
trust within 30 days of receipt of the requisition presented
each quarter by the board.
Section 109. (Reserved).
Section 110. Section 8341 of Title 24 is amended to read:
§ 8341. Return of accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable from the system under this chapter to which he
may be entitled, elect to receive his accumulated deductions by
his required beginning date.
Section 111. Sections 8342(a) and 8344(a), (b) and (d) of
Title 24 are amended and the sections are amended by adding
subsections to read:
§ 8342. Maximum single life annuity.
(a) General rule.--Upon termination of service, any full
coverage member who is eligible to receive an annuity pursuant
to the provisions of section 8307(a) or (b) (relating to
eligibility for annuities) and has made an application in
accordance with the provisions of section 8507(f) (relating to
rights and duties of school employees [and members], members and
participants) shall be entitled to receive a maximum single life
annuity attributable to his credited service and equal to the
sum of the following single life annuities beginning at the
effective date of retirement and, in case the member on the
effective date of retirement is under superannuation age,
multiplied by a reduction factor calculated to provide benefits
actuarially equivalent to an annuity starting at superannuation
age: Provided however, That on or after July 1, 1976, in the
case of any member other than a Class T-G or Class T-H member
who has attained age 55 and has 25 or more eligibility points
such sum of single life annuities shall be reduced by a
percentage determined by multiplying the number of months,
including a fraction of a month as a full month, by which the
effective date of retirement precedes superannuation age by
1/4%: Further provided, That on or after July 1, 2019, in the
case of any Class T-G member who has attained age 57 and has 25
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or more eligibility points, such sum of single life annuities
shall be reduced by a percentage determined by multiplying the
number of months, including a fraction of a month as a full
month, by which the effective date of retirement precedes
superannuation age by 1/4%: Further provided, That on or after
July 1, 2019, in the case of any Class T-H member who has
attained age 62 and has 25 or more eligibility points and who
terminates service on or after attaining age 55, such sum of
single life annuities shall be reduced by a percentage
determined by multiplying the number of months, including a
fraction of a month as a full month, by which the effective date
of retirement precedes superannuation age by 1/4%: Further
provided, In no event shall a Class T-E [or], Class T-F, Class
T-G or Class T-H member receive an annual benefit, calculated as
of the effective date of retirement, greater than the member's
final average salary:
(1) A [standard single life annuity multiplied by the]
single life annuity that is the sum of annuities determined
separately for each class of service [multiplier] and
calculated on the basis of the number of years of credited
school service other than concurrent service.
(2) A standard single life annuity multiplied by the
class of service multiplier and calculated on the basis of
the number of years of concurrent service and multiplied by
the ratio of total compensation received in the school system
during the period of concurrent service to the total
compensation received during such period.
(3) A supplemental annuity such that the total annuity
prior to any optional modification or any reduction due to
retirement prior to superannuation age shall be at least $100
for each full year of credited service.
* * *
(d) Coordination of benefits.--The determination and payment
of the maximum single life annuity under this section shall be
in addition to any payments a member may be entitled to receive,
has received or is receiving as a result of being a participant
in the plan.
(e) Special calculation for class T-G and T-H.--For the
calculation under subsection (a) for all T-G and T-H members the
interest used in the calculation for an annuity for a vestee or
an active or inactive member that has not attained the age of 62
shall be the amount required to have no actuarial cost to the
system. The amount to be calculated shall be certified by the
system's actuary in their annual valuation and will only be
valid if adopted by the board.
§ 8344. Disability annuities.
(a) Amount of annuity.--A member who has made application
for a disability annuity as provided in section 8507(k)
(relating to rights and duties of school employees [and],
members and participants) and has been found to be eligible in
accordance with the provisions of sections 8307(c) (relating to
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eligibility for annuities) and 8505(c)(1) (relating to duties of
board regarding applications and elections of members and
participants) shall receive a disability annuity payable from
the effective date of disability and continued until a
subsequent determination by the board that the annuitant is no
longer entitled to a disability annuity. The disability annuity
shall be a single life annuity that is equal to a sum of the
standard single life [annuity] annuities determined separately
for each class of service if the total number of years of
credited service is greater than 16.667, otherwise [the] each
standard single life annuity shall be multiplied by the lesser
of the following ratios:
Y*/Y or 16.667/Y
where Y = total number of years of credited service and Y* =
total years of credited service if the member were to continue
as a school employee until attaining superannuation age, or if
the member has attained superannuation age then the number of
years of credited service. For purposes of calculating a
disability annuity for a member of Class T-G or Class T-H, the
standard single life annuity shall equal 2% of the final average
salary, multiplied by the total number of years and fractional
part of a year of service credited for such class of service. In
no event shall the disability annuity plus any cost-of-living
increases be less than $100 for each full year of credited
service. The member shall be entitled to the election of a joint
and survivor annuity on that portion of the disability annuity
to which he is entitled under section 8342 (relating to maximum
single life annuity).
(b) Reduction on account of earned income.--Payments on
account of disability shall be reduced by that amount by which
the earned income of the annuitant, as reported in accordance
with section 8508(b) (relating to rights and duties of
annuitants) for the preceding year together with the disability
annuity payments for the year, exceeds the greater of $5,000 or
the last year's salary of the annuitant as a [school employee]
member of the system, provided that the annuitant shall not
receive less than his member's annuity or the amount to which he
may be entitled under section 8342, whichever is greater.
* * *
(d) Withdrawal of accumulated deductions.--Upon termination
of disability annuity payments in excess of an annuity
calculated in accordance with section 8342, a disability
annuitant who[:
(1) is a Class T-C or Class T-D member; or
(2) is a Class T-E or Class T-F member with less than
ten eligibility points
and who] does not return to school service may file an
application with the board for an amount equal to the
accumulated deductions, shared-risk member contributions and
statutory interest standing to his credit at the effective date
of disability less the total payments received on account of his
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member's annuity.
* * *
(f) Coordination of benefits.--The determination and payment
of a disability annuity under this section shall be in addition
to any payments a school employee may be entitled to receive,
has received or is receiving as a result of being a participant
in the plan.
Section 112. Sections 8345(a), 8346(a), (a.1), (b), (b.1)(1)
and (d)(1) and (2), 8347(a) and (b) and 8349 heading, (a) and
(b) of Title 24 are amended to read:
§ 8345. Member's options.
(a) General rule.--Any Class T-C or Class T-D member who is
a vestee with five or more eligibility points, any Class T-E
[or], Class T-F, Class T-G or Class T-H member who is a vestee
with ten or more eligibility points, or any [other] eligible
member upon termination of school service [who has not withdrawn
his accumulated deductions as provided in section 8341 (relating
to return of accumulated deductions)] who is eligible to receive
an annuity, may apply for and elect to receive either a maximum
single life annuity, as calculated in accordance with the
provisions of section 8342 (relating to maximum single life
annuity), or a reduced annuity certified by the actuary to be
actuarially equivalent to the maximum single life annuity and in
accordance with one of the following options, except that no
member shall elect an annuity payable to one or more survivor
annuitants other than his spouse or alternate payee of such a
magnitude that the present value of the annuity payable to him
for life plus any lump sum payment he may have elected to
receive is less than 50% of the present value of his maximum
single life annuity and no member may elect a payment option
that would provide benefits that do not satisfy the minimum
distribution requirements or would violate the incidental death
benefit rules of IRC § 401(a)(9). In no event shall a Class T-E
or Class T-F member receive an annual benefit, calculated as of
the effective date of retirement, greater than the member's
final average salary.
(1) Option 1.--A life annuity to the member with a
guaranteed total payment equal to the present value of the
maximum single life annuity on the effective date of
retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
(2) Option 2.--A joint and survivor annuity payable
during the lifetime of the member with the full amount of
such annuity payable thereafter to his survivor annuitant, if
living at his death.
(3) Option 3.--A joint and fifty percent (50%) survivor
annuity payable during the lifetime of the member with one-
half of such annuity payable thereafter to his survivor
annuitant, if living at his death.
(4) Option 4.--Some other benefit which shall be
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certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
(i) Any annuity shall be payable without reduction
during the lifetime of the member.
(ii) The sum of all annuities payable to the
designated survivor annuitants shall not be greater than
the annuity payable to the member.
(iii) A portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the accumulated deductions
standing to the credit of the member. The balance of the
present value of the maximum single life annuity adjusted
in accordance with section 8342(b) shall be paid in the
form of an annuity with a guaranteed total payment, a
single life annuity, or a joint and survivor annuity or
any combination thereof but subject to the restrictions
of subparagraphs (i) and (ii) of this paragraph. [This
subparagraph shall not apply to a Class T-E or Class T-F
member.] For purposes of this subparagraph:
(A) The term "actuarially equivalent," as
applied to any lump sum withdrawal attributable to
contributions credited to the member's savings
account of Class T-C and Class T-D members who
elected membership in Class T-G or Class T-H pursuant
to section 8305.5 (relating to optional membership in
Class T-G or Class T-H, or optional participation in
Class DC), on or after July 1, 2019, together with
statutory interest thereon, shall mean equal present
values, computed on the basis of the interest rate
and such mortality and other tables as adopted by the
board under section 8328(b) (relating to actuarial
cost method) in effect on the effective date of
retirement of the member.
(B) the term "actuarially equivalent," as
applied to any lump sum withdrawal attributable to
contributions credited to the member's savings
account of Class T-E, Class T-F, Class T-G or Class
T-H members, together with statutory interest
thereon, shall mean equal present values, computed on
the basis of the interest rate and such mortality and
other tables as adopted by the board under section
8328(b) in effect on the effective date of retirement
of the member.
* * *
§ 8346. Termination of annuities.
(a) General rule.--If an annuitant returns to school service
or enters or has entered State service and elects multiple
service membership, any annuity payable to him under this part
shall cease effective upon the date of his return to school
service or entering State service without regard to whether he
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is a mandatory, optional or prohibited member of the system or
participant in the plan or, if a multiple service member,
whether he is a mandatory, optional or prohibited member or
participant of the State Employees' Retirement System or State
Employees' Defined Contribution Plan; and, in the case of an
annuity other than a disability annuity the present value of
such annuity, adjusted for full coverage in the case of a joint
coverage member who makes the appropriate back contributions for
full coverage, shall be frozen as of the date such annuity
ceases. An annuitant who is credited with an additional 10% of
membership service as provided in section 8302(b.2) (relating to
credited school service) and who returns to school service,
except as provided in subsection (b), shall forfeit such
credited service and shall have his frozen present value
adjusted as if his 10% retirement incentive had not been applied
to his account. In the event that the cost-of-living increase
enacted December 18, 1979, occurred during the period of such
State or school employment, the frozen present value shall be
increased, on or after the member attains superannuation age, by
the percent applicable had he not returned to service.
(a.1) Return of benefits.--In the event an annuitant whose
annuity from the system ceases pursuant to this section receives
any annuity payment, including a lump sum payment pursuant to
section 8345 (relating to member's options) on or after the date
of his return to school service or entering State service, the
annuitant shall return to the board the amount so received from
the system plus statutory interest. The amount payable shall be
certified in each case by the board in accordance with methods
approved by the actuary and shall be paid in a lump sum within
90 days or in the case of an active member or a State employee
who is an active member of the State Employees' Retirement
System may be amortized with statutory interest through salary
deductions to the system in amounts agreed upon by the member
and the board. The salary deduction amortization plans agreed to
by the member and the board may include a deferral of payment
amounts and statutory interest until the termination of school
service or State service as the board in its sole discretion
decides to allow. The board may limit salary deduction
amortization plans to such terms as the board in its sole
discretion determines. In the case of a State employee who is an
active member of the State Employees' Retirement System, the
agreed upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer to
the board the amounts paid.
* * *
(b) Return to school service during emergency.--When, in the
judgment of the employer, an emergency creates an increase in
the work load such that there is serious impairment of service
to the public or in the event of a shortage of appropriate
subject certified teachers or other personnel, an annuitant or
participant receiving distributions may be returned to school
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service for a period not to extend beyond the school year during
which the emergency or shortage occurs, without loss of his
annuity or distributions, provided that the annuitant meets the
conditions set forth in subsection (b.2). The annuitant or
participant receiving distributions shall not be entitled to
earn any credited service, and no contributions may be made to
the fund or the trust by the annuitant or participant receiving
distributions, the employer or the Commonwealth on account of
such employment. Such service shall not be subject to member or
participant contributions or be eligible for qualification as
creditable school service or for participation in the plan,
mandatory pickup participant contributions, voluntary
contributions or employer defined contributions.
(b.1) Return to school service in an extracurricular
position.--
(1) An annuitant or participant receiving distributions
may be employed under separate contract by a public school or
charter school in an extracurricular position performed
primarily outside regular instructional hours and not part of
mandated curriculum without loss of annuity, provided that
the annuitant meets the conditions set forth in subsection
(b.2). [Neither the annuitant nor] The annuitant, the
participant receiving distributions and the employer shall
not make contributions to the member's savings account, the
individual investment account or State accumulation account
respectively for such service. Further, such contract shall
contain a waiver whereby the annuitant waives any potential
retirement benefits that could arise from the contract and
releases the employer and the board from any liability for
such benefits. Such service shall not be subject to member or
participant contributions or be eligible for qualification as
creditable school service or for participation in the plan,
mandatory pickup participant contributions or employer
defined contributions.
* * *
(d) Elimination of the effect of frozen present value.--
(1) An annuitant who returns to school service as an
active member of the system and earns three eligibility
points by performing credited school service or reemployment
from USERRA leave following the most recent period of receipt
of an annuity under this part, or an annuitant who enters
State service and:
(i) is a multiple service member; or
(ii) who elects multiple service membership, and
earns three eligibility points by performing credited State
service, reemployment from USERRA leave or credited school
service following the most recent period of receipt of an
annuity under this part, and who had the present value of his
annuity frozen in accordance with subsection (a), shall
qualify to have the effect of the frozen present value
resulting from all previous periods of retirement eliminated,
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provided that all payments under Option 4 and annuity
payments payable during previous periods of retirement plus
interest as set forth in paragraph (3) shall be returned to
the fund in the form of an actuarial adjustment to his
subsequent benefits or in such form as the board may
otherwise direct.
(2) Upon subsequent discontinuance of service and the
filing of an application for an annuity from the system, a
former annuitant who qualifies to have the effect of a frozen
present value eliminated under this subsection shall be
entitled to receive the higher of either:
(i) an annuity (prior to optional modification)
calculated as if the freezing of the former annuitant's
account pursuant to subsection (a) had not occurred,
adjusted by crediting Class T-C school service as Class
T-D service as provided for in section 8305(c) (relating
to classes of service) and further adjusted according to
paragraph (3), provided that a former annuitant of the
system or a former annuitant of the State Employees'
Retirement System who retired under a provision of law
granting additional service credit if termination of
school or State service or retirement occurred during a
specific period of time shall not be permitted to retain
the additional service credit under the prior law when
the annuity is computed for his most recent retirement;
or
(ii) an annuity (prior to optional modification)
calculated as if the former annuitant did not qualify to
have the effect on the frozen present value eliminated,
unless the former annuitant notifies the board in writing by
the later of the date the application for annuity is filed or
the effective date of retirement that the former annuitant
wishes to receive the lower annuity.
* * *
§ 8347. Death benefits.
(a) Members eligible for annuities.--Any member or former
member on USERRA leave, other than an annuitant, who dies and
was eligible for an annuity in accordance with section 8307(a)
or (b) (relating to eligibility for annuities) shall be
considered as having applied for an annuity from the fund to
become effective the day before his death; and, in the event he
has not elected an option, it shall be assumed that he elected
Option 1 and assigned as beneficiary that person last designated
in writing to the board. For purposes of this section, a Class
T-G or Class T-H member with ten or more eligibility points
shall be considered eligible for an annuity under section
8307(a) or (b) and eligible for a death benefit under section
8309 (relating to eligibility for death benefits) even if the
member had not attained the age of 62.
(b) Members ineligible for annuities.--In the event of the
death of any member or former member on USERRA leave, other than
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an annuitant, who is not entitled to a death benefit as provided
in subsection (a), his designated beneficiary shall be paid the
full amount of his accumulated deductions payable from the fund.
* * *
§ 8349. Payment of benefits from the system.
(a) Annuities.--Any annuity granted under the provisions of
this part and paid from the fund shall be paid in equal monthly
installments commencing by the required beginning date.
(b) Death benefits.--If the amount of a death benefit
payable from the fund to a beneficiary of a member under section
8347 (relating to death benefits) or under the provisions of
Option 1 of section 8345(a)(1) (relating to member's options) is
$10,000 or more, such beneficiary may elect to receive payment
according to one of the following options:
(1) A lump sum payment.
(2) An annuity actuarially equivalent to the amount
payable.
(3) A lump sum payment and an annuity such that the
annuity is actuarially equivalent to the amount payable less
the lump sum payment specified by the beneficiary.
* * *
Section 113. Title 24 is amended by adding a chapter to
read:
CHAPTER 84
SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN
Sec.
8401. Establishment.
8402. Plan document.
8403. Individual investment accounts.
8404. Participant contributions.
8405. Mandatory pickup participant contributions.
8406. Employer defined contributions.
8407. Eligibility for benefits.
8408. Death benefits.
8409. Vesting.
8410. Termination of distributions.
8411. Powers and duties of board.
8411.1. Relation of administrators of School Employees' Defined
Contribution Plan to providers of 403(b) plans.
8412. Responsibility for investment loss.
8413. Investments based on participant's investment allocation
choices.
8414. Expenses.
8415. Tax qualification.
§ 8401. Establishment.
(a) School Employees' Defined Contribution Plan.--The School
Employees' Defined Contribution Plan is established. The board
shall administer and manage the plan, which shall be a defined
contribution plan exclusively for the benefit of those school
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
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board shall determine the terms and provisions of the plan not
inconsistent with this part, the IRC and other applicable law
and shall provide for the plan's administration.
(b) School Employees' Defined Contribution Trust.--The
School Employees' Defined Contribution Trust is established as
part of the plan in accordance with this part. The trust shall
be comprised of the individual investment accounts, all assets
and moneys in those accounts and any assets and monies held by
the board as part of the plan that are not allocated to the
individual investment accounts. The members of the board shall
be the trustees of the trust, which shall be administered
exclusively for the benefit of those school employees who
participate in the plan and their beneficiaries within the
meaning of and in conformity with IRC § 401(a). The board shall
determine the terms and provisions of the trust not inconsistent
with this part, the IRC and other applicable law and shall
provide for the investment and administration of the trust.
(c) Assets held in trust.--All assets and income in the plan
that have been or shall be withheld or contributed by the
participants, the Commonwealth and employers in accordance with
this part shall be held in trust in any funding vehicle
permitted by the applicable provisions of the IRC for the
exclusive benefit of the plan's participants and their
beneficiaries until such time as the funds are distributed to
the participants or their beneficiaries in accordance with the
terms of the plan document. The assets of the plan held in trust
for the exclusive benefit of the participants and their
beneficiaries may be used for the payment of the fees, costs and
expenses related to the administration and investment of the
plan and the trust.
(d) Name for transacting business.--By the name of "The
School Employees' Defined Contribution Plan," all of the
business of the plan shall be transacted, the trust invested,
all requisitions for money drawn and payments made and all of
its cash and securities and other property shall be held, except
that, any other law to the contrary notwithstanding, the board
may establish a nominee registration procedure for the purpose
of registering securities to facilitate the purchase, sale or
other disposition of securities under the provisions of this
part.
§ 8402. Plan document.
The board shall set forth the terms and provisions of the
plan and trust in a document containing the terms and conditions
of the plan and in a trust declaration. The creation of the
document containing the terms and conditions of the plan and the
trust declaration and the establishment of the terms and
provisions of the plan and the trust need not be promulgated by
regulation or formal rulemaking and shall not be subject to the
act of July 31, 1968 (P.L.769, No.240), referred to as the
Commonwealth Documents Law. A reference in this part or other
law to the plan shall include the plan document unless the
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context clearly indicates otherwise.
§ 8403. Individual investment accounts.
The board:
(1) Shall establish in the trust an individual
investment account for each participant in the plan. All
contributions by a participant or an employer for or on
behalf of a participant shall be credited to the
participant's individual investment account, together with
all interest and investment earnings and losses. Investment
and administrative fees, costs and expenses shall be charged
to the participants' individual investment accounts.
(2) Shall separately track participant contributions,
including investment gains and losses, and employer
contributions, including investment gains and losses, but all
interest, investment gains and losses and administrative
fees, costs and expenses shall be allocated proportionately.
(3) May contract with financial institutions, insurance
companies or other types of third-party providers and other
vendors to allow participants to deposit participant
contributions into the individual investment accounts in a
form and manner as provided by the contract.
§ 8404. Participant contributions.
(a) Mandatory contributions.--A participant shall make
mandatory pickup participant contributions through payroll
deductions to the participant's individual investment account
for school service required to be credited in the plan. The
employer shall cause those contributions for service required to
be credited in the plan to be made and deducted from each
payroll or on such schedule as established by the board.
(b) Voluntary contributions.--A participant may make
voluntary contributions through payroll deductions, through
direct trustee-to-trustee transfers or through transfers of
money received in an eligible rollover into the trust to the
extent allowed by IRC § 402. Rollovers shall be made in a form
and manner as determined by the board, shall be credited to the
participant's individual investment account and shall be
separately accounted for by the board.
(c) Prohibition on contributions.--No contributions shall be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any participant contributions
in excess of the limitations and investment earnings on those
contributions, minus investment fees and charges, shall be
refunded to the participant by the board.
§ 8405. Mandatory pickup participant contributions.
(a) Treatment for purposes of IRC § 414(h).--The
contributions to the trust required to be made under section
8404(a) (relating to participant contributions) with respect to
school service rendered by an active participant shall be picked
up by the employer and shall be treated as the employer's
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contribution for purposes of IRC § 414(h). After the effective
date of this section, an employer employing a participant in the
plan shall pick up the required mandatory participant
contributions by a reduction in the compensation of the
participant.
(b) Treatment for other purposes.--For all other purposes
under this part and otherwise, mandatory pickup participant
contributions shall be treated as contributions made by a
participant in the same manner and to the same extent as if the
contributions were made directly by the participant and not
picked up.
§ 8406. Employer defined contributions.
(a) Contributions for service.--The employer of a
participant shall make employer defined contributions for
service of an active participant that shall be credited to the
active participant's individual investment account. Employer
defined contributions must be recorded and accounted for
separately from participant contributions.
(b) Contributions resulting from participants reemployed
from USERRA leave.--When a school employee reemployed from
USERRA leave makes the mandatory pickup participant
contributions permitted to be made for the USERRA leave, the
employer by whom the school employee is employed at the time the
participant contributions are made shall make whatever employer
defined contributions would have been made under this section
had the employee making the participant contributions after
being reemployed from USERRA leave continued to be employed in
the employee's school position instead of performing USERRA
leave. The employer defined contributions shall be placed in the
participant's individual investment account as otherwise
provided by this part.
(c) Limitations on contributions.--No contributions shall be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any employer defined
contributions in excess of the limitations and investment
earnings thereon shall be refunded to the employer by the board.
§ 8407. Eligibility for benefits.
(a) Termination of service.--A participant who terminates
school service shall be eligible to withdraw the vested
accumulated total defined contributions standing to the
participant's credit in the participant's individual investment
account or a lesser amount as the participant may request.
Payment shall be made in a lump sum unless the board has
established other forms of distribution in the plan document. A
participant who withdraws the vested accumulated total defined
contributions shall no longer be a participant in the plan,
notwithstanding that the former school employee may continue to
be a member of the system with Class T-G or Class T-H service
credit, or may contract to receive an annuity or other form of
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payment from a provider retained by the board for such purposes.
(b) Required distributions.--All payments under this section
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9). The board shall take any action and make any
distributions it may determine are necessary to comply with
those requirements.
(c) Prohibited distributions.--A school employee must be
terminated from all positions that result in either membership
in the system or participation in the plan to be eligible to
receive a distribution.
(d) Loans.--Loans or other distributions, including hardship
or unforeseeable emergency distributions, from the plan to
school employees who have not terminated school service are not
permitted, except as required by law.
(e) Small individual investment accounts.--A participant who
terminates school service and whose vested accumulated total
defined contributions are below the threshold established by law
as of the date of termination of service may be paid the vested
accumulated total defined contributions in a lump sum as
provided in IRC § 401(a)(31).
§ 8408. Death benefits.
(a) General rule.--In the event of the death of an active
participant or inactive participant, the board shall pay to the
participant's beneficiary the vested balance in the
participant's individual investment account in a lump sum or in
such other manner as the board may establish in the plan
document.
(b) Death of participant receiving distributions.--In the
event of the death of a participant receiving distributions, the
board shall pay to the participant's beneficiary the vested
balance in the participant's individual investment account in a
lump sum or in such other manner as the board may establish in
the plan document or, if the board has established alternative
methods of distribution in the plan document under which the
participant was receiving distributions, to the participant's
beneficiary or successor payee as provided in the plan document.
(c) Contracts.--The board may contract with financial
institutions, insurance companies or other types of third-party
providers to allow participants and their beneficiaries who
receive a lump sum distribution to receive payments and death
benefits in a form and manner as provided by the contract.
§ 8409. Vesting.
(a) Participant and voluntary contributions.--Subject to the
forfeiture and attachment provisions of section 8533 (relating
to taxation, attachment and assignment of funds) or otherwise as
provided by law, a participant shall be immediately vested with
respect to all mandatory pickup participant contributions and
voluntary contributions paid by or on behalf of the participant
to the trust plus interest and investment gains or losses on the
participant contributions but minus investment fees and
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administrative charges.
(b) Employer defined contributions.--
(1) Subject to the forfeiture and attachment provisions
of section 8533 or otherwise as provided by law, a
participant shall be vested with respect to employer defined
contributions paid to the participant's individual investment
account in the trust plus interest and investment gains or
losses on the employer defined contributions but minus
investment fees and administrative charges according to the
following schedule:
(i) until such time as the participant has earned
three eligibility points as a member of the plan, 0%; or
(ii) at and after the attainment of three
eligibility points as a member of the plan, 100%.
(2) For purposes of this subsection, all eligibility
points credited to a member of the system in any class of
service shall be used for determining vested status in the
plan even if the employee was not a participant in the plan
at the time the eligibility points were earned.
(3) Nonvested employer defined contributions, including
interest and investment gains and losses that are forfeited
by a participant, shall be applied to the participant's most
recent employer's obligations assessed in future years.
(c) USERRA leave and eligibility points.--A participant in
the plan who is reemployed from USERRA leave or who dies while
performing USERRA leave shall receive eligibility points under
this section for the school service that would have been
performed had the member not performed USERRA leave.
§ 8410. Termination of distributions.
(a) Return to school service.--
(1) A participant receiving distributions or an inactive
participant who returns to school service shall cease
receiving distributions and shall not be eligible to receive
distributions until the participant subsequently terminates
school service, without regard to whether the participant is
a mandatory, optional or prohibited member of the system or
participant in the plan.
(2) This subsection shall not apply to a distribution
that the participant has received or used to purchase an
annuity from a provider contracted by the board.
(b) Return of benefits paid during USERRA leave.--
(1) If a former school employee is reemployed from
USERRA leave and received any payments or annuity from the
plan during the USERRA leave, the employee shall return to
the board the amount so received plus interest as provided in
the plan document.
(2) The amount payable shall be certified in each case
by the board in accordance with methods approved by the
actuary and shall be paid in a lump sum within 30 days or, in
the case of an active participant, may be amortized with
interest as provided in the plan document through salary
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deductions to the trust in amounts agreed upon by the active
participant and the board, but not longer than a period that
starts with the date of reemployment and continuing for up to
three times the length of the active participant's immediate
past period of USERRA leave. The repayment period shall not
exceed five years.
§ 8411. Powers and duties of board.
The board, in addition to its powers and duties set forth in
Chapter 85 (relating to administration and miscellaneous
provisions), shall have the following powers and duties to
establish the plan and trust and to administer the provisions of
this part:
(1) The board may commingle or pool assets with the
assets of other persons or entities.
(2) The board shall pay all administrative fees, costs
and expenses of managing, investing and administering the
plan, the trust and the individual investment accounts from
the balance of such individual investment accounts, except as
otherwise provided in this part or as the General Assembly
otherwise provides through appropriations from the General
Fund.
(3) The board may establish investment guidelines and
limits on the types of investments that participants may
make, consistent with the board's fiduciary obligations.
(4) The board shall have the power to change the terms
of the plan as may be necessary to maintain the tax-qualified
status of the plan.
(5) The board may establish a process for election to
participate in the plan by those school employees for whom
participation is not mandatory.
(6) The board may perform an annual or more frequent
review of any qualified fund manager for the purpose of
assuring it continues to meet all standards and criteria
established.
(7) The board may allow for eligible rollovers and
direct trustee-to-trustee transfers into the trust from
qualified plans of other employers, regardless of whether the
employers are private employers or public employers.
(8) The board may allow an inactive participant to
maintain the participant's individual investment account
within the plan.
(9) The board shall administer or ensure the
administration of the plan in compliance with the
qualification and other rules of IRC.
(10) The board may establish procedures to provide for
the lawful payment of benefits.
(11) The board shall determine what constitutes a
termination of school service.
(12) The board may establish procedures for
distributions of small accounts as required or permitted by
IRC.
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(13) The board may establish procedures in the plan
document or to promulgate rules and regulations as it deems
necessary for the administration and management of the plan,
including, but not limited to, establishing:
(i) Procedures by which eligible participants may
change voluntary contribution amounts or their investment
choices on a periodic basis or make other elections
regarding their participation in the plan.
(ii) Procedures for deducting mandatory pickup
participant contributions and voluntary contributions
from a participant's compensation.
(iii) Procedures for rollovers and trustee-to-
trustee transfers allowed under the IRC and permitted by
the board as part of the plan.
(iv) Standards and criteria for providing not less
than ten options which are offered by three or more
providers of investment options to eligible individuals
regarding investments of amounts deferred under the plan.
The standards and criteria must provide for a variety of
investment options and shall be reviewed in accordance
with criteria established by the board.
(v) Standards and criteria for disclosing to the
participants the anticipated and actual income
attributable to amounts invested, property rights and all
fees, costs and expenses to be made against amounts
deferred to cover the costs and expenses of administering
and managing the plan or trust.
(vi) Procedures, standards and criteria for the
making of distributions from the plan upon termination
from employment, one of which shall include an option for
an annuity with a minimum interest rate of 2.5% to the
extent commercially available, or death or in other
circumstances consistent with the purpose of the plan.
(14) The board may waive any reporting or information
requirement contained in this part if the board determines
that the information is not needed for the administration of
the plan.
(15) The board may contract any services and duties in
lieu of staff except final adjudications and as prohibited by
law. Any duties or responsibilities of the board not required
by law to be performed by the board may be delegated to a
third-party provider subject to appeal to the board.
(16) The board may provide that any duties of the
employer or information provided by the participant to the
employer be performed or received directly by the board.
(17) The board shall ensure that participants are
provided with educational materials about investment options
and choices.
(18) The provisions and restrictions of the act of July
2, 2010 (P.L.266, No.44), known as the Protecting
Pennsylvania's Investments Act, shall not apply to the
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participants' individual investment accounts or the moneys
and investments therein, but the board is authorized to offer
to the plan participants investment vehicles that would be
permitted under the Protecting Pennsylvania's Investments
Act.
§ 8411.1. Relation of administrators of School Employees'
Defined Contribution Plan to providers of 403(b)
plans.
(a) General rule.--A financial institution or pension
management organization entering into a written agreement under
section 8411 (relating to powers and duties of board) may offer
or provide services to any plan established or maintained by a
school district under IRC § 403(b) or 457 if the written
agreement for the administration of the School Employees'
Defined Contribution Plan is not combined with any other written
agreement for the administration of a school district's 403(b)
plan or 457 plan. Each school district that provides a 403(b)
plan shall make available, in the manner provided by subsection
(c), to participants, multiple financial institutions or pension
management organizations that have not entered into a written
agreement to section 8411 and which provide services to the
school district's 403(b) plan or 457 plan.
(b) Plan transparency and administration.--A financial
institution or pension management organization providing
services for any plan established or maintained by a school
district under IRC § 403(b) or 457 shall:
(1) enter into an agreement with the school district or
the school district's independent compliance administrator
that shall require the financial institution or pension
management organization to provide in an electronic format
all data necessary for the administration of the 403(b) plan
or 457 plan as determined by the school district or the
school district's compliance administrator; and
(2) provide all data required by the school district or
a school district's compliance administrator to facilitate
disclosure of all fees, charges, expenses, commissions,
compensation and payments to third parties related to
investments offered under the 403(b) plan or 457 plan.
(c) Provider selection.--A school district that establishes
or maintains a plan under IRC § 403(b) or 457 shall select a
minimum of four financial institutions or pension management
organizations, in addition to the financial institution or
pension management organization that entered into an agreement
under section 8411, to provide services to the 403(b) plan or
457 plan. If fewer than four such additional financial
institutions or pension management organizations are determined
to be available or able to meet the requirements established in
this section, then the school district shall select the number
of available providers able to meet the school district's
requirements. A financial institution or pension management
organization shall be designated a 403(b) plan or 457 plan
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provider if the financial institution or pension management
organization enters into an agreement in accordance with
subsection (b).
§ 8412. Responsibility for investment loss.
The Commonwealth, the board, an employer or a school entity
or other political subdivision shall not be responsible for any
investment loss incurred under the plan or for the failure of
any investment to earn any specific or expected return or to
earn as much as any other investment opportunity or to cost less
than any other investment opportunity, whether or not such other
opportunity was offered to participants in the plan.
§ 8413. Investments based on participant's investment
allocation choices.
(a) Investment by participant.--All contributions, interest
and investment earnings shall be invested based on a
participant's investment allocation choices , provided that the
board may provide for a default investment option . All
investment allocation choices shall be credited proportionally
between contributions from the participant and employer defined
contributions. Each participant shall be credited individually
with the amount of contributions, interest and investment
earnings.
(b) Investment of contributions made by entities other than
Commonwealth.--Investment of contributions by any corporation,
institution, insurance company, custodial bank or other entity
that the board has approved shall not be unreasonably delayed,
and in no case shall the investment of contributions be delayed
more than 30 days from the date of payroll deduction or
voluntary contributions are made to the date that funds are
invested. Any interest earned on the funds pending investment
shall be used to pay administrative costs and fees that would
otherwise be required to be borne by participants who are then
participating in the plan or that are funded by contributions
from the employers.
§ 8414. Expenses.
All expenses, fees and costs of administering the plan and
the trust and investing the assets of the trust shall be borne
by the participants and paid from assessments against the
balances of the individual investment accounts as established by
the board, except that the expenses, fees and costs of
establishing and administering the plan and trust may be paid by
the Commonwealth through annual appropriations.
§ 8415. Tax qualification.
(a) Required distributions.--All payments under this chapter
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a).
(b) Limitations.--The following shall apply:
(1) (i) Except as provided under subparagraph (ii) and
notwithstanding a provision of this part, a contribution
or benefit related to the plan may not exceed a
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limitation under IRC § 415 with respect to a governmental
plan that is in effect on the date the contribution or
benefit payment takes effect.
(ii) An increase in a limitation under IRC § 415
shall apply to the participants on or after the effective
date of this section.
(iii) For the purposes of this paragraph, the term
"government plan" shall have the same meaning as in IRC §
414(d).
(2) (i) Except as provided under subparagraph (ii), an
amendment of this part on or after the effective date of
this section that increases contributions or benefits for
active participants, inactive participants or
participants receiving distributions may not be deemed to
provide for a contribution or benefit in excess of a
limitation, adjusted on or after the effective date of
this section, under IRC § 415 unless specifically
provided by legislation.
(ii) Notwithstanding subparagraph (i), an increase
in benefits on or after the effective date of this
section for a participant in the plan shall be authorized
and apply to the fullest extent allowed by law.
Section 114. Sections 8501(a), (c), (d) and (e) and 8502(a),
(b), (c), (e), (h), (i), (j), (k), (m), (n) and (o) of Title 24
are amended and the sections are amended by adding subsections
to read:
§ 8501. Public School Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and shall consist of 15
members: the Secretary of Education, ex officio; the State
Treasurer, ex officio; the Secretary of Banking and Securities,
ex officio; two Senators; two members of the House of
Representatives; the executive secretary of the Pennsylvania
School Boards Association, ex officio; [two] one to be appointed
by the Governor[, at least one of whom shall not be a school
employee or an officer or employee of the State]; three to be
elected by the active professional members of the system and
active professional participants of the plan from among their
number; one to be elected by annuitants or participants of the
plan who have terminated school service and are receiving or are
eligible to receive distributions from among their number; one
to be elected by the active nonprofessional members of the
system or active nonprofessional participants of the plan from
among their number; and one to be elected by members of
Pennsylvania public school boards from among their number. The
appointments made by the Governor shall be confirmed by the
Senate and each election shall be conducted in a manner approved
by the board. The terms of the appointed and nonlegislative
elected members shall be three years. The members from the
Senate shall be appointed by the President pro tempore of the
Senate and shall consist of one member from the majority and one
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member from the minority. The members from the House of
Representatives shall be appointed by the Speaker of the House
of Representatives and shall consist of one member from the
majority and one member from the minority. The legislative
members shall serve on the board for the duration of their
legislative terms and shall continue to serve until 30 days
after the convening of the next regular session of the General
Assembly after the expiration of their respective legislative
terms or until a successor is appointed for the new term,
whichever occurs first. The chairman of the board shall be
elected by the board members. Each ex officio member of the
board and each legislative member of the board may appoint a
duly authorized designee to act in his stead. In the event that
a board member, who is designated as an active participant or as
the participant in the plan who is receiving or is eligible to
receive distributions, receives a total distribution of the
board member's interest in the plan, that board member may
continue to serve on the board for the remainder of his term.
* * *
(c) Oath of office.--Each member of the board shall take an
oath of office that he will, so far as it devolves upon him,
diligently and honestly administer the affairs of said board,
the system and the plan and that he will not knowingly violate
or willfully permit to be violated any of the provisions of law
applicable to this part. Such oath shall be subscribed by the
member making it and certified by the officer before whom it is
taken and shall be immediately filed in the office of the
Secretary of the Commonwealth.
(d) Compensation and expenses.--The members of the board who
are members of the system or participants in the plan shall
serve without compensation. Members of the board who are members
of the system or participants in the plan and who are employed
by a governmental entity shall not suffer loss of salary or
wages through serving on the board. The board, on request of the
employer of any member of the board who is an active
professional or nonprofessional member of the system or active
professional or nonprofessional participant in the plan, may
reimburse such employer for the salary or wages of the member or
participant, or for the cost of employing a substitute for such
member or participant, while the member or participant is
necessarily absent from employment to execute the duties of the
board. The employer of any such member shall provide leave to
allow such member to execute the duties of the board, including
but not limited to, attendance at the location of all regular
and special board and committee meetings. The members of the
board who are not members of either the school system or the
State Employees' Retirement System may be paid $100 per day when
attending meetings and all board members shall be reimbursed for
any necessary expenses. However, when the duties of the board as
mandated are not executed, no compensation or reimbursement for
expenses of board members shall be paid or payable during the
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period in which such duties are not executed.
(e) Corporate power and legal advisor.--For the purposes of
this part, the board shall possess the power and privileges of a
corporation. [The Attorney General of the Commonwealth shall be
the legal advisor of the board.] The board shall be an
independent agency under the act of October 15, 1980 (P.L.950,
No.164), known as the Commonwealth Attorneys Act.
(f) Board training.--Each member of the board will be
required to obtain eight hours of mandatory training in
investment strategies, actuarial cost analysis and retirement
portfolio management on an annual basis.
§ 8502. Administrative duties of board.
(a) Employees.--
(1) Effective 30 days after the effective date of this
paragraph, the positions of secretary, assistant secretary
and investment professional shall be placed under the
unclassified service provisions of the act of August 5, 1941
(P.L.752, No.286), known as the Civil Service Act, as those
positions are vacated. All other positions of the board shall
be placed in either the classified or unclassified service
according to the definition of the terms under the Civil
Service Act.
(2) Notwithstanding any other provision of law, the
compensation of investment professionals shall be established
by the board. The compensation of all other officers and
employees of the board who are not covered by a collective
bargaining agreement shall be established by the board
consistent with the standards of compensation established by
the Executive Board of the Commonwealth.
(3) The board may utilize the staff of employees
provided for under this subsection for both the system and
the plan, but shall allocate the fees, costs and expenses
incurred under this subsection between the system and the
plan as appropriate.
(b) Professional personnel.--
(1) The board shall contract for the services of a chief
medical examiner, an actuary, investment advisors,
counselors, an investment coordinator, and such other
professional personnel as it deems advisable.
(2) The board may utilize the same individuals and firms
contracted under this subsection for both the system and the
plan but shall allocate the fees, costs and expenses incurred
under this subsection between the system and the plan as
appropriate.
(c) Expenses.--
(1) The board shall, through the Governor, submit to the
General Assembly annually a budget covering the
administrative expenses of [this part.] the system and a
separate budget covering the administrative expenses of the
plan. The separate budgets shall include those expenses
necessary to establish the plan and trust.
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(2) Such expenses of the system as approved by the
General Assembly in an appropriation bill shall be paid from
investment earnings of the fund.
(3) For fiscal years beginning on or after July 1, 2019,
the expenses of the plan as approved by the General Assembly
shall be paid from interest, under section 8413(b) (relating
to investments based on participant's investment allocation
choices) or assessments on the balances of the participants'
individual investment accounts or as otherwise provided in
this part.
(4) Concurrently with its administrative budget, the
board shall also submit to the General Assembly annually a
list of proposed expenditures which the board intends to pay
through the use of directed commissions, together with a list
of the actual expenditures from the past year actually paid
by the board through the use of directed commissions. All
such directed commission expenditures shall be made by the
board for the exclusive benefit of the system and its members
and for the exclusive benefit of the plan and its
participants, respectively.
* * *
(e) Records.--
(1) The board shall keep a record of all its proceedings
which shall be [open to inspection by] accessible to the
public, except as otherwise provided in this part or by other
law.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public [inspection]
access under the act of [June 21, 1957 (P.L.390, No.212),
referred to] February 14, 2008 (P.L.6, No.3), known as the
Right-to-Know Law, if, in the reasonable judgment of the
board, the [inspection] access would:
(i) in the case of an alternative investment or
alternative investment vehicle involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust, or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) The following apply:
(i) The sensitive investment or financial
information excluded from [inspection] access under
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paragraph (2)(i), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once the board is no longer required by
its agreement to maintain confidentiality.
(ii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(ii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer causes
substantial competitive harm to the person from whom
the information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(iii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer has a
substantial detrimental impact on the value of an
investment of the fund or trust and would not cause a
breach of the standard of care or fiduciary duty set
forth in this part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public [inspection] access under the Right-to-Know Law.
(5) Notwithstanding the provisions of this subsection,
the following information regarding an alternative investment
vehicle shall be subject to public [inspection] access under
the Right-to-Know Law:
(i) The name, address and vintage year of the
alternative investment vehicle.
(ii) The identity of the manager of the alternative
investment vehicle.
(iii) The dollar amount of the commitment made by
the system or plan to the alternative investment vehicle.
(iv) The dollar amount of cash contributions made by
the system or plan to the alternative investment vehicle
since inception.
(v) The dollar amount of cash distributions received
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by the system or plan from the alternative investment
vehicle since inception.
(vi) The net internal rate of return of the
alternative investment vehicle since inception, provided
that the system or plan shall not be required to disclose
the net internal rate of return under circumstances in
which, because of the limited number of portfolio assets
remaining in the alternative investment vehicle, the
disclosure could reveal the values of specifically
identifiable remaining portfolio assets to the detriment
of the alternative investment.
(vii) The aggregate value of the remaining portfolio
assets attributable to the system's or plan's investment
in the alternative investment vehicle, provided that the
system or plan shall not be required to disclose the
value under circumstances in which, because of the
limited number of portfolio assets remaining in the
alternative investment vehicle, the disclosure could
reveal the values of specifically identifiable remaining
portfolio assets to the detriment of the alternative
investment.
(viii) The dollar amount of total management fees
and costs paid to the alternative investment vehicle by
the system or plan on an annual fiscal year-end basis.
(6) Any record, material or data received, prepared,
used or retained by the board or its employees or agents
relating to the contributions, account value or benefits
payable to or on account of a participant shall not
constitute a public record subject to public access under the
Right-to-Know Law, if, in the reasonable judgment of the
board, the access would disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions and trustee-to-trustee
transfers, of any participant.
(ii) The investment option selections of any
participant.
(iii) The balance of a participant's individual
investment account, including the amount distributed to
the participant, and any investment gains or losses, or
rates of return.
(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The benefit payment option of a participant.
(7) The following shall apply:
(i) Nothing in this part shall be construed to mean
that the release or publicizing of a record, material or
data that would not constitute a public record under this
subsection shall be a violation of the board's fiduciary
duties.
(ii) This subsection shall apply to a record,
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material or data under this subsection, notwithstanding
whether:
(A) the record, material or data was created,
generated or stored before the effective date of this
section;
(B) the record, material or data was previously
released or made public; or
(C) a request for the record, material or data
was made or is pending final response under the
former act of June 21, 1957 (P.L.390, No.212),
referred to as the Right-to-Know Law, or the Right-
to-Know Law.
* * *
(h) Regulations and procedures.--The board shall, with the
advice of the Attorney General and the actuary, adopt and
promulgate rules and regulations for the uniform administration
of the system. The actuary shall approve in writing all
computational procedures used in the calculation of
contributions and benefits pertaining to the system, and the
board shall by resolution adopt such computational procedures,
prior to their application by the board. Such rules, regulations
and computational procedures as so adopted from time to time and
as in force and effect at any time, together with such tables as
are adopted and published pursuant to subsection (j) as
necessary for the calculation of annuities and other benefits,
shall be as effective as if fully set forth in this part. Any
actuarial assumption specified in or underlying any such rule,
regulation or computational procedure and utilized as a basis
for determining any benefit shall be applied in a uniform
manner.
(i) Data.--The board shall keep in convenient form such data
as are stipulated by the actuary in order that an annual
actuarial valuation of the various accounts of the fund can be
completed within six months of the close of each fiscal year.
The board shall have final authority over the means by which
data is collected, maintained and stored and in so doing shall
protect the rights of its membership as to privacy and
confidentiality.
(j) Actuarial investigation and valuation.--The board shall
have the actuary make an annual valuation of the various
accounts of the fund within six months of the close of each
fiscal year. In the fiscal year 1975 and in every fifth year
thereafter, the board shall have the actuary conduct an
actuarial investigation and evaluation of the system based on
data including the mortality, service, and compensation
experience provided by the board annually during the preceding
five years concerning the members and beneficiaries of the
system. The board shall by resolution adopt such tables as are
necessary for the actuarial valuation of the fund and
calculation of contributions, annuities, and other benefits
based on the reports and recommendations of the actuary. Within
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30 days of their adoption, the secretary of the board shall
cause those tables which relate to the calculation of annuities
and other benefits to be published in the Pennsylvania Bulletin
in accordance with the provisions of 45 Pa.C.S. § 725(a)
(relating to additional contents of Pennsylvania Bulletin) and,
unless the board specifies therein a later effective date, such
tables shall become effective on such publication. The board
shall include a report on the significant facts, recommendations
and data developed in each five-year actuarial investigation and
evaluation of the system in the annual financial statement
published pursuant to the requirements of subsection (n) for the
fiscal year in which such investigation and evaluation were
concluded.
(k) Certification of employer contributions to fund.--The
board shall, each year in addition to the itemized budget
required under section 8330 (relating to appropriations by the
Commonwealth), certify to the employers and the Commonwealth the
employer contribution rate expressed as a percentage of members'
payroll necessary for the funding of prospective annuities for
active members and the annuities of annuitants, and certify the
rates and amounts of the normal contributions as determined
pursuant to section 8328(b) (relating to actuarial cost method),
accrued liability contributions as determined pursuant to
section 8328(c), supplemental annuities contribution rate as
determined pursuant to section 8328(d), the experience
adjustment factor as determined pursuant to section 8328(e),
premium assistance contributions as determined pursuant to
section 8328(f), the costs added by legislation as determined
pursuant to section 8328(i), the actuarial required contribution
rate as determined pursuant to section 8328(i), the collared
contribution rate as determined pursuant to section 8328(g), the
final contribution rate as determined pursuant to section
8328(h) and the shared-risk contribution rate as determined
under section 8321(b) (relating to regular member contributions
for current service), which shall be paid to the fund and
credited to the appropriate accounts. These certifications shall
be regarded as final and not subject to modification by the
Secretary of the Budget.
* * *
(m) Member contributions and interest.--The board shall
cause each member's contributions, including payroll deductions,
pickup contributions, shared-risk contributions and all other
payments, including, but not limited to, amounts collected by
the State Employees' Retirement System for the reinstatement of
previous school service or creditable nonschool service and
amounts paid to return benefits paid after the date of return to
school service or entering State service representing lump sum
payments made pursuant to section 8345(a)(4)(iii) (relating to
member's options) and member's annuity payments, but not
including other benefits returned pursuant to section 8346(a.1)
and (a.2) (relating to termination of annuities), to be credited
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to the account of such member and shall pay all such amounts
into the fund. Such contributions shall be credited with
statutory interest until date of termination of service, except
in the case of a vestee, who shall have such interest credited
until the effective date of retirement or until the return of
his accumulated deductions, if he so elects; and in the case of
a multiple service member who shall have such interest credited
until termination of service in both the school and the State
systems.
(n) Annual financial [statement] statements.--The board
shall prepare and have published, on or before January 1 of each
year, [a financial statement] financial statements as of the
fiscal year ending June 30 of the previous year showing the
condition of the fund, the trust and the various accounts,
including, but not limited to, the board's accrual and
expenditure of directed commissions, and setting forth such
other facts, recommendations and data as may be of use in the
advancement of knowledge concerning annuities and other benefits
provided by this part. The board shall submit said financial
[statement] statements to the Governor and shall make copies
available to the employers for the use of the school employees
and the public.
(o) Independent [audit] audits.--The board shall provide for
[an annual audit] annual audits of the system and the plan by an
independent certified public accounting firm[, which audit]. The
audits shall include the board's accrual and expenditure of
directed commissions. The board may use the same independent
certified public accounting firm for the audits of both the
system and the plan.
* * *
(q) Participant and employer contributions to trust.--The
board shall, each year in addition to any fees and itemized
budget required under section 8330, certify, as a percentage of
each participant's compensation, the employer defined
contributions, which shall be paid to the trust and credited to
each participant's individual investment account. These
certifications shall be regarded as final and not subject to
modification by the Secretary of the Budget. The board shall
cause all mandatory pickup participant contributions made on
behalf of a participant and all voluntary contributions made by
a participant to be credited to the participant's individual
investment account.
(r) Limitation on fees charged to the board.--In striving to
achieve actuarial savings of $1,500,000,000 over 30 years from
the effective date of this subsection, while achieving the
assumed annual rate of return at the least cost and maximum
return of the fund, the board shall:
(1) Consider the findings and recommendations of the
Public Pension Management and Asset Investment Review
Commission. The board may, at its sole discretion, adopt
guidelines and procedures to implement any recommendations of
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the Public Pension Management and Asset Investment Review
Commission that the board determines appropriate in attaining
the highest return on investment at the lowest responsible
cost.
(2) Review, identify and implement any investment fee
reduction and cost avoidance strategies identified to be
prudent by the board, to reduce expenditures for investment
costs.
Section 115. Section 8502.2(a) of Title 24 is amended to
read:
§ 8502.2. Health insurance.
(a) Authority.--The board may sponsor a participant-funded
group health insurance program for annuitants, participants
receiving distributions, spouses of annuitants and participants
receiving distributions, survivor annuitants and their
dependents. The board may promulgate regulations regarding the
prudent and efficient operation of the program, including, but
not limited to:
(1) Establishment of an annual budget and disbursements
in accordance with the budget.
(2) Determination of the benefits structure.
(3) Determination of enrollment procedures.
(4) Establishment of premium rates sufficient to fully
fund the program, including administrative expenses.
(5) Contracting for goods, equipment, services,
consultants and other professional personnel as needed to
operate the program.
* * *
Section 116. Sections 8503 heading and (b), 8505 heading,
(h) and (i), 8506 (a), (d), (e), (f), (i) and (k) and 8507
heading, (a), (c), (e), (f) and (i) of Title 24 are amended and
the sections are amended by adding subsections to read:
§ 8503. Duties of board to advise and report to employers [and
members], members and participants.
* * *
(b) Member status statements.--The board shall furnish
annually on or before December 31, a statement to each member
showing the accumulated deductions standing to the credit of the
member and the number of years and fractional part of a year of
service credited in each class of service, as applicable, as of
June 30 of that year. Each member's statement shall include a
request that the member make any necessary corrections or
revisions regarding his designated beneficiary, whose name at
the request of the member shall remain confidential and not
appear on this statement.
(b.1) Participant status statements.--The board shall
furnish annually to each participant on or before December 31,
and more frequently as the board may agree or as required by
law, a statement showing the accumulated total defined
contributions credited to the participant's individual
investment account, the nature and type of investments and the
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investment allocation of future contributions as of June 30 of
the current year and shall request the participant to make any
necessary correction or revision regarding his designated
beneficiary.
* * *
§ 8505. Duties of board regarding applications and elections of
members and participants.
* * *
(e.1) Certification to participants terminating service.--
The board shall certify to the participant in writing within one
year of termination of service of the participants of the vested
accumulated total defined contributions credited to the
participant's individual investment account as of the date
stated in the writing, any notices regarding rollover or other
matters required by IRC or other law, the obligation of the
participant to commence distributions from the plan by the
participant's required beginning date and the ability to receive
all or part of the vested balance in the participant's
individual investment account in a lump sum or in such other
form as the board may authorize or as required by law.
* * *
(f.1) Notification to inactive participants approaching
required beginning date.--The board shall notify in writing each
inactive participant who has terminated school service and who
has not commenced distribution by 90 days before the
participant's required beginning date that the inactive
participant has an obligation to commence distributions by the
required beginning date in a form and manner required by IRC §
401(a)(9) and other applicable provisions of IRC.
* * *
(g.1) Initial payment to a participant.--The board shall
make the initial payment to a participant who has applied for a
distribution within 60 days of the filing of the application and
receipt of the required data from the employer of the
participant and other necessary data.
(h) Death benefits.--Upon receipt of notification of the
death of a member or former member on USERRA leave or an active
participant, an inactive participant or a former participant
performing USERRA leave, the board shall notify the designated
beneficiary or survivor annuitant of the benefits to which he is
entitled and shall make the first payment to the beneficiary
under the [plan] benefits elected by the beneficiary within 60
days of receipt of certification of death and other necessary
data. If no beneficiary designation is in effect at the date of
the member's or participant's death or no notice has been filed
with the board to pay the amount of such benefits to the
member's or participant's estate, the board is authorized to pay
such benefits to the executor, administrator, surviving spouse
or next-of-kin of the deceased member or participant, and
payment pursuant hereto shall fully discharge the fund or plan
from any further liability to make payment of such benefits to
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any other person.
(i) Medical insurance coverage.--Upon receipt of
notification from an insurance carrier offering a health
insurance program approved by the board that an annuitant or
participant who has attained age 65 has elected medical, major
medical, and hospitalization insurance coverage or notification
that annuitants with less than 24 1/2 eligibility points (other
than disability annuitants), spouses of annuitants and survivor
annuitants eligible to elect to enroll in the approved health
insurance program have elected participation in such health
insurance program, the board may deduct from the annuity
payments, from payments to a participant receiving distributions
or from a successor payee, the appropriate annual charges in
equal monthly installments. Such deductions shall be transmitted
to the insurance carrier.
* * *
§ 8506. Duties of employers.
(a) Status of members and participants.--The employer shall,
each month, notify the board in a manner prescribed by the board
of the salary changes effective during the past month, the date
of all removals from the payroll, and the type of leave of any
member or participant who has been removed from the payroll for
any time during that month, and:
(1) if the removal is due to leave without pay, the
employer shall furnish the board with the date of beginning
leave, the date of return to service, and the reason for
leave;
(2) if the removal is due to a transfer to another
employer, the former employer shall furnish such employer and
the board with a complete school service record, including
credited or creditable nonschool service; or
(3) if the removal is due to termination of school
service, the employer shall furnish the board with a complete
school service record including credited or creditable
nonschool service and in the case of death of the member or
participant the employer shall so notify the board.
* * *
(c.1) Participant and employer defined contributions.--The
employer shall cause the mandatory pickup participant
contributions on behalf of a participant to be made and shall
cause to be deducted any voluntary contributions authorized by a
participant. The employer shall also cause the employer defined
contributions on behalf of a participant to be made. The
employer shall notify the board at times and in a manner
prescribed by the board of the compensation of any participant
to whom the limitation under IRC § 401(a)(17) either applies or
is expected to apply and shall cause the participant's
contributions to be deducted from payroll to cease at the
limitation under IRC § 401(a)(17) on the payroll date if and
when such limit shall be reached. The employer shall certify to
the board the amounts picked up and deducted and the employer
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defined contributions being made and shall send the total amount
picked up, deducted and contributed together with a duplicate of
such voucher to the secretary of the board every pay period or
on such schedule as established by the board.
(d) New employees subject to mandatory membership or
participation.--Upon the assumption of duties of each new school
employee whose membership in the system or plan is mandatory,
the employer shall no later than 30 days thereafter cause an
application for membership or participation, which application
shall include the employee's home address, birthdate certified
by the employer, previous school or State service and any other
information requested by the board, and a nomination of
beneficiary to be made by such employee and filed with the board
and shall make pickup contributions or mandatory pickup
participant contributions from the effective date of school
employment.
(e) New employees subject to optional membership or
participation.--The employer shall inform any eligible school
employee whose membership in the system or participation in the
plan is not mandatory of his opportunity to become a member of
the system or participant in the plan provided that he elects to
purchase credit for all such continuous creditable service. If
such employee so elects, the employer shall no later than 30
days thereafter cause an application for membership or
participation which application shall include the employee's
home address, birthdate certified by the employer, previous
school or State service and any other information requested by
the board, and a nomination of beneficiary to be made by him and
filed with the board and shall cause proper contributions to be
made from the date of election of membership or participation.
(f) Advising members of duties.--The employer shall advise
his employees of their duties as members of the system and
participants of the plan. Local school districts shall be held
harmless from decisions made by the employee in this regard.
* * *
(i) Termination of service by members.--The employer shall,
in the case of any member terminating school service, advise
such member in writing of any benefits from the system to which
he may be entitled under the provisions of this part and shall
have the member prepare, on or before the date of termination of
school service, one of the following three forms, a copy of
which shall be given to the member and the original of which
shall be filed with the board:
(1) An application for the return of accumulated
deductions.
(2) An election to vest his retirement rights, if
eligible, and, if he is a joint coverage member and so
desires, an election to become a full coverage member and an
agreement to pay within 30 days of the date of termination of
service the lump sum required.
(3) An application for an immediate annuity, if
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eligible, and, if he is a joint coverage member and so
desires, an election to become a full coverage member and an
agreement to pay within 30 days of date of termination of
service the lump sum required.
* * *
(k) School employees performing USERRA or military-related
leave of absence.--The employer shall report to the board all of
the following:
(1) Any school employee who:
(i) ceases to be an active member or active
participant to perform USERRA service; or
(ii) is granted a leave of absence under 51 Pa.C.S.
§ 4102 (relating to leaves of absence for certain
government employees) or a military leave of absence
under 51 Pa.C.S. § 7302 (relating to granting military
leaves of absence).
(2) The date on which the USERRA service, leave of
absence or military leave of absence began.
(3) The date on which the school employee is reemployed
from USERRA leave or returns after the leave of absence or
military leave of absence, if applicable.
(4) Any other information the board may require.
(l) Differential wage payments and military leave of absence
payments.--Notwithstanding the exclusion of differential wage
payments as defined in IRC § 414(u)(12) from compensation under
this part, the employer of any school employee on USERRA leave
shall report differential wage payments made to the employee to
the board, and the employer of any school employee on leave of
absence under 51 Pa.C.S. § 4102 shall report any payment made to
the employee in the form and manner established by the board.
§ 8507. Rights and duties of school employees [and members],
members and participants.
(a) Information on new employees.--Upon his assumption of
duties, each new school employee shall furnish his employer with
a complete record of his previous school or State service, or
creditable nonschool service, proof of his date of birth, his
home address, his current status in the system and the plan and
in the State Employees' Retirement System and the State
Employees' Defined Contribution Plan and such other information
as the board may require. Willful failure to provide the
information required by this subsection to the extent available
or the provision of erroneous information upon entrance into the
system or plan shall result in the forfeiture of the right of
the member or participant to subsequently assert any right to
benefits based on erroneous information or on any of the
required information which he failed to provide. In any case in
which the board finds that a member or participant is receiving
an annuity based on false information, the additional amounts
received predicated on such false information together with
statutory interest doubled and compounded shall be deducted from
the present value of any remaining benefits to which the member
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or participant is legally entitled and such remaining benefits
shall be correspondingly decreased.
* * *
(c) Multiple service membership.--Any active member who was
formerly an active member in the State Employees' Retirement
System may elect to become a multiple service member. Such
election shall occur no later than 365 days after becoming an
active member in this system. A school employee who is eligible
to elect to become a multiple service member and who begins
USERRA leave during the election period without having elected
multiple service membership [may make the election within 365
days after being reemployed from] shall have the election period
extended by the number of days on USERRA leave.
* * *
(d.2) Contributions for USERRA leave.--Any active
participant or inactive participant or former participant who
was reemployed from USERRA leave and who desires to make
mandatory pickup participant contributions and voluntary
contributions for his USERRA leave shall so notify the board
within the time period required under 38 U.S.C. Ch. 43 (relating
to employment and reemployment rights of members of the
uniformed services) and IRC § 414(u) of his desire to make such
contributions. Upon the participant making the permitted
mandatory pickup participant contributions within the allowed
time period, the employer shall make the corresponding employer
defined contributions at the same time.
(d.3) Voluntary contributions by a participant.--Any
participant who desires to make voluntary contributions to be
credited to his individual investment account shall notify the
board and, upon compliance with the requirements, procedures and
limitations established by the board in the plan document, may
do so subject to the limitations under IRC §§ 401(a) and 415 and
other applicable law.
(e) Beneficiary for death benefits from system.--Every
member shall nominate a beneficiary by written designation filed
with the board to receive the death benefit or the benefit
payable from the system under the provisions of Option 1. Such
nomination may be changed at any time by the member by written
designation filed with the board. A member may also nominate a
contingent beneficiary or beneficiaries to receive the death
benefit or the benefit payable under the provisions of Option 1.
(e.1) Beneficiary for death benefits from plan.--Every
participant shall nominate a beneficiary by written designation
filed with the board as provided in section 8506 (relating to
duties of employers) to receive the death benefit payable under
section 8408 (relating to death benefits). A participant may
also nominate a contingent beneficiary or beneficiaries to
receive the death benefit provided under section 8408. Such
nominations may be changed at any time by the participant by
written designation filed with the board.
(e.2) Beneficiary designation.--A school employee may
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designate or nominate different persons to be beneficiaries,
survivor annuitants and successor payees for his benefits from
the system and the plan.
(f) Termination of service by members.--Each member who
terminates school service and who is not then a disability
annuitant shall execute on or before the date of termination of
service a written application, duly attested by the member or
his legally constituted representative, electing to do one or
more of the following:
(1) Withdraw his accumulated deductions.
(2) Vest his retirement rights, if eligible, and if he
is a joint coverage member, and so desires, elect to become a
full coverage member and agree to pay within 30 days of the
date of termination of service the lump sum required.
(3) Receive an immediate annuity, if eligible, and may,
if he is a joint coverage member, elect to become a full
coverage member and agree to pay within 30 days of date of
termination of service the lump sum required.
* * *
(g.1) Deferral of retirement rights.--If a participant
terminates school service and does not commence receiving a
distribution, he shall nominate a beneficiary by written
designation filed with the board, and he may anytime thereafter,
but no later than his required beginning date, withdraw the
vested accumulated total defined contributions standing to his
credit or apply for another form of distribution required by law
or authorized by the board.
* * *
(i) Failure to apply for annuity.--If a member is eligible
to receive an annuity from the system and does not file a proper
application within 90 days of termination of service, he shall
be deemed to have elected to vest, and his annuity will become
effective as of the date an application is filed with the board
or the date designated on the application whichever is later,
provided that in no event shall a member begin receiving
benefits on a date later than the required beginning date.
* * *
Section 117. Sections 8521(b), 8522, 8524, 8525 and 8531 of
Title 24 are amended to read:
§ 8521. Management of fund and accounts.
* * *
(b) Crediting of interest.--The board annually shall allow
statutory interest, excluding the individual investment
accounts, to the credit of the members' savings account on the
mean amount of the accumulated deductions of all members for
whom interest is payable for the preceding year and valuation
interest on the mean amount of the annuity reserve account for
the preceding year to the credit of that account. The board
annually shall allow valuation interest calculated on the mean
amount for the preceding year of the balance in the State
accumulation account excluding any earnings of the fund credited
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to the account during that year. In the event the total earnings
for the year do not exceed 5 1/2% of the mean amount for the
preceding year of the total assets of the fund less earnings
credited to the fund during that year plus the administrative
expenses of the board, the difference required to be
appropriated from the General Fund shall be credited to the
State accumulation account.
* * *
§ 8522. Public School Employees' Retirement Fund.
(a) General rule.--The fund shall consist of all moneys in
the several separate funds in the State Treasury set apart to be
used under the direction of the board for the benefit of members
of the system; and the Treasury Department shall credit to the
fund all moneys received from the Department of Revenue arising
from the contributions relating to or on behalf of the members
of the system required under the provisions of Chapter 83
(relating to membership, contributions and benefits) and all
earnings from investments or moneys of said fund. There shall be
established and maintained by the board the several ledger
accounts specified in sections 8523 (relating to members'
savings account), 8524 (relating to State accumulation account),
8525 (relating to annuity reserve account) and 8526 (relating to
health insurance account).
(b) Individual investment accounts and trust.--The
individual investment accounts that are part of the trust are
not part of the fund. Mandatory pickup participant
contributions, voluntary contributions and employer defined
contributions made under this part and any income earned by the
investment of such contributions shall not be paid or credited
to the fund but instead shall be paid to the trust and credited
to the individual investment accounts.
§ 8524. State accumulation account.
The State accumulation account shall be the ledger account to
which shall be credited all contributions of the Commonwealth
and other employers as well as the earnings of the fund, except
the premium assistance contributions and earnings thereon in the
health insurance account. Valuation interest shall be allowed on
the total amount of such account less any earnings of the fund
credited during the year. The reserves necessary for the payment
of annuities and death benefits resulting from membership in the
system as approved by the board and as provided in Chapter 83
(relating to membership, contributions and benefits) shall be
transferred from the State accumulation account to the annuity
reserve account. At the end of each year the required interest
shall be transferred from the State accumulation account to the
credit of the members' savings account and the annuity reserve
account. The administrative expenses of the board shall be
charged to the State accumulation account. Employer defined
contributions, mandatory pickup contributions and a
participant's voluntary contributions, together with any income
or interest earned thereon, may be temporarily placed into the
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State accumulation account pending allocation or distribution
to the participant's individual investment account.
§ 8525. Annuity reserve account.
(a) Credits and charges to account.--The annuity reserve
account shall be the ledger account to which shall be credited
the reserves held for the payment of annuities and death
benefits resulting from membership in the system on account of
all annuitants and the contributions from the Commonwealth and
other employers as determined in accordance with section 8328
(relating to actuarial cost method) for the payment of the
supplemental annuities provided in sections 8348 (relating to
supplemental annuities), 8348.1 (relating to additional
supplemental annuities), 8348.2 (relating to further additional
supplemental annuities), 8348.3 (relating to supplemental
annuities commencing 1994), 8348.4 (relating to special
supplemental postretirement adjustment), 8348.5 (relating to
supplemental annuities commencing 1998), 8348.6 (relating to
supplemental annuities commencing 2002) and 8348.7 (relating to
supplemental annuities commencing 2003). The annuity reserve
account shall be credited with valuation interest. After the
transfers provided in sections 8523 (relating to members'
savings account) and 8524 (relating to State accumulation
account), all annuity and death benefit payments shall be
charged to the annuity reserve account and paid from the fund.
(b) Transfers from account.--Should an annuitant be
subsequently restored to active service either as a member of
the system or participant in the plan, the present value of his
member's annuity at the time of reentry into school service
shall be transferred from the annuity reserve account and placed
to his individual credit in the members' savings account. In
addition, the actuarial reserve for his annuity less the amount
transferred to the members' savings account shall be transferred
from the annuity reserve account to the State accumulation
account.
§ 8531. State guarantee regarding the system.
Statutory interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and other
benefits granted by the board from the system under the
provisions of this part relating to the establishment and
administration of the system are hereby made obligations of the
Commonwealth. All income, interest, and dividends derived from
deposits and investments of the system authorized by this part
shall be used for the payment of the said obligations of the
Commonwealth and shall not be used for any obligations of the
plan or trust.
Section 118. Section 8533(a), (b) and (d) of Title 24 are
amended and the section is amended by adding a subsection to
read:
§ 8533. Taxation, attachment and assignment of funds.
(a) General rule.--Except as provided in subsections (b),
(c) and (d), the right of a person to a member's annuity, a
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State annuity, or retirement allowance, to the return of
contributions, any benefit or right accrued or accruing to any
person under the provisions of this part, and the moneys in the
fund and the trust are hereby exempt from any State or municipal
tax, [and exempt from] levy and sale, garnishment, attachment,
the provisions of Article XIII.1 of the act of April 9, 1929
(P.L.343, No.176), known as The Fiscal Code, or any other
process whatsoever, and shall be unassignable.
(a.1) Individual investment accounts and distributions.--No
participant or beneficiary, successor payee or alternate payee
of a participant shall have the ability to commute, sell,
assign, alienate, anticipate, mortgage, pledge, hypothecate,
commutate or otherwise transfer or convey any benefit or
interest in an individual investment account or rights to
receive or direct distributions under this part or under
agreements entered into under this part except as otherwise
provided in this part and in the case of either a member or a
participant.
(b) Forfeiture.--
(1) Rights under this part shall be subject to
forfeiture as provided by the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture Act.
Forfeitures under this subsection or under any other
provision of law may not be applied to increase the benefits
that any member would otherwise receive under this part.
(2) In accordance with section 16(b) of Article V of the
Constitution of Pennsylvania and notwithstanding paragraph
(1), the Public Employee Pension Forfeiture Act or 42 Pa.C.S.
§ 3352 (relating to pension rights), the accumulated
mandatory participant contributions and accumulated voluntary
contributions standing to the credit of a participant shall
not be forfeited but shall be available for payment of fines
and restitution as provided by law. Amounts in the trust that
have been ordered to be distributed to an alternate payee as
the result of an equitable distribution of marital property
as part of an approved domestic relations order entered
before the date of the order or action in a court or other
tribunal resulting in a forfeiture of a participant's
interest in the trust shall not be subject to the Public
Employee Pension Forfeiture Act or 42 Pa.C.S. § 3352. Any
accumulated employer defined contributions forfeited as a
result of this subsection or other law shall be retained by
the board and used for the payment of expenses of the plan.
* * *
(d) Direct rollover.--Effective with distributions made on
or after January 1, 1993, and notwithstanding any other
provision of this part to the contrary, a distributee may elect,
at the time and in the manner prescribed by the board, to have
any portion of an eligible rollover distribution paid directly
to an eligible retirement plan by way of a direct rollover. For
purposes of this subsection, a "distributee" includes a member
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[and], a participant, a member's surviving spouse [and], a
participant's surviving spouse, a member's former spouse who is
an alternate payee under an approved domestic relations
order[.], a participant's former spouse who is an alternate
payee under an approved domestic relations order and anyone else
authorized under IRC and the plan terms approved by the board to
have an eligible rollover distribution paid directly to an
eligible retirement plan by way of a direct rollover. For
purposes of this subsection, the term "eligible rollover
distribution" has the meaning given such term by IRC § 402(f)(2)
(A) and "eligible retirement plan" has the meaning given such
term by IRC § 402(c)(8)(B), except that a qualified trust shall
be considered an eligible retirement plan only if it accepts the
distributee's eligible rollover distribution; however, in the
case of an eligible rollover distribution to a surviving spouse,
an eligible retirement plan is an "individual retirement
account" or an "individual retirement annuity" as those terms
are defined in IRC § 408(a) and (b).
Section 119. Sections 8533.1, 8533.2, 8533.3 and 8533.4(a)
of Title 24 are amended to read:
§ 8533.1. Approval of domestic relations orders.
(a) Certification regarding members.--A domestic relations
order pertaining to a member of the system shall be certified as
an approved domestic relations order by the secretary of the
board, or his designated representative, only if such order
meets all of the following:
(1) Requires the system to provide any type or form of
benefit or any option applicable to members already provided
under this part.
(2) Requires the system to provide no more than the
total amount of benefits than the member would otherwise
receive (determined on the basis of actuarial value) unless
increased benefits are paid to the member or alternate payee
based upon cost-of-living increases or increases based on
other than actuarial value.
(3) Specifies the amount or percentage of the member's
benefits to be paid by the system to each such alternate
payee or the manner in which the amount or percentage is to
be determined.
(4) Specifies the retirement option to be selected by
the member upon retirement or states that the member may
select any retirement option offered by this part upon
retirement.
(5) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(6) Does not grant an alternate payee any of the rights,
options or privileges of a member under this part.
(7) Requires the member to execute an authorization
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allowing each alternate payee to monitor the member's
compliance with the terms of the domestic relations order
through access to information concerning the member
maintained by the system. An authorization granted under this
section shall be construed as an authorization for the
alternate payee to receive information concerning the
administration, calculation and payment of the alternate
payee's share of the benefits payable under this part and not
as an authorization to exercise the rights afforded to
members or obtain information that is not related to the
administration, calculation and payment of alternate payee's
share of the benefits payable under this part.
(a.1) Certification regarding participants.--A domestic
relations order pertaining to a participant shall be certified
as an approved domestic relations order by the secretary of the
board, or his designated representative, only if that order
meets all of the following:
(1) Does not require the plan to provide any type or
form of benefit or any option applicable to members of the
system or participants in the plan.
(2) Does not require the segregation of the alternate
payee's share of the participant's individual investment
account into a subaccount or newly established individual
account titled in the name of the alternate payee.
(3) Does not require the plan to recover or distribute
any funds that were distributed to the participant or at the
participant's direction prior to the approval of the domestic
relations order by the secretary of the board or his
designated representative.
(4) Requires the plan to pay to the alternate payee no
more than the lesser of the vested amount of the
participant's individual investment account specified by the
domestic relations order or the vested amount of the
participant's individual investment account as of the date of
the transfer of the alternate payee's share to the alternate
payee.
(5) States that the plan shall not be required to recoup
or make good for losses in value to the participant's
individual investment account incurred between the date of
the valuation of the account used for equitable distribution
purposes and the date of distribution to the alternate payee.
(6) Specifies the amount or percentage of the
participant's individual investment account to be paid to the
alternate payee and the date upon which such valuation is
based.
(7) Specifies the name and last known mailing address,
if any, of the participant and the name and last known
mailing address of each alternate payee covered by the order
and states that it is the responsibility of each alternate
payee to keep a current mailing address on file with the
plan.
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(8) Does not grant an alternate payee the rights,
privileges or options available to a participant.
(9) Requires the participant to execute an authorization
allowing each alternate payee to monitor the participant's
compliance with the terms of the domestic relations order
through access to information concerning the participant
maintained by the plan. Any authorization granted under this
section shall be construed as an authorization for the
alternate payee to receive information concerning the
participant that relates to the administration, calculation
and payment of the alternate payee's share of the
participant's account and not as an authorization to exercise
the rights afforded to participants or obtain information
that is not related to the administration, calculation and
payment of alternate payee's share of the participant's
individual investment account.
(10) Requires the immediate distribution of the
alternate payee's share of the participant's individual
investment account, which may be made by direct payment,
eligible rollover or trustee-to-trustee transfer to another
eligible plan or qualified account owned by the alternate
payee.
(11) In the case of a participant who is currently
receiving distributions from the plan as of the date the
domestic relations order is approved by the secretary of the
board or his designated representative, may not order the
board to pay the alternate payee more than the vested balance
available in the participant's individual investment account
as of the date the order is approved or require that
distributions continue to the alternate payee after the death
of the participant and final settlement of the participant's
individual investment account.
(b) Determination by secretary.--Within a reasonable period
of time after receipt of a domestic relations order, the
secretary of the board, or his designated representative, shall
determine whether [this] the order is an approved domestic
relations order and notify the member or participant and each
alternate payee of this determination. Notwithstanding any other
provision of law, the exclusive remedy of any member,
participant or alternate payee aggrieved by a decision of the
secretary of the board, or his designated representative, shall
be the right to an adjudication by the board under 2 Pa.C.S. Ch.
5 (relating to practice and procedure) with appeal therefrom to
the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to
judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct
appeals from government agencies).
(c) Other orders.--The requirements for approval identified
in [subsection (a)] subsections (a) and (a.1) shall not apply to
any domestic relations order which is an order for support as
that term is defined in 23 Pa.C.S. § 4302 (relating to
definitions) or an order for the enforcement of arrearages as
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provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages). These orders shall be approved to the extent that
they do not attach moneys in excess of the limits on attachments
as established by the laws of this Commonwealth and the United
States[.], require distributions of benefits in a manner that
would violate the laws of the United States, any other state or
this Commonwealth or require the distribution of funds for
support or enforcement of arrearages against any participant who
is not receiving distributions from the plan at the time the
order is entered. These orders may be approved notwithstanding
any other provision of this part or the plan that would
otherwise require a distribution of accumulated employer defined
contributions in the form of an annuity or to require the
purchase of an annuity.
(d) Obligation discharged.--Only the requirements of this
part and any regulations promulgated hereunder shall be used to
govern the approval or disapproval of a domestic relations
order. Therefore, if the secretary of the board, or his
designated representative, acts in accordance with the
provisions of this part and any promulgated regulations in
approving or disapproving a domestic relations order, then the
obligations of the system or plan with respect to such approval
or disapproval shall be discharged.
§ 8533.2. Irrevocable beneficiary.
Notwithstanding any other provision of this part, a domestic
relations order may provide for an irrevocable beneficiary. A
domestic relations order requiring the nomination of an
irrevocable beneficiary shall be deemed to be one that requires
a member or participant to nominate an alternate payee as a
beneficiary and that prohibits the removal or change of that
beneficiary without approval of a court of competent
jurisdiction, except by operation of law. Such a domestic
relations order may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, after the member or participant makes such
nomination, in which case the irrevocable beneficiary so ordered
by the court cannot be changed by the member or participant
without approval by the court.
§ 8533.3. Irrevocable survivor annuitant.
Notwithstanding any other provisions of this part, a domestic
relations order may provide for an irrevocable survivor
annuitant pertaining to a member. A domestic relations order
requiring the designation of an irrevocable survivor annuitant
of a member of the fund shall be deemed to be one that requires
a member to designate an alternate payee as a survivor annuitant
and that prohibits the removal or change of that survivor
annuitant for benefits payable from the fund without approval of
a court of competent jurisdiction, except by operation of law.
Such a domestic relations order may be certified as an approved
domestic relations order by the secretary of the board, or his
designated representative, in which case the irrevocable
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survivor annuitant so ordered by the court cannot be changed by
the member without approval by the court. A person ineligible to
be designated as a survivor annuitant may not be designated an
irrevocable survivor annuitant.
§ 8533.4. Amendment of approved domestic relations orders.
(a) Deceased alternate payee.--In the event that the
alternate payee predeceases the member or participant and there
are benefits payable to the alternate payee, the divorce court
may amend the approved domestic relations order to substitute a
person for the deceased alternate payee to receive any benefits
payable to the deceased alternate payee.
* * *
Section 120. Title 24 is amended by adding a section to
read:
§ 8533.5. Irrevocable successor payee.
(a) Condition.--Notwithstanding any other provisions of this
part, a domestic relations order pertaining to a participant may
provide for an irrevocable successor payee only if the
participant is receiving a payment under a payment option
provided by the board that allows for a successor payee.
(b) Determination.--A domestic relations order requiring the
designation of an irrevocable successor payee shall be deemed to
be one that requires a participant who is receiving payments
from an annuity or other distribution option to designate an
alternate payee as a successor payee and that prohibits the
removal or change of that successor payee without approval of a
court of competent jurisdiction, except by operation of law.
(c) Certification.--A domestic relations order under
subsection (b) may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, in which case the irrevocable successor payee so
ordered by the court cannot be changed by the participant
without approval by the court.
(d) Ineligibility.--A person ineligible to be designated as
a successor payee may not be designated as an irrevocable
successor payee. A court may not name an irrevocable successor
payee if the alternate payee is eligible to receive a lump sum
distribution of the alternate payee's portion of the marital
portion of the pension benefit.
Section 121. Sections 8534 and 8535 of Title 24 are amended
to read:
§ 8534. Fraud and adjustment of errors.
(a) Penalty for fraud.--Any person who shall knowingly make
any false statement or shall falsify or permit to be falsified
any record or records of this system or plan in any attempt to
defraud the system or plan as a result of such act shall be
guilty of a misdemeanor of the second degree.
(b) Adjustment of errors.--Should any change or mistake in
records result in any member, participant, beneficiary, [or]
survivor annuitant or successor payee receiving from the system
or plan more or less than he would have been entitled to receive
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had the records been correct, then regardless of the intentional
or unintentional nature of the error and upon the discovery of
such error, the board shall correct the error and if the error
affects contributions to or payments from the system, then so
far as practicable shall adjust the payments which may be made
for and to such person in such a manner that the actuarial
equivalent of the benefit to which he was correctly entitled
shall be paid. If the error affects contributions to or payments
from the plan, the board shall take such action as shall be
provided for in the plan document.
§ 8535. Payments to school entities by Commonwealth.
For each school year beginning with the 1995-1996 school year
and ending with the 2018-2019 school year, each school entity
shall be paid by the Commonwealth for contributions based upon
school service of active members of the system after June 30,
1995, as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
Fund based upon school service of all active members,
including members on activated military service leave, whose
effective dates of employment with their school entities are
after June 30, 1994, and who also had not previously been
employed by any school entity within this Commonwealth an
amount equal to the amount certified by the Public School
Employees' Retirement Board as necessary to provide, together
with the members' contributions, reserves on account of
prospective annuities, supplemental annuities and the premium
assistance program as provided in this part in accordance
with section 8328 (relating to actuarial cost method),
multiplied by the market value/income aid ratio of the school
entity. For no school year shall any school entity receive
less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code [of 1949] was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
Fund based upon school service of all active members,
including members on activated military service leave, who
are not described in paragraph (1), one-half of the amount
certified by the Public School Employees' Retirement Board as
necessary to provide, together with the members'
contributions, reserves on account of prospective annuities,
supplemental annuities and the premium assistance program as
provided in this part in accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to [make] forward the payment to the Public School
Employees' Retirement Fund. School entities are expected to
make the full payment to the Public School Employees'
Retirement Fund in accordance with section 8327 (relating to
payments by employers) in the event the receipt of the
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Commonwealth's portion of the employer's liability is delayed
because of delinquent salary reporting or other conduct by
the school entities.
Section 122. Title 24 is amended by adding sections to read:
§ 8535.1. Payments to school entities by Commonwealth
commencing with the 2019-2020 school year.
For each school year, beginning with the 2019-2020 school
year, each school entity shall be paid by the Commonwealth for
contributions based upon school service of active members of the
system and active participants of the plan after June 30, 2018,
as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the fund or the trust based upon school
service of all active members or active participants,
including members or participants on activated or USERRA
military service leave, whose effective dates of employment
with their school entities are after June 30, 1994, and who
also had not previously been employed by any school entity
within this Commonwealth, an amount equal to the amount
certified by the board as necessary to provide, together with
the members' and participants' contributions, reserves on
account of prospective annuities, supplemental annuities and
the premium assistance program as provided in this part in
accordance with section 8328 (relating to actuarial cost
method), multiplied by the market value/income aid ratio of
the school entity. For no school year shall any school entity
receive less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the fund or the trust based upon school
service of all active members or active participants,
including members or participants on activated military
service leave, and active participants of the plan who are
not described in paragraph (1) one-half of the amount
certified by the board as necessary to provide, together with
the members' and participants' contributions, reserves on
account of prospective annuities, supplemental annuities and
the premium assistance program as provided in this part in
accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to forward the payment to the fund or the trust.
School entities are expected to make the full payment to the
fund or the trust in accordance with section 8327 (relating
to payments by employers) in the event the receipt of the
Commonwealth's portion of the employer's liability is delayed
because of delinquent salary reporting or other conduct by
the school entities.
(4) Employers whose payments to the Public School
Employees' Retirement Fund are delinquent shall be charged
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interest by the Public School Employees' Retirement Fund at
the annual interest rate adopted by the board under section
8328 in effect in the fiscal year in which the payments are
required to be paid.
§ 8537. Internal Revenue Code limitations.
Notwithstanding any provisions of this part to the contrary,
no contribution or benefit related to the School Employees'
Defined Contribution Plan may be made or payable to the extent
that the contribution or benefit exceeds a limitation under IRC
§ 415 in effect with respect to a "governmental plan" as defined
in IRC § 414(d) on the date the contribution or benefit payment
becomes effective. An increase in a limitation under IRC § 415
shall be applicable to all current and future participants.
§ 8538. Public Pension Management and Asset Investment Review
Commission.
(a) Establishment.--A Public Pension Management and Asset
Investment Review Commission shall be established, which shall
be composed of five appointees, one appointed by each of the
following:
(1) The Governor.
(2) The President pro tempore of the Senate.
(3) The Minority Leader of the Senate.
(4) The Speaker of the House of Representatives.
(5) The Minority Leader of the House of Representatives.
The appointees shall be investment professionals and retirement
advisors and shall be appointed within 90 days of the effective
date of this section.
(b) Duties.--The duties of the Public Pension Management and
Asset Investment Review Commission are as follows:
(1) Study the performance of current investment
strategies and procedures of the Public School Employees'
Retirement System, comparing realized rates of return to
established benchmarks and considering associated fees paid
for active and passive management.
(2) Study the costs and benefits of both active and
passive investment strategies in relation to future
investment activities of the Public School Employees'
Retirement System.
(3) Study alternative future investment strategies with
available assets of the Public School Employees' Retirement
System that will maximize future rates of return net of fees.
(3.1) The commission shall evaluate and make
recommendations on:
(i) Improving investment fee transparency on
alternative investments as specified in the Standardized
Reporting Guidelines of the Institutional Limited
Partners Association.
(ii) Implementing the recommendations of the Society
of Actuaries Blue Ribbon Panel on stress testing, to test
the ability of the plan to withstand a period of
investment returns above or below the level of assumed
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return.
(4) Publish extensive and detailed findings online,
including findings about:
(i) Assets.
(ii) Returns.
(iii) Financial managers.
(iv) Consultants.
(v) Requests for proposals.
(vi) Investment performance measured against
benchmarks.
(5) Recommend an amount of investment fees sufficient
for the board to achieve the board's assumed annual rate of
return and to develop recommendations to reduce expenditures
to generate actuarial savings of $1,500,000,000 over 30 years
from the effective date of this section.
(6) Report its findings and recommendations to the
Governor and the General Assembly within six months of its
first organizational meeting.
(c) Quorum.--A majority of appointed members shall
constitute a quorum for the purpose of conducting business. The
members shall select one of their number to be chairperson and
another to be vice chairperson.
(d) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission shall be subject to the
following laws:
(1) The act of February 14, 2008 (P.L.6, No.3), known as
the Right-to-Know Law.
(2) The former act of July 3, 1986 (P.L.388, No.84),
known as the Sunshine Act.
(3) The act of October 4, 1978 (P.L.883, No.170), known
as the Public Official and Employee Ethics Law.
(4) The act of July 19, 1957 (P.L.1017, No.451), known
as the State Adverse Interest Act.
(e) Information gathering.--The Public Pension Management
and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate and necessary to fulfill its duties.
(f) Logistical and other support.--The Public Pension
Management and Asset Investment Review Commission shall receive
logistical and other support from the Joint State Government
Commission and may employ additional temporary staff as needed.
(g) Reimbursement.--The members of the Public Pension
Management and Asset Investment Review Commission shall be
reimbursed for reasonable expenses.
(h) Expiration.--The Public Pension Management and Asset
Investment Review Commission shall expire 60 days after delivery
of its report in accordance with subsection (b)(5). Any unspent
appropriation shall lapse back to the General Fund.
Section 123. The definition of "eligible person" in section
8702(a) of Title 24 is amended to read:
§ 8702. Definitions.
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(a) General rule.--Subject to additional definitions
contained in subsequent provisions of this part which are
applicable to specific provisions of this part, the following
words and phrases when used in this part shall have the meanings
given to them in this section unless the context clearly
indicates otherwise:
"Eligible person." An individual who is:
(1) an annuitant or survivor annuitant or the spouse or
dependent of an annuitant or survivor annuitant[.]; or
(2) a participant receiving distributions or a successor
payee, or the spouse or dependent of a participant receiving
distributions or a successor payee.
* * *
ARTICLE II
Section 201. Section 7306(a) introductory paragraph of Title
51 is amended and the section is amended by adding a subsection
to read:
§ 7306. Retirement rights.
(a) Options available to employees.--Any employee who is a
member of a retirement system other than an active member or
inactive member on leave without pay of the State Employees'
Retirement System [or], an active participant or inactive
participant on leave without pay of the State Employees' Defined
Contribution Plan, an active or inactive member of the Public
School Employees' Retirement System or an active or inactive
participant of the School Employees' Defined Contribution Plan
at the time he is granted a military leave of absence shall be
entitled to exercise any one of the following options in regard
thereto:
* * *
(f) Participant of a defined contribution plan.--
(1) (Reserved).
(2) An employee who is an active participant or inactive
participant on leave without pay of the State Employees'
Defined Contribution Plan at the time the employee is granted
a military leave of absence shall be entitled to make
contributions to the State Employees' Defined Contribution
Trust for the leave as provided by 71 Pa.C.S. Pt. XXV
(relating to retirement for State employees and officers).
ARTICLE III
Section 301. (Reserved).
Section 302. The definitions of "alternate payee," "average
noncovered salary," "beneficiary," "class of service
multiplier," "compensation," "creditable nonstate service,"
"credited service," "date of termination of service,"
"distribution," "domestic relations order," "eligibility
points," "final average salary," "inactive member," "intervening
military service," "irrevocable beneficiary," "member's
annuity," "reemployed from USERRA leave," "regular member
contributions," "required beginning date," "retirement
counselor," "salary deductions," "shared-risk member
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contributions," "special vestee," "standard single life
annuity," "State employee," "superannuation age," "valuation
interest" and "vestee" in section 5102 of Title 71 are amended
and the section is amended by adding definitions to read:
§ 5102. Definitions.
The following words and phrases as used in this part, unless
a different meaning is plainly required by the context, shall
have the following meanings:
* * *
"Accumulated employer defined contributions." The total of
the employer defined contributions paid into the trust on
account of a participant's State service together with any
investment earnings and losses and adjustment for fees, costs
and expenses credited or charged thereon and reduced by any
distributions.
"Accumulated mandatory participant contributions." The total
of the mandatory pickup participant contributions paid into the
trust on account of a participant's State service together with
any investment earnings and losses and adjustments for fees,
costs and expenses credited or charged thereon and reduced by
any distributions.
"Accumulated total defined contributions." The total of the
accumulated mandatory participant contributions, accumulated
employer defined contributions and accumulated voluntary
contributions standing to the credit of a participant in an
individual investment account in the trust.
"Accumulated voluntary contributions." The total of
voluntary contributions paid into the trust by a participant and
any amounts rolled over by a participant or transferred by a
direct trustee-to-trustee transfer into the trust together with
any investment earnings and losses and adjustment for fees,
costs and expenses credited or charged thereon and reduced by
any distributions.
* * *
"Active participant." A State employee for whom mandatory
pickup participant contributions are being made to the trust or
for whom contributions otherwise required for State service
required to be credited in the plan are not being made solely by
reason of any provision of this part relating to the limitations
under section 401(a)(17) or 415 of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415).
* * *
"Alternate payee." Any spouse, former spouse, child or
dependent of a member or participant who is recognized by a
domestic relations order as having a right to receive all or a
portion of the moneys payable to that member or participant
under this part.
* * *
"Average noncovered salary." The average of the amounts of
compensation received as an active member each calendar year
since January 1, 1956, exclusive of the amount which was or
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could have been covered by the Federal Social Security Act[, 42
U.S.C. § 301 et seq.] (42 U.S.C. § 301 et seq.), during that
portion of the member's service since January 1, 1956, for which
he has received social security integration credit.
* * *
"Beneficiary." [The] In the case of the system, the person
or persons last designated in writing to the board by a member
to receive his accumulated deductions or a lump sum benefit upon
the death of such member. In the case of the plan, the person or
persons last designated in writing to the board by the
participant to receive the participant's vested accumulated
total defined contributions or a lump sum benefit upon the death
of the participant.
* * *
"Class A-5 exempt employee." Any of the following:
(1) A sworn police officer.
(2) An enforcement officer.
(3) A wildlife conservation officer or other
commissioned law enforcement personnel employed by the
Pennsylvania Game Commission who has and exercises the same
law enforcement powers as a wildlife conservation officer.
The term shall not include a deputy wildlife conservation
officer.
(4) A Delaware River Port Authority policeman.
(5) A park ranger.
(6) A Capitol Police officer.
(7) A campus police officer employed by a State-owned
educational institution, community college or The
Pennsylvania State University.
(8) An installation police officer at Fort Indiantown
Gap or other designated Commonwealth military installation or
facility commissioned under 51 Pa.C.S. § 711 (relating to
installation of police officers for Fort Indiantown Gap and
other designated Commonwealth military installations and
facilities).
(9) A correction officer.
"Class of service multiplier."
Class of Service Multiplier
A 1
AA
for all purposes
except
calculating
regular member
contributions on
compensation
paid prior to
January 1, 2002 1.25
AA
for purposes of
calculating
regular member
contributions
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on compensation
paid prior to
January 1, 2002 1
A-3
for all purposes
except the
calculation of
regular member
contributions
and
contributions
for creditable
nonstate service 1
A-3
for purposes of
calculating
regular member
contributions
and
contributions
for creditable
nonstate service 1.25
A-4
for all purposes
except the
calculation of
regular member
contributions 1.25
A-4
for purposes of
calculating
regular member
contributions 1.86
A-5
for all purposes
except the
calculation of
regular member
contributions .625
A-5
for purposes of
calculating
regular member
contributions 1
A-6 for all purposes
except the
calculation of
regular member
contributions .5
A-6 for purposes of
calculating
regular member
contributions .8
B .625
C 1
D 1.25
D-1 prior to January
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1, 1973 1.875
D-1
on and
subsequent to
January 1, 1973 1.731
D-2
prior to January
1, 1973 2.5
D-2
on and
subsequent to
January 1, 1973 1.731
D-3
prior to January
1, 1973 3.75
D-3
on and
subsequent to
January 1, 1973 1.731 except prior to
December 1, 1974
as applied to
any additional
legislative
compensation as
an officer of
the General
Assembly
3.75
D-4
for all purposes
except
calculating
regular member
contributions
on compensation
paid prior to
July 1, 2001 1.5
D-4
for purposes of
calculating
regular member
contributions on
compensation
paid prior to
July 1, 2001 1
E, E-1
prior to January
1, 1973 2 for each of the
first ten years
of judicial
service, and
1.5 for each
subsequent year
of judicial
service
E, E-1 on and
subsequent to
January 1, 1973 1.50 for each of the
first ten years
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of judicial
service and
1.125 for each
subsequent year
of judicial
service
E-2 prior to
September 1,
1973 1.5
E-2
on and
subsequent to
September 1,
1973 1.125
G 0.417
H 0.500
I 0.625
J 0.714
K 0.834
L 1.000
M 1.100
N 1.250
T-C (Public School
Employees'
Retirement Code) 1
T-E (Public School
Employees'
Retirement Code) 1
T-F (Public School
Employees'
Retirement Code) 1
T-G (Public School
Employees'
Retirement Code) 1
T-H (Public School
Employees'
Retirement Code) 1
* * *
"Compensation." Pickup contributions and mandatory pickup
participant contributions plus remuneration actually received as
a State employee excluding refunds for expenses, contingency and
accountable expense allowances; excluding any severance payments
or payments for unused vacation or sick leave; and excluding
payments for military leave and any other payments made by an
employer while on USERRA leave, leave of absence granted under
51 Pa.C.S. § 4102 (relating to leaves of absence for certain
government employees), military leave of absence granted under
51 Pa.C.S. § 7302 (relating to granting military leaves of
absence) or other types of military leave, including other types
of leave payments, stipends, differential wage payments as
defined in IRC § 414(u)(12) and any other payments: Provided,
however, That for purposes of determining member and employer
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contributions to the system and for calculating annuities and
benefits from the system resulting from service performed as a
Class A-5 exempt employee who first became a member on or after
January 1, 2019, compensation shall not include remuneration
received in any pay period for voluntary overtime service or
duty that exceeds 10% of a Class A-5 exempt employee's base
salary or wages in that pay period , notwithstanding the
provisions of a binding arbitration award issued before July 1,
1989, under the act of June 24, 1968 (P.L.237, No.111), referred
to as the Policemen and Firemen Collective Bargaining Act, and
implemented by the board : Provided further, That compensation
received prior to January 1, 1973, shall be subject to the
limitations for retirement purposes in effect December 31, 1972,
if any: Provided further, That the limitation under section
401(a)(17) of the Internal Revenue Code of 1986 (Public Law 99-
514, 26 U.S.C. § 401(a)(17)) taken into account for the purpose
of member contributions, including any additional member
contributions in addition to regular or joint coverage member
contributions and Social Security integration contributions,
regardless of class of service, shall apply to each member who
first became a member of the State Employees' Retirement System
on or after January 1, 1996, and who by reason of such fact is a
noneligible member subject to the application of the provisions
of section 5506.1(a) (relating to annual compensation limit
under IRC § 401(a)(17)) and shall apply to each participant
pertaining to his participation in the plan.
* * *
"Creditable nonstate service." Service for which an active
member may obtain credit in the system, other than:
(1) service as a State employee;
(2) service converted to State service pursuant to
section 5303.1 (relating to election to convert county
service to State service); or
(3) school service converted to State service pursuant
to section 5303.2 (relating to election to convert school
service to State service) [for which an active member may
obtain credit].
"Credited service." State or creditable nonstate service for
which the required contributions have been made to the fund or
for which the contributions otherwise required for such service
were not made solely by reason of section 5502.1 (relating to
waiver of regular member contributions and Social Security
integration member contributions) or any provision of this part
relating to the limitations under section 401(a)(17) or 415 of
the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
§ 401(a)(17) or 415), except as otherwise provided in this part,
or for which salary deductions or lump sum payments to the
system have been agreed upon in writing.
"Date of termination of service." The latest of the
following dates:
(1) the last day of service for which pickup
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contributions are made for an active member or for which the
contributions otherwise required for such service are not
made solely by reason of any provision of this part relating
to the limitations under section 401(a)(17) or 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or 415);
(2) in the case of an inactive member on leave without
pay or an inactive participant on leave without pay, the date
of his resignation or the date his employment is formally
discontinued by his employer[.]; or
(3) the last day of service for which mandatory pickup
participant contributions are made for an active participant.
* * *
"Distribution." Payment of all or any portion of a person's
interest in either the State Employees' Retirement Fund or the
State Employees' Defined Contribution Trust, or both, which is
payable under this part.
"Domestic relations order." Any judgment, decree or order,
including approval of a property settlement agreement, entered
on or after the effective date of this definition by a court of
competent jurisdiction pursuant to a domestic relations law
which relates to the marital property rights of the spouse or
former spouse of a member or participant, including the right to
receive all or a portion of the moneys payable to that member or
participant under this part in furtherance of the equitable
distribution of marital assets. The term includes orders of
support as that term is defined by 23 Pa.C.S. § 4302 (relating
to definitions) and orders for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages).
* * *
"Eligibility points." Points which are accrued by an active
member, active participant or a multiple service member who is
an active member in the Public School Employees' Retirement
System for credited service or a member who has been reemployed
from USERRA leave or a member who dies while performing USERRA
leave and are used in the determination of eligibility for
benefits.
"Employer defined contributions." Contributions equal to a
percentage of an active participant's compensation that are made
by the Commonwealth or other employer to the trust to be
credited in an active participant's individual investment
account as follows:
(1) 2.25% of compensation for service credited as a
Class A-5 member;
(2) 2% of compensation for service credited as a Class
A-6 member; and
(3) 3.5% of compensation for service performed solely as
a participant.
* * *
"Final average salary." [The] As follows:
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(1) For members with an effective date of retirement
before January 1, 2019, and for purposes of calculating
standard single life annuities and benefits resulting from
credited service other than Class A-5 service and Class A-6
service regardless of the effective date of retirement, the
highest average compensation received as a member during any
three nonoverlapping periods of four consecutive calendar
quarters during which the member was a State employee, with
the compensation for part-time service being annualized on
the basis of the fractional portion of the year for which
credit is received; except if the employee was not a member
for three nonoverlapping periods of four consecutive calendar
quarters, the total compensation received as a member,
annualized in the case of part-time service, divided by the
number of nonoverlapping periods of four consecutive calendar
quarters of membership[;].
(2) For purposes of calculating standard single life
annuities and benefits from the system attributable to
service as a member of Class A-5 or Class A-6, the highest
average compensation received as a member during any five
calendar years during which the member was a State employee,
with the compensation for part-time service or for any
partial year of credit annualized on the basis of the
fractional portion of the year for which credit is received;
except if the employee was not a member during five calendar
years, the average of the number of calendar years during
which the employee was an active member.
(3) For all members and for the calculation of all
standard single life annuities without regard to class of
membership and credited service, in the case of a member with
multiple service, the final average salary shall be
determined on the basis of the compensation received by him
as a [State employee or as a school employee] member of the
system or as a member of the Public School Employees'
Retirement System, or both[;], and, in the case of a member
with [Class A-3 or Class A-4 service and] service in more
than one [or more other classes] class of service, the final
average salary for purposes of calculating annuities and
benefits from all classes of service shall be determined on
the basis of the compensation received by him in all classes
of State service credited in the system; and, in the case of
a member who first became a member on or after January 1,
1996, the final average salary shall be determined as
hereinabove provided but subject to the application of the
provisions of section 5506.1(a) (relating to annual
compensation limit under IRC § 401(a)(17)). Final average
salary shall be determined by including in compensation
payments deemed to have been made to a member reemployed from
USERRA leave to the extent member contributions have been
made as provided in section 5302(f)(2) (relating to credited
State service) and payments made to a member on leave of
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absence under 51 Pa.C.S. § 4102 (relating to leaves of
absence for certain government employees) as provided in
section 5302(f)(6).
* * *
"Inactive member." A member for whom no pickup contributions
are being made to the fund, except in the case of an active
member for whom such contributions otherwise required for
current State service are not being made solely by reason of
section 5502.1 (relating to waiver of regular member
contributions and Social Security integration member
contributions) or any provision of this part relating to the
limitations under section 401(a)(17) or 415 of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17)
or 415), but who has accumulated deductions standing to his
credit in the fund and who is not eligible to become or has not
elected to become a vestee or has not filed an application for
an annuity.
"Inactive member on leave without pay." The term does not
include a State employee who is performing service solely as a
participant in the plan unless the participant concurrently is
employed as a Class A-5 exempt employee and on leave without
pay.
"Inactive participant." A participant for whom no mandatory
pickup participant contributions are being made to the trust,
except in the case of an active participant for whom such
contributions otherwise required for current State service are
not being made solely by reason of any provision of this part
relating to limitations under section 401(a)(17) or 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or 415), but who has vested accumulated total defined
contributions standing to his credit in the trust and who has
not filed an application for a distribution.
"Inactive participant on leave without pay." The term does
not include a Class A-5 exempt employee who is an active member
on leave without pay unless the Class A-5 exempt employee
concurrently is employed in an office or position in which the
Class A-5 exempt employee is a participant in the plan and on
leave without pay.
"Individual investment account." The account in the trust to
which are credited the amounts of the contributions made by a
participant and the participant's employer in accordance with
the provisions of this part, together with all interest and
investment earnings after deduction for fees, costs, expenses
and investment losses and charges for distributions.
"Intervening military service." Active military service of a
member who was a State employee and active member of the system
immediately preceding his induction into the armed services or
forces of the United States in order to meet a military
obligation excluding any voluntary extension of such service and
who becomes a State employee within 90 days of the expiration of
such service.
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* * *
"Irrevocable beneficiary." The person or persons permanently
designated by a member or participant in writing to the State
Employees' Retirement Board pursuant to an approved domestic
relations order to receive all or a portion of the accumulated
deductions, vested accumulated total defined contributions or
lump sum benefit payable upon the death of such member or
participant.
"Irrevocable successor payee." The person permanently
designated by a participant receiving distributions in writing
to the board pursuant to an approved domestic relations order to
receive one or more distributions from the plan upon the death
of the participant.
* * *
"Mandatory pickup participant contributions." Contributions
equal to a percentage of compensation that are made by the
Commonwealth or other employer for an active participant for
current State service that are picked up by the employer and
credited in the plan as follows:
(1) for a participant who did not make the election
under section 5306.5 (relating to election by active members
to become a Class A-5 member, Class A-6 member or plan
participant):
(i) 3.25% of compensation for service credited as a
Class A-5 member;
(ii) 3.5% of compensation for service credited as a
Class A-6 member;
(iii) 7.5% of compensation for service performed
solely as a participant; or
(2) for a participant who makes the election under
section 5306.5, the percentage of compensation otherwise
provided under section 5306.5(e).
* * *
"Member's annuity." The single life annuity which is
actuarially equivalent, at the effective date of retirement and
taking into account any delay in the receipt of the portion of
the annuity based on Class A-5 service or Class A-6 service, if
the effective date of retirement is under the age at which the
member can receive a withdrawal annuity based on Class A-5
service or Class A-6 service, to the sum of the regular
accumulated deductions, shared-risk accumulated deductions, the
additional accumulated deductions and the social security
integration accumulated deductions standing to the member's
credit in the members' savings account.
* * *
"Participant." An active participant, inactive participant
or participant receiving distributions.
"Participant receiving distributions." A participant in the
plan who has commenced receiving distributions from his
individual investment account but who has not received a total
distribution of his vested interest in the individual investment
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account.
* * *
"Plan." The State Employees' Defined Contribution Plan as
established under the provisions of this part and the board.
"Plan document." The documents created by the board under
section 5802 (relating to plan document) that contain the terms
and provisions of the plan and trust as established by the board
regarding the establishment, administration and investment of
the plan and trust.
* * *
"Reemployed from USERRA leave." Resumption of active
membership or active participation as a State employee after a
period of USERRA leave, provided, however, that the resumption
of active membership or active participation was within the time
period and under conditions and circumstances such that the
State employee was entitled to reemployment rights under 38
U.S.C. Ch. 43 (relating to employment and reemployment rights of
members of the uniformed services).
* * *
"Regular member contributions." The product of the basic
contribution rate, the class of service multiplier [if greater
than one] and the compensation of the member[.], subject to any
adjustment under section 5501.1(c) (relating to shared-risk
member contributions and shared-gain adjustments to regular
member contributions).
"Required beginning date." The latest date by which
distributions of a member's interest or a participant's interest
in his individual investment account must commence under section
401(a)(9) of the Internal Revenue Code of 1986 (Public Law 99-
514, 26 U.S.C. § 401(a)(9)).
"Retirement counselor." The State Employees' Retirement
[System] Board employee whose duty it shall be to advise each
employee of his rights and duties as a member of the system or
as a participant of the plan.
"Salary deductions." The amounts certified by the board,
deducted from the compensation of an active member or active
participant, or the school service compensation of a multiple
service member who is an active member of the Public School
Employees' Retirement System, and paid into the fund or trust.
"School Employees' Defined Contribution Plan." The defined
contribution plan for school employees established under 24
Pa.C.S. Pt. IV (relating to retirement for school employees).
* * *
"Shared-risk member contributions." The product of the
applicable shared-risk contribution rate and the compensation of
a member [for service credited as Class A-3 or Class A-4] who is
required to make shared-risk member contributions.
* * *
"Special vestee." An employee of The Pennsylvania State
University who is a member of the State Employees' Retirement
System with five or more but less than ten eligibility points
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and who has a date of termination of service from The
Pennsylvania State University of June 30, 1997, because of the
transfer of his job position or duties to a controlled
organization of the Penn State Geisinger Health System or
because of the elimination of his job position or duties due to
the transfer of other job positions or duties to a controlled
organization of the Penn State Geisinger Health System, provided
that:
(1) subsequent to termination of State service as an
employee of The Pennsylvania State University, the member has
not returned to State service in any other capacity or
position as a State employee;
(2) The Pennsylvania State University certifies to the
board that the member is eligible to be a special vestee;
(3) the member files an application to vest the member's
retirement rights under section 5907(f) (relating to rights
and duties of State employees [and], members and
participants) on or before September 30, 1997; and
(4) the member elects to leave the member's total
accumulated deductions in the fund and to defer receipt of an
annuity until attainment of superannuation age or the
member's required beginning date.
"Standard single life annuity." An annuity equal to 2% of
the final average salary, multiplied by the total number of
years and fractional part of a year of credited service of a
member in each class of service.
"State employee." Any person holding a State office or
position under the Commonwealth, employed by the State
Government of the Commonwealth, in any capacity whatsoever,
except an independent contractor or any person compensated on a
fee basis or any person paid directly by an entity other than a
State Employees' Retirement System employer, and shall include
members of the General Assembly, and any officer or employee of
the following:
(1) (i) The Department of Education.
(ii) State-owned educational institutions.
(iii) Community colleges.
(iv) The Pennsylvania State University, except an
employee in the College of Agriculture who is paid wholly
from Federal funds or an employee who is participating in
the Federal Civil Service Retirement System. The
university shall be totally responsible for all employer
contributions under section 5507 (relating to
contributions to the system by the Commonwealth and other
employers) and all employer defined contributions to the
trust under section 5806 (relating to employer defined
contributions).
(2) The Pennsylvania Turnpike Commission, the Delaware
River Port Authority, the Port Authority Transit Corporation,
the Philadelphia Regional Port Authority, the Delaware River
Joint Toll Bridge Commission, the State Public School
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Building Authority, The General State Authority, the State
Highway and Bridge Authority, the Delaware Valley Regional
Planning Commission, the Interstate Commission of the
Delaware River Basin, and the Susquehanna River Basin
Commission any time subsequent to its creation, provided the
commission or authority agrees to contribute and does
contribute to the fund or trust, from time to time, the
moneys required to build up the reserves necessary for the
payment of the annuities or other benefits of such officers
and employees without any liability on the part of the
Commonwealth to make appropriations for such purposes, and
provided in the case of employees of the Interstate
Commission of the Delaware River Basin, that the employee
shall have been a member of the system for at least ten years
prior to January 1, 1963.
(3) Any separate independent public corporation created
by statute, not including any municipal or quasi-municipal
corporation, so long as he remains an officer or employee of
such public corporation, and provided that such officer or
employee of such public corporation was an employee of the
Commonwealth immediately prior to his employment by such
corporation, and further provided such public corporation
shall agree to contribute and contributes to the fund or
trust, from time to time, the moneys required to build up the
reserves necessary for the payment of the annuities or other
benefits of such officers and employees without any liability
on the part of the Commonwealth to make appropriations for
such purposes.
* * *
"Successor payee." The person or persons last designated in
writing to the board by a participant receiving distributions to
receive one or more distributions upon the death of the
participant.
"Superannuation age." For classes of service in the system
other than Class A-3 [and], Class A-4, Class A-5 and Class A-6,
any age upon accrual of 35 eligibility points or age 60, except
for a member of the General Assembly who has no service as a
member of the General Assembly in Class A-3, Class A-4, Class A-
5 or Class A-6, an enforcement officer, a correction officer, a
psychiatric security aide, a Delaware River Port Authority
policeman or an officer of the Pennsylvania State Police, age
50, and, except for a member with Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service, age 55
upon accrual of 20 eligibility points. For Class A-3 and Class
A-4 service, any age upon attainment of a superannuation score
of 92, provided the member has accrued 35 eligibility points, or
age 65, or for park rangers or capitol police officers, age 55
with 20 years of service as a park ranger or capitol police
officer, except for a member of the General Assembly whose
service as a member of the General Assembly is performed as a
Class A-3 or Class A-4 member, an enforcement officer, a
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correction officer, a psychiatric security aide, a Delaware
River Port Authority policeman or an officer of the Pennsylvania
State Police, age 55. For Class A-5 and Class A-6 service, any
age upon attainment of a superannuation score of 97, provided
the member has accrued 35 eligibility points, or age 67. A
vestee with Class A-3 or Class A-4 service credit attains
superannuation age on the birthday the vestee attains the age
resulting in a superannuation score of 92, provided that the
vestee has at least 35 eligibility points, or attains another
applicable superannuation age, whichever occurs first.
* * *
"Sworn police officer." A State police officer who is
employed and serving as an officer of the Pennsylvania State
Police.
* * *
"Trust." The State Employees' Defined Contribution Trust
established under Chapter 58 (relating to State Employees'
Defined Contribution Plan).
* * *
"Valuation interest." Interest at 5 1/2% per annum
compounded annually and applied to all accounts of the fund
other than the members' savings account.
"Vestee." A member with:
(1) five or more eligibility points in a class of
service other than Class A-3 [or], Class A-4, Class A-5 or
Class A-6 or, if a multiple service member, Class T-E [or],
Class T-F, Class T-G or Class T-H in the Public School
Employees' Retirement System[, a member with];
(2) Class G, Class H, Class I, Class J, Class K, Class
L, Class M or Class N service with five or more eligibility
points[, or a member with]; or
(3) Class A-3 [or], Class A-4, Class A-5 or Class A-6
service with ten or more eligibility points
and who has terminated State service and has elected to leave
his total accumulated deductions in the fund and to defer
receipt of an annuity.
"Voluntary contributions." Contributions made by a
participant to the trust and credited to his individual
investment account in excess of his mandatory pickup participant
contributions, either by salary deductions paid through the
Commonwealth or other employer, or through an eligible rollover
or through a direct trustee-to-trustee transfer.
Section 303. Section 5103 of Title 71 is amended to read:
§ 5103. Notice to members and participants.
Notice by publication, including, without being limited to,
newsletters, newspapers, forms, first class mail, letters,
manuals and, to the extent authorized by a policy adopted by the
board, electronically, including, without being limited to, e-
mail or [World Wide Web sites] Internet websites, distributed or
made available to members and participants in a manner
reasonably calculated to give actual notice of [those sections
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of the State Employees' Retirement Code] the provisions of this
part that require notice to members or participants shall be
deemed sufficient notice for all purposes.
Section 304. Title 71 is amended by adding a section to
read:
§ 5104. Reference to State Employees' Retirement System.
(a) Construction.--As of the effective date of this section,
unless the context clearly indicates otherwise, any reference to
the State Employees' Retirement System in a statutory provision
other than this part and 24 Pa.C.S. Pt. IV (relating to
retirement for school employees) shall include a reference to
the State Employees' Defined Contribution Plan, and any
reference to the State Employees' Retirement Fund shall include
a reference to the State Employees' Defined Contribution Trust.
(b) Agreement.--The agreement of an employer listed in the
definition of "State employee" or any other law to make
contributions to the fund or to enroll its employees as members
in the system shall be deemed to be an agreement to make
contributions to the trust or to enroll its employees in the
plan. An employer may not agree or elect to make contributions
to the trust or to enroll its employees in the plan without also
agreeing or electing to make contributions to the fund or to
enroll its employees as members in the system.
Section 305. Section 5301 heading, (a), (b), (c) and (d) of
Title 71 are amended and the section is amended by adding
subsections to read:
§ 5301. Mandatory and optional membership in the system and
participation in the plan.
(a) Mandatory membership.--Membership in the system shall be
mandatory as of the effective date of employment for all State
employees except the following:
(1) Governor.
(2) Lieutenant Governor.
(3) Members of the General Assembly.
(4) Heads or deputy heads of administrative departments.
(5) Members of any independent administrative board or
commission.
(6) Members of any departmental board or commission.
(7) Members of any advisory board or commission.
(8) Secretary to the Governor.
(9) Budget Secretary.
(10) Legislative employees.
(11) School employees who have elected membership in the
Public School Employees' Retirement System.
(12) School employees who have elected membership in an
independent retirement program approved by the employer,
provided that in no case, except as hereinafter provided,
shall the employer contribute on account of such elected
membership at a rate greater than the employer normal
contribution rate as determined in section 5508(b) (relating
to actuarial cost method). For the fiscal year 1986-1987 an
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employer may contribute on account of such elected membership
at a rate which is the greater of 7% or the employer normal
contribution rate as determined in section 5508(b) and for
the fiscal year 1992-1993 and all fiscal years after that at
a rate of 9.29%.
(13) Persons who have elected to retain membership in
the retirement system of the political subdivision by which
they were employed prior to becoming eligible for membership
in the State Employees' Retirement System.
(14) Persons who are not members of the system and are
employed on a per diem or hourly basis for less than 100 days
or 750 hours in a [12-month period] calendar year.
(15) Employees of the Philadelphia Regional Port
Authority who have elected to retain membership in the
pension plan or retirement system in which they were enrolled
as employees of the predecessor Philadelphia Port Corporation
prior to the creation of the Philadelphia Regional Port
Authority.
(16) Employees of the Juvenile Court Judges' Commission
who, before the effective date of this paragraph, were
transferred from the State System of Higher Education to the
Juvenile Court Judges' Commission as a result of an
interagency transfer of staff approved by the Office of
Administration and who, while employees of the State System
of Higher Education, had elected membership in an independent
retirement program approved by the employer.
(17) State employees, other than any Class A-5 exempt
employees performing service as Class A-5 exempt employees,
whose first period of State service starts on or after
January 1, 2019, provided that a State employee listed in
this paragraph who is not listed in paragraphs (1) through
(16) shall be mandatory members unless the employee elected
to be solely a participant in the plan under section 5306.4
(relating to election to become a Class A-6 member or solely
a participant in the plan).
(a.1) Mandatory participation in the plan.--A State employee
who is a member of the system as a member of Class A-5 or Class
A-6 shall be a mandatory participant in the plan for that same
service as of the effective date of Class A-5 or Class A-6
membership in the system except for service as a Class A-5
exempt employee. A State employee who elected to be solely a
participant in the plan shall be a mandatory participant in the
plan for all service except for service as a Class A-5 exempt
employee.
(b) Optional membership in the system.--The State employees
listed in subsection (a)(1) through (11) shall have the right to
elect membership in the system; once such election is exercised,
membership shall continue until the termination of State
service. State employees listed in subsection (a)(17) who are
listed in subsection (a)(1) through (11) shall have the right to
elect membership in Class A-5 or Class A-6 provided they have
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not previously elected to be solely participants in the plan.
(b.1) Optional participation in the plan.--The State
employees who are optional members of the system as members of
Class A-5 or Class A-6 also are optional participants in the
plan. The State employees who elect membership in the system as
members of Class A-5 or Class A-6, including the employees who
elect to become members of Class A-5 or Class A-6 under section
5306.5 (relating to election by active members to become a Class
A-5 member, Class A-6 member or plan participant) also
automatically elect participation in the plan as of the date
they elect membership in the system, except for service as a
Class A-5 exempt employee. A State employee can elect
participation in the plan without also electing membership in
the system under section 5306.4 (relating to election to become
a Class A-6 member or solely a participant in the plan).
(c) Prohibited membership in the system.--The State
employees listed in subsection (a)(12), (13), (14) and (15)
shall not have the right to elect membership in the system.
(c.1) Prohibited participation in the plan.--The State
employees listed in subsection (a)(11), (12), (13), (14) and
(15) or who first become a member of the system before January
1, 2019, or who could have elected membership in the system but
did not do so in the required time period shall not be eligible
to be active participants in the plan unless an election is made
under section 5306.5. Class A-5 exempt employees shall not be
eligible to participate in the plan for service performed as a
Class A-5 exempt employee. State employees who are not mandatory
participants in the plan under subsection (a.1) or eligible for
optional participation in the plan under subsection (b.1) shall
not be eligible to participate in the plan unless an election is
made under section 5306.5.
(d) Return to service.--
(1) An annuitant who returns to service as a State
employee before January 1, 2019, or returns to State service
as a Class A-5 exempt employee after December 31, 2018, shall
resume active membership in the system as of the effective
date of employment, except as otherwise provided in section
5706(a) (relating to termination of annuities), regardless of
the optional membership category of the position.
(2) An annuitant or a participant receiving
distributions who returns to service as a State employee on
or after January 1, 2019, shall resume active membership in
the system and, if an active member of Class A-5 or Class A-
6, shall be an active participant in the plan as of the
effective date of employment, except as otherwise provided in
section 5706(a), regardless of the optional membership or
participation category of the position: Provided, however,
That a participant or former participant who previously
elected to be solely a participant under section 5306.4 or
5306.5 shall be a participant in the plan and not an active
member of the system, except for service as a Class A-5
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exempt employee.
* * *
Section 306. Sections 5302(a), (b), (e) and (f), 5303(b)(1)
and (2), (d)(1) and (e)(1) and (4), 5303.2(a) and 5304(a) and
(b) of Title 71 are amended to read:
§ 5302. Credited State service.
(a) Computation of credited service.--In computing credited
State service of a member for the determination of benefits, a
full-time salaried State employee, including any member of the
General Assembly, shall receive credit for service in each
period for which contributions as required are made to the fund,
or for which contributions otherwise required for such service
were not made to the fund solely by reason of section 5502.1
(relating to waiver of regular member contributions and Social
Security integration member contributions) or any provision of
this part relating to the limitations under IRC § 401(a)(17) or
415, except as otherwise provided in this part, but in no case
shall he receive more than one year's credit for any 12
consecutive months or 26 consecutive biweekly pay periods. A per
diem or hourly State employee shall receive one year of credited
service for each nonoverlapping period of 12 consecutive months
or 26 consecutive biweekly pay periods in which he is employed
and for which contributions are made to the fund or would have
been made to the fund but for such waiver under section 5502.1
or limitations under the IRC for at least 220 days or 1,650
hours of employment. If the member was employed and
contributions were made to the fund for less than 220 days or
1,650 hours, he shall be credited with a fractional portion of a
year determined by the ratio of the number of days or hours of
service actually rendered and for which contributions are or
would have been made to the fund except for the waiver under
section 5502.1 or limitations under the IRC to 220 days or 1,650
hours, as the case may be. A part-time salaried employee shall
be credited with the fractional portion of the year which
corresponds to the number of hours or days of service actually
rendered in relation to 1,650 hours or 220 days, as the case may
be. In no case shall a member who has elected multiple service
receive an aggregate in the two systems of more than one year of
credited service for any 12 consecutive months.
(b) Creditable leaves of absence.--
(1) A member on leave without pay who is studying under
a Federal grant approved by the head of his department or who
is engaged up to a maximum of two years of temporary service
with the United States Government, another state or a local
government under the Intergovernmental Personnel Act of 1970
(5 U.S.C. §§ 1304, 3371-3376; 42 U.S.C. §§ 4701-4772) shall
be eligible for credit for such service: Provided, That
contributions are made in accordance with sections 5501
(relating to regular member contributions for current
service), 5501.1 (relating to shared-risk member
contributions [for Class A-3 and Class A-4 service] and
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shared-gain adjustments to regular member contributions),
5505.1 (relating to additional member contributions) and 5507
(relating to contributions to the system by the Commonwealth
and other employers), the member returns from leave without
pay to active State service as a member of the system for a
period of at least one year, and he is not entitled to
retirement benefits for such service under a retirement
system administered by any other governmental agency.
(2) An active member or active participant on paid leave
granted by an employer for purposes of serving as an elected
full-time officer for a Statewide employee organization which
is a collective bargaining representative under the act of
June 24, 1968 (P.L.237, No.111), referred to as the Policemen
and Firemen Collective Bargaining Act, or the act of July 23,
1970 (P.L.563, No.195), known as the Public Employe Relations
Act, and up to 14 full-time business agents appointed by an
employee organization that represents correction officers
employed at State correctional institutions: Provided, That
for elected full-time officers such leave shall not be for
more than three consecutive terms of the same office and for
up to 14 full-time business agents appointed by an employee
organization that represents correction officers employed at
State correctional institutions no more than three
consecutive terms of the same office; that the employer shall
fully compensate the member or participant, including, but
not limited to, salary, wages, pension and retirement
contributions and benefits, other benefits and seniority, as
if he were in full-time active service; and that the
Statewide employee organization shall fully reimburse the
employer for all expenses and costs of such paid leave,
including, but not limited to, contributions and payment in
accordance with sections 5501, 5501.1, 5505.1 [and], 5507,
5804 (relating to participant contributions), 5805 (relating
to mandatory pickup participant contributions) and 5806
(relating to employer defined contributions), if the employee
organization either directly pays, or reimburses the
Commonwealth or other employer for, contributions made in
accordance with [section 5507] sections 5507, 5804, 5805 and
5806.
* * *
(e) Cancellation of credited service.--
(1) All credited service in the system shall be
cancelled if a member withdraws his total accumulated
deductions, except that a member with Class A-3 [or], Class
A-4, Class A-5 or Class A-6 service credit and one or more
other classes of service credit shall not have his service
credit as a member of any classes of service other than as a
member of Class A-3 [or], Class A-4, Class A-5 or Class A-6
cancelled when the member receives a lump sum payment of
accumulated deductions resulting from Class A-3 [or], Class
A-4, Class A-5 or Class A-6 service pursuant to section
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5705.1 (relating to payment of accumulated deductions
resulting from [Class A-3 and Class A-4] more than one class
of service).
(2) A partial or total distribution of accumulated total
defined contributions to a participant who also is a member
shall not cancel service credited in the system.
(f) Credit for military service.--A State employee who has
performed USERRA leave may receive credit in the system or
participate in the plan as follows:
(1) For purposes of determining whether a member is
eligible to receive credited service in the system for a
period of active military service, other than active duty
service to meet periodic training requirements, rendered
after August 5, 1991, and that began before the effective
date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73
(relating to military leave of absence) shall apply to all
individuals who were active members of the system when the
period of military service began, even if not defined as an
employee pursuant to 51 Pa.C.S. § 7301 (relating to
definitions).
(1.1) State employees may not receive service credit in
the system or exercise the options under 51 Pa.C.S. § 7306
(relating to retirement rights) for military leaves that
begin on or after the effective date of this subsection,
except as otherwise provided by this subsection.
(1.2) State employees may not participate in the plan or
exercise the options under 51 Pa.C.S. § 7306 for military
leaves that begin on or after the effective date of this
paragraph, except as otherwise provided by this subsection.
(2) A State employee who has performed USERRA leave may
receive credit in the system as provided by this paragraph.
The following shall apply:
(i) A State employee who is reemployed from USERRA
leave as an active member of the system shall be treated
as not having incurred a break in State service by reason
of the USERRA leave and shall be granted eligibility
points as if the State employee had not been on the
USERRA leave. If a State employee who is reemployed from
USERRA leave as an active member of the system
subsequently makes regular member contributions,
additional member contributions, Social Security
integration member contributions, shared-risk member
contributions and any other member contributions in the
amounts and in the time periods required by 38 U.S.C. Ch.
43 (relating to employment and reemployment rights of
members of the uniformed services) and IRC § 414(u) as if
the State employee had continued in State office or
employment and performed State service and was
compensated during the period of USERRA leave, then the
State employee shall be granted State service credit for
the period of USERRA leave. The State employee shall have
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the State employee's benefits, rights and obligations
determined under this part as if the State employee was
an active member who performed creditable State service
during the USERRA leave in the job position that the
State employee would have held had the State employee not
been on USERRA leave and received the compensation on
which the member contributions to receive State service
credit for the USERRA leave were determined.
(ii) For purposes of determining whether a State
employee has made the required employee contributions for
State service credit for USERRA leave, if an employee who
is reemployed from USERRA leave as an active member of
the system terminates State service or dies in State
service before the expiration of the allowed payment
period, then State service credit for the USERRA leave
will be granted as if the required member contributions
were paid the day before termination or death. The amount
of the required member contributions will be treated as
an incomplete payment subject to the provisions of
section 5506 (relating to incomplete payments). Upon a
subsequent return to State service or to school service
as a multiple service member, the required member
contributions treated as incomplete payments shall be
treated as member contributions that were either
withdrawn in a lump sum at termination or paid as a lump
sum pursuant to section 5705(a)(4) or (a.1) (relating to
member's options), as the case may be.
(iii) A State employee who is reemployed from USERRA
leave as an active member of the system who does not make
the required member contributions or makes only part of
the required member contributions within the allowed
payment period shall not be granted credited service for
the period of USERRA leave for which the required member
contributions were not timely made, shall not be eligible
to subsequently make contributions and shall not be
granted either State service credit or nonstate service
credit for the period of USERRA leave for which the
required member contributions were not timely made.
(2.1) (i) A participant who is reemployed from USERRA
leave shall be treated as not having incurred a break in
State service by reason of the USERRA leave and shall be
granted eligibility points as if the participant had not
been on USERRA leave. If a participant who is reemployed
from USERRA leave subsequently makes mandatory pickup
participant contributions in the amounts and in the time
periods required by 38 U.S.C. Ch. 43 and IRC § 414(u) as
if the participant had continued in his State office or
employment and performed State service and been
compensated during the period of USERRA leave, the
participant's employer shall make the corresponding
employer defined contributions. The employee shall have
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his contributions, benefits, rights and obligations
determined under this part as if he were an active
participant who performed State service during the USERRA
leave in the job position that he would have held had he
not been on USERRA leave and received the compensation on
which the mandatory pickup participant contributions to
receive State service credit for the USERRA leave were
determined.
(ii) A participant who is reemployed from USERRA
leave who does not make the mandatory pickup participant
contributions or makes only part of the mandatory pickup
participant contributions within the allowed payment
period shall not be eligible to make mandatory pickup
participant contributions or voluntary contributions at a
later date for the period of USERRA leave for which the
mandatory pickup participant contributions were not
timely made.
(3) A State employee who is a member of the system and
performs USERRA leave from which the employee could have been
reemployed from USERRA leave had the State employee returned
to State service in the time frames required by 38 U.S.C. Ch.
43 for reemployment rights, but did not do so, shall be able
to receive creditable nonstate service as nonintervening
military service for the period of USERRA leave should the
employee later return to State service as an active member of
the system and is otherwise eligible to purchase the service
as nonintervening military service.
(3.1) A State employee who is a participant in the plan
and performs USERRA leave from which the employee could have
been reemployed from USERRA leave had the employee returned
to State service in the time frames required by 38 U.S.C. Ch.
43 for reemployment rights, but did not do so, shall not be
eligible to make mandatory pickup participant contributions
or voluntary contributions for the period of USERRA leave
should the employee later return to State service and be a
participant in the plan.
(4) [A State employee] An active member or inactive
member on leave without pay who on or after the effective
date of this subsection is granted a leave of absence under
51 Pa.C.S. § 4102 (relating to leaves of absence for certain
government employees) or a military leave under 51 Pa.C.S.
Ch. 73, that is not USERRA leave shall be able to receive
creditable nonstate service as nonintervening military
service should the employee return to State service as an
active member of the system and is otherwise eligible to
purchase the service as nonintervening military service.
(4.1) An active participant or inactive participant on
leave without pay who on or after the effective date of this
paragraph is granted a leave of absence under 51 Pa.C.S. §
4102 or a military leave under 51 Pa.C.S. Ch. 73 that is not
USERRA leave shall not be able to make mandatory pickup
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participant contributions or voluntary contributions during
or for the leave of absence or military leave and shall not
have employer defined contributions made during such leave,
without regard to whether or not the State employee received
salary, wages, stipends, differential wage payments or other
payments from his employer during the leave, notwithstanding
any provision to the contrary under 51 Pa.C.S. § 4102 or 51
Pa.C.S. Ch. 73.
(5) If a member dies while performing USERRA leave, then
the beneficiaries or survivor annuitants, as the case may be,
of the deceased member are entitled to any additional
benefits, including eligibility points, other than benefit
accruals relating to the period of qualified military
service, provided under this part had the member resumed and
then terminated employment on account of death.
(5.1) If a participant dies while performing USERRA
leave, the beneficiaries or successor payees of the deceased
participant are entitled to any additional benefits, other
than benefit accruals relating to the period of qualified
military service, provided under this part had the
participant resumed and then terminated employment on account
of death.
(6) A State employee who is on a leave of absence from
his duties as a State employee for which 51 Pa.C.S. § 4102
provides that he is not to suffer a loss of pay, time or
efficiency rating shall not be an active member, receive
service credit or make member contributions for the leave of
absence, except as provided for in this part. Notwithstanding
this paragraph, any pay the member receives pursuant to 51
Pa.C.S. § 4102 shall be included in the determination of
final average salary and other calculations in the system
utilizing compensation as if the payments were compensation
under this part.
§ 5303. Retention and reinstatement of service credits.
* * *
(b) Eligibility points for prospective credited service.--
(1) Every active member of the system or a multiple
service member who is a school employee and a member of the
Public School Employees' Retirement System on or after the
effective date of this part shall receive eligibility points
in accordance with section 5307 for current State service,
previous State service, or creditable nonstate service upon
compliance with sections 5501 (relating to regular member
contributions for current service), 5501.1 (relating to
shared-risk member contributions [for Class A-3 and Class A-4
service] and shared-gain adjustments to regular member
contributions), 5504 (relating to member contributions for
the purchase of credit for previous State service or to
become a full coverage member), 5505 (relating to
contributions for the purchase of credit for creditable
nonstate service), 5505.1 (relating to additional member
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contributions) or 5506 (relating to incomplete payments).
Subject to the limitations in sections 5306.1 (relating to
election to become a Class AA member) and 5306.2 (relating to
elections by members of the General Assembly), the class or
classes of service in which the member may be credited for
previous State service prior to the effective date of this
part shall be the class or classes in which he was or could
have at any time elected to be credited for such service,
except that a State employee who first becomes a member of
the system on or after January 1, 2011, or on or after
December 1, 2010, as a member of the General Assembly and:
(i) is credited with Class A-3 service for such
membership and is not a member of Class A-5 or Class A-6,
shall be credited only with Class A-3 service for
previous State service performed before January 1, 2011,
that was not previously credited in the system; [or]
(ii) is credited with Class A-4 service for such
membership and is not a member of Class A-5 or Class A-6,
shall be credited only with Class A-4 service for
previous State service performed before January 1, 2011,
that was not previously credited in the system[.];
(iii) is credited with Class A-5 service for such
membership shall be credited only with Class A-5 service
for previous State service performed before January 1,
2019, other than service as a Class A-5 exempt employee,
that was not previously credited in the system; or
(iv) is credited with Class A-6 service for such
membership shall be credited only with Class A-6 service
for previous State service performed before January 1,
2019, other than service as a Class A-5 exempt employee,
that was not previously credited in the system.
The class of service in which a member shall be credited for
service subsequent to the effective date of this part shall
be determined in accordance with section 5306 (relating to
classes of service).
* * *
(2) A special vestee or person otherwise eligible to be
a special vestee who returns to State service, other than
solely as a participant in the plan, or withdraws his
accumulated deductions pursuant to section 5311 (relating to
eligibility for refunds) or 5701 (relating to return of total
accumulated deductions) shall receive or retain eligibility
points in accordance with paragraph (1) but upon subsequent
termination of State service shall only be eligible to be an
annuitant vestee or inactive member without regard to
previous status as a special vestee and without regard to the
provisions of this part providing for special vestees.
* * *
(d) Transfer of certain pension service credit.--
(1) Any person who was an employee of any county in this
Commonwealth on the personal staff of an appellate court
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judge prior to September 9, 1985, and who had that employment
transferred to the Commonwealth pursuant to 42 Pa.C.S. § 3703
(relating to local chamber facilities) shall be a member of
the system for all service rendered as an employee of the
Commonwealth on the personal staff of an appellate court
judge subsequent to the date of the transfer unless
specifically prohibited pursuant to section 5301(c) (relating
to mandatory and optional membership in the system and
participation in the plan). The employee shall be entitled to
have any prior service credit in that county or other
municipal pension plan or retirement system transferred to
the system and deemed to be State service for all purposes
under this part. However, for those employees who were in
continuous county employment which commenced prior to July
22, 1983, section 5505.1 shall not apply. The transfer of
prior service credit to the system shall occur upon the
transfer, by the member, county or other municipal pension
plan or retirement system, to the system of the amount of
accumulated member contributions, pick-up contributions and
credited interest standing in the employee's county or
municipal pension plan or retirement system account as of the
date that these funds are transferred to the system. In the
event that these funds have been refunded to the member, the
transfer of service credit shall occur when the member
transfers an amount equal to either the refund which the
member received from the county or municipal pension plan or
retirement system or the amount due under section 5504, if
less. In the case of a transfer by the member, the transfer
shall occur by December 31, 1987, in order for the member to
receive credit for the prior service. In the case of a
transfer by the county or other municipal pension plan or
retirement system, the transfer shall also occur by December
31, 1987. If the amount transferred to the system by the
member of a county or municipal pension plan or retirement
system is greater than the amount that would have accumulated
in the member's account if the employee had been a member of
the system, all excess funds shall be returned to the
employee within 90 days of the date on which such funds are
credited to the member's account in the system. Within 60
days of receipt of written notice that an employee has
elected to transfer credits under the provisions of this
subsection, the county or other municipal pension plans or
retirement systems shall be required to transfer to the
system an amount, excluding contributions due under section
5504(a), equal to the liability of the prior service in
accordance with county or other municipal pension plan or
retirement system benefit provisions, multiplied by the ratio
of system actuarial value of assets for active members to the
system actuarial accrued liability for active members. The
Public Employee Retirement Study Commission shall determine
the appropriate amount of employer contributions to be
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transferred to the system by the county or other municipal
pension plans or retirement systems.
* * *
(e) Transfer and purchase of certain pension service credit;
Philadelphia Regional Port Authority.--
(1) Any employee of the Philadelphia Regional Port
Authority who becomes a State employee, as defined in section
5102 (relating to definitions), and an active member of the
system shall be eligible to obtain retirement credit for
prior uncredited service with the Philadelphia Port
Corporation, a Pennsylvania not-for-profit corporation
("predecessor corporation"), provided that the Commonwealth
does not incur any liability for the funding of the annuities
attributable to the prior, uncredited "predecessor
corporation" service, the cost of which shall be determined
according to paragraph (2).
* * *
(4) Any person who became employed by the Philadelphia
Regional Port Authority between July 10, 1989, and passage of
this act and who becomes a State employee, as defined in
section 5102, and an active member of the system shall be
eligible to obtain retirement credit for service from the
date of employment with the Philadelphia Regional Port
Authority, provided that the contributions are made in
accordance with sections 5501, 5504, 5505.1 and 5506.
* * *
§ 5303.2. Election to convert school service to State service.
(a) Eligibility.--An active member or inactive member on
leave without pay who was an employee transferred from the
Department of Education to the Department of Corrections
pursuant to section 908-B of the act of April 9, 1929 (P.L.177,
No.175), known as The Administrative Code of 1929, and who on
the effective date of that transfer did not participate in an
independent retirement program approved by the Department of
Education under 24 Pa.C.S. § 8301(a)(1) (relating to mandatory
and optional membership in the system and participation in the
plan) or section 5301(a)(12) (relating to mandatory and optional
membership in the system and participation in the plan),
notwithstanding any other provision of law or any collective
bargaining agreement, arbitration award, contract or term or
conditions of any retirement system or pension plan, may make a
one-time election to convert all service credited in the Public
School Employees' Retirement System as of June 30, 1999, and
transfer to the system all accumulated member contributions and
statutory interest credited in the members' savings account in
the Public School Employees' Retirement System as of June 30,
1999, plus statutory interest on that amount credited by the
Public School Employees' Retirement System from July 1, 1999, to
the date of transfer to the system.
* * *
§ 5304. Creditable nonstate service.
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(a) Eligibility.--
(1) An active member who first becomes an active member
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, or a multiple service member
who first becomes an active member before January 1, 2011, or
before December 1, 2010, as a member of the General Assembly,
and who is a school employee and an active member of the
Public School Employees' Retirement System shall be eligible
for Class A service credit for creditable nonstate service as
set forth in subsections (b) and (c) except that intervening
military service shall be credited in the class of service
for which the member was eligible at the time of entering
into military service and for which he makes the required
contributions to the fund and except that a multiple service
member who is a school employee and an active member of the
Public School Employees' Retirement System shall not be
eligible to purchase service credit for creditable nonstate
service set forth in subsection (c)(5).
(2) An active member who first becomes an active member
on or after January 1, 2011, or on or after December 1, 2010,
as a member of the General Assembly and is an active member
of a class of service other than Class A-5 or Class A-6, or a
multiple service member who first becomes an active member on
or after January 1, 2011, or on or after December 1, 2010, as
a member of the General Assembly in a class of service other
than Class A-5 or Class A-6, and [who] is a school employee
and an active member of the Public School Employees'
Retirement System shall be eligible for Class A-3 service
credit for creditable nonstate service as set forth in
subsections (b) and (c) except that intervening military
service shall be credited in the class of service for which
the member was eligible at the time of entering into military
service and for which he makes the required contributions to
the fund and except that a multiple service member who is a
school employee and an active member of the Public School
Employees' Retirement System shall not be eligible to
purchase service credit for creditable nonstate service set
forth in subsection (c)(5).
(3) An active member of Class A-5 or Class A-6 or a
multiple service member who has service credited only as
Class A-5 or Class A-6 and is a school employee and an active
member of the Public School Employees' Retirement System
shall be eligible for Class A-5 service credit if a Class A-5
member and Class A-6 service credit if a Class A-6 member for
creditable nonstate service as set forth in subsections (b)
and (c) for which the member makes the required contributions
to the fund.
* * *
(b) Limitations on eligibility.--An active member or a
multiple service member who is a school employee and an active
member of the Public School Employees' Retirement System shall
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be eligible as provided under subsection (a) to receive credit
for nonstate service provided that he does not have credit for
such service in the system or in the [school system] Public
School Employees' Retirement System and is not entitled to
receive, eligible to receive now or in the future, or is
receiving retirement benefits for such service in the system or
under a retirement system administered and wholly or partially
paid for by any other governmental agency or by any private
employer, or a retirement program approved by the employer in
accordance with section 5301(a)(12) (relating to mandatory and
optional membership in the system and participation in the
plan), and further provided, that such service is certified by
the previous employer and contributions are agreed upon and made
in accordance with section 5505 (relating to contributions for
the purchase of credit for creditable nonstate service).
* * *
Section 306.1. Section 5305(b) of Title 71 is amended and
the section is amended by adding a subsection to read:
§ 5305. Social security integration credits.
* * *
(b) Accrual of subsequent credits.--Any active member who
has social security integration accumulated deductions to his
credit or is receiving a benefit on account of social security
integration credits may accrue one social security integration
credit for each year of service as a State employee on or
subsequent to March 1, 1974, and a fractional credit for a
corresponding fractional year of service provided that
contributions are made to the fund, or would have been made to
the fund but for section 5502.1 (relating to waiver of regular
member contributions and Social Security integration member
contributions) or the limitations under IRC § 401(a)(17) or 415,
except as otherwise provided in this part, in accordance with
section 5502 (relating to Social Security integration member
contributions), and he:
(1) continues subsequent to March 1, 1974, as an active
member in either the [State or school] system or, if a
multiple service member, as an active member in the Public
School Employees' Retirement System;
(2) terminates such continuous service in the [State or
school] system or the Public School Employees' Retirement
System and returns to active membership in the [State] system
within six months; or
(3) terminates his status as a vestee or an annuitant
and returns to State service as an active member of the
system.
* * *
(e) Class A-5 and Class A-6 service ineligible for credit.--
No Social Security integration credits shall accrue for any
service performed or credited as Class A-5 or Class A-6 service.
Section 306.2. Section 5305.1 of Title 71 is amended to
read:
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§ 5305.1. Eligibility for actuarial increase factor.
A person who is:
(1) an active member;
(2) an inactive member on leave without pay; [or]
(3) a multiple service member who is a school employee
and an active member of the Public School Employees'
Retirement System; or
(4) an active participant or an inactive participant on
leave without pay;
who terminates State service or school service, as the case may
be, after attaining age 70 and who applies for a superannuation
annuity with an effective date of retirement the day after the
date of termination of State service or school service shall
have that person's maximum single life annuity calculated
pursuant to section 5702(a.1) (relating to maximum single life
annuity).
Section 307. Section 5306(a), (a.1), (a.2), (a.3) and (b)(2)
of Title 71 are amended and the section is amended by adding
subsections to read:
§ 5306. Classes of service.
(a) Class A and Class A-3 membership.--
(1) A State employee who is a member of Class A on the
effective date of this part or who first becomes a member of
the system subsequent to the effective date of this part and
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, shall be classified as a
Class A member and receive credit for Class A service upon
payment of regular and additional member contributions for
Class A service, provided that the State employee does not
become a member of Class AA pursuant to subsection (a.1) or a
member of Class D-4 pursuant to subsection (a.2)[.] or a
member of Class A-5 or Class A-6 or solely a participant in
the plan under section 5306.5 (relating to election by active
members to become a Class A-5 member, Class A-6 member or
plan participant).
(2) A State employee who first becomes a member of the
system on or after January 1, 2011, or on or after December
1, 2010, as a member of the General Assembly and before
January 1, 2019, shall be classified as a Class A-3 member
and receive credit for Class A-3 service upon payment of
regular member contributions and shared-risk member
contributions for Class A-3 service provided that the State
employee does not become a member of Class A-4 pursuant to
subsection (a.3) or a member of Class A-5 or Class A-6 or
solely a participant in the plan under section 5306.5, except
that a member of the judiciary shall be classified as a
member of such other class of service for which the member of
the judiciary is eligible, shall elect and make regular
member contributions[.] unless the member of the judiciary
becomes a member of Class A-5 or Class A-6 or solely a
participant in the plan under section 5306.5.
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(3) A State employee who first becomes a member of the
system on or after January 1, 2011, or on or after December
1, 2010, as a member of the General Assembly, and a Class A-5
exempt employee on or after January 1, 2019, shall receive
credit for all service as a Class A-5 exempt employee as a
member of Class A-3 upon payment of the required member
contributions and shall not be eligible to be a member of
Class A-5 or Class A-6 or a participant in the plan for such
service. Notwithstanding the provisions of a binding
arbitration award issued before July 1, 1989, under the act
of June 24, 1968 (P.L.237, No.111), referred to as the
Policemen and Firemen Collective Bargaining Act, and
implemented by the board, all other State service shall be
credited in the system or in the plan as otherwise provided
under this part. Class A-3 service provided for under this
paragraph shall be subject to an election to be credited as
Class A-4 provided that the State employee has not previously
had the opportunity to elect Class A-3 service and failed to
do so.
(a.1) Class AA membership.--
(1) A person who becomes a State employee and an active
member of the system after June 30, 2001, and who first
became an active member before January 1, 2011, or before
December 1, 2010, as a member of the General Assembly, and
who is not a State police officer and not employed in a
position for which a class of service other than Class A is
credited or could be elected shall be classified as a Class
AA member and receive credit for Class AA State service upon
payment of regular member contributions for Class AA service,
provided that the State employee does not become a member of
Class A-5 or Class A-6 or solely a participant in the plan
under section 5306.5, and, subject to the limitations
contained in paragraph (7), if previously a member of Class A
or previously employed in a position for which Class A
service could have been earned, shall have all Class A State
service (other than State service performed as a State police
officer or for which a class of service other than Class A
was earned or could have been elected) classified as Class AA
service.
(2) A person who is a State employee on June 30, 2001,
and July 1, 2001, but is not an active member of the system
because membership in the system is optional or prohibited
pursuant to section 5301 (relating to mandatory and optional
membership in the system and participation in the plan) and
who first becomes an active member after June 30, 2001, and
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, and who is not a State police
officer and not employed in a position for which a class of
service other than Class A is credited or could be elected
shall be classified as a Class AA member and receive credit
for Class AA State service upon payment of regular member
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contributions for Class AA service, provided that the State
employee does not become a member of Class A-5 or Class A-6
or solely a participant in the plan under section 5306.5,
and, subject to the limitations contained in paragraph (7),
if previously a member of Class A or previously employed in a
position for which Class A service could have been earned,
shall have all Class A State service (other than State
service performed as a State Police officer or for which a
class of service other than Class A was earned or could have
been elected) classified as Class AA service.
(3) Provided that an election to become a Class AA
member is made pursuant to section 5306.1 (relating to
election to become a Class AA member), a State employee,
other than a State employee who is a State police officer on
or after July 1, 1989, who on June 30, 2001, and July 1,
2001, is:
(i) a member of Class A, other than a member of
Class A who could have elected membership in a Class C,
Class D-3, Class E-1 or Class E-2; or
(ii) an inactive member on a leave without pay from
a position in which the State employee would be a Class A
active member if the employee was not on leave without
pay, other than a position in which the State employee
could elect membership in Class C, Class D-3, Class E-1
or Class E-2;
shall be classified as a Class AA member and receive
credit for Class AA State service performed after June 30,
2001, upon payment of regular member contributions for Class
AA service, provided that the State employee does not become
a member of Class A-5 or Class A-6 or solely a participant in
the plan under section 5306.5, and, subject to the
limitations contained in paragraph (7), shall receive Class
AA service credit for all Class A State service, other than
State service performed as a State police officer or as a
State employee in a position for which the member could have
elected membership in Class C, Class D-3, Class E-1 or Class
E-2, performed before July 1, 2001.
(4) Provided that an election to become a Class AA
member is made pursuant to section 5306.1, a former State
employee, other than a former State employee who was a State
police officer on or after July 1, 1989, who on June 30,
2001, and July 1, 2001, is a multiple service member and a
school employee and a member of the Public School Employees'
Retirement System, subject to the limitations contained in
paragraph (7), shall receive Class AA service credit for all
Class A State service, other than State service performed as
a State police officer or as a State employee in a position
in which the former State employee could have elected a class
of service other than Class A, performed before July 1, 2001.
(5) A former State employee who first becomes a member
before January 1, 2011, or before December 1, 2010, as a
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member of the General Assembly, other than a former State
employee who was a State police officer on or after July 1,
1989, who is a school employee and who on or after July 1,
2001, becomes a multiple service member, subject to the
limitations contained in paragraph (7), shall receive Class
AA service credit for all Class A State service other than
State service performed as a State employee in a position in
which the former State employee could have elected a class of
service other than Class A.
(6) A State employee who after June 30, 2001, becomes a
State police officer or [who is employed in a position in
which the member could elect membership in a class of service
other than Class AA or Class D-4] a member of the judiciary
shall retain any Class AA service credited prior to becoming
a State police officer or being so employed but shall be
ineligible to receive Class AA credit thereafter and instead
shall receive Class A credit for service as a member of the
judiciary if the State employee first becomes a member of the
system before January 1, 2019, and the member of the
judiciary does not become a member of Class A-5 or Class A-6
or solely a participant in the plan under section 5306.5 or
if he first became a member before January 1, 2011, or
December 1, 2010, as a member of the General Assembly, or
Class A-3 credit for service other than as a member of the
judiciary and he first became a member on or after January 1,
2011, or December 1, 2010, as a member of the General
Assembly, if the nonjudicial service is service as a Class A-
5 exempt employee, or Class A-5 service credit, Class A-6
service credit or solely as a participant in the plan if the
nonjudicial service is as a member who elected to become a
member of Class A-5 or Class A-6 or solely a participant of
the plan under section 5306.5, or the State employee first
became a member on or after January 1, 2019, and the service
is not as a Class A-5 exempt employee, unless a class of
membership other than Class A is elected.
(7) (i) State service performed as Class A service
before July 1, 2001, and State service for which Class A
service could have been credited but was not credited
because membership in the system was optional or
prohibited pursuant to section 5301 shall be credited as
Class AA service only upon the completion of all acts
necessary for the State service to be credited as Class A
service had this subsection not been enacted and upon
payment of required Class AA member contributions as
provided in section 5504 (relating to member
contributions for the purchase of credit for previous
State service or to become a full coverage member).
(ii) A person who is not a State employee or a
school employee on June 30, 2001, and July 1, 2001, and
who has previous State service (except a disability
annuitant who returns to State service after June 30,
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2001, upon termination of the disability annuity) shall
not receive Class AA service credit for State service
performed before July 1, 2001, until such person becomes
an active member, or an active member of the Public
School Employees' Retirement System and a multiple
service member, and earns three eligibility points by
performing credited State service or credited school
service after June 30, 2001.
(a.2) Class of membership for members of the General
Assembly.--
(1) A person who:
(i) becomes a member of the General Assembly and an
active member of the system after June 30, 2001, and
before December 1, 2010; or
(ii) is a member of the General Assembly on July 1,
2001, but is not an active member of the system because
membership in the system is optional pursuant to section
5301 and who becomes an active member after June 30,
2001, and before December 1, 2010;
and who was not a State police officer on or after July 1,
1989, shall be classified as a Class D-4 member and receive
credit as a Class D-4 member for all State service as a
member of the system as a member of the General Assembly that
is not performed as a member who elected to become a member
of Class A-5 or Class A-6 or solely a participant in the plan
under section 5306.5 upon payment of regular member
contributions for Class D-4 service and, subject to the
limitations contained in subsection (a.1)(7), if previously a
member of Class A or employed in a position for which Class A
service could have been earned, shall receive Class AA
service credit for all Class A State service, other than
State service performed as a State police officer or for
which a class of service other than Class A or Class D-4 was
or could have been elected or credited.
(2) Provided an election to become a Class D-4 member is
made pursuant to section 5306.2 (relating to elections by
members of the General Assembly), a State employee who was
not a State police officer on or after July 1, 1989, who on
July 1, 2001, is a member of the General Assembly and an
active member of the system and not a member of Class D-3
shall be classified as a Class D-4 member and receive credit
as a Class D-4 member for all State service as a member of
the system performed as a member of the General Assembly that
is not performed as a member who elected to become a member
of Class A-5 or Class A-6 or solely a participant of the plan
under section 5306.5 and not credited as another class other
than Class A upon payment of regular member contributions for
Class D-4 service and, subject to the limitations contained
in paragraph (a.1)(7), shall receive Class AA service credit
for all Class A State service, other than State service
performed as a State police officer or as a State employee in
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a position in which the member could have elected a class of
service other than Class A, performed before July 1, 2001.
(3) A member of the General Assembly who after June 30,
2001, becomes a State police officer shall retain any Class
AA service or Class D-4 service credited prior to becoming a
State police officer or being so employed but shall be
ineligible to receive Class AA or Class D-4 credit thereafter
and instead shall receive Class A credit or Class A-3 credit
if he first becomes a member of the system on or after
January 1, 2011[.], and before January 1, 2019, or as a Class
A-5 exempt employee, and Class A-5 or Class A-6 credit if he
first becomes a member of the system on or after January 1,
2019, and is not a Class A-5 exempt employee.
(4) Notwithstanding the provisions of this subsection,
no service as a member of the General Assembly performed
before December 1, 2010, that is not credited as Class D-4
service on November 30, 2010, shall be credited as Class D-4
service, unless such service was previously credited in the
system as Class D-4 service and the member withdrew his total
accumulated deductions as provided in section 5311 (relating
to eligibility for refunds) or 5701 (relating to return of
total accumulated deductions). No service as a member of the
General Assembly performed on or after December 1, 2010,
shall be credited as Class D-4 service unless the member
previously was credited with Class D-4 service credits.
(a.3) Class A-4 membership.--Provided that an election to
become a Class A-4 member is made pursuant to section 5306.3
(relating to election to become a Class A-4 member), a State
employee who first becomes a member before January 1, 2019, or
is a Class A-5 exempt employee who otherwise would be a member
of Class A-3 shall be classified as a Class A-4 member and
receive Class A-4 credit for all creditable State service
performed after the effective date of membership in the system,
except as a member of the judiciary[,] or as a member who
elected to become a member of Class A-5 or Class A-6 or solely a
participant in the plan if the employee first becomes a member
before January 1, 2019, and for all creditable State service
performed as a Class A-5 exempt employee if the employee first
becomes a member on or after January 1, 2019, upon payment of
regular member contributions and shared-risk member
contributions for Class A-4 service.
(a.4) Class A-5 membership.--A State employee who first
becomes a member of the system on or after January 1, 2019,
other than as a Class A-5 exempt employee, and who does not make
an election to be a member of Class A-6 or an election to be
solely a participant in the plan under section 5306.4 (relating
to election to become a Class A-6 member or solely a participant
in the plan), shall be classified as a Class A-5 member and
receive credit for Class A-5 service for service other than as a
Class A-5 exempt employee upon payment of regular member
contributions and shared-risk member contributions for Class A-5
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service. A Class A-5 exempt employee who first becomes a member
of the system on or after January 1, 2019, shall be classified
in the applicable class other than Class A-5 for service
performed as a Class A-5 exempt employee and classified as a
Class A-5 member for any service performed in a position or
office other than as a Class A-5 exempt employee ,
notwithstanding the provisions of a binding arbitration award
issued before July 1, 1989, under the act of June 24, 1968
(P.L.237, No.111), referred to as the Policemen and Firemen
Collective Bargaining Act, and implemented by the board . A State
employee who elects Class A-5 membership under section 5306.5
shall be classified as a Class A-5 member and receive credit for
Class A-5 service upon payment of regular member contributions
and shared-risk member contributions for Class A-5 without
regard to any other class of service the State employee might
have been at any time before the election under section 5306.5.
(a.5) Class A-6 membership.--Provided that an election to
become a Class A-6 member is made pursuant to section 5306.4, a
State employee who otherwise would be a member of Class A-5
shall be classified as a Class A-6 member and receive Class A-6
credit for all creditable State service performed after the
effective date of membership in the system, except as a Class A-
5 exempt employee, upon payment of regular member contributions
and shared-risk member contributions for Class A-6 service. A
State employee who elects Class A-6 membership under section
5306.5 shall be classified as a Class A-6 member and receive
credit for Class A-6 service upon payment of regular member
contributions and shared-risk member contributions for Class A-6
without regard to any other class of service the State employee
might have been at any time before the election under section
5306.5.
(b) Other class membership.--
* * *
(2) Notwithstanding any other provision of this section,
a State employee [who] whose first period of State service
began before January 1, 2019, is appointed [bail
commissioner] an arraignment court magistrate of the
Philadelphia Municipal Court under 42 Pa.C.S. § 1123(a)(5)
(relating to jurisdiction and venue) and is eligible to be a
member of the system as an arraignment court magistrate may,
within 30 days of the effective date of this sentence or
within 30 days of his initial appointment as [a bail
commissioner] an arraignment court magistrate, whichever is
later, elect Class E-2 service credit for service performed
as [a bail commissioner] an arraignment court magistrate
until the termination of State service. [This] The class of
service multiplier for E-2 service as [a bail commissioner]
an arraignment court magistrate shall be 1.5.
* * *
(e) Ineligibility for classes of service.--An individual who
is or was a State employee on or before January 1, 2019, but is
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not and was not a member of the system on or before January 1,
2019, or who first becomes a State employee on or after January
1, 2019, shall be ineligible for active membership in the system
other than as a member of Class A-5 or Class A-6, or the several
classes of State service for service performed as a Class A-5
exempt employee as otherwise provided for under this section.
Any such State employee, if eligible, may be a participant in
the plan as a result of such State service.
Section 308. Sections 5306.1(c) and (d), 5306.2(b) and (c)
and 5306.3(b), (c) and (d) of Title 71 are amended to read:
§ 5306.1. Election to become a Class AA member.
* * *
(c) Effect of election.--An election to become a Class AA
member shall become effective the later of July 1, 2001, or the
date when the election is filed with the board and shall remain
in effect until the termination of employment[.] or an election
is made to become a member of Class A-5 or Class A-6 or solely a
participant in the plan under section 5306.5 (relating to
election by active members to become a Class A-5 member, Class
A-6 member or plan participant). Upon termination and subsequent
reemployment, the member's class of service shall be credited in
the class of service otherwise provided for in this part, and
the State employee's eligibility for participation in the plan
shall be as provided in this part.
(d) Effect of failure to make election.--[Failure] Subject
to the provisions of this part relating to election of Class A-5
or Class A-6 or to be solely a participant in the plan, failure
to elect to become a Class AA member within the election period
set forth in subsection (b) shall result in all of the member's
Class A State service, other than service performed as a State
police officer or in a position in which the member could elect
a class of membership other than Class A, being credited as
Class A service and not subject to further election or crediting
as Class AA service upon termination and subsequent employment.
§ 5306.2. Elections by members of the General Assembly.
* * *
(b) Effect of election.--Membership as a Class D-4 member
shall become effective on July 1, 2001, and shall remain in
effect until the termination of service as a member of the
General Assembly[.] or an election is made to become a member of
Class A-5 or Class A-6 or solely a participant in the plan under
section 5306.5 (relating to election by active members to become
a Class A-5 member, Class A-6 member or plan participant). Upon
termination and a subsequent reemployment, the member's class of
service shall be credited in the class of service otherwise
provided for in this part, and the State employee's eligibility
for participation in the plan shall be as provided in this part.
(c) Effect of failure to make election.--A member of the
General Assembly who is a member of Class A as a result of
failure to elect to become a member of another class or who is a
member of another class other than Class D-4 as a result of
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electing membership in such class for legislative service shall
not be eligible to receive or elect a different class of service
for such legislative service either during the period of
legislative service or upon termination and subsequent
employment[.] unless the State employee elects to become a
member of Class A-5 or Class A-6 or solely a participant in the
plan under section 5306.5.
§ 5306.3. Election to become a Class A-4 member.
* * *
(b) Time for making election.--The election to become a
Class A-4 member must be made by the member filing written
notice with the board in a form and manner determined by the
board no later than 45 days after notice from the board of the
member's eligibility to elect Class A-4 membership. A State
employee who is eligible to elect to become a Class A-4 member
who begins USERRA leave during the election period without
having elected Class A-4 membership [may make the election
within 45 days after being reemployed from] shall have the
election period extended by the number of days on USERRA leave.
(c) Effect of election.--An election to become a Class A-4
member shall be irrevocable and shall become effective on the
effective date of membership in the system and shall remain in
effect for all future [creditable] State service creditable to
the system, other than service performed as a member of the
judiciary[.], but shall not apply to service performed as a
member who elected to become a member of Class A-5 or Class A-6
or solely a participant in the plan under section 5306.5
(relating to election by active members to become a Class A-5
member, Class A-6 member or plan participant) to service not
performed as a Class A-5 exempt employee if the State employee
first becomes a member of the system on or after January 1,
2019. Payment of regular member contributions and shared-risk
member contributions for Class A-4 State service performed prior
to the election of Class A-4 membership shall be made in a form,
manner and time determined by the board. Upon termination of
State service and subsequent reemployment, a member who elected
Class A-4 membership shall be credited as a Class A-4 member for
creditable State service performed after reemployment, except as
a member of the judiciary, or unless the reemployment is as a
member who elected to become a member of Class A-5 or Class A-6
or solely a participant in the plan under section 5306.5,
provided that if the State employee first becomes a member of
the system on or after January 1, 2019, the reemployment is as a
Class A-5 exempt employee, regardless of termination of
employment, termination of membership by withdrawal of
accumulated deductions or status as an annuitant, vestee or
inactive member after the termination of service.
(d) Effect of failure to make election.--Failure to elect to
become a Class A-4 member within the election period set forth
in subsection (b) shall result in all of the member's State
service, other than service performed as a member of the
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judiciary, or if the State employee first becomes a member of
the system on or after January 1, 2019, all service as a Class
A-5 exempt employee, being credited as Class A-3 service and not
subject to further election or crediting as Class A-4 service,
unless the State employee elects to become a member of Class A-5
or Class A-6 or solely a participant in the plan under section
5306.5. Upon termination and subsequent employment, a member who
failed to elect to become a Class A-4 member shall not be
eligible to make another election to become a Class A-4 member
for either past or future State service.
Section 309. Title 71 is amended by adding sections to read:
§ 5306.4. Election to become a Class A-6 member or solely a
participant in the plan.
(a) General rule.--A State employee who was not eligible to
make an election under section 5306.5 (relating to election by
active members to become a Class A-5 member, Class A-6 member or
plan participant) and who otherwise is eligible for Class A-5
membership who has not previously elected or declined to elect
Class A-6 membership or to be solely a participant in the plan
may elect to become either a member of Class A-6 or solely a
participant in the plan.
(b) Time for making election.--The election to become a
Class A-6 member or solely a participant in the plan must be
made by the member filing written notice with the board in a
form and manner determined by the board no later than 45 days
after notice from the board of the member's eligibility to elect
Class A-6 membership or to be solely a participant in the plan.
This notice shall be given upon a State employee first beginning
State service in a position eligible to be a member of the
system that is not as a Class A-5 exempt employee. A State
employee who is eligible to elect to become a Class A-6 member
or solely a participant in the plan who begins USERRA leave
during the election period without having elected Class A-6
membership or to be solely a participant in the plan will have
the election period extended by the number of days on USERRA
leave.
(c) Effect of election to be a Class A-6 member.--An
election to become a Class A-6 member shall be irrevocable and
shall become effective on the effective date of membership in
the system and shall remain in effect for all future creditable
State service, other than service performed as a Class A-5
exempt employee. Payment of regular member contributions for
Class A-6 State service performed prior to the election of Class
A-6 membership shall be made in a form, manner and time
determined by the board. Upon termination and subsequent
reemployment, a member who elected Class A-6 membership shall be
credited as a Class A-6 member for creditable State service
performed after reemployment, except as a Class A-5 exempt
employee, regardless of termination of employment, termination
of membership by withdrawal of accumulated deductions or status
as an annuitant, vestee or inactive member after the termination
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of service.
(d) Effect of election to be solely a participant in the
plan.--An election to become solely a participant in the plan
shall be irrevocable and shall become effective on the date that
membership in the system would have been effective had the
election not been made and shall remain in effect for all future
State service, other than service performed as a Class A-5
exempt employee. Payment of mandatory participant pickup
contributions for service solely as a participant in the plan
performed prior to the election shall be made in a form, manner
and time determined by the board. Upon termination and
subsequent reemployment, a State employee who elected to be
solely a participant in the plan shall resume active
participation for State service performed after reemployment,
except as a Class A-5 exempt employee, regardless of termination
of employment, termination of participation by a partial or
total distribution of vested total defined contributions or
status as an annuitant, vestee or inactive member of the system
as a Class A-5 exempt employee after the termination of service.
(e) Effect of failure to make election.--Failure to elect to
become a Class A-6 member or solely a participant in the plan
within the election period set forth in subsection (b) shall
result in all of the member's State service not performed as a
Class A-5 exempt employee being credited as Class A-5 service
and not subject to further election or crediting as Class A-6
service or solely as a participant in the plan. Upon termination
and subsequent employment, a member who failed to elect to
become a Class A-6 member or solely a participant in the plan
shall not be eligible to make another election to become a Class
A-6 member or solely a participant in the plan for either past
or future State service.
§ 5306.5. Election by active members to become a Class A-5
member, Class A-6 member or plan participant.
(a) General rule.--A State employee, except for a Class A-5
exempt employee, who is an active member or inactive member on
leave without pay on December 31, 2018, and January 1, 2019, may
elect to become a member of Class A-5, a member of Class A-6 or
solely a participant in the plan. A State employee who was
previously a member of the system before January 1, 2019, and
who returns to State service on or after January 1, 2019, or who
is a Class A-5 exempt employee on December 31, 2018, and January
1, 2019, is not eligible to elect Class A-5 membership, Class A-
6 membership or participation in the plan.
(b) Time for making election.--The election to become a
Class A-5 member, Class A-6 member or solely a participant in
the plan must be made by the employee filing written notice with
the board before the termination of State service or by March
31, 2019, whichever occurs first, but may not be made before
January 1, 2019. A State employee who is eligible to elect to
become a Class A-5 member, Class A-6 member or solely a
participant in the plan who begins USERRA leave during the
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election period without having elected Class A-5 membership,
Class A-6 membership or participation in the plan will have the
election period extended by the number of days the employee is
on USERRA leave.
(c) Effect of election.--An election to become a Class A-5
member, a Class A-6 member or solely a participant in the plan
shall be irrevocable as of the earlier of the date of
termination of State service or the day after the election
period expires. The election shall apply to all service
performed on or after July 1, 2019, and shall remain in effect
for all future creditable State service, other than service
performed as a Class A-5 exempt employee. A member who elects
Class A-5 membership shall be subject to all provisions of this
part applicable to Class A-5 membership and participation in the
plan as a Class A-5 member for all service other than service as
a Class A-5 exempt employee performed on and after July 1, 2019.
A member who elects Class A-6 membership shall be subject to all
provisions of this part applicable to Class A-6 membership and
participation in the plan as a Class A-6 member for all service
other than service as a Class A-5 exempt employee performed on
and after July 1, 2019. A member who elects to be solely a
participant in the plan shall be subject to all provisions of
this part applicable to participation in the plan for all
service other than service as a Class A-5 exempt employee
performed on and after July 1, 2019. Upon termination and
subsequent reemployment, a member who elected Class A-5
membership, Class A-6 membership or to be solely a participant
in the plan shall be credited as a Class A-5 member, a Class A-6
member, or solely as a participant in the plan, as the case may
be, for creditable State service performed after reemployment,
except as a Class A-5 exempt employee, regardless of termination
of employment, termination of membership by withdrawal of
accumulated deductions, termination of participation by a
distribution of vested total defined contributions or status as
an annuitant, vestee, inactive member or participant receiving
distributions after the termination of service.
(d) Effect of failure to make election.--If the employee
fails to file timely an election to become a Class A-5 member, a
Class A-6 member or solely a participant in the plan, the
employee shall continue to be enrolled in the applicable class
of service and shall never be able to elect Class A-5
membership, Class A-6 membership or participation in the plan,
regardless of whether the employee terminates service or has a
break in service.
(e) Mandatory pickup participant contributions.--An
individual who has made the election under subsection (a) shall
make the following mandatory pickup participant contributions
for service:
(1) If the participant elected to be a member of Class
A-5, then:
(i) If the participant would have been a member of
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Class A if the election had not been made, no mandatory
pickup participant contributions shall be made.
(ii) If the participant would have been a member of
Class AA if the election had not been made, at a rate of
1.25% of compensation.
(iii) If the participant would have been a member of
Class A-3 if the election had not been made, at a rate of
1.25% of compensation.
(iv) If the participant would have been a member of
Class A-4 if the election had not been made, at a rate of
4.3% of compensation.
(v) If the participant would have been a member of
Class D-4 if the election had not been made, at a rate of
2.5% of compensation.
(vi) If the participant would have been a member of
Class E-1 if the election had not been made, at a rate of
5% of compensation for service for which the regular
member contributions would have been 10% of compensation
or at a rate of 2.5% for service for which the regular
member contributions would have been 7.5% of
compensation.
(vii) If the participant would have been a member of
Class E-2 if the election had not been made, at a rate of
2.5% of compensation.
(2) If the participant elected to be a member of Class
A-6, then:
(i) If the participant would have been a member of
Class A if the election had not been made, at a rate of
1% of compensation.
(ii) If the participant would have been a member of
Class AA if the election had not been made, at a rate of
2.25% of compensation.
(iii) If the participant would have been a member of
Class A-3 if the election had not been made, at a rate of
2.25% of compensation.
(iv) If the participant would have been a member of
Class A-4 if the election had not been made, at a rate of
5.3% of compensation.
(v) If the participant would have been a member of
Class D-4 if the election had not been made, at a rate of
3.5% of compensation.
(vi) If the participant would have been a member of
Class E-1 if the election had not been made, at a rate of
6% of compensation for service for which the regular
member contributions would have been 10% of compensation
or at a rate of 3.5% for service for which the regular
member contributions would have been 7.5% of
compensation.
(vii) If the participant would have been a member of
Class E-2 if the election had not been made, at a rate of
3.5% of compensation.
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(3) If the participant elected to be solely a
participant in the plan, then:
(i) If the participant would have been a member of
Class A if the election had not been made, at a rate of
5% of compensation.
(ii) If the participant would have been a member of
Class AA if the election had not been made, at a rate of
6.25% of compensation.
(iii) If the participant would have been a member of
Class A-3 if the election had not been made, at a rate of
6.25% of compensation.
(iv) If the participant would have been a member of
Class A-4 if the election had not been made, at a rate of
9.3% of compensation.
(v) If the participant would have been a member of
Class D-4 if the election had not been made, at a rate of
7.5% of compensation.
(vi) If the participant would have been a member of
Class E-1 if the election had not been made, at a rate of
10% of compensation for service for which the regular
member contributions would have been 10% of compensation
or at a rate of 7.5% for service for which the regular
member contributions would have been 7.5% of
compensation.
(vii) If the participant would have been a member of
Class E-2 if the election had not been made, at a rate of
7.5% of compensation.
(viii) If the participant would have been making
shared-risk member contributions if the election had not
been made, then the mandatory pickup participant
contributions shall be a percentage of compensation
greater than the amounts listed in this subsection equal
to the shared-risk member contribution rate that would
have been applicable. This percentage rate shall be
subject to any subsequent changes in the shared-risk
member contributions.
(ix) If the participant would have had regular
member contributions adjusted by the shared-gain
adjustment if the election had not been made, then the
mandatory pickup participant contributions shall be
reduced by the same percentage of compensation regular
member contributions would have been reduced by the
shared-gain adjustment. This percentage rate shall be
subject to any subsequent changes in the shared-gain
adjustment to regular member contributions.
(4) If the participant would have been making Social
Security Integration contributions if the election had not
been made, then the mandatory pickup participant
contributions on compensation for which Social Security
Integration contributions would have been made shall be 5% of
compensation greater than the amounts listed in this
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subsection.
Section 310. Sections 5307, 5308, 5308.1 introductory
paragraph and (1), 5309, 5310, 5311(a), 5501.1, 5502, 5503.1(a)
and 5504 of Title 71 are amended to read:
§ 5307. Eligibility points.
(a) General rule.--An active member of the system shall
accrue one eligibility point for each year of credited service
as a member of the [State or] system and if a multiple service
member as a member of the Public School Employees' Retirement
System. A member shall accrue an additional two-thirds of an
eligibility point for each year of Class D-3 credited service.
In the case of a fractional part of a year of credited service,
a member shall accrue the corresponding fractional portion of
eligibility points to which the class of service entitles him. A
State employee who is performing State service solely as a
participant in the plan shall accrue eligibility points at the
same rate and manner as if the State employee was performing
State service credited as a member of Class A-5. No eligibility
points shall accrue in the system or the plan for service as a
school employee credited as Class DC service in the Public
School Employees' Retirement System.
(a.1) USERRA leave.--A member of the system or participant
in the plan who is reemployed from USERRA leave or who dies
while performing USERRA leave shall be granted the eligibility
points that he would have accrued had he continued in his State
office or employment instead of performing USERRA leave. In the
event that a State employee who is reemployed from USERRA leave
makes the member contributions or mandatory pickup participant
contributions to be granted State service credit for the USERRA
leave, no additional eligibility points will be granted.
(b) Transitional rule.--
(1) In determining whether a member who is not a State
employee or school employee on June 30, 2001, and July 1,
2001, and who has previous State service (except a disability
annuitant who returns to State service after June 30, 2001,
upon termination of the disability annuity) has the five
eligibility points required by sections 5102 (relating to
definitions), 5308(b) (relating to eligibility for
annuities), 5309 (relating to eligibility for vesting),
5704(b) (relating to disability annuities) and 5705(a)
(relating to member's options), only eligibility points
earned by performing credited State service, USERRA leave or
credited school service as an active member of the Public
School Employees' Retirement System after June 30, 2001,
shall be counted until such member earns one eligibility
point by performing credited State service or, if a multiple
service member, credited school service as an active member
of the Public School Employees' Retirement System after June
30, 2001, at which time all eligibility points as determined
pursuant to subsection (a) shall be counted.
(2) Any member to whom paragraph (1) applies shall be
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considered to have satisfied any requirement for five
eligibility points contained in this part if the member:
(i) has ten or more eligibility points as determined
pursuant to subsection (a); or
(ii) has Class G, Class H, Class I, Class J, Class
L, Class M or Class N service and has eight or more
eligibility points as determined pursuant to subsection
(a).
(c) Application of eligibility points.--Eligibility points
accrued for service as either member of the system or
participant in the plan may be used to determine the eligibility
for benefits from either the system or the plan unless the
provision is restricted to eligibility points accrued from
specific types of State service. Eligibility points accrued from
service as an active member of the Public School Employees'
Retirement System shall apply only if a State employee has
elected multiple service. Eligibility points accrued by a State
employee for service solely as a participant in the plan for
which he received a total distribution of accumulated total
defined contributions shall not apply when determining
eligibility for benefits from the system or the plan resulting
from any State service subsequently credited in the system or
performed after the total distribution.
§ 5308. Eligibility for annuities.
(a) Superannuation annuity.--Attainment of superannuation
age by an active member [or], an inactive member on leave
without pay or a participant with service credited as a member
of the system with three or more eligibility points other than
eligibility points resulting from nonstate service or nonschool
service shall entitle him to receive a superannuation annuity
upon termination of State service and compliance with section
5907(f) (relating to rights and duties of State employees [and
members], members and participants).
(b) Withdrawal annuity.--
(1) Any vestee or any active member [or], inactive
member on leave without pay or participant with service
credited as a member of the system who terminates State
service having five or more eligibility points and who does
not have Class A-3 [or], Class A-4, Class A-5 or Class A-6
service credit or, if a multiple service member, Class T-E
[or], Class T-F, Class T-G or Class T-H service credit in the
Public School Employees' Retirement System, or who has Class
G, Class H, Class I, Class J, Class K, Class L, Class M or
Class N service and terminates State service having five or
more eligibility points, upon compliance with section
5907(f), (g) or (h) shall be entitled to receive an annuity.
(2) Any vestee, active member [or], inactive member on
leave without pay or participant with service credited as a
member of the system who has Class A-3 [or], Class A-4, Class
A-5 or Class A-6 service credit or, if a multiple service
member, Class T-E [or], Class T-F, Class T-G or Class T-H
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service credit in the Public School Employees' Retirement
System who terminates State service having ten or more
eligibility points, upon compliance with section 5907(f), (g)
or (h), shall be entitled to receive an annuity.
(3) Any vestee, active member or inactive member on
leave without pay or participant with service credited as a
member of the system who has either Class A-3 [or], Class A-
4, Class A-5 or Class A-6 service credit or, if a multiple
service member, Class T-E [or], Class T-F, Class T-G or Class
T-H service credit in the Public School Employees' Retirement
System and also has service credited in the system in one or
more other classes of service who has five or more, but fewer
than ten, eligibility points, upon compliance with section
5907(f), (g) or (h), shall be eligible to receive an annuity
calculated on his service credited in classes of service
other than Class A-3 [or], Class A-4, Class A-5 or Class A-6,
provided that the member has five or more eligibility points
resulting from service in classes other than Class A-3 [or],
Class A-4, Class A-5 or Class A-6 or Class T-E [or], Class T-
F, Class T-G or Class T-H service in the Public School
Employees' Retirement System.
(4) Notwithstanding paragraphs (2) and (3), no single
life annuity determined on service credited as Class A-5 or
Class A-6 shall be paid before a member attains age 62, or in
the case of a member with service credited as Class A-5 who
has 25 or more eligibility points before that member attains
age 57 . In the event that a member is eligible to receive an
annuity on service credited in classes other than Class A-5
or Class A-6, the member may receive an annuity before
attaining age 57 or age 62 on classes of service other than
Class A-5 and Class A-6, with payment of an annuity on
service credited in Class A-5 and Class A-6, other than a
payment of a lump sum under section 5705(a.1) (relating to
member's options), deferred until the annuitant attains age
57 or age 62 as provided under sections 5702 (relating to
maximum single life annuity) and 5705.
(c) Disability annuity.--An active member or inactive member
on leave without pay who has five or more eligibility points
other than eligibility points resulting from membership in the
Public School Employees' Retirement System or any active member
or inactive member on leave without pay who is an officer of the
Pennsylvania State Police or an enforcement officer shall, upon
compliance with section 5907(k), be entitled to a disability
annuity if he becomes mentally or physically incapable of
continuing to perform the duties for which he is employed and
qualifies in accordance with the provisions of section 5905(c)
(1) (relating to duties of the board regarding applications and
elections of members and participants).
(d) Required beginning date.--Members eligible for an
annuity must commence receiving the annuity by the member's
required beginning date.
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§ 5308.1. Eligibility for special early retirement.
Notwithstanding any provisions of this title to the contrary,
the following special early retirement provisions shall be
applicable to specified eligible members [as follows]:
(1) During the period of July 1, 1985, to September 30,
1991, an active member who has attained the age of at least
53 years and has accrued at least 30 eligibility points shall
be entitled, upon termination of State service and compliance
with section 5907(f) (relating to rights and duties of State
employees [and], members and participants), to receive a
maximum single life annuity calculated under section 5702
(relating to maximum single life annuity) without a reduction
by virtue of an effective date of retirement which is under
the superannuation age.
* * *
§ 5309. Eligibility for vesting.
Any member who:
(1) Does not have Class A-3 [or], Class A-4, Class A-5
or Class A-6 service credit or, if a multiple service member,
Class T-E [or], Class T-F, Class T-G or Class T-H service
credit in the Public School Employees' Retirement System and
terminates State service, or if a multiple service member and
an active member of the Public School Employees' Retirement
System terminates school service, with five or more
eligibility points, or any member with Class G, Class H,
Class I, Class J, Class K, Class L, Class M or Class N
service with five or more eligibility points, shall be
eligible until his required beginning date to vest his
retirement benefits.
(2) Has only Class A-3 [or], Class A-4, Class A-5 or
Class A-6 service credit [or] and, if a multiple service
member, only Class T-E [or], Class T-F, Class T-G or Class T-
H service credit in the Public School Employees' Retirement
System and terminates State service, or if a multiple service
member and an active member of the Public School Employees'
Retirement System terminates school service, with ten or more
eligibility points shall be eligible until his required
beginning date to vest his retirement benefits.
(3) Has either Class A-3 [or], Class A-4, Class A-5 or
Class A-6 service credit [or] and, if a multiple service
member, Class T-E [or], Class T-F, Class T-G or Class T-H
service credit in the Public School Employees' Retirement
System, also has service credited in the system in one or
more other classes of service and has five or more, but fewer
than ten, eligibility points and terminates State service, or
if a multiple service member and an active member of the
Public School Employees' Retirement System terminates school
service, shall be eligible until his required beginning date
to vest his retirement benefits calculated on his service
credited in classes of service other than Class A-3 [or],
Class A-4, Class A-5 or Class A-6 and to be credited with
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statutory interest on total accumulated deductions,
regardless of whether or not any part of his accumulated
deductions are a result of Class A-3 [or], Class A-4, Class
A-5 or Class A-6 service credit.
§ 5310. Eligibility for death benefits.
In the event of the death of a member who is eligible for an
annuity in accordance with section 5308(a) or (b) (relating to
eligibility for annuities), his beneficiary shall be entitled to
a death benefit. For purposes of this section, a member with ten
or more eligibility points shall be considered eligible for an
annuity based on Class A-5 service or Class A-6 service even if
under superannuation age.
§ 5311. Eligibility for refunds.
(a) Total accumulated deductions.--Any active member,
regardless of eligibility for benefits, may elect to receive his
total accumulated deductions by his required beginning date upon
termination of service in lieu of any benefit from the system to
which he is entitled.
* * *
§ 5501.1. Shared-risk member contributions [for Class A-3 and
Class A-4 service] and shared-gain adjustments to
regular member contributions.
(a) General.--Shared-risk member contributions shall be made
to the fund on behalf of each member of Class A-3 [or], Class A-
4, Class A-5 or Class A-6 for current service credited [as Class
A-3 or Class A-4] in each such class of service as provided
under this section, except for any period of current service in
which the making of the contributions has ceased solely by
reason of any provision of this part relating to the limitations
under IRC § 401(a)(17) or 415. Shared-risk member contributions
shall be credited to the members' savings account. A shared-gain
adjustment to regular member contributions for Class A-3, Class
A-4, Class A-5 and Class A-6 shall be made as provided under
this section.
(a.1) Exception for certain members who elected under
section 5306.5.--Notwithstanding subsection (a), shared-risk
member contributions and shared-gain adjustments to regular
member contributions for Class A-5 and Class A-6 service shall
not be made for any member who elected Class A-5 or Class A-6
membership under section 5306.5 (relating to election by active
members to become a Class A-5 member, Class A-6 member or plan
participant) who were members of a class of service other than
Class A-3 or Class A-4 before making the election.
(b) Determination of shared-risk contribution rate[.--] for
Class A-3 and Class A-4 service.--The shared-risk contribution
for Class A-3 and Class A-4 service shall be determined as
follows:
(1) For the period from the effective date of this
section until June 30, 2014, the shared-risk contribution
rate for Class A-3 and Class A-4 shall be zero.
(2) For the period from July 1, 2014, to June 30, 2017,
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if the annual interest rate adopted by the board for use
during the period from January 1, 2011, to December 31, 2013,
for the calculation of the normal contribution rate is more
than 1% greater than the actual rate of return, net of fees,
of the investments of the fund based on market value over the
period, the shared-risk contribution rate shall be .5%. In
all other situations, the shared-risk contribution rate shall
be zero.
(3) For each subsequent three-year period, if the
shared-gain adjustment to regular member contributions is
zero, the shared-risk contribution rate shall be increased by
.5% if the annual interest rate adopted by the board for use
during the previous ten-year period for the calculation of
the normal contribution rate is more than 1% greater than the
actual rate of return, net of fees, of the investments of the
fund based on market value over the period. The shared-risk
contribution rate shall be decreased by .5% if the annual
interest rate adopted by the board for use during the
previous ten-year period for the calculation of the normal
contribution rate is equal to or less than the actual rate of
return, net of fees, of the investments of the fund based on
market value over that period.
(4) Notwithstanding paragraphs (2) and (3), the shared-
risk contribution rate shall not be less than zero and shall
not be more than the experience adjustment factor resulting
from investment gains or losses during the determination
period in effect on the first day when the new rate would be
applied, expressed as a percentage of member compensation,
and shall not be more than 2%. For the determination of the
shared-risk contribution rate to be effective July 1, 2017,
the determination period shall be January 1, 2011, through
December 31, 2016. For the determination of the shared-risk
contribution rate to be effective July 1, 2020, the
determination period shall be January 1, 2011, through
December 31, 2019.
(5) The shared-risk contribution rate and the factors
entering into its calculation shall be certified by the
actuary as part of the annual valuations and the actuarial
investigation and evaluation of the system conducted every
five years under section 5902(j) (relating to administrative
duties of the board).
(6) In the event that the annual interest rate adopted
by the board for the calculation is changed during the period
used to determine the shared-risk contribution rate, the
board, with the advice of the actuary, shall determine the
applicable rate during the entire period, expressed as an
annual rate.
(7) For any fiscal year in which the actual
contributions by the Commonwealth or an employer are lower
than [those required to be made under section 5507(d)
(relating to contributions by the Commonwealth and other
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employers)] the actuarially required contributions, the
prospective shared-risk contribution rate for those employees
whose employers are not making the actuarially required
contributions [required by section 5507(d)] shall be zero and
shall not subsequently be increased, except as otherwise
provided in this section. For purposes of this paragraph, the
actuarially required contribution shall be no less than the
normal cost plus the cost to fully amortize the unfunded
actuarial accrued liability calculated using actuarial
methods and assumptions that are consistent with generally
accepted actuarial standards and generally accepted
accounting principles, including professional actuarial
standards of practice.
(8) If the actuary certifies that the accrued liability
contributions calculated in accordance with the actuarial
cost method provided in section 5508(b) [(relating to
actuarial cost method)], as adjusted by the experience
adjustment factor, are zero or less, then the shared-risk
contribution rate for the next fiscal year shall be zero and
shall not subsequently be increased, except as otherwise
provided in this section.
(9) The shared-risk contribution rate for Class A-5 or
Class A-6 service performed by State employees who were
members of Class A-3 or Class A-4 and who elected to be
members of Class A-5 or Class A-6 under section 5306.5 shall
be determined under this subsection and not subsection (e).
(c) Determination of shared-gain adjustment to regular
member contributions for Class A-3 and Class A-4 service.--The
regular member contributions for Class A-3 and Class A-4 service
shall be determined as follows:
(1) For the period from the effective date of this
section until June 30, 2017, the regular member contributions
for Class A-3 and Class A-4 service shall be determined as
otherwise provided in this part.
(2) For the period from July 1, 2017, to June 30, 2020,
if the shared-risk contribution rate for Class A-3 and Class
A-4 service is zero and the annual interest rate adopted by
the board for use during the period from January 1, 2011, to
December 31, 2016, for the calculation of the normal
contribution rate is more than 1% lower than the actual rate
of return, net of fees, of the investments of the fund based
on market value over the period, then the regular member
contribution rate of each member for Class A-3 and Class A-4
service shall be reduced by .5%. In all other situations, the
regular member contributions shall be determined as otherwise
provided in this part.
(3) For each subsequent three-year period, if the
shared-risk contribution rate for Class A-3 and Class A-4 is
zero, the regular member contribution rate shall be decreased
by .5% if the annual interest rate adopted by the board for
use during the previous ten-year period for the calculation
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of the normal contribution rate is more than 1% lower than
the actual rate of return, net of fees, of the investments of
the fund based on market value over the period. The regular
member contribution rate shall be increased by .5% if the
annual interest rate adopted by the board for use during the
previous ten-year period for the calculation of the normal
contribution rate is equal to or greater than the actual rate
of return, net of fees, of the investments of the fund based
on market value over that period.
(4) Notwithstanding paragraphs (2) and (3), the regular
member contribution rate may not be greater than the product
of the basic contribution rate and the class of service
multiplier; and the amount of the adjustment to a lower
regular member contribution rate may not be greater than the
reduction in the actuarially required contribution rate by
the experience adjustment factor resulting from investment
gains or losses during the determination period in effect on
the first day when the new rate would be applied, expressed
as a percentage of member compensation. In no event may the
adjustment to the regular member contribution rate be more
than 2%. For the determination of the regular member
contribution rate to be effective July 1, 2020, the
determination period shall be January 1, 2011, through
December 31, 2019.
(5) The shared-gain adjustment to the regular member
contribution rate and the factors entering into its
calculation shall be certified by the actuary as part of the
annual valuations and the actuarial investigation and
evaluation of the system conducted every five years under
section 5902(j).
(6) If the annual interest rate adopted by the board for
the calculation is changed during the period used to
determine the shared-gain adjustment to the regular member
contribution rate, the board, with the advice of the actuary,
shall determine the applicable rate during the entire period,
expressed as an annual rate.
(7) The shared-gain adjustment to the regular member
contribution rate for Class A-5 or Class A-6 service
performed by State employees who were members of Class A-3 or
Class A-4 and who elected to be members of Class A-5 or Class
A-6 under section 5306.5 shall be determined under this
subsection and not subsection (f).
(d) Calculation of regular member contribution rate.--For
purposes of this section, the regular member contribution rate
for each member is the product of the basic contribution rate
and the class of service multiplier used to determine the
regular member contributions for each member.
(e) Determination of shared-risk contribution rate for Class
A-5 and Class A-6 service.--The shared-risk contribution for
Class A-5 or Class A-6 service shall be determined as follows:
(1) For the period from the effective date of this
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section until June 30, 2023, the shared-risk contribution
rate shall be zero.
(2) For the period from July 1, 2023, to June 30, 2026,
if the annual interest rate adopted by the board for use
during the period from January 1, 2020, to December 31, 2022,
for the calculation of the normal contribution rate is more
than 1% greater than the actual rate of return, net of fees,
of the investments of the fund based on market value over the
period, the shared-risk contribution rate shall be 0.75%. In
all other situations, the shared-risk contribution rate shall
be zero.
(3) For each subsequent three-year period, if the
shared-gain adjustment to regular member contributions is
zero, the shared-risk contribution rate shall be increased by
.75% if the annual interest rate adopted by the board for use
during the previous ten-year period for the calculation of
the normal contribution rate is more than 1% greater than the
actual rate of return, net of fees, of the investments of the
fund based on market value over the period. The shared-risk
contribution rate shall be decreased by .75% if the annual
interest rate adopted by the board for use during the
previous ten-year period for the calculation of the normal
contribution rate is equal to or less than the actual rate of
return, net of fees, of the investments of the fund based on
market value over that period.
(4) Notwithstanding paragraphs (2) and (3), the shared-
risk contribution rate may not be less than zero and may not
be more than the experience adjustment factor resulting from
investment gains or losses during the determination period in
effect on the first day when the new rate would be applied,
expressed as a percentage of member compensation, and shall
not be more than 3%. For the determination of the shared-risk
contribution rate to be effective July 1, 2026, the
determination period shall be January 1, 2020, through
December 31, 2025. For the determination of the shared-risk
contribution rate to be effective July 1, 2029, the
determination period shall be January 1, 2020, through
December 31, 2028.
(5) The shared-risk contribution rate and the factors
entering into its calculation shall be certified by the
actuary as part of the annual valuations and the actuarial
investigation and evaluation of the system conducted every
five years under section 5902(j).
(6) In the event that the annual interest rate adopted
by the board for the calculation is changed during the period
used to determine the shared-risk contribution rate, the
board, with the advice of the actuary, shall determine the
applicable rate during the entire period, expressed as an
annual rate.
(7) For any fiscal year in which the actual
contributions by the Commonwealth or an employer are lower
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than the actuarially required contributions, the prospective
shared-risk contribution rate for those employees whose
employers are not making the actuarially required
contributions shall be zero and shall not subsequently by
increased, except as otherwise provided in this section. For
purposes of this paragraph, the actuarially required
contribution shall be no less than the normal cost plus the
cost to fully amortize the unfunded actuarial accrued
liability calculated using actuarial methods and assumptions
that are consistent with generally accepted actuarial
standards and generally accepted accounting principles,
including professional actuarial standards of practice.
(8) If the actuary certifies that the accrued liability
contributions calculated in accordance with the actuarial
cost method provided in section 5508(b), as adjusted by the
experience adjustment factor, are zero or less, then the
shared-risk contribution rate for the next fiscal year shall
be zero and shall not subsequently be increased, except as
otherwise provided in this section.
(9) The shared-risk contribution rate for Class A-5 or
Class A-6 service performed by State employees who were
members of Class A-3 or Class A-4 and who elected to be
members of Class A-5 or Class A-6 under section 5306.5 shall
be determined under subsection (b) and not this subsection.
(f) Determination of shared-gain adjustment to regular
member contributions for Class A-5 or Class A-6 service.--The
regular member contributions for Class A-5 or Class A-6 service
shall be determined as follows:
(1) For the period from the effective date of this
section until June 30, 2023, the regular member contributions
shall be determined as otherwise provided in this part.
(2) For the period from July 1, 2023, to June 30, 2026,
if the annual interest rate adopted by the board for use
during the period from January 1, 2020, to December 31, 2022,
for the calculation of the normal contribution rate is more
than 1% lower than the actual rate of return, net of fees, of
the investments of the fund based on market value over the
period, then the regular member contribution rate of each
member for Class A-5 and Class A-6 service shall be reduced
by .75%. In all other situations, the regular member
contributions shall be determined as otherwise provided in
this part.
(3) For each subsequent three-year period, if the
shared-risk contribution rate for Class A-5 and Class A-6
service is zero, the regular member contribution rate shall
be decreased by .75% if the annual interest rate adopted by
the board for use during the previous ten-year period for the
calculation of the normal contribution rate is more than 1%
lower than the actual rate of return, net of fees, of the
investments of the fund based on market value over the
period. The regular member contribution rate shall be
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increased by .75% if the annual interest rate adopted by the
board for use during the previous ten-year period for the
calculation of the normal contribution rate is equal to or
greater than the actual rate of return, net of fees, of the
investments of the fund based on market value over that
period.
(4) Notwithstanding paragraphs (2) and (3), the regular
member contribution rate may not be greater than the product
of the basic contribution rate and the class of service
multiplier; and the amount of the adjustment to a lower
regular member contribution rate may not be greater than the
reduction in the actuarially required contribution rate by
the experience adjustment factor resulting from investment
gains or losses during the determination period in effect on
the first day when the new rate would be applied, expressed
as a percentage of member compensation. In no event may the
adjustment to the regular member contribution rate be more
than 3%. For the determination of the regular member
contribution rate to be effective July 1, 2026, the
determination period shall be January 1, 2020, through
December 31, 2025. For the determination of the regular
member contribution rate to be effective July 1, 2029, the
determination period shall be January 1, 2020, through
December 31, 2028.
(5) The shared-gain adjustment to the regular member
contribution rate and the factors entering into its
calculation must be certified by the actuary as part of the
annual valuations and the actuarial investigation and
evaluation of the system conducted every five years under
section 5902(j).
(6) If the annual interest rate adopted by the board for
the calculation is changed during the period used to
determine the shared-gain adjustment to the regular member
contribution rate, the board, with the advice of the actuary,
shall determine the applicable rate during the entire period,
expressed as an annual rate.
(7) The shared-gain adjustment to the regular member
contribution rate for Class A-5 or Class A-6 service
performed by State employees who were members of Class A-3 or
Class A-4 and who elected to be members of Class A-5 or Class
A-6 under section 5306.5 shall be determined under subsection
(c) and not this subsection.
§ 5502. Social Security integration member contributions.
Except for any period of current service in which the making
of regular member contributions has ceased solely by reason of
section 5502.1 (relating to waiver of regular member
contributions and Social Security integration member
contributions) or any provision of this part relating to
limitations under IRC § 401(a)(17) or 415, contributions shall
be made on behalf of [a] an active member of any class who prior
to March 1, 1974, has elected Social Security integration
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coverage. The amount of such contributions shall be 6 1/4% of
that portion of his compensation as an active member in excess
of the maximum wages taxable under the provisions of the Social
Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.), in
addition to the regular member contributions which, after such
election, shall be determined on the basis of the basic
contribution rate of 5% and the additional member contribution
of 1 1/4%: Provided, That a member may elect to discontinue
Social Security integration coverage and shall thereafter be
ineligible to accrue any further Social Security integration
credits or any additional benefits on account of Social Security
integration membership.
§ 5503.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions to the fund required to be made under sections
5501 (relating to regular member contributions for current
service), 5501.1 (relating to shared-risk member contributions
[for Class A-3 and Class A-4 service] and shared-gain
adjustments to regular member contributions), 5502 (relating to
Social Security integration member contributions), 5503
(relating to joint coverage member contributions) and [section]
5505.1 (relating to additional member contributions), with
respect to current State service rendered by an active member on
or after January 1, 1982, shall be picked up by the Commonwealth
or other employer and shall be treated as the employer's
contribution for purposes of IRC § 414(h).
* * *
§ 5504. Member contributions for the purchase of credit for
previous State service or to become a full coverage
member.
(a) Amount of contributions for service in other than Class
G through N.--
(1) The contributions to be paid by an active member or
eligible school employee for credit in the system for the
portion of total previous State service other than service in
Class G, Class H, Class I, Class J, Class K, Class L, Class M
and Class N that a member is eligible to have credited or to
become a full coverage member shall be sufficient to provide
an amount equal to the regular accumulated deductions,
shared-risk accumulated deductions and additional accumulated
deductions which would have been standing to the credit of
the member for such service had regular accumulated
deductions, shared-risk accumulated deductions and additional
member contributions been made with full coverage in the
class of service and at the rate of contribution applicable
during such period of previous service and had his regular
and additional accumulated deductions been credited with
statutory interest during all periods of subsequent State and
school service up to the date of purchase.
(2) Notwithstanding paragraph (1), members [with Class
A-3 State service] who are performing State service credited
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in Class A-3, Class A-4, Class A-5 or Class A-6 shall make
contributions and receive credit as if the [previous]
previously uncredited State service was [Class A-3 service,
and members with Class A-4 State service shall make
contributions and receive credit as if the previous State
service was Class A-4 service,] performed in the class in
which they are an active member at the time the service is
credited even if it would have been credited as a different
class of service had the State employee been a member of the
system at the time the service was performed unless it was
mandatory that the State employee be an active member of the
system and the previous State service is being credited as
the result of a mandatory active membership requirement.
Notwithstanding section 5303(b) (relating to retention and
reinstatement of service credits), a State employee who is an
active member of the system as a result of concurrently
performing service in more than one position or office at the
time previously uncredited State service is credited shall
elect which position or office is used for the determination
of required contributions and crediting and classification of
the previously uncredited service.
(a.1) Converted county service.--No contributions shall be
required to restore credit for previously credited State service
in Class G, Class H, Class I, Class J, Class K, Class L, Class M
and Class N. Such service shall be restored upon the
commencement of payment of the contributions required to restore
credit in the system for all other previous State service.
(b) Certification and method of payment.--
(1) The amount payable shall be certified in each case
by the board in accordance with methods approved by the
actuary and shall be paid in a lump sum within 30 days or in
the case of an active member or eligible school employee who
is an active member of the Public School Employees'
Retirement System may be amortized with statutory interest
through salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service as
the board in its sole discretion decides to allow. The board
may limit the salary deduction amortization plans to such
terms as the board in its sole discretion determines. In the
case of an eligible school employee who is an active member
of the Public School Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the Public School
Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
(2) No payments for service or coverage shall be allowed
for which the required contributions would cause a violation
of the limitation related to contributions applicable to
governmental plans contained in IRC § 415. In the event that
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any service credit or coverage based on such disallowed
contributions is granted after the effective date of this
paragraph, then such service credit shall be canceled and
benefits calculated without regard to such service or
contributions and any member contributions in excess of the
limitations and statutory interest credited on those
contributions shall be refunded to the member by the board.
Section 311. Section 5505(b), (c), (d) and (i)(2) and (4) of
Title 71 are amended and the section is amended by adding a
subsection to read:
§ 5505. Contributions for the purchase of credit for creditable
nonstate service.
* * *
(b) Nonintervening military service.--
(1) The amount due for the purchase of credit for
military service other than intervening military service
shall be determined by applying the member's basic
contribution rate, the additional contribution rate plus the
Commonwealth normal contribution rate for active members at
the time of entry, subsequent to such military service, of
the member into State service to his average annual rate of
compensation as a member of the system over the first three
years of such subsequent State service and multiplying the
result by the number of years and fractional part of a year
of creditable nonintervening military service being purchased
together with statutory interest during all periods of
subsequent State and school service to date of purchase. Upon
application for credit for such service, payment shall be
made in a lump sum within 30 days or in the case of an active
member or eligible school employee who is an active member of
the Public School Employees' Retirement System it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service as the board in its sole
discretion decides to allow. The board may limit salary
deduction amortization plans to such terms as the board in
its sole discretion determines. In the case of an eligible
school employee who is an active member of the Public School
Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid. Application may be filed for all such
military service credit upon completion of three years of
subsequent State service as a member of the system and shall
be credited as Class A service except as provided in section
5304(a) (relating to creditable nonstate service).
(1.1) In the case of an active member who is purchasing
the military service as Class A-3 service, for purposes of
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paragraph (1), the Commonwealth normal contribution rate for
active members at the time of entry, subsequent to the
military service, shall be determined using only the average
new Class A-3 member.
(1.2) In the case of an active member who is purchasing
the military service as Class A-5 service, for purposes of
paragraph (1), the Commonwealth normal contribution rate for
active members at the time of entry, subsequent to the
military service, shall be determined using only the average
new Class A-5 member, and the member's basic contribution
rate shall be multiplied by the class of service multiplier
used to calculate regular member contributions for Class A-5
service.
(1.3) In the case of an active member who is purchasing
the military service as Class A-6 service, for purposes of
paragraph (1), the Commonwealth normal contribution rate for
active members at the time of entry, subsequent to the
military service, shall be determined using only the average
new Class A-6 member, and the member's basic contribution
rate shall be multiplied by the class of service multiplier
used to calculate regular member contributions for Class A-6
service.
(2) Applicants may purchase credit as follows:
(i) one purchase of the total amount of creditable
nonintervening military service; or
(ii) one purchase per 12-month period of a portion
of creditable nonintervening military service.
The amount of each purchase shall be not less than one year
of creditable nonintervening military service.
(c) Intervening military service.--Contributions on account
of credit for intervening military service shall be determined
by the member's regular contribution rate, shared-risk
contribution rate, Social Security integration contribution
rate, the additional contribution rate which shall be applied
only to those members who began service on or after the
effective date of this amendatory act and compensation as a
member of the system at the time of entry of the member into
active military service, together with statutory interest during
all periods of subsequent State and school service to date of
purchase. Upon application for such credit the amount due shall
be certified in the case of each member by the board in
accordance with methods approved by the actuary, and
contributions may be made by:
(1) regular monthly payments during active military
service; or
(2) a lump sum payment within 30 days of certification;
or
(3) salary deductions to the system in amounts agreed
upon by the member or eligible school employee who is an
active member of the Public School Employees' Retirement
System and the board.
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The salary deduction amortization plans agreed to by members and
the board may include a deferral of payment amounts and
statutory interest until the termination of school service or
State service as the board in its sole discretion decides to
allow. The board may limit salary deduction amortization plans
to such terms as the board in its sole discretion determines. In
the case of an eligible school employee who is an active member
of the Public School Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the Public School
Employees' Retirement Board, which shall certify and transfer to
the board the amounts paid.
(d) Nonmilitary and nonmagisterial service.--Contributions
on account of credit for creditable nonstate service other than
military and magisterial service by State employees who first
become members of the system before January 1, 2011, or before
December 1, 2010, as a member of the General Assembly shall be
determined by applying the member's basic contribution rate, the
additional contribution rate plus the Commonwealth normal
contribution rate for active members at the time of entry
subsequent to such creditable nonstate service of the member
into State service to his compensation as a member of the system
at the time of entry into State service and multiplying the
result by the number of years and fractional part of a year of
creditable nonstate service being purchased together with
statutory interest during all periods of subsequent State and
school service to the date of purchase. Upon application for
credit for such service payment shall be made in a lump sum
within 30 days or in the case of an active member or eligible
school employee who is an active member of the Public School
Employees' Retirement System it may be amortized with statutory
interest through salary deductions to the system in amounts
agreed upon by the member and the board. The salary deduction
amortization plans agreed to by members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as the
board in its sole discretion determines. In the case of an
eligible school employee who is an active member of the Public
School Employees' Retirement System, the agreed upon salary
deduction shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the board
the amounts paid.
* * *
(i) Purchases of nonstate service credit by State employees
who first became members of the system on or after December 1,
2010.--
* * *
(2) The full actuarial cost of the increased benefit
attributable to the purchased nonstate service credit shall
be the difference between:
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(i) the present value of a standard single life
annuity, beginning at the earliest possible
superannuation age assuming Class A-3 service credit for
the nonstate service to be purchased[; and] by an active
member of Class A-3 or Class A-4 and assuming Class A-5
service credit for the nonstate service to be purchased
by an active member of Class A-5 and assuming Class A-6
service credit for the nonstate service to be purchased
by an active member of Class A-6; and
(ii) the present value of a standard single life
annuity, beginning at the earliest possible
superannuation age, excluding the nonstate service credit
to be purchased.
* * *
(4) The payment for credit purchased under this
subsection shall be certified in each case by the board in
accordance with methods approved by the actuary and shall be
paid in a lump sum within 30 days or in the case of an active
member or eligible school employee who is an active member of
the Public School Employees' Retirement System may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
members and the board may include a deferral of payment
amounts and interest until the termination of school service
or State service as the board in its sole discretion decides
to allow. The board may limit the salary deduction
amortization plans to such terms as the board in its sole
discretion determines. In the case of an eligible school
employee who is an active member of the Public School
Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
* * *
(k) Inapplicability of election and adjustments.--If a
member is purchasing creditable nonstate service, the regular
member contribution rate used to determine the contributions
necessary to purchase such credit shall be determined without
regard to any adjustments applicable under section 5501.1(c)
(relating to shared-risk member contributions and shared-gain
adjustments to regular member contributions).
Section 312. Section 5506.1(a) of Title 71 is amended to
read:
§ 5506.1. Annual compensation limit under IRC § 401(a)(17).
(a) General rule.--In addition to other applicable
limitations set forth in this part, and notwithstanding any
provision of this part to the contrary, the annual compensation
of each noneligible member and each participant, both before and
after any annualization, taken into account for benefit purposes
under this part shall not exceed the limitation under IRC §
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401(a)(17). On and after January 1, 1996, any reference in this
part to the limitation under IRC § 401(a)(17) shall mean the
Omnibus Budget Reconciliation Act of 1993 (OBRA '93) (Public Law
103-66, 107 Stat. 312) annual compensation limit set forth in
this subsection. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the commissioner for increases in the
cost of living in accordance with IRC § 401(a)(17)(B). The cost-
of-living adjustment in effect for a calendar year applies to
any determination period which is a period, not exceeding 12
months, over which compensation is determined, beginning in such
calendar year. If a determination period consists of fewer than
12 months, the OBRA '93 compensation limit will be multiplied by
a fraction, the numerator of which is the number of months in
the determination period and the denominator of which is 12.
* * *
Section 313. Section 5507 heading, (a), (b) and (d) of Title
71 are amended and the section is amended by adding subsections
to read:
§ 5507. Contributions to the system by the Commonwealth and
other employers.
(a) Contributions on behalf of active members.--The
Commonwealth and other employers whose employees are members of
the system or participants in the plan shall make contributions
to the fund on behalf of all active members in such amounts as
shall be certified by the board as necessary to provide,
together with the members' total accumulated deductions, annuity
reserves on account of prospective annuities other than those
provided in sections 5708 (relating to supplemental annuities),
5708.1 (relating to additional supplemental annuities), 5708.2
(relating to further additional supplemental annuities), 5708.3
(relating to supplemental annuities commencing 1994), 5708.4
(relating to special supplemental postretirement adjustment),
5708.5 (relating to supplemental annuities commencing 1998),
5708.6 (relating to supplemental annuities commencing 2002),
5708.7 (relating to supplemental annuities commencing 2003) and
5708.8 (relating to special supplemental postretirement
adjustment of 2002), in accordance with the actuarial cost
method provided in section 5508(a), (b), (c), (d) and (f)
(relating to actuarial cost method).
(b) Contributions on behalf of annuitants.--The Commonwealth
and other employers whose employees are members of the system or
participants in the plan shall make contributions on behalf of
annuitants in such amounts as shall be certified by the board as
necessary to fund the liabilities for supplemental annuities in
accordance with the actuarial cost method provided in section
5508(e) [(relating to actuarial cost method)].
(b.1) Payment of employer contributions to the system.--
(1) Payment of employer normal contributions shall be as
a percentage of compensation of active members.
(2) Payment of accrued liability contributions as
modified by the experience adjustment factor and supplemental
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annuity contributions shall be as a percentage of
compensation of active members and active participants.
* * *
(d) Payment of final contribution rate.--Notwithstanding the
calculation of the actuarially required contribution rate and
the provisions of subsections (a) and (b), the Commonwealth and
other employers whose employees are members of the system or
participants in the plan shall make contributions to the fund on
behalf of all active members and annuitants in such amounts as
shall be certified by the board in accordance with section
5508(i).
* * *
(g) Payment of additional accrued liability contributions.--
In addition to all other contributions required under this
section and sections 5508 and 5941, the Commonwealth and other
employers whose employees are members of the system or
participants in the plan shall make contributions as certified
by the board as a percentage of the compensation of each member
and each participant as provided in this subsection, unless the
actuary certifies that the accrued liability contribution rate
determined under section 5508(c) is zero or less for that fiscal
year. Additional accrued liability contributions received by the
board as a result of this subsection shall be recognized as part
of the experience adjustment factor under section 5508(f).
Fiscal year
beginning date
Additional accrued liability
contribution rate
July 1, 2018 0.00%
July 1, 2019 0.71%
July 1, 2020 0.66%
July 1, 2021 0.62%
July 1, 2022 0.00%
July 1, 2023 0.00%
July 1, 2024 0.00%
July 1, 2025 0.00%
July 1, 2026 0.00%
July 1, 2027 0.00%
July 1, 2028 0.00%
July 1, 2029 0.00%
July 1, 2030 0.00%
July 1, 2031 0.00%
July 1, 2032 0.10%
July 1, 2033 0.22%
July 1, 2034 0.33%
July 1, 2035 0.43%
July 1, 2036 0.53%
July 1, 2037 0.62%
July 1, 2038 0.71%
July 1, 2039 0.79%
July 1, 2040 0.86%
July 1, 2041 0.93%
Section 314. Section 5508(a), (b), (c)(1), (e)(2), (f) and
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(h) of Title 71 are amended and subsection (c) is amended by
adding a paragraph to read:
§ 5508. Actuarial cost method.
(a) Employer contribution rate on behalf of active
members.--[The] For each fiscal year, the amount of the
Commonwealth and other employer contributions on behalf of all
active members shall be computed by the actuary as a percentage
of the total compensation of all active members during the
period for which the amount is determined and shall be so
certified by the board. The actuarially required contribution
rate on behalf of all active members shall consist of the
employer normal contribution rate, as defined in subsection (b),
and the accrued liability contribution rate as defined in
subsection (c). The actuarially required contribution rate on
behalf of all active members shall be modified by the experience
adjustment factor as calculated in subsection (f).
(b) Employer normal contribution rate.--The employer normal
contribution rate shall be determined after each actuarial
valuation on the basis of an annual interest rate and such
mortality and other tables as shall be adopted by the board in
accordance with generally accepted actuarial principles. The
employer normal contribution rate shall be determined as [a
level percentage of the compensation of the average new active
member, which percentage, if contributed on the basis of his
prospective compensation through his entire period of active
State service, would be sufficient to fund the liability for any
prospective benefit payable to him in excess of that portion
funded by his prospective member contributions, excluding
shared-risk member contributions.] follows:
(1) From the effective date of this paragraph through
fiscal year 2021-2022, as a level percentage of the
compensation of the average new active member, which
percentage, if contributed on the basis of his prospective
compensation through his entire period of active State
service, would be sufficient to fund the liability for any
prospective benefit payable to him in excess of that portion
funded by his prospective member contributions, excluding
shared-risk member contributions and shared-gain adjustments
to regular member contributions. In no case shall the
employer normal contribution rate in the aggregate or for
each class of service separately be less than zero.
(2) For fiscal year 2022-2023 and each fiscal year
thereafter, as a level percentage of the compensation of all
active members, which percentage, if contributed from the
start of their employment on the basis of their prospective
compensation through their entire period of active State
service, would be sufficient to fund the liability for any
prospective benefit payable to them in excess of that portion
funded by their prospective member contributions, excluding
shared-risk member contributions and shared-gain adjustments
to regular member contributions. In no case shall the
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employer normal contribution rate in the aggregate or for
each class of service separately be less than zero.
(c) Accrued liability contribution rate.--
(1) For the fiscal years beginning July 1, 2002, and
July 1, 2003, the accrued liability contribution rate shall
be computed as the rate of total compensation of all active
members which shall be certified by the actuary as sufficient
to fund over a period of ten years from July 1, 2002, the
present value of the liabilities for all prospective
benefits, except for the supplemental benefits as provided in
sections 5708 (relating to supplemental annuities), 5708.1
(relating to additional supplemental annuities), 5708.2
(relating to further additional supplemental annuities),
5708.3 (relating to supplemental annuities commencing 1994),
5708.4 (relating to special supplemental postretirement
adjustment), 5708.5 (relating to supplemental annuities
commencing 1998), 5708.6 (relating to supplemental annuities
commencing 2002), 5708.7 (relating to supplemental annuities
commencing 2003) and 5708.8 (relating to special supplemental
postretirement adjustment of 2002), in excess of the total
assets in the fund (calculated recognizing all investment
gains and losses over a five-year period), excluding the
balance in the supplemental annuity account, and the present
value of employer normal contributions and of member
contributions payable with respect to all active members on
December 31, 2001, and excluding contributions to be
transferred by county retirement systems or pension plans
pursuant to section 5507(c) (relating to contributions to the
system by the Commonwealth and other employers). The amount
of each annual accrued liability contribution shall be equal
to the amount of such contribution for the fiscal year
beginning July 1, 2002, except that, if the accrued liability
is increased by legislation enacted subsequent to June 30,
2002, but before July 1, 2003, such additional liability
shall be funded over a period of ten years from the first day
of July, coincident with or next following the effective date
of the increase. The amount of each annual accrued liability
contribution for such additional legislative liabilities
shall be equal to the amount of such contribution for the
first annual payment.
* * *
(4) For fiscal years beginning on or after July 1, 2018,
the accrued liability contribution rate shall be computed as
provided for under this section, except that the rate shall
be computed as a rate of total compensation of all active
members and active participants for the applicable period. If
the accrued liability is changed by legislation enacted
subsequent to December 31, 2016, such change in liability
shall be funded in equal dollar installments as a percentage
of compensation of all active members and active participants
over a period of ten years from the first day of July
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following the valuation date coincident with or next
following the date such legislation is enacted. In addition
to any employer defined contributions made to the trust, the
Commonwealth and other employers of participants shall make
the accrued liability contributions to the fund certified by
the board.
* * *
(e) Supplemental annuity contribution rate.--
* * *
(2) For fiscal years beginning on or after July 1, 2010,
contributions from the Commonwealth and other employers whose
employees are members of the system required to provide for
the payment of supplemental annuities as provided in sections
5708, 5708.1, 5708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7
and 5708.8 shall be paid as part of the accrued liability
contribution rate as provided for in subsection (c)(3), and
there shall not be a separate supplemental annuity
contribution rate attributable to those supplemental
annuities. In the event that supplemental annuities are
increased by legislation enacted subsequent to December 31,
2009, the additional liability for the increase in benefits
shall be funded in equal dollar installments as a percentage
of compensation of all active members and active participants
over a period of ten years from the first day of July
following the valuation date coincident with or next
following the date such legislation is enacted.
(f) Experience adjustment factor.--
(1) For each fiscal year after the establishment of the
accrued liability contribution rate and the supplemental
annuity contribution rate for the fiscal year beginning July
1, 2010, any increase or decrease in the unfunded accrued
liability and any increase or decrease in the liabilities and
funding for supplemental annuities, due to actual experience
differing from assumed experience (recognizing all realized
and unrealized investment gains and losses over a five-year
period), changes in contributions caused by the final
contribution rate being different from the actuarially
required contribution rate, State employees making shared-
risk member contributions or having shared-gain adjustments
to their regular member contributions, payment of additional
accrued liability contributions under section 5507(g),
changes in actuarial assumptions or changes in the terms and
conditions of the benefits provided by the system by
judicial, administrative or other processes other than
legislation, including, but not limited to, reinterpretation
of the provisions of this part, shall be amortized in equal
dollar annual contributions as a percentage of compensation
of all active members and active participants over a period
of 30 years beginning with the July 1 succeeding the
actuarial valuation determining said increases or decreases.
(2) The actuarially required contribution rate shall be
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the sum of the normal contribution rate, the accrued
liability contribution rate and the supplemental annuity
contribution rate, modified by the experience adjustment
factor as calculated in paragraph (1).
* * *
(h) Temporary application of collared contribution rate.--
The collared contribution rate for each fiscal year shall be
determined by comparing the actuarially required contribution
rate calculated without regard for costs added by legislation to
the prior year's final contribution rate. If, for any of the
fiscal years beginning July 1, 2011, July 1, 2012, and on or
after July 1, 2013, the actuarially required contribution rate
calculated without regard for costs added by legislation is more
than 3%, 3.5% and 4.5%, respectively, of the total compensation
of all active members greater than the prior year's final
contribution rate, then the collared contribution rate shall be
applied and be equal to the prior year's final contribution rate
increased by the respective percentage above of total
compensation of all active members. Otherwise, and for all
subsequent fiscal years, the collared contribution rate shall
not [be applicable] apply. In no case shall the collared
contribution rate be less than 4% of total compensation of all
active members.
* * *
Section 315. Section 5509 of Title 71 is amended to read:
§ 5509. Appropriations and assessments by the Commonwealth.
(a) Annual submission of budget.--The board shall prepare
and submit annually an itemized budget consisting of the amounts
necessary to be appropriated by the Commonwealth out of the
General Fund and special operating funds and the amounts to be
assessed the other employers required to meet the separate
obligations to the fund and the trust accruing during the fiscal
period beginning the first day of July of the following year.
(b) Appropriation and payment.--The General Assembly shall
make an appropriation sufficient to provide for the separate
obligations of the Commonwealth to the fund and the trust. Such
amount shall be paid by the State Treasurer through the
Department of Revenue into the fund or trust in accordance with
requisitions presented by the board. The contributions to the
system by the Commonwealth on behalf of active members who are
officers of the Pennsylvania State Police shall be charged to
the General Fund and to the Motor License Fund in the same
ratios as used to apportion the appropriations for salaries of
members of the Pennsylvania State Police. The contributions to
the system by the Commonwealth on behalf of active members who
are enforcement officers and investigators of the Pennsylvania
Liquor Control Board shall be charged to the General Fund and to
the State Stores Fund.
(c) Contributions from funds other than General Fund.--The
amounts assessed other employers who are required to make the
necessary separate contributions to the fund and the trust out
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of funds other than the General Fund shall be paid by such
employers into the fund or trust in accordance with requisitions
presented by the board. The General Fund of the Commonwealth
shall not be held liable to appropriate the moneys required to
build up the reserves in the fund necessary for the payment of
benefits from the system to employees or to make the employer
defined contributions for employees of such other employers. In
case any such other employer shall fail to provide to the fund
the moneys necessary for such purpose, then the service of such
members of the system for such period for which money is not so
provided shall be credited and pickup contributions with respect
to such members shall continue to be credited to the members'
savings account. The annuity to which such member is entitled
shall be determined as actuarially equivalent to the present
value of the maximum single life annuity of each such member
reduced by the amount of employer contributions to the system
payable on account and attributable to his compensation during
such service, except that no reduction shall be made as a result
of the failure of an employer to make contributions required for
a period of USERRA leave.
Section 316. (Reserved).
Section 317. Sections 5701 and 5701.1 of Title 71 are
amended to read:
§ 5701. Return of total accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable from the system under this chapter to which he
may be entitled, elect to receive his total accumulated
deductions by his required beginning date.
§ 5701.1. Transfer of accumulated deductions.
When an employee of the Juvenile Court Judges' Commission
elects membership in an independent retirement program pursuant
to section 5301(f) (relating to mandatory and optional
membership in the system and participation in the plan), the
board shall transfer directly to the trustee or administrator of
the independent retirement program all accumulated deductions
resulting from service credited while an employee of the
Juvenile Court Judges' Commission.
Section 318. Sections 5702(a)(1), (4) and (6), (b) and (c),
5704(a), (c), (e) and (f) and 5705(a) of Title 71 are amended
and the sections are amended by adding subsections to read:
§ 5702. Maximum single life annuity.
(a) General rule.--Any full coverage member who is eligible
to receive an annuity pursuant to the provisions of section
5308(a) or (b) (relating to eligibility for annuities) who
terminates State service, or if a multiple service member who is
a school employee who is an active member of the Public School
Employees' Retirement System who terminates school service,
before attaining age 70 shall be entitled to receive a maximum
single life annuity attributable to his credited service and
equal to the sum of the following single life annuities
beginning at the effective date of retirement:
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(1) A single life annuity that is the sum of the
standard single life [annuity multiplied by the sum of the
products,] annuities determined separately for each class of
service[, obtained by multiplying] multiplied by the
appropriate class of service multiplier [by the ratio of
years of service credited in that class to the total credited
service] applicable to each standard single life annuity. In
case the member on the effective date of retirement is under
superannuation age for any service, a reduction factor
calculated to provide benefits actuarially equivalent to an
annuity starting at superannuation age shall be applied to
the product determined for that service[.]: Provided,
however, That any standard single life annuity resulting from
Class A-5 service shall be reduced by a percentage determined
by multiplying the number of months, including a fraction of
a month as a full month, by which the effective date of
retirement precedes superannuation age by 0.25% if the
effective date of retirement is on or after the date the
member has attained age 57 and the member has 25 or more
eligibility points , and that any standard single life annuity
resulting from Class A-6 service shall be reduced by a
percentage determined by multiplying the number of months,
including a fraction of a month as a full month, by which the
effective date of retirement precedes superannuation age by
0.25% if the effective date of retirement is on or after the
date the member has attained age 62 and the member has 25 or
more eligibility points . The class of service multiplier for
any period of concurrent service shall be multiplied by the
proportion of total State and school compensation during such
period attributable to State service as a member of the
system. In the event a member has two multipliers for one
class of service [the class of service multiplier to be used
for calculating benefits for that class shall be the average
of the two multipliers weighted by the proportion of
compensation attributable to each multiplier during the three
years of highest annual compensation in that class of
service: Provided, That in the case of a member of Class E-1,
a portion but not all of whose three years of highest annual
judicial compensation is prior to January 1, 1973, two class
of service multipliers shall be calculated on the basis of
his entire judicial service, the one applying the judicial
class of service multipliers effective prior to January 1,
1973 and the second applying the class of service multipliers
effective subsequent to January 1, 1973. The average class of
service multiplier to be used for calculating benefits for
his judicial service shall be the average of the two
calculated multipliers weighted by the proportion of
compensation attributable to each of the calculated
multipliers during the three years of highest annual
compensation in that class of service.], separate standard
single life annuities shall be calculated for the portion of
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service in the class applicable to each class of service
multiplier. In the case of a member with Class A-5 service
credit or Class A-6 service credit and credit in one or more
other classes of service who has not attained age 62 on the
effective date of retirement , or in the case of a member with
Class A-5 service credit who has 25 eligibility points and
credit in one or more other classes of service who has not
attained age 57 on the effective date of retirement, but who
is otherwise eligible for an annuity resulting from his Class
A-5 service or Class A-6 service, and who commences receipt
of a superannuation annuity or withdrawal annuity based on
the other classes of service, no annuity based on the
member's Class A-5 service credit or Class A-6 service credit
shall be paid until the attainment of age 62 or age 57 for
Class A-5 for a member who has 25 eligibility points.
* * *
(4) If eligible, a single life annuity which is
actuarially equivalent to the amount by which his regular and
additional accumulated deductions attributable to any
credited service other than as a member of Class A-3, Class
A-4, Class A-5, Class A-6 and Class C are greater than one-
half of the actuarially equivalent value on the effective
date of retirement of the annuity as provided in paragraph
(1) attributable to service other than Class A-3, Class A-4,
Class A-5, Class A-6 and Class C for which regular or joint
coverage member contributions were made. [This paragraph
shall not apply to any member with State service credited as
Class A-3 or Class A-4.]
* * *
(6) If eligible, a single life annuity sufficient
together with the annuity provided for in paragraph (1) as a
Class A, Class AA, Class A-3 [and], Class A-4, Class A-5 or
Class A-6 member and the highest annuity provided for in
paragraph (2) to which he is entitled, or at his option could
have been entitled, to produce that percentage of [a] the
sums of the standard single life [annuity] annuities adjusted
by the application of the class of service multiplier for
Class A, Class AA, Class A-3 [or], Class A-4, Class A-5 or
Class A-6 as set forth in paragraph (1) in the case where any
service is credited as a member of Class A, Class AA, Class
A-3 [or], Class A-4, Class A-5 or Class A-6 on the effective
date of retirement as determined by his total years of
credited service as a member of Class A, Class AA, Class A-3
[and], Class A-4, Class A-5 or Class A-6 and by the following
table:
Total Years of
Credited Service
as a Member of
Class A,
Class AA, Class A-3
[and], Class A-4, Class A-5
Percentage of Sums of
Standard
Single Life
[Annuity] Annuities Adjusted for
Class A, Class AA,
Class A-3 [and], Class A-4,
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and Class A-6
Class A-5 and Class A-6
Class of
Service Multipliers
35-40 100%
41 102%
42 104%
43 106%
44 108%
45 or more 110%
* * *
(b) Present value of annuity.--The present value of the
maximum single life annuity as calculated in accordance with
subsection (a) of this section shall be determined by
multiplying the maximum single life annuity by the cost of a
dollar annuity on the effective date of retirement[.], which
shall take into account any delay in the receipt of the portion
of the annuity based on Class A-5 service or Class A-6 service
if the effective date of retirement is before the member attains
age 62 or age 57 for a member with Class A-5 service who has 25
eligibility points. Such present value shall be decreased only
as required under the provisions of section 5506 (relating to
incomplete payments), 5509(c) (relating to appropriations and
assessments by the Commonwealth) or 5703 (relating to reduction
of annuities on account of social security old-age insurance
benefits).
(c) Limitation on amount of annuity.--The annuity paid to a
member under subsection (a) and reduced in accordance with the
option elected under section 5705 (relating to member's options)
shall not exceed the highest compensation received as a member
of the system during any period of twelve consecutive months of
credited service. No limit on the total annuity paid to a member
with Class D-3 service shall be applied in the case of a member
who served as a constitutional officer of the General Assembly.
* * *
(e) Coordination of benefits.--The determination and payment
of the maximum single life annuity under this section shall be
in addition to any payments a member may be entitled to receive,
has received or is receiving as a result of being a participant
in the plan.
(f) Special calculation for A-5 and A-6.--For the
calculation under subsection (a) for all A-5 and A-6 members the
interest used in the calculation for an annuity for a member
that has not attained the age of 62 shall be the amount required
to have no actuarial cost to the system. The amount to be
calculated shall be certified by the system's actuary in their
annual valuation and will only be valid if adopted by the board.
§ 5704. Disability annuities.
(a) Amount of annuity.--A member who has made application
for a disability annuity and has been found to be eligible in
accordance with the provisions of section 5905(c)(1) (relating
to duties of the board regarding applications and elections of
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members and participants) shall receive a disability annuity
payable from the effective date of disability as determined by
the board and continued until a subsequent determination by the
board that the annuitant is no longer entitled to a disability
annuity. [The] If the sum of the products of the number of years
and fractional part of a year of credited service in each class
and the appropriate class of service multiplier is greater than
16.667, the disability annuity shall be a single life annuity
that is equal to [a] the sum of the standard single life
[annuity] annuities determined separately for each class of
service multiplied by the appropriate class of service
multiplier [applicable to the class of service at the time of
disability if the product of such class of service multiplier
and the total number of years of credited service is greater
than 16.667, otherwise the], otherwise each standard single life
annuity shall be multiplied by the lesser of the following
ratios:
MY*/Y or 16.667/Y
[where] Where Y = total number of years of credited service[,];
Y* = total years of credited service if the member were to
continue as a State employee until attaining superannuation age
as applicable to that class of service at the time of
disability, or if the member has attained superannuation age, as
applicable to that class of service at the time of disability,
then the number of years of credited service and M = the class
of service multiplier as applicable to that class of service at
the effective date of disability. A member of Class C shall
receive, in addition, any annuity to which he may be eligible
under section 5702(a)(3) (relating to maximum single life
annuity). The member shall be entitled to the election of a
joint and survivor annuity on that portion of the disability
annuity to which he is entitled under section 5702.
* * *
(c) Reduction on account of earned income.--Subsequent to
January 1, 1972, payments on account of disability shall be
reduced by that amount by which the earned income of the
annuitant, as reported in accordance with section 5908(b)
(relating to rights and duties of annuitants), for the preceding
calendar year together with the disability annuity payments
provided in this section other than subsection (b), for the
year, exceeds the product of:
[(i)] (1) the last year's salary of the annuitant as a
[State employee] member of the system; and
[(ii)] (2) the ratio of the current monthly payment to
the monthly payment at the effective date of disability;
Provided, That the annuitant shall not receive less than his
member's annuity or the amount to which he may be entitled under
section 5702 whichever is greater.
* * *
(e) Termination of State service.--Upon termination of
disability annuity payments in excess of an annuity calculated
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in accordance with section 5702, a disability annuitant who[:
(1) does not have Class A-3 or Class A-4 service credit;
or
(2) has Class A-3 or Class A-4 service credit and fewer
than ten eligibility points;
and who] does not return to State service may file an
application with the board for an amount equal to the excess, if
any, of the sum of the shared-risk accumulated deductions plus
the regular and additional accumulated deductions standing to
his credit at the effective date of disability over one-third of
the total disability annuity payments received. If the annuitant
on the date of termination of service was eligible for an
annuity as provided in section 5308(a) or (b) (relating to
eligibility for annuities), he may file an application with the
board for an election of an optional modification of his
annuity.
(f) Supplement for service connected disability.--
(1) If a member has been found to be eligible for a
disability annuity and if the disability has been found to be
a service connected disability and if the member is receiving
workers' compensation payments for other than medical
benefits, such member shall receive a supplement equal to
[70% of his final average salary] the amount determined under
paragraph (2) less the sum of the annuity as determined under
subsection (a) and any payments paid or payable on account of
such disability under the act of June 2, 1915 (P.L.736,
No.338), known as the Workers' Compensation Act, the act of
June 21, 1939 (P.L.566, No.284), known as The Pennsylvania
Occupational Disease Act, and the Social Security Act (49
Stat. 620, 42 U.S.C. § 301 et seq.). Such supplement shall
continue as long as he is determined to be disabled and is
receiving workers' compensation payments for other than
medical benefits on account of his service connected
disability in accordance with the Workers' Compensation Act
or The Pennsylvania Occupational Disease Act. If the member
has received a lump sum workers' compensation payment in lieu
of future weekly compensation payments, the length in weeks
and calculation of the service connected disability
supplement shall be determined by dividing the lump sum
payment by the average weekly wage as determined by the
Workers' Compensation Board.
(2) For a member who does not have Class A-5 or Class A-
6 service, the amount to be used to determine eligibility for
the supplement under paragraph (1) shall be 70% of the
member's final average salary. For a member who has Class A-5
or Class A-6 service, the amount to be used to determine
eligibility for the supplement under paragraph (1) shall be
calculated according to the following formula:
A = .7[(Y
W
MULTIPLIED BY FAS
W
)+(Y
P
MULTIPLIED BY FAS
P
)]
Y
T
Y
T
(3) The following apply to the formula in paragraph (2):
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(i) A equals the amount used to determine the
supplement;
(ii) Y
T
equals total years of credited service;
(iii) Y
W
equals years of credited service that are
not Class A-5 or Class A-6 service;
(iv) FAS
W
equals final average salary calculated for
credited service other than Class A-5 or Class A-6
service;
(v) Y
P
equals years of service credited as Class A-5
or Class A-6 service; and
(vi) FAS
P
equals final average salary calculated for
service credited as Class A-5 or Class A-6 service.
* * *
(h) Coordination of benefits.--The determination and payment
of a disability annuity under this section is in addition to any
payments a member may be entitled to receive, has received or is
receiving as a result of being a participant in the plan.
§ 5705. Member's options.
(a) General rule.--Any special vestee [who has attained
superannuation age, any vestee who does not have Class A-3 or
Class A-4 service credit having five or more eligibility points
for service other than Class T-E or Class T-F service in the
Public School Employees' Retirement System, or vestee who has
Class A-3 or Class A-4 service credit having ten or more
eligibility points, any member with Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service having
five or more eligibility points or any other eligible member
upon termination of State service who has not withdrawn his
total accumulated deductions as provided in section 5701
(relating to return of total accumulated deductions)], vestee or
any other member upon termination of State service who is
eligible to receive an annuity as provided in section 5308(a) or
(b) (relating to eligibility for annuities) may apply for and
elect to receive either a maximum single life annuity, as
calculated in accordance with the provisions of section 5702
(relating to maximum single life annuity), or a reduced annuity
certified by the actuary to be actuarially equivalent to the
maximum single life annuity payable after reduction under
subsection (a.1) and in accordance with one of the following
options; except that no member shall elect an annuity payable to
one or more survivor annuitants other than his spouse or
alternate payee of such a magnitude that the present value of
the annuity payable to him for life plus any lump sum payment
under this subsection and subsection (a.1) he may have elected
to receive is less than 50% of the present value of his maximum
single life annuity and no member may elect a payment option
that would provide benefits that do not satisfy the minimum
distribution requirements or would violate the incidental death
benefit rules of IRC § 401(a)(9):
(1) Option 1.--A life annuity to the member with a
guaranteed total payment equal to the present value of the
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maximum single life annuity on the effective date of
retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
(2) Option 2.--A joint and survivor annuity payable
during the lifetime of the member with the full amount of
such annuity payable thereafter to his survivor annuitant, if
living at his death.
(3) Option 3.--A joint and fifty percent (50%) survivor
annuity payable during the lifetime of the member with one-
half of such annuity payable thereafter to his survivor
annuitant, if living at his death.
(4) Option 4.--Some other benefit which shall be
certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
(i) any annuity shall be payable without reduction
during the lifetime of the member;
(ii) the sum of all annuities payable to the
designated survivor annuitants shall not be greater than
[one and one-half times] the annuity payable to the
member; and
(iii) a portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the total accumulated
deductions standing to the credit of the member that are
not the result of contributions and statutory interest
made or credited as a result of Class A-3 [or], Class A-
4, Class A-5 or Class A-6 service. The balance of the
present value of the maximum single life annuity adjusted
in accordance with section 5702(b) shall be paid in the
form of an annuity with a guaranteed total payment, a
single life annuity, or a joint and survivor annuity or
any combination thereof but subject to the restrictions
of subparagraphs (i) and (ii) under this option.
(a.1) Additional lump sum withdrawal.--The following shall
apply:
(1) If a member has an effective date of retirement
after December 31, 2018, and has elected to have the full
amount allowed under subsection (a)(4)(iii) paid in a lump
sum, or is not eligible to have any money paid under
subsection (a)(4)(iii), then the member may elect to receive
an additional amount payable in a lump sum at the same time
as the payment elected under subsection (a)(4)(iii), if any.
(2) The additional amount payable in a lump sum may not
exceed an amount equal to total accumulated deductions
standing to the credit of the member on the effective date of
retirement related to service credited as Class A-3, Class A-
4, Class A-5 or Class A-6.
(3) If a member elects to be paid an additional lump sum
amount under this subsection, then the maximum single life
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annuity calculated under section 5702 and payable under
subsection (a) shall be reduced by the additional amount
withdrawn divided by the cost of a dollar annuity on the
effective date of retirement computed on the basis of the
annual interest rate adopted for that fiscal year by the
board for the calculation of the employer normal contribution
rate under section 5508(b) (relating to actuarial cost
method) and the mortality tables adopted by the board for the
determination of actuarially equivalent benefits under this
part. The reduction in the maximum single life annuity under
this paragraph shall apply before the election and
calculation of any reduced annuities payable under subsection
(a).
* * *
Section 319. Sections 5705.1 and 5706(a), (a.2), (a.5), (b)
and (c) of Title 71 are amended to read:
§ 5705.1. Payment of accumulated deductions resulting from
[Class A-3 and Class A-4] more than one class of
service.
Any superannuation or withdrawal annuitant who:
(1) has Class A-3 [or], Class A-4, Class A-5 or Class A-
6 service credit;
(2) has service credited in one or more classes of
service; and
(3) because he has five or more, but fewer than ten,
eligibility points is not eligible to receive an annuity on
his Class A-3 [or], Class A-4, Class A-5 or Class A-6 service
shall receive in a lump sum at the time of his retirement, in
addition to any other annuity or lump sum payment which he may
elect, his accumulated deductions resulting from his Class A-3
[or], Class A-4, Class A-5 or Class A-6 service credit. Payment
of these accumulated deductions resulting from Class A-3 [or],
Class A-4, Class A-5 or Class A-6 service credit shall not be
eligible for installment payments pursuant to section 5905.1
(relating to installment payments of accumulated deductions) but
shall be considered a lump sum payment for purposes of section
5905.1(d).
§ 5706. Termination of annuities.
(a) General rule.--
(1) If the annuitant returns to State service or enters
or has entered school service and elects multiple service
membership, any annuity payable to him under this part shall
cease effective upon the date of his return to State service
or entering school service without regard to whether he is a
mandatory, optional or prohibited member of the system or
participant in the plan or, if a multiple service member,
whether he is a mandatory, optional or prohibited member or
participant of the Public School Employees' Retirement System
or School Employees' Defined Contribution Plan; and, in the
case of an annuity other than a disability annuity the
present value of such annuity, adjusted for full coverage in
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the case of a joint coverage member who makes the appropriate
back contributions for full coverage, shall be frozen as of
the date such annuity ceases. An annuitant who is credited
with an additional 10% of Class A and Class C service as
provided in section 5302(c) (relating to credited State
service) and who returns to State service shall forfeit such
credited service and shall have his frozen present value
adjusted as if his 10% retirement incentive had not been
applied to his account. In the event that the cost-of-living
increase enacted December 18, 1979 occurred during the period
of such State or school employment, the frozen present value
shall be increased, on or after the member attains
superannuation age, by the percent applicable had he not
returned to service.
(2) This subsection shall not apply in the case of any
annuitant who:
(i) may render services to the Commonwealth in the
capacity of an independent contractor; or
(ii) is over normal retirement age or who has been
an annuitant for more than one year and who may render
service to the Commonwealth:
(A) as a member of an independent board or
commission or as a member of a departmental
administrative or advisory board or commission when
such members of independent or departmental boards or
commissions are compensated on a per diem basis for
not more than 150 days per calendar year; or
(B) as a member of an independent board or
commission requiring appointment by the Governor,
with advice and consent of the Senate, where the
annual salary payable to the member does not exceed
$35,000 and where the member has been an annuitant
for at least six months immediately preceding the
appointment.
* * *
(a.2) Return of benefits.--In the event an annuitant whose
annuity from the system ceases pursuant to this section receives
any annuity payment, including a lump sum payment pursuant to
section 5705 (relating to member's options) on or after the date
of his return to State service or entering school service, the
annuitant shall return to the board the amount so received from
the system plus statutory interest. The amount payable shall be
certified in each case by the board in accordance with methods
approved by the actuary and shall be paid in a lump sum within
30 days or in the case of an active member or school employee
who is an active member of the Public School Employees'
Retirement System may be amortized with statutory interest
through salary deductions to the system in amounts agreed upon
by the member and the board. The salary deduction amortization
plans agreed to by the member and the board may include a
deferral of payment amounts and statutory interest until the
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termination of school service or State service as the board in
its sole discretion decides to allow. The board may limit salary
deduction amortization plans to such terms as the board in its
sole discretion determines. In the case of a school employee who
is an active member of the Public School Employees' Retirement
System, the agreed upon salary deductions shall be remitted to
the Public School Employees' Retirement Board, which shall
certify and transfer to the board the amounts paid.
* * *
(a.5) No contributions or credited service.--The service of
an annuitant whose annuity does not cease upon his return to
State or school service shall not be subject to member
contributions or eligible for qualification as creditable State
service[.] and shall not be eligible for participation in the
plan, mandatory pickup participant contributions, voluntary
contributions or employer defined contributions.
(b) Subsequent discontinuance of service.--Upon subsequent
discontinuance of service, such [member] terminating State
employee other than a former annuitant who had the effect of his
frozen present value eliminated in accordance with subsection
(c) or a former disability annuitant shall be entitled to an
annuity which is actuarially equivalent to [the sum of] the
present value as determined under subsection (a) [and] to which
shall be added, if the service after reemployment was as a
member of the system, the present value of a maximum single life
annuity based on years of service credited subsequent to reentry
in the system and his final average salary computed by reference
to his compensation as a member of the system or as a member of
the Public School Employees' Retirement System during his entire
period of State and school service.
(c) Elimination of the effect of frozen present value.--
(1) An annuitant who returns to State service as an
active member of the system and earns three eligibility
points as a member of the system by performing credited State
service following the most recent period of receipt of an
annuity under this part, or an annuitant who enters school
service other than as a Class DC participant and:
(i) is a multiple service member; or
(ii) who elects multiple service membership, and
earns three eligibility points by performing credited State
service as a member of the system or credited school service
following the most recent period of receipt of an annuity
under this part, and who had the present value of his annuity
frozen in accordance with subsection (a), shall qualify to
have the effect of the frozen present value resulting from
all previous periods of retirement eliminated, provided that
all lump sum payments under Option 4 or under section
5705(a.1) and annuity payments payable during previous
periods of retirement plus interest as set forth in paragraph
(3) shall be returned to the fund in the form of an actuarial
adjustment to his subsequent benefits or in such form as the
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board may otherwise direct.
* * *
Section 320. Sections 5707(a), (b) and (f) and 5709 heading,
(a) and (b) of Title 71 are amended and the sections are amended
by adding subsections to read:
§ 5707. Death benefits.
(a) Members eligible for annuities.--Any active member,
inactive member [on leave without pay], vestee or current or
former State employee performing USERRA leave who dies and was
eligible for an annuity in accordance with section 5308(a) or
(b) (relating to eligibility for annuities) or special vestee
who has attained superannuation age and dies before applying for
a superannuation annuity shall be considered as having applied
for an annuity to become effective the day before his death and
in the event he has not elected an option or such election has
not been approved prior to his death, it shall be assumed that
he elected Option 1. For purposes of this subsection, a member
with Class A-5 service or Class A-6 service who has ten or more
eligibility points shall be considered eligible for an annuity
based on Class A-5 or Class A-6 service, subject to a reduction
factor calculated to provide benefits actuarially equivalent to
an annuity starting at superannuation age, even if the member
had not attained age 62.
(b) Members ineligible for annuities.--In the event of the
death of a special vestee, an active member, an inactive member
[on leave without pay] or a current or former State employee
performing USERRA leave who is not entitled to a death benefit
as provided in subsection (a), his designated beneficiary shall
be paid the full amount of his total accumulated deductions.
(b.1) Members eligible for annuities in some classes of
service and ineligible in other classes of service.--In the
event of the death of a member who is eligible for an annuity
based on service credited in some classes of service and
ineligible for an annuity for service credited in other classes
of service, a benefit shall be paid under subsection (a) based
on the service for which an annuity is deemed payable in
addition to payment under subsection (b) of the accumulated
deductions attributable to service for which the member was not
eligible for an annuity.
* * *
(f) Members subject to limitations under section 5702(c).--
Subject to the limitations contained in section 401(a)(9) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(9)), the present value of any annuity in excess of that
payable under section 5702 (relating to maximum single life
annuity) that is not subject to the limitations under section
415(b) of the Internal Revenue Code of 1986 shall be paid in a
lump sum to the beneficiary designated by the member after the
death of the member. A beneficiary receiving a benefit under
this subsection shall not be able to elect a payment method
otherwise allowed under section 5709(b)(2) and (3) (relating to
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payment of benefits from the system).
* * *
§ 5709. Payment of benefits from the system.
(a) Annuities.--Any annuity granted under the provisions of
this part and paid from the fund shall be paid in equal monthly
installments.
(b) Death benefits.--If the amount of a death benefit
payable from the fund to a beneficiary of a member under section
5707 (relating to death benefits) or under the provisions of
Option 1 of section 5705(a)(1) (relating to member's options) is
$10,000 or more, such beneficiary may elect to receive payment
according to one of the following options:
(1) a lump sum payment;
(2) an annuity actuarially equivalent to the amount
payable; or
(3) a lump sum payment and an annuity such that the
annuity is actuarially equivalent to the amount payable less
the lump sum payment specified by the beneficiary.
* * *
(e) Members with Class A-5 or Class A-6 service and service
in one or more other classes of service.--An annuitant whose
receipt of the portion of his annuity attributable to Class A-5
service or Class A-6 service has been delayed to the attainment
of age 62 or age 57 in the case of a member who has Class A-5
service and 25 eligibility points shall have his annuity
increased upon attainment of the applicable age under the terms
and conditions of the annuity payment option selected at the
time of retirement or if applicable under section 5907(j)
(relating to rights and duties of State employees, members and
participants). In the event such a member selected a joint and
survivor annuity and died prior to attaining age 62 or age 57 in
the case of a member who has Class A-5 service and 25
eligibility points, the annuity of his survivor annuitant, if
surviving, will be increased at the time the member would have
attained age 62 or age 57 in the case of a member who has Class
A-5 service and 25 eligibility points.
Section 321. Title 71 is amended by adding a chapter to
read:
CHAPTER 58
STATE EMPLOYEES' DEFINED CONTRIBUTION PLAN
Sec.
5801. Establishment.
5802. Plan document.
5803. Individual investment accounts.
5804. Participant contributions.
5805. Mandatory pickup participant contributions.
5806. Employer defined contributions.
5807. Eligibility for benefits.
5808. Death benefits.
5809. Vesting.
5810. Termination of distributions.
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5811. (Reserved).
5812. Powers and duties of board.
5813. Responsibility for investment loss.
5814. Investments based on participant's investment allocation
choices.
5815. Expenses.
5816. Tax qualification.
§ 5801. Establishment.
(a) State Employees' Defined Contribution Plan.--The State
Employees' Defined Contribution Plan is established. The board
shall administer and manage the plan which shall be a defined
contribution plan exclusively for the benefit of those State
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
board shall determine the terms and provisions of the plan not
inconsistent with this part, the IRC or other applicable law and
shall provide for the plan's administration.
(b) State Employees' Defined Contribution Trust.--The State
Employees' Defined Contribution Trust is established as part of
the plan. The trust shall be comprised of the individual
investment accounts and all assets and money in those accounts,
and any assets and money held by the board as part of the plan
that are not allocated to individual investment accounts. The
members of the board shall be the trustees of the trust, which
shall be administered exclusively for the benefit of those State
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
board shall determine the terms and provisions of the trust not
inconsistent with this part, the IRC or other applicable law and
shall provide for the investment and administration of the
trust.
(c) Assets held in trust.--All assets and income in the plan
that have been or shall be withheld or contributed by the
participants, the Commonwealth and other employers in accordance
with this part shall be held in trust in any funding vehicle
permitted by the applicable provisions of the IRC for the
exclusive benefit of the participants and their beneficiaries
until such time as the funds are distributed to the participants
or their beneficiaries in accordance with the terms of the plan
document. The assets of the plan held in trust for the exclusive
benefit of the participants and their beneficiaries may be used
for the payment of the fees, costs and expenses related to the
administration and investment of the plan and the trust.
(d) Name for transacting business.--All of the business of
the plan shall be transacted, the trust invested, all
requisitions for money drawn and payments made and all of its
cash and securities and other property shall be held by the name
of the "State Employees' Defined Contribution Plan."
Notwithstanding any other law to the contrary, the board may
establish a nominee registration procedure for the purpose of
registering securities to facilitate the purchase, sale or other
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disposition of securities under the provisions of this part.
§ 5802. Plan document.
The board shall set forth the terms and provisions of the
plan and trust in a document containing the terms and conditions
of the plan and in a trust declaration that shall be published
in the Pennsylvania Bulletin. Any amendments to the plan and
trust declaration also shall be published. The creation of the
document containing the terms and conditions of the plan and the
trust declaration and the establishment of the terms and
provisions of the plan and the trust need not be promulgated by
regulation or formal rulemaking and shall not be subject to the
act of July 31, 1968 (P.L.769, No.240), referred to as the
Commonwealth Documents Law. A reference in this part or other
law to the plan shall include the plan document unless the
context clearly indicates otherwise.
§ 5803. Individual investment accounts.
The board shall establish in the trust an individual
investment account for each participant in the plan. All
contributions by a participant or an employer for or on behalf
of a participant shall be credited to the participant's
individual investment account, together with all interest and
investment earnings and losses. Investment and administrative
fees, costs and expenses shall be charged to the participants'
individual investment accounts except as otherwise provided
under this part or as the General Assembly otherwise provides by
appropriations from the General Fund. Employer defined
contributions shall be recorded and accounted for separately
from participant contributions, but all interest, investment
earnings and losses, and investment and administrative fees,
costs and expenses shall be allocated proportionately.
§ 5804. Participant contributions.
(a) Mandatory contributions.--A participant who did not make
the election under section 5306.5 (relating to election by
active members to become a Class A-5 member, Class A-6 member or
plan participant) shall make mandatory pickup participant
contributions through payroll deductions to the participant's
individual investment account equal to 3.25% of compensation for
current State service credited as a Class A-5 member or 3.5% of
compensation for current State service credited as a Class A-6
member and 7.5% of compensation for current service performed
solely as a participant. A participant who made the election
under section 5306.5 shall make mandatory pickup participant
contributions as provided under section 5306.5. The employer
shall cause those contributions for current service to be made
and deducted from each payroll or on such schedule as
established by the board.
(b) Voluntary contributions.--A participant may make
voluntary contributions through payroll deductions, through
direct trustee-to-trustee transfers, or through transfers of
money received in an eligible rollover into the trust to the
extent allowed by IRC § 402. The rollovers shall be made in a
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form and manner as determined by the board, shall be credited to
the participant's individual investment account and shall be
separately accounted for by the board.
(c) Prohibited contributions.--No contributions may be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any participant contributions
in excess of the limitations and investment earnings on those
contributions, but minus investment fees and administrative
charges, shall be refunded to the participant by the board.
§ 5805. Mandatory pickup participant contributions.
(a) Treatment for purposes of IRC § 414(h).--The
contributions to the trust required to be made under section
5804(a) (relating to participant contributions) with respect to
State service rendered by an active participant shall be picked
up by the Commonwealth or other employer and shall be treated as
the employer's contribution for purposes of IRC § 414(h). After
the effective date of this section, an employer employing a
participant in the plan shall pick up the required mandatory
participant contributions by a reduction in the compensation of
the participant.
(b) Treatment for other purposes.--For all other purposes
under this part and otherwise, mandatory pickup participant
contributions shall be treated as contributions made by a
participant in the same manner and to the same extent as if the
contributions were made directly by the participant and not
picked up.
§ 5806. Employer defined contributions.
(a) Contributions for service.--The Commonwealth or other
employer of an active participant shall make employer defined
contributions for service of an active participant that shall be
credited to the active participant's individual investment
account. Employer defined contributions shall be recorded and
accounted for separately from participant contributions.
(b) Contributions resulting from participants reemployed
from USERRA leave.--When a State employee reemployed from USERRA
leave makes the mandatory pickup participant contributions
permitted to be made for the USERRA leave, the Commonwealth or
other employer by whom the State employee is employed at the
time the participant contributions are made shall make whatever
employer defined contributions would have been made under this
section had the employee making the participant contributions
continued to be employed in the participant's State office or
position instead of performing USERRA leave. The employer
defined contributions shall be placed in the participant's
individual investment account as otherwise provided by this
part.
(c) Limitations on contributions.--No contributions may be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
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IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any employer defined
contributions in excess of the limitations and investment
earnings on the contributions, but minus investment fees and
administrative charges, shall be refunded to the employer by the
board.
§ 5807. Eligibility for benefits.
(a) Termination of service.--A participant who terminates
State service shall be eligible to withdraw the vested
accumulated total defined contributions standing to the
participant's credit in the participant's individual investment
account or a lesser amount as the participant may request.
Payment shall be made in a lump sum unless the board has
established other forms of distribution in the plan document. A
participant who withdraws his vested accumulated total defined
contributions shall no longer be a participant in the plan,
notwithstanding that the former State employee may continue to
be a member of the system or may have contracted to receive an
annuity or other form of payment from a provider retained by the
board for such purposes.
(b) Required distributions.--All payments under this section
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9). The board shall take any action and make any
distributions it may determine are necessary to comply with
those requirements.
(c) (Reserved).
(d) Prohibited distributions.--A State employee must be
terminated from all positions that result in either membership
in the system or participation in the plan to be eligible to
receive a distribution. No distribution shall be allowed that
would be an in-service distribution prohibited by the IRC.
(e) Loans.--Loans or other distributions, including hardship
or unforeseeable emergency distributions, from the plan to State
employees who have not terminated State service are not
permitted, except as required by law.
(f) Small individual investment accounts.--A participant who
terminates State service and whose vested accumulated total
defined contributions are below the threshold established by law
as of the date of termination of service may be paid the vested
accumulated total defined contributions in a lump sum as
provided in IRC § 401(a)(31).
(g) Option to purchase annuity.--Except as prohibited by the
IRC or as otherwise provided in this part, a participant who is
eligible and elects to receive a distribution or vested
accumulated employer defined contributions may purchase an
annuity with that distribution from an annuity provider
contracted by the board under section 5808(c) (relating to death
benefits) and under such conditions as provided in the plan
document. The conditions may include that the board is
authorized to make the distribution directly to the annuity
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provider.
§ 5808. Death benefits.
(a) General rule.--In the event of the death of an active
participant or inactive participant, the board shall pay to the
participant's beneficiary the vested balance in the
participant's individual investment account in a lump sum or in
such other manner as the board may establish in the plan
document.
(b) Death of participant receiving distributions.--In the
event of the death of a participant receiving distributions, the
board shall pay to the participant's beneficiary the vested
balance in the participant's individual investment account in a
lump sum or in such other manner as the board may establish in
the plan document or, if the board has established alternative
methods of distribution in the plan document under which the
participant was receiving distributions, to the participant's
beneficiary or successor payee, as the case may be, as provided
in the plan document.
(c) Contracts.--The board shall contract with financial
institutions, insurance companies or other types of third-party
providers to allow a participant, beneficiary or successor payee
who receives a lump sum distribution to receive payments and
death benefits in a form and manner as provided by the contract.
To the extent commercially available, any annuity option shall
include an interest rate of at least 2.5% compounded annually.
§ 5809. Vesting.
(a) Participant and voluntary contributions.--Subject to the
forfeiture and attachment provisions of section 5953 (relating
to taxation, attachment and assignment of funds) or otherwise as
provided by law, a participant shall be vested immediately with
respect to all mandatory pickup participant contributions and
voluntary contributions paid by or on behalf of the participant
to the trust in addition to interest and investment gains or
losses on the participant contributions but minus investment
fees and administrative charges.
(b) Employer defined contributions.--
(1) Subject to the forfeiture and attachment provisions
of section 5953 or otherwise as provided by law, a
participant shall be vested with respect to all employer
defined contributions paid to the participant's individual
investment account in the trust in addition to interest and
investment gains and losses on the employer defined
contributions but minus investment fees and administrative
charges according to the following schedule:
(i) Until such time as a participant has earned
three eligibility points as a member of the system or
participant in the plan, 0%;
(ii) At and after the attainment of three
eligibility points as a member of the system or
participant in the plan, 100%.
(2) For purposes of this subsection, all eligibility
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points credited to a member of the system in any class of
service shall be used for determining vested status in the
plan even if the employee was not a participant in the plan
at the time the eligibility points were earned.
(3) Nonvested employer defined contributions and the
interest and investment gains and losses on the nonvested
employer defined contributions that are forfeited when a
participant terminates State service before accruing three
eligibility points as provided under section 5307(c)(3)
(relating to eligibility points) are credited to the
participant's most recent employer's future obligation
assessed under section 5509 (relating to appropriations and
assessments by the Commonwealth).
(c) USERRA leave and eligibility points.--A participant in
the plan who is reemployed from USERRA leave or who dies while
performing USERRA leave shall receive eligibility points under
this section for the State service that would have been
performed had the member not performed USERRA leave.
§ 5810. Termination of distributions.
(a) Return to State service.--
(1) A participant receiving distributions or an inactive
participant who returns to State service shall cease
receiving distributions and shall not be eligible to receive
distributions until the participant subsequently terminates
State service, without regard to whether the participant is a
mandatory, optional or prohibited member of the system or
participant in the plan.
(2) This subsection shall not apply to distributions
that the participant has received or used to purchase an
annuity from a provider contracted by the board.
(b) Return of benefits paid during USERRA leave.--
(1) If a former State employee is reemployed from USERRA
leave and received any distributions from the plan during the
USERRA leave, the employee shall return to the board the
amount so received plus interest as provided in the plan
document.
(2) The amount payable shall be certified in each case
by the board in accordance with methods approved by the
actuary and shall be paid in a lump sum within 30 days or in
the case of an active participant may be amortized with
interest as provided in the plan document through salary
deductions to the trust in amounts agreed upon by the active
participant and the board, but for not longer than a period
that starts with the date of reemployment and continues for
up to three times the length of the active participant's
immediate past period of USERRA leave. The repayment period
shall not exceed five years.
§ 5811. (Reserved).
§ 5812. Powers and duties of board.
The board, in addition to its powers and duties set forth in
Chapter 59 (relating to administration, funds, accounts, general
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provisions), shall have the following powers and duties to
establish the plan and trust and administer the provisions of
this chapter and part:
(1) The board may commingle or pool assets with the
assets of other persons or entities.
(2) The board shall pay all administrative fees, costs
and expenses of managing, investing and administering the
plan, the trust and the individual investment accounts from
the balance of such individual investment accounts except as
otherwise provided under this part or as the General Assembly
otherwise provides by appropriations from the General Fund.
(3) The board may establish investment guidelines and
limits on the types of investments that participants may
make, consistent with the board's fiduciary obligations.
(4) The board shall have the power to change the terms
of the plan as may be necessary to maintain the tax-qualified
status of the plan.
(5) The board may establish a process for election to
participate in the plan by those State employees eligible to
do so for whom participation is not mandatory.
(6) The board may perform an annual or more frequent
review of any qualified fund manager for the purpose of
assuring that the fund manager continues to meet all
standards and criteria established.
(7) The board may allow for eligible rollovers and
direct trustee-to-trustee transfers into the trust from
qualified plans of other employers, regardless of whether the
employers are private employers or public employers.
(8) The board may allow an inactive participant to
maintain the participant's individual investment account
within the plan.
(9) The board shall administer or ensure the
administration of the plan in compliance with the
qualifications and other rules of the IRC.
(10) The board may establish procedures to provide for
the lawful payment of benefits, including, but not limited
to, alternate payees as set forth in sections 5953 (relating
to taxation, attachment and assignment of funds) through
5953.6 (relating to irrevocable successor payee).
(11) The board shall determine, after reviewing
applicable law, what constitutes a termination of State
service.
(12) The board may establish procedures for
distributions of small accounts as required or permitted by
the IRC.
(13) The board may establish procedures in the plan
document or promulgate rules and regulations as it deems
necessary for the administration and management of the plan,
including, but not limited to, establishing:
(i) Procedures for eligible participants to change
voluntary contribution amounts or their investment
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choices on a periodic basis or make other elections
regarding their participation in the plan.
(ii) Procedures for deducting mandatory pickup
participant contributions and voluntary contributions
from a participant's compensation.
(iii) Procedures for rollovers and trustee-to-
trustee transfers allowed under the IRC and permitted as
part of the plan.
(iv) Standards and criteria for providing not less
than ten options which are offered by three or more
providers of investment options to eligible individuals
regarding investments of amounts deferred under the plan.
The standards and criteria must provide for a variety of
investment options and shall be reviewed in accordance
with criteria established by the board.
(v) Standards and criteria for disclosing to the
participants the anticipated and actual income
attributable to amounts invested, property rights and all
fees, costs and expenses to be made against amounts
deferred to cover the fees, costs and expenses of
administering and managing the plan or trust.
(vi) Procedures, standards and criteria for the
making of distributions from the plan upon termination
from employment or death or in other circumstances
consistent with the purpose of the plan.
(14) The board may waive any reporting or information
requirement contained in this part if the board determines
that the information is not needed for the administration of
the plan.
(15) The board may contract any services and duties in
lieu of staff, except final adjudications and as prohibited
by law. Any duties or responsibilities of the board not
required by law to be performed by the board can be delegated
to a third-party provider subject to appeal to the board.
(16) The board may provide that any duties of the
employer or information provided by the participant to the
employer be performed or received directly by the board.
(17) The board shall ensure that participants are
provided with educational materials about investment options
and choices.
(18) The provisions and restrictions of the act of July
2, 2010 (P.L.266, No.44), known as the Protecting
Pennsylvania's Investments Act, shall not apply to the
participants' individual investment accounts or the moneys
and investments therein, but the board is authorized to offer
to the plan participants investment vehicles that would be
permitted under the Protecting Pennsylvania's Investments
Act.
§ 5813. Responsibility for investment loss.
The board, the Commonwealth, an employer or other political
subdivision shall not be responsible for any investment or other
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loss incurred under the plan or for the failure of any
investment to earn any specific or expected return or to earn as
much as any other investment opportunity or to cost less than
any other investment opportunity, whether or not the other
opportunity was offered to participants in the plan.
§ 5814. Investments based on participant's investment
allocation choices.
(a) Investment by participant.--All contributions, interest
and investment earnings shall be invested based on a
participant's investment allocation choices, provided that the
board may provide for a default investment option. All
investment allocation choices shall be credited proportionally
between participant contributions and employer defined
contributions. Each participant shall be credited individually
with the amount of contributions, interest and investment
earnings.
(b) Investment of contributions made by entities other than
the Commonwealth.--Investment of contributions by any
corporation, institution, insurance company, custodial bank or
other entity that the board has approved shall not be
unreasonably delayed, and in no case may the investment of
contributions be delayed more than 30 days from the date of
payroll deduction or the date voluntary contributions are made
to the date that funds are invested. Any interest earned on the
funds pending investment shall be used to pay administrative
costs and fees that would otherwise be required to be borne by
participants who are then participating in the plan or paid by
appropriations from the General Fund.
§ 5815. Expenses.
All fees, costs and expenses of establishing and
administering the plan and the trust and investing the assets of
the trust shall be borne by the participants and paid from
assessments against the balances of the individual investment
accounts as established by the board, except that the fees,
costs and expenses of establishing and administering the plan
and the trust may be paid by the Commonwealth through annual
appropriations.
§ 5816. Tax qualification.
(a) Required distributions.--All payments under this chapter
shall start and be made in compliance with the required
beginning date, minimum distribution requirements and incidental
death benefit rules of IRC § 401(a).
(b) Limitations.--The following shall apply:
(1) (i) Except as provided under subparagraph (ii) and
notwithstanding a provision of this part, a contribution
or benefit related to the plan may not exceed any
limitation under IRC § 415 with respect to a governmental
plan which is in effect on the date the contribution or
benefit payment takes effect.
(ii) An increase in a limitation under IRC § 415
shall apply to all participants on and after the
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effective date of this section.
(iii) For the purposes of this paragraph, the term
"governmental plan" shall have the same meaning as the
term has in IRC § 414(d).
(2) (i) Except as provided under subparagraph (ii), an
amendment of this part on or after the effective date of
this section that increases contributions or benefits for
active participants, inactive participants or
participants receiving distributions shall not be deemed
to provide for a contribution or benefit in excess of any
limitation, adjusted on or after the effective date of
this section, under IRC § 415 unless specifically
provided by legislation.
(ii) Notwithstanding subparagraph (i), an increase
in benefits on or after the effective date of this
section for a participant in the plan shall be authorized
and apply to the fullest extent allowed by law.
Section 322. Sections 5901(a), (c), (d) and (e), 5902(a)(2),
(a.1), (b), (c), (e), (h), (i), (j), (k), (l), (m) and (n) and
5903 heading of Title 71 are amended and the sections are
amended by adding subsections to read:
§ 5901. The State Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and consist of 11 members: the
State Treasurer, ex officio, the Secretary of Banking and
Securities, ex officio, two Senators, two members of the House
of Representatives and [six] five members appointed by the
Governor, one of whom shall be an annuitant of the system or a
participant in the plan who has terminated State service and is
receiving or is eligible to receive distributions, for terms of
four years, subject to confirmation by the Senate. At least five
board members shall be active members of the system or active
participants in the plan, and at least two shall have ten or
more years of credited State service[.] or shall have been
active participants in the plan for ten calendar years or have a
combination of years of credited State service in the system and
calendar years as active participants in the plan equal to ten
or more years. The chairman of the board shall be designated by
the Governor from among the members of the board. Each member of
the board who is a member of the General Assembly may appoint a
duly authorized designee to act in his stead. In the event that
a board member, who is designated as an active participant or as
a participant in the plan who is receiving or is eligible to
receive distributions, receives a total distribution of his
interest in the plan, that board member may continue to serve on
the board for the remainder of his term.
* * *
(c) Oath of office.--Each member of the board shall take an
oath of office that he will, so far as it devolves upon him,
diligently and honestly, administer the affairs of said board,
the system and the plan and that he will not knowingly violate
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or willfully permit to be violated any of the provisions of law
applicable to this part. Such oath shall be subscribed by the
member taking it and certified by the officer before whom it is
taken and shall be immediately filed in the Office of the
Secretary of the Commonwealth.
(d) Compensation and expenses.--The members of the board who
are members of the system or participants in the plan shall
serve without compensation but shall not suffer loss of salary
or wages through serving on the board. The members of the board
who are not members of the system or participants in the plan
shall receive $100 per day when attending meetings and all board
members shall be reimbursed for any necessary expenses. However,
when the duties of the board as mandated are not executed, no
compensation or reimbursement for expenses of board members
shall be paid or payable during the period in which such duties
are not executed.
(e) Corporate power and legal advisor.--For the purposes of
this part, the board shall possess the power and privileges of a
corporation. [The Attorney General of the Commonwealth shall be
the legal advisor of the board.] The board shall be an
independent agency under the act of October 15, 1980 (P.L.950,
No.164), known as the Commonwealth Attorneys Act.
(f) Board training.--Each member of the board will be
required to obtain eight hours of mandatory training in
investment strategies, actuarial cost analysis and retirement
portfolio management on an annual basis.
§ 5902. Administrative duties of the board.
(a) Employees.--
* * *
(2) Notwithstanding any other provisions of law, the
compensation of investment professionals and legal counsel
shall be established by the board. The compensation of all
other officers and employees of the board who are not covered
by a collective bargaining agreement shall be established by
the board consistent with the standards of compensation
established by the Executive Board of the Commonwealth.
(a.1) Secretary.--The secretary shall act as chief
administrative officer for the board with respect to both the
system and the plan. In addition to other powers and duties
conferred upon and delegated to the secretary by the board, the
secretary shall:
(1) Serve as the administrative agent of the board.
(2) Serve as liaison between the board and applicable
legislative committees, the Treasury Department, the
Department of the Auditor General, and between the board and
the investment counsel and the mortgage supervisor in
arranging for investments to secure maximum returns to the
fund.
(3) Review and analyze proposed legislation and
legislative developments affecting the system or the plan and
present findings to the board, legislative committees, and
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other interested groups or individuals.
(4) Direct the maintenance of files and records and
preparation of periodic reports required for actuarial
evaluation studies.
(5) Receive inquiries and requests for information
concerning the system or the plan from the press,
Commonwealth officials, State employees, the general public,
research organizations, and officials and organizations from
other states, and provide information as authorized by the
board.
(6) (i) Supervise a staff of administrative, technical,
and clerical employees engaged in record-keeping and
clerical processing activities for both the system and
the plan in maintaining files of members and
participants, accounting for contributions, processing
payments to annuitants and terminated participants,
preparing required reports, and retirement counseling.
(ii) The board may utilize the staff of employees
provided for under this paragraph for both the system and
the plan but shall allocate the fees, costs and expenses
incurred under this paragraph between the system and the
plan as appropriate.
(b) Professional personnel.--
(1) The board shall contract for the services of a chief
medical examiner, an actuary, investment advisors and
counselors, and such other professional personnel as it deems
advisable. The board may[, with the approval of the Attorney
General,] contract for legal services.
(2) The board may utilize the same individuals and firms
contracted under this subsection for both the system and the
plan but shall allocate the fees, costs and expenses incurred
under this subsection between the system and the plan as
appropriate.
(c) Expenses.--
(1) The board shall, through the Governor, submit to the
General Assembly annually a budget covering the
administrative expenses of [this part.] the system and a
separate budget covering the administrative expenses of the
plan. Budgets under this paragraph shall include those
expenses necessary to establish the plan and trust.
(2) Such expenses of the system as approved by the
General Assembly in an appropriation bill shall be paid from
investment earnings of the fund.
(3) For fiscal years ending on or before June 30, 2020,
and for any additional fiscal years as the General Assembly
may provide, such expenses of the plan as approved by the
General Assembly in an appropriation bill shall be paid from
the General Fund. For fiscal years beginning on or after July
1, 2020, such expenses of the plan as approved by the General
Assembly shall be paid from interest under section 5814(b)
(relating to investments based on participant's investment
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allocation choices) or assessments on the balances of the
participants' individual investment accounts or as otherwise
provided in this part except as the General Assembly
otherwise provides by appropriations from the General Fund.
(4) Concurrently with its administrative budget, the
board shall also submit to the General Assembly annually a
list of proposed expenditures which the board intends to pay
through the use of directed commissions, together with a list
of the actual expenditures from the past year actually paid
by the board through the use of directed commissions. All
such directed commission expenditures shall be made by the
board for the exclusive benefit of the system and its
members.
* * *
(e) Records.--
(1) The board shall keep a record of all its proceedings
which shall be open to [inspection] access by the public,
except as otherwise provided in this part or by other law.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public [inspection]
access under the act of [June 21, 1957 (P.L.390, No.212),
referred to as the Right-to-Know Law] February 14, 2008
(P.L.6, No.3), known as the Right-to-Know Law, if, in the
reasonable judgment of the board, the [inspection] access
would:
(i) in the case of an alternative investment or
alternative investment vehicle, involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) The following apply:
(i) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(i), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once the board is no longer required by
its agreement to maintain confidentiality.
(ii) The sensitive investment or financial
information excluded from [inspection] access under
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paragraph (2)(ii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer causes
substantial competitive harm to the person from whom
the information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(iii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer has a
substantial detrimental impact on the value of an
investment of the fund or trust and would not cause a
breach of the standard of care or fiduciary duty set
forth in this part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public [inspection] access under the Right-to-Know Law.
(5) Any record, material or data received, prepared,
used or retained by the board or its employees, or agents
relating to the contributions, account value or benefits
payable to or on account of a participant shall not
constitute a public record subject to public access under the
Right-to-Know Law if, in the reasonable judgment of the
board, the access would disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions or trustee-to-trustee
transfers, of any participant.
(ii) The investment option selections of any
participant.
(iii) The balance of a participant's individual
investment account, including the amount distributed to
the participant, investment gains or losses or rates of
return.
(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The form of distribution of a participant's
account.
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(6) Nothing in this subsection shall be construed to
designate any record, material or data received, prepared,
used or retained by the board or its employees, or agents
relating to the contributions, account value or benefits
payable to or on account of a participant as a public record
subject to public access under the Right-to-Know Law.
(7) The following apply:
(i) Nothing in this part shall be construed to mean
that the release or publicizing of a record, material or
data which would not constitute a public record under
this subsection shall be a violation of the board's
fiduciary duties.
(ii) This subsection shall apply to a record,
material or data under this subsection, notwithstanding
any of the following:
(A) Whether the record, material or data was
created, generated or stored before the effective
date of this paragraph.
(B) Whether the record, material or data was
previously released or made public.
(C) Whether a request for the record, material
or data was made or is pending final response under
the Right-to-Know Law.
* * *
(h) Regulations and procedures.--The board shall, with the
advice of the Attorney General, legal counsel and the actuary,
adopt and promulgate rules and regulations for the uniform
administration of the system. The actuary shall approve in
writing all computational procedures used in the calculation of
contributions and benefits pertaining to the system, and the
board shall by resolution adopt such computational procedures,
prior to their application by the board. Such rules, regulations
and computational procedures as so adopted from time to time and
as in force and effect at any time, together with such tables as
are adopted pursuant to subsection (j) as necessary for the
calculation of annuities and other benefits, shall be as
effective as if fully set forth in this part. Any actuarial
assumption specified in or underlying any such rule, regulation
or computational procedure and utilized as a basis for
determining any benefit shall be applied in a uniform manner.
(i) Data.--The board shall keep in convenient form such data
as are stipulated by the actuary in order that an annual
actuarial valuation of the various accounts of the fund can be
completed within six months of the close of each calendar year.
(j) Actuarial investigation and valuation.--The board shall
have the actuary make an annual valuation of the various
accounts of the fund within six months of the close of each
calendar year. In the year 1975 and in every fifth year
thereafter the board shall have the actuary conduct an actuarial
investigation and evaluation of the system based on data
including the mortality, service, and compensation experience
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provided by the board annually during the preceding five years
concerning the members and beneficiaries of the system. The
board shall by resolution adopt such tables as are necessary for
the actuarial valuation of the fund and calculation of
contributions, annuities and other benefits based on the reports
and recommendations of the actuary. Within 30 days of their
adoption, the secretary of the board shall cause those tables
which relate to the calculation of annuities and other benefits
to be published in the Pennsylvania Bulletin in accordance with
the provisions of 45 Pa.C.S. § 725(a) (relating to additional
contents of Pennsylvania Bulletin) and, unless the board
specifies therein a later effective date, such tables shall
become effective on such publication. The board shall include a
report on the significant facts, recommendations and data
developed in each five-year actuarial investigation and
evaluation of the system in the annual financial statement
published pursuant to the requirements of subsection (m) for the
fiscal year in which such investigation and evaluation were
concluded.
(k) Certification of employer contributions to fund.--The
board shall, each year in addition to the itemized budget
required under section 5509 (relating to appropriations and
assessments by the Commonwealth), certify, as a percentage of
the members' payroll, the shared-risk contribution rate, the
shared-gain adjustment to the regular member contribution rate,
the employers' contributions as determined pursuant to section
5508 (relating to actuarial cost method) necessary for the
funding of prospective annuities for active members and the
annuities of annuitants and certify the rates and amounts of the
employers' normal contributions as determined pursuant to
section 5508(b), accrued liability contributions as determined
pursuant to section 5508(c), supplemental annuities contribution
rate as determined pursuant to section 5508(e), the experience
adjustment factor as determined pursuant to section 5508(f), the
collared contribution rate pursuant to section 5508(h) and the
final contribution rate pursuant to section 5508(i), which shall
be paid to the fund and credited to the appropriate accounts.
The board may allocate the final contribution rate and certify
various employer contribution rates and amounts based upon the
different benefit eligibility, class of service multiplier,
superannuation age, final average salary calculation,
compensation limits and other benefit differences resulting from
State service credited for individual members even though such
allocated employer contribution rate on behalf of any given
member may be more or less than 5% of the member's compensation
for the period from July 1, 2010, to June 30, 2011, or may
differ from the prior year's contribution for that member by
more or less than the percentages used to calculate the collared
contribution rate for that year and may be below any minimum
contribution rate established for the collared contribution rate
or final contribution rate. These certifications shall be
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regarded as final and not subject to modification by the
Secretary of the Budget.
(l) Member contributions.--The board shall cause all pickup
contributions made on behalf of a member to be credited to the
account of the member and credit to his account any other
payment made by such member, including, but not limited to,
amounts collected by the Public School Employees' Retirement
System for the reinstatement of previous State service or
creditable nonstate service and amounts paid to return benefits
paid after the date of return to State service or entering
school service representing lump sum payments made pursuant to
section 5705(a)(4)(iii) or (a.1) (relating to member's options)
and member's annuity payments, but not including other benefits
returned pursuant to section 5706(a.2) or (a.3) (relating to
termination of annuities), and shall pay all such amounts into
the fund.
(m) Annual financial statement.--The board shall prepare and
have published, on or before July 1 of each year, [a financial
statement] financial statements as of the calendar year ending
December 31 of the previous year showing the condition of the
fund, the trust and the various accounts, including, but not
limited to, the board's accrual and expenditure of directed
commissions, and setting forth such other facts,
recommendations, and data as may be of use in the advancement of
knowledge concerning annuities and other benefits provided by
this part. The board shall submit said financial [statement]
statements to the Governor and shall file copies with the head
of each department for the use of the State employees and the
public.
(n) Independent [audit] audits.--The board shall provide for
[an annual audit] annual audits of the system and the plan by
[an] independent certified public [accountant, which audit]
accountants. The audits shall include the board's accrual and
expenditure of directed commissions. The board may use the same
independent certified public accountant for the audits of both
the system and the plan.
* * *
(p) Participant and employer contributions to trust.--The
board shall, each year in addition to any fees and itemized
budget required under section 5509, certify, as a percentage of
each participant's compensation, the employer defined
contributions, which shall be paid to the trust and credited to
each participant's individual investment account. Certifications
under this subsection shall be regarded as final and not subject
to modification by the Secretary of the Budget. The board shall
cause all mandatory pickup participant contributions made on
behalf of a participant and all voluntary contributions made by
a participant to be credited to the participant's individual
investment account.
(q) Limitation on fees charged to the board.--In order to
strive towards actuarial savings of $1,500,000,000 over 30 years
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from the effective date of this subsection while achieving the
assumed annual rate of return at the least cost and maximum
return on the system assets, the board shall:
(1) Consider the findings and recommendations of the
Public Pension Management and Asset Investment Review
Commission. The board shall, at its discretion, adopt
guidelines and procedures to implement any recommendations of
the Public Pension Management and Asset Investment Review
Commission that the board believes will ensure the highest
return on investment at the lowest responsible cost.
(2) Review, identify and implement any investment fee
reduction and cost avoidance strategies identified to be
prudent by the board, to reduce expenditures for investment.
§ 5903. Duties of the board to advise and report to heads of
departments [and], members and participants.
* * *
(b.1) Participant status statements.--The board shall
furnish annually to each participant, on or before April 1 and
more frequently as the board may agree or as required by law, a
statement showing the accumulated total defined contributions
credited to the participant's individual investment account, the
nature and type of investments and the investment allocation of
future contributions as of December 31 of the previous year, and
shall request the participant to make any necessary correction
or revision regarding the designated beneficiary.
* * *
Section 323. Section 5904(c) of Title 71 is amended to read:
§ 5904. Duties of the board to report to the Public School
Employees' Retirement Board.
* * *
(c) Applications for benefits for school employees.--Upon
receipt of notification and the required data from the Public
School Employees' Retirement Board that a former State employee
who elected multiple service has applied for a public school
employees' retirement benefit or, in the event of his death, his
legally constituted representative has applied for such benefit,
the board shall:
(1) certify to the Public School Employees' Retirement
Board;
(i) the salary history as a member of the State
Employees' Retirement System and the final average salary
as calculated on the basis of the compensation received
as a [State and school employee] member of the system and
as a member of the Public School Employees' Retirement
System; and
(ii) the annuity or benefit to which the member or
his beneficiary is entitled as modified according to the
option selected; and
(2) transfer to the Public School Employees' Retirement
Fund the total accumulated deductions standing to such
member's credit and the actuarial reserve required on account
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of years of credited service in the State system, final
average salary determined on the basis of his compensation as
a member in both systems and the average noncovered salary to
be charged to the State accumulation account, the State
Police benefit account or the enforcement officers' benefit
account, as each case may require.
* * *
Section 324. Section 5905 heading, (c.1) and (g) of Title 71
are amended and the section is amended by adding subsections to
read:
§ 5905. Duties of the board regarding applications and
elections of members and participants.
* * *
(c.1) Termination of service by a member.--In the case of
any member terminating State service who is entitled to an
annuity and who is not then a disability annuitant, the board
shall advise such member in writing of any benefits from the
system to which he may be entitled under the provisions of this
part and shall have the member prepare, on or before the date of
termination of State service, one of the following three forms,
a copy of which shall be given to the member and the original of
which shall be filed with the board:
(1) an application for the return of total accumulated
deductions;
(2) if eligible, an election to vest his retirement
rights and, if he is a joint coverage member and so desires,
elect to become a full coverage member and agree to pay
within 30 days of the date of termination of service the lump
sum required; or
(3) if eligible, an application for an immediate annuity
and, if he desires:
(i) an election to convert his medical, major
medical and hospitalization insurance coverage to the
plan for State annuitants; and
(ii) if he is a joint coverage member, an election
to become a full coverage member and an agreement to pay
within 30 days of date of termination of service the lump
sum required.
(c.2) Termination of service by participant.--In the case of
a participant terminating State service, the board shall advise
the participant in writing of the vested accumulated total
defined contributions credited to the participant's individual
investment account as of the date stated in the writing, any
notices regarding rollover or other matters required by IRC or
other law, the obligation of the participant to commence
distributions from the plan by the participant's required
beginning date and the ability to receive all or part of the
vested balance in the participant's individual investment
account in a lump sum or in such other form as the board may
authorize or as required by law.
* * *
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(e.2) Notification to inactive participants approaching
required beginning date.--The board shall notify in writing each
inactive participant who has terminated State service and has
not commenced distribution by 90 days before the participant's
required beginning date that the inactive participant has an
obligation to commence distributions by the required beginning
date in a form and manner required by IRC § 401(a)(9) and other
applicable provisions of the IRC.
* * *
(f.1) Initial payment to participants.--The board shall make
the initial payment to a participant who has applied for a
distribution within 60 days of the receipt of all information
necessary to process the application for a distribution.
(g) Death benefits.--Upon receipt of notification from the
head of a department of the death of an active member, a member
performing USERRA leave [or], a member on leave without pay, an
active participant, an inactive participant on leave without pay
or a former participant performing USERRA leave, the board shall
advise the designated beneficiary of the benefits to which he is
entitled, and shall make the first payment to the beneficiary
within 60 days of receipt of certification of death and other
necessary data. If no beneficiary designation is in effect at
the date of the member's death or no notice has been filed with
the board to pay the amount of the benefits to the member's
estate, the board is authorized to pay the benefits to the
executor, administrator, surviving spouse or next of kin of the
deceased member, and payment pursuant [hereto] to this
subsection shall fully discharge the fund from any further
liability to make payment of such benefits to any other person.
If no beneficiary designation is in effect at the date of a
participant's death or no notice has been filed with the board
to pay the amount of the benefits to the participant's estate,
the board may pay the benefits as established in the plan
document, and payment pursuant to this subsection shall fully
discharge the trust from any further liability to make payment
of such benefits to any other person.
* * *
Section 325. Section 5905.1(a), (b) and (d) of Title 71 are
amended to read:
§ 5905.1. Installment payments of accumulated deductions.
(a) General rule.--Notwithstanding any other provision of
this part, whenever a member elects to withdraw his total
accumulated deductions pursuant to section 5311(a) (relating to
eligibility for refunds) or 5701 (relating to return of total
accumulated deductions) or elects to receive a portion of his
benefit payable as a lump sum pursuant to section 5705(a)(4)
(iii) or (a.1) (relating to member's options), the member may
elect to receive the amount in not more than four installments.
(b) Payment of first installment.--The payment of the first
installment shall be made in the amount and within seven days of
the date specified by the member, except as follows:
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(1) Upon receipt of a member's application to withdraw
his total accumulated deductions as provided in section
5311(a) or 5701 and upon receipt of all required data from
the head of the department and, if the member has Class G,
Class H, Class I, Class J, Class K, Class L, Class M or Class
N service, any data required from the county retirement
system or pension plan to which the member was a contributor
before being transferred to State employment, the board shall
not be required to pay the first installment prior to 45 days
after the filing of the application and the receipt of the
data or the date of termination of service, whichever is
later.
(2) In the case of an election as provided in section
5705(a)(4)(iii) or (a.1) by a member terminating service
within 60 days prior to the end of a calendar year and upon
receipt of all required data from the head of the department
and, if the member has Class G, Class H, Class I, Class J,
Class K, Class L, Class M or Class N service, any data
required from the county retirement system or pension plan to
which the member was a contributor before being transferred
to State employment, the board shall not be required to pay
the first installment prior to 21 days after the later of the
filing of the application and the receipt of the data or the
date of termination of service, but, unless otherwise
directed by the member, the payment shall be made no later
than 45 days after the filing of the application and the
receipt of the data or the date of termination of service,
whichever is later.
(3) In the case of an election as provided in section
5705(a)(4)(iii) or (a.1) by a member who is not terminating
service within 60 days prior to the end of a calendar year
and upon receipt of all required data from the head of the
department and, if the member has Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service, any
data required from the county retirement system or pension
plan to which the member was a contributor before being
transferred to State employment, the board shall not be
required to pay the first installment prior to 45 days after
the filing of the application and the receipt of the data or
the date of termination of service, whichever is later.
* * *
(d) Statutory interest.--Any lump sum, including a lump sum
payable pursuant to section 5705.1 (relating to payment of
accumulated deductions resulting from [Class A-3 and Class A-4]
more than one class of service), or installment payable shall
include statutory interest credited to the date of payment,
except in the case of a member, other than a vestee or special
vestee, who has not filed his application prior to 90 days
following his termination of service.
Section 326. Section 5906(a), (b), (d), (e), (g), (h) (i)
and (l) of Title 71 are amended and the section is amended by
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adding subsections to read:
§ 5906. Duties of heads of departments.
(a) Status of members and participants.--The head of
department shall, at the end of each pay period, notify the
board in a manner prescribed by the board of salary changes
effective during that period for any members and participants of
the department, the date of all removals from the payroll, and
the type of leave of any members and participants of the
department who have been removed from the payroll for any time
during that period, and:
(1) if the removal is due to leave without pay, he shall
furnish the board with the date of beginning leave and the
date of return to service, and the reason for leave; or
(2) if the removal is due to a transfer to another
department, he shall furnish such department and the board
with a complete State service record, including past State
service in other departments or agencies, or creditable
nonstate service; or
(3) if the removal is due to termination of State
service, he shall furnish the board with a complete State
service record, including service in other departments or
agencies, or creditable nonstate service and;
(i) in the case of death of the member or
participant, the head of the department shall so notify
the board;
(ii) in the case of a service connected disability
of a member, the head of department shall, to the best of
his ability, investigate the circumstances surrounding
the disablement of the member and submit in writing to
the board information which shall include but not
necessarily be limited to the following: date, place and
time of disablement to the extent ascertainable; nature
of duties being performed at such time; and whether or
not the duties being performed were authorized and
included among the member's regular duties. In addition,
the head of department shall furnish in writing to the
board all such other information as may be related to the
member's disablement;
(iii) in the case of a member terminating from The
Pennsylvania State University who is a member of the
system with five or more but less than ten eligibility
points and who has terminated State service on June 30,
1997, because of the transfer of his job position or
duties to a controlled organization of the Penn State
Geisinger Health System or because of the elimination of
his job position or duties due to the transfer of other
job positions or duties to a controlled organization of
the Penn State Geisinger Health System, the head of the
department shall so certify to the board.
(b) Records and information regarding members and
participants.--At any time at the request of the board and at
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termination of service of a member or participant, the head of
department shall furnish service and compensation records and
such other information as the board may require and shall
maintain and preserve such records as the board may direct for
the expeditious discharge of its duties.
* * *
(c.1) Participant and employer defined contributions.--The
head of department shall:
(1) Cause to be made:
(i) the mandatory pickup participant contributions
on behalf of a participant;
(ii) the deduction of any voluntary contributions
authorized by a participant; and
(iii) the employer defined contributions on behalf
of a participant.
(2) Notify the board at times and in a manner prescribed
by the board of the compensation of any participant to whom
the limitation under IRC § 401(a)(17) either applies or is
expected to apply and cause the participant's contributions
to be deducted from payroll to cease at the limitation under
IRC § 401(a)(17) on the payroll date if and when such limit
shall be reached.
(3) Certify to the State Treasurer the amounts picked up
and deducted and the employer defined contributions being
made and send the total amount picked up, deducted and
contributed together with a duplicate of the voucher to the
secretary of the board every pay period or on such schedule
as established by the board.
(d) New employees subject to mandatory membership or
participation.--Upon the assumption of duties of each new State
employee whose membership in the system or plan is mandatory,
the head of department shall cause an application for membership
or participation and a nomination of beneficiary to be made by
such employee and filed with the board and shall make pickup
contributions or mandatory pickup participant contributions from
the effective date of State employment.
(e) New employees subject to optional membership or
participation.--The head of department shall, upon the
employment or entering into office of any State employee whose
membership in the system or participation in the plan is not
mandatory, inform such employee of his opportunity to become a
member of the system or a participant in the plan. If such
employee so elects, the head of department shall cause an
application for membership or participation and a nomination of
beneficiary to be made by him and filed with the board and shall
cause proper contributions to be made from the effective date of
membership or participation.
* * *
(g) Former school employee contributors.--The head of
department shall, upon the employment of a former contributor to
the Public School Employees' Retirement System who is not an
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annuitant of the Public School Employees' Retirement System,
advise such employee [of his] if he has a right to elect within
365 days of entry into the system to become a multiple service
member, and in the case of any such employee who so elects and
has withdrawn his accumulated deductions, require him to
reinstate his credit in the Public School Employees' Retirement
System. The head of the department shall advise the board of
such election.
(h) Former school employee annuitants.--The head of
department shall, upon the employment of an annuitant of the
Public School Employees' Retirement System who applies for
membership in the system, advise such employee [that] if he may
elect multiple service membership within 365 days of entry into
the system and if he so elects his public school employee's
annuity will be discontinued effective upon the date of his
return to State service and, upon termination of State service
and application for an annuity, the annuity will be adjusted in
accordance with section 5706 (relating to termination of
annuities). The head of department shall advise the board of
such election.
(i) Annual statement to members.--Annually, upon receipt
from the board, the head of department shall furnish to each
member the statement specified in section 5903(b) (relating to
duties of the board to advise and report to heads of departments
[and], members and participants).
* * *
(l) State employees performing USERRA or military-related
leave of absence.--The head of department shall report to the
board any State employee who ceases to be an active member or
active participant to perform USERRA service, or who is granted
a leave of absence under 51 Pa.C.S. § 4102 (relating to leaves
of absence for certain government employees) or a military leave
of absence under 51 Pa.C.S. § 7302 (relating to granting
military leaves of absence), the date on which the USERRA
service, leave of absence or military leave of absence began,
the date on which the State employee is reemployed from USERRA
leave or returns after the leave of absence or military leave of
absence, if the event occurs, and any other information the
board may require or direct.
* * *
(n) Employees receiving payments for overtime service or
duties.--The head of the department shall report to the board in
a form and manner established by the board any payments made to,
and hours worked by, a Class A-5 exempt employee for overtime
service or duties and identify which of those payments and hours
were for voluntary overtime.
Section 327. Section 5907 heading, (a), (b)(1), (c), (d),
(e), (f), (g) and (h) of Title 71 are amended and the section is
amended by adding subsections to read:
§ 5907. Rights and duties of State employees [and], members and
participants.
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(a) Information on new employees.--Upon his assumption of
duties each new State employee shall furnish the head of
department with a complete record of his previous State service,
his school service or creditable nonstate service, and proof of
his date of birth and current status in the system and the plan
and in the Public School Employees' Retirement System and the
School Employees' Defined Contribution Plan. Willful failure to
provide the information required by this subsection to the
extent available upon entrance into the system shall result in
the forfeiture of the right of the member to subsequently assert
any right to benefits based on any of the required information
which he failed to provide. In any case in which the board finds
that a member is receiving an annuity based on false
information, the total amount received predicated on such false
information together with statutory interest doubled and
compounded shall be deducted from the present value of any
remaining benefits to which the member is legally entitled.
(b) Application for membership.--
(1) In the case of a new employee who is not currently a
member of the system, and whose membership is mandatory or in
the case of a new employee whose membership in the system is
not mandatory but is permitted and who desires to become a
member of the system, the new employee shall execute an
application for membership and a nomination of beneficiary.
(b.1) Application for participation.--On or after January 1,
2019, the following types of employees shall execute an
application for participation and a nomination of a beneficiary:
(1) An employee who is not currently a participant in
the plan and whose participation is mandatory.
(2) An employee whose participation is not mandatory but
is permitted and who desires to become a participant in the
plan.
(c) Multiple service membership.--Any active member who was
formerly an active member in the Public School Employees'
Retirement System may elect to become a multiple service member.
Such election shall occur no later than 365 days after becoming
an active member in this system. A State employee who is
eligible to elect to become a multiple service member who begins
USERRA leave during the election period without having elected
multiple service membership [may make the election within 365
days after being reemployed from] shall have the election period
extended by the number of days on USERRA leave.
(d) Credit for previous service or change in membership
status.--Any active member or eligible school employee who
desires to receive credit for the portion of his total previous
State service or creditable nonstate service to which he is
entitled, or a joint coverage member who desires to become a
full coverage member, shall so notify the board and upon written
agreement by the member and the board as to the manner of
payment of the amount due, the member shall receive credit for
such service as of the date of such agreement subject to the
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provisions in this part relating to the limitations under IRC §
415.
* * *
(d.2) Contributions for USERRA leave.--Any active
participant or inactive participant on leave without pay or
former participant who was reemployed from USERRA leave who
desires to make mandatory pickup participant contributions and
voluntary contributions for his USERRA leave shall notify the
board within the time period required under 38 U.S.C. Ch. 43
(relating to employment and reemployment rights of members of
the uniformed services) and IRC § 414(u) of his desire to make
such contributions. Upon the participant making the permitted
mandatory pickup participant contributions within the allowed
time period, the head of department shall make the corresponding
employer defined contributions at the same time.
(d.3) Voluntary contributions by a participant.--Any
participant who desires to make voluntary contributions to be
credited to his individual investment account shall notify the
board and, upon compliance with the requirements, procedures and
limitations established by the board in the plan document, may
do so subject to the limitations under IRC §§ 401(a) and 415 and
other applicable law.
(e) Beneficiary for death benefits from system.--Every
member shall nominate a beneficiary by written designation filed
with the board as provided in section 5906(d) or (e) (relating
to duties of heads of departments) to receive the death benefit
payable under section 5707 (relating to death benefits) or the
benefit payable under the provisions of Option 1 of section
5705(a)(1) (relating to member's options). Such nomination may
be changed at any time by the member by written designation
filed with the board. A member may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit
provided under section 5707 or the benefit payable under the
provisions of Option 1 of section 5705(a)(1).
(e.1) Beneficiary for death benefits from the plan.--Every
participant shall nominate a beneficiary by written designation
filed with the board as provided in section 5906(d) or (e) to
receive the death benefit payable under section 5808 (relating
to death benefits). A participant may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit
provided under section 5808. Such nominations may be changed at
any time by the participant by written designation filed with
the board.
(e.2) Beneficiaries for employees who are members and
participants.--A State employee who is both a member of the
system and a participant in the plan may designate or nominate
different persons to be beneficiaries, survivor annuitants and
successor payees for his benefits from the system and the plan.
(f) Termination of service by members.--Each member who
terminates State service and who is not then a disability
annuitant shall execute on or before the date of termination of
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service the appropriate application, duly attested by the member
or his legally constituted representative, electing to:
(1) withdraw his total accumulated deductions; or
(2) if eligible, vest his retirement rights; and if he
is a joint coverage member, and so desires, elect to become a
full coverage member and agree to pay within 30 days of the
date of termination of service the lump sum required; or
(3) if eligible, receive an immediate annuity and may,
(i) if eligible, elect to convert his medical, major
medical, and hospitalization coverage to the plan for
State annuitants; and
(ii) if he is a joint coverage member, elect to
become a full coverage member and agree to pay within 30
days of date of termination of service the lump sum
required.
(g) Vesting of retirement rights.--If a member elects to
vest his retirement rights he shall nominate a beneficiary by
written designation filed with the board and he may anytime
thereafter, but no later than his required beginning date,
withdraw the total accumulated deductions standing to his credit
or apply for an annuity[.], provided, however, that no annuity
resulting from Class A-5 service or Class A-6 service shall be
paid before the member attains age 62 or age 57 for Class A-5
service for a member who has 25 eligibility points.
(g.1) Deferral of retirement rights.--If a participant
terminates State service and does not commence receiving a
distribution, he shall nominate a beneficiary, and he may
anytime thereafter, but no later than his required beginning
date, withdraw the vested accumulated total defined
contributions standing to his credit or apply for another form
of distribution required by law or authorized by the board.
(h) Vestees and special vestees attaining superannuation
age.--Upon attainment of superannuation age a vestee or special
vestee shall execute and file an application for an annuity. Any
such application filed within 90 days after attaining
superannuation age shall be effective as of the date of
attainment of superannuation age. Any application filed after
such period shall be filed by the member's required beginning
date and shall be effective as of the date it is filed with the
board, subject to the provisions of section 5905(f) (relating to
duties of the board regarding applications and elections of
members and participants).
* * *
Section 328. Sections 5931(b), 5932, 5933(a), 5934, 5935,
5936, 5937, 5938, 5939, 5951, 5953, 5953.1, 5953.2, 5953.3 and
5953.4(a) of Title 71 are amended to read:
§ 5931. Management of fund and accounts.
* * *
(b) Crediting of interest.--The board, annually, shall allow
the required interest on the mean amount for the preceding year
to the credit of each of the accounts other than the individual
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investment accounts. The amount so allowed shall be credited
thereto by the board and transferred from the interest reserve
account.
* * *
§ 5932. State Employees' Retirement Fund.
(a) General rule.--The fund shall consist of all balances in
the several separate accounts set apart to be used under the
direction of the board for the benefit of members of the system;
and the Treasury Department shall credit to the fund all moneys
received from the Department of Revenue arising from the
contributions relating to or on behalf of members of the system
required under the provisions of Chapter 55 (relating to
contributions), and any income earned by the investments or
moneys of said fund. There shall be established and maintained
by the board the several ledger accounts specified in sections
5933 (relating to members' savings account), 5934 (relating to
State accumulation account), 5935 (relating to annuity reserve
account), 5936 (relating to State Police benefit account), 5937
(relating to enforcement officers' benefit account), 5938
(relating to supplemental annuity account) and 5939 (relating to
interest reserve account).
(b) Individual investment accounts and trust.--The
individual investment accounts that are part of the trust shall
not be part of the fund. Mandatory pickup participant
contributions, voluntary contributions and employer defined
contributions made under this part and any income earned by the
investment of such contributions shall not be paid or credited
to the fund but shall be paid to the trust and credited to the
individual investment accounts.
§ 5933. Members' savings account.
(a) Credits to account.--The members' savings account shall
be the ledger account to which shall be credited the amounts of
the pickup contributions made by the Commonwealth or other
employer and contributions or lump sum payments made by active
members in accordance with the provisions of sections 5501
(relating to regular member contributions for current service),
5501.1 (relating to shared-risk member contributions [for Class
A-3 and Class A-4 service] and shared-gain adjustments to
regular member contributions), 5502 (relating to social security
integration member contributions), 5503 (relating to joint
coverage member contributions), 5504 (relating to member
contributions for the purchase of credit for previous State
service or to become a full coverage member), 5505.1 (relating
to additional member contributions) and 5505 (relating to
contributions for the purchase of credit for creditable nonstate
service) and transferred from the members' savings account of
the Public School Employees' Retirement System in accordance
with the provisions of section 5303.2 (relating to election to
convert school service to State service).
* * *
§ 5934. State accumulation account.
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The State accumulation account shall be the ledger account to
which shall be credited all contributions of the Commonwealth or
other employers whose employees are members of the system and
made in accordance with the provisions of section 5507(a) or (d)
(relating to contributions to the system by the Commonwealth and
other employers) except that the amounts received under the
provisions of the act of May 12, 1943 (P.L.259, No.120), and the
amounts received under the provisions of the Liquor Code, act of
April 12, 1951 (P.L.90, No.21), shall be credited to the State
Police benefit account or the enforcement officers' benefit
account as the case may be. All amounts transferred to the fund
by county retirement systems or pension plans in accordance with
the provisions of section 5507(c) also shall be credited to the
State accumulation account. All amounts transferred to the fund
by the Public School Employees' Retirement System in accordance
with section 5303.2(e) (relating to election to convert school
service to State service), except amounts credited to the
members' savings account, and all amounts paid by the Department
of Corrections in accordance with section 5303.2(f) also shall
be credited to the State accumulation account. The State
accumulation account shall be credited with valuation interest.
The reserves necessary for the payment of annuities and death
benefits resulting from membership in the system as approved by
the board and as provided in Chapter 57 (relating to benefits)
shall be transferred from the State accumulation account to the
annuity reserve account provided for in section 5935 (relating
to annuity reserve account), except that the reserves necessary
on account of a member who is an officer of the Pennsylvania
State Police or an enforcement officer shall be transferred from
the State accumulation account to the State Police benefit
account provided for in section 5936 (relating to State Police
benefit account) or to the enforcement officers' benefit account
as provided for in section 5937 (relating to enforcement
officers' benefit account) as the case may be. The reserves
necessary for the payment of supplemental annuities in excess of
those reserves credited to the supplemental annuity account on
June 30, 2010, shall be transferred from the State accumulation
account to the supplemental annuity account. In the event that
supplemental annuities are increased by legislation enacted
after December 31, 2009, the necessary reserves shall be
transferred from the State accumulation account to the
supplemental annuity account.
§ 5935. Annuity reserve account.
(a) Credits and charges to account.--The annuity reserve
account shall be the ledger account to which shall be credited
the reserves held for payment of annuities and death benefits on
account of all annuitants except in the case of members who are
officers of the Pennsylvania State Police or enforcement
officers. The annuity reserve account shall be credited with
valuation interest. After the transfers provided in sections
5933 (relating to members' savings account), 5934 (relating to
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State accumulation account) and 5938 (relating to supplemental
annuity account), all annuity and death benefit payments
resulting from membership in the system except those payable to
any member who retires as an officer of the Pennsylvania State
Police or an enforcement officer shall be charged to the annuity
reserve account and paid from the fund.
(b) Transfers from account.--Should an annuitant other than
a member who was retired as an officer of the Pennsylvania State
Police or an enforcement officer be subsequently restored to
active service as a member of the system or as a participant in
the plan, the present value of his member's annuity at the time
of reentry into State service shall be transferred from the
annuity reserve account and placed to his individual credit in
the members' savings account. In addition, the actuarial reserve
for his annuity less the amount transferred to the members'
savings account shall be transferred from the annuity reserve
account to the State accumulation account.
§ 5936. State Police benefit account.
(a) Credits and charges to account.--The State Police
benefit account shall be the ledger account to which shall be
credited all contributions received under the provisions of the
act of May 12, 1943 (P.L.259, No.120), referred to as the
Foreign Casualty Insurance Premium Tax Allocation Law, and any
additional Commonwealth or other employer contributions provided
for in section 5507 (relating to contributions to the system by
the Commonwealth and other employers) which are creditable to
the State Police benefit account. The State Police benefit
account shall be credited with the required interest. In
addition, upon the filing of an application for an annuity by a
member who is an officer of the Pennsylvania State Police, the
total accumulated deductions standing to the credit of the
member in the members' savings account and the necessary
reserves from the State accumulation account shall be
transferred to the State Police benefit account. Thereafter, the
total annuity of such annuitant shall be charged to the State
Police benefit account and paid from the fund.
(b) Transfers from account.--Should the said annuitant be
subsequently restored to active service as a member of the
system or as a participant in the plan, the present value of the
member's annuity at the time of reentry into State service shall
be transferred from the State Police benefit account and placed
to his individual credit in the members' savings account. In
addition, the actuarial reserve for his annuity, calculated as
if he had been a member of Class A if he has Class A or Class C
service credited[; as if he had been a member of Class A-3 if
the annuitant has Class A-3 State service credited; or as if he
had been a member of Class A-4 if the annuitant has Class A-4
service credited], less the amount transferred to the members'
savings account shall be transferred from the State Police
benefit account to the State accumulation account. Upon
subsequent retirement other than as an officer of the
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Pennsylvania State Police the actuarial reserve remaining in the
State Police benefit account shall be transferred to the
appropriate reserve account.
§ 5937. Enforcement officers' benefit account.
(a) Credits and charges to account.--The enforcement
officers' benefit account shall be the ledger account to which
shall be credited moneys transferred from the enforcement
officers' retirement account in the State Stores Fund according
to the provisions of the act of April 12, 1951 (P.L.90, No.21),
known as the Liquor Code, and any additional Commonwealth or
other employer contributions provided for in section 5507
(relating to contributions to the system by the Commonwealth and
other employers) which are creditable to the enforcement
officers' benefit account. The enforcement officers' benefit
account shall be credited with the required interest. In
addition, upon the filing of an application for an annuity by a
member who is an enforcement officer of the Pennsylvania Liquor
Control Board, the total accumulated deductions standing to the
credit of the member in the members' savings account and the
necessary reserves from the State accumulation account shall be
transferred to the enforcement officers' benefit account.
Thereafter, the total annuity of such annuitant shall be charged
to the enforcement officers' benefit account and paid from the
fund.
(b) Transfers from account.--Should the said annuitant be
subsequently restored to active service as a member of the
system or as a participant in the plan, the present value of the
member's annuity at the time of reentry into State service shall
be transferred from the enforcement officers' benefit account
and placed to his individual credit in the members' savings
account. In addition, the actuarial reserve for his annuity
[calculated as if he had been a member of Class A if the
annuitant does not have any Class AA, Class A-3 or Class A-4
service credited; as if he had been a member of Class AA if the
annuitant does have Class AA service credited; as if he had been
a member of Class A-3 if the annuitant has Class A-3 State
service credited; or as if he had been a member of Class A-4 if
the annuitant has Class A-4 service credited], less the amount
transferred to the members' savings account shall be transferred
from the enforcement officers' benefit account to the State
accumulation account. Upon subsequent retirement other than as
an enforcement officer the actuarial reserve remaining in the
enforcement officers' benefit account shall be transferred to
the appropriate reserve account.
§ 5938. Supplemental annuity account.
The supplemental annuity account shall be the ledger account
to which shall be credited all contributions from the
Commonwealth and other employers in accordance with section
5507(b) (relating to contributions to the system by the
Commonwealth and other employers) for the payment of the
supplemental annuities provided in sections 5708 (relating to
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supplemental annuities), 5708.1 (relating to additional
supplemental annuities), 5708.2 (relating to further additional
supplemental annuities), 5708.3 (relating to supplemental
annuities commencing 1994), 5708.4 (relating to special
supplemental postretirement adjustment), 5708.5 (relating to
supplemental annuities commencing 1998), 5708.6 (relating to
supplemental annuities commencing 2002), 5708.7 (relating to
supplemental annuities commencing 2003) and 5708.8 (relating to
special supplemental postretirement adjustment of 2002) made
before July 1, 2010, the amount transferred from the State
accumulation account to provide all additional reserves
necessary as of June 30, 2010, to pay such supplemental
annuities and adjustments, and the amounts transferred from the
State accumulation account to provide all additional reserves
necessary as a result of supplemental annuities enacted after
December 31, 2009. The supplemental annuity account shall be
credited with valuation interest. The reserves necessary for the
payment of such supplemental annuities shall be transferred from
the supplemental annuity account to the annuity reserve account
as provided in section 5935 (relating to annuity reserve
account).
§ 5939. Interest reserve account.
The interest reserve account shall be the ledger account to
which shall be credited all income earned by the fund and to
which shall be charged all administrative and investment
expenses incurred by the fund. At the end of each year the
required interest shall be transferred from the interest reserve
account to the credit of each of the accounts of the fund in
accordance with the provisions of this subchapter. In addition,
at the end of each accounting period, the interest reserve
account shall be credited or charged with all recognized changes
in the market valuation of the investments of the fund. The
administrative and investment expenses of the board relating to
the administration of the system and investments of the fund
shall be paid from the fund out of earnings. Any surplus or
deficit in the interest reserve account at the end of each year
shall be transferred to the State accumulation account.
§ 5951. State guarantee regarding the system.
The required interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and other
benefits granted by the board from the system under the
provisions of this part relating to the establishment and
administration of the system are hereby made obligations of the
Commonwealth. All income, interest, and dividends derived from
deposits and investments of the system authorized by this part
shall be used for the payment of the said obligations of the
Commonwealth and shall not be used for any obligation of the
plan or trust.
§ 5953. Taxation, attachment and assignment of funds.
(a) General rule.--
(1) Except as provided in paragraphs (2), (3) and (4),
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the right of a person to any benefit or right accrued or
accruing under the provisions of this part and the moneys in
the fund and the trust are hereby exempt from any State or
municipal tax, levy and sale, garnishment, attachment,
spouse's election, the provisions of Article XIII.1 of the
act of April 9, 1929 (P.L.343, No.176), known as The Fiscal
Code, or any other process whatsoever, and no participant or
beneficiary, successor payee or alternate payee of a
participant shall have the ability to commute, sell, assign,
alienate, anticipate, mortgage, pledge, hypothecate,
commutate or otherwise transfer or convey any benefit or
interest in an individual investment account or rights to
receive or direct distributions under this part or under
agreements entered into under this part except as provided in
this part, and in the case of either a member or a
participant except for a set-off by the Commonwealth in the
case provided in this paragraph, and shall be unassignable
except to the Commonwealth in the case of a member or
participant who is terminating State service and has been
determined to be obligated to the Commonwealth for the
repayment of money owed on account of his employment.
(2) (i) Rights under this part shall be subject to
forfeiture as provided by the act of July 8, 1978
(P.L.752, No.140), known as the Public Employee Pension
Forfeiture Act, and by or pursuant to section 16(b) of
Article V of the Constitution of Pennsylvania.
Forfeitures under this subsection or under any other
provision of law may not be applied to increase the
benefits that any member would otherwise receive under
this part.
(ii) In accordance with section 16(b) of Article V
of the Constitution of Pennsylvania and notwithstanding
this paragraph, the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture
Act, or 42 Pa.C.S. § 3352 (relating to pension rights),
the accumulated mandatory participant contributions and
accumulated voluntary contributions standing to the
credit of a participant shall not be forfeited but shall
be available for payment of fines and restitution as
provided by law. In accordance with section 16(b) of
Article V of the Constitution of Pennsylvania, amounts in
the trust that have been ordered to be distributed to an
alternate payee as the result of an equitable
distribution of marital property as part of an approved
domestic relations order entered before the date of the
order or action in a court or other tribunal resulting in
a forfeiture of a participant's interest in the trust
shall not be subject to the provisions of the Public
Employee Pension Forfeiture Act or 42 Pa.C.S. § 3352. Any
accumulated employer defined contributions forfeited as a
result of this paragraph or other law shall be retained
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by the board and notwithstanding sections 5812(2)
(relating to powers and duties of board), 5815 (relating
to expenses) and 5902(c) (relating to administrative
duties of the board) used for the payment of expenses of
the plan.
(3) Rights under this part shall be subject to
attachment in favor of an alternate payee as set forth in an
approved domestic relations order.
(4) Effective with distributions made on or after
January 1, 1993, and notwithstanding any other provision of
this part to the contrary, a distributee may elect, at the
time and in the manner prescribed by the board, to have any
portion of an eligible rollover distribution paid directly to
an eligible retirement plan by way of a direct rollover. For
purposes of this paragraph, a "distributee" includes a member
[and], a participant, a member's surviving spouse [and], a
participant's surviving spouse, a member's former spouse who
is an alternate payee under an approved domestic relations
order[.], a participant's former spouse who is an alternate
payee under an approved domestic relations order and anyone
else authorized under the IRC and the plan terms approved by
the board to have an eligible rollover distribution paid
directly to an eligible retirement plan by way of a direct
rollover. For purposes of this paragraph, the term "eligible
rollover distribution" has the meaning given such term by IRC
§ 402(f)(2)(A), and "eligible retirement plan" has the
meaning given such term by IRC § 402(c)(8)(B), except that a
qualified trust shall be considered an eligible retirement
plan only if it accepts the distributee's eligible rollover
distribution; however, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement
plan is an "individual retirement account" or an "individual
retirement annuity" as those terms are defined in IRC §
408(a) and (b).
(b) Authorized payments from fund and trust.--
(1) The board shall be authorized to pay from the fund
and the trust in the case of a member or participant who is
terminating service, the amount determined after
certification by the head of the department that the member
or participant is so obligated, and after review and approval
by the department or agency's legal representative or upon
receipt of an assignment from the member or participant in
the amount so certified[.], except that no payment shall be
made from the individual investment account of a participant
until the participant otherwise applies for and receives a
distribution and shall not exceed the amount of the
distribution.
(2) In the case of a participant whose former spouse is
an alternate payee of an equitable distribution of marital
assets under an approved domestic relations order, a lump sum
of the alternate payee's interest in the participant's vested
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accumulated total defined contributions. This paragraph shall
apply without regard to whether the participant has not
terminated, is terminating or has terminated State service.
§ 5953.1. Approval of domestic relations orders.
(a) Certification regarding members.--A domestic relations
order pertaining to a member of the system shall be certified as
an approved domestic relations order by the secretary of the
board, or his designated representative, only if that order
meets all of the following:
(1) Requires the system to provide any type or form of
benefit or any option applicable to members already provided
under this part.
(2) Requires the system to provide no more than the
total amount of benefits than the member would otherwise
receive (determined on the basis of actuarial value) unless
increased benefits are paid to the member or alternate payee
based upon cost-of-living increases or increases based on
other than actuarial value.
(3) Specifies the amount or percentage of the member's
benefits to be paid by the system to each such alternate
payee or the manner in which such amount or percentage is to
be determined.
(4) Specifies the retirement option to be selected by
the member upon retirement or states that the member may
select any retirement option offered by this part upon
retirement.
(5) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(6) Does not grant an alternate payee any of the rights,
options or privileges of a member under this part.
(7) Requires the member to execute an authorization
allowing each alternate payee to monitor the member's
compliance with the terms of the domestic relations order
through access to information concerning the member
maintained by the system. An authorization granted under this
section shall be construed as an authorization for the
alternate payee to receive information concerning the
administration, calculation and payment of the alternate
payee's share of the benefits payable under this part and not
as an authorization to exercise the rights afforded to
members or obtain information which is not related to the
administration, calculation and payment of alternate payee's
share of the benefits payable under this part.
(a.1) Certification regarding participants.--A domestic
relations order pertaining to a participant shall be certified
as an approved domestic relations order by the secretary of the
board, or his designated representative, only if the order meets
all of the following:
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(1) Does not require the plan to provide a type or form
of benefit or an option applicable to members of the system
or participants in the plan.
(2) Does not require the segregation of the alternate
payee's share of the participant's individual investment
account into a subaccount or newly established individual
account titled in the name of the alternate payee.
(3) Does not require the plan to recover or distribute
any funds that were distributed to the participant or at the
participant's direction prior to the approval of the domestic
relations order by the secretary of the board or his
designated representative.
(4) Requires the plan to pay to the alternate payee no
more than the lesser of the vested amount of the
participant's individual investment account specified by the
domestic relations order or the vested amount of the
participant's individual investment account as of the date of
the transfer of the alternate payee's share to the alternate
payee.
(5) States that the plan shall not be required to recoup
or make good for losses in value to the participant's
individual investment account incurred between the date of
the valuation of the account used for equitable distribution
purposes and the date of distribution to the alternate payee.
(6) Specifies the amount or percentage of the
participant's individual investment account to be paid to the
alternate payee and the date upon which the valuation is
based.
(7) Specifies the name and last known mailing address,
if any, of the participant and the name and last known
mailing address of each alternate payee covered by the order
and states that it is the responsibility of each alternate
payee to keep a current mailing address on file with the
plan.
(8) Does not grant an alternate payee the rights,
privileges or options available to a participant.
(9) Requires the participant to execute an authorization
allowing each alternate payee to monitor the participant's
compliance with the terms of the domestic relations order
through access to information concerning the participant
maintained by the plan. An authorization granted under this
section shall be construed as an authorization for the
alternate payee to receive information concerning the
participant that relates to the administration, calculation
and payment of the alternate payee's share of the
participant's account and not as an authorization to exercise
the rights afforded to participants or obtain information
that is not related to the administration, calculation and
payment of alternate payee's share of the participant's
individual investment account.
(10) Requires the immediate distribution of the
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alternate payee's share of the participant's individual
investment account, which may be made by direct payment,
eligible rollover or trustee-to-trustee transfer to another
eligible plan or qualified account owned by the alternate
payee.
(11) In the case of a participant who is currently
receiving distributions from the plan as of the date the
domestic relations order is approved by the secretary of the
board or his designated representative, may not order the
board to pay the alternate payee more than the vested balance
available in the participant's individual investment account
as of the date the order is approved or require that
distributions continue to the alternate payee after the death
of the participant and final settlement of the participant's
individual investment account.
(b) Determination by secretary.--Within a reasonable period
after receipt of a domestic relations order, the secretary of
the board, or his designated representative, shall determine
whether [this] the order is an approved domestic relations order
and notify the member or participant and each alternate payee of
this determination. Notwithstanding any other provision of law,
the exclusive remedy of any member, participant or alternate
payee aggrieved by a decision of the secretary of the board, or
his designated representative, shall be the right to an
adjudication by the board under 2 Pa.C.S. Ch. 5 Subch. A
(relating to practice and procedure) with appeal therefrom to
the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to
judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct
appeals from government agencies).
(c) Other orders.--The requirements for approval identified
in [subsection (a)] subsections (a) and (a.1) shall not apply to
any domestic relations order which is an order for support as
the term is defined at 23 Pa.C.S. § 4302 (relating to
definitions) or an order for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages). These orders shall be approved to the extent that
they do not attach moneys in excess of the limits on attachments
as established by the laws of the United States and this
Commonwealth[.], require distributions of benefits in a manner
that would violate the laws of the United States, any other
state or this Commonwealth or require the distribution of funds
for support or enforcement of arrearages against a participant
who is not receiving distributions from the plan at the time the
order is entered. These orders may be approved notwithstanding
any other provision of this part or the plan that would require
a distribution of accumulated employer defined contributions in
the form of an annuity or to require the purchase of an annuity.
(d) Obligation discharged.--Only the requirements of this
part and any regulations promulgated hereunder shall be used to
govern the approval or disapproval of a domestic relations
order. Therefore, if the secretary of the board, or his
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designated representative, acts in accordance with the
provisions of this part and any promulgated regulations in
approving or disapproving a domestic relations order, then the
obligations of the system or the plan with respect to such
approval or disapproval shall be discharged.
§ 5953.2. Irrevocable beneficiary.
Notwithstanding any other provision of this part, a domestic
relations order may provide for an irrevocable beneficiary. A
domestic relations order requiring the nomination of an
irrevocable beneficiary shall be deemed to be one that requires
a member or participant to nominate an alternate payee as a
beneficiary and that prohibits the removal or change of that
beneficiary without approval of a court of competent
jurisdiction, except by operation of law. Such a domestic
relations order may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, after the member or participant makes such
nomination, in which case the irrevocable beneficiary so ordered
by the court cannot be changed by the member or participant
without approval by the court.
§ 5953.3. Irrevocable survivor annuitant.
Notwithstanding any other provisions of this part, a domestic
relations order pertaining to a member may provide for an
irrevocable survivor annuitant. A domestic relations order
requiring the designation of an irrevocable survivor annuitant
shall be deemed to be one that requires a member to designate an
alternate payee as a survivor annuitant and that prohibits the
removal or change of that survivor annuitant without approval of
a court of competent jurisdiction, except by operation of law.
Such a domestic relations order may be certified as an approved
domestic relations order by the secretary of the board, or his
designated representative, in which case the irrevocable
survivor annuitant so ordered by the court cannot be changed by
the member without approval by the court. A person ineligible to
be designated as a survivor annuitant may not be designated as
an irrevocable survivor annuitant.
§ 5953.4. Amendment of approved domestic relations orders.
(a) Deceased alternate payee.--In the event that the
alternate payee predeceases the member or the participant and
there are benefits payable to the alternate payee, the divorce
court may amend the approved domestic relations order to
substitute a person for the deceased alternate payee to receive
any benefits payable to the deceased alternate payee.
* * *
Section 329. Title 71 is amended by adding a section to
read:
§ 5953.6. Irrevocable successor payee.
(a) Condition.--Notwithstanding any other provision of this
part, a domestic relations order pertaining to a participant may
provide for an irrevocable successor payee if the participant is
receiving a payment under a payment option provided by the board
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that allows for a successor payee.
(b) Determination.--A domestic relations order requiring the
designation of an irrevocable successor payee is an order which:
(1) requires a participant who is receiving payments
from an annuity or other distribution option to designate an
alternate payee as a successor payee; and
(2) except by operation of law, prohibits the removal or
change of the successor payee without approval of a court of
competent jurisdiction.
(c) Certification.--A domestic relations order under
subsection (b) may be certified as an approved domestic
relations order by the secretary of the board or his designated
representative. If a domestic relations order is certified under
this subsection, the irrevocable successor payee ordered by the
court shall not be changed by the participant without approval
by the court.
(d) Ineligibility.--A person ineligible to be designated as
a successor payee shall not be designated as an irrevocable
successor payee. A court shall not name an irrevocable successor
payee if the alternate payee is eligible to receive a lump sum
distribution of the alternate payee's portion of the marital
portion of the pension benefit.
Section 330. Sections 5954, 5955, 5955.2(d) and 5957 of
Title 71 are amended to read:
§ 5954. Fraud and adjustment of errors.
(a) Penalty for fraud.--Any person who shall knowingly make
any false statement or shall falsify or permit to be falsified
any record or records of this system or plan in any attempt to
defraud the system or plan as a result of such act shall be
guilty of a misdemeanor of the second degree.
(b) Adjustment of errors.--Should any change or mistake in
records result in any member, participant, beneficiary [or],
survivor annuitant or successor payee receiving from the system
or plan more or less than he would have been entitled to receive
had the records been correct, then regardless of the intentional
or unintentional nature of the error and upon the discovery of
such error, the board shall correct the error and if the error
affected contributions to or payments from the system, then so
far as practicable shall adjust the payments which may be made
for and to such person in such a manner that the actuarial
equivalent of the benefit to which he was correctly entitled
shall be paid. If the error affected contributions to or
payments from the plan, the board shall take action as provided
for in the plan document.
§ 5955. Construction of part.
(a) Exclusive source of rights and benefits.--Regardless of
any other provision of law, pension and benefit rights of State
employees shall be determined solely by this part or any
amendment thereto[,] or the plan document established by the
board; and no collective bargaining agreement nor any
arbitration award between the Commonwealth and [its] other
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employers and the Commonwealth's and other employer's employees
or their collective bargaining representatives shall be
construed to change any of the provisions herein, to require the
board to administer pension or retirement benefits not set forth
in this part or not established by the board in the plan
document, to require the board to modify, amend or change any of
the terms and provisions of the plan document, or to otherwise
require action by any other government body pertaining to
pension or retirement benefits or rights of State employees.
Notwithstanding the foregoing, any pension or retirement
benefits or rights previously so established by or as a result
of an arbitration award shall remain in effect after the
expiration of the current collective bargaining agreement
between the State employees so affected and the Commonwealth
until the expiration of each of the collective bargaining
agreements in effect on January 1, 2011, at which time the
classes of membership and resulting member contribution rates
and contributions for creditable nonstate service, eligibility
for vesting, withdrawal and superannuation annuities, optional
modification of annuities and other terms and conditions related
to class of membership shall be as determined by this part for
employees covered by those and successor collective bargaining
agreements. For purposes of administering this part, for those
State employees who are members of each such collective
bargaining unit, the date January 1, 2011, contained in this
part, except in this section, shall be replaced with the date of
the day immediately following the expiration of each such
collective bargaining agreement. The provisions of this part
insofar as they are the same as those of existing law are
intended as a continuation of such laws and not as new
enactments. The provisions of this part shall not affect any act
done, liability incurred, right accrued or vested, or any suit
or prosecution pending or to be instituted to enforce any right
or penalty or to punish any offense under the authority of any
repealed laws.
(b) (Reserved).
(c) Officer or member of the Pennsylvania State Police.--
(1) Notwithstanding a provision of subsection (a) or
section 12.1 of the act of November 23, 2010 (P.L.1269,
No.120), regarding the continued effectiveness of pension or
retirement benefits or rights previously established by or as
a result of a binding arbitration award issued before July 1,
1989, under the act of June 24, 1968 (P.L.237, No.111),
referred to as the Policemen and Firemen Collective
Bargaining Act, and implemented by the board, the eligibility
for and calculation of pension or retirement benefits or
rights under the binding arbitration award of a State
employee who first becomes a State police officer on or after
January 1, 2019, shall be determined using only service
performed and compensation and eligibility points earned as
an officer or member of the Pennsylvania State Police or
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while on USERRA leave from service as an officer or member of
the Pennsylvania State Police and provided that service
credit and eligibility points for service as an officer or
member of the Pennsylvania State Police shall be adjusted for
any other concurrent service as a State employee.
(2) Any service other than service as an officer or
member of the Pennsylvania State Police performed by a State
employee eligible for a benefit under the binding arbitration
under paragraph (1) shall be used to determine benefits as
provided in this part in addition to any benefit an officer
or member of the Pennsylvania State Police is eligible to
receive under the binding arbitration award as set forth in
this subsection.
(3) (Reserved).
(4) A State employee who first becomes a State police
officer on or after January 1, 2019, who does not have 20 or
more eligibility points as an officer or member of the
Pennsylvania State Police or from USERRA leave from service
as an officer or member of the Pennsylvania State Police and
who terminates State service on or after January 1, 2019,
shall be eligible to receive a maximum single life annuity
before optional modification under section 5705 equal to the
maximum single life annuity that the State employee is
eligible to receive under this part attributable to all
credited service, compensation and eligibility points.
(5) Except as otherwise provided under this part,
service as a State police officer credited in the system
shall not operate to prevent any State employee from being a
participant in the plan for any State service that is not
service as a Class A-5 exempt employee that would otherwise
result in participation in the plan. Any benefit resulting
from participation in the plan shall be in addition to any
benefit a State police officer may be eligible to receive as
a member of the system.
(6) As used in this subsection, the following words and
phrases shall have the meanings given to them in this
paragraph unless the context clearly indicates otherwise:
"Binding arbitration award." A binding arbitration award
issued before July 1, 1989, under the act of June 24, 1968
(P.L.237, No.111), referred to as the Policemen and Firemen
Collective Bargaining Act, and implemented by the board.
(7) For the determination of the entire annuity under
this subsection and any applicable binding arbitration award,
any salary or compensation for service as a Class A-5 exempt
employee by a State employee who first became a member of the
system on or after January 1, 2019, shall not include
remuneration received in any pay period for voluntary
overtime service or duty that exceeds 10% of the State
employee's base salary or wages in that pay period.
(d) Adverse inference.--Nothing in this part shall be
construed to mean that the limitations on benefits or other
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requirements under IRC § 401(a) or other applicable provisions
of the IRC which are applicable to participants in the plan do
not apply to the participants or to members of the system and
the benefits payable under this part.
§ 5955.2. Construction of part with respect to the Internal
Revenue Code.
* * *
(d) References to Internal Revenue Code of 1986 or the
Uniformed Services Employment and Reemployment Rights Act.--
References in this part to provisions of the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) or the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), including for this
purpose administrative regulations promulgated under [that act]
the acts, are intended to include such laws and regulations as
are in effect on the effective date of this section and as they
may be amended or supplemented or supplanted by successor
provisions after the effective date of this section.
* * *
§ 5957. Independent Fiscal Office study.
The Independent Fiscal Office shall study and analyze the
implementation of shared-risk contributions under section 5501.1
(relating to shared-risk member contributions [for Class A-3 and
Class A-4 service] and shared-gain adjustments to regular member
contributions) and its impact on the system. The study shall be
completed by December 31, 2015, and shall be transmitted to the
Appropriations Committee and the Finance Committee of the
Senate, the Appropriations Committee and the Finance Committee
of the House of Representatives and to the Governor.
Section 331. Title 71 is amended by adding a section to
read:
§ 5958. Public Pension Management and Asset Investment Review
Commission.
(a) Establishment.--A Public Pension Management and Asset
Investment Review Commission shall be established, which shall
be composed of five appointees, one appointed by each of the
following:
(1) The Governor.
(2) The President pro tempore of the Senate.
(3) The Minority Leader of the Senate.
(4) The Speaker of the House of Representatives.
(5) The Minority Leader of the House of Representatives.
The appointees shall be investment professionals and retirement
advisors and shall be appointed within 90 days of the effective
date of this section.
(b) Duties.--The duties of the Public Pension Management and
Asset Investment Review Commission are as follows:
(1) Study the performance of current investment
strategies and procedures of the system, comparing realized
rates of return to established benchmarks and considering
associated fees paid for active and passive management.
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(2) Study the costs and benefits of both active and
passive investment strategies in relation to future
investment activities of the State Employees' Retirement
System.
(3) Study alternative future investment strategies with
available assets of the State Employees' Retirement System
that will maximize future rates of return net of fees.
(3.1) The commission shall evaluate and make
recommendations on:
(i) Improving investment fee transparency on
alternative investments as specified in the Standardized
Reporting Guidelines of the Institutional Limited
Partners Association.
(ii) Implementing the recommendations of the Society
of Actuaries Blue Ribbon Panel on stress testing, to test
the ability of the plan to withstand a period of
investment returns above or below the level of assumed
return.
(4) Publish extensive and detailed findings online,
including findings about:
(i) assets;
(ii) returns;
(iii) financial managers;
(iv) consultants;
(v) requests for proposals; and
(vi) investment performance measured against
benchmarks.
(5) Identify the lowest amount of investment fees to be
paid by the board for the board to achieve the board's
anticipated annual rate of return and to develop
recommendations to reduce expenditures to generate actuarial
savings of $1,500,000,000 over 30 years from the effective
date of this section.
(6) Report its findings and recommendations to the
Governor and the General Assembly within six months of its
first organizational meeting.
(c) Quorum.--A majority of appointed members shall
constitute a quorum for the purpose of conducting business. The
members shall select one of their number to be chairperson and
another to be the vice chairperson.
(d) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission shall be subject to the
following laws:
(1) The act of July 19, 1957 (P.L.1017, No.451), known
as the State Adverse Interest Act.
(2) The act of February 14, 2008 (P.L.6, No.3), known as
the Right-to-Know Law.
(3) 65 Pa.C.S. Ch. 7 (relating to open meetings).
(4) 65 Pa.C.S. Ch. 11 (relating to ethics standards and
financial disclosure).
(e) Information gathering.--The Public Pension Management
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and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate and necessary to fulfill its duties.
(f) Logistical and other support.--The Public Pension
Management and Asset Investment Review Commission shall receive
logistical and other support from the Joint State Government
Commission and may employ additional temporary staff as needed.
(g) Reimbursement.--The members of the Public Pension
Management and Asset Investment Review Commission shall be
reimbursed for reasonable expenses.
(h) Expiration.--The Public Pension Management and Asset
Investment Review Commission shall expire 60 days after delivery
of its report in accordance with subsection (b)(5). Any unspent
appropriation shall lapse back to the General Fund.
(i) Administrative costs and payment.--None of the
administrative costs and expenses of the Public Pension
Management and Asset Investment Review Commission, including,
but not limited to, member and employee salary, wages, benefits
and other forms of compensation or remuneration, shall be paid
or appropriated from the fund or the trust.
ARTICLE IV
Section 401. The following shall apply:
(1) The following provisions shall not create in a
member of the Public School Employees' Retirement System, a
participant in the School Employees' Defined Contribution
Plan or another person claiming an interest in the account of
a member or participant an express or implied contractual
right in the provisions nor in a construction of 24 Pa.C.S.
Pt. IV, 51 Pa.C.S. or rules or regulations adopted under 24
Pa.C.S. Pt. IV or 51 Pa.C.S.:
(i) A provision of this act which amends 51 Pa.C.S.
or 24 Pa.C.S. Pt. IV in relation to requirements for any
of the following:
(A) (Reserved).
(B) Qualification of the School Employees'
Defined Contribution Plan as a qualified pension plan
under the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. §§ 401(a) and 415(b)), or
compliance with the Uniformed Services Employment and
Reemployment Rights Act of 1994 (Public Law 103-353,
108 Stat. 3149).
(C) Domestic relations orders regarding
alternate payees of participants in the School
Employees' Defined Contribution Plan.
(ii) A construction of 24 Pa.C.S. Pt. IV or 51
Pa.C.S. or rules or regulations adopted under 24 Pa.C.S.
Pt. IV or 51 Pa.C.S. or a term or provision of the School
Employees' Defined Contribution Plan or School Employees'
Defined Contribution Trust, established by statute or in
the plan document or trust declaration or by contract
with providers of investment and administrative services
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to the School Employees' Defined Contribution Plan or the
School Employees' Defined Contribution Trust.
(2) The provisions of 24 Pa.C.S. Pt. IV shall remain
subject to the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), and regulations
under those statutes, and the General Assembly reserves to
itself the further exercise of its legislative power to amend
or supplement the provisions as may be required in order to
maintain the qualification of the Public School Employees'
Retirement System and the School Employees' Defined
Contribution Plan as a qualified pension plan under section
401(a) and other applicable provisions of the Internal
Revenue Code of 1986 and the Uniformed Services Employment
and Reemployment Rights Act of 1994 (Public Law 103-353, 108
Stat. 3149).
(3) The following provisions shall not create in a
member of the State Employees' Retirement System, a
participant in the State Employees' Defined Contribution Plan
or another person claiming an interest in the account of a
member or participant an expressed or implied contractual
right in the provisions nor in a construction of 51 Pa.C.S. §
7306, 71 Pa.C.S. Pt. XXV, or rules or regulations adopted
under 51 Pa.C.S. § 7306 or 71 Pa.C.S. Pt. XXV:
(i) A provision of this act which amends 51 Pa.C.S.
§ 7306 or 71 Pa.C.S. Pt. XXV, in relation to requirements
for any of the following:
(A) Qualification of the State Employees'
Defined Contribution Plan as a qualified pension plan
under the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. § 401(a)).
(B) Compliance with the Uniformed Services
Employment and Reemployment Rights Act of 1994
(Public Law 103-353).
(C) Domestic relations orders regarding
alternate payees of participants in the State
Employees' Defined Contribution Plan.
(ii) A construction of 51 Pa.C.S. or 71 Pa.C.S. Pt.
XXV, or rules or regulation promulgated under 51 Pa.C.S.
or 71 Pa.C.S. Pt. XXV, or a term or provision of the
State Employees' Defined Contribution Plan or State
Employees' Defined Contribution Trust established by
statute or in the plan document or trust declaration or
by contract with providers of investment and
administrative services to the State Employees' Defined
Contribution Plan or State Employees' Defined
Contribution Trust.
(4) The provisions of 71 Pa.C.S. Pt. XXV shall remain
subject to the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), and regulations
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promulgated under those statutes.
(5) The General Assembly reserves to itself the further
exercise of its legislative power to amend or supplement the
provisions of 71 Pa.C.S. Pt. XXV in order to maintain the
qualification of the State Employees' Retirement System and
the State Employees' Defined Contribution Plan as qualified
pension plans under section 401(a) and other applicable
provisions of the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149).
Section 402. The following shall apply:
(1) Nothing in this act shall be construed to mean that
a calculation or actuarial method used by the Public School
Employees' Retirement Board, its actuaries or the Public
School Employees' Retirement System was not in accordance
with the provisions of 24 Pa.C.S. Pt. IV or other applicable
law prior to the effective date of this paragraph.
(2) Nothing in this act shall be construed to mean that
a calculation or actuarial method used by the State
Employees' Retirement Board, its actuaries or the State
Employees' Retirement System was not in accordance with the
provisions of 71 Pa.C.S. Pt. XXV or other applicable law
prior to the effective date of this section.
Section 403. (Reserved).
Section 404. The following shall apply:
(1) Notwithstanding any other provision of law:
(i) A change in accrued liability of the State
Employees' Retirement System created under this act shall
be funded in equal dollar installments over a period of
30 years beginning July 1, 2019.
(ii) A change in accrued liability of the State
Employees' Retirement System created under this act by
the amendment of 71 Pa.C.S. § 5508(b) shall be funded in
equal dollar installments over a period of 30 years
beginning July 1, 2022.
(2) (Reserved).
Section 405. The following shall apply:
(1) This act shall be construed and administered in such
a manner that the Public School Employees' Retirement System
and the School Employees' Defined Contribution Plan shall
satisfy the requirements necessary to qualify as a qualified
pension plan under section 401(a) of the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)), other
applicable provisions of the Internal Revenue Code of 1986
and the Uniformed Services Employment and Reemployment Rights
Act of 1994 (Public Law 103-353, 108 Stat. 3149). The rules,
regulations and procedures adopted and promulgated by the
Public School Employees' Retirement Board and the terms and
conditions of the plan document and trust declaration adopted
by the Public School Employees' Retirement Board may include
provisions necessary to accomplish the purpose of this
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section.
(2) Nothing in this act shall be construed or deemed to
imply that any member shall be required to make contributions
to the Public School Employees' Retirement System in excess
of the limits established by section 415(n)(3)(A)(iii) of the
Internal Revenue Code of 1986 (26 U.S.C. § 415(n)(3)(A)
(iii)). A contribution made by a member that is determined to
be in excess of the limits shall be refunded to the member in
a lump sum subject to withholding for all applicable taxes
and penalties as soon as administratively possible after the
determination is made. A refund under this subparagraph shall
not affect the benefit payable to the member and shall not be
treated as or deemed to be a withdrawal of the member's
accumulated deductions.
(3) Nothing in this act shall be construed to mean that
an interpretation or application of 24 Pa.C.S. Pt. IV or
benefits available to members of the Public School Employees'
Retirement System was not in accordance with 24 Pa.C.S. Pt.
IV or other applicable law, including the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) and
the Uniformed Services Employment and Reemployment Rights Act
of 1994 (Public Law 103-353, 108 Stat. 3149) before the
effective date of this section.
Section 406. The following shall apply to construction
related to Federal law as to the State Employees' Retirement
System:
(1) This act shall be construed and administered in a
manner that the State Employees' Retirement System and the
State Employees' Defined Contribution Plan shall satisfy the
requirements necessary to qualify as a qualified pension plan
under section 401(a) of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 401(a)), other applicable
provisions of the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149). The rules,
regulations and procedures adopted and promulgated by the
State Employees' Retirement Board and the terms and
conditions of the plan document and trust declaration adopted
by the State Employees' Retirement Board may include
provisions necessary to accomplish the purpose of this
section.
(2) Nothing in this act shall be construed or deemed to
imply that any member shall be required to make contributions
to the State Employees' Retirement System in excess of the
limits established by section 415(n)(3)(A)(iii) of the
Internal Revenue Code of 1986 (26 U.S.C. § 415(n)(3)(A)
(iii)). A contribution made by a member that is determined to
be in excess of the limits shall be refunded to the member in
a lump sum subject to withholding for all applicable taxes
and penalties as soon as administratively possible after the
determination is made. A refund under this subparagraph shall
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not affect the benefit payable to the member and shall not be
treated as or deemed to be a withdrawal of the member's
accumulated deductions.
(3) Nothing in this act shall be construed to mean that
an interpretation or application of 71 Pa.C.S. Pt. XXV or
benefits available to members of the State Employees'
Retirement System was not in accordance with 71 Pa.C.S. Pt.
XXV or other applicable law, including the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) and
the Uniformed Services Employment and Reemployment Rights Act
of 1994 (Public Law 103-353, 108 Stat. 3149) before the
effective date of this section.
Section 407. (Reserved).
Section 408. Nothing in this act shall be deemed to permit
the restoration of service credit or retirement benefits that:
(1) were or are subject to section 16 of Article V of
the Constitution of Pennsylvania or 42 Pa.C.S. § 3352; or
(2) were or are the subject of an order of forfeiture
under the act of July 8, 1978 (P.L.752, No.140), known as the
Public Employee Pension Forfeiture Act.
Section 409. Notwithstanding the amendment of 24 Pa.C.S. §
8501(e) and 71 Pa.C.S. § 5901(e), the Governor's Office of
General Counsel shall continue to provide legal counsel and
legal services to the Public School Employees' Retirement Board
and the State Employees' Retirement Board until such time as
each board appoints a chief counsel and such other counsel as it
deems necessary to provide it with legal services and through
its secretary gives such notice to the General Counsel.
Section 410. No school employee otherwise a member of,
eligible to be a member of, or having school or nonschool
service credited in a class of service other than Class T-G may
cancel, decline or waive membership in such other class of
service in order to obtain Class T-G service credit, become a
member of Class T-G or elect Class T-G membership.
Section 411. Except as provided under 71 Pa.C.S. § 5306.5,
no State employee otherwise a member of, eligible to be a member
of or having State or nonstate service credited in a class of
service other than Class A-5 or Class A-6 may cancel, decline or
waive membership in such other class of service in order to
obtain Class A-5 or Class A-6 service credit, become a member of
Class A-5 or Class A-6 or elect Class A-5 or Class A-6
membership or to be solely a participant in the plan.
Section 412. Notwithstanding any regulation promulgated by
the Public School Employees' Retirement Board, application or
interpretation of 24 Pa.C.S. Pt. IV, or administrative practice
to the contrary, a member's eligibility deriving from Class T-G
or Class T-H service credit for a superannuation annuity or
other rights and benefits based upon attaining superannuation
age shall be determined by including only those eligibility
points actually accrued.
Section 412.1. Notwithstanding any regulation promulgated by
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the State Employees' Retirement Board, application or
interpretation of 71 Pa.C.S. Pt. XXV, or administrative practice
to the contrary, the eligibility of a member of the State
Employees' Retirement System deriving from Class A-5 or Class A-
6 service credit for a superannuation annuity, withdrawal
annuity or other rights and benefits based on attaining a
specific age or number of eligibility points or a combination of
age and eligibility points shall be determined by including only
those eligibility points actually accrued.
Section 413. The following shall apply:
(1) Except as provided under paragraph (2), if a
provision of this act or its application to any person or
circumstance is held invalid, the invalidity shall not affect
other provisions or applications of this act that can be
given effect without the invalid provision or application.
(2) The following shall apply:
(i) If the application of the shared-risk provisions
of 71 Pa.C.S. Pt. XXV is declared inapplicable to any
person by a court or administrative tribunal of competent
jurisdiction, the provisions of Pt. XXV relating to
shared-gain adjustments to regular member contributions
shall be inapplicable to that person.
(ii) The following shall apply:
(A) If the application of any provision of this
act relating to membership in Class A-5 or Class A-6
or participation in the State Employees' Defined
Contribution Plan is declared invalid to any person
for any period of State service, the invalidity shall
not affect the application of this act to any other
person. The provisions of this act relating to both
membership in Class A-5 or Class A-6 and
participation in the State Employees' Defined
Contribution Plan shall be invalid as to the person
for the period of State service for which part of the
State service was invalid and that person shall be
considered a Class A-5 exempt employee for the
service at issue. If a State employee's participation
in the State Employees' Defined Contribution Plan is
declared invalid for any period of State service, the
affected State employee shall return to the State
Employees' Defined Contribution Trust any
distributions related to the period of State service
at issue, shall be granted the status and service
credit in the State Employees' Retirement System as
if he was a Class A-5 exempt employee and shall be
required to make all contributions to the State
Employees' Retirement Fund as if he was a Class A-5
exempt employee for the period of State service at
issue.
(B) The affected State employee's accumulated
mandatory participant contributions and accumulated
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voluntary contributions shall be transferred to the
affected employee's member savings account to the
extent necessary to fund that account with the member
contributions and interest that would have been
standing to the member's account had the State
employee been a Class A-5 exempt employee for the
period of service at issue. Any remaining balance
shall be refunded to the State employee, who also
shall be responsible for paying to the fund in a
manner and time determined by the State Employees'
Retirement Board any additional funds required if the
accumulated mandatory participant contributions and
accumulated voluntary contributions were not
sufficient.
(C) The accumulated employer defined
contributions shall be transferred to the State
Accumulation Account and no further amount shall be
due from the employer or refund paid.
Section 414. Notwithstanding the provisions of 71 Pa.C.S. §
5903(b), the statement for each member prepared by the State
Employees' Retirement Board for the periods ending December 31,
2017, December 31, 2018, and December 31, 2019, and any other
statements or estimates of benefits prepared by the board
pursuant to the State Employees' Retirement Code from the
effective date of this section to December 31, 2019, need not
reflect the provisions of this act and in the case of the
statements for each member for the periods ending on or before
December 31, 2019, need not include a projection of the benefit
to which the member is entitled upon attainment of
superannuation age.
Section 415. Notwithstanding the provisions of 71 Pa.C.S.
Pt. XXV, the obligation of the State Employees' Retirement Board
to make payments within specified time periods of the receipt of
applications for benefits or other information shall not apply
from the effective date of this section to December 31, 2019.
Section 415.1. The following shall expire on January 1,
2019:
(1) The addition of the portion of subsection (b)(3) in
the amendment of 24 Pa.C.S. § 8307 that requires a vestee to
obtain the age of 62.
(2) The addition of the portion of subsection (b)(4) in
the amendment of 71 Pa.C.S. § 5308(b)(4) that requires a
vestee to obtain the age of 62.
Section 416. The following shall apply:
(1) The appointment of the Secretary of Banking and
Securities to the membership of the Public School Employees'
Retirement Board in the amendment of 24 Pa.C.S. § 8501(a)
shall take effect when the first of the two positions
currently appointed by the Governor becomes vacant or an
incumbent member's term expires. Notification of the
expiration or vacancy shall be submitted by the Public School
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Employees' Retirement Board to the Legislative Reference
Bureau for publication in the Pennsylvania Bulletin.
(2) The appointment of the Secretary of Banking and
Securities to the membership of the State Employees'
Retirement Board and reduction of the number of members
appointed by the Governor from six to five in 71 Pa.C.S. §
5901(a) shall take effect when the first of the six positions
currently appointed by the Governor that is not held by an
annuitant becomes vacant or an incumbent member's term
expires. Notification of the expiration or vacancy shall be
submitted by the State Employees' Retirement System to the
Legislative Reference Bureau for publication in the
Pennsylvania Bulletin.
Section 417. This act shall take effect immediately.
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See A01354 in
the context
of SB0001