PRINTER'S NO. 804
No. 719 Session of 2007
INTRODUCED BY NICKOL, BASTIAN, BOYD, BUXTON, CALTAGIRONE,
CAPPELLI, CREIGHTON, DALLY, DENLINGER, EVERETT, FAIRCHILD,
GEIST, GILLESPIE, GRELL, HARHAI, HERSHEY, JAMES, MACKERETH,
McILHATTAN, MICOZZIE, R. MILLER, REICHLEY, ROSS, RUBLEY,
SAINATO, SAYLOR, SCAVELLO, SOLOBAY, STERN, SWANGER AND
YOUNGBLOOD, MARCH 9, 2007
REFERRED TO COMMITTEE ON FINANCE, MARCH 9, 2007
AN ACT
1 Amending the act of December 18, 1984 (P.L.1005, No.205),
2 entitled "An act mandating actuarial funding standards for
3 all municipal pension systems; establishing a recovery
4 program for municipal pension systems determined to be
5 financially distressed; providing for the distribution of the
6 tax on the premiums of foreign fire insurance companies; and
7 making repeals," further providing for definitions and for
8 contents of actuarial valuation report; providing for the
9 certification of municipal pension costs; further providing
10 for minimum funding standards and for revision of financing;
11 and providing for in-service retirement option plans in local
12 governments.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. The title of the act of December 18, 1984
16 (P.L.1005, No.205), known as the Municipal Pension Plan Funding
17 Standard and Recovery Act, is amended to read:
18 AN ACT
19 Mandating actuarial funding standards for all municipal pension
20 systems; establishing a recovery program for municipal
21 pension systems determined to be financially distressed;
1 providing for the distribution of the tax on the premiums of
2 foreign fire insurance companies; providing for the
3 establishment and administration of in-service retirement
4 option plans in local governments; and making repeals.
5 Section 2. The definition of "municipal employee" in section
6 102 of the act is amended and the section is amended by adding
7 definitions to read:
8 Section 102. Definitions.
9 Except as provided in Chapter 7, the following words and
10 phrases when used in this act shall have the meanings given to
11 them in this section unless the context clearly indicates
12 otherwise:
13 * * *
14 "IROP." An in-service retirement option plan created and
15 operated by a local government or the Pennsylvania Municipal
16 Retirement System under Chapter 11 or any deferred retirement
17 option plan or similar program established by a local government
18 that provides for the commencement and accumulation of
19 retirement benefit payments for active employees with
20 disbursement of the accumulated payments and interest earnings
21 as a lump sum upon termination of employment.
22 "IROP participant." A retired member of a local government-
23 defined benefit pension plan who is eligible to participate in
24 an IROP under section 1112 and who has elected to participate in
25 an IROP under section 1113.
26 "IROP participant account." A pension trust fund ledger
27 account established under section 1121(a).
28 "Local government." A municipality or any county.
29 * * *
30 "Municipal employee." Any person [other than an independent
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1 contractor] who provides regular services for a municipality in
2 return for compensation from the municipality. The term does not
3 include an independent contractor or an IROP participant.
4 * * *
5 Section 3. Section 202(b) of the act, amended July 15, 2004
6 (P.L.715, No.81), is amended to read:
7 Section 202. Contents of actuarial valuation report.
8 * * *
9 (b) Contents of actuarial exhibits; defined benefit plans
10 self-insured in whole or in part.--For any pension plan which is
11 a defined benefit plan and which is self-insured in whole or in
12 part, all applicable actuarial exhibits shall be prepared in
13 accordance with the entry age normal actuarial cost method with
14 entry age established as the actual entry age for all plan
15 members unless the municipality applies for and is granted
16 authorization by the commission to use an alternative actuarial
17 cost method. Authorization shall be granted if the municipality
18 demonstrates on an individual pension plan basis that there are
19 compelling reasons of an actuarial nature for the use of an
20 alternative actuarial cost method. The commission shall issue
21 rules and regulations specifying the criteria which the
22 commission will use to determine the question of the existence
23 of compelling reasons for the use of an alternative actuarial
24 cost method, the documentation which a municipality seeking the
25 authorization will be required to supply and the acceptable
26 alternative actuarial cost methods which the commission may
27 authorize. The actuarial cost method shall be used to value all
28 aspects of the benefit plan or plans of the pension plan unless
29 the municipality applies for and is granted authorization by the
30 commission to use approximation techniques other than the
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1 actuarial cost method for aspects of the benefit plan or plans
2 of the pension plan other than the retirement benefit.
3 Authorization shall be granted if the municipality demonstrates
4 on an individual pension plan basis that there are compelling
5 reasons of an actuarial nature for the use of these
6 approximation techniques. The commission shall issue rules and
7 regulations specifying the criteria which the commission will
8 use to determine the question of the existence of compelling
9 reasons for the use of approximation techniques, the
10 documentation which a municipality seeking the authorization
11 will be required to supply and the acceptable approximation
12 technique which the commission may authorize. The actuarial
13 exhibits shall use actuarial assumptions which are, in the
14 judgment of the actuary and the governing body of the plan, the
15 best available estimate of future occurrences in the case of
16 each assumption. With respect to economic actuarial assumptions,
17 the assumptions shall either be within the range specified in
18 rules and regulations issued by the commission or documentation
19 explaining and justifying the choice of assumptions outside the
20 range shall accompany the report. The actuarial exhibits shall
21 measure all aspects of the benefit plan or plans of the pension
22 plan in accordance with modifications in the benefit plan or
23 plans, if any, and salaries which as of the valuation date are
24 known or can reasonably be expected to be in force during the
25 ensuing plan year. In preparing the actuarial exhibits or any
26 actuarial valuation report, the municipality shall exclude the
27 compensation of all IROP participants from the active member
28 payroll, all IROP participants from active member data and the
29 balance in the IROP participant account from the assets of the
30 pension trust fund. The actuarial valuation report shall contain
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1 the following actuarial exhibits:
2 (1) An exhibit of the normal cost of the benefits
3 provided by the benefit plan as of the date of the actuarial
4 valuation, expressed as a percentage of the future covered
5 payroll of the active membership of the pension plan as of
6 the date of the actuarial valuation.
7 (2) An exhibit of the actuarial accrued liability of the
8 benefit plan as of the date of the actuarial valuation in
9 total which shall be the actuarial present value of all
10 projected benefits provided by the benefit plan reduced by
11 the actuarial present value of future normal costs, and in
12 particular, which shall include the following required
13 actuarial present values for pension plan benefits of related
14 items:
15 (i) Required actuarial present values on account of
16 active members:
17 (A) Retirement benefits.
18 (B) Disability benefits.
19 (C) Survivor benefits.
20 (D) Refund liability due to withdrawal from
21 active service or death.
22 (E) Other benefits, specifying the nature of
23 each type.
24 This item shall include a footnote indicating the amount
25 of accumulated member contributions without accrued
26 interest.
27 (ii) Required actuarial present values on account of
28 former members with a deferred, vested or otherwise
29 nonforfeitable right to a retirement benefit.
30 (iii) Required actuarial present values on account
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1 of former members who do not have a deferred, vested or
2 otherwise nonforfeitable right to the retirement benefit
3 and who have not withdrawn any accumulated member
4 contributions.
5 (iv) Required actuarial present values on account of
6 benefit recipients:
7 (A) Retirement benefits.
8 (B) Disability benefits.
9 (C) Surviving spouse benefits.
10 (D) Surviving child benefits.
11 (E) Other benefits, specifying the nature of
12 each type.
13 (v) Required actuarial present values for other
14 benefits provided by the benefit plan, specifying the
15 nature of each type.
16 (vi) Actuarial present value of future normal cost.
17 (3) An exhibit of the unfunded actuarial accrued
18 liability of the pension plan in total, which shall be the
19 actuarial accrued liability of the pension plan calculated
20 pursuant to paragraph (2) less the actuarial value of assets
21 of the pension plan calculated pursuant to subsection (e)(1),
22 and which, in particular, shall include the following:
23 (i) The remaining balance of the unfunded actuarial
24 accrued liability in existence as of the first actuarial
25 valuation report required by this section occurring next
26 following the date of enactment of this section.
27 (ii) The remaining balance of each increment of
28 unfunded actuarial accrued liability attributable to
29 modifications in the benefit plan governing the pension
30 plan which were applicable to active members, separately
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1 indicating each and designating each by the plan year in
2 which the benefit plan modification was made effective.
3 (iii) The remaining balance of each increment of
4 unfunded actuarial accrued liability attributable to
5 modifications in the benefit plan governing the pension
6 plan which were applicable to retired members and other
7 benefit recipients, separately indicating each and
8 designating each by the plan year in which the benefit
9 plan modification was made effective.
10 (iv) The remaining balance of each increment of net
11 unfunded actuarial accrued liability attributable to
12 modifications in the actuarial assumptions used to
13 calculate the actuarial accrued liability of the pension
14 plan separately indicating each and designating each by
15 the plan year in which the actuarial assumption
16 modification was made effective.
17 (v) The remaining balance of each increment or
18 decrement of net unfunded actuarial accrued liability
19 attributable to net actuarial experience losses or gains,
20 separately indicating each and designating each by the
21 plan year in which the actuarial experience loss or gain
22 was recognized.
23 (vi) The remaining balance of each increment of
24 unfunded actuarial accrued liability attributable to the
25 provision of survivor benefits payable under section
26 5(e)(2) of the act of May 29, 1956 (1955 P.L.1804,
27 No.600), referred to as the Municipal Police Pension Law,
28 separately indicating each and designating each by the
29 plan year in which the actuarial experience loss was
30 recognized.
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1 The initial determination of the unfunded actuarial accrued
2 liability attributable to a modification in the benefit plan
3 governing the pension plan or to a modification in the
4 actuarial assumptions used to calculate the actuarial accrued
5 liability of the pension plan shall be made by calculating
6 the unfunded actuarial accrued liability of the pension plan
7 in accordance with the benefit plan provisions and actuarial
8 assumptions which were in effect prior to the modification
9 and by calculating the unfunded actuarial accrued liability
10 of the pension plan in accordance with the modification in
11 the provisions of the benefit plan governing the pension plan
12 or the actuarial assumptions used to calculate the actuarial
13 accrued liability of the pension plan, whichever is
14 applicable, and the remaining benefit plan provisions and
15 actuarial assumptions. The initial determination of the
16 unfunded actuarial accrued liability attributable to an
17 actuarial loss shall be made in conjunction with the analysis
18 of increases or decreases in the unfunded actuarial accrued
19 liability of the pension plan required pursuant to paragraph
20 (6).
21 (4) An exhibit of any additional funding costs
22 associated with the amortization of any unfunded actuarial
23 accrued liability of the pension plan, indicating for each
24 increment of unfunded actuarial accrued liability specified
25 in paragraph (3), the level annual dollar contribution
26 required to pay an amount equal to the actuarial assumption
27 as to investment earnings applied to the principal amount of
28 the remaining balance of the increment of unfunded actuarial
29 accrued liability and to retire by the applicable
30 amortization target date specified in this paragraph the
20070H0719B0804 - 8 -
1 principal amount of the remaining balance of the increment of
2 unfunded actuarial accrued liability. The amortization target
3 date applicable for each type of increment of unfunded
4 actuarial accrued liability shall be as follows:
5 (i) (A) In the case of a pension plan established
6 on or prior to January 1, 1985 for the unfunded
7 actuarial accrued liability in existence as of the
8 beginning of the plan year occurring in calendar year
9 1985, at the end of the plan year occurring in
10 calendar year 2015; or
11 (B) In the case of a pension plan established
12 after January 1, 1985, for the unfunded actuarial
13 accrued liability then or subsequently determined to
14 be or to have been in existence as of the date of the
15 establishment of the plan, at the end of the plan
16 year occurring 30 years after the calendar year in
17 which the pension plan was established.
18 (ii) Increment or decrement of net unfunded
19 actuarial accrued liability attributable to a change in
20 actuarial assumptions, at the end of the plan year
21 occurring 20 years after the calendar year in which
22 actuarial assumption modification was effective.
23 (iii) Increment of net unfunded actuarial accrued
24 liability attributable to a modification in the benefit
25 plan applicable to active members, at the end of the plan
26 year occurring 20 years after the calendar year in which
27 the benefit plan modification was effective.
28 (iv) Increment of unfunded actuarial accrued
29 liability attributable to a modification in the benefit
30 plan applicable to retired members and other benefit
20070H0719B0804 - 9 -
1 recipients, at the end of the plan year occurring 10
2 years after the calendar year in which the benefit plan
3 modification was effective.
4 (v) (A) Increment or decrement of net unfunded
5 actuarial accrued liability attributable to an
6 actuarial experience loss or gain, at the end of plan
7 year occurring 15 years after the calendar year in
8 which the actuarial experience loss or gain was
9 recognized.
10 (B) Notwithstanding any other provision of this
11 act or other law, as of the beginning of the plan
12 year occurring in calendar year 2003, the outstanding
13 balance of the increment of unfunded actuarial
14 accrued liability attributable to the net actuarial
15 investment losses incurred in calendar years 2001 and
16 2002 may, at the sole discretion of the municipality,
17 be amortized with the amortization target date being
18 the end of the plan year occurring 30 years after
19 January 1, 2003. In order for a municipality to
20 extend the applicable amortization period pursuant to
21 this clause, the municipality must file a revised
22 actuarial valuation report reflecting the
23 amortization period extension provided for under this
24 clause with the executive director of the commission
25 no later than September 30, 2004. Any such revised
26 actuarial valuation report may not be filed in lieu
27 of the actuarial valuation report prepared in
28 compliance with clause (A) and required to be filed
29 on or before March 31, 2004, and may be used only for
30 the purposes of recalculating the 2004 minimum
20070H0719B0804 - 10 -
1 municipal obligation of the municipality and
2 calculating the 2005 minimum municipal obligation of
3 the municipality to reflect the amortization period
4 extension. Any such revised actuarial valuation
5 report shall not affect distributions under the
6 General Municipal Pension System State Aid Program
7 under Chapter 4.
8 (vi) Increment of unfunded actuarial accrued
9 liability attributable to the provision of survivor
10 benefits payable under section 5(e)(2) of the Municipal
11 Police Pension Law at the end of the plan year occurring
12 40 years after the calendar year in which the survivor
13 benefits were first payable.
14 With respect to any applicable pension plan other than a plan
15 which comprises all or part of a moderately distressed or a
16 severely distressed municipal pension system, if the
17 remaining average period between the current average attained
18 age of active members as of the valuation date and the later
19 of their earliest average normal retirement age or their
20 average assumed retirement age is less than the applicable
21 period or periods ending with the amortization target date or
22 dates specified in subparagraph (i), (ii), (iii) or (v)(A),
23 the appropriate amortization target date for the applicable
24 subparagraph determined with reference to the longest
25 applicable remaining average period rounded to the next
26 largest whole number shall be used. With respect to any plan
27 year beginning after December 31, 1997, if, as of the
28 beginning of the plan year, the ratio of the actuarial value
29 of assets to the actuarial accrued liability exceeds 0.70 and
30 the governing body of the municipality has passed a
20070H0719B0804 - 11 -
1 resolution to irrevocably commit the municipality to apply
2 the limit on the additional funding costs, as provided
3 herein, in the preparation of the current and all future
4 exhibits under this paragraph, then the sum of the additional
5 funding costs for subparagraphs (i), (ii), (iii), (iv) and
6 (v) above shall not exceed the amount required to amortize
7 the remaining unfunded actuarial accrued liability as of the
8 beginning of the plan year over 10 years in level annual
9 dollar contributions. The exhibit shall indicate the total
10 dollar amount of additional funding costs associated with the
11 amortization of any unfunded actuarial accrued liability of
12 the pension plan applicable for that plan year and any
13 subsequent plan year occurring prior to the preparation of
14 the next required actuarial valuation report, which shall be
15 the total of the additional funding costs associated with the
16 amortization of each increment of unfunded actuarial accrued
17 liability. The exhibit shall also indicate the plan year in
18 which any unfunded actuarial accrued liability of the pension
19 plan would be fully amortized if the total annual additional
20 funding cost calculated pursuant to this paragraph were met
21 continuously without increase or decrease in amount until the
22 total unfunded actuarial accrued liability currently existing
23 was fully amortized. In calculating the additional funding
24 costs associated with the amortization of any unfunded
25 actuarial accrued liability of the pension plan in any plan
26 year, any amortization contribution made in the interval
27 since the last actuarial valuation report shall be allocated
28 to each type of increment of unfunded actuarial accrued
29 liability in proportion to the remaining dollar amount of
30 each type.
20070H0719B0804 - 12 -
1 (5) An exhibit of the total administrative cost of the
2 pension plan for the plan year occurring immediately prior to
3 the plan year for which the actuarial valuation report is
4 made.
5 (6) An exhibit containing an analysis of the increase or
6 decrease in the unfunded actuarial accrued liability of the
7 pension plan since the most recent prior actuarial valuation
8 report, including specifically an indication of increases or
9 decreases due to the following:
10 (i) Modifications in the benefit plan or plans of
11 the pension plan.
12 (ii) Changes in actuarial assumptions.
13 (iii) Deviations in the actual experience of the
14 pension plan from the experience expected by virtue of
15 the actuarial assumptions.
16 (iv) Presence or absence of payments to amortize the
17 unfunded accrued liability of the pension plan.
18 (v) Other reasons.
19 The analysis shall be based on the best professional judgment
20 of the approved actuary reached after preparing the various
21 applicable actuarial exhibits of the actuarial valuation
22 report. If, in the opinion of the approved actuary, the
23 inclusion of any portion of this information is not
24 appropriate, that portion of the analysis may be omitted with
25 the provision of adequate explanation or justification of the
26 appropriateness of the omission.
27 (7) An exhibit summarizing the economic and demographic
28 actuarial assumptions used in the preparation of the
29 actuarial exhibits.
30 (8) A summary of the principal provisions of the benefit
20070H0719B0804 - 13 -
1 plan of the pension plan upon which the actuarial exhibits
2 are based.
3 * * *
4 Section 4. The act is amended by adding a section to read:
5 Section 210. Certification of municipal pension costs.
6 The commission shall determine annually the actual financial
7 requirement for each municipal pension plan based on the data
8 contained in the most recent complete report required to be
9 filed by the municipality pursuant to this chapter and shall
10 certify annually to the Auditor General the actual financial
11 requirements for each municipal pension plan based on the data
12 contained in the most recent actuarial valuation report required
13 to be filed by the municipality pursuant to this chapter. The
14 Auditor General shall use the data certified by the commission
15 to implement the provisions of section 402(f)(2).
16 Section 5. Section 302(b)(2) of the act, amended December
17 18, 1990 (P.L.753, No.189), is amended to read:
18 Section 302. Minimum funding standard; defined benefit plans
19 self-insured in whole or in part.
20 * * *
21 (b) Financial requirements of the pension plan.--
22 * * *
23 (2) The normal cost and administrative expense
24 requirements for the following plan year shall be expressed
25 as a dollar amount and shall be determined by applying the
26 normal cost of the benefit plan and the administrative
27 expense payable from the assets attributable to the benefit
28 plan, as reported in the actuarial valuation report of the
29 pension plan and expressed as a percentage of payroll, to the
30 payroll of the active membership of the pension plan as of
20070H0719B0804 - 14 -
1 the date the financial requirements of the pension plan are
2 determined. In expressing the normal cost and administrative
3 expense requirements as a dollar amount, the municipality
4 shall exclude the compensation of all IROP participants from
5 the payroll of the active membership of the pension plan.
6 * * *
7 Section 6. Section 402(e)(2) of the act is amended to read:
8 Section 402. Revision of financing from State revenue sources;
9 General Municipal Pension System State Aid
10 Program.
11 * * *
12 (e) Allocation of general municipal pension system State
13 aid.--
14 * * *
15 (2) The applicable number of units shall be attributable
16 to each active employee who was employed on a full-time basis
17 for a minimum of six consecutive months prior to December 31
18 preceding the date of certification and who was participating
19 in a pension plan maintained by that municipality, provided
20 that the municipality maintains a generally applicable
21 pension plan for that type of employee which was either
22 established on or prior to December 31, 1984, or, if
23 established after December 31, 1984, has been maintained by
24 that municipality for at least three plan years. For the
25 purpose of computing and reporting the applicable number of
26 units, an IROP participant shall not be reported to the
27 Auditor General as an active employee. The applicable number
28 of units per employee attributable to each eligible recipient
29 county of the second class shall be two units for each police
30 officer. The applicable number of units attributable to each
20070H0719B0804 - 15 -
1 eligible recipient city, borough, incorporated town and
2 township shall be as follows:
3 (i) Police officer - two units.
4 (ii) Firefighter - two units.
5 (iii) Employee other than police officer or
6 firefighter - one unit.
7 * * *
8 Section 7. The act is amended by adding a chapter to read:
9 CHAPTER 11
10 IN-SERVICE RETIREMENT OPTION PLANS LAW
11 SUBCHAPTER A
12 PRELIMINARY PROVISIONS
13 Section 1101. Short title.
14 This chapter shall be known and may be cited as the In-
15 Service Retirement Option Plans Law.
16 Section 1102. Declaration of purpose.
17 It is the purpose of this chapter to provide for an in-
18 service retirement option plan under which an eligible member of
19 the local government's retirement system may elect to
20 participate in an IROP, defer receipt of retirement system
21 benefits and continue employment with the local government.
22 Section 1103. Definitions.
23 The following words and phrases when used in this chapter
24 shall have the meanings given to them in this section unless the
25 context clearly indicates otherwise:
26 "Normal retirement benefit." The retirement benefit payable
27 to a member of a defined benefit pension plan on or after the
28 date on which the member first satisfies the age and service
29 requirements for full, unreduced retirement benefits, including
30 supplemental amounts provided to the member after retirement as
20070H0719B0804 - 16 -
1 cost-of-living increases.
2 "Subsidiary IROP participant account." The separate,
3 interest-bearing, subsidiary IROP participant account
4 established for an IROP participant under section 1121.
5 Section 1104. Employment status.
6 Participation in an IROP does not guarantee the IROP
7 participant's employment by the local government during the
8 specified period of the IROP.
9 SUBCHAPTER B
10 GENERAL PROVISIONS
11 Section 1111. Establishment of IROP.
12 (a) Local governments.--A local government that has
13 established or maintains a defined benefit pension plan for a
14 group of its employees which is self-insured in whole or in part
15 under section 202(b), except for a local government that has
16 joined the Pennsylvania Municipal Retirement System, may
17 establish by ordinance an IROP for those employees as part of
18 the pension plan. The ordinance establishing the IROP shall
19 specify a uniform participation period for the IROP that is not
20 more than five years in duration.
21 (b) Pennsylvania Municipal Retirement System participants.--
22 A local government that has established or maintains a defined
23 benefit plan for a group of its employees which is self-insured
24 in whole or in part under section 202(b) and has joined the
25 Pennsylvania Municipal Retirement System may establish an IROP
26 for those employees as a part of the pension plan only through
27 participation in the IROP established and administered by the
28 Pennsylvania Municipal Retirement System.
29 (c) Pennsylvania Municipal Retirement System standards.--The
30 Pennsylvania Municipal Retirement Board shall establish an IROP
20070H0719B0804 - 17 -
1 for local government-defined benefit pension plans that have
2 joined the Pennsylvania Municipal Retirement System. The IROP so
3 established shall be uniform, in compliance with the provisions
4 of this chapter, open to any local government and applicable to
5 any of the defined benefit pension plans administered by the
6 Pennsylvania Municipal Retirement System.
7 Section 1112. Eligibility of member to participate in IROP.
8 An active member of a local government retirement system that
9 has an IROP as a part of its defined benefit pension plan who is
10 eligible for a normal retirement benefit under the pension plan
11 or will be eligible for a normal retirement benefit under the
12 pension plan prior to participation in the IROP is eligible to
13 participate in the IROP by filing a written application with the
14 retirement system at least 30 days before the member's effective
15 date of retirement.
16 Section 1113. Participation in IROP.
17 (a) Election by an active member.--An eligible active member
18 may elect to participate in an IROP for the period specified in
19 the ordinance establishing the IROP.
20 (b) IROP participation election.--Upon deciding to
21 participate in an IROP, a member shall submit on forms provided
22 and required by the retirement system:
23 (1) A binding and irrevocable letter of resignation from
24 regular employment with the local government that discloses
25 the member's intent to retire and specifies the member's
26 retirement date.
27 (2) An irrevocable written election to participate in
28 the IROP that:
29 (i) Details an IROP participant's rights and
30 obligations under the IROP.
20070H0719B0804 - 18 -
1 (ii) Includes an agreement to forgo:
2 (A) Active membership in the retirement system.
3 (B) Any growth in the salary base used for
4 calculating the regular retirement benefit.
5 (C) Any additional benefit accrual for
6 retirement purposes.
7 (iii) Specifies the effective date of IROP
8 participation that shall be the day after the specified
9 retirement date.
10 (iv) Specifies the IROP termination date that
11 satisfies the limitation in subsection (a).
12 (3) Any other information required by the retirement
13 system.
14 (c) IROP termination.--
15 (1) An IROP participant may change the IROP termination
16 date to an earlier date within the limitations of subsection
17 (a). No penalty shall be imposed for early termination of
18 IROP participation.
19 (2) Upon either early or regular termination of IROP
20 participation:
21 (i) The IROP participant shall be separated from
22 employment by the local government.
23 (ii) The retirement system shall pay the balance in
24 the IROP participant's subsidiary IROP participant
25 account to the terminating IROP participant as provided
26 in section 1114(d).
27 (iii) The IROP participant shall be ineligible to
28 reenroll in the IROP thereafter even if the former IROP
29 participant is reemployed by the local government with
30 renewed active membership in the retirement system.
20070H0719B0804 - 19 -
1 Section 1114. Benefits payable under IROP.
2 (a) Fixing retirement benefit, retirement date, retirement
3 benefits and IROP dates.-- Effective with the date of
4 retirement, which shall be the day before the effective date of
5 IROP participation, the member's monthly, normal retirement
6 benefit under the pension plan, the member's effective date of
7 retirement and the member's effective dates of beginning and
8 terminating employment as an IROP participant shall be fixed.
9 (b) Effective dates of IROP participation.--
10 (1) A retired member's effective date of participation
11 in an IROP shall begin the day following the effective date
12 of the member's regular retirement.
13 (2) A retired member's participation in an IROP shall
14 end on the last day of the participation period specified in
15 the ordinance establishing the IROP that is in effect on the
16 effective date of the retired member's participation in the
17 IROP.
18 (c) Treatment of normal retirement benefit payments and
19 accruals.--All of the retired member's monthly, normal
20 retirement benefit and interest thereon at the assigned rate
21 shall be credited to the IROP participant's subsidiary IROP
22 participant account in the pension trust fund and a separate
23 accounting of the IROP participant's accrued benefit
24 accumulation under the IROP shall be calculated annually and
25 provided to the IROP participant.
26 (d) Payment of IROP benefits.--On the effective date of an
27 IROP participant's termination of employment with the local
28 government as an IROP participant, participation in the IROP
29 shall cease and the retirement system shall calculate and pay to
30 the participant the participant's total accumulated IROP
20070H0719B0804 - 20 -
1 benefits in the IROP participant's subsidiary IROP participant
2 account subject to the following provisions:
3 (1) Except as provided in paragraph (2), the terminating
4 IROP participant or, if deceased, the participant's named
5 beneficiary shall elect on a form provided by the retirement
6 system to receive payment of the IROP benefits in accordance
7 with one of the following options:
8 (i) The balance in the IROP participant's subsidiary
9 IROP participant account less withholding taxes, if any,
10 remitted to the Internal Revenue Service shall be paid
11 within 45 days by the retirement system from the account
12 to the IROP participant or surviving beneficiary.
13 (ii) The balance in the IROP participant's
14 subsidiary IROP participant account shall be paid within
15 45 days by the retirement system from the account
16 directly to the custodian of an eligible retirement plan
17 as defined in section 402(c)(8)(b) of the Internal
18 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
19 402(c)(8)(b)), or, in the case of an eligible rollover
20 distribution to the surviving spouse of a deceased IROP
21 participant, an eligible retirement plan that is an
22 individual retirement account or an individual retirement
23 annuity as described in section 402(c)(9) of the Internal
24 Revenue Code of 1986 (26 U.S.C. § 402(c)(9)).
25 (2) If the IROP participant or beneficiary fails to
26 elect a method of payment within 60 days after the
27 participant's termination date, the retirement system shall
28 pay the balance as a lump sum as provided in paragraph (1).
29 (3) The form of payment selected by the IROP participant
30 or surviving beneficiary shall comply with the minimum
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1 distribution requirements of the Internal Revenue Code.
2 (e) Taxation, attachment and assignment of IROP
3 participant's account.--
4 (1) Except as provided in paragraphs (2), (3) and (4),
5 the right of an IROP participant to any benefit or right
6 accrued or accruing under the provisions of this chapter and
7 the moneys in the IROP participant's subsidiary IROP
8 participant account are exempt from any State or municipal
9 tax, levy and sale, garnishment, attachment, spouse's
10 election or any other process whatsoever.
11 (2) Rights under this chapter shall be subject to
12 forfeiture as provided by the act of July 8, 1978 (P.L.752,
13 No.140), known as the Public Employee Pension Forfeiture Act.
14 Forfeitures under this subsection or under any other
15 provision of law may not be applied to increase the benefits
16 that any IROP participant otherwise would receive under this
17 chapter.
18 (3) Rights under this chapter shall be subject to
19 attachment in favor of an alternate payee as set forth in a
20 qualified domestic relations order.
21 (4) Under subsection (d)(1)(ii), a distributee may elect
22 to have an eligible rollover distribution paid directly to an
23 eligible retirement plan by way of a direct rollover. For
24 purposes of this paragraph, a "distributee" includes an IROP
25 participant, an IROP participant's designated beneficiary and
26 an IROP participant's former spouse who is an alternate payee
27 under a qualified domestic relations order. For purposes of
28 this paragraph, "eligible rollover distribution" has the
29 meaning given the term by section 402(f)(2)(A) of the
30 Internal Revenue Code of 1986 (26 U.S.C. § 402(f)(2)(A)),
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1 except that a qualified trust shall be considered an eligible
2 retirement plan only if it accepts the distributee's eligible
3 rollover distribution and, in the case of an eligible
4 rollover distribution to a surviving spouse, an eligible
5 retirement plan is an "individual retirement account" or an
6 "individual retirement annuity" as those terms are defined in
7 section 408(a) and (b) of the Internal Revenue Code of 1986
8 (26 U.S.C. § 408(a) and (b)).
9 (f) Effect of disability pension benefits.--If an IROP
10 participant becomes eligible for a disability pension benefit
11 and terminates employment, the monthly normal retirement benefit
12 of the IROP participant shall terminate.
13 (g) Eligibility for active member benefits.--Except for
14 those benefits specified under section 1113(b)(2)(ii) as forgone
15 by the member, an IROP participant shall be eligible for any
16 employee benefits provided to active employees before retirement
17 as set forth in the ordinance instituting the IROP.
18 (h) Eligibility for benefits otherwise provided by law.--An
19 IROP participant shall be eligible for all preretirement
20 benefits for employees otherwise provided by law, including, but
21 not limited to, benefits under the act of June 2, 1915 (P.L.736,
22 No.338), known as the Workers' Compensation Act; the act of June
23 28, 1935 (P.L.477, No.193), referred to as the Enforcement
24 Officer Disability Benefits Law; the act of December 5, 1936
25 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
26 Compensation Law; the act of June 24, 1976 (P.L.424, No.101),
27 referred to as the Emergency and Law Enforcement Personnel Death
28 Benefits Act; and the Public Safety Officers' Benefit Act of
29 1976 (Public Law 94-430, 42 U.S.C. § 90 Stat. 1347).
30 Section 1115. Death benefits under IROP.
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1 (a) IROP benefits for named beneficiary.--If an IROP
2 participant dies, the IROP participant's named beneficiary shall
3 be entitled to apply for and receive the benefits accrued in the
4 IROP participant's subsidiary IROP participant account as
5 provided in section 1114(d).
6 (b) Final credited monthly retirement benefit.--The monthly
7 retirement system benefit accrued in the IROP participant's
8 subsidiary IROP participant account during the month of an IROP
9 participant's death shall be the final monthly retirement system
10 benefit credited for IROP participation.
11 (c) IROP eligibility terminates upon participant's death.--
12 An IROP participant's eligibility to participate in the IROP
13 terminates upon the death of the IROP participant. If an IROP
14 participant dies on or after the effective date of participation
15 in the IROP but before the monthly retirement system benefit of
16 the participant accruable for the month has accrued in the IROP
17 participant's subsidiary IROP participant account, the local
18 government shall pay the monthly retirement system benefits as
19 though the participant had not elected IROP participation and
20 had died after the member's effective date of retirement but
21 before receipt of the retired member's first regular retirement
22 benefit.
23 (d) Survivors ineligible for active member's death
24 benefit.--Except as provided in subsection (e), the survivors of
25 an IROP participant who dies shall not be eligible to receive
26 retirement system death benefits payable in the event of the
27 death of an active member.
28 (e) IROP participant killed in service.--If otherwise
29 qualified as a family member under the act of May 29, 1956 (1955
30 P.L.1804, No.600), referred to as the Municipal Police Pension
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1 Law, the named beneficiary of an IROP participant who is killed
2 in service shall be entitled to apply for and receive a
3 recalculation for payment of survivor benefits at 100% of the
4 IROP participant's salary as fixed at the participant's date of
5 retirement.
6 Section 1116. Subsequent employment and renewal of active
7 membership.
8 After both the termination of the IROP participant's
9 employment as an IROP participant by the local government and
10 the expiration of the IROP participation period, a former IROP
11 participant shall be subject to such reemployment limitations as
12 other retired members and shall be eligible for renewed
13 membership as an active member in the local government
14 employees' retirement system.
15 SUBCHAPTER C
16 ADMINISTRATIVE PROVISIONS
17 Section 1121. IROP participant account.
18 (a) General rule.--If a local government creates an IROP, it
19 shall establish an IROP participant account as an interest-
20 bearing ledger account in its pension trust fund. The account
21 balance shall be accounted for separately but need not be
22 physically segregated from other pension trust fund assets.
23 (b) Subsidiary IROP participant accounts.--A separate
24 interest-bearing subsidiary IROP participant account shall be
25 established for each IROP participant. While a retired member is
26 employed as an IROP participant, the member's monthly, normal
27 retirement benefit and interest thereon shall be credited to the
28 IROP participant's subsidiary IROP participant account under
29 section 1114(c). The interest shall be compounded and credited
30 monthly at an annual rate specified in the ordinance
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1 establishing the IROP that shall be not less than 1% nor more
2 than 4 1/2%.
3 (c) Termination of employment.--When an IROP participant
4 terminates employment with the local government as an IROP
5 participant, the IROP participant's total accumulated benefits
6 shall be calculated, charged to the IROP participant account and
7 paid out of the pension trust fund under section 1114(d). Under
8 section 202(b), the balance in the IROP participant account
9 shall be excluded from actuarial valuation reports of the
10 retirement system prepared and filed under this act.
11 (d) Account held in trust.--The IROP participant account
12 shall be held in trust for the exclusive benefit of IROP retired
13 members who are or were IROP participants and for the
14 beneficiaries of the members.
15 Section 1122. Audit of Pennsylvania Municipal Retirement
16 System.
17 The IROP established by the Pennsylvania Municipal Retirement
18 Board shall be subject to financial and compliance audits
19 conducted by the Auditor General with the initial audit
20 conducted within one year of its establishment.
21 Section 1123. Existing IROPs.
22 A local government with an IROP in existence on the effective
23 date of this chapter that does not conform to the provisions of
24 this chapter shall amend its plan within 180 days of the
25 effective date of this chapter or when the current labor-
26 management contract creating the plan expires, whichever is
27 later, to conform with the provisions of this chapter with
28 respect to future IROP participants.
29 Section 1124. Noncompliance.
30 If a local government that established an IROP under section
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1 1111(a) or the Pennsylvania Municipal Retirement Board that
2 established an IROP under section 1111(c) fails to comply within
3 90 days with a finding by the Auditor General of noncompliance
4 with this chapter or if the finding is appealed within 90 days
5 of conclusion of the appeal process, the failure to comply shall
6 be deemed sufficient refusal by the local government or the
7 Pennsylvania Municipal Retirement Board to comply with its duty
8 antecedent to the commencement of a mandamus action and the
9 Auditor General shall refer the finding to the Attorney General.
10 Upon receipt of the finding from the Auditor General, the
11 Attorney General shall proceed in the name of the Commonwealth
12 to institute a legal proceeding for mandamus and no other remedy
13 at law shall be deemed to be sufficiently adequate and
14 appropriate to bar the commencement of this action.
15 Section 8. This act shall take effect in 60 days.
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