SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY WILLIAMS AND D. EVANS, JULY 3, 2009

 AS AMENDED ON THIRD CONSIDERATION, IN SENATE, AUGUST 26, 2009   

AN ACT

Amending the act of December 18, 1984 (P.L.1005, No.205),

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entitled "An act mandating actuarial funding standards for

all municipal pension systems; establishing a recovery

program for municipal pension systems determined to be

financially distressed; providing for the distribution of the

tax on the premiums of foreign fire insurance companies; and

making repeals,"  adding special provisions for amortization

of unfunded actuarial accrued liability and minimum municipal

obligation in cities of the first class; and providing for

special taxing authority for cities of the first class.

Amending the act of December 18, 1984 (P.L.1005, No.205),

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entitled "An act mandating actuarial funding standards for

all municipal pension systems; establishing a recovery

program for municipal pension systems determined to be

financially distressed; providing for the distribution of the

tax on the premiums of foreign fire insurance companies; and

making repeals," amending the title of the act; in

preliminary provisions, further providing for definitions; in

preliminary provisions, providing for methodology; in

municipal pension plan actuarial reporting, further providing

for contents of actuarial valuation report and providing for

actuarial asset valuation and for revised actuarial valuation

report; in minimum funding standard for municipal pension

plans, further providing for minimum funding standard and

defined benefit plans self-insured in whole or in part; in

revisions applicable to municipal pension fund financing,

further providing for revision of financing from State

revenue sources and General Municipal Pension System State

Aid Program; in financially distressed municipal pension plan

determination procedure, further providing for initiation of

distress determination, for pension plans to be included in

determination and for determination procedure; in financially

distressed municipal pension system recovery program, further

providing for application, for election determination

procedure, for recovery program level I, for recovery program

level II, for recovery program level III, for remedies

applicable to various recovery program levels, for

supplemental State assistance program and fund and for

municipal employee retirement program; in financially

distressed municipal pension system recovery program,

establishing programs for municipal pension recovery and

municipal employee retirement; in financially distressed

municipal pension system recovery program, further providing

for rules and regulations; providing for standards for

municipal pension systems for second class cities and for

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level III administration in cities of the second class; in

alternative funding mechanism, providing special provisions

relating to certain cities and counties; further providing

for alternative funding mechanism; providing for cities of

the first and second classes, for special taxing authority,

for cities of the second class and for municipal excess

payments; authorizing certain deferred retirement option

plans; and making a related repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Chapter 10 heading of the act of December 18,

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1984 (P.L.1005, No.205), known as the Municipal Pension Plan

Funding Standard and Recovery Act, added June 18, 1998 (P.L.626,

No.82), is amended to read:

CHAPTER 10

[ALTERNATIVE FUNDING MECHANISM]

PROVISIONS RELATING TO CITIES OF THE FIRST CLASS

Section  2.  Section 1001(b) of the act, added June 18, 1998

(P.L.626, No.82), is amended and the section is amended by

adding a subsection to read:

Section 1001.  Alternative funding mechanism.

* * *

(b)  Period of payment requirements prior to July 1, 2009.--

The period of the city's payment requirements under an

alternative funding mechanism implemented prior to December 31,

2002, shall be the greater of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after

December 31, 2002, but before July 1, 2009, the period described

in paragraph (1) shall be the period of the city's payment

requirements.

(b.1)  Period of payment requirements beginning July 1,

2009.--The period of the city's payment requirements under an

alternative funding mechanism implemented or refinanced in whole

or in part on or after July 1, 2009, and prior to the beginning

of the plan year that commences in 2019, shall be the greater

of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after July 1,

2019, the period described in paragraph (1) shall be the period

of the city's payment requirements.

* * *

Section 3.  The act is amended by adding sections to read:

Section 1002.  Special provisions for amortization of unfunded

actuarial accrued liability and minimum municipal

obligation.

(a)  Amortization of unfunded actuarial accrued liability.--

(1)  Notwithstanding any other provision of this act or

other law, a city of the first class, in its sole discretion,

may amortize its entire unfunded actuarial accrued liability,

as measured on a valuation date selected by the city of the

first class and occurring in the plan year commencing after

January 1, 2009, and ending before December 31, 2010, as a

level dollar amount with the amortization target date being

the end of the plan year occurring 30 years after the plan

year commencing on July 1, 2009, with payments to commence in

the next plan year.

(2)  In order for a city of the first class to extend the

applicable amortization period pursuant to this subsection,

the city of the first class must file a revised actuarial

valuation report reflecting the amortization period extension

provided for under this section and the actuarial assumed

rate in effect on the valuation date with the commission no

later than March 31, 2010.

(3)  Any such revised actuarial valuation report may not

be filed in lieu of the actuarial valuation report prepared

in compliance with section 202(b)(4)(v)(A) and required to be

filed on or before March 31, 2009, and may be used only for

the purposes of recalculating the minimum municipal

obligation of the city of the first class for the plan year

commencing on July 1, 2009, and calculating the minimum

municipal obligation of the city of the first class for the

plan year commencing on July 1, 2010, to reflect the

amortization period extension. The revised report shall

supersede the original report to the extent of the revisions.

(4)  Any such revised actuarial valuation report shall

not affect distributions under the General Municipal Pension

System State Aid Program under Chapter 4.

(b)  Revised minimum municipal obligation for certain plan

years.--

(1)  Notwithstanding any other provision of this act or

other law, a city of the first class is authorized to defer a

portion of the minimum municipal obligation provided for

section 302:

(i)  for the plan year ending June 30, 2010, in an

amount not to exceed $155,000,000; and

(ii)  for the plan year ending June 30, 2011, in an

amount not to exceed $80,000,000.

(2)  The amounts deferred shall bear interest at the rate

of 8.25%, which shall be calculated from the beginning of the

plan year in which the deferral was made. Accrued interest on

any amounts deferred shall be paid yearly on or before June

30, 2010, June 30, 2011, and June 30, 2012. 

(3)  On or before June 30, 2013, the city of the first

class shall repay:

(i)  at least $90,000,000 of any amounts deferred,

plus interest accrued on all amounts deferred; or

(ii)  if the total amount deferred is less than

$90,000,000, the total amount deferred, plus interest

accrued on that amount.

(4)  The balance of all amounts deferred, including

interest accrued and unpaid on amounts deferred, shall be

repaid by June 30, 2014.

(5)  Any of the amounts deferred, including interest

accrued on deferred amounts, which remain unpaid at the end

of the plan year ending June 30, 2014, shall be added to the

minimum municipal obligation of the city of the first class

for the following plan year, with interest calculated and due

until the date that the amounts due are paid.

(6)  The calculation of the unfunded actuarial accrued

liability made by and certified by an approved actuary under

section 202 shall not include any amounts deferred pursuant

to this subsection, so long as the city of the first class is

paying interest accrued on such deferred amounts and repaying

such deferred amounts in accordance with the terms of this

subsection.

(7)  The repayment of any amounts deferred, including

interest accrued on deferred amounts, as and when required in

this subsection, shall constitute a commitment and

obligation, binding and absolute, on the city of the first

class; and the city of the first class shall include all

amounts due to be paid under this subsection in the budget of

the city, and all amounts due to be paid shall be

appropriated and paid in order to make timely repayment of

any amounts deferred, including interest accrued on deferred

amounts, with such payment being unconditional and without

setoff.

(8)  (i)  Any person who is beneficially interested in

the city of the first class paying its minimum municipal

obligation under this subsection shall have standing to

institute a legal proceeding for mandamus to enforce the

obligation of the city of the first class to make

payments under this subsection in the same manner as

payment requirements of an alternative funding mechanism

may be enforced under section 1001.

(ii)  For purposes of this paragraph, a person is

beneficially interested under this subsection if the

person is a beneficially interested person under section

1001(f).

(9)  The city of the first class shall be required to pay

the balance of its minimum municipal obligation in full when

due in each plan year.

Section 1003.  Special taxing authority.

(a)  Imposition of special tax.–-

(1)  Solely for the purposes set forth in subsection (b),

a city of the first class is authorized to impose a tax on

the sale at retail of tangible personal property or services

or use of tangible personal property or services purchased at

retail, as those terms are defined in Article II of the act

of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

of 1971, which tax shall be in addition to the tax authorized

under the provisions of section 503(a) and (b) of the act of

June 5, 1991 (P.L.9, No.6), known as the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class. The tax authorized by this subsection shall not

be levied, assessed and collected upon the occupancy of a

room or rooms in a hotel in the city.

(2)  The tax authorized under this subsection shall be

imposed and collected at the rate of 1%, and shall be

computed as set forth at section 503(e)(2) of the

Pennsylvania Intergovernmental Cooperation Authority Act for

Cities of the First Class.

(3)  The tax authorized under this subsection shall be

administered, collected, deposited and disbursed in the same

manner as the tax imposed under Chapter 5 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class and the situs of the tax authorized under this

subsection shall be determined in accordance with that act

and Article II-A of the Tax Reform Code of 1971. The

department shall use the money received by the department to

cover its costs of administration of the tax authorized by

the provisions of Chapter 5 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class to cover the costs of administration of the tax

authorized by this section; and the department shall not

retain any additional amounts for the costs of collection of

the tax authorized by this section. No additional fee shall

be charged for either a license or any renewal in addition to

a license or renewal fee otherwise authorized and imposed

pursuant to Article II of the Tax Reform Code of 1971.

(b)  Municipal action.--

(1)  If a city of the first class determines to impose

the tax authorized by subsection (a), the governing body of

the city shall adopt or shall previously have adopted an

ordinance which shall state the tax rate.

(2)  The city ordinance, including an ordinance adopted

prior to the effective date of this article, may take effect

no earlier than 20 days after the adoption of the ordinance

or 20 days after the effective date of this section,

whichever is later.

(3)  A certified copy of a city ordinance imposing the

tax authorized by subsection (a) shall be delivered to the

department within ten days prior to or after the effective

date of that ordinance.

(4)  A certified copy of a repeal ordinance shall be

delivered to the department at least 30 days prior to the

effective date of the repeal.

(c)  Use of tax receipts.--Any moneys received by the city

from the levy, assessment and collection of the tax authorized

under subsection (a) may only be used to:

(1)  pay as and when due in any plan year any amounts of

the city's minimum municipal obligation provided for in

section 302, including, but not limited to, amounts deferred

pursuant to section 1002(b) and interest accrued on deferred

amounts; and

(2)  reimburse the city for payments made by the city,

from sources other than the tax authorized in subsection (a),

of the city's minimum municipal obligation for that year,

including, but not limited to, amounts deferred pursuant to

section 1002(b) and interest accrued on deferred amounts.

(d)  Expiration.--

(1)  This section shall expire July 1, 2014.

(2)  Notwithstanding the expiration of this section, any

tax imposed pursuant to subsection (a) on sales or uses

occurring before July 1, 2014, shall be paid to and received

by the department and, along with interest and penalties,

less any refunds and credits paid, shall be credited to the

Local Sales and Use Tax Fund created pursuant to the

Pennsylvania Intergovernmental Cooperation Authority Act for

Cities of the First Class as if this section had not expired.

Such moneys shall be disbursed to the city imposing the tax

in the manner provided by section 509 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class.

(e)  Effect of imposition, expiration or repeal of tax.--The

imposition, termination or repeal of the tax authorized under

subsection (a) shall not affect in any way the amount of

supplemental State assistance allocable to the city imposing the

tax.

Section 1004.  Additional assistance.

Notwithstanding any other provision of this act or other law,

a city of the first class shall continue to receive State

supplemental assistance and any other assistance available under

this act.

Section 4.  This act shall take effect immediately.

Section 1.  The title of the act of December 18, 1984

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(P.L.1005, No.205), known as the Municipal Pension Plan Funding

Standard and Recovery Act, is amended to read:

AN ACT

Mandating actuarial funding standards for all municipal pension

systems; establishing a recovery program for municipal

pension systems determined to be financially distressed;

providing for the distribution of the tax on the premiums of

foreign fire insurance companies; providing for the

establishment and administration of deferred retirement

option plans in local governments and for local tax; and

making repeals.

Section 2.  The definition of "municipal employee" in section

102 of the act is amended and the section is amended by adding

definitions to read:

Section 102.  Definitions.

Except as provided in Chapter 7, the following words and

phrases when used in this act shall have the meanings given to

them in this section unless the context clearly indicates

otherwise:

* * *

"DROP."  A deferred retirement option plan created and

operated by a local government or the Pennsylvania Municipal

Retirement System under Chapter 11 or any deferred retirement

option plan or similar program established by a local government

that provides for the commencement and accumulation of

retirement benefit payments for active employees with

disbursement of the accumulated payments and interest earnings

as a lump sum upon termination of employment.

"DROP participant."  A retired member of a local government-

defined benefit pension plan who is eligible to participate in a

DROP under section 1112, who has elected to participate in a

DROP under section 1113 and who is not an elected official.

"DROP participant account."  A pension trust fund ledger

account established under section 1121(a).

* * *

"Local government."  A municipality or any county.

* * *

"Municipal employee."  Any person [other than an independent

contractor] who provides regular services for a municipality in

return for compensation from the municipality. The term does not

include an independent contractor or a DROP participant.

* * *

Section 2.1.  The act is amended by adding a section to read:

Section 103.  Methodology.

In performing an actuarial study under this act or the act of

December 6, 1972 (P.L.1383, No.293), entitled "An act requiring

municipal pension systems to have an actuarial investigation of

the fund made by an actuary who shall report his findings to the

Department of Community Affairs," municipalities and counties

may utilize any reasonable actuarial assumptions or

methodologies provided for in this act.

Section 3.  Section 202(b)(4)(i), (ii), (iii), (iv) and (v)

of the act, amended July 15, 2004 (P.L.715, No.81), are amended

to read:

Section 202.  Contents of actuarial valuation report.

* * *

(b)  Contents of actuarial exhibits; defined benefit plans

self-insured in whole or in part.--For any pension plan which is

a defined benefit plan and which is self-insured in whole or in

part, all applicable actuarial exhibits shall be prepared in

accordance with the entry age normal actuarial cost method with

entry age established as the actual entry age for all plan

members unless the municipality applies for and is granted

authorization by the commission to use an alternative actuarial

cost method. Authorization shall be granted if the municipality

demonstrates on an individual pension plan basis that there are

compelling reasons of an actuarial nature for the use of an

alternative actuarial cost method. The commission shall issue

rules and regulations specifying the criteria which the

commission will use to determine the question of the existence

of compelling reasons for the use of an alternative actuarial

cost method, the documentation which a municipality seeking the

authorization will be required to supply and the acceptable

alternative actuarial cost methods which the commission may

authorize. The actuarial cost method shall be used to value all

aspects of the benefit plan or plans of the pension plan unless

the municipality applies for and is granted authorization by the

commission to use approximation techniques other than the

actuarial cost method for aspects of the benefit plan or plans

of the pension plan other than the retirement benefit.

Authorization shall be granted if the municipality demonstrates

on an individual pension plan basis that there are compelling

reasons of an actuarial nature for the use of these

approximation techniques. The commission shall issue rules and

regulations specifying the criteria which the commission will

use to determine the question of the existence of compelling

reasons for the use of approximation techniques, the

documentation which a municipality seeking the authorization

will be required to supply and the acceptable approximation

technique which the commission may authorize. The actuarial

exhibits shall use actuarial assumptions which are, in the

judgment of the actuary and the governing body of the plan, the

best available estimate of future occurrences in the case of

each assumption. With respect to economic actuarial assumptions,

the assumptions shall either be within the range specified in

rules and regulations issued by the commission or documentation

explaining and justifying the choice of assumptions outside the

range shall accompany the report. The actuarial exhibits shall

measure all aspects of the benefit plan or plans of the pension

plan in accordance with modifications in the benefit plan or

plans, if any, and salaries which as of the valuation date are

known or can reasonably be expected to be in force during the

ensuing plan year. In preparing the actuarial exhibits or any

actuarial valuation report, the municipality shall exclude the

compensation of all DROP participants from the active member

payroll and all DROP participants from active member data. The

actuarial valuation report shall contain the following actuarial

exhibits:

* * *

(4)  An exhibit of any additional funding costs

associated with the amortization of any unfunded actuarial

accrued liability of the pension plan, indicating for each

increment of unfunded actuarial accrued liability specified

in paragraph (3), the level annual dollar contribution

required to pay an amount equal to the actuarial assumption

as to investment earnings applied to the principal amount of

the remaining balance of the increment of unfunded actuarial

accrued liability and to retire by the applicable

amortization target date specified in this paragraph the

principal amount of the remaining balance of the increment of

unfunded actuarial accrued liability. The amortization target

date applicable for each type of increment of unfunded

actuarial accrued liability shall be as follows:

(i)  The following apply:

(A)  In the case of a pension plan established on

or prior to January 1, 1985 for the unfunded

actuarial accrued liability in existence as of the

beginning of the plan year occurring in calendar year

1985, at the end of the plan year occurring in

calendar year 2015; or

(B)  In the case of a pension plan established

after January 1, 1985, for the unfunded actuarial

accrued liability then or subsequently determined to

be or to have been in existence as of the date of the

establishment of the plan, at the end of the plan

year occurring 30 years after the calendar year in

which the pension plan was established.

(ii)  The following apply:

(A)  Increment or decrement of net unfunded

actuarial accrued liability attributable to a change

in actuarial assumptions, at the end of the plan year

occurring 20 years after the calendar year in which

actuarial assumption modification was effective.

(B)  Increment or decrement of net unfunded

actuarial accrued liability attributable to a change

in actuarial assumptions made on or after the

effective date of this clause, at the end of the plan

year occurring 15 years after the calendar year in

which the actuarial assumption modification was

effective.

(iii)  The following apply:

(A)  Increment of net unfunded actuarial accrued

liability attributable to a modification in the

benefit plan applicable to active members, at the end

of the plan year occurring 20 years after the

calendar year in which the benefit plan modification

was effective.

(B)  From and after the effective date of this

clause, the increment of net unfunded actuarial

accrued liability attributable to a modification in

the benefit plan mandated by new legislation, at the

end of the plan year occurring 20 years after the

calendar year in which the benefit plan modification

was effective.

(iv)  The following apply:

(A)  Increment of unfunded actuarial accrued

liability attributable to a modification in the

benefit plan applicable to retired members and other

benefit recipients, at the end of the plan year

occurring 10 years after the calendar year in which

the benefit plan modification was effective.

(B)  Increment Except as provided under clause

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(C), increment of unfunded actuarial accrued

liability attributable to a modification in the

benefit plan for active members adopted on or after

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the effective date of this clause and not mandated by

new legislation, at the end of the plan year

occurring ten years after the calendar year in which

the benefit plan modification was effective.

(C)  An increment of unfunded actuarial accrued

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liability attributable to a modification in the

benefit plan applicable to retired members and other

benefit recipients not mandated by new legislation,

at the end of the plan year following the year in

which the modification was effective.

(v)  The following apply:

(A)  Increment or decrement of net unfunded

actuarial accrued liability attributable to an

actuarial experience loss or gain, at the end of plan

year occurring [15] 20 years after the calendar year

in which the actuarial experience loss or gain was

recognized.

(B)  Notwithstanding any other provision of this

act or other law, as of the beginning of the plan

year occurring in calendar year 2003, the outstanding

balance of the increment of unfunded actuarial

accrued liability attributable to the net actuarial

investment losses incurred in calendar years 2001 and

2002 may, at the sole discretion of the municipality,

be amortized with the amortization target date being

the end of the plan year occurring 30 years after

January 1, 2003. In order for a municipality to

extend the applicable amortization period pursuant to

this clause, the municipality must file a revised

actuarial valuation report reflecting the

amortization period extension provided for under this

clause with the executive director of the commission

no later than September 30, 2004. Any such revised

actuarial valuation report may not be filed in lieu

of the actuarial valuation report prepared in

compliance with clause (A) and required to be filed

on or before March 31, 2004, and may be used only for

the purposes of recalculating the 2004 minimum

municipal obligation of the municipality and

calculating the 2005 minimum municipal obligation of

the municipality to reflect the amortization period

extension. Any such revised actuarial valuation

report shall not affect distributions under the

General Municipal Pension System State Aid Program

under Chapter 4.

* * *

Section 4.  The act is amended by adding sections to read:

Section 210.  Actuarial asset valuation.

(a)  General rule.--A municipality may value the assets in

each of its pension plans to equal the greater of :

(1)  the actuarial value of assets from the most recent

biennial actuarial valuation report accepted by the

commission:

(i)  increased by contributions and other deposits

except investment income;

(ii)  decreased by benefit payments and

administrative expenses or other payments; and

(iii)  credited with interest at 1% less than the

plan's assumed rate, to the date of the actuarial

valuation; or

(2)  the market value of assets on the valuation date.

(b)  Methodology.--

(1)  The actuarial value of pension plan assets is the

value of cash, investment securities and other property

belonging to the municipal pension plan according to a method

for valuing assets adopted by the governing body of the

municipal pension plan upon the recommendation of the

actuary.

(2)  The method for valuing assets shall be adequately

disclosed in the accompanying documentation or exhibits and,

except as set forth in subsection (c) or Chapter 6, may not

produce a result that in total is:

(i)  greater than 120% of the fair market value of

the assets of the municipal pension plan; or

(ii)  less than 80% of the fair market value of the

assets of the municipal pension plan.

(c)  Temporary valuation.--

(1)  For the two-year actuarial valuation reporting

period beginning in 2009, a municipality may utilize a method

for valuing assets which does not produce a result that in

total is:

(i)  greater than 130% of the fair market value of

the assets of the municipal pension plan; or

(ii)  less than 70% of the fair market value of the

assets of the municipal pension plan.

(2)  Upon the expiration of that two-year actuarial

valuation reporting period, subsection (b) applies.

Section 211.  Revised actuarial valuation report.

Upon enactment of legislation which would alter the actuarial

valuation of a pension plan, a revised actuarial valuation

report shall be filed with the commission as the commission

directs.

Section 5.  Section 302(b)(2) of the act, amended December

18, 1990 (P.L.753, No.189), is amended and the section is

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amended by adding a subsection to read:

Section 302.  Minimum funding standard; defined benefit plans

self-insured in whole or in part.

* * *

(b)  Financial requirements of the pension plan.--

* * *

(2)  The normal cost and administrative expense

requirements for the following plan year shall be expressed

as a dollar amount and shall be determined by applying the

normal cost of the benefit plan and the administrative

expense payable from the assets attributable to the benefit

plan, as reported in the actuarial valuation report of the

pension plan and expressed as a percentage of payroll, to the

payroll of the active membership of the pension plan as of

the date the financial requirements of the pension plan are

determined. In expressing the normal cost and administrative

expense requirements as a dollar amount, the municipality

shall exclude the compensation of all DROP participants from

the payroll of the active membership of the pension plan.

* * *

(f)  Cost-of-living adjustments.--A cost-of-living adjustment

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for an inactive member shall be fully amortized within one year

of the date of the implementation of the adjustment.

Section 6.  Sections 402(e)(2), 501 and 502 of the act are

amended to read:

Section 402.  Revision of financing from State revenue sources;

General Municipal Pension System State Aid Program.

* * *

(e)  Allocation of general municipal pension system State

aid.--

* * *

(2)  The applicable number of units shall be attributable

to each active employee who was employed on a full-time basis

for a minimum of six consecutive months prior to December 31

preceding the date of certification and who was participating

in a pension plan maintained by that municipality, provided

that the municipality maintains a generally applicable

pension plan for that type of employee which was either

established on or prior to December 31, 1984, or, if

established after December 31, 1984, has been maintained by

that municipality for at least three plan years. For the

purpose of computing and reporting the applicable number of

units, a DROP participant shall not be reported to the

Auditor General as an active employee. The applicable number

of units per employee attributable to each eligible recipient

county of the second class shall be two units for each police

officer. The applicable number of units attributable to each

eligible recipient city, borough, incorporated town and

township shall be as follows:

(i)  Police officer - two units.

(ii)  Firefighter - two units.

(iii)  Employee other than police officer or

firefighter - one unit.

* * *

Section 501.  Initiation of distress determination.

[Each municipality which wishes to avail itself of any of the

provisions of sections 604, 605 and 606 shall apply to the

commission for a determination of its status pursuant to this

chapter. The application shall be in the form and shall contain

the required information as prescribed in rules and regulations

issued by the commission. Determinations pursuant to this

chapter shall be made annually.] The commission shall review the

biennial actuarial valuation reports filed on behalf of each

municipal pension plan to determine the municipality's

eligibility to avail itself of sections 604, 605 and 606.

Section 502.  Pension plans for inclusion in determination.

The determination provided for in this chapter shall be made

for a municipality taking into account all pension plans which

the municipality has established and maintains[.], except those

created after the last biennial actuarial valuation date. The

initial actuarial valuation report for any plan shall not be

recognized in the determination of a municipality's distress

level. If the municipality filed an actuarial valuation report

for any pension plan in the prior reporting period, that

valuation report shall control the determination of distress

without regard to the funding status of any newly established

plan. If no other plan was previously maintained by a

municipality, the newly established plan shall be assigned a

distress score of 0.

Section 7.  Sections 503 and 602 of the act, amended December

10, 1996 (P.L.934, No.150), are amended to read:

Section 503.  Determination procedure.

(a)  Generally.--The determination provided for in this

chapter shall be made by the commission using the actuarial

[indicators] indicator specified in subsection (b) [and the

municipal finance indicators specified in subsection (c), and

the scoring system associated with each].

(b)  Actuarial [indicators] indicator.--The actuarial

[indicators] indicator shall be based on the most current

actuarial valuation report or reports filed by the applicable

municipality with the commission pursuant to law and shall be

made in aggregate for all pension plans maintained by the

applicable municipality. [The actuarial indicators and the

associated scoring system for each shall be as follows:

(1)  The aggregate amount of current pension plan

benefits payable shall be computed as a percentage of the

current market value of aggregate plan assets:

(2)  The aggregate actuarial value of plan assets shall

be computed as a percentage of the aggregate accrued

actuarial liability:

(3)  The aggregate amount of normal cost expressed as a

percentage of covered payroll reduced by the aggregate amount

of any member contributions expressed as a percentage of

covered payroll is added to the aggregate amount of any

employer contributions to the Federal old age, survivors,

disability and health insurance program expressed as a

percentage of covered payroll:

(4)  The aggregate requirement to amortize the unfunded

accrued actuarial liability on a level annual dollar basis

according to the applicable amortization schedules specified

in section 202(b)(4) is divided by the aggregate normal cost

requirement:

(5)  The difference between the aggregate amount of

normal cost plus the requirement to amortize the unfunded

accrued actuarial liability on a level annual dollar basis

according to the applicable amortization schedules specified

in section 202(b)(4), and the total aggregate amount of

member contributions, State allocations dedicated for pension

purposes and municipal contributions received for the

previous year is computed and expressed as a percentage of

covered payroll:

(6)  The compound annual percentage rate of increase in

the aggregate amount of the unfunded accrued actuarial

liability over the most recent four-year period is computed,

unless the amount of the unfunded accrued actuarial liability

equals less than 10% of the amount of assets in either the

first or fourth year:

(7)  The compound annual percentage rate of increase in

the aggregate amount of municipal contributions over the most

recent four-year period is computed:

The actuarial indicator shall be the ratio of the actuarial

value of assets to the actuarial accrued liability, expressed as

a percentage known as the funding ratio, and shall be applied in

accordance with the following actuarial distress scoring system:

[(c)  Municipal finance indicators.--The municipal finance

indicators shall be based on the most recent financial report or

reports filed by the applicable municipality with the Department

of Community Affairs and certified by the secretary or by the

designee of the secretary. Before certification for a

municipality that has issued bonds or notes to fund an unfunded

actuarial accrued liability under the act of July 12, 1972

(P.L.781, No.185), known as the Local Government Unit Debt Act,

or under the laws applicable to the municipality, the municipal

finance data extracted from the most recent financial report or

reports shall be adjusted as directed by the commission to hold

harmless the municipality under section 404(c) by excluding the

municipal debt issued to fund an unfunded actuarial accrued

liability and the debt service on that debt. The municipal

finance indicators and the associated scoring system for each

shall be as follows:

(1)  The total amount of taxes collected by the

municipality for the current year are divided by the

population of the municipality as of the last Federal census,

and the percentage increase in the amount of municipal taxes

collected per capita in the most recent five-year period:

(2)  The municipal tax rate on the market value of real

property (adjusted mill rate) in the municipality for the

most recent year and the percentage increase in the amount of

that adjusted mill rate in the most recent five-year period:

(3)  For the most recent year, the result of the total

municipal bonded debt plus the total municipal floating debt

less the total municipal credits against municipal debt is

divided by the population of the municipality as of the last

Federal census:

(4)  For the most recent year, the result of the total

municipal bonded debt plus the total municipal floating debt

less the total municipal credits against municipal debt is

computed as a percentage of the assessed value of real

property in the municipality:

(5)  For the most recent year, the result of the total

municipal bonded debt plus the total municipal floating debt

less the total municipal credits against municipal debt is

computed as a percentage of the market value of real property

in the municipality:

(6)  For the most recent year, the municipal bonded debt

retired during the preceding 12 months plus the interest paid

during the preceding 12 months on all municipal debt is

computed as a percentage of the total taxes collected by the

municipality for the same period:

(7)  The market value of real property in the

municipality for the current year is divided by the

population of the municipality as of the last Federal census,

and the percentage increase in the amount of market value per

capita in the most recent year over the amount of market

value per capita in the most recent five-year period:

(8)  For the most recent year, adjusted total municipal

expenditures (total municipal expenditures less any municipal

urban renewal expenditures and less any municipal enterprise

expenditures) divided by the population of the municipality

as of the last Federal census and the percentage increase in

the amount of adjusted total municipal expenditures per

capita in the most recent year over the amount of adjusted

total municipal expenditures per capita in the most recent

five-year period:

(d)  Levels of distress.--The three levels of municipal

pension system financial distress shall be as follows:

(1)  Minimal [financial] distress, which shall include

any municipality which has a distress determination scoring

[greater than zero but not greater than 299] equal to one.

(2)  Moderate [financial] distress, which shall include

any municipality which has a distress determination scoring

equal to [or greater than 300 but not greater than 499] two

or greater than two but with an unfunded actuarial accrued

liability of less than $50,000.

(3)  Severe [financial] distress, which shall include any

municipality which has a distress determination scoring equal

to [or greater than 500] three and an unfunded actuarial

accrued liability of not less than $50,000.

Section 602.  Application.

(a)  Generally.--The various remedies contained in this

recovery program shall be available to municipalities based on

the extent of financial distress of the municipal pension system

determined by the commission, as provided in this section.