1Amending Title 24 (Education) of the Pennsylvania Consolidated
2Statutes, in retirement for school employees, further
3providing for definitions and for mandatory and optional
4membership; and providing for the Public School Employees'
5Optional Retirement Program.

6The General Assembly of the Commonwealth of Pennsylvania
7hereby enacts as follows:

8Section 1.  Section 8102 of Title 24 of the Pennsylvania
9Consolidated Statutes is amended by adding a definition to read:

10§ 8102.  Definitions.

11The following words and phrases when used in this part shall
12have, unless the context clearly indicates otherwise, the
13meanings given to them in this section:

14* * *

15"Public School Employees' Optional Retirement Program."  The
16alternative defined contribution retirement program established
17under Subchapter D of Chapter 85 (relating to Public School
18Employees' Optional Retirement Program).

19* * *

1Section 2.  Section 8301 of Title 24 is amended to read:

2§ 8301.  Mandatory and optional membership.

3(a)  Mandatory membership.--Membership in the system shall be
4mandatory as of the effective date of employment for all school
5employees except the following:

6(1)  Any officer or employee of the Department of
7Education, State-owned educational institutions, community
8colleges, area vocational-technical schools, technical
9institutes, or the Pennsylvania State University and who is a
10member of the State Employees' Retirement System or a member
11of another retirement program approved by the employer.

12(2)  Any school employee who is not a member of the 
13system and who is employed on a per diem or hourly basis for
14less than 80 full-day sessions or 500 hours in any fiscal
15year or annuitant who returns to school service under the
16provisions of section 8346(b) (relating to termination of
17annuities).

18(3)  Any officer or employee of a governmental entity who
19subsequent to December 22, 1965 and prior to July 1, 1975
20administers, supervises, or teaches classes financed wholly
21or in part by the Federal Government so long as he continues
22in such service.

23(4)  Any part-time school employee who has an individual
24retirement account pursuant to the Federal act of September
252, 1974 (Public Law 93-406, 88 Stat. 829), known as the
26Employee Retirement Income Security Act of 1974.

27(5)  Any person who becomes a school employee on or after
28January 1, 2014, and who elects to participate in the Public
29School Employees' Optional Retirement Program under
30Subchapter D of Chapter 85 (relating to Public School

1Employees' Optional Retirement Program).

2(b)  Prohibited membership.--The school employees categorized
3in subsection (a)(1) [and], (2) and (5) shall not have the right
4to elect membership in the system.

5(c)  Optional membership.--The school employees categorized
6in subsection (a)(3) and, if otherwise eligible, subsection
7(a)(4) shall have the right to elect membership in the system.
8Once such election is exercised, membership shall commence from
9the original date of eligibility and shall continue until the
10termination of such service.

11Section 3.  Chapter 85 of Title 24 is amended by adding a
12subchapter to read:

13SUBCHAPTER D

14PUBLIC SCHOOL EMPLOYEES' OPTIONAL RETIREMENT PROGRAM

15Sec.

168541.  Definitions.

178542.  Public School Employees' Optional Retirement Program.

188543.  Powers and duties of board.

198544.  Taxation.

208545.  Investments and expenses.

218546.  Trust.

228547.  Investments.

238548.  Participant contributions.

248549.  Employer contributions.

258550.  Vesting.

26§ 8541.  Definitions.

27The following words and phrases when used in this subchapter
28shall have the meanings given to them in this section unless the
29context clearly indicates otherwise:

30"Participant."  A qualified employee who elects to 

1participate in the Public School Employees' Optional Retirement 
2Program, in lieu of becoming a member of the system.

3"Program."  The Public School Employees' Optional Retirement 
4Program.

5"Qualified employee."  Any individual who becomes a school 
6employee on or after January 1, 2014, and who is not a member of 
7the system or a school employee categorized in section

88301(a)(1) or (2) (relating to mandatory and optional 
9membership).

10"Trust fund."  The trust created under section 8546 (relating 
11to trust) to hold the assets of the program in trust for the 
12exclusive benefit of the program's participants and 
13beneficiaries, and for the payment of reasonable expenses of the 
14program in accordance with section 8545 (relating to investments 
15and expenses) and IRC § 401.

16§ 8542.  Public School Employees' Optional Retirement Program.

17The board shall establish and administer an optional defined
18contribution retirement program to be known as the Public School
19Employees' Optional Retirement Program under which retirement
20benefits will be provided for qualified employees who elect to
21participate in the program in lieu of membership in the system.
22The benefits to be provided for or on behalf of participants in
23the program shall be provided through participant-directed
24investments, in accordance with IRC § 401(a). Participants and
25employers shall contribute to the program in accordance with
26sections 8548 (relating to participant contributions) and 8549
27(relating to employer contributions).

28§ 8543.  Powers and duties of board.

29In order to establish and administer the program, the powers
30and duties of the board shall include all of the following:

1(1)  Entering into written agreements with financial or
2other organizations to administer the program for
3participants and to invest funds held under the program. The
4program and any written agreement shall comply with the IRC,
5including the plan qualification requirements imposed on
6governmental plans under IRC § 401(a).

7(2)  Establishing procedures whereby qualified employees
8may elect to participate in the program and participants may
9change their investment choices on a periodic basis, as
10determined by the board, which shall not be less frequently
11than quarterly.

12(3)  Arranging for a deduction from the compensation of
13participants of employee contributions to the program.

14(4)  Establishing standards or criteria for selection by
15the board of the financial institutions, insurance companies
16or other organizations that may be qualified as managers, on
17behalf of the board, of funds accumulated under the program
18on behalf of any participant.

19(5)  Establishing standards and criteria for the
20providing of options to qualified employees and participants
21concerning the method of investing amounts accumulated under
22the program if the options include a diversified mix of low-
23cost investment products that span the risk-return spectrum.

24(6)  Establishing standards and criteria for informing
25qualified employees and participants of specific options
26offered by qualified managers.

27(7)  Designing a comprehensive, balanced and impartial
28educational program to assist qualified employees and
29participants in their choice of investment options under the
30program, which shall include retirement planning education

1and financial planning guidance on matters such as investment
2diversification, investment risks, investment costs and asset
3allocation.

4(8)  Establishing standards and criteria for the
5disclosure to qualified employees and participants of the
6anticipated and actual income attributable to the amounts,
7property and rights and all fees, costs and charges to be
8made against the amounts accumulated to cover the costs of
9administering and managing the funds.

10(9)  Establishing processes for election to participate
11in the program. The election period shall begin on the date
12that an individual becomes a qualified employee and shall end
1390 days from that date.

14(10)  Performing an annual review of any qualified fund
15manager for the purpose of making certain it continues to
16meet all standards and criteria established.

17(11)  Establishing procedures whereby any participant may
18do one of the following:

19(i)  Withdraw accumulated amounts in cases of
20financial hardship or separation of a participant from
21school service or as otherwise permitted under the IRC.

22(ii)  Dispose of a participant's account under a
23domestic relations order unless in conflict with the IRC.

24(12)  Administering the program in compliance with the
25IRC.

26(13)  Promulgating regulations necessary to administer
27this subchapter.

28§ 8544.  Taxation.

29All amounts deferred under the program shall constitute 
30taxable income for purposes of the act of March 4, 1971 (P.L.6,

1No.2), known as the Tax Reform Code of 1971, and shall 
2constitute taxable income for State and local earned income 
3taxes.

4§ 8545.  Investments and expenses.

5The board shall not be responsible for any investment loss
6incurred in the program or for failure of any investment to earn
7any specific or expected return or to earn as much as any other
8investment opportunity, whether or not the other investment
9opportunity was offered to participants in the program. The
10expenses arising from allowing qualified employees to elect to
11participate in the program and participants to choose a fund
12manager, deduct from compensation amounts contributed under the
13program and transfer to the fund manager amounts so deducted
14shall be borne by the board. All other expenses arising from the
15administration of the program shall be assessed against the
16accounts created on behalf of participants either by the fund
17managers or by the board.

18§ 8546.  Trust.

19(a)  Establishment.--All assets and income that have been or
20shall be withheld by the employer in accordance with this
21subchapter shall be held in trust in any funding vehicle
22permitted by applicable provisions of the IRC for the exclusive
23benefit of the program's participants and their beneficiaries
24until the time when the funds are distributed to the participant
25or the participant's beneficiary in accordance with the terms of
26the agreement between the participant and the board. All such
27assets and income withheld by the employer shall be held in
28trust as set forth in this subsection in a special fund created
29within the State Treasury of which the State Treasurer shall be
30custodian.

1(b)  Members.--The members of the board shall be the trustees
2of the trust established under this subchapter.

3(c)  Attachment.--Notwithstanding any other provision of law,
4any benefit or interest available under the program, any right
5to receive or direct payments under the program or any
6distribution of payment made under the program shall not, except
7as expressly specified by the program, be subject to assignment,
8alienation, garnishment, attachment, transfer, anticipation,
9sale, mortgage, pledge, hypothecation, commutation, execution or
10levy, whether by voluntary or involuntary act of any interested
11person.

12§ 8547.  Investments.

13Investment of contributions by any corporation, institution,
14insurance company or custodial bank that the board has approved
15shall not be unreasonably delayed and in no case shall the
16investment of contributions be delayed more than 30 days from
17the date of payroll deduction to the date that funds are
18invested. Any interest earned on the funds pending investment
19shall be allocated to the Commonwealth and credited to the
20accounts of participants who are then participating in the
21program unless the interest is used to defray administrative
22costs and fees that would otherwise be required to be borne by
23participants who are then participating in the program.

24§ 8548.  Participant contributions.

25Regular participant contributions shall be made to the
26program on behalf of each active member for current service in
27an amount equal to 6% of the participant's compensation. The
28employer shall cause required participant contributions for
29current service to be made and deducted from each payroll.

30§ 8549.  Employer contributions.

1Each employer of a participant shall make payments to the
2trust fund on behalf of the participant in an amount equal to 3%
3of the participant's total compensation. The Commonwealth shall
4make payments to the trust fund on behalf of each participant in
5an amount equal to 3% of the participant's compensation.

6§ 8550.  Vesting.

7A participant shall be vested after completing one year of
8school service during which he or she is a participant in the
9program with respect to employer contributions paid on behalf of
10the participant to the program plus interest and earnings on the
11employer contributions but minus investment fees and
12administrative charges.

13Section 4.  This act shall take effect immediately.