PRINTER'S NO. 183
THE GENERAL ASSEMBLY OF PENNSYLVANIA
INTRODUCED BY BROWNE, BRUBAKER, PILEGGI, SCARNATI, CORMAN, EICHELBERGER, FOLMER, HUTCHINSON, SMUCKER, YAW, RAFFERTY, TOMLINSON, ARGALL, ERICKSON, MENSCH, VULAKOVICH, GREENLEAF, WARD, VANCE, ALLOWAY, D. WHITE, BAKER, WAUGH, MCILHINNEY, ROBBINS AND VOGEL, JANUARY 22, 2013
REFERRED TO FINANCE, JANUARY 22, 2013
10UNIFIED CONTRIBUTION PENSION PLAN
1271. Membership, Contributions and Benefits
14MEMBERSHIP, CONTRIBUTIONS AND BENEFITS
167101. Declaration of purpose.
27104. Public Employees' Retirement System Board.
37105. Duties of board.
47106. Administration and investment options.
57107. Plan structure.
67108. Investments and expenses.
97111. Active member contributions.
107112. Employer contributions.
147115. Duties of heads of departments.
17§ 7101. Declaration of purpose.
18In order to preserve the long-term fiscal stability and
19viability of this Commonwealth and school districts, the purpose
20of this chapter is to provide a unified retirement system for
21employees of the Commonwealth and school districts to
22participate in and to provide retirement income security through
23a system of defined contribution authorized by the United States
24Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1
25et seq.), permitting the employees to obtain the advantages
26inherent in the plans relative to the income tax treatment of
27the contributions and disbursements made under defined
29§ 7102. Definitions.
30The following words and phrases when used in this chapter
6"Board." The Public Employees' Retirement System Board.
15"Fund." The Public Employees' Retirement Fund.
16"Head of department." Any of the following:
17(1) The chief administrative officer of a department.
20(3) The Court Administrator of Pennsylvania.
21(4) The Chief Clerk of the Senate.
22(5) The Chief Clerk of the House of Representatives.
23(6) A designee of any of the individuals listed under
24this definition who otherwise executes duties similar to that
25of a chief administrative officer of an employer or a
26department of any other employer.
8"Pensionable earnings." Compensation minus any compensation
9received for the performance of overtime or compensation in the
10form of a bonus, regardless if the bonus is pro rata, lump sum
11or in any other method.
14(1) A State employee.
15(2) A school employee.
19(1) All educational classes of an employer charged with
20the responsibility of public education within this
21Commonwealth as well as those classes financed wholly or in
22part by the Federal Government.
27(4) The State Board of Education.
3"School employee." A person engaged in work relating to a
4public school for any governmental entity and for which work the
5person is receiving regular remuneration as an officer,
6administrator or employee. The term does not include an
7independent contractor or a person compensated on a fee basis.
8"State employee." Any person holding a State office or
9position under the Commonwealth or employed by the Commonwealth
10in any capacity. The term shall not include an independent
11contractor, a person compensated on a fee basis or a person paid
12directly by an entity other than a State Employees' Retirement
13System employer. The term shall include members of the General
14Assembly and any officer or employee of any of the following:
15(1) The Pennsylvania Turnpike Commission, the Delaware
16River Port Authority, the Port Authority Transit Corporation,
17the Philadelphia Regional Port Authority, the Delaware River
18Joint Toll Bridge Commission, the State Public School
19Building Authority, the General State Authority, the State
20Highway and Bridge Authority, the Delaware Valley Regional
21Planning Commission and the Susquehanna River Basin
22Commission, if the commission or authority makes employer
23contributions on behalf of employees under section 7112
24(relating to employer contributions).
25(2) The Interstate Commission of the Delaware River
26Basin, if the commission contributes to the fund the money
27required to build up the reserves necessary for the payment
28of the annuities of the officers and employees without any
29liability on the part of the Commonwealth to make
30appropriations for those purposes.
10(iii) The public corporation contributes to the fund
11the money required to build up the reserves necessary for
12the payment of the annuities of the officers and
13employees without any liability on the part of the
14Commonwealth to make appropriations for those purposes.
15"System." The Public Employee's Retirement System.
16§ 7103. Establishment.
21§ 7104. Public Employees' Retirement System Board.
30(2) Two members of the Senate or a designee.
9(7) Three members appointed by the Governor. One of the
10members first appointed by the Governor shall be appointed
11for a term which shall expire on June 30, 2018, one member
12for a term which shall expire on June 30, 2018, and one
13member for a term which shall expire on June 30, 2019.
14(c) Terms and qualifications.--Except as provided under
15subsection (d), members shall serve for terms of four years.
16Members appointed by the Governor may not be or have been a
17public employee on or before the effective date of this section,
18nor may be a current or former member of the State Employees'
19Retirement System, the Public School Employees' Retirement
20System, the Pennsylvania Municipal Retirement System or any
21other Pennsylvania public retirement system and shall be subject
22to confirmation by the Senate.
23(d) Legislative members.--The members of the Senate shall be
24appointed by the President pro tempore of the Senate and shall
25consist of a majority member and a minority member. One member
26of the House of Representatives shall be appointed by the
27Majority Leader of the House of Representatives. One member of
28the House of Representatives shall be appointed by the Minority
29Leader of the House of Representatives. The legislative members
30shall serve on the board for the duration of their legislative
1terms and shall continue to serve until 30 days after the
2convening of the next regular session of the General Assembly
3after the expiration of their respective legislative terms or
4until a successor is appointed for the new term, whichever
5occurs first. A vacancy occurring during the term of an
6appointed member shall be filled for the unexpired term by the
7appointment and confirmation of a successor in the same manner
8as the member's predecessor. Legislative members shall be
9precluded from being appointed to the board if they have
10previously or are currently serving in any capacity with any
11other retirement board or system.
12(e) Oath of office.--Each member of the board shall take an
13oath of office that the member will, so far as it devolves upon
14the member, diligently and honestly administer the affairs of
15the board and will not knowingly violate or willfully permit to
16be violated any of the provisions of law applicable to this
17chapter. The oath shall be subscribed by the member taking it
18and certified by the officer before whom it is taken and shall
19be immediately filed in the Office of the Secretary of the
21(f) Compensation and expenses.--All board members shall be
22reimbursed for any necessary expenses and shall not suffer loss
23of salary or wages through serving on the board, except that, if
24duties the board has mandated are not executed, no compensation
25or reimbursement for necessary expenses of board members shall
26be paid or payable during the period in which the duties are not
1§ 7105. Duties of board.
2(a) Employees.--The following shall apply:
3(1) The positions of secretary, assistant secretary and
4investment professional shall be placed under the
5unclassified service provisions of the act of August 5, 1941
6(P.L.752, No.286), known as the Civil Service Act. All other
7positions of the board shall be placed in either the
8classified or unclassified service according to the
9definition of the terms under the Civil Service Act.
10(2) Notwithstanding any other provision of law, the
11compensation of investment professionals shall be established
12by the board. The compensation of all other officers and
13employees of the board who are not covered by a collective
14bargaining agreement shall be established by the board
15consistent with the standards of compensation established by
16the Executive Board of the Commonwealth.
17(b) Secretary.--The secretary shall act as chief
18administrative officer for the board. In addition to other
19powers and duties conferred upon and delegated to the secretary
20by the board, the secretary shall do all of the following:
21(1) Serve as the administrative agent of the board.
22(2) Serve as liaison between the board and applicable
23legislative committees, the Treasury Department, the
24Department of the Auditor General and between the board and
25the investment counsel and the mortgage supervisor in
26arranging for investments to secure maximum returns to the
1interested groups or individuals.
4(5) Receive inquiries and requests for information
5concerning the system from the press, Commonwealth officials,
6State employees, the general public, research organizations
7and officials and organizations from other states and provide
8information as authorized by the board.
9(6) Supervise a staff of administrative, technical and
10clerical employees engaged in recordkeeping and clerical
11processing activities in maintaining files of members,
12accounting for contributions, processing payments to
13annuitants, preparing required reports and retirement
21(2) Entering into written agreements with financial or
22other organizations to administer the system for an active
23member and to invest funds held pursuant to the system. The
24system and any written agreement shall comply with the IRC.
25(3) Establishing procedures whereby public employees
26shall participate in the system and may change their
27investment choices on a periodic basis, as determined by the
28board, which shall not be less frequently than once per
30(4) Arranging for a deduction, from the compensation of
1public employees, of employee contributions to the system.
2(5) Establishing criteria for selection by the board of
3the financial institutions, insurance companies or other
4organizations that may be qualified as managers, on behalf of
5the board, of funds accumulated under the system on behalf of
6any active member.
7(6) Establishing standards or criteria for the providing
8of options to an active member concerning the method of
9investing amounts accumulated under the system if the options
10include a diversified mix of low-cost investment products
11that span the risk-return spectrum.
15(8) Designing a comprehensive, balanced and impartial
16educational program to assist active members in their choice
17of investment options under the system, which shall include
18retirement planning education and financial planning guidance
19on matters such as investment diversification, investment
20risks, investment costs and asset allocation.
21(9) Establishing standards and criteria for the
22disclosure to active members of the anticipated and actual
23income attributable to the amounts, property and rights and
24all fees, costs and charges to be made against the amounts
25accumulated to cover the costs of administering and managing
19(e) Professional personnel.--The board shall contract for
20the services of investment advisors and counselors and any other
21professional personnel as it deems advisable. The board may,
22with the approval of the Attorney General, contract for legal
24(f) Expenses.--The board shall, through the Governor, submit
25to the General Assembly annually a budget covering the
26administrative expenses of this part. The expenses as approved
27by the General Assembly in an appropriation bill shall be paid
28in whole or in part from nonvested forfeitures. Concurrently
29with its administrative budget, the board shall also submit to
30the General Assembly annually a list of proposed expenditures
1which the board intends to pay through the use of directed
2commissions, together with a list of actual expenditures from
3the past year actually paid by the board through the use of
4directed commissions. All directed commission expenditures shall
5be made by the board for the exclusive benefit of the system and
7(g) Meetings.--The board shall hold at least six regular
8public meetings annually and any other public meetings as it may
9deem necessary. A majority of the board shall constitute a
10quorum for the transaction of business at a public meeting of
12(h) Records.--The following shall apply:
15(2) Any record, material or data received, prepared,
16used or retained by the board or its employees, investment
17professionals or agents relating to an investment shall not
18constitute a public record subject to public inspection under
19the act of February 14, 2008 (P.L.6, No.3), known as the
20Right-to-Know Law, if, in the reasonable judgment of the
21board, the inspection would do one of the following:
22(i) In the case of an alternative investment or
23alternative investment vehicle, involve the release of
24sensitive investment or financial information relating to
25the alternative investment or alternative investment
26vehicle which the fund was able to obtain only upon
27agreeing to maintain its confidentiality.
1(iii) Have a substantial detrimental impact on the
2value of an investment to be acquired, held or disposed
3of by the fund or would cause a breach of the standard of
4care or fiduciary duty set forth under this chapter.
5(3) The following shall apply:
6(i) The sensitive investment or financial
7information excluded from inspection under paragraph (2)
8(i), to the extent not otherwise excluded from
9inspection, shall constitute a public record subject to
10public inspection under the Right-to-Know Law once the
11board is no longer required by its agreement to maintain
13(ii) The sensitive investment or financial
14information excluded from inspection under paragraph (2)
15(ii), to the extent not otherwise excluded from
16inspection, shall constitute a public record subject to
17public inspection under the Right-to-Know Law once the
18latter of one of the following occurs:
24(iii) The sensitive investment or financial
25information excluded from inspection under paragraph (2)
26(iii), to the extent not otherwise excluded from
27inspection, shall constitute a public record subject to
28public inspection under the Right-to-Know Law once the
29latter of one of the following occurs:
30(A) The inspection no longer has a substantial
9(j) Performance of departmental duties.--In the event the
10head of department fails to comply with the procedures mandated
11under section 7115 (relating to duties of heads of departments),
12the board shall perform the duties and bill the department for
13the cost of the same.
17(l) Annual financial statement.--The board shall prepare and
18have published, on or before July 1 of each year, a financial
19statement as of the calendar year ending December 31 of the
20previous year showing the condition of the fund and the various
21accounts, including the board's accrual and expenditure of
22directed commissions, and setting forth any other facts,
23recommendations and data as may be of use in the advancement of
24knowledge concerning annuities and other benefits provided under
25this chapter. The board shall submit the financial statement to
26the Governor and the General Assembly and shall file copies with
27the head of each department for the use of the State employees
28and the public.
3§ 7106. Administration and investment options.
4(a) Administration.--The board shall administer the system
5as a defined contribution retirement system under the IRC under
6which benefits will be provided for active members. The benefits
7to be provided for or on behalf of active members in the system
8shall be provided through active member-directed investments in
9accordance with IRC § 401(a). Active members and employers shall
10contribute to the system in accordance with sections 7111
11(relating to active member contributions) and 7112 (relating to
17(c) Additional investment options.--The system shall make
18available investment options that represent a broad cross
19section of asset classes and risk profiles. To the extent
20practical, a composite fund may be offered to participants which
21represents the entire portfolio return under management within
22the Public School Employees' Retirement System or the State
23Employees' Retirement System.
24(d) Default investment option.--The system shall provide a
25default investment option to an active member who does not
26affirmatively elect a specific investment option. The default
27investment option shall be the lifestyle fund which most closely
28represents the current demographic of the active member and the
29projected retirement of the active member. The active member
30contribution in the default investment option shall be 6% of the
1active member's total pensionable earnings.
7§ 7107. Plan structure.
14(3) Effectively leverage the existing administrative and
15financial capabilities of the State Employees' Retirement
16System and the Public School Employees' Retirement System,
17provided that this requirement shall not implicitly preclude
18the board from contracting with or utilizing the services of
19existing entities providing retirement or financial services.
10(c) Costs.--Any administrative costs, overhead costs or
11nonrecurring, start-up costs shall be paid by the board with an
12annual appropriation to the board for administrative costs. Any
13other costs may be charged against participant accounts.
14§ 7108. Investments and expenses.
15The board shall not be responsible for any investment loss
16incurred in the system or for failure of any investment to earn
17any specific or expected return or to earn as much as any other
18investment opportunity, whether or not the other investment
19opportunity was offered to active members in the system. The
20board shall bear the expenses arising from allowing public
21employees to elect to participate in the system and active
22members to choose a fund manager which are deducted from
23compensation amounts contributed under the system and
24transferred to the fund manager. All other expenses arising from
25the administration of the system shall be assessed against the
26accounts created on behalf of active members either by the fund
27managers or by the board.
28§ 7109. Attachment.
1direct payments under the system or any distribution of payment
2made under the system shall not, except as expressly specified
3by the system, be subject to assignment, alienation,
4garnishment, attachment, transfer, anticipation, sale, mortgage,
5pledge, hypothecation, commutation, execution or levy, whether
6by voluntary or involuntary act of any interested person.
7§ 7110. Investments.
8Investment of contributions by any corporation, institution,
9insurance company or custodial bank that the board has approved
10shall not be unreasonably delayed, and in no case shall the
11investment of contributions be delayed more than 30 days from
12the date of payroll deduction to the date that funds are
13invested. Any interest earned on the funds pending investment
14shall be allocated to the Commonwealth and credited to the
15accounts of active members who are then participating in the
16system unless the interest is used to defray administrative
17costs and fees that would otherwise be required to be borne by
18active members who are then participating in the system.
19§ 7111. Active member contributions.
20Regular active member contributions shall be made to the
21system on behalf of each active member for current service in an
22amount equal to a percentage of the active member's pensionable
23earnings. The employer shall cause active member contributions
24for current service to be made and deducted from each payroll.
25Active members may elect to contribute to the system on their
26behalf to the extent permitted by law.
27§ 7112. Employer contributions.
4(b) Disability.--In the event an active member becomes
5totally and permanently disabled, the employer shall continue to
6make employer contributions in the same amount as the employer's
7previous contribution on behalf of the active member as provided
8under subsection (a) until the active member has attained 65
9years of age. A contribution under this subsection shall be made
10regardless of the level of the active member's contributions or
11the absence thereof.
12§ 7113. Vesting.
13(a) Forfeiture.--The following shall apply:
14(1) Except as provided under paragraph (2), an active
15member shall be vested after completing three years of
16service during which the person is an active member in the
17system with respect to employer contributions paid on behalf
18of the active member to the system plus interest and earnings
19on the employer contributions but minus investment fees and
24(b) Forfeiture.--The following shall apply:
25(1) If an active member or a beneficiary entitled to a
26payment cannot be located, the related accounts shall be
27forfeited as of the date the active member or the beneficiary
28cannot be located. The active member's vested account balance
29that is so forfeited shall be restored to the active member's
30account if the active member or beneficiary entitled to the
3(2) Any unvested portion of an active member's accounts
4shall be forfeited and may be applied as provided under
5section 7105(f) (relating to duties of board) upon the death
6or other termination of public service of the active member.
9(a) Manual of regulations.--The board shall, with the advice
10of the Attorney General, prepare and provide, within 90 days of
11the effective date of this section, a manual incorporating rules
12and regulations consistent with the provisions of this chapter
13to the heads of departments who shall provide the information to
14newly hired public employees who are active members and shall
15make the information contained in the manual available to the
16general membership. The board shall thereafter advise the heads
17of departments within 90 days of any changes in the rules and
18regulations due to changes in the law or due to changes in
20(b) Member status statements and certifications.--The board
21shall furnish annually to the head of each department, on or
22before April 1, a statement for each member employed in such
23department showing the total accumulated deductions standing to
24his credit as of December 31 of the previous year and requesting
25the member to make any necessary corrections or revisions
26regarding his designated beneficiary. In addition, for each
27member employed in any department and for whom the department
28has furnished the necessary information, the board shall certify
29the number of years and fractional part of a year of credited
1§ 7115. Duties of heads of departments.
2(a) Status of members.--The head of the department shall, at
3the end of each pay period, notify the board in a manner
4prescribed by the board of salary changes effective during that
5period for any members of the department, the date of all
6removals from the payroll and the type of leave of any members
7of the department who have been removed from the payroll for any
8time during that period. The following shall apply:
13(2) If the removal is due to a transfer to another
14department, the head of the department shall furnish the
15department and the board with a complete public service
16record, including past public service.
23(ii) In the case of a service-connected disability,
24the head of the department shall, to the best of his or
25her ability, investigate the circumstances surrounding
26the disablement of the member and submit in writing to
27the board information which shall include the date, place
28and time of disablement to the extent ascertainable, the
29nature of duties being performed at the time and whether
30or not the duties being performed were authorized and
5(b) Records and information.--At any time at the request of
6the board and at termination of service of a member, the head of
7the department shall furnish service and compensation records
8and any other information as the board may require and shall
9maintain and preserve the records as the board may direct for
10the expeditious discharge of its duties.
11(c) Employer contributions.--The head of the department
12shall cause the required employer contributions to be made and
13deducted under section 7110 (relating to investments). The head
14of the department shall certify to the State Treasurer the
15amounts deducted and shall send the total amount picked up and
16deducted, together with a duplicate of the voucher to the
17secretary of the board every pay period. On or before January
1831, 2013, and on or before each January 31 thereafter, the head
19of the department shall, at the time when the income and
20withholding information required by law is furnished to each
21member, also furnish the amount of employer contributions made
22on his behalf.
23(d) Mandatory membership.--Each public employee shall be
24subject to mandatory membership in the system. Upon the
25assumption of public service of each new public employee whose
26membership in the system is mandatory, the head of the
27department shall cause an application for membership and a
28nomination of beneficiary to be made by such public employee and
29filed with the board and shall make employer contributions from
30the effective date of public service.
1(e) Annual statement to active members.--Annually, upon
2receipt from the board, the head of the department shall furnish
3to each active member the statement specified under section
47114(b) (relating to duties of board to advise and report to
5heads of departments and members).
6(f) Termination of service.--The head of the department
7shall, in the case of any active member terminating public
8service who is ineligible for an annuity before attainment of
9superannuation age, advise the member in writing of any benefits
10to which the member may be entitled under this chapter and shall
11have the member prepare, on or before the date of termination of
12public service, an application for the return of total
14(g) Date of application for benefits.--Any application
15properly executed and filed under subsection (f) with the
16department and not filed with the board within 30 days shall be
17deemed to have been filed with the board on the date filed with
18the department, and in such case all required data shall be
19furnished to the board immediately.
20§ 7116. Administration.
23§ 7117. Applicability.
24(1) Except as provided in paragraph (2), this chapter
25shall apply to public employees entering into public service
26after December 31, 2013, or upon the expiration of any
27collective bargaining agreement an employer has entered
28providing retirement benefits to a public employee, whichever
29is later, and shall not be construed to affect any person who
30is a public school employee or State employee before January
5Section 2. The following shall apply:
10Section 3. This act shall take effect in 60 days.