1Requiring municipal retirement systems to pay annual
2postretirement adjustments to certain retired municipal
3employees; and providing for the financing of these
4adjustments and for the administration of the Commonwealth's
5reimbursements for these adjustments.

6TABLE OF CONTENTS

7Chapter 1. General Provisions

8Section 101. Short title.

9Section 102. Definitions.

10Chapter 3. Annual Municipal Employee Postretirement Adjustment

11Section 301. Entitlement to annual municipal employee
12postretirement adjustment.

13Section 302. Amount of annual adjustment.

14Section 303. Payment of annual adjustment.

15Chapter 5. Financing of Annual Municipal Employee
16Postretirement Adjustment

17Section 501. Actuarial funding by municipality.

18Section 502. Reimbursement by Commonwealth for annual
19adjustment.

1Chapter 7. Special Account

2Section 701. Establishment.

3Section 702. Deposits into special account.

4Chapter 9. Administrative Provisions

5Section 901. Municipal retirement system certification of
6adjustments paid and of reimbursable amounts.

7Section 902. Commonwealth disbursement of reimbursement
8payment.

9Section 903. Municipal receipt of reimbursement payment.

10Section 904. Administration by Auditor General.

11Chapter 11. Miscellaneous Provisions

12Section 1101. Limitation of prior act.

13Section 1102. Repeals.

14Section 1103. Effective date.

15The General Assembly of the Commonwealth of Pennsylvania
16hereby enacts as follows:

17CHAPTER 1

18GENERAL PROVISIONS

19Section 101. Short title.

20This act shall be known and may be cited as the Annual
21Municipal Employee Postretirement Adjustment Act.

22Section 102. Definitions.

23The following words and phrases when used in this act shall
24have the meanings given to them in this section unless the
25context clearly indicates otherwise:

26"Active employment." The situation of an individual, other
27than an independent contractor, who performs for compensation
28regular services for a municipality and who is regularly entered
29on the payroll of the municipality.

30"Annual municipal employer postretirement adjustment,"

1"annual adjustment" or "annual postretirement adjustment." An
2increase in the amount of a retirement benefit as provided for
3under this act.

4"Chief administrative officer." The person who has the
5primary responsibility for the execution of the administrative
6or management affairs of a municipal retirement system or the
7designee of that person.

8"Firefighter." A municipal employee who holds a full-time
9position in the firefighting service of a municipality and has
10retirement coverage provided by a retirement system.

11"Municipal employee." A firefighter, police officer or
12nonuniformed employee.

13"Municipality." A borough, city, incorporated town or
14township, however constituted, whether operating under a
15legislative charter, municipal code, optional charter adopted
16under the act of July 15, 1957 (P.L.901, No.399), known as the
17Optional Third Class City Charter Law, a home rule charter or an
18optional plan adopted under the former act of April 13, 1972 
19(P.L.184, No.62), known as the Home Rule Charter and Optional
20Plans Law, or 53 Pa.C.S. Pt. III Subpt. E (relating to home rule
21and optional plan government), or other arrangement or an
22association of these municipalities cooperating under the former
23act of July 12, 1972 (P.L.762, No.180), referred to as the
24Intergovernmental Cooperation Law, or 53 Pa.C.S. Ch. 23 Subch. A
25(relating to intergovernmental cooperation).

26"Nonuniformed municipal employee." A municipal employee
27other than a police officer or firefighter.

28"Police officer." A municipal employee who holds a full-time
29position in the police service of a municipality and has
30retirement coverage provided by a retirement system.

1"Postretirement adjustment." An increase in or change in the
2amount of a retirement annuity, retirement benefit, service
3pension or disability pension benefit granted or effective after
4active employment ceases.

5"Public employee retirement system." An entity, whether a
6separate entity or part of a governmental entity, that collects
7retirement and other employee benefit contributions from
8government employees and employers, holds and manages the
9resulting assets as reserves for present and future retirement
10annuity, retirement benefit, service pension or disability
11pension benefit payments and makes provision for these payments
12to qualified retirees and beneficiaries.

13"Retirement benefit." The amount paid on a regular basis to
14a retired or disabled police officer or firefighter by a
15municipal retirement system established for police officers or
16firefighters.

17"Retirement system." A public employee retirement system.

18"Special account." The Annual Municipal Employee
19Postretirement Adjustment Account established under section 701.

20CHAPTER 3

21ANNUAL MUNICIPAL EMPLOYEE POSTRETIREMENT ADJUSTMENT

22Section 301. Entitlement to annual municipal employee
23postretirement adjustment.

24A municipal retirement system shall pay a retired municipal
25employee an annual municipal employee postretirement adjustment
26under this chapter if all of the following apply:

27(1) The retiree has terminated active employment with
28the municipality as a municipal employee.

29(2) The retiree is receiving a retirement annuity,
30retirement benefit, service pension or disability pension

1benefit from a municipal retirement system on the basis of
2active employment with a municipality as a municipal
3employee.

4(3) The retiree began receiving the retirement annuity,
5retirement benefit, service pension or disability pension
6benefit before April 1 of the prior year.

7Section 302. Amount of annual adjustment.

8A municipal retirement system shall pay a retired municipal
9employee an annual adjustment equal to the increase in the
10Consumer Price Index for the prior year minus 0.5%, provided
11that the annual adjustment may not exceed 5%.

12Section 303. Payment of annual adjustment.

13The annual adjustment is effective on the date of the first
14payment of the retiree's retirement annuity, retirement benefit,
15service pension or disability pension benefit due after April 1
16of each year. The municipal retirement system shall pay the
17annual adjustment as soon as practicable after that date and
18shall include in the first payment any omitted amount payable
19between the effective date of the adjustment and the date of the
20first payment.

21CHAPTER 5

22FINANCING OF ANNUAL MUNICIPAL EMPLOYEE POSTRETIREMENT

23ADJUSTMENT

24Section 501. Actuarial funding by municipality.

25A municipality shall fund the actuarial liability
26attributable to an annual municipal employee postretirement
27adjustment under the provisions of the act of December 18, 1984 
28(P.L.1005, No.205), known as the Municipal Pension Plan Funding
29Standard and Recovery Act, and shall include that actuarial
30liability in the actuarial valuation report under that act.

1Section 502. Reimbursement by Commonwealth for annual
2adjustment.

3(a) General rule.--

4(1) Except as provided in subsection (b), beginning in
5the year following the year in which the amortization
6contribution requirement attributable to an annual adjustment
7under Chapter 3 is first reflected in the financial
8requirements of the retirement system determined under
9Chapter 3 of the act of December 18, 1984 (P.L.1005, No.205),
10known as the Municipal Pension Plan Funding Standard and
11Recovery Act, the Auditor General shall determine the
12Commonwealth reimbursement payable to the municipality
13representing the amortization contribution requirement
14attributable to the annual postretirement adjustment under
15Chapter 3 that was paid with revenues of the municipality
16other than general municipal pension system State aid
17provided under the Municipal Pension Plan Funding Standard
18and Recovery Act.

19(2) The determination of the reimbursable amount of the
20amortization contribution requirement attributable to the
21annual postretirement adjustment under Chapter 3 in any year
22shall be calculated as the amortization contribution
23requirement attributable to the annual postretirement
24adjustments under Chapter 3 and reflected in the
25determination of the financial requirements of the pension
26plan under Chapter 3 of the Municipal Pension Plan Funding
27Standard and Recovery Act for the immediate prior year less
28the product of that amortization contribution requirement
29multiplied by the ratio of the amount of general municipal
30pension system State aid allocated to the retirement system

1in the immediate prior year to the total amount of municipal
2contributions made to the retirement system from all sources
3other than employee contributions in the immediate prior
4year. Where a municipality has issued bonds or notes to fund
5an unfunded actuarial accrued liability under 53 Pa.C.S. Pt. 
6VII Subpt. B (relating to indebtedness and borrowing) or
7under other laws applicable to the municipality, the general
8municipal pension system State aid and municipal
9contributions used by the municipality to make debt service
10payments on the bonds or notes, or both, issued to fund an
11unfunded actuarial accrued liability shall be included in the
12calculation of the ratio applied to the amortization
13contribution requirement.

14(3) The Commonwealth shall reimburse a municipality,
15from the special account established under section 701 for
16the reimbursable amount determined for each year under this
17paragraph.

18(b) Limitation of eligibility.--

19(1) The Commonwealth shall not reimburse any
20municipality for an annual adjustment paid under Chapter 3 if
21the information required under section 901(a) either was not
22certified to the Auditor General or was certified after April
231 of the year the certification was due.

24(2) The Commonwealth shall not reimburse a municipality
25for the reimbursable amount of the amortization contribution
26requirement attributable to the annual postretirement
27adjustment under Chapter 3 if the municipality fails to
28submit a complete certification of the reimbursable amount of
29the amortization contribution requirement determined under
30subsection (a) to the Auditor General before April 1 of the

1year in which the reimbursement is payable.

2(c) Variable definition of "amortization contribution
3requirement."--For purposes of this section, the term
4"amortization contribution requirement" shall have the meaning
5specified in this subsection as follows:

6(1) In a municipal pension plan with defined benefits
7for which the municipality determines the financial
8requirements of the pension plan under section 302 of the
9Municipal Pension Plan Funding Standard and Recovery Act, the
10term "amortization contribution requirement" shall mean the
11amortization contribution requirement attributable to the
12annual postretirement adjustments under Chapter 3 that was
13reflected in the financial requirements of the pension plan
14determined for the immediate prior year.

15(2) In a municipal pension plan without defined benefits
16for which the municipality determines the financial
17requirements of the pension plan under section 303 of the
18Municipal Pension Plan Funding Standard and Recovery Act, the
19term "amortization contribution requirement" shall mean the
20sum of the payments made to the retirement system in the
21immediate prior year in order to provide the annual
22postretirement adjustments under Chapter 3 in that year.

23CHAPTER 7

24SPECIAL ACCOUNT

25Section 701. Establishment.

26The Annual Municipal Employee Postretirement Adjustment
27Account is established in the Municipal Pension Aid Fund. The
28special account shall be established as soon as practicable
29following the effective date of this section.

30Section 702. Deposits into special account.

1Notwithstanding any applicable provision of the act of May 
212, 1943 (P.L.259, No.120), referred to as the Foreign Casualty
3Insurance Premium Tax Allocation Law, or any applicable
4provision of the act of March 4, 1971 (P.L.6, No.2), known as
5the Tax Reform Code of 1971, or the provisions of sections
6402(b) and 803(c) of the act of December 18, 1984 (P.L.1005, 
7No.205), known as the Municipal Pension Plan Funding Standard
8and Recovery Act, prior to the deposit of the proceeds of the
9insurance premium tax on foreign casualty insurance premiums
10into the General Municipal Pension System State Aid Program
11revenue account, an amount sufficient to provide for the
12Commonwealth's reimbursement payments and reimbursable amounts
13to municipalities for annual adjustments under this act shall be
14deposited in the separate account established under section 701.

15CHAPTER 9

16ADMINISTRATIVE PROVISIONS

17Section 901. Municipal retirement system certification of
18adjustments paid and of reimbursable amounts.

19(a) Certification.--On January 1 of each year the chief
20administrative officer of a municipal retirement system that
21pays an annual adjustment under Chapter 3 in that year shall
22certify the reimbursable amount under section 502(a) to the
23Auditor General not later than April 1 of the following year.

24(b) Certification form.--Not later than February 1 of each
25year, the Auditor General shall send each municipality
26maintaining a retirement system for municipal employees a notice
27of the filing requirement for the certification of the
28reimbursable amount under section 502(a), which shall include a
29detailed description of the formula for determining the
30reimbursable amount and the proper form on which to make the

1certifications under subsection (a).

2Section 902. Commonwealth disbursement of reimbursement
3payment.

4(a) Payment to account.--Not later than June 1 of the year
5in which the form is due, the Auditor General shall certify to
6the State Treasurer the amount to be deposited into the special
7account and shall draw a warrant, payable to the treasurer of
8the municipality, on the State Treasurer from the special
9account created for the amount certified under section 901(a).

10(b) Disbursements.--Not later than the first business day of
11October of the year in which the certification form is due, the
12State Treasurer shall disburse the reimbursement payment for the
13postretirement adjustments under Chapter 3 out of the special
14account.

15Section 903. Municipal receipt of reimbursement payment.

16Upon receipt of the reimbursement payment from the
17Commonwealth for the annual postretirement adjustments under
18Chapter 3, the treasurer of the municipality shall deposit the
19reimbursement payment into the municipality's general fund.

20Section 904. Administration by Auditor General.

21The Auditor General shall administer the annual municipal
22employee postretirement adjustment reimbursement payments. Under
23the act of July 31, 1968 (P.L.769, No.240), referred to as the
24Commonwealth Documents Law, and 2 Pa.C.S. (relating to
25administrative law and procedure), the Auditor General shall
26promulgate regulations necessary for the efficient
27administration of these reimbursement payments and shall specify
28the form and content of any forms applicable to the
29reimbursement payments. The Auditor General shall make an audit,
30as deemed necessary, in accordance with generally accepted

1governmental auditing standards of every municipality that
2receives a reimbursement payment under this act and of every
3municipal retirement system that pays an annual adjustment under
4this act.

5CHAPTER 11

6MISCELLANEOUS PROVISIONS

7Section 1101. Limitation of prior act.

8To the extent that an annual municipal employee
9postretirement adjustment granted by the Commonwealth causes the
10calculation of total benefits to be paid to a member of a police
11force receiving retirement benefit to exceed the limitations
12contained in the act of May 29, 1956 (1955 P.L.1804, No.600),
13referred to as the Municipal Police Pension Law, the police
14pension fund may exceed the limitations therein provided to pay
15the adjustment to the retired or disabled member.

16Section 1102. Repeals.

17All acts and parts of acts are repealed insofar as they are
18inconsistent with this act.

19Section 1103. Effective date.

20This act shall take effect in 60 days.