AN ACT

 

1Amending Titles 24 (Education), 51 (Military Affairs) and 71
2(State Government) of the Pennsylvania Consolidated Statutes,
3extensively revising pension provisions: for the Public
4School Employees' Retirement System, in the areas of
5preliminary provisions, of membership, contributions and
6benefits, of School Employees' Defined Contribution Plan, of
7administration and miscellaneous provisions and of health
8insurance for retired school employees; for military
9pensions, in the area of military leave of absence; for the
10State Employees' Retirement System, in the areas of
11preliminary provisions, of membership, credited service,
12classes of service and eligibility for benefits, of School
13Employees' Defined Contribution Plan and of contributions, of
14benefits, administration, funds, accounts, general
15provisions; and providing, as to the revisions, for
16construction, applicability, funding, amortization, re-
17amortization, recertification, liability and legal challenge.

18The General Assembly of the Commonwealth of Pennsylvania
19hereby enacts as follows:

20ARTICLE I

21Section 101. The definitions of "active member," "alternate
22payee," "basic contribution rate," "beneficiary," "class of
23service multiplier," "compensation," "creditable nonschool
24service," "credited service," "date of termination of service,"
25"distribution," "domestic relations order," "eligible

1annuitants," "final average salary," "inactive member,"
2"intervening military service," "irrevocable beneficiary,"
3"leave for service with a collective bargaining organization,"
4"previous school service," "salary deductions," "standard single
5life annuity," "superannuation or normal retirement age," and
6"valuation interest" in section 8102 of Title 24 of the
7Pennsylvania Consolidated Statutes are amended and the section
8is amended by adding definitions to read:

9§ 8102. Definitions.

10The following words and phrases when used in this part shall
11have, unless the context clearly indicates otherwise, the
12meanings given to them in this section:

13* * *

14"Accumulated employer defined contributions." The total of
15the employer defined contributions paid into the trust on
16account of a participant's school service together with any
17investment earnings and losses and adjustments for fees, costs
18and expenses credited or charged thereon.

19"Accumulated mandatory participant contributions." The total
20of the mandatory pickup participant contributions paid into the
21trust on account of a participant's school service together with
22any investment earnings and losses and adjustments for fees,
23costs and expenses credited or charged thereon.

24"Accumulated total defined contributions." The total of the
25accumulated mandatory participant contributions, accumulated
26employer defined contributions and accumulated voluntary
27contributions, reduced by any distributions, standing to the
28credit of a participant in an individual investment account in
29the trust.

30"Accumulated voluntary contributions." The total of

1voluntary contributions paid into the trust by a participant and
2any amounts rolled over by a participant or transferred by a
3direct trustee-to-trustee transfer into the trust together with
4any investment earnings and losses and adjustments for fees,
5costs and expenses credited or charged thereon.

6"Active member." A school employee for whom pickup
7contributions are being made to the fund or for whom such
8contributions otherwise required for current school service are
9not being made solely by reason of any provision of this part
10relating to the limitations under section 401(a)(17) or 415(b)
11of the Internal Revenue Code of 1986 (Public Law 99-514, 26
12U.S.C. § 401(a)(17) or 415(b)) or any provision of this part 
13limiting compensation.

14"Active participant." A school employee for whom mandatory
15pickup participant contributions are being made to the trust or
16for whom such contributions otherwise required for current
17school service are not being made solely by reason of any
18provision of this part relating to the limitations under section
19401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public
20Law 99-514, 26 U.S.C. § 401(a)(17) or 415) or any provision of
21this part limiting compensation.

22* * *

23"Alternate payee." Any spouse, former spouse, child or 
24dependent of a member or participant who is recognized by a 
25domestic relations order as having a right to receive all or a 
26portion of the moneys payable to that member or participant 
27under this part.

28* * *

29"Annualized service credit." For purposes of determining
30final average salary, the amount of service credit the member

1would have earned if the member worked the number of months that
2the employer typically expects a full-time employee in the same
3position or with the same contract to work during a fiscal year.
4If the member worked fewer months than the number of months for
5the position or contract, the annualized service credit is equal
6to the ratio of the number of months for the position or
7contract over the number of months the member worked, multiplied
8by the actual service credit for the year. Annualized service
9credit is rounded to two decimals and may not be greater than
101.00.

11* * *

12"Basic contribution rate." For Class T-A, T-B and T-C
13service, the rate of 6 1/4%. For Class T-D service, the rate of
147 1/2%. For all active members on the effective date of this
15provision who are currently paying 5 1/4% and elect Class T-D
16service, the rate of 6 1/2%. For Class T-E service, the rate of
177 1/2%. For Class T-F service, the rate of 10.30%. For Class T-G 
18service, the rate of 7.5%. For Class T-H service, the rate of 
1912.5%. For service performed by a member of the system in a 
20fiscal year beginning on or after July 1, 2015, the basic 
21contribution rate and shared risk contribution rate shall be 
22applied to an amount that may not exceed the Social Security 
23taxable wage base in effect at the beginning of the fiscal year.

24"Beneficiary." [The] In the case of the system, the person 
25or persons last designated in writing to the board by a member 
26to receive his accumulated deductions or a lump sum benefit upon 
27the death of such member. In the case of the plan, the spouse of 
28a participant. If the participant is not married or the spouse 
29consents, then the person or persons last designated in writing 
30to the board by the participant to receive the participant's
 

1vested accumulated total defined contributions or a lump sum 
2benefit upon the death of the participant.

3* * *

4"Class of service multiplier."

5Class of service

Multiplier

6T-A

.714

7T-B

.625

8T-C

1.000

9T-D

1.000

10T-E

1.000

11T-F

1.000

12T-G

1.000

13T-H

1.000

14"Combined service employee." A current or former school
15employee who is both a member of the system and a participant in
16the plan.

17* * *

18"Compensation." Pickup contributions and mandatory pickup 
19participant contributions plus any remuneration received as a 
20school employee excluding reimbursements for expenses incidental 
21to employment and excluding any bonus, severance payments, any 
22other remuneration or other emolument received by a school 
23employee during his school service which is not based on the 
24standard salary schedule under which he is rendering service, 
25payments for unused sick leave or vacation leave, bonuses or 
26other compensation for attending school seminars and 
27conventions, payments under health and welfare plans based on 
28hours of employment or any other payment or emolument which may 
29be provided for in a collective bargaining agreement which may 
30be determined by the Public School Employees' Retirement Board
 

1to be for the purpose of enhancing compensation as a factor in 
2the determination of final average salary, and for participants, 
3excluding payments for military leave, and any other payments 
4made by an employer while the participant is on USERRA leave, 
5leave of absence granted under 51 Pa.C.S. § 4102 (relating to 
6leaves of absence for certain government employees), military 
7leave of absence granted under 51 Pa.C.S. § 7302 (relating to 
8granting military leaves of absence), military leave of absence 
9granted under section 1176 of the act of March 10, 1949 (P.L.30, 
10No.14), known as the Public School Code of 1949, or other types 
11of military leave, including other types of leave payments, 
12stipends, differential wage payments as defined in the Internal 
13Revenue Code of 1986 § 414(u)(12) and any other payments, 
14provided, however, that the limitation under section 401(a)(17) 
15of the Internal Revenue Code of 1986 (Public Law 99-514, 26 
16U.S.C. § 401(a)(17)) taken into account for the purpose of 
17member contributions, including regular or joint coverage member 
18contributions, regardless of class of service, shall apply to 
19each member who first became a member of the Public School 
20Employes' Retirement System on or after July 1, 1996, and who by 
21reason of such fact is a noneligible member subject to the 
22application of the provisions of section 8325.1 (relating to 
23annual compensation limit under IRC § 401(a)(17))[.] and shall 
24apply to each participant. For purposes of determining final 
25average salary and applying the basic contribution rate, 
26compensation received for service performed in a fiscal year 
27beginning on or after July 1, 2015, as a member of the system, 
28may not exceed the Social Security taxable wage base in effect 
29at the beginning of the fiscal year.

30* * *

1"Creditable nonschool service." Service other than service 
2as a school employee for which an active member may obtain 
3credit in the system.

4"Credited service." School or creditable nonschool service 
5for which the required contributions have been made to the fund, 
6or for which the contributions otherwise required for such 
7service were not made solely by reason of any provision of this 
8part relating to the limitations under section 401(a)(17) or 
9415(b) of the Internal Revenue Code of 1986 (Public Law 99-514, 
1026 U.S.C. § 401(a)(17) or 415(b)) or a provision of this part 
11limiting compensation, or for which salary deductions to the 
12system or lump sum payments have been agreed upon in writing.

13"Date of termination of service." The last date of service 
14for which: 

15(1) pickup contributions are made for an active member 
16[or,];

17(2) in the case of an inactive member, the effective 
18date of his resignation or the date his employment is 
19formally discontinued by his employer or two years following 
20the last day of service for which contributions were made, 
21whichever is earliest[.];

22(3) mandatory pickup participant contributions are made
23for an active participant;

24(4) in the case of an inactive participant, the date of
25his resignation or the date his employment is formally
26discontinued by his employer; or

27(5) in the case of a combined service employee, the
28latest of the dates in paragraph (3) or (4).

29* * *

30"Distribution." Payment of all or any portion of a person's
 

1interest in either the Public School Employees' Retirement Fund 
2or the School Employees' Defined Contribution Trust or both 
3which is payable under this part.

4"Domestic relations order." Any judgment, decree or order, 
5including approval of a property settlement agreement, entered 
6on or after the effective date of this definition by a court of 
7competent jurisdiction pursuant to a domestic relations law 
8which relates to the marital property rights of the spouse or 
9former spouse of a member or participant, including the right to 
10receive all or a portion of the moneys payable to that member or 
11participant under this part in furtherance of the equitable 
12distribution of marital assets. The term includes orders of 
13support as that term is defined by 23 Pa.C.S. § 4302 (relating 
14to definitions) and orders for the enforcement of arrearages as 
15provided in 23 Pa.C.S. § 3703 (relating to enforcement of 
16arrearages).

17* * *

18"Eligible annuitants." All current and prospective 
19annuitants with 24 1/2 or more eligibility points and all 
20current and prospective disability annuitants. Beginning January 
211, 1995, ["eligible annuitants" shall include] the term includes 
22members with 15 or more eligibility points who terminated or who 
23terminate school service on or after attaining superannuation 
24retirement age and who are annuitants with an effective date of 
25retirement after superannuation age. The term does not include 
26participants.

27* * *

28"Employer defined contributions." Contributions equal to 4%
29of an active participant's compensation that are made by an
30employer for current service to the trust to be credited in the

1active participant's individual investment account.

2"Final average salary." [The]

3(1) As applied to service performed and service credit 
4purchased before July 1, 2015, as a member of the system, the 
5highest average compensation received as an active member, 
6not limited by the Social Security taxable wage base, during 
7any three nonoverlapping periods of 12 consecutive months 
8with the compensation for part-time service being annualized 
9on the basis of the fractional portion of the school year for 
10which credit is received; except, if the employee was not a 
11member for three such periods, the total compensation 
12received as an active member annualized in the case of part-
13time service divided by the number of such periods of 
14membership; in the case of a member with multiple service 
15credit, the final average salary shall be determined by 
16reference to compensation received by him as a [school 
17employee] member of the system or a State employee, other 
18than as a participant in the State Employees' Defined 
19Contribution Plan, or both; and, in the case of a noneligible 
20member, subject to the application of the provisions of 
21section 8325.1 (relating to annual compensation limit under 
22IRC § 401(a)(17)).

23(2) As applied to service performed and service credit 
24purchased on or after July 1, 2015, as a member of the 
25system, the highest average compensation received as an 
26active member, as limited by the Social Security taxable wage 
27base, during any five fiscal years, with the compensation for 
28part-time service being annualized on the basis of the 
29fractional portion of the school year for which credit is 
30received, provided that if the compensation received during a
 

1fiscal year included in the period used to determine final 
2average salary exceeds that of the average of the previous 
3four fiscal years, as limited by the Social Security taxable 
4wage base, with the compensation for part-time service being 
5annualized on the basis of the fractional portion of the 
6school year for which credit is received, and with 
7compensation for a partial year of service being annualized, 
8by more than 10%, the amount in excess of 10% shall be 
9excluded from the computation of final average salary. If the 
10employee was not a member for five fiscal years, the formula 
11under this definition shall be applied to the extent 
12practicable. In the case of a member with multiple service 
13credit, the salary shall be determined by reference to 
14include compensation received as a school employee or State 
15employee or both. In the case of a noneligible member, the 
16salary shall be subject to the application of the provisions 
17of section 8325.1 (relating to annual compensation limit 
18under IRC § 401(a)(17)).

19* * *

20"Inactive member." A member for whom no pickup contributions 
21are being made to the fund, except in the case of an active 
22member for whom such contributions otherwise required for 
23current school service are not being made solely by reason of 
24any provision of this part relating to the limitations under 
25section 401(a)(17) or 415(b) of the Internal Revenue Code of 
261986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)) or 
27any provision of this part limiting compensation, who has 
28accumulated deductions standing to his credit in the fund and 
29for whom contributions have been made within the last two school 
30years or a multiple service member who is active in the State
 

1Employees' Retirement System.

2"Inactive participant." A participant for whom no mandatory
3pickup participant contributions are being made to the trust,
4except in the case of an active participant for whom such
5contributions otherwise required for current school service are
6not being made solely by reason of any provision of this part
7relating to limitations under section 401(a)(17) or 415 of the
8Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
9401(a)(17) or 415), who has vested accumulated total defined
10contributions standing to his credit in the trust and who has
11not filed an application for an annuity.

12"Individual investment account." The account in the trust to
13which are credited the amounts of the contributions made by a
14participant and the participant's employer in accordance with
15the provisions of this part, together with all investment
16earnings after deduction for fees, costs and expenses,
17investment losses and charges for distributions.

18"Intervening military service." Active military service of a 
19member who was a school employee and an active member of the 
20system immediately preceding his induction into the armed 
21services or forces of the United States in order to meet a draft 
22obligation excluding any voluntary extension of such 
23obligational service and who becomes a school employee and an 
24active member of the system within 90 days of the expiration of 
25such service.

26* * *

27"Irrevocable beneficiary." The person or persons permanently 
28designated by a member or participant in writing to the board 
29pursuant to an approved domestic relations order to receive all 
30or a portion of the accumulated deductions, vested accumulated
 

1total defined contributions or lump sum benefit payable upon the 
2death of such member or participant.

3"Irrevocable successor payee." The person permanently
4designated in writing by a participant receiving vested
5distributions to the board pursuant to an approved domestic
6relations order to receive one or more distributions from the
7plan upon the death of such participant.

8* * *

9"Leave for service with a collective bargaining 
10organization." Paid leave granted to an active member or active 
11participant by an employer for purposes of working full time for 
12or serving full time as an officer of a Statewide employee 
13organization or a local collective bargaining representative 
14under the act of July 23, 1970 (P.L.563, No.195), known as the 
15Public Employe Relations Act: Provided, That greater than one-
16half of the members of the employee organization are active 
17members of the system or active participants of the plan; that 
18the employer shall fully compensate the member or active 
19participant, including, but not limited to, salary, wages, 
20pension and retirement contributions and benefits, other 
21benefits and seniority, as if he were in full-time active 
22service; and that the employee organization shall fully 
23reimburse the employer for such salary, wages, pension and 
24retirement contributions and benefits and other benefits and 
25seniority.

26"Mandatory pickup participant contributions." Contributions
27equal to 7.5% of compensation that are made by the employer for
28active participants for current service.

29* * *

30"Participant." An active participant, inactive participant

1or participant receiving distributions.

2"Participant receiving distributions." A participant in the
3plan who has commenced receiving distributions from his
4individual investment account but who has not received a total
5distribution of his vested interest in the individual investment
6account.

7"Part-time service." For the purposes of calculating final
8average salary, the determination of whether service for a
9fiscal year is part time is based on annualized service credit
10for the year. If the annualized service credit is 1.00, the
11service rendered during the fiscal year is full time. If the
12annualized service credit is less than 1.00, the service
13rendered during the fiscal year is part time.

14* * *

15"Plan." The School Employees' Defined Contribution Plan as
16established by the provisions of this part and the board.

17"Plan document." The documents created by the board under
18section 8402 (relating to plan document) that contain the terms
19and provisions of the plan and trust as established by the board
20regarding the establishment, administration and investment of
21the plan and trust.

22"Previous school service." Service [rendered] as a school 
23employee including service in any summer school conducted by a 
24school district of the Commonwealth, but excluding service 
25rendered during which the school employee was or could have been 
26a participant in the plan, prior to the member's most recent 
27entrance in the system.

28* * *

29"Reemployed from USERRA leave." Resumption of active
30participation as a school employee after a period of USERRA

1leave, provided the resumption of active participation was
2within the time period and under conditions and circumstances
3such that the school employee was entitled to reemployment
4rights under 38 U.S.C. Ch. 43 (relating to employment and
5reemployment rights of members of the uniformed services).

6* * *

7"Required beginning date." The latest date by which
8distributions of a participant's interest in his individual
9investment account must commence under the Internal Revenue Code
10of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).

11* * *

12"Salary deductions." The amounts certified by the board, 
13deducted from the compensation of an active member or active 
14participant or the State service compensation of a multiple 
15service member who is an active member of the State Employees' 
16Retirement System or active participant of the School Employees' 
17Defined Contribution Plan and paid into the fund or trust.

18* * *

19"Standard single life annuity." For Class T-A, T-B and T-C 
20credited service of a member, an annuity equal to 2% of the 
21final average salary, multiplied by the total number of years 
22and fractional part of a year of credited service of a member in 
23that class. For Class T-D credited service of a member, an 
24annuity equal to 2.5% of the final average salary, multiplied by 
25the total number of years and fractional part of a year of 
26credited service in that class. For Class T-E credited service 
27of a member, an annuity equal to 2% of the final average salary, 
28multiplied by the total number of years and fractional part of a 
29year of credited service of a member in that class. For Class T-
30F credited service of a member, an annuity equal to 2.5% of the
 

1final average salary, multiplied by the total number of years 
2and fractional part of a year of credited service of a member[.] 
3in that class. For Class T-G credited service of a member, an 
4annuity equal to 2% of the final average salary, multiplied by 
5the total number of years and fractional part of a year of 
6credited service of a member in the class. For Class T-H 
7credited service of a member, an annuity equal to 2.5% of the 
8final average salary that is multiplied by the total number of 
9years and fractional part of a year of credited service of a 
10member in the class.

11"State Employees' Defined Contribution Plan." The defined
12contribution plan for State employees established by 71 Pa.C.S.
13Pt. XXV (relating to retirement for State employees and
14officers).

15* * *

16"Successor payee." The person or persons last designated in
17writing by a participant receiving distributions to the board to
18receive one or more distributions upon the death of such
19participant.

20* * *

21"Superannuation or normal retirement age."

22Class of service

Age

23T-A

24

62 or any age upon accrual of
35 eligibility points

25T-B

62

26T-C [and], T-D, T-G 
27and T-H

28

29

30

 

1

62 or age 60 provided the
member has at least 30
eligibility points or any
age upon accrual of 35
eligibility points

2T-E and T-F

3

4

5

6

7

8

9

65 with accrual of at least
three eligibility points
or a combination of age
and eligibility points
totaling 92, provided the
member has accrued at
least 35 eligibility
points

10* * *

11"Trust." The School Employees' Defined Contribution Trust
12established under Chapter 84 (relating to School Employees'
13Defined Contribution Plan).

14"USERRA leave." Any period of time for service in the
15uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
16employment and reemployment rights of members of the uniformed
17services) by a participant or former participant who terminated
18school service to perform such service in the uniformed
19services, if such current or former participant is entitled to
20reemployment rights under 38 U.S.C. Ch. 43 with respect to such
21uniformed service.

22"Valuation interest." Interest at 5 1/2% per annum,
23compounded annually and applied to all accounts of the fund
24other than the members' savings account.

25* * *

26"Voluntary contributions." Contributions made by a
27participant to the trust and credited to his individual
28investment account in excess of his mandatory pickup participant
29contributions, either by salary deductions paid through the
30employer or by an eligible rollover or direct trustee-to-trustee

1transfers.

2Section 102. Section 8103 of Title 24 is amended by adding
3subsections to read:

4§ 8103. Construction of part.

5* * *

6(c) Construction regarding inactive member and inactive
7participant.--As used in this part:

8(1) The term "inactive member" does not include a
9combined service employee who is an "inactive participant,"
10unless the combined service employee is concurrently employed
11in a position in which such employee is a member of the
12system.

13(2) The term "inactive participant" does not include a
14combined service employee who is an "inactive member," unless
15the combined service employee is concurrently employed in a
16position in which such employee is a participant in the plan.

17(d) Provisions severable.--The provisions of this part are
18severable and if any of its provisions shall be held to be
19unconstitutional, the decision of the court shall not affect or
20impair any of the remaining provisions. It is hereby declared to
21be the legislative intent that this part would have been adopted
22had such unconstitutional provisions not been included.

23(e) References to certain Federal statutes.--References in
24this part to the IRC or the Uniformed Services Employment and
25Reemployment Rights Act of 1994 (Public Law 103-353, 108 Stat.
263149), including administrative regulations promulgated under
27the IRC or the Uniformed Services Employment and Reemployment
28Rights Act of 1994, are intended to include laws and regulations
29in effect on the effective date of this section and amended,
30supplemented or supplanted on and after the effective date of

1this section.

2(f) Construction.--

3(1) This part may not be construed to mean that the
4limitations on benefits or other requirements under IRC §
5401(a) or other applicable provisions of the IRC that are 
6applicable to participants in the plan do not apply to the
7participants or to the members of the system and the benefits
8payable under Part IV.

9(2) This part may not be construed to mean that an 
10interpretation or application of the provisions of Part IV or 
11benefits available to members of the Public School Employees' 
12Retirement System was not in accordance with the provisions 
13of Part IV or other applicable law, including the IRC and the 
14Uniformed Services Employment and Reemployment Rights Act of 
151994 before the effective date of this section.

16(3) This part may not be construed to mean that the
17release or publicizing of a record, material or data that
18would not constitute a public record under section 8502(e)(2)
19(relating to administrative duties of board) is a violation
20of the fiduciary duties of the board.

21(g) Applicability.--The following shall apply:

22(1) The amendment of Part IV regarding the establishment
23of and participation in the plan shall apply to current and
24former members of the system who have returned to school
25service on or after July 1, 2015, after a termination of
26school service, notwithstanding the following:

27(i) Whether the termination occurred before or after
28July 1, 2015.

29(ii) Whether the school employee was an annuitant,
30inactive member, vestee or special vestee or withdrew

1accumulated deductions during the period of termination.

2(2) A terminated school employee who returns to school
3service on or after July 1, 2015, is subject to the
4provisions of Part IV regarding participation in the plan or
5membership in the system that are in effect on the effective
6date of reemployment, including, but not limited to, benefit
7formulas and accrual rates, eligibility for annuities and
8distributions, contribution rates, definitions, purchase of
9creditable school and nonschool service provisions and
10actuarial and funding assumptions.

11(3) This part shall apply to a record, material or data
12under 8502(e)(2) notwithstanding whether:

13(i) the record, material or data was created,
14generated or stored before the effective date of this
15section;

16(ii) the record, material or data was previously
17released or made public; or

18(iii) a request for the record, material or data was
19made or is pending final response under the former act of
20June 21, 1957 (P.L.390, No.212), referred to as the
21Right-to-Know Law, or the act of February 14, 2008
22(P.L.6, No.3), known as the Right-to-Know Law.

23Section 103. Title 24 is amended by adding a section to
24read:

25§ 8103.1. Reference to Public School Employees' Retirement
26System.

27As of the effective date of this section, unless the context
28clearly indicates otherwise, a reference to the Public School
29Employees' Retirement System in a statutory provision, other
30than this part and 71 Pa.C.S. Pt. XXV (relating to retirement

1for State employees and officers), shall include a reference to
2the plan, and a reference to the Public School Employees'
3Retirement Fund shall include a reference to the trust.

4Section 104. Section 8301 of Title 24 is amended to read:

5§ 8301. Mandatory and optional membership.

6(a) Mandatory membership in system and participation in 
7plan.--[Membership] Unless an election to be a participant in 
8the plan is made, membership in the system shall be mandatory as
9of the effective date of employment for all school employees
10except the following:

11(1) Any officer or employee of the Department of
12Education, State-owned educational institutions, community
13colleges, area vocational-technical schools, technical
14institutes, or the Pennsylvania State University and who is a
15member of the State Employees' Retirement System or a member
16of another retirement program approved by the employer.

17(2) Any school employee who is not a member of the 
18system and who is employed on a per diem or hourly basis for
19less than 80 full-day sessions or 500 hours in any fiscal
20year or annuitant who returns to school service under the
21provisions of section 8346(b) (relating to termination of
22annuities).

23(3) Any officer or employee of a governmental entity who
24subsequent to December 22, 1965 and prior to July 1, 1975
25administers, supervises, or teaches classes financed wholly
26or in part by the Federal Government so long as he continues
27in such service.

28(4) Any part-time school employee who has an individual
29retirement account pursuant to the Federal act of September
302, 1974 (Public Law 93-406, 88 Stat. 829), known as the

1Employee Retirement Income Security Act of 1974.

2(5) Any school employee whose most recent period of
3school service starts on or after July 1, 2015.

4(b) Prohibited membership.--The school employees categorized
5in subsection (a)(1) [and], (2) and (5) shall not have the right
6to elect membership in the system.

7(c) Optional membership in system.--The school employees
8categorized in subsection (a)(3) and, if otherwise eligible,
9subsection (a)(4) shall have the right to elect membership in
10the system on or before July 1, 2015. Once such election is
11exercised, membership shall commence from the original date of
12eligibility and shall continue until the termination of such
13service[.] or until the school employee elects to be a
14participant in the plan.

15(d) Mandatory participation in the plan.--Unless the
16employee is or elects to be a participant in the State Employes'
17Defined Contribution Plan, a member of the State Employees'
18Retirement System or a member of another retirement program
19approved by the employer, a school employee who, on or after
20July 1, 2015, begins school service or returns to school service
21after a break in service shall be a mandatory participant in the
22plan as a result of the school service. A school employee who is
23a nonmember and waived membership under subsection (a)(4) shall
24be a mandatory participant in the plan commencing for the school
25service rendered on or after July 1, 2015.

26(e) Certain agreements.--The agreement of an employer to
27make contributions to the fund or to enroll its employees as
28members in the system shall be deemed to be an agreement to make
29contributions to the trust or to enroll its employees in the
30plan.

1Section 105. Section 8302(a), (b) and (c) of Title 24 are
2amended and the section is amended by adding a subsection to
3read:

4§ 8302. Credited school service.

5(a) Computation of credited service.--In computing credited
6school service of a member for the determination of benefits, a
7full-time salaried school employee shall receive one year of
8credit for each school year or the corresponding fraction
9thereof, in accordance with the proportion of the full school
10year for which the required regular member contributions have
11been made to the fund, or for which such contributions otherwise
12required for such service were not made to the fund solely by
13reason of any provision of this part relating to the limitations
14under IRC § 401(a)(17) or 415(b) or another provision of this 
15part limiting compensation. A per diem or hourly school employee
16shall receive one year of credited service for each
17nonoverlapping period of 12 consecutive months in which he is
18employed and for which contributions are made to the fund, or
19would have been made to the fund but for such limitations under
20the IRC, or another provision of this part limiting compensation
21for at least 180 full-day sessions or 1,100 hours of employment.
22If such member was employed and contributions were made to the 
23fund for less than 180 full-day sessions or 1,100 hours, he
24shall be credited with a fractional portion of a year determined
25by the ratio of the number of full-day sessions or hours of
26service actually rendered and for which contributions are made 
27to the fund to 180 full-day sessions or 1,100 hours, as the case
28may be. A part-time salaried employee shall be credited with the
29fractional portion of the year which corresponds to the service
30actually rendered and for which contributions are or would have
 

1been made to the fund in relation to the service required as a
2comparable full-time salaried employee. In no case shall a
3member receive more than one year of credited service for any 12
4consecutive months or a member who has elected multiple service
5receive an aggregate in the two systems of more than one year of
6credited service for any 12 consecutive months.

7(b) Approved leaves of absence.--An active member shall
8receive credit, and an active participant shall receive vesting 
9credit, for an approved leave of absence provided that:

10(1) the member returns for a period at least equal to
11the length of the leave or one year as a member of the system 
12or the participant returns to school service as an active 
13participant in the plan, whichever is less, to the school
14district which granted his leave, unless such condition is
15waived by the employer; and

16(2) the proper contributions are made by the member and
17the employer or by the active participant and the employer.

18* * *

19(c) Cancellation of credited service.--All credited service 
20in the system shall be cancelled if a member withdraws his
21accumulated deductions. A partial or total distribution of 
22accumulated total defined contributions to a combined service 
23employee shall not cancel service credited in the system.

24(d) Military service by a participant.--A participant who
25has performed USERRA leave shall be treated and may make
26contributions as follows:

27(1) A participant who is reemployed from USERRA leave
28shall be treated as not having incurred a break in school
29service by reason of the USERRA leave and shall be granted
30vesting credit as if the participant had not been on USERRA

1leave. If a participant who is reemployed from USERRA leave
2subsequently makes mandatory pickup participant contributions
3in the amounts and in the time periods required by 38 U.S.C.
4Ch. 43 (relating to employment and reemployment rights of
5members of the uniformed services) and IRC § 414(u) as if the
6participant had continued in his school employment and
7performed school service and been compensated during the
8period of USERRA leave, then the participant's employer shall
9make the corresponding employer defined contributions. Such
10an employee shall have his contributions, benefits, rights
11and obligations determined under this part as if he was an
12active participant who performed school service during the
13USERRA leave in the job position that he would have held had
14he not been on USERRA leave and received the compensation on
15which the mandatory pickup participant contributions to
16receive school service credit for the USERRA leave were
17determined, including the right to make voluntary
18contributions on such compensation as permitted by law.

19(2) A participant who is reemployed from USERRA leave
20and does not make the mandatory pickup participant
21contributions or makes only part of the mandatory pickup
22participant contributions within the allowed payment period
23shall not be eligible to make mandatory pickup participant
24contributions and voluntary contributions at a later date for
25the period of USERRA leave for which the mandatory pickup
26participant contributions were not timely made.

27(3) A participant who performs USERRA leave from which
28the employee could have been reemployed from USERRA leave had
29the school employee returned to school service in the time
30frames required by 38 U.S.C. Ch. 43 for reemployment rights,

1but did not do so, shall not be eligible to make mandatory
2pickup participant contributions or voluntary contributions
3for the period of USERRA leave should the employee later
4return to school service and be a participant in the plan.

5(4) An active participant or inactive participant who,
6on or after the effective date of this subsection, is granted
7a leave of absence under 51 Pa.C.S. § 4102 (relating to
8leaves of absence for certain government employees) or a
9military leave under 51 Pa.C.S. Ch. 73 (relating to military
10leave of absence) that is not USERRA leave shall not be
11eligible to make mandatory pickup participant contributions
12or voluntary contributions during or for the leave of absence
13or military leave, and shall not have employer defined
14contributions made during such leave, without regard to
15whether or not the participant received salary, wages,
16stipends, differential wage payments or other payments from
17his employer during the leave, notwithstanding any provision
18to the contrary in 51 Pa.C.S. § 4102 or Ch 73.

19(5) If a participant dies while performing USERRA leave,
20then the beneficiaries or successor payees, as the case may
21be, of the deceased participant are entitled to any
22additional benefits, other than benefit accruals relating to
23the period of qualified military service, provided under this
24part had the participant resumed and then terminated
25employment on account of death.

26Section 106. Sections 8303(c) and 8303.1 of Title 24 are
27amended to read:

28§ 8303. Eligibility points for retention and reinstatement of
29service credits.

30* * *

1(c) Purchase of previous creditable service.--Every active
2member of the system or a multiple service member who is an
3active member of the State Employees' Retirement System on or
4after the effective date of this part may purchase credit and
5receive eligibility points:

6(1) as a member of Class T-C, Class T-D, Class T-E [or], 
7Class T-F, Class T-G or Class T-H for previous creditable 
8school service [or creditable nonschool service] of the same 
9class; [or]

10(2) as a member of Class [T-D for previous creditable 
11school service, provided the member elects to become a Class 
12T-D member pursuant to section 8305.1 (relating to election 
13to become a Class T-D member);] T-C, Class T-D, Class T-G or 
14Class T-H for creditable nonschool service as Class T-C, 
15except as otherwise provided in this part; or

16(3) as a member of Class T-E or Class T-F for creditable
17nonschool service as the same class;

18upon written agreement by the member and the board as to the
19manner of payment of the amount due for credit for such service;
20except, that any purchase for reinstatement of service credit
21shall be for all service previously credited.

22* * *

23§ 8303.1. Waiver of adjustments.

24(a) Allowance.--Upon appeal by an affected member, 
25participant, beneficiary or survivor annuitant, the board may
26waive an adjustment or any portion of an adjustment made under
27section 8534(b) (relating to fraud and adjustment of errors) if
28in the opinion of the board or the board's designated
29representative:

30(1) the adjustment or portion of the adjustment will

1cause undue hardship to the member, participant, beneficiary
2or survivor annuitant;

3(2) the adjustment was not the result of erroneous
4information supplied by the member, participant, beneficiary
5or survivor annuitant;

6(3) the member or participant had no knowledge or notice
7of the error before adjustment was made, and the member, 
8participant, beneficiary or survivor annuitant took action
9with respect to their benefits based on erroneous information
10provided by the system or plan; and

11(4) the member, participant, beneficiary or survivor
12annuitant had no reasonable grounds to believe the erroneous
13information was incorrect before the adjustment was made.

14(b) Time period.--

15(1) In order to obtain consideration of a waiver under
16this section, the affected member, participant, beneficiary
17or survivor annuitant must appeal to the board in writing
18within 30 days after receipt of notice that benefits have
19been adjusted or, if no notice was given, within 30 days
20after the adjustment was known or should have been known to
21the affected member, participant, beneficiary or survivor
22annuitant.

23(2) For any adjustments made prior to the effective date
24of this subsection for which the member, participant,
25beneficiary or survivor annuitant appealed to the board and
26was denied, an appeal under this section must be filed within
2790 days of the effective date of this subsection.

28Section 107. Title 24 is amended by adding a section to
29read:

30§ 8303.2. Spouses rights, benefits and effect of nomination of

1spouse.

2(a) No rights of participation in spouse.--The spouse of a
3participant does not have any of the rights, options or
4privileges of a participant. The rights of a spouse shall remain
5derivative of those of the participant, including, but not
6limited to, rights under the act of July 8, 1978 (P.L.752,
7No.140), known as the Public Employee Pension Forfeiture Act,
8section 16(b) of Article V of the Constitution of Pennsylvania,
9and a spouse may not compel a participant to take, or prevent a
10participant from taking, any action regarding membership, rights
11or benefits in the plan in which he is a participant other than
12those expressly set forth in this part; nor may a spouse take
13any action on behalf of a participant, except as otherwise duly
14authorized under this part.

15(b) No waiver of benefits without spousal consent.--To the
16extent that the law allows a participant to waive any benefits
17or return of contributions which the participant is entitled to
18receive now or in the future, or is receiving, no such waiver
19will be valid unless the spouse of the participant consents to
20it as provided for in this part.

21(c) Effect of nomination of spouse as beneficiary by law.--
22Whenever the spouse of a participant in the plan is deemed to be
23the beneficiary by operation of law instead of by a written
24nomination of beneficiary filed with the board, then the person
25last nominated as beneficiary in writing filed with the board
26shall become the contingent beneficiary.

27Section 108. Section 8305(b) of Title 24 is amended and the
28section is amended by adding subsections to read:

29§ 8305. Classes of service.

30* * *

1(b) Other class membership.--A school employee who is a
2member of a class of service other than Class T-C on the
3effective date of this part may elect to become a member of
4Class T-C or Class T-D or may retain his membership in such
5other class until the service is discontinued or he elects to
6become a full coverage member or elects to purchase credit for
7previous school or creditable nonschool service. Any service
8thereafter as a member of the system shall be credited as Class
9T-C or T-D service as applicable.

10* * *

11(f) Ineligibility for active membership and classes of
12service.--An individual who elects to be a participant in the
13plan or who is a school employee on July 1, 2015, but who is not
14a member of the system, or who first becomes a school employee
15on or after July 1, 2015, or who returns to school service on or
16after July 1, 2015, after a termination of school service, shall
17be ineligible for active membership in the system. Instead, any
18such school employee shall be a participant in the plan as a
19result of such school service, subject to the provisions in
20section 8301 (relating to mandatory and optional membership).

21(g) Class T-G membership.--Notwithstanding any other
22provision of law, a member who is, becomes, or is eligible to
23become, a Class T-D member and who performs school service on or
24after July 1, 2015, shall perform the service as a Class T-G
25member and shall be classified as a Class T-G member for all
26school service performed on or after July 1, 2015, upon payment
27of regular member contributions.

28(h) Class T-H membership.--Notwithstanding any other
29provision of law, any Class T-G member shall have the right to
30elect into Class T-H membership, provided the member elects to

1become a Class T-H member pursuant to section 8305.3 (relating
2to election to become a Class T-H member), upon written election
3filed with the board and payment of regular member
4contributions.

5Section 109. Sections 8305.1(c) and 8305.2(c) and (d) of
6Title 24 are amended to read:

7§ 8305.1. Election to become a Class T-D member.

8* * *

9(c) Effect of election.--An election to become a Class T-D
10member shall remain in effect until the termination of
11employment except as otherwise provided in this part. Those
12members who, on the effective date of this section, contribute
13at the rate of 5 1/4% shall be deemed to have accepted the basic
14contribution rate of 6 1/2% for all Class T-D service performed
15on or after January 1, 2002. Those members who, on the effective
16date of this section, contribute at the rate of 6 1/4% shall be
17deemed to have accepted the basic contribution rate of 7 1/2%
18for all Class T-D service performed on or after January 1, 2002.
19Upon termination and a subsequent reemployment that occurs 
20before July 1, 2015, the class of service of the school employee 
21shall be credited in the class of service otherwise provided for 
22in this part. If the reemployment occurs on or after July 1, 
232015, the school employee's eligibility for membership in the 
24system or participation in the plan shall be as provided in this 
25part.

26* * *

27§ 8305.2. Election to become a Class T-F member.

28* * *

29(c) Effect of election.--An election to become a Class T-F 
30member shall be irrevocable and shall commence from the original
 

1date of eligibility[. A member who elects Class T-F membership 
2shall receive Class T-F service credit on any and all future 
3service, regardless of whether the member terminates service or 
4has a break in service.] and shall remain in effect for all 
5future school service creditable in the system except as 
6otherwise provided in this part.

7(d) Effect of failure to make election.--If a member fails 
8to timely file an election to become a Class T-F member, then 
9the member shall be enrolled as a member of Class T-E, unless 
10the school employee elects or is required to be a participant in 
11the plan, and the member shall never be able to elect Class T-F 
12service, regardless of whether the member terminates service or 
13has a break in service.

14Section 110. Title 24 is amended by adding a section to
15read:

16§ 8305.3.  Election to become a Class T-H member.

17(a)  General rule.--A school employee who first becomes a 
18Class T-G member on or after July 1, 2015, and who is eligible 
19to become a Class T-H member may elect to become a member of 
20Class T-H.

21(b)  Time for making election.--

22(1) Except as otherwise provided in paragraph (2), a
23member must elect to become a Class T-H member by filing a
24written election with the board within 60 days of
25notification by the board that the member is eligible for the
26election.

27(2) A Class T-G member, who is eligible to elect to
28become a Class T-H member but who begins USERRA leave during
29the election period without having elected Class T-H, may
30make the election within 60 days after returning to school

1service from the USERRA leave.

2(c)  Effect of election.--An election to become a Class T-H
3member shall be irrevocable, commence from the original date of
4eligibility and remain in effect for all future school service
5creditable in the system, except as otherwise provided in this
6part. A member who elects Class T-H membership shall receive
7Class T-H service credit on any and all future service, except
8as otherwise provided in this part.

9(d)  Effect of failure to make election.--If a member fails
10to timely file an election to become a Class T-H member, then
11the member shall be enrolled as a member of Class T-G and the
12member shall never be able to elect Class T-H service,
13regardless of whether the member terminates service or has a
14break in service.

15Section 111. (Reserved).

16Section 112. Sections 8306(b), 8307(a) and (b), 8308, 8310,
178321(a), 8322.1(a), 8323(a), (c) and (d), 8324(a), (b), (c) and
18(d), 8325, 8325.1(a), 8326(a) and (c), 8327, 8328(a), (b), (c),
19(d), (e) and (g), 8330 and 8341 of Title 24 are amended to read:

20§ 8306. Eligibility points.

21* * *

22(b) Transitional rule.--For the purposes of the transition:

23(1) In determining whether a member, other than a
24disability annuitant who returns to school service after June
2530, 2001, upon termination of the disability annuity, who is
26not a school employee or a State employee on June 30, 2001,
27and July 1, 2001, and who has previous school service, has
28the five eligibility points required by the definition of
29"vestee" in sections 8102 (relating to definitions), 8307
30(relating to eligibility for annuities), 8308 (relating to

1eligibility for vesting) and 8345 (relating to member's
2options), only eligibility points earned by performing
3credited school service as an active member of the system or
4credited State service as an active member of the State 
5Employees' Retirement System after June 30, 2001, shall be
6counted until such member earns one eligibility point by
7performing credited school service or credited State service
8after June 30, 2001, at which time all eligibility points as
9determined under subsection (a) shall be counted.

10(2) A member subject to paragraph (1) shall be
11considered to have satisfied any requirement for five
12eligibility points contained in this part if the member has
13at least ten eligibility points determined under subsection
14(a).

15§ 8307. Eligibility for annuities.

16(a) Superannuation annuity.--An active or an inactive member
17who attains superannuation age shall be entitled to receive a
18superannuation annuity upon termination of service and filing of
19a proper application. A combined service employee who is an 
20active or inactive participant and attains superannuation age 
21shall be entitled to receive a superannuation annuity upon 
22termination of service and filing of a proper application.

23(b) Withdrawal annuity.--A vestee in Class T-C [or], Class
24T-D, Class T-G or Class T-H with five or more eligibility points
25or an active or inactive Class T-C or Class T-D member or a 
26combined service employee with Class T-C or Class T-D service
27who terminates school service having five or more eligibility
28points shall, upon filing a proper application, be entitled to
29receive an early annuity. A vestee in Class T-E or Class T-F
30with ten or more eligibility points or an active or inactive

1Class T-E or Class T-F member or a combined service employee 
2with Class T-E or Class T-F service who terminates school
3service having ten or more eligibility points shall, upon filing
4a proper application, be entitled to receive an early annuity.

5* * *

6§ 8308. Eligibility for vesting.

7Any Class T-C [or], Class T-D, Class T-G or Class T-H member
8who terminates school service with five or more eligibility
9points shall be entitled to vest his retirement benefits until
10attainment of superannuation age. Any Class T-E or Class T-F
11member who terminates school service with ten or more
12eligibility points shall be entitled to vest his retirement
13benefits until attainment of superannuation age.

14§ 8310. Eligibility for refunds.

15Upon termination of service any active member, regardless of
16eligibility for benefits, may elect to receive his accumulated
17deductions in lieu of any benefit from the system to which he is
18entitled.

19§ 8321. Regular member contributions for current service.

20(a) General.--Regular member contributions shall be made to
21the fund on behalf of each active member for current service
22except for any period of current service in which the making of
23such contributions has ceased solely by reason of any provision
24of this part relating to the limitations under IRC § 401(a)(17)
25or 415(b) or any provision of this part limiting compensation.

26* * *

27§ 8322.1. Pickup contributions.

28(a) Treatment for purposes of IRC § 414(h).--All
29contributions to the fund required to be made under sections
308321 (relating to regular member contributions for current

1service) and 8322 (relating to joint coverage member
2contributions), with respect to current school service rendered
3by an active member on or after January 1, 1983, shall be picked
4up by the employer and shall be treated as the employer's
5contribution for purposes of IRC § 414(h).

6* * *

7§ 8323. Member contributions for creditable school service.

8(a) Previous school service, sabbatical leave and full
9coverage.--The contributions to be paid by an active member or
10an eligible State employee for credit in the system for
11reinstatement of all previously credited school service, school
12service not previously credited, sabbatical leave as if he had
13been in full-time daily attendance, or full-coverage membership
14shall be sufficient to provide an amount equal to the
15accumulated deductions which would have been standing to the
16credit of the member for such service had regular member
17contributions been made with full coverage at the rate of
18contribution necessary to be credited as Class T-C service,
19Class T-D service if the member is a Class T-D member, Class T-E 
20service if the member is a Class T-E member [or], Class T-F 
21service if the member is a Class T-F member, Class T-G service 
22if the member is a Class T-G member or Class T-H service if the 
23member is a Class T-H member and had such contributions been
24credited with statutory interest during the period the
25contributions would have been made and during all periods of
26subsequent school service as an active member or inactive member
27and State service as an active member or inactive member on 
28leave without pay up to the date of purchase.

29* * *

30(c) Approved leave of absence other than sabbatical leave

1and activated military service leave.--The contributions to be
2paid by an active member for credit for an approved leave of
3absence, other than sabbatical leave and activated military
4service leave, shall be sufficient to transfer his membership to
5Class T-C or to Class T-D if the member is a Class T-D member,
6to Class T-E if the member is a Class T-E member or to Class T-F 
7if the member is a Class T-F member or to Class T-G service if 
8the member is a Class T-G member, or to Class T-H service if the 
9member is a Class T-H member and further to provide an annuity
10as a Class T-C member or Class T-D member if the member is a
11Class T-D member, to Class T-E if the member is a Class T-E 
12member or to Class T-F if the member is a Class T-F member or to 
13Class T-G service if the member is a Class T-G member, or to 
14Class T-H service if the member is a Class T-H member for such
15additional credited service. Such amount shall be the sum of the
16amount required in accordance with the provisions of subsection
17(b) and an amount determined as the sum of the member's basic
18contribution rate and the normal contribution rate as provided
19in section 8328 (relating to actuarial cost method) during such
20period multiplied by the compensation which was received or
21which would have been received during such period and with
22statutory interest during all periods of subsequent school and
23State service up to the date of purchase.

24* * *

25(d) Certification and payment of contributions.--

26(1) In all cases other than for the purchase of credit
27for sabbatical leave and activated military service leave
28beginning before the effective date of paragraph (2), the
29amount payable shall be certified by the board in accordance
30with methods approved by the actuary and may be paid in a

1lump sum within 90 days or in the case of an active member or
2an eligible State employee who is an active member of the
3State Employees' Retirement System it may be amortized with
4statutory interest through salary deductions to the system 
5in amounts agreed upon by the member and the board. The
6salary deduction amortization plans agreed to by members and
7the board may include a deferral of payment amounts and
8statutory interest until the termination of school service or
9State service or becoming a participant and combined service 
10employee as the board in its sole discretion decides to
11allow. The board may limit salary deduction amortization
12plans to such terms as the board in its sole discretion
13determines. In the case of an eligible State employee who is
14an active member of the State Employees' Retirement System,
15the agreed upon salary deductions shall be remitted to the
16State Employees' Retirement Board, which shall certify and
17transfer to the board the amounts paid.

18(2) In the case of activated military service leave
19beginning before the effective date of this paragraph, the
20amount payable may be paid according to this subsection or
21subsection (c.1), but all lump sum payments must be made
22within one year of the termination of activated military
23service leave.

24§ 8324. Contributions for purchase of credit for creditable 
25nonschool service and noncreditable school service.

26(a) Source of contributions.--The total contributions to
27purchase credit as a member of Class T-C, Class T-E [or], Class
28T-F, Class T-G or Class T-H for creditable nonschool service of
29an active member or an eligible State employee shall be paid
30either by the member, the member's previous employer, the

1Commonwealth, or a combination thereof, as provided by law.

2(b) Nonintervening military service.--The amount due for the 
3purchase of credit for military service other than intervening 
4military service shall be determined by applying the member's 
5basic contribution rate plus the normal contribution rate as 
6provided in section 8328 (relating to actuarial cost method) at 
7the time of entry of the member into school service subsequent 
8to such military service to one-third of his total compensation 
9received during the first three years of such subsequent 
10credited school service and multiplying the product by the 
11number of years and fractional part of a year of creditable 
12nonintervening military service being purchased together with 
13statutory interest during all periods of subsequent school 
14service as an active member or inactive member and State service 
15as an active member or inactive member on leave without pay to 
16date of purchase. Upon certification of the amount due, payment 
17may be made in a lump sum within 90 days or in the case of an 
18active member or an eligible State employee who is an active 
19member of the State Employees' Retirement System it may be 
20amortized with statutory interest through salary deductions to 
21the system in amounts agreed upon by the member and the board. 
22The salary deduction amortization plans agreed to by members and 
23the board may include a deferral of payment amounts and 
24statutory interest until the termination of school service or 
25State service or becoming a participant and a combined service 
26employee as the board in its sole discretion decides to allow. 
27The board may limit salary deduction amortization plans to such 
28terms as the board in its sole discretion determines. In the 
29case of an eligible State employee who is an active member of 
30the State Employees' Retirement System, the agreed upon salary
 

1deductions shall be remitted to the State Employees' Retirement 
2Board, which shall certify and transfer to the board the amounts 
3paid. Application may be filed for all such military service 
4credit upon completion of three years of subsequent credited 
5school service and shall be credited as Class T-C service. In 
6the event that a Class T-E member makes a purchase of credit for 
7such military service, then such service shall be credited as 
8Class T-E service. In the event that a Class T-F member makes a 
9purchase of credit for such military service, then such service 
10shall be credited as Class T-F service.

11(c) Intervening military service.--Contributions on account
12of credit for intervening military service shall be determined
13by the member's basic contribution rate and compensation at the
14time of entry of the member into active military service,
15together with statutory interest during all periods of
16subsequent school service as an active member or inactive member 
17and State service as an active member or inactive member on 
18leave without pay to date of purchase. Upon application for such
19credit the amount due shall be certified in the case of each
20member by the board, in accordance with methods approved by the
21actuary, and contributions may be made by one of the following
22methods:

23(1) Regular monthly payments during active military
24service.

25(2) A lump sum payment within 90 days of certification
26of the amount due.

27(3) Salary deductions to the system in amounts agreed
28upon by the member and the board. The salary deduction
29amortization plans agreed to by the members and the board may
30include a deferral of payment amounts and statutory interest

1until the termination of school service or State service or 
2becoming a participant and a combined service employee as the
3board in its sole discretion decides to allow. The board may
4limit salary deduction amortization plans to such terms as
5the board in its sole discretion determines. In the case of
6an eligible State employee who is an active member of the
7State Employees' Retirement System, the agreed upon salary
8deductions shall be remitted to the State Employees'
9Retirement Board, which shall certify and transfer to the
10board the amounts paid.

11(d) Other creditable nonschool service and noncreditable 
12school service.--

13(1) Contributions on account of Class T-C credit for 
14creditable nonschool service other than military service 
15shall be determined by applying the member's basic 
16contribution rate plus the normal contribution rate as 
17provided in section 8328 at the time of the member's entry 
18into school service subsequent to such creditable nonschool 
19service to his total compensation received during the first 
20year of subsequent credited school service and multiplying 
21the product by the number of years and fractional part of a 
22year of creditable nonschool service being purchased together 
23with statutory interest during all periods of subsequent 
24school service as an active member or inactive member or 
25State service as an active member or inactive member on leave 
26without pay to the date of purchase, except that in the case 
27of purchase of credit for creditable nonschool service as set 
28forth in section 8304(b)(5) (relating to creditable nonschool 
29service) the member shall pay only the employee's share 
30unless otherwise provided by law. Upon certification of the
 

1amount due, payment may be made in a lump sum within 90 days 
2or in the case of an active member or an eligible State 
3employee who is an active member of the State Employees' 
4Retirement System it may be amortized with statutory interest 
5through salary deductions to the system in amounts agreed 
6upon by the member and the board. The salary deduction 
7amortization plans agreed to by the members and the board may 
8include a deferral of payment amounts and statutory interest 
9until the termination of school service or State service or 
10becoming a participant and combined service employee as the 
11board in its sole discretion decides to allow. The board may 
12limit salary deduction amortization plans to such terms as 
13the board in its sole discretion determines. In the case of 
14an eligible State employee who is an active member of the 
15State Employees' Retirement System, the agreed upon salary 
16deductions shall be remitted to the State Employees' 
17Retirement Board, which shall certify and transfer to the 
18board the amounts paid.

19(2) Contributions on account of Class T-E or Class T-F
20credit for creditable nonschool service other than military
21service shall be the present value of the full actuarial cost
22of the increase in the projected superannuation annuity
23caused by the additional service credited on account of the
24purchase. Upon certification of the amount due, payment may
25be made in a lump sum within 90 days or, in the case of an
26active member or an eligible State employee who is an active
27member of the State Employees' Retirement System, it may be
28amortized with statutory interest through salary deductions
29to the system in amounts agreed upon by the member and the
30board. The salary deduction amortization plans agreed to by

1the members and the board may include a deferral of payment
2amounts and statutory interest until the termination of
3school service or State service or becoming a participant and 
4combined service employee as the board in its sole discretion
5decides to allow. The board may limit salary deduction
6amortization plans to the terms as the board in its sole
7discretion determines. In the case of an eligible State
8employee who is an active member of the State Employees'
9Retirement System, the agreed upon salary deductions shall be
10remitted to the State Employees' Retirement Board, which
11shall certify and transfer to the board the amounts paid.

12(3) Contributions on account of Class T-E or Class T-F 
13credit for noncreditable school service other than military 
14service shall be the present value of the full actuarial cost 
15of the increase in the projected superannuation annuity 
16caused by the additional service credited on account of the 
17purchase. Upon certification of the amount due, payment may 
18be made in a lump sum within 90 days or, in the case of an 
19active member or an eligible State employee who is an active 
20member of the State Employees' Retirement System, it may be 
21amortized with statutory interest through salary deductions 
22to the system in amounts agreed upon by the member and the 
23board. The salary deduction amortization plans agreed to by 
24the members and the board may include a deferral of payment 
25amounts and statutory interest until the termination of 
26school service or State service or becoming a participant and 
27combined service employee as the board in its sole discretion 
28decides to allow. The board may limit salary deduction 
29amortization plans to the terms as the board in its sole 
30discretion determines. In the case of an eligible State
 

1employee who is an active member of the State Employees' 
2Retirement System, the agreed upon salary deductions shall be 
3remitted to the State Employees' Retirement Board, which 
4shall certify and transfer to the board the amounts paid.

5* * *

6§ 8325. Incomplete payments.

7(a) Right to pay balance due.--In the event that a member
8terminates school service or becomes a participant or a multiple
9service member who is an active member of the State Employees'
10Retirement System terminates State service before any agreed
11upon payments or return of benefits on account of returning to
12school service or entering State service and electing multiple
13service have been completed, the member or multiple service
14member who is an active member of the State Employees'
15Retirement System shall have the right to pay within 30 days of
16termination of school service or State service or becoming a 
17participant the balance due, including interest, in a lump sum,
18and the annuity shall be calculated including full credit for
19the previous school service, creditable nonschool service, or
20full-coverage membership.

21(b) Effect of failure to pay balance due.--In the event a
22member does not pay the balance due within 30 days of
23termination of school service or becoming a participant or in
24the event a member dies in school service or within 30 days of
25termination of school service or in the case of a multiple
26service member who is an active member of the State Employees'
27Retirement System does not pay the balance due within 30 days of
28termination of State service or dies in State service or within
2930 days of termination of State service or becoming a 
30participant and before the agreed upon payments have been

1completed, the present value of the benefit otherwise payable
2shall be reduced by the balance due, including interest, and the
3benefit payable shall be calculated as the actuarial equivalent
4of such reduced present value.

5§ 8325.1. Annual compensation limit under IRC § 401(a)(17).

6(a) General rule.--In addition to other applicable
7limitations set forth in this part, and notwithstanding any
8provision of this part to the contrary, the annual compensation
9of each noneligible member and each participant taken into
10account for benefit purposes under this subchapter shall not
11exceed the limitation under IRC § 401(a)(17). On and after July
121, 1996, any reference in this part to the limitation under IRC
13§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
141993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
15compensation limit set forth in this subsection. The OBRA '93
16annual compensation limit is $150,000, as adjusted by the
17commissioner for increases in the cost of living in accordance
18with IRC § 401(a)(17)(B). The cost-of-living adjustment in
19effect for a calendar year applies to any determination period
20which is a period, not exceeding 12 months, over which
21compensation is determined, beginning in such calendar year. If
22a determination period consists of fewer than 12 months, the
23OBRA '93 compensation limit will be multiplied by a fraction,
24the numerator of which is the number of months in the
25determination period and the denominator of which is 12.

26* * *

27§ 8326. Contributions by the Commonwealth.

28(a) Contributions on behalf of active members and 
29participants.--The Commonwealth shall make contributions into
30the fund on behalf of all active members and participants,

1including members and participants on activated military service
2leave, in an amount equal to one-half the amount certified by
3the board as necessary to provide, together with the members'
4contributions, annuity reserves on account of prospective
5annuities as provided in this part in accordance with section
68328 (relating to actuarial cost method). In case a school
7employee has elected membership in a retirement program approved
8by the employer, the Commonwealth shall contribute to such
9program on account of his membership an amount no greater than
10the amount it would have contributed had the employee been a
11member of the Public School Employees' Retirement System.

12* * *

13(c) Contributions after June 30, 1995.--

14(1) The Commonwealth shall make contributions into the
15fund on behalf of all active members and participants,
16including members and participants on activated military
17service leave, for service performed after June 30, 1995, in
18the following manner:

19(i) For members and participants who are employees
20of employers that are school entities, no Commonwealth
21contributions shall be made.

22(ii) For members and participants who are employees
23of employers that are not school entities, the amount
24computed under subsection (a).

25(2) The Commonwealth shall make contributions into the
26fund on behalf of annuitants for all amounts due to the fund
27after June 30, 1995, including, but not limited to, amounts
28due pursuant to section 8328(d) and (f), in the following
29manner:

30(i) For members and participants who are employees

1of employers who are school entities, no Commonwealth
2contributions shall be made.

3(ii) For members and participants who are employees
4of employers who are not school entities, the amount
5computed under subsection (b).

6§ 8327. Payments by employers.

7(a) General rule.--[Each]

8(1) For payments prior to June 30, 2015, each employer,
9including the Commonwealth as employer of employees of the
10Department of Education, State-owned colleges and
11universities, Thaddeus Stevens College of Technology, Western 
12Pennsylvania School for the Deaf, Scotland School for
13Veterans' Children[,] and [the] The Pennsylvania State
14University, shall make payments to the fund each quarter in
15an amount equal to one-half the sum of the percentages, as
16determined under section 8328 (relating to actuarial cost
17method), applied to the total compensation during the pay
18periods in the preceding quarter of all its employees who
19were members of the system during such period, including
20members on activated military service leave. In the event a
21member on activated military service leave does not return to
22service for the necessary time or receives an undesirable,
23bad conduct or dishonorable discharge or does not elect to
24receive credit for activated military service under section
258302(b.1)(3) (relating to credited school service), the
26contributions made by the employer on behalf of such member
27shall be returned with valuation interest upon application by
28the employer.

29(2) For payments after June 30, 2015, each employer,
30including the Commonwealth as employer of employees of the

1Department of Education, State-owned colleges and
2universities, Thaddeus Stevens College of Technology, Western
3Pennsylvania School for the Deaf, Scotland School for
4Veterans' Children and The Pennsylvania State University,
5shall make payments to the fund each quarter in an amount
6equal to one-half the sum of the percentages, as determined
7under section 8328, applied to the total compensation during
8the pay periods in the preceding quarter of all its employees
9who were members of the system during such period, including
10members on activated military service leave, plus the accrued
11liability contribution rate applied to the total compensation
12of all active participants in the plan. In the event a member
13on activated military service leave does not return to
14service for the necessary time or receives an undesirable,
15bad conduct or dishonorable discharge or does not elect to
16receive credit for activated military service under section
178302(b.1)(3), the contributions made by the employer on
18behalf of such member shall be returned with valuation
19interest upon application by the employer.

20(b) Deduction from appropriations.--

21(1) To facilitate the payment of amounts due from any
22employer to the fund and the trust through the State
23Treasurer and to permit the exchange of credits between the
24State Treasurer and any employer, the Secretary of Education
25and the State Treasurer shall cause to be deducted and paid
26into the fund and the trust from the amount of any moneys due
27to any employer on account of any appropriation for schools
28or other purposes amounts equal to the employer and pickup
29contributions which an employer is required to pay to the
30fund and the trust, as certified by the board, and as remains

1unpaid on the date such appropriations would otherwise be
2paid to the employer. Such amount shall be credited to the
3appropriate accounts in the fund and the trust.

4(2) To facilitate the payments of amounts due from any
5charter school, as defined in Article XVII-A of the act of 
6March 10, 1949 (P.L.30, No.14), known as the Public School
7Code of 1949, to the fund and the trust through the State
8Treasurer and to permit the exchange of credits between the
9State Treasurer and any employer, the Secretary of Education
10and the State Treasurer shall cause to be deducted and paid
11into the fund and the trust from any funds appropriated to
12the Department of Education for basic education of the
13chartering school district of a charter school and public
14school employees' retirement contributions amounts equal to
15the employer and pickup contributions which a charter school
16is required to pay to the fund and the trust, as certified by
17the board, and as remains unpaid on the date such
18appropriations would otherwise be paid to the chartering
19school district or charter school. Such amounts shall be
20credited to the appropriate accounts in the fund and the 
21trust. Any reduction in payments to a chartering school
22district made pursuant to this section shall be deducted from
23the amount due to the charter school district pursuant to the
24Public School Code of 1949.

25(c) Payments by employers after June 30, 1995, and before 
26July 1, 2015.--After June 30, 1995, and before July 1, 2015,
27each employer, including the Commonwealth as employer of
28employees of the Department of Education, State-owned colleges
29and universities, Thaddeus Stevens College of Technology,
30Western Pennsylvania School for the Deaf, Scotland School for

1Veterans' Children and The Pennsylvania State University, shall
2make payments to the fund and the trust each quarter in an
3amount computed in the following manner:

4(1) For an employer that is a school entity, the amount
5shall be the sum of the percentages as determined under
6section 8328 applied to the total compensation during the pay
7periods in the preceding quarter of all employees who were
8active members of the system or active participants of the 
9plan during such period, including members or active 
10participants on activated military service leave. In the
11event a member on activated military service leave does not
12return to service for the necessary time or receives an
13undesirable, bad conduct or dishonorable discharge or does
14not elect to receive credit for activated military service
15under section 8302(b.1)(3), the contribution made by the
16employer on behalf of such member shall be returned with
17valuation interest upon application by the employer.

18(2) For an employer that is not a school entity, the
19amount computed under subsection (a).

20(3) For any employer, whether or not a school entity, in
21computing the amount of payment due each quarter, there shall
22be excluded from the total compensation referred to in this
23subsection and subsection (a) any amount of compensation of a
24noneligible member on the basis of which member or 
25participant contributions have not been made by reason of the
26limitation under IRC § 401(a)(17), except as otherwise 
27provided in this part. Any amount of contribution to the fund
28or trust paid by the employer on behalf of a noneligible
29member or participant on the basis of compensation which was
30subject to exclusion from total compensation in accordance

1with the provisions of this paragraph shall, upon the board's
2determination or upon application by the employer, be
3returned to the employer with valuation interest.

4(d) Payments by employers after June 30, 2015.--After June
530, 2015, each employer, including the Commonwealth as employer
6of employees of the Department of Education, State-owned
7colleges and universities, Thaddeus Stevens College of
8Technology, Western Pennsylvania School for the Deaf, Scotland
9School for Veterans' Children and The Pennsylvania State
10University, shall make payments to the fund and the trust each
11quarter in an amount computed in the following manner:

12(1) For an employer that is a school entity, the amount
13shall be the sum of the percentages as determined under
14section 8328 applied to the total compensation during the pay
15periods in the preceding quarter of all employees who were
16active members of the system during such period, including
17members on activated military service leave, plus the accrued
18liability contribution rate applied to the total compensation
19of all active participants in the plan. In the event a member
20on activated military service leave does not return to
21service for the necessary time or receives an undesirable,
22bad conduct or dishonorable discharge or does not elect to
23receive credit for activated military service under section
248302(b.1)(3), the contribution made by the employer on behalf
25of such member shall be returned with valuation interest upon
26application by the employer.

27(2) For an employer that is not a school entity, the
28amount computed under subsection (a).

29(3) For any employer, whether or not a school entity, in
30computing the amount of payment due each quarter, there shall

1be excluded from the total compensation referred to in this
2subsection and subsection (a) any amount of compensation of a
3noneligible member or participant on the basis of which
4member or participant contributions have not been made by
5reason of the limitation under IRC § 401(a)(17). Any amount
6of contribution to the fund paid by the employer on behalf of
7a noneligible member or participant on the basis of
8compensation which was subject to exclusion from total
9compensation in accordance with the provisions of this
10paragraph shall, upon the board's determination or upon
11application by the employer, be returned to the employer with
12valuation interest.

13(e) Deemed agreed to.--The agreement of an employer listed
14in the definition of school employee under section 8102
15(relating to definitions) or any other law to make contributions
16to the fund or to enroll its employees as members in the system
17shall be deemed to be an agreement to make contributions to the
18trust or enroll its employees in the plan.

19(f) Contributions.--The employer employing a participant
20shall pick up the required mandatory participant contributions
21by a reduction in the compensation of the participant.

22(g) Contributions resulting from members reemployed from
23USERRA leave.--When a school employee reemployed from USERRA
24leave makes the member contributions required to be granted
25school service credit for the USERRA leave after June 30, 2015,
26either by actual payment or by actuarial debt under section 8325
27(relating to incomplete payments), the employer that employed
28the school employee when the member contributions are made or
29the last employer before termination in the case of payment
30under section 8325 shall make the employer contributions that

1would have been made under this section if the employee making
2the member contributions after he is reemployed from USERRA
3leave continued to be employed in his school office or position
4instead of performing USERRA leave.

5§ 8328. Actuarial cost method.

6(a) Employer contribution rate.--The amount of the total
7employer contributions shall be computed by the actuary as a
8percentage of the total compensation of all active members and 
9active participants, as applicable, during the period for which
10the amount is determined and shall be so certified by the board.
11The total employer contribution rate shall be the sum of the 
12final contribution rate as computed in subsection (h) plus the 
13premium assistance contribution rate as computed in subsection 
14(f). The actuarially required contribution rate shall consist of
15the normal contribution rate as defined in subsection (b), the
16accrued liability contribution rate as defined in subsection (c)
17and the supplemental annuity contribution rate as defined in
18subsection (d). Beginning July 1, 2004, the actuarially required
19contribution rate shall be modified by the experience adjustment
20factors as calculated in subsection (e).

21(b) Normal contribution rate.--[The]

22(1) For the fiscal year ending June 30, 2014, the normal
23contribution rate shall be determined after each actuarial
24valuation. Until all accrued liability contributions have
25been completed, the normal contribution rate shall be
26determined, on the basis of an annual interest rate and such
27mortality and other tables as shall be adopted by the board
28in accordance with generally accepted actuarial principles,
29as a level percentage of the compensation of the average new
30active member, which percentage, if contributed on the basis

1of his prospective compensation through the entire period of
2active school service, would be sufficient to fund the
3liability for any prospective benefit payable to him, in
4excess of that portion funded by his prospective member
5contributions, excluding the shared-risk contributions.

6(2) For fiscal years beginning on or after July 1, 2014,
7the normal contribution rate shall be determined after each
8actuarial valuation. Until all accrued liability
9contributions have been completed, the normal contribution
10rate shall be determined, on the basis of an annual interest
11rate and such mortality and other tables as shall be adopted
12by the board in accordance with generally accepted actuarial
13principles, as a level percentage of the compensation of all
14active members not limited by the Social Security taxable
15wage base, which percentage, if contributed on the basis of
16the member's prospective compensation through the entire
17period of active school service, would be sufficient to fund
18the liability for any prospective benefit payable to him, in
19excess of that portion funded by his prospective member
20contributions, excluding the shared-risk contributions.

21(c) Accrued liability contribution rate.--

22(1) For the fiscal years beginning July 1, 2002, and 
23ending June 30, 2011, the accrued liability contribution rate
24shall be computed as the rate of total compensation of all
25active members which shall be certified by the actuary as
26sufficient to fund over a period of ten years from July 1,
272002, the present value of the liabilities for all
28prospective benefits of active members, except for the
29supplemental benefits provided in sections 8348 (relating to 
30supplemental annuities), 8348.1 (relating to additional
 

1supplemental annuities), 8348.2 (relating to further 
2additional supplemental annuities), 8348.3 (relating to 
3supplemental annuities commencing 1994), 8348.4 (relating to 
4special supplemental postretirement adjustment), 8348.5
5(relating to supplemental annuities commencing 1998), 8348.6
6(relating to supplemental annuities commencing 2002) and
78348.7 (relating to supplemental annuities commencing 2003),
8in excess of the total assets in the fund (calculated by
9recognizing the actuarially expected investment return
10immediately and recognizing the difference between the actual
11investment return and the actuarially expected investment
12return over a five-year period), excluding the balance in the
13annuity reserve account, and of the present value of normal
14contributions and of member contributions payable with
15respect to all active members on July 1, 2002, during the
16remainder of their active service.

17(2) For the fiscal years beginning July 1, 2003, and 
18ending June 30, 2011, the amount of each annual accrued
19liability contribution shall be equal to the amount of such
20contribution for the fiscal year, beginning July 1, 2002,
21except that, if the accrued liability is increased by
22legislation enacted subsequent to June 30, 2002, but before
23July 1, 2003, such additional liability shall be funded over
24a period of ten years from the first day of July, coincident
25with or next following the effective date of the increase.
26The amount of each annual accrued liability contribution for
27such additional legislative liabilities shall be equal to the
28amount of such contribution for the first annual payment.

29(3) Notwithstanding any other provision of law,
30beginning July 1, 2004, and ending June 30, 2011, the

1outstanding balance of the increase in accrued liability due
2to the change in benefits enacted in 2001 and the outstanding
3balance of the net actuarial loss incurred in fiscal year
42000-2001 shall be amortized in equal dollar annual
5contributions over a period that ends 30 years after July 1,
62002, and the outstanding balance of the net actuarial loss
7incurred in fiscal year 2001-2002 shall be amortized in equal
8dollar annual contributions over a period that ends 30 years
9after July 1, 2003. For fiscal years beginning on or after
10July 1, 2004, if the accrued liability is increased by
11legislation enacted subsequent to June 30, 2003, such
12additional liability shall be funded in equal dollar annual
13contributions over a period of ten years from the first day
14of July coincident with or next following the effective date
15of the increase.

16(4) For the fiscal year beginning July 1, 2011, the 
17accrued liability contribution rate shall be computed as the 
18rate of total compensation of all active members which shall 
19be certified by the actuary as sufficient to fund as a level 
20percentage of compensation over a period of 24 years from 
21July 1, 2011, the present value of the liabilities for all 
22prospective benefits calculated as of June 30, 2010, 
23including the supplemental benefits as provided in sections 
248348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 
258348.7, in excess of the actuarially calculated assets in the 
26fund (calculated recognizing all realized and unrealized 
27investment gains and losses each year in level annual 
28installments over a ten-year period provided that the 
29resulting actuarially calculated assets are constrained 
30within a range of 70% to 130% of market value). In the event
 

1that the accrued liability is [increased] changed by 
2legislation enacted subsequent to June 30, 2010, such 
3[additional] change in liability shall be funded as a level 
4percentage of compensation over a period of ten years from 
5the July 1 second succeeding the date such legislation is 
6enacted.

7(5) Notwithstanding the above, for the fiscal years
8beginning July 1, 2014, compensation shall be defined as the
9total compensation of all active members not limited by the
10Social Security taxable wage base and active participants.

11(d) Supplemental annuity contribution rate.--

12(1) For the period of July 1, 2002, to June 30, 2011, 
13contributions from the Commonwealth and other employers
14required to provide for the payment of the supplemental
15annuities provided for in sections 8348, 8348.1, 8348.2,
168348.4 and 8348.5 shall be paid over a period of ten years
17from July 1, 2002. The funding for the supplemental annuities
18commencing 2002 provided for in section 8348.6 shall be as
19provided in section 8348.6(f). The funding for the
20supplemental annuities commencing 2003 provided for in
21section 8348.7 shall be as provided in section 8348.7(f). The
22amount of each annual supplemental annuities contribution
23shall be equal to the amount of such contribution for the
24fiscal year beginning July 1, 2002.

25(2) For fiscal years beginning July 1, 2011, and ending 
26June 30, 2014, contributions from the Commonwealth and other 
27employers whose employees are members of the system required 
28to provide for the payment of supplemental annuities as 
29provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4, 
308348.5, 8348.6 and 8348.7 shall be paid as part of the
 

1accrued liability contribution rate as provided for in 
2subsection (c)(4), and there shall not be a separate 
3supplemental annuity contribution rate attributable to those 
4supplemental annuities. In the event that supplemental 
5annuities are increased by legislation enacted subsequent to 
6June 30, 2010, [the] but before July 1, 2013, such additional 
7liability for the increase in benefits shall be funded as a 
8level percentage of compensation over a period of ten years 
9from the July 1 second succeeding the date such legislation 
10is enacted.

11(3) For fiscal years beginning on or after July 1, 2014,
12contributions from employers whose employees are members of
13the system required to provide for the payment of
14supplemental annuities as provided in sections 8348, 8348.1,
158348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be
16paid as part of the accrued liability contribution rate as
17provided for in subsection (c)(4), and there shall not be a
18separate supplemental annuity contribution rate attributable
19to those supplemental annuities. In the event that
20supplemental annuities are increased by legislation enacted
21subsequent to June 30, 2013, the additional liability for the
22increase in benefits shall be funded as a level percentage of
23compensation of all active members not limited by the Social
24Security taxable wage base and active participants over a
25period of ten years from the July 1 second succeeding the
26date such legislation is enacted.

27(e) Experience adjustment factor.--

28(1) For each year after the establishment of the accrued
29liability contribution rate for the fiscal year beginning
30July 1, 2011, and ending June 30, 2014, any increase or

1decrease in the unfunded accrued liability, excluding the
2gains or losses on the assets of the health insurance
3account, due to actual experience differing from assumed
4experience, changes in actuarial assumptions, changes in 
5contributions caused by the final contribution rate being 
6different from the actuarially required contribution rate, 
7active members making shared-risk contributions or changes in
8the terms and conditions of the benefits provided by the
9system by judicial, administrative or other processes other
10than legislation, including, but not limited to,
11reinterpretation of the provisions of this part, recognized 
12by the actuarial valuations on June 30, 2011, and June 30, 
132012, shall be amortized as a level percentage of 
14compensation over a period of 24 years beginning with the
15July 1 second succeeding the actuarial valuation determining 
16said increases or decreases.

17(2) (Reserved).

18(3) For fiscal years beginning July 1, 2014, any
19increase or decrease in the unfunded accrued liability,
20excluding the gains or losses on the assets of the health
21insurance account, due to actual experience differing from
22assumed experience, changes in actuarial assumptions, changes
23in contributions caused by the final contribution rate being
24different from the actuarially required contribution rate,
25active members making shared-risk contributions or changes in
26the terms and conditions of the benefits provided by the
27system by judicial, administrative or other processes other
28than legislation, including, but not limited to,
29reinterpretation of the provisions of this part, shall be
30amortized as a level percentage of the compensation of all

1active members, not limited by the Social Security taxable
2wage base, and active participants over a period of 24 years
3beginning with the July 1 second succeeding the actuarial
4valuation determining such increases or decreases.

5* * *

6(g) Temporary application of collared contribution rate.--

7(1) The collared contribution rate for each year shall
8be determined by comparing the actuarially required
9contribution rate, calculated without regard for the costs
10added by legislation, to the prior year's final contribution
11rate.

12(2) If, for any of the fiscal years beginning July 1,
132011, and July 1, 2012, [and on or after July 1, 2013,] the
14actuarially required contribution rate, calculated without
15regard for the costs added by legislation, is more than 3%[,]
16or 3.5% [and 4.5%], respectively, of the total compensation
17of all active members greater than the prior year's final
18contribution rate, then the collared contribution rate shall
19be applied and be equal to the prior year's final
20contribution rate increased by 3%[,] or 3.5% [and 4.5%],
21respectively, of total compensation of all active members.
22Otherwise, and for all other fiscal years, the collared
23contribution rate shall not be applicable. In no case shall
24the collared contribution rate be less than 4% of the total
25compensation of all active members.

26(3) If, for any of the fiscal years beginning July 1,
272013, July 1, 2014, July 1, 2015, July 1, 2016, July 1, 2017,
28and on or after July 1, 2018, the actuarially required
29contribution rate, calculated without regard for the costs
30added by legislation, is more than 2.25%, 2.75%, 3.25%,

13.75%, 4.25% and 4.5%, respectively, of the total
2compensation of all active members and active participants
3greater than the prior year's final contribution rate, then
4the collared contribution rate shall be applied and be equal
5to the prior year's final contribution rate increased by
62.25%, 2.75%, 3.25%, 3.75%, 4.25% and 4.5%, respectively, of
7total compensation of all active members, not limited by the
8Social Security taxable wage base, and active participants.

9(4) For purposes of applying the collared contribution
10rate, compensation for determining the normal contribution
11rate shall be defined as the total compensation of all active
12members not limited by the Social Security taxable wage base
13and active participants.

14* * *

15§ 8330. Appropriations by the Commonwealth.

16(a) Annual submission of budget.--The board shall prepare
17and through the Governor submit annually to the General Assembly
18an itemized budget consisting of the amounts necessary to be
19appropriated by the Commonwealth out of the General Fund
20required to meet the separate obligations to the fund and the 
21trust accruing during the fiscal period beginning July 1 of the
22following year.

23(b) Appropriation and payment.--The General Assembly shall
24make an appropriation sufficient to provide for the separate
25obligations of the Commonwealth to the fund and the trust. Such
26amount shall be paid by the State Treasurer through the
27Department of Revenue into the fund or the trust, as the case 
28may be, within 30 days of receipt of the requisition presented
29each quarter by the board.

30§ 8341. Return of accumulated deductions.

1Any member upon termination of service may, in lieu of all
2benefits payable from the system under this chapter to which he
3may be entitled, elect to receive his accumulated deductions.

4Section 113. Section 8342 of Title 24 is amended by adding a
5subsection to read:

6§ 8342. Maximum single life annuity.

7* * *

8(d) Coordination of benefits.--The determination and payment
9of the maximum single life annuity under this section shall be
10in addition to any payments a combined service employee may be
11entitled to receive, has received or is receiving as a result of
12being a participant in the plan.

13Section 114. Sections 8344, 8345(a), 8346 and 8349 heading,
14(a) and (b) of Title 24 are amended to read:

15§ 8344. Disability annuities.

16(a) Amount of annuity.--A member who has made application
17for a disability annuity as provided in section 8507(k)
18(relating to rights and duties of school employees [and
19members], members and participants) and has been found to be
20eligible in accordance with the provisions of sections 8307(c)
21(relating to eligibility for annuities) and 8505(c)(1) (relating
22to duties of board regarding applications and elections of
23members) shall receive a disability annuity payable from the
24effective date of disability and continued until a subsequent
25determination by the board that the annuitant is no longer
26entitled to a disability annuity. The disability annuity shall
27be a single life annuity that is equal to a sum of the standard
28single life [annuity] annuities determined separately for each 
29class of service if the total number of years of credited
30service is greater than 16.667, otherwise [the] each standard

1single life annuity shall be multiplied by the lesser of the
2following ratios:

3Y*/Y or 16.667/Y

4where Y = total number of years of credited service and Y* =
5total years of credited service if the member were to continue
6as a school employee until attaining superannuation age, or if
7the member has attained superannuation age then the number of
8years of credited service. In no event shall the disability
9annuity plus any cost-of-living increases be less than $100 for
10each full year of credited service. The member shall be entitled
11to the election of a joint and survivor annuity on that portion
12of the disability annuity to which he is entitled under section
138342 (relating to maximum single life annuity).

14(b) Reduction on account of earned income.--Payments on
15account of disability shall be reduced by that amount by which
16the earned income of the annuitant, as reported in accordance
17with section 8508(b) (relating to rights and duties of
18annuitants) for the preceding year together with the disability
19annuity payments for the year, exceeds the greater of $5,000 or
20the last year's salary of the annuitant as a [school employee]
21member of the system, provided that the annuitant shall not
22receive less than his member's annuity or the amount to which he
23may be entitled under section 8342, whichever is greater.

24(c) Termination and modification of payments.--Payment of
25that portion of the disability annuity in excess of the annuity
26to which the annuitant was entitled on the effective date of
27disability calculated in accordance with section 8342 shall
28cease if the annuitant is no longer eligible under the
29provisions of section 8505(c)(2) or section 8508(b) or (c) and
30if such annuitant on the date of termination of service was

1eligible for an annuity, he may file an application with the
2board for an election of an optional modification of the annuity
3to which he was entitled in accordance with section 8342.

4(d) Withdrawal of accumulated deductions.--Upon termination
5of disability annuity payments in excess of an annuity
6calculated in accordance with section 8342, a disability
7annuitant who:

8(1) is a Class T-C [or], Class T-D, Class T-G or Class 
9T-H member; or

10(2) is a Class T-E or Class T-F member with less than
11ten eligibility points

12and who does not return to school service may file an 
13application with the board for an amount equal to the 
14accumulated deductions, shared-risk member contributions and 
15statutory interest standing to his credit at the effective date 
16of disability less the total payments received on account of his 
17member's annuity.

18(e) Limitation regarding annual benefit under IRC §
19415(b).--Notwithstanding any provision of this part to the
20contrary, no benefit shall be payable to the extent that such
21benefit exceeds any limitation under IRC § 415(b) in effect with
22respect to governmental plans, as such term is defined in IRC §
23414(d), on the date the benefit payment becomes effective.

24(f) Coordination of benefits.--The determination and payment
25of a disability annuity under this section shall be in addition
26to any payments a combined service employee may be entitled to
27receive, has received or is receiving as a result of being a
28participant in the plan.

29§ 8345. Member's options.

30(a) General rule.--Any Class T-C [or], Class T-D, Class T-G
 

1or Class T-H member who is a vestee with five or more 
2eligibility points, any Class T-E or Class T-F member who is a 
3vestee with ten or more eligibility points, or any other 
4eligible member upon termination of school service who has not 
5withdrawn his accumulated deductions as provided in section 8341 
6(relating to return of accumulated deductions) may apply for and 
7elect to receive either a maximum single life annuity, as 
8calculated in accordance with the provisions of section 8342 
9(relating to maximum single life annuity), or a reduced annuity 
10certified by the actuary to be actuarially equivalent to the 
11maximum single life annuity and in accordance with one of the 
12following options, except that no member shall elect an annuity 
13payable to one or more survivor annuitants other than his spouse 
14or alternate payee of such a magnitude that the present value of 
15the annuity payable to him for life plus any lump sum payment he 
16may have elected to receive is less than 50% of the present 
17value of his maximum single life annuity. In no event shall a 
18Class T-E or Class T-F member receive an annual benefit, 
19calculated as of the effective date of retirement, greater than 
20the member's final average salary.

21(1) Option 1.--A life annuity to the member with a
22guaranteed total payment equal to the present value of the
23maximum single life annuity on the effective date of
24retirement with the provision that, if, at his death, he has
25received less than such present value, the unpaid balance
26shall be payable to his beneficiary.

27(2) Option 2.--A joint and survivor annuity payable
28during the lifetime of the member with the full amount of
29such annuity payable thereafter to his survivor annuitant, if
30living at his death.

1(3) Option 3.--A joint and fifty percent (50%) survivor
2annuity payable during the lifetime of the member with one-
3half of such annuity payable thereafter to his survivor
4annuitant, if living at his death.

5(4) Option 4.--Some other benefit which shall be
6certified by the actuary to be actuarially equivalent to the
7maximum single life annuity, subject to the following
8restrictions:

9(i) Any annuity shall be payable without reduction
10during the lifetime of the member.

11(ii) The sum of all annuities payable to the
12designated survivor annuitants shall not be greater than
13one and one-half times the annuity payable to the member.

14(iii) A portion of the benefit may be payable as a
15lump sum, except that such lump sum payment shall not
16exceed an amount equal to the accumulated deductions
17standing to the credit of the member. The balance of the
18present value of the maximum single life annuity adjusted
19in accordance with section 8342(b) shall be paid in the
20form of an annuity with a guaranteed total payment, a
21single life annuity, or a joint and survivor annuity or
22any combination thereof but subject to the restrictions
23of subparagraphs (i) and (ii) of this paragraph. This 
24subparagraph shall not apply to a Class T-E or Class T-F 
25member. For purposes of this subparagraph only, the term 
26"actuarially equivalent," as applied to any lump sum 
27withdrawal attributable to contributions credited to the 
28member's savings account on or after July 1, 2015, 
29together with all interest thereon, shall mean equal 
30present values, computed on the basis of the interest
 

1rate and such mortality and other tables as adopted by 
2the board pursuant to section 8328(b) (relating to 
3actuarial cost method) in effect on the effective date of 
4retirement of the member.

5* * *

6§ 8346. Termination of annuities.

7(a) General rule.--If an annuitant returns to school service
8or enters or has entered State service and elects multiple
9service membership, any annuity payable to him under this part
10shall cease effective upon the date of his return to school
11service or entering State service without regard to whether he 
12is a mandatory, optional or prohibited member of the system or 
13participant in the plan or, if a multiple service member, 
14whether he is a mandatory, optional or prohibited member or 
15participant of the State Employees' Retirement System or State 
16Employees' Defined Contribution Plan and in the case of an
17annuity other than a disability annuity the present value of
18such annuity, adjusted for full coverage in the case of a joint
19coverage member who makes the appropriate back contributions for
20full coverage, shall be frozen as of the date such annuity
21ceases. An annuitant who is credited with an additional 10% of
22membership service as provided in section 8302(b.2) (relating to
23credited school service) and who returns to school service,
24except as provided in subsection (b), shall forfeit such
25credited service and shall have his frozen present value
26adjusted as if his 10% retirement incentive had not been applied
27to his account. In the event that the cost-of-living increase
28enacted December 18, 1979, occurred during the period of such
29State or school employment, the frozen present value shall be
30increased, on or after the member attains superannuation age, by

1the percent applicable had he not returned to service.

2(a.1) Return of benefits.--In the event an annuitant whose
3annuity ceases pursuant to this section receives any annuity
4payment, including a lump sum payment pursuant to section 8345
5(relating to member's options) on or after the date of his
6return to school service or entering State service, the
7annuitant shall return to the board the amount so received plus
8statutory interest. The amount payable shall be certified in
9each case by the board in accordance with methods approved by
10the actuary and shall be paid in a lump sum within 90 days or in
11the case of an active member or a State employee who is an
12active member of the State Employees' Retirement System may be
13amortized with statutory interest through salary deductions to 
14the system in amounts agreed upon by the member and the board.
15The salary deduction amortization plans agreed to by the member
16and the board may include a deferral of payment amounts and
17statutory interest until the termination of school service or
18State service as the board in its sole discretion decides to
19allow. The board may limit salary deduction amortization plans
20to such terms as the board in its sole discretion determines. In
21the case of a State employee who is an active member of the
22State Employees' Retirement System, the agreed upon salary
23deductions shall be remitted to the State Employees' Retirement
24Board, which shall certify and transfer to the board the amounts
25paid.

26(b) Return to school service during emergency.--When, in the
27judgment of the employer, an emergency creates an increase in
28the work load such that there is serious impairment of service
29to the public or in the event of a shortage of appropriate
30subject certified teachers or other personnel, an annuitant or
 

1participant receiving distributions may be returned to school
2service for a period not to extend beyond the school year during
3which the emergency or shortage occurs, without loss of his
4annuity or distributions. The annuitant shall not be entitled to
5earn any credited service, and no contributions may be made by
6the annuitant, the employer or the Commonwealth on account of
7such employment. Such service shall not be subject to member 
8contributions or be eligible for qualification as creditable 
9school service or for participation in the plan, mandatory 
10pickup participant contributions or employer defined 
11contributions.

12(b.1) Return to school service in an extracurricular
13position.--

14(1) An annuitant or participant receiving distributions
15may be employed under separate contract by a public school or
16charter school in an extracurricular position performed
17primarily outside regular instructional hours and not part of
18mandated curriculum without loss of annuity. [Neither the]
19The annuitant [nor], the participant receiving distributions 
20and the employer shall not make contributions to the member's
21savings account, the individual investment account or State
22accumulation account respectively for such service. Further,
23such contract shall contain a waiver whereby the annuitant
24waives any potential retirement benefits that could arise
25from the contract and releases the employer and the board
26from any liability for such benefits. Such service shall not 
27be subject to member or participant contributions or be 
28eligible for qualification as creditable school service or 
29for participation in the plan, mandatory pickup participant 
30contributions or employer defined contributions.

1(2) Nothing in this subsection shall be construed to
2abridge or limit any rights provided under a collective
3bargaining agreement or any rights provided under the act of 
4July 23, 1970 (P.L.563, No.195), known as the Public Employe
5Relations Act.

6(3) For purposes of this subsection, the term
7"extracurricular position" means a contract position filled
8by an annuitant that is separate from the established
9academic course structure, including the position of athletic
10director.

11(c) Subsequent discontinuance of service.--Upon subsequent
12discontinuance of service, such [member] terminating school 
13employee other than a former annuitant who had the effect of his
14frozen present value eliminated in accordance with subsection
15(d) or a former disability annuitant shall be entitled to an
16annuity which is actuarially equivalent to [the sum of] the
17present value as determined under subsection (a) [and] to which 
18shall be added, if the service after reemployment was as a 
19member of the system, the present value of a maximum single life
20annuity based on years of service credited subsequent to reentry
21in the system and his final average salary computed by reference
22to his compensation as a member of the system or as a member of 
23the State Employees' Retirement System during his entire period
24of school and State service.

25(d) Elimination of the effect of frozen present value.--

26(1) An annuitant who returns to school service as an 
27active member of the system and earns three eligibility
28points by performing credited school service following the
29most recent period of receipt of an annuity under this part,
30or an annuitant who enters State service other than a
 

1participant in the State Employees' Defined Contribution Plan
2and:

3(i) is a multiple service member; or

4(ii) who elects multiple service membership, and 
5earns three eligibility points by performing credited
6State service or credited school service following the
7most recent period of receipt of an annuity under this
8part, and who had the present value of his annuity frozen
9in accordance with subsection (a), shall qualify to have
10the effect of the frozen present value resulting from all
11previous periods of retirement eliminated, provided that
12all payments under Option 4 and annuity payments payable
13during previous periods of retirement plus interest as
14set forth in paragraph (3) shall be returned to the fund
15in the form of an actuarial adjustment to his subsequent
16benefits or in such form as the board may otherwise
17direct.

18(2) Upon subsequent discontinuance of service and the
19filing of an application for an annuity, a former annuitant
20who qualifies to have the effect of a frozen present value
21eliminated under this subsection shall be entitled to receive
22the higher of either:

23(i) an annuity (prior to optional modification)
24calculated as if the freezing of the former annuitant's
25account pursuant to subsection (a) had not occurred,
26adjusted by crediting Class T-C school service as Class
27T-D service as provided for in section 8305(c) (relating
28to classes of service) and further adjusted according to
29paragraph (3), provided that a former annuitant of the
30system or a former annuitant of the State Employees'

1Retirement System who retired under a provision of law
2granting additional service credit if termination of
3school or State service or retirement occurred during a
4specific period of time shall not be permitted to retain
5the additional service credit under the prior law when
6the annuity is computed for his most recent retirement;
7or

8(ii) an annuity (prior to optional modification)
9calculated as if the former annuitant did not qualify to
10have the effect on the frozen present value eliminated,

11unless the former annuitant notifies the board in writing by
12the later of the date the application for annuity is filed or
13the effective date of retirement that the former annuitant
14wishes to receive the lower annuity.

15(3) In addition to any other adjustment to the present
16value of the maximum single life annuity that a member may be
17entitled to receive that occurs as a result of any other
18provision of law, the present value of the maximum single
19life annuity shall be reduced by all amounts paid or payable
20to him during all previous periods of retirement plus
21interest on these amounts until the date of subsequent
22retirement. The interest for each year shall be calculated
23based upon the annual interest rate adopted for that school
24year by the board for the calculation of the normal
25contribution rate pursuant to section 8328(b) (relating to
26actuarial cost method).

27§ 8349. Payment of benefits from the system.

28(a) Annuities.--Any annuity granted under the provisions of
29this part and paid from the fund shall be paid in equal monthly
30installments.

1(b) Death benefits.--If the amount of a death benefit
2payable from the fund to a beneficiary of a member under section
38347 (relating to death benefits) or under the provisions of
4Option 1 of section 8345(a)(1) (relating to member's options) is
5$10,000 or more, such beneficiary may elect to receive payment
6according to one of the following options:

7(1) A lump sum payment.

8(2) An annuity actuarially equivalent to the amount
9payable.

10(3) A lump sum payment and an annuity such that the
11annuity is actuarially equivalent to the amount payable less
12the lump sum payment specified by the beneficiary.

13* * *

14Section 115. Title 24 is amended by adding a chapter to
15read:

16CHAPTER 84

17SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN

18Sec.

198401. Establishment.

208402. Plan document.

218403. Individual investment accounts.

228404. Participant contributions.

238405. Mandatory pickup participant contributions.

248406. Employer defined contributions.

258407. Eligibility for benefits.

268408. Death benefits.

278409. Vesting.

288410. Termination of distributions.

298411. Agreements with financial institutions and other
30organizations.

18412. Powers and duties of board.

28413. Responsibility for investment loss.

38414. Investments based on participants' investment allocation
4choices.

58415. Expenses.

68416. Election by members to be participants.

78417. Tax qualification.

8§ 8401. Establishment.

9(a) School Employees' Defined Contribution Plan.--The School
10Employees' Defined Contribution Plan is established. The board
11shall administer and manage the plan, which shall be a defined
12contribution plan exclusively for the benefit of those school
13employees who participate in the plan and their beneficiaries
14within the meaning of and in conformity with IRC § 401(a). The
15board shall determine the terms and provisions of the plan not
16inconsistent with this part, the IRC and other applicable law
17and shall provide for the plan's administration.

18(b) School Employees' Defined Contribution Trust.--The
19School Employees' Defined Contribution Trust is established as
20part of the plan in accordance with this part. The trust shall
21be comprised of the individual investment accounts and all
22assets and moneys in those accounts. The members of the board
23shall be the trustees of the trust, which shall be administered
24exclusively for the benefit of those school employees who
25participate in the plan and their beneficiaries within the
26meaning of and in conformity with IRC § 401(a). The board shall
27determine the terms and provisions of the trust not inconsistent
28with this part, the IRC and other applicable law and shall
29provide for the investment and administration of the trust.

30(c) Assets held in trust.--All assets and income in the plan

1that have been or shall be withheld or contributed by the
2participants, the Commonwealth and employers in accordance with
3this part shall be held in trust in any funding vehicle
4permitted by the applicable provisions of IRC for the exclusive
5benefit of the plan's participants and their beneficiaries until
6such time as the funds are distributed to the participants or
7their beneficiaries in accordance with the terms of the plan
8document. The assets of the plan held in trust for the exclusive
9benefit of the participants and their beneficiaries may be used
10for the payment of the fees, costs and expenses related to the
11administration and investment of the plan and the trust.

12(d) Name for transacting business.--By the name of "The
13School Employees' Defined Contribution Plan," all of the
14business of the plan shall be transacted, the trust invested,
15all requisitions for money drawn and payments made and all of
16its cash and securities and other property shall be held, except
17that, any other law to the contrary notwithstanding, the board
18may establish a nominee registration procedure for the purpose
19of registering securities in order to facilitate the purchase,
20sale or other disposition of securities pursuant to the
21provisions of this part.

22§ 8402. Plan document.

23The board shall set forth the terms and provisions of the
24plan and trust in a document containing the terms and conditions
25of the plan and in a trust declaration that shall be published
26in the Pennsylvania Bulletin. The creation of the document
27containing the terms and conditions of the plan and the trust
28declaration and the establishment of the terms and provisions of
29the plan and the trust need not be promulgated by regulation or
30formal rulemaking and shall not be subject to the act of July

131, 1968 (P.L.769, No.240), referred to as the Commonwealth
2Documents Law. A reference in this part or other law to the plan
3shall include the plan document unless the context clearly
4indicates otherwise.

5§ 8403. Individual investment accounts.

6The board shall:

7(1) establish in the trust an individual investment
8account for each participant in the plan. All contributions
9by a participant or an employer for or on behalf of a
10participant shall be credited to the participant's individual
11investment account, together with all interest and investment
12earnings and losses. Investment and administrative fees,
13costs and expenses shall be charged to the participants'
14individual investment accounts; and

15(2) separately track participant contributions,
16including investment gains and losses, and employer
17contributions, including investment gains and losses, but all
18interest, investment gains and losses and administrative
19fees, costs and expenses shall be allocated proportionately.

20§ 8404. Participant contributions.

21(a) Mandatory contributions.--A participant shall make
22mandatory pickup participant contributions through payroll
23deductions to the participant's individual investment account
24equal to 7.5% of compensation for current school service. The
25employer shall cause such contributions for current service to
26be made and deducted from each payroll or on such schedule as
27established by the board. After the effective date of this
28section, an employer employing a participant in the plan shall
29pick up the required mandatory participant contributions by a
30reduction in the compensation of the participant.

1(b) Voluntary contributions.--A participant may make
2voluntary contributions up to the limits permitted by IRC
3through payroll deductions or through direct trustee-to-trustee
4transfers or through transfers of money received in an eligible
5rollover into the trust to the extent allowed by IRC § 402. Such
6rollovers shall be made in a form and manner as determined by
7the board, shall be credited to the participant's individual
8investment account and shall be separately accounted for by the
9board.

10(c) Prohibition on contributions.--No contributions shall be
11allowed that would cause a violation of the limitations related
12to contributions applicable to governmental plans contained in
13IRC § 415 or in other provisions of law. In the event that any
14disallowed contributions are made, any participant contributions
15in excess of the limitations and investment earnings on those
16contributions shall be refunded to the participant by the board.

17§ 8405. Mandatory pickup participant contributions.

18(a) Treatment for purposes of IRC § 414(h).--The
19contributions to the trust required to be made under section
208404(a) (relating to participant contributions) with respect to
21current school service rendered by an active participant shall
22be picked up by the employer and shall be treated as the
23employer's contribution for purposes of IRC § 414(h). After the
24effective date of this section, an employer employing a
25participant in the plan shall pick up the required mandatory
26participant contributions by a reduction in the compensation of
27the participant.

28(b) Treatment for other purposes.--For all other purposes
29under this part and otherwise, such mandatory pickup participant
30contributions shall be treated as contributions made by a

1participant in the same manner and to the same extent as if the
2contributions were made directly by the participant and not
3picked up.

4§ 8406. Employer defined contributions.

5(a) Contributions for current service.--The employer of a
6participant shall make employer defined contributions for
7current service of an active participant that shall be credited
8to the active participant's individual investment account.
9Employer defined contributions must be recorded and accounted
10for separately from participant contributions.

11(b) Contributions resulting from participants reemployed
12from USERRA leave.--When a school employee reemployed from
13USERRA leave makes the mandatory pickup participant
14contributions permitted to be made for the USERRA leave, the
15employer by whom the school employee is employed at the time the
16participant contributions are made shall make whatever employer
17defined contributions would have been made under this section
18had the employee making the participant contributions after
19being reemployed from USERRA leave continued to be employed in
20the employee's school position instead of performing USERRA
21leave. Such employer defined contributions shall be placed in
22the participant's individual investment account as otherwise
23provided by this part.

24(c) Limitations on contributions.--No contributions shall be
25allowed that would cause a violation of the limitations related
26to contributions applicable to governmental plans contained in
27IRC § 415 or in other provisions of law. In the event that any
28disallowed contributions are made, any employer defined
29contributions in excess of the limitations and investment
30earnings thereon shall be refunded to the employer by the board.

1§ 8407. Eligibility for benefits.

2(a) Termination of service.--A participant who terminates
3school service shall be eligible to withdraw the vested
4accumulated total defined contributions standing to the
5participant's credit in the participant's individual investment
6account or a lesser amount as the participant may request.
7Payment shall be made in a lump sum unless the board has
8established other forms of distribution in the plan document,
9subject to the provisions of subsection (g). A participant who
10withdraws the vested accumulated total defined contributions
11shall no longer be a participant in the plan, notwithstanding
12that the participant may have contracted to receive an annuity
13or other form of payment from a provider retained by the board
14for such purposes.

15(b) Required distributions.--All payments pursuant to this
16section shall start and be made in compliance with the minimum
17distribution requirements and incidental death benefit rules of
18IRC § 401(a)(9). The board shall take any action and make any
19distributions it may determine are necessary to comply with
20those requirements.

21(c) Spousal consent not required.--A participant who is
22married may receive a lump sum distribution or other
23distribution directly from the board without the consent of the
24participant's spouse, unless the plan document provides
25otherwise.

26(d) Combined service employee.--A participant who is a
27combined service employee must be terminated from all positions
28that result in either membership in the system or participation
29in the plan to be eligible to receive a distribution.

30(e) Loans.--Loans or other distributions, including hardship

1or unforeseeable emergency distributions, from the plan to
2school employees who have not terminated school service are not
3permitted, except as required by law.

4(f) Small individual investment accounts.--

5(1) A participant who terminates school service and
6whose vested accumulated total defined contributions are
7below the threshold established by law as of the date of
8termination of service may be paid the vested accumulated
9total defined contributions in a lump sum as provided in IRC
10§ 401(a)(31).

11(2) The board may also provide in the plan document
12that, notwithstanding subsection (g), a participant whose
13vested accumulated employer defined contributions are below
14the thresholds established by the board may receive those
15distributions without the obligation to purchase an annuity.
16The threshold may be established as a dollar amount, an
17annuity amount, in some other form individually or in
18combination as the board determines.

19(g) Requirement to purchase annuity.--Except as prohibited
20by the IRC or as otherwise provided in this part, a participant
21who is eligible and elects to receive a distribution of vested
22accumulated employer defined contributions shall be required to
23purchase an annuity with the distribution under such conditions
24as provided in the plan document. The conditions may include 
25that the board is authorized to make the distribution directly 
26to the annuity provider.

27§ 8408. Death benefits.

28(a) General rule.--In the event of the death of an active
29participant or inactive participant, the board shall pay to the
30participant's beneficiary the vested balance in the

1participant's individual investment account in a lump sum or in
2such other manner as the board may establish in the plan
3document.

4(b) Death of participant receiving distributions.--In the
5event of the death of a participant receiving distributions, the
6board shall pay to the participant's beneficiary the vested
7balance in the participant's individual investment account in a
8lump sum or in such other manner as the board may establish in
9the plan document or, if the board has established alternative
10methods of distribution in the plan document under which the
11participant was receiving distributions, to the participant's
12beneficiary or successor payee as provided in the plan document.

13(c) Contracts.--The board may contract with financial
14institutions, insurance companies or other types of third-party
15providers to allow participants who receive a lump sum
16distribution to receive payments and death benefits in a form
17and manner as provided by the contract. The contracts may, but
18are not required to, provide that any payment and death benefit
19options for a married former participant be in the form of a
20joint and survivor annuity unless the spouse consents to another
21payment option.

22(d) Spousal consent.--All nomination or change of
23beneficiaries made by a married participant shall be subject to
24the consent of the participant's spouse as provided for in this
25part.

26§ 8409. Vesting.

27(a) Participant and voluntary contributions.--Subject to the
28forfeiture and attachment provisions of section 8533 (relating
29to taxation, attachment and assignment of funds) or otherwise as
30provided by law, a participant shall be fully vested with

1respect to all mandatory pickup participant contributions and
2voluntary contributions paid by or on behalf of the participant
3to the trust plus interest and investment earnings on the
4participant contributions but minus investment fees and
5administrative charges.

6(b) Employer defined contributions.--

7(1) Subject to the forfeiture and attachment provisions
8of section 8533 or otherwise as provided by law, a
9participant shall be vested with respect to employer defined
10contributions paid plus interest and investment earnings by
11or on behalf of the participant to the trust according to the
12following schedule:

13(i) During the first and second year of school
14service as a participant in the plan, 0%.

15(ii) At and after the second year of school service
16as a participant in the plan, 50%.

17(iii) At and after the third year of school service
18as a participant in the plan, 75%.

19(iv) At and after the fourth year of school service
20as a participant in the plan, 100%.

21(2) The board shall establish in the plan document:

22(i) How the required time periods of school service
23in the plan are determined and calculated.

24(ii) The effect of periods that school employees
25spend on paid or unpaid leave on the determination of a
26participant's vested status in the plan.

27(iii) The effect of termination of school service or
28distributions from the plan on a participant's vested
29status in the plan.

30(iv) Other terms and conditions for the

1implementation and administration of this section.

2(3) Nonvested employer defined contributions, including
3interest and investment gains and losses that are forfeited
4by a participant, shall be applied to the participant's most
5recent employer's obligations assessed under this section in
6future years.

7(c) USERRA leave and vesting credit.--A participant in the
8plan who is reemployed from USERRA leave or who dies while
9performing USERRA leave shall receive vesting credit under this
10section for the school service that would have been performed
11had the member not performed USERRA leave.

12§ 8410. Termination of distributions.

13(a) Return to school service.--

14(1) A participant receiving distributions or an inactive
15participant who returns to school service shall cease
16receiving distributions and shall not be eligible to receive
17distributions until the participant subsequently terminates
18school service, without regard to whether the participant is
19a mandatory, optional or prohibited member of the system or
20participant in the plan.

21(2) This subsection shall not apply to a distribution of
22accumulated employer defined contributions or other
23distributions that the participant has received and used to
24purchase an annuity from a provider contracted by the board.

25(b) Return of benefits paid during USERRA leave.--

26(1) If a former school employee is reemployed from
27USERRA leave and received any payments or annuity from the
28plan during the USERRA leave, the employee shall return to
29the board the amount so received plus interest as provided in
30the plan document.

1(2) The amount payable shall be certified in each case
2by the board in accordance with methods approved by the
3actuary and shall be paid in a lump sum within 30 days or, in
4the case of an active participant, may be amortized with
5interest as provided in the plan document through salary
6deductions to the trust in amounts agreed upon by the active
7participant and the board, but not longer than a period that
8starts with the date of reemployment and continuing for up to
9three times the length of the active participant's immediate
10past period of USERRA leave. The repayment period shall not
11exceed five years.

12§ 8411. Agreements with financial institutions and other
13organizations.

14To establish and administer the plan, the board may enter
15into written agreements with one or more financial institutions
16or other organizations relating to the plan's administration and
17investment of funds held pursuant to the plan.

18§ 8412. Powers and duties of board.

19The board shall have the following powers and duties to
20establish the plan and trust and to administer the provisions of
21this part:

22(1) The board may commingle or pool assets with the
23assets of other persons or entities.

24(2) The board shall pay all administrative fees, costs
25and expenses of managing, investing and administering the
26plan, the trust and the individual investment accounts from
27the balance of such individual investment accounts, except as
28the General Assembly otherwise provides through
29appropriations from the General Fund.

30(3) The board may establish investment guidelines and

1limits on the types of investments that participants may
2make, consistent with the board's fiduciary obligations.

3(4) The board shall have the power to change the terms
4of the plan as may be necessary to maintain the tax-qualified
5status of the plan.

6(5) The board may establish a process for election to
7participate in the plan by those school employees for whom
8participation is not mandatory.

9(6) The board may perform an annual or more frequent
10review of any qualified fund manager for the purpose of
11assuring it continues to meet all standards and criteria
12established.

13(7) The board may allow for eligible rollovers and
14direct trustee-to-trustee transfers into the trust from
15qualified plans of other employers, regardless of whether the
16employers are private employers or public employers.

17(8) The board may allow a former participant to maintain
18the participant's individual investment account within the
19plan.

20(9) The board shall administer the plan in compliance
21with the qualification and other rules of IRC.

22(10) The board may establish procedures to provide for
23the lawful payment of benefits.

24(11) The board shall determine what constitutes a
25termination of school service.

26(12) The board may establish procedures for
27distributions of small accounts as required or permitted by
28IRC.

29(13) The board may establish procedures in the plan
30document or to promulgate rules and regulations as it deems

1necessary for the administration and management of the plan,
2including, but not limited to, establishing:

3(i) Procedures by which eligible participants may
4change voluntary contribution amounts or their investment
5choices on a periodic basis or make other elections
6regarding their participation in the plan.

7(ii) Procedures for deducting mandatory pickup
8participant contributions and voluntary contributions
9from a participant's compensation.

10(iii) Procedures for rollovers and trustee-to-
11trustee transfers allowed under the IRC and permitted by
12the board as part of the plan.

13(iv) Standards and criteria for disclosing and
14providing not less than ten options to eligible
15individuals regarding investments of amounts deferred
16under the plan, provided that one of the available
17options must serve as the default option for participants
18who do not make a timely election and that, to the extent
19commercially available, one option must have an annuity
20investment feature.

21(v) Standards and criteria for disclosing to the
22participants the anticipated and actual income
23attributable to amounts invested, property rights and all
24fees, costs and expenses to be made against amounts
25deferred to cover the costs and expenses of administering
26and managing the plan or trust.

27(vi) Procedures, standards and criteria for the
28making of distributions from the plan upon termination
29from employment or death or in other circumstances
30consistent with the purpose of the plan.

1(14) The board may waive any reporting or information
2requirement contained in this part if the board determines
3that the information is not needed for the administration of
4the plan.

5(15) The board may contract any services and duties in
6lieu of staff except final adjudications and as prohibited by
7law. Any duties or responsibilities of the board not required
8by law to be performed by the board may be delegated to a
9third-party provider subject to appeal to the board.

10(16) The board may provide that any duties of the
11employer or information provided by the participant to the
12employer be performed or received directly by the board.

13(17) The provisions and restrictions of the act of July
142, 2010 (P.L.266, No.44), known as Protecting Pennsylvania's
15Investments Act, shall not apply to the plan or trust or the
16investments thereof, but the board may offer to the plan
17participants investment vehicles that would be allowed under
18the Protecting Pennsylvania's Investments Act. The board
19shall also to the extent commercially available provide that
20one option for participants have an annuity investment
21feature.

22(18) The board shall ensure that participants are
23provided with educational materials about investment options
24and choices.

25§ 8413. Responsibility for investment loss.

26The Commonwealth, the board, an employer or a school entity
27or other political subdivision shall not be responsible for any
28investment loss incurred under the plan or for the failure of
29any investment to earn any specific or expected return or to
30earn as much as any other investment opportunity, whether or not

1such other opportunity was offered to participants in the plan.

2§ 8414. Investments based on participants' investment
3allocation choices.

4(a) Investment by participant.--All contributions, interest
5and investment earnings shall be invested based on a
6participant's investment allocation choices. All investment
7allocation choices shall be credited proportionally between
8contributions from the participant and employer defined
9contributions. Each participant shall be credited individually
10with the amount of contributions, interest and investment
11earnings.

12(b) Investment of contributions made by entities other than
13Commonwealth.--Investment of contributions by any corporation,
14institution, insurance company or custodial bank or other entity
15that the board has approved shall not be unreasonably delayed
16and in no case shall the investment of contributions be delayed
17more than 30 days from the date of payroll deduction or
18voluntary contributions are made to the date that funds are
19invested. Any interest earned on the funds pending investment
20shall be allocated to the employers and credited to the
21individual investment accounts of participants who are then
22participating in the plan, unless the interest is used to defray
23administrative costs and fees that would otherwise be required
24to be borne by participants who are then participating in the
25plan.

26§ 8415. Expenses.

27All expenses, fees and costs of administering the plan and
28the trust and investing the assets of the trust shall be borne
29by the participants and paid from assessments against the
30balances of the individual investment accounts as established by

1the board, except that for fiscal years ending before July 1,
22015, the expenses, fees and costs of establishing and
3administering the plan and trust shall be paid by the
4Commonwealth through annual appropriations from the General
5Fund, made on the basis of estimates from the board.

6§ 8416. Election by members to be participants.

7(a) General rule.--Any school employee who is an active
8member or inactive member on or after July 1, 2015, and who is
9employed in a position that would otherwise be eligible for
10participation in the plan may elect to become a participant in
11the plan.

12(b) Time for making election.--An eligible school employee
13may elect to become a participant and a combined service
14employee at any time before termination of school service by
15filing a written election with the board.

16(c) Effect of election.--The following apply:

17(1) An election to become a participant shall be
18irrevocable. Participation shall be effective at the
19beginning of the next pay period commencing after the
20election is filed with the board.

21(2) A member who elects to become a participant shall
22remain a participant for all future school service.

23(3) Any prior school or nonschool service credited in
24the system shall remain in the class of service in which it
25is credited on the effective date of participation.

26(4) A combined service employee shall not be eligible to
27receive an annuity from the system or a withdrawal of
28accumulated deductions until the employee has terminated
29school service.

30(5) A participant shall not be entitled to purchase any

1previous school service or creditable nonschool service.

2(6) The eligibility of a combined service employee for
3an annuity from the system and, if eligible, the amount of
4the annuity shall be as determined under this part.

5§ 8417. Tax qualification.

6(a) Required distributions.--All payments under this chapter
7shall start and be made in compliance with the minimum
8distribution requirements and incidental death benefit rules of
9IRC § 401(a).

10(b) Limitations.--The following shall apply:

11(1) (i) Except as provided under subparagraph (ii) and
12notwithstanding a provision of this part, a contribution
13or benefit related to the plan may not exceed a
14limitation under IRC § 415 with respect to governmental
15plans that is in effect on the date the contribution or
16benefit payment takes effect.

17(ii) An increase in a limitation under IRC § 415
18shall apply to the participants on or after the effective
19date of this section.

20(iii) For the purposes of this paragraph, the term
21"government plans" shall have the same meaning as in IRC
22§ 414(d).

23(2) (i) Except as provided under subparagraph (ii), an
24amendment of this part on or after the effective date of
25this section that increases contributions or benefits for
26active participants, inactive participants or
27participants receiving distributions may not be deemed to 
28provide for a contribution or benefit in excess of a
29limitation, adjusted on or after the effective date of
30this section, under IRC § 415 unless specifically

1provided by legislation.

2(ii) Notwithstanding subparagraph (i), an increase
3in benefits on or after the effective date of this
4section for a participant in the plan shall be authorized
5and apply to the fullest extent allowed by law.

6Section 116. Section 8501(a), (c) and (d) of Title 24 are
7amended to read:

8§ 8501. Public School Employees' Retirement Board.

9(a) Status and membership.--The board shall be an
10independent administrative board and shall consist of 15
11members: the Secretary of Education, ex officio; the State
12Treasurer, ex officio; two Senators; two members of the House of
13Representatives; the executive secretary of the Pennsylvania
14School Boards Association, ex officio; two to be appointed by
15the Governor, at least one of whom shall not be a school
16employee or an officer or employee of the State; three to be
17elected by the active professional members of the system and 
18active professional participants of the plan from among their
19number; one to be elected by annuitants or a participant of the 
20plan who has terminated school service and is receiving or is 
21eligible to receive distributions from among their number; one
22to be elected by the active nonprofessional members of the
23system or active nonprofessional participants of the plan from
24among their number; and one to be elected by members of
25Pennsylvania public school boards from among their number. The
26appointments made by the Governor shall be confirmed by the
27Senate and each election shall be conducted in a manner approved
28by the board. The terms of the appointed and nonlegislative
29elected members shall be three years. The members from the
30Senate shall be appointed by the President pro tempore of the

1Senate and shall consist of one member from the majority and one
2member from the minority. The members from the House of
3Representatives shall be appointed by the Speaker of the House
4of Representatives and shall consist of one member from the
5majority and one member from the minority. The legislative
6members shall serve on the board for the duration of their
7legislative terms and shall continue to serve until 30 days
8after the convening of the next regular session of the General
9Assembly after the expiration of their respective legislative
10terms or until a successor is appointed for the new term,
11whichever occurs first. The chairman of the board shall be
12elected by the board members. Each ex officio member of the
13board and each legislative member of the board may appoint a
14duly authorized designee to act in his stead. In the event that 
15a board member, who is designated as an active participant or as 
16the participant in the plan who is receiving or is eligible to 
17receive distributions, receives a total distribution of the 
18board member's interest in the plan, that board member may 
19continue to serve on the board for the remainder of the term.

20* * *

21(c) Oath of office.--Each member of the board shall take an
22oath of office that he will, so far as it devolves upon him,
23diligently and honestly administer the affairs of said board, 
24the system and the plan and that he will not knowingly violate
25or willfully permit to be violated any of the provisions of law
26applicable to this part. Such oath shall be subscribed by the
27member making it and certified by the officer before whom it is
28taken and shall be immediately filed in the office of the
29Secretary of the Commonwealth.

30(d) Compensation and expenses.--The members of the board who

1are members of the system or participants in the plan shall
2serve without compensation. Members of the board who are members
3of the system or participants in the plan and who are employed
4by a governmental entity shall not suffer loss of salary or
5wages through serving on the board. The board, on request of the
6employer of any member of the board who is an active
7professional or nonprofessional member of the system or active 
8professional or nonprofessional participant in the plan, may
9reimburse such employer for the salary or wages of the member or 
10participant, or for the cost of employing a substitute for such
11member or participant, while the member or participant is
12necessarily absent from employment to execute the duties of the
13board. The members of the board who are not members of either
14the school system or the State Employees' Retirement System may
15be paid $100 per day when attending meetings and all board
16members shall be reimbursed for any necessary expenses. However,
17when the duties of the board as mandated are not executed, no
18compensation or reimbursement for expenses of board members
19shall be paid or payable during the period in which such duties
20are not executed.

21* * *

22Section 117. Section 8502(b), (c), (e), (h), (i), (j), (k),
23(n) and (o) of Title 24 are amended and the section is amended
24by adding a subsection to read:

25§ 8502. Administrative duties of board.

26* * *

27(b) Professional personnel.--The board shall contract for
28the services of a chief medical examiner, an actuary, investment
29advisors, counselors, an investment coordinator, and such other
30professional personnel as it deems advisable. The board may
 

1utilize the same individuals and firms contracted under this 
2subsection for both the system and the plan but shall allocate 
3the fees, costs and expenses incurred under this subsection 
4between the system and the plan as appropriate.

5(c) Expenses.--

6(1) The board shall, through the Governor, submit to the
7General Assembly annually a budget covering the
8administrative expenses of [this part.] the system and a 
9separate budget covering the administrative expenses of the 
10plan. The separate budget shall include those expenses 
11necessary to establish the plan and trust.

12(2) Such expenses of the system as approved by the
13General Assembly in an appropriation bill shall be paid from
14investment earnings of the fund.

15(3) For fiscal years ending on or before June 30, 2015,
16such expenses of the plan as approved by the General Assembly
17through an appropriation shall be paid from the General
18Fund. For fiscal years beginning on or after July 1, 2015,
19such expenses of the plan as approved by the General Assembly
20shall be paid from interest, pursuant to section 8414(b)
21(relating to investments based on participant investment
22allocation choices) or assessments on the balances of the
23participants' individual investment accounts.

24(4) Concurrently with its administrative budget, the
25board shall also submit to the General Assembly annually a
26list of proposed expenditures which the board intends to pay
27through the use of directed commissions, together with a list
28of the actual expenditures from the past year actually paid
29by the board through the use of directed commissions. All
30such directed commission expenditures shall be made by the

1board for the exclusive benefit of the system and its members
2and for the exclusive benefit of the plan and its 
3participants, respectively.

4* * *

5(e) Records.--

6(1) The board shall keep a record of all its proceedings
7which shall be [open to inspection by] accessible to the
8public, except as otherwise provided in this part or by other
9law.

10(2) Any record, material or data received, prepared,
11used or retained by the board or its employees, investment
12professionals or agents relating to an investment shall not
13constitute a public record subject to public [inspection] 
14access under the act of [June 21, 1957 (P.L.390, No.212),
15referred to] February 14, 2008 (P.L.6, No.3), known as the
16Right-to-Know Law, if, in the reasonable judgment of the
17board, the [inspection] access would:

18(i) in the case of an alternative investment or
19alternative investment vehicle involve the release of
20sensitive investment or financial information relating to
21the alternative investment or alternative investment
22vehicle which the fund or trust was able to obtain only
23upon agreeing to maintain its confidentiality;

24(ii) cause substantial competitive harm to the
25person from whom sensitive investment or financial
26information relating to the investment was received; or

27(iii) have a substantial detrimental impact on the
28value of an investment to be acquired, held or disposed
29of by the fund or trust, or would cause a breach of the
30standard of care or fiduciary duty set forth in this

1part.

2(3) (i) The sensitive investment or financial
3information excluded from [inspection] access under
4paragraph (2)(i), to the extent not otherwise excluded
5from [inspection] access, shall constitute a public
6record subject to public [inspection] access under the
7Right-to-Know Law once the board is no longer required by
8its agreement to maintain confidentiality.

9(ii) The sensitive investment or financial
10information excluded from [inspection] access under
11paragraph (2)(ii), to the extent not otherwise excluded
12from [inspection] access, shall constitute a public
13record subject to public [inspection] access under the
14Right-to-Know Law once:

15(A) the [inspection] access no longer causes
16substantial competitive harm to the person from whom
17the information was received; or

18(B) the entity in which the investment was made
19is liquidated;

20whichever is later.

21(iii) The sensitive investment or financial
22information excluded from [inspection] access under
23paragraph (2)(iii), to the extent not otherwise excluded
24from [inspection] access, shall constitute a public
25record subject to public [inspection] access under the
26Right-to-Know Law once:

27(A) the [inspection] access no longer has a
28substantial detrimental impact on the value of an
29investment of the fund or trust and would not cause a
30breach of the standard of care or fiduciary duty set

1forth in this part; or

2(B) the entity in which the investment was made
3is liquidated;

4whichever is later.

5(4) Except for the provisions of paragraph (3), nothing
6in this subsection shall be construed to designate any
7record, material or data received, prepared, used or retained
8by the board or its employees, investment professionals or
9agents relating to an investment as a public record subject
10to public [inspection] access under the Right-to-Know Law.

11(5) Notwithstanding the provisions of this subsection,
12the following information regarding an alternative investment
13vehicle shall be subject to public [inspection] access under
14the Right-to-Know Law:

15(i) The name, address and vintage year of the
16alternative investment vehicle.

17(ii) The identity of the manager of the alternative
18investment vehicle.

19(iii) The dollar amount of the commitment made by
20the system or plan to the alternative investment vehicle.

21(iv) The dollar amount of cash contributions made by
22the system or plan to the alternative investment vehicle
23since inception.

24(v) The dollar amount of cash distributions received
25by the system or plan from the alternative investment
26vehicle since inception.

27(vi) The net internal rate of return of the
28alternative investment vehicle since inception, provided
29that the system or plan shall not be required to disclose
30the net internal rate of return under circumstances in

1which, because of the limited number of portfolio assets
2remaining in the alternative investment vehicle, the
3disclosure could reveal the values of specifically
4identifiable remaining portfolio assets to the detriment
5of the alternative investment.

6(vii) The aggregate value of the remaining portfolio
7assets attributable to the system's or plan's investment
8in the alternative investment vehicle, provided that the
9system or plan shall not be required to disclose the
10value under circumstances in which, because of the
11limited number of portfolio assets remaining in the
12alternative investment vehicle, the disclosure could
13reveal the values of specifically identifiable remaining
14portfolio assets to the detriment of the alternative
15investment.

16(viii) The dollar amount of total management fees
17and costs paid to the alternative investment vehicle by
18the system or plan on an annual fiscal year-end basis.

19(6) Any record, material or data received, prepared,
20used or retained by the board or its employees or agents
21relating to a participant shall not constitute a public
22record subject to public access under the Right-to-Know Law,
23if, in the reasonable judgment of the board, the access would
24disclose any of the following:

25(i) The existence, date, amount and any other
26information pertaining to the voluntary contributions,
27including rollover contributions and trustee-to-trustee
28transfers, of any participant.

29(ii) The investment option selections of any
30participant.

1(iii) The balance of a participant's individual
2investment account, including the amount distributed to
3the participant, and any investment gains or losses, or
4rates of return.

5(iv) The identity of a participant's designated
6beneficiary, successor payee or alternate payee.

7(v) The benefit payment option of a participant.

8(7) Nothing in this part shall be construed to designate
9any record, material or data received, prepared, used or
10retained by the board or its employees or agents relating to
11the contributions, investments, account value or benefits
12payable to or on account of a participant as a public record
13subject to public access under the Right-to-Know Law.

14* * *

15(h) Regulations and procedures.--The board shall, with the
16advice of the Attorney General and the actuary, adopt and
17promulgate rules and regulations for the uniform administration
18of the system. The actuary shall approve in writing all
19computational procedures used in the calculation of
20contributions and benefits pertaining to the system, and the
21board shall by resolution adopt such computational procedures,
22prior to their application by the board. Such rules, regulations
23and computational procedures as so adopted from time to time and
24as in force and effect at any time, together with such tables as
25are adopted and published pursuant to subsection (j) as
26necessary for the calculation of annuities and other benefits,
27shall be as effective as if fully set forth in this part. Any
28actuarial assumption specified in or underlying any such rule,
29regulation or computational procedure and utilized as a basis
30for determining any benefit shall be applied in a uniform

1manner.

2(i) Data.--The board shall keep in convenient form such data
3as are stipulated by the actuary in order that an annual
4actuarial valuation of the various accounts of the fund can be
5completed within six months of the close of each fiscal year.
6The board shall have final authority over the means by which
7data is collected, maintained and stored and in so doing shall
8protect the rights of its membership as to privacy and
9confidentiality.

10(j) Actuarial investigation and valuation.--The board shall
11have the actuary make an annual valuation of the various
12accounts of the fund within six months of the close of each
13fiscal year. In the fiscal year 1975 and in every fifth year
14thereafter, the board shall have the actuary conduct an
15actuarial investigation and evaluation of the system based on
16data including the mortality, service, and compensation
17experience provided by the board annually during the preceding
18five years concerning the members and beneficiaries of the 
19system. The board shall by resolution adopt such tables as are
20necessary for the actuarial valuation of the fund and
21calculation of contributions, annuities, and other benefits
22based on the reports and recommendations of the actuary. Within
2330 days of their adoption, the secretary of the board shall
24cause those tables which relate to the calculation of annuities
25and other benefits to be published in the Pennsylvania Bulletin
26in accordance with the provisions of 45 Pa.C.S. § 725(a)
27(relating to additional contents of Pennsylvania Bulletin) and,
28unless the board specifies therein a later effective date, such
29tables shall become effective on such publication. The board
30shall include a report on the significant facts, recommendations

1and data developed in each five-year actuarial investigation and
2evaluation of the system in the annual financial statement
3published pursuant to the requirements of subsection (n) for the
4fiscal year in which such investigation and evaluation were
5concluded.

6(k) Certification of employer contributions to fund.--The
7board shall, each year in addition to the itemized budget
8required under section 8330 (relating to appropriations by the
9Commonwealth), certify to the employers and the Commonwealth the
10employer contribution rate expressed as a percentage of members'
11payroll necessary for the funding of prospective annuities for
12active members and the annuities of annuitants, and certify the
13rates and amounts of the normal contributions as determined
14pursuant to section 8328(b) (relating to actuarial cost method),
15accrued liability contributions as determined pursuant to
16section 8328(c), supplemental annuities contribution rate as
17determined pursuant to section 8328(d), the experience
18adjustment factor as determined pursuant to section 8328(e),
19premium assistance contributions as determined pursuant to
20section 8328(f), the costs added by legislation as determined 
21pursuant to section 8328(i), the actuarial required contribution 
22rate as determined pursuant to section 8328(i), the collared 
23contribution rate as determined pursuant to section 8328(g), the 
24final contribution rate as determined pursuant to section 
258328(h) and the shared-risk contribution rate as determined 
26under section 8321(b) (relating to regular member contributions 
27for current service), which shall be paid to the fund and
28credited to the appropriate accounts. These certifications shall
29be regarded as final and not subject to modification by the
30Secretary of the Budget.

1* * *

2(n) Annual financial statement.--The board shall prepare and
3have published, on or before January 1 of each year, [a
4financial statement] financial statements as of the fiscal year
5ending June 30 of the previous year showing the condition of the
6fund, the trust and the various accounts, including, but not
7limited to, the board's accrual and expenditure of directed
8commissions, and setting forth such other facts, recommendations
9and data as may be of use in the advancement of knowledge
10concerning annuities and other benefits provided by this part.
11The board shall submit said financial [statement] statements to
12the Governor and shall make copies available to the employers
13for the use of the school employees and the public.

14(o) Independent [audit] audits.--The board shall provide for
15[an annual audit] annual audits of the system and the plan by an
16independent certified public accounting firm, which [audit]
17audits shall include the board's accrual and expenditure of
18directed commissions. The board may use the same independent 
19certified public accounting firm for the audits of both the 
20system and the plan.

21* * *

22(q) Participant and employer contributions to trust.--The
23board shall, each year in addition to any fees and itemized
24budget required under section 8330, certify, as a percentage of
25each participant's compensation, the employer defined
26contributions, which shall be paid to the trust and credited to
27each participant's individual investment account. These
28certifications shall be regarded as final and not subject to
29modification by the Secretary of the Budget. The board shall
30cause all mandatory pickup participant contributions made on

1behalf of a participant and all voluntary contributions made by
2a participant to be credited to the participant's individual
3investment account.

4Section 118. Section 8502.2(a) of Title 24 is amended to
5read:

6§ 8502.2. Health insurance.

7(a) Authority.--The board may sponsor a participant-funded
8group health insurance program for annuitants, participants 
9receiving distributions, spouses of annuitants and participants 
10receiving distributions, survivor annuitants and their
11dependents. The board may promulgate regulations regarding the
12prudent and efficient operation of the program, including, but
13not limited to:

14(1) Establishment of an annual budget and disbursements
15in accordance with the budget.

16(2) Determination of the benefits structure.

17(3) Determination of enrollment procedures.

18(4) Establishment of premium rates sufficient to fully
19fund the program, including administrative expenses.

20(5) Contracting for goods, equipment, services,
21consultants and other professional personnel as needed to
22operate the program.

23* * *

24Section 119. Section 8503 heading and (a) of Title 24 are
25amended and the section is amended by adding a subsection to
26read:

27§ 8503. Duties of board to advise and report to employers [and
28members], members and participants.

29(a) Manual of regulations.--The board shall, with the advice
30of the Attorney General and the actuary, prepare, within 90 days

1of the effective date of this part, a manual incorporating rules
2and regulations consistent with the provisions of this part for
3the employers who shall make information contained therein
4available to the general membership. The board shall thereafter
5advise the employers within 90 days of any changes in such rules
6and regulations due to changes in the law or due to changes in
7administrative policies. As soon as practicable after the
8commissioner's publication with respect thereto, the board shall
9also advise the employers as to any cost-of-living adjustment
10for the succeeding calendar year in the amount of the limitation
11under IRC § 401(a)(17) and the dollar amounts of the limitations
12under IRC § 415[(b)].

13* * *

14(b.1) Participant status statements.--The board shall have
15furnished annually to each participant on or before December 31,
16and more frequently as the board may agree or as required by
17law, a statement showing the accumulated total defined
18contributions credited to the participant's individual
19investment account, the nature and type of investments and the
20investment allocation of future contributions as of June 30 of
21the current year and requesting the participant to make any
22necessary correction or revision regarding his designated
23beneficiary.

24* * *

25Section 120. Section 8504(c) of Title 24 is amended to read:

26§ 8504. Duties of board to report to State Employees'
27Retirement Board.

28* * *

29(c) Applications for benefits for State employees.--Upon
30receipt of notification and the required data from the State

1Employees' Retirement Board that a former school employee who
2elected multiple service has applied for a State employee's
3retirement benefit or, in the event of his death, his legally
4constituted representative has applied for such benefit, the
5board shall:

6(1) Certify to the State Employees' Retirement Board:

7(i) The salary history as a member of the Public
8School Employees' Retirement System and the final average
9salary as calculated on the basis of the compensation
10received as a State and school employee.

11(ii) The annuity or benefit which the member or his
12beneficiary is entitled to receive under this part and
13modified according to the option selected.

14(2) Transfer to the State Employees' Retirement Fund the
15accumulated deductions standing to such member's credit and
16the actuarial reserve required on account of the member's
17years of credited service in the school system and his final
18average salary determined on the basis of his compensation as 
19a member in both systems.

20Section 121. Sections 8505 heading, (b), (h), (i) and (l),
218506(a), (d), (e), (g) and (h) and 8507 heading, (a), (e) and
22(f) of Title 24 are amended and the sections are amended by
23adding subsections to read:

24§ 8505. Duties of board regarding applications and elections of
25members and participants.

26* * *

27(b) State employees electing multiple service status.--Upon
28receipt of notification from the State Employees' Retirement
29Board that a former school employee has become an active member
30in the State Employees' Retirement System and has elected to

1become a member with multiple service status, the board shall:

2(1) In case of a member who is receiving an annuity from
3the system:

4(i) Discontinue payments, transfer the present value
5of the member's annuity at the time of entering State
6service, plus the amount withdrawn in a lump sum payment,
7on or after the date of entering State service, pursuant
8to section 8345 (relating to member's options), with
9statutory interest to date of transfer, minus the amount
10to be returned to the board on account of return to
11service that the board has determined is to be credited
12in the members' savings account, from the annuity reserve
13account to the members' savings account and resume
14crediting of statutory interest on the amount restored to
15his credit.

16(ii) Transfer the balance of the present value of
17the total annuity, minus the amount to be returned to the
18board on account of return to service that the board has
19determined is to be credited in the State accumulation
20account, from the annuity reserve account to the State
21accumulation account.

22(iii) Certify to the member the amount of lump sum
23and annuity payments with statutory interest the member
24is to return to the board and, of those amounts, which
25amount shall be credited to the members' savings account
26and credited with statutory interest as such payments are
27returned and which amount shall be credited to the State
28accumulation account.

29(2) In case of a member who is not receiving an annuity
30from the system and who has not withdrawn his accumulated

1deductions, continue or resume the crediting of statutory
2interest on his accumulated deductions.

3(3) In case of a member who is not receiving an annuity
4from the system and his accumulated deductions were
5withdrawn, certify to the member the accumulated deductions
6as they would have been at the time of his separation had he
7been a full coverage member together with statutory interest
8for all periods of subsequent State service eligible for 
9membership in the State Employees' Retirement System and
10school service eligible for membership in the system to the
11date of repayment. Such amount shall be restored by him and
12shall be credited with statutory interest as such payments
13are restored.

14* * *

15(e.1) Certification to participants terminating service.--
16The board shall certify to a participant, within one year of
17termination of service of such participant, and, if the
18participant is married, the board is authorized to advise the
19participant's spouse, in writing of the vested accumulated total
20defined contributions credited to the participant's individual
21investment account as of the date stated in the writing, any
22notices regarding rollover or other matters required by IRC or
23other law, the obligation of the participant to commence
24distributions from the plan by the participant's required
25beginning date, and the ability to receive all or part of the
26vested balance in the participant's individual investment
27account in a lump sum or in such other form as the board may
28authorize or as required by law.

29* * *

30(f.1) Notification to inactive participants approaching

1required beginning date.--The board shall notify each inactive
2participant who has terminated school service and for whom
3distribution has not commenced by 90 days before the
4participant's required beginning date, and, if the participant
5is married, the board may advise the participant's spouse, in
6writing, that the inactive participant has an obligation to
7commence distributions by the required beginning date in a form
8and manner required by IRC § 401(a)(9) and other applicable
9provisions of IRC.

10* * *

11(g.1) Initial payment to a participant.--The board shall
12make the initial payment to a participant who has applied for a
13distribution within 60 days of the filing of the application.

14(h) Death benefits.--Upon receipt of notification of the
15death of a member, an active participant, an inactive 
16participant or a former participant performing USERRA leave, the
17board shall notify the designated beneficiary or survivor
18annuitant of the benefits to which he is entitled and shall make
19the first payment to the beneficiary under the plan elected by
20the beneficiary within 60 days of receipt of certification of
21death and other necessary data. If no beneficiary designation is
22in effect at the date of the member's or participant's death or
23no notice has been filed with the board to pay the amount of
24such benefits to the member's or participant's estate, the board
25is authorized to pay such benefits to the executor,
26administrator, surviving spouse or next-of-kin of the deceased
27member or participant, and payment pursuant hereto shall fully
28discharge the fund or plan from any further liability to make
29payment of such benefits to any other person. If the surviving
30spouse or next-of-kin of the deceased member or participant
 

1cannot be found for the purpose of paying such benefits for a
2period of seven years from the date of death of the member or 
3participant, then such benefits shall be escheated to the
4Commonwealth for the benefit of the fund or plan.

5(i) Medical insurance coverage.--Upon receipt of
6notification from an insurance carrier offering a health
7insurance program approved by the board that an annuitant of the 
8system who has attained age 65 has elected medical, major
9medical, and hospitalization insurance coverage or notification
10that annuitants of the system with less than 24 1/2 eligibility
11points (other than disability annuitants of the system), spouses
12of annuitants and survivor annuitants eligible to elect to
13enroll in the approved health insurance program have elected
14participation in such health insurance program, the board may
15deduct from the annuity payments the appropriate annual charges
16in equal monthly installments. Such deductions shall be
17transmitted to the insurance carrier.

18* * *

19(l) Notification of Class T-F or Class T-G membership.--The 
20board shall inform any eligible school employee of the right to 
21elect Class T-F membership or the right to elect Class T-H 
22membership, as applicable.

23§ 8506. Duties of employers.

24(a) Status of members and participants.--The employer shall,
25each month, notify the board in a manner prescribed by the board
26of the salary changes effective during the past month, the date
27of all removals from the payroll, and the type of leave of any
28member or participant who has been removed from the payroll for
29any time during that month, and:

30(1) if the removal is due to leave without pay, the

1employer shall furnish the board with the date of beginning
2leave, the date of return to service, and the reason for
3leave;

4(2) if the removal is due to a transfer to another
5employer, the former employer shall furnish such employer and
6the board with a complete school service record, including
7credited or creditable nonschool service; or

8(3) if the removal is due to termination of school
9service, the employer shall furnish the board with a complete
10school service record including credited or creditable
11nonschool service and in the case of death of the member the
12employer shall so notify the board.

13* * *

14(c.1) Participant and employer defined contributions.--The
15employer shall cause the mandatory pickup participant
16contributions on behalf of a participant to be made and shall
17cause to be deducted any voluntary contributions authorized by a
18participant. The employer shall also cause the employer defined
19contributions on behalf of a participant to be made. The
20employer shall notify the board at times and in a manner
21prescribed by the board of the compensation of any participant
22to whom the limitation under IRC § 401(a)(17) either applies or
23is expected to apply and shall cause the participant's
24contributions to be deducted from payroll to cease at the
25limitation under IRC § 401(a)(17) on the payroll date if and
26when such limit shall be reached. The employer shall certify to
27the board the amounts picked up and deducted and the employer
28defined contributions being made and shall send the total amount
29picked up, deducted and contributed together with a duplicate of
30such voucher to the secretary of the board every pay period or

1on such schedule as established by the board.

2(d) New employees subject to mandatory membership or 
3participation.--Upon the assumption of duties of each new school
4employee whose membership in the system or plan is mandatory,
5the employer shall no later than 30 days thereafter cause an
6application for membership or participation, which application
7shall include the employee's home address, birthdate certified
8by the employer, previous school or State service and any other
9information requested by the board, and a nomination of
10beneficiary to be made by such employee, who shall be the 
11participant's spouse if the participant is married, unless the 
12spouse consents otherwise, and filed with the board and shall
13make pickup contributions or mandatory pickup participant 
14contributions from the effective date of school employment.

15(e) New employees subject to optional membership or 
16participation.--The employer shall inform any eligible school
17employee whose membership in the system or participation in the 
18plan is not mandatory of his opportunity to become a member of
19the system or participant in the plan provided that he elects to
20purchase credit for all such continuous creditable service. If
21such employee so elects, the employer shall no later than 30
22days thereafter cause an application for membership which
23application shall include the employee's home address, birthdate
24certified by the employer, previous school or State service and
25any other information requested by the board, and a nomination
26of beneficiary, who shall be the participant's spouse if the 
27participant is married, unless the spouse consents otherwise, to
28be made by him and filed with the board and shall cause proper
29contributions to be made from the date of election of membership 
30or participation.

1* * *

2(g) Former State employee contributors.--

3(1) The employer shall, upon the employment of a former
4member of the State Employees' Retirement System who is not