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
5an annuitant of the State Employees' Retirement System,
6advise such employee of his right to elect multiple service
7membership within 365 days of entry into the system and, in
8the case any such employee who so elects has withdrawn his
9accumulated deductions, require him to restore his
10accumulated deductions as they would have been at the time of
11his separation had he been a full coverage member, together
12with statutory interest for all periods of subsequent State
13and school service to date of repayment. The employer shall
14advise the board of such election.

15(2) Paragraph (1) shall not apply to a school employee
16who is employed in a position where the school employee is or
17could be a participant in the plan other than a member who
18elects to become a participant in the plan.

19(h) Former State employee annuitants.--

20(1) The employer shall, upon the employment of an
21annuitant of the State Employees' Retirement System who
22applies for membership in the system, advise such employee
23that he may elect multiple service membership within 365 days
24of entry into the system and that if he so elects his annuity
25from the State Employees' Retirement System will be
26discontinued effective upon the date of his return to school
27service and, upon termination of school service and
28application for an annuity, the annuity will be adjusted in
29accordance with section 8346 (relating to termination of
30annuities). The employer shall advise the board of such

1election.

2(2) Paragraph (1) shall not apply to a school employee
3who is employed in a position where the school employee is or
4could be a participant in the plan other than a member who
5elects to become a participant in the plan.

6* * *

7(k) School employees performing USERRA or military related
8leave of absence.--The employer shall report to the board any
9school employee who ceases to be an active participant in order
10to perform USERRA service, or who is granted a leave of absence
11under 51 Pa.C.S. § 4102 (relating to leaves of absences for
12certain government employees) or a military leave of absence
13under 51 Pa.C.S. § 7302 (relating to granting military leaves of
14absence), the date on which such USERRA service, leave of
15absence or military leave of absence began, the date on which
16the school employee is reemployed from USERRA leave or returns
17after the leave of absence or military leave of absence, if such
18event occurs, and any other information the board may require or
19direct.

20(l) Differential wage payments and military leave of absence
21payments.-—Notwithstanding the exclusion of differential wage
22payments as defined in IRC § 414(u)(12) from compensation under
23this part, the employer of any school employee on USERRA leave
24shall report differential wage payments made to the employee to
25the board, and the employer of any school employee on leave of
26absence pursuant to 51 Pa.C.S. § 4102 shall report any payment
27made to the employee, in the form and manner established by the
28board.

29§ 8507. Rights and duties of school employees [and members], 
30members and participants.

1(a) Information on new employees.--Upon his assumption of
2duties, each new school employee shall furnish his employer with
3a complete record of his previous school or State service, or
4creditable nonschool service, name and address of his spouse, if 
5married and he is or is eligible to be a participant in the 
6plan, proof of his date of birth, his home address, his current
7status in the system and the plan and in the State Employees'
8Retirement System and the State Employees' Defined Contribution 
9Plan and such other information as the board may require.
10Willful failure to provide the information required by this
11subsection to the extent available or the provision of erroneous
12information upon entrance into the system shall result in the
13forfeiture of the right of the member to subsequently assert any
14right to benefits based on erroneous information or on any of
15the required information which he failed to provide. In any case
16in which the board finds that a member is receiving an annuity
17based on false information, the additional amounts received
18predicated on such false information together with statutory
19interest doubled and compounded shall be deducted from the
20present value of any remaining benefits to which the member is
21legally entitled and such remaining benefits shall be
22correspondingly decreased.

23* * *

24(b.1) Application for participation.--On or after July 1,
252015, in the case of a new employee who is not currently a
26participant in the plan and whose participation is mandatory, or
27in the case of a new employee whose participation is not
28mandatory but is permitted and who desires to become a
29participant in the plan, the new employee shall execute an
30application for participation and a nomination of a beneficiary,

1who shall be the participant's spouse if the participant is
2married, unless the spouse consents otherwise.

3* * *

4(d.1) Voluntary contributions by a participant.--Any
5participant who desires to make voluntary contributions to be
6credited to his individual investment account shall notify the
7board and, upon compliance with the requirements, procedures and
8limitations established by the board in the plan document, may
9do so subject to the limitations under IRC §§ 401(a) and 415 and
10other applicable law.

11(d.2) Contributions for USERRA leave.--Any active
12participant or inactive participant or former participant who
13was reemployed from USERRA leave and who desires to make
14mandatory pickup participant contributions and voluntary
15contributions for his USERRA leave shall so notify the board
16within the time period required under 38 U.S.C. Ch. 43 (relating
17to employment and reemployment rights of members of the
18uniformed services) and IRC § 414(u) of his desire to make such
19contributions. Upon making the permitted mandatory pickup
20participant contributions within the allowed time period, the
21employer shall make the corresponding employer defined
22contributions at the same time.

23(e) Beneficiary for death benefits from system.--Every
24member shall nominate a beneficiary by written designation filed
25with the board to receive the death benefit or the benefit
26payable under the provisions of Option 1. Such nomination may be
27changed at any time by the member by written designation filed
28with the board. A member may also nominate a contingent
29beneficiary or beneficiaries to receive the death benefit or the
30benefit payable under the provisions of Option 1.

1(e.1) Beneficiary for death benefits from plan.--Every
2participant shall nominate a beneficiary by written designation
3filed with the board as provided in section 8506 (relating to
4duties of employers) to receive the death benefit payable under
5section 8347 (relating to death benefits). A participant may
6also nominate a contingent beneficiary or beneficiaries to
7receive the death benefit provided under this section. Such
8nomination may be changed at any time by the participant by
9written designation filed with the board, provided that, if the
10participant is married, the participant's spouse consents to the
11change unless the change is to name the spouse as beneficiary or
12unless the change is limited to contingent beneficiaries and the
13spouse is the primary beneficiary. If the spouse of a
14participant in the plan is deemed to be the beneficiary by
15operation of law, the person last nominated as beneficiary in a
16writing filed with the board shall become the contingent
17beneficiary.

18(e.2) Beneficiary for combined service employee.--A combined
19service employee may designate or nominate different persons to
20be beneficiaries, survivor annuitants and successor payees for
21his benefits from the system and the plan.

22(f) Termination of service by members.--Each member who
23terminates school service and who is not then a disability
24annuitant shall execute on or before the date of termination of
25service a written application, duly attested by the member or
26his legally constituted representative, electing to do one of
27the following:

28(1) Withdraw his accumulated deductions.

29(2) Vest his retirement rights and if he is a joint
30coverage member, and so desires, elect to become a full

1coverage member and agree to pay within 30 days of the date
2of termination of service the lump sum required.

3(3) Receive an immediate annuity, if eligible, and may,
4if he is a joint coverage member, elect to become a full
5coverage member and agree to pay within 30 days of date of
6termination of service the lump sum required.

7* * *

8(g.1) Deferral of retirement rights.--If a participant
9terminates school service and does not commence receiving a
10distribution, he shall nominate a beneficiary, who shall be the
11participant's spouse if the participant is married, unless the
12spouse consents otherwise, by written designation filed with the
13board, and he may anytime thereafter, but no later than his
14required beginning date, withdraw the vested accumulated total
15defined contributions standing to his credit or apply for
16another form of distribution required by law or authorized by
17the board.

18* * *

19(l) Continuing obligation regarding spouses.--A participant
20shall have the continuing obligation to notify the board in
21writing of any change in marital status and, if applicable, the
22name and current address of the participant's spouse.

23Section 122. Sections 8521(b), 8522, 8524, 8525, 8531, 8533,
248533.1, 8533.3 and 8533.4(a) of Title 24 are amended to read:

25§ 8521. Management of fund and accounts.

26* * *

27(b) Crediting of interest.--The board annually shall allow
28statutory interest, excluding the individual investment 
29accounts, to the credit of the members' savings account on the
30mean amount of the accumulated deductions of all members for

1whom interest is payable for the preceding year and valuation
2interest on the mean amount of the annuity reserve account for
3the preceding year to the credit of that account. The board
4annually shall allow valuation interest calculated on the mean
5amount for the preceding year of the balance in the State
6accumulation account excluding any earnings of the fund credited
7to the account during that year. In the event the total earnings
8for the year do not exceed 5 1/2% of the mean amount for the
9preceding year of the total assets of the fund less earnings
10credited to the fund during that year plus the administrative
11expenses of the board, the difference required to be
12appropriated from the General Fund shall be credited to the
13State accumulation account.

14* * *

15§ 8522. Public School Employees' Retirement Fund.

16(a) General rule.--The fund shall consist of all moneys in
17the several separate funds in the State Treasury set apart to be
18used under the direction of the board for the benefit of members
19of the system; and the Treasury Department shall credit to the
20fund all moneys received from the Department of Revenue arising
21from the contributions relating to or on behalf of the members 
22of the system required under the provisions of Chapter 83
23(relating to membership, contributions and benefits) and all
24earnings from investments or moneys of said fund. There shall be
25established and maintained by the board the several ledger
26accounts specified in sections 8523 (relating to members'
27savings account), 8524 (relating to State accumulation account),
288525 (relating to annuity reserve account) and 8526 (relating to
29health insurance account).

30(b) Individual investment accounts and trust.--The

1individual investment accounts that are part of the trust are
2not part of the fund. Mandatory pickup participant
3contributions, voluntary contributions and employer defined
4contributions made under this part and any income earned by the
5investment of such contributions shall not be paid or credited
6to the fund but instead shall be paid to the trust and credited
7to the individual investment accounts.

8§ 8524. State accumulation account.

9The State accumulation account shall be the ledger account to
10which shall be credited all contributions of the Commonwealth
11and other employers as well as the earnings of the fund, except
12the premium assistance contributions and earnings thereon in the
13health insurance account. Valuation interest shall be allowed on
14the total amount of such account less any earnings of the fund
15credited during the year. The reserves necessary for the payment
16of annuities and death benefits resulting from membership in the 
17system as approved by the board and as provided in Chapter 83
18(relating to membership, contributions and benefits) shall be
19transferred from the State accumulation account to the annuity
20reserve account. At the end of each year the required interest
21shall be transferred from the State accumulation account to the
22credit of the members' savings account and the annuity reserve
23account. The administrative expenses of the board shall be
24charged to the State accumulation account.

25§ 8525. Annuity reserve account.

26(a) Credits and charges to account.--The annuity reserve
27account shall be the ledger account to which shall be credited
28the reserves held for the payment of annuities and death
29benefits resulting from membership in the system on account of
30all annuitants and the contributions from the Commonwealth and

1other employers as determined in accordance with section 8328
2(relating to actuarial cost method) for the payment of the
3supplemental annuities provided in sections 8348 (relating to
4supplemental annuities), 8348.1 (relating to additional
5supplemental annuities), 8348.2 (relating to further additional
6supplemental annuities), 8348.3 (relating to supplemental
7annuities commencing 1994), 8348.4 (relating to special
8supplemental postretirement adjustment), 8348.5 (relating to
9supplemental annuities commencing 1998), 8348.6 (relating to
10supplemental annuities commencing 2002) and 8348.7 (relating to
11supplemental annuities commencing 2003). The annuity reserve
12account shall be credited with valuation interest. After the
13transfers provided in sections 8523 (relating to members'
14savings account) and 8524 (relating to State accumulation
15account), all annuity and death benefit payments shall be
16charged to the annuity reserve account and paid from the fund.

17(b) Transfers from account.--Should an annuitant be
18subsequently restored to active service either as a member of 
19the system or participant in the plan, the present value of his
20member's annuity at the time of reentry into school service
21shall be transferred from the annuity reserve account and placed
22to his individual credit in the members' savings account. In
23addition, the actuarial reserve for his annuity less the amount
24transferred to the members' savings account shall be transferred
25from the annuity reserve account to the State accumulation
26account.

27§ 8531. State guarantee regarding the system.

28Statutory interest charges payable, the maintenance of
29reserves in the fund, and the payment of all annuities and other
30benefits granted by the board from the system under the

1provisions of this part relating to the establishment and 
2administration of the system are hereby made obligations of the
3Commonwealth. All income, interest, and dividends derived from
4deposits and investments of the system authorized by this part
5shall be used for the payment of the said obligations of the
6Commonwealth and shall not be used for any obligations of the 
7plan or trust.

8§ 8533. Taxation, attachment and assignment of funds.

9(a) General rule.--Except as provided in subsections (b),
10(c) [and (d)], (d) and (e), the right of a person to a member's
11annuity, a State annuity, or retirement allowance, to the return
12of contributions, any benefit or right accrued or accruing to
13any person under the provisions of this part, and the moneys in
14the fund and the trust are hereby exempt from any State or
15municipal tax, and exempt from levy and sale, garnishment,
16attachment, the provisions of Article XIII.1 of the the act of 
17April 9, 1929 (P.L.343, No.176), known as The Fiscal Code, or
18any other process whatsoever, and shall be unassignable.

19(a.1) Individual investment accounts and distributions.--No
20participant or beneficiary, successor payee, spouse or alternate
21payee of a participant shall have the ability to commute, sell,
22assign, alienate, anticipate, mortgage, pledge, hypothecate,
23commutate or otherwise transfer or convey any benefit or
24interest in an individual investment account or rights to
25receive or direct distributions under this part or under
26agreements entered into under this part except as otherwise
27provided in this part and in the case of either a member or a
28participant.

29(b) Forfeiture.--

30(1) Rights under this part shall be subject to

1forfeiture as provided by the act of July 8, 1978 (P.L.752, 
2No.140), known as the Public Employee Pension Forfeiture Act. 
3Forfeitures under this subsection or under any other
4provision of law may not be applied to increase the benefits
5that any member would otherwise receive under this part.

6(2) Notwithstanding paragraph (1), the act of July 8,
71978 (P.L.752, No.140), known as the Public Employee Pension
8Forfeiture Act, section 16(b) of Article V of the
9Constitution of Pennsylvania and 42 Pa.C.S. § 3352 (relating
10to pension rights), the accumulated mandatory participant
11contributions and accumulated voluntary contributions
12standing to the credit of a participant shall not be
13forfeited but shall be available for payment of fines and
14restitution as provided by law. Furthermore, amounts in the
15trust that have been ordered to be distributed to an
16alternate payee as the result of an equitable distribution of
17marital property as part of an approved domestic relations
18order entered before the date of the order or action in a
19court or other tribunal resulting in a forfeiture of a
20participant's interest in the trust shall not be subject to
21the Public Employee Pension Forfeiture Act, section 16(b) of
22the Article V of the Constitution of Pennsylvania or 42
23Pa.C.S. § 3352. Any accumulated employer defined
24contributions forfeited as a result of this subsection or
25other law shall be retained by the board and used for the
26payment of expenses of the plan.

27(c) Domestic relations order.--Rights under this part shall
28be subject to attachment in favor of an alternate payee as set
29forth in an approved domestic relations order.

30(d) Direct rollover.--Effective with distributions made on

1or after January 1, 1993, and notwithstanding any other
2provision of this part to the contrary, a distributee may elect,
3at the time and in the manner prescribed by the board, to have
4any portion of an eligible rollover distribution paid directly
5to an eligible retirement plan by way of a direct rollover. For
6purposes of this subsection, a "distributee" includes a member
7[and], a participant, a spouse, a member's surviving spouse
8[and], a participant's surviving spouse, a member's former
9spouse who is an alternate payee under an approved domestic
10relations order and a participant's former spouse who is an 
11alternate payee under an approved domestic relations order and 
12anyone else authorized under IRC and the plan terms approved by 
13the board to have an eligible rollover distribution paid 
14directly to an eligible retirement plan by way of a direct 
15rollover. For purposes of this subsection, the term "eligible
16rollover distribution" has the meaning given such term by IRC §
17402(f)(2)(A) and "eligible retirement plan" has the meaning
18given such term by IRC § 402(c)(8)(B), except that a qualified
19trust shall be considered an eligible retirement plan only if it
20accepts the distributee's eligible rollover distribution;
21however, in the case of an eligible rollover distribution to a
22surviving spouse, an eligible retirement plan is an "individual
23retirement account" or an "individual retirement annuity" as
24those terms are defined in IRC § 408(a) and (b).

25(e) Married participants.--No married participant may take
26an action inconsistent with the spousal consent provisions of
27this part or the plan.

28§ 8533.1. Approval of domestic relations orders.

29(a) Certification regarding members.--A domestic relations
30order pertaining to a member of the system shall be certified as

1an approved domestic relations order by the secretary of the
2board, or his designated representative, only if such order
3meets all of the following:

4(1) Requires the system to provide any type or form of
5benefit or any option applicable to members already provided
6under this part.

7(2) Requires the system to provide no more than the
8total amount of benefits than the member would otherwise
9receive (determined on the basis of actuarial value) unless
10increased benefits are paid to the member or alternate payee
11based upon cost-of-living increases or increases based on
12other than actuarial value.

13(3) Specifies the amount or percentage of the member's
14benefits to be paid by the system to each such alternate
15payee or the manner in which the amount or percentage is to
16be determined.

17(4) Specifies the retirement option to be selected by
18the member upon retirement or states that the member may
19select any retirement option offered by this part upon
20retirement.

21(5) Specifies the name and last known mailing address,
22if any, of the member and the name and last known mailing
23address of each alternate payee covered by the order and
24states that it is the responsibility of each alternate payee
25to keep a current mailing address on file with the system.

26(6) Does not grant an alternate payee any of the rights,
27options or privileges of a member under this part.

28(7) Requires the member to execute an authorization
29allowing each alternate payee to monitor the member's
30compliance with the terms of the domestic relations order

1through access to information concerning the member
2maintained by the system.

3(a.1) Certification regarding participants.--A domestic
4relations order pertaining to a participant shall be certified
5as an approved domestic relations order by the secretary of the
6board, or his designated representative, only if that order
7meets all of the following:

8(1) Does not require the plan to provide any type or
9form of benefit or any option applicable to members of the
10system or participants in the plan.

11(2) Does not require the segregation of the alternate
12payee's share of the participant's individual investment
13account into a subaccount or newly established individual
14account titled in the name of the alternate payee.

15(3) Does not require the plan to recover or distribute
16any funds which were distributed to the participant or at the
17participant's direction prior to the approval of the domestic
18relations order by the secretary of the board or his
19designated representative.

20(4) Requires the plan to pay to the alternate payee no
21more than the lesser of the vested amount of the
22participant's individual investment account specified by the
23domestic relations order or the vested amount of the
24participant's individual investment account as of the date of
25the transfer of the alternate payee's share to the alternate
26payee.

27(5) States that the plan shall not be required to recoup
28or make good for losses in value to the participant's
29individual investment account incurred between the date of
30the valuation of the account used for equitable distribution

1purposes and the date of distribution to the alternate payee.

2(6) Specifies the amount or percentage of the
3participant's individual investment account to be paid to the
4alternate payee and the date upon which such valuation is
5based.

6(7) Specifies the name and last known mailing address,
7if any, of the participant and the name and last known
8mailing address of each alternate payee covered by the order
9and states that it is the responsibility of each alternate
10payee to keep a current mailing address on file with the
11system.

12(8) Does not grant an alternate payee the rights,
13privileges or options available to a participant.

14(9) Requires the participant to execute an authorization
15allowing each alternate payee to monitor the participant's
16compliance with the terms of the domestic relations order
17through access to information concerning the participant
18maintained by the plan. Any authorization granted under this
19section shall be construed only as an authorization for the
20alternate payee to receive information concerning the
21participant which relates to the administration, calculation
22and payment of the alternate payee's share of the
23participant's account and not as an authorization to exercise
24the rights afforded to participants or obtain information
25that is not related to the administration, calculation and
26payment of the alternate payee's share of the participant's
27individual investment account.

28(10) In the case of participants who have not yet begun
29to receive distributions as of the date the domestic
30relations order is approved by the secretary of the board or

1his designated representative, requires the immediate
2distribution of the alternate payee's share of the
3participant's individual investment account, which may be
4made by direct payment, eligible rollover or trustee-to-
5trustee transfer to another eligible plan or qualified
6account owned by the alternate payee, notwithstanding any
7other provision of this part or the plan that would otherwise
8require a distribution of accumulated employer defined
9contributions in the form of an annuity or to require the
10purchase of an annuity.

11(11) In the case of participants who are currently
12receiving distributions from the trust as of the date the
13domestic relations order is approved by the secretary of the
14board or his designated representative, the domestic
15relations order may not order the board to pay the alternate
16payee more than the balance available in the participant's
17individual investment account as of the date the order is
18approved or require that distributions continue to the
19alternate payee after the death of the participant and final
20settlement of the participant's individual investment
21account.

22(b) Determination by secretary.--Within a reasonable period
23of time after receipt of a domestic relations order, the
24secretary of the board, or his designated representative, shall
25determine whether this order is an approved domestic relations
26order and notify the member or participant and each alternate
27payee of this determination. Notwithstanding any other provision
28of law, the exclusive remedy of any member, participant or
29alternate payee aggrieved by a decision of the secretary of the
30board, or his designated representative, shall be the right to

1an adjudication by the board under 2 Pa.C.S. Ch. 5 (relating to 
2practice and procedure) with appeal therefrom to the 
3Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to judicial 
4review) and 42 Pa.C.S. § 763(a)(1) (relating to direct appeals 
5from government agencies).

6(c) Other orders.--The requirements for approval identified 
7in [subsection (a)] subsections (a) and (a.1) shall not apply to 
8any domestic relations order which is an order for support as 
9that term is defined in 23 Pa.C.S. § 4302 (relating to 
10definitions) or an order for the enforcement of arrearages as 
11provided in 23 Pa.C.S. § 3703 (relating to enforcement of 
12arrearages). These orders shall be approved to the extent that
13they do not attach moneys in excess of the limits on attachments
14as established by the laws of this Commonwealth and the United
15States[.], require distributions of benefits in a manner that 
16would violate the laws of the United States, any other state or 
17this Commonwealth or require the distribution of funds for 
18support or enforcement of arrearages against any participant who 
19is not receiving distributions from the plan at the time such 
20order is entered. These orders may be approved notwithstanding 
21any other provision of this part or the plan that would 
22otherwise require a distribution of accumulated employer defined 
23contributions in the form of an annuity or to require the 
24purchase of an annuity.

25(d) Obligation discharged.--Only the requirements of this
26part and any regulations promulgated hereunder shall be used to
27govern the approval or disapproval of a domestic relations
28order. Therefore, if the secretary of the board, or his
29designated representative, acts in accordance with the
30provisions of this part and any promulgated regulations in

1approving or disapproving a domestic relations order, then the
2obligations of the system or plan with respect to such approval
3or disapproval shall be discharged.

4§ 8533.3. Irrevocable survivor annuitant.

5Notwithstanding any other provisions of this part, a domestic
6relations order pertaining to a member may provide for an
7irrevocable survivor annuitant. A domestic relations order
8requiring the designation of an irrevocable survivor annuitant
9shall be deemed to be one that requires a member to designate an
10alternate payee as a survivor annuitant and that prohibits the
11removal or change of that survivor annuitant without approval of
12a court of competent jurisdiction, except by operation of law.
13Such a domestic relations order may be certified as an approved
14domestic relations order by the secretary of the board, or his
15designated representative, in which case the irrevocable
16survivor annuitant so ordered by the court cannot be changed by
17the member without approval by the court. A person ineligible to
18be designated as a survivor annuitant may not be designated an
19irrevocable survivor annuitant.

20§ 8533.4. Amendment of approved domestic relations orders.

21(a) Deceased alternate payee.--In the event that the
22alternate payee predeceases the member or participant and there
23are benefits payable to the alternate payee, the divorce court
24may amend the approved domestic relations order to substitute a
25person for the deceased alternate payee to receive any benefits
26payable to the deceased alternate payee.

27* * *

28Section 123. Title 24 is amended by adding sections to read:

29§ 8533.5. Irrevocable successor payee.

30(a) Condition.--Notwithstanding any other provisions of this

1part, a domestic relations order pertaining to a participant may
2provide for an irrevocable successor payee, only if the
3participant is receiving a payment pursuant to a payment option
4provided by the board that allows for a successor payee.

5(b) Determination.--A domestic relations order requiring the
6designation of an irrevocable successor payee shall be deemed to
7be one that requires a participant who is receiving payments
8from an annuity or other distribution option to designate an
9alternate payee as a successor payee and that prohibits the
10removal or change of that successor payee without approval of a
11court of competent jurisdiction, except by operation of law.

12(c) Certification.--A domestic relations order under
13subsection (b) may be certified as an approved domestic
14relations order by the secretary of the board, or his designated
15representative, in which case the irrevocable successor payee so
16ordered by the court cannot be changed by the participant
17without approval by the court.

18(d) Ineligibility.--A person ineligible to be designated as
19a successor payee may not be designated as an irrevocable
20successor payee. A court may not name an irrevocable successor
21payee if the alternate payee is eligible to receive a lump sum
22distribution of the alternate payee's portion of the marital
23portion of the pension benefit.

24§ 8533.6. Exemption from spousal consent.

25If a domestic relations order approved under section 8533.1
26(relating to approval of domestic relations orders) requires any
27nomination of irrevocable beneficiary or irrevocable survivor
28annuitant or the selection of any benefit by a participant, the
29provisions of this part or the plan requiring the spouse of a
30married participant to be nominated as beneficiary or designated

1as survivor annuitant or to grant consent to any action,
2election or application of a participant shall not apply to any
3action or nomination so required by the approved domestic
4relations order to the extent that the required action or
5nomination is inconsistent with the rights of the spouse set
6forth in this part.

7Section 124. Section 8534 of Title 24 is amended to read:

8§ 8534. Fraud and adjustment of errors.

9(a) Penalty for fraud.--Any person who shall knowingly make
10any false statement or shall falsify or permit to be falsified
11any record or records of this system or plan in any attempt to
12defraud the system or plan as a result of such act shall be
13guilty of a misdemeanor of the second degree.

14(b) Adjustment of errors.--Should any change or mistake in
15records result in any member, participant, beneficiary, [or],
16survivor annuitant or successor payee receiving from the system 
17or plan more or less than he would have been entitled to receive
18had the records been correct, then regardless of the intentional
19or unintentional nature of the error and upon the discovery of
20such error, the board shall correct the error and if the error 
21affects contributions to or payments from the system, then so
22far as practicable shall adjust the payments which may be made
23for and to such person in such a manner that the actuarial
24equivalent of the benefit to which he was correctly entitled
25shall be paid. If the error affects contributions to or payments 
26from the plan, the board shall take such action as shall be 
27provided for in the plan document.

28Section 125. Title 24 is amended by adding a section to
29read:

30§ 8534.1. Spousal consent and participants.

1(a) General rule.--No married participant may:

2(1) take any action regarding rights in the plan;

3(2) make an election regarding benefits in the plan; or

4(3) file a valid application regarding the consent of
5the participant's spouse unless the participant's spouse
6consents in writing to that action, election or application.
7A consent shall be valid only if the consent is:

8(i) signed after the participant's spouse receives
9counseling or affirmatively waives the right to receive
10counseling;

11(ii) witnessed before a notary public; and

12(iii) filed with the board within 90 days of the
13filing of the application or within 90 days of the date
14the action or election would otherwise be valid. A
15consent or lack thereof shall not affect the effective
16date of any action or election.

17(b) Exceptions to consent.--Spousal consent shall not be
18required where:

19(1) the spouse cannot be located; or

20(2) such other circumstances as the board may establish
21in the plan document.

22(c) Legal guardians and powers of attorney.--A legal
23guardian, even if the participant, may execute a valid spousal
24consent. A participant, as agent under a power of attorney, may
25not execute a valid spousal consent unless the spouse is
26incapacitated and the spouse had executed a valid durable power
27of attorney.

28(d) Spouse of participant.--This part does not grant to the
29spouse of a participant of the plan the rights, options or
30privileges of a participant. The rights of the spouse shall

1remain derivative of the rights of the participant, including
2rights under the act of July 8, 1978 (P.L.752, No.140), known as
3the Public Employee Pension Forfeiture Act, section 16(b) of
4Article V of the Constitution of Pennsylvania and 42 Pa.C.S. §
53352 (relating to pension rights). The spouse may not do the
6following:

7(1) compel the participant to take, or prevent the
8participant from taking, an action regarding membership,
9rights or benefits in the plan other than as provided under
10this part; or

11(2) take any action on behalf of the participant, except as
12provided under this part.

13(e) Waiver.--If a law allows a participant in the plan to
14waive benefits or return of contributions that the participant
15is receiving, entitled to currently receive or receive in the
16future, the waiver is not valid unless the spouse of the
17participant consents to the waiver as provided for under this 
18part.

19Section 126. Section 8535 of Title 24 is amended to read:

20§ 8535. Payments to school entities by Commonwealth.

21For each school year beginning with the 1995-1996 school year
22and ending with the 2014-2015 school year, each school entity
23shall be paid by the Commonwealth for contributions based upon
24school service of active members of the system after June 30,
251995, as follows:

26(1) The Commonwealth shall pay each school entity for
27contributions made to the Public School Employees' Retirement
28Fund based upon school service of all active members,
29including members on activated military service leave, whose
30effective dates of employment with their school entities are

1after June 30, 1994, and who also had not previously been
2employed by any school entity within this Commonwealth an
3amount equal to the amount certified by the Public School
4Employees' Retirement Board as necessary to provide, together
5with the members' contributions, reserves on account of
6prospective annuities, supplemental annuities and the premium
7assistance program as provided in this part in accordance
8with section 8328 (relating to actuarial cost method),
9multiplied by the market value/income aid ratio of the school
10entity. For no school year shall any school entity receive
11less than the amount that would result if the market
12value/income aid ratio as defined in section 2501(14.1) of
13the Public School Code [of 1949] was 0.50.

14(2) The Commonwealth shall pay each school entity for
15contributions made to the Public School Employees' Retirement
16Fund based upon school service of all active members,
17including members on activated military service leave, who
18are not described in paragraph (1), one-half of the amount
19certified by the Public School Employees' Retirement Board as
20necessary to provide, together with the members'
21contributions, reserves on account of prospective annuities,
22supplemental annuities and the premium assistance program as
23provided in this part in accordance with section 8328.

24(3) School entities shall have up to five days after
25receipt of the Commonwealth's portion of the employer's
26liability to make payment to the Public School Employees'
27Retirement Fund. School entities are expected to make the 
28full payment to the Public School Employees' Retirement Fund 
29in accordance with section 8327 (relating to payments by 
30employers) in the event the receipt of the Commonwealth's
 

1portion of the employer's liability is delayed because of 
2delinquent salary reporting or other conduct by the school 
3entities.

4Section 127. Title 24 is amended by adding a section to
5read:

6§ 8535.1. Payments to school entities by Commonwealth
7commencing with the 2015-2016 school year.

8For each school year, beginning with the 2015-2016 school
9year, each school entity shall be paid by the Commonwealth for
10contributions based upon school service of active members of the
11system and active participants of the plan after June 30, 2015,
12as follows:

13(1) The Commonwealth shall pay each school entity for
14contributions made to the fund based upon school service of
15all active members, including members on activated military
16service leave, and active participants of the plan whose
17effective dates of employment with their school entities are
18after June 30, 1994, and who also had not previously been
19employed by any school entity within this Commonwealth an
20amount equal to the amount certified by the board as
21necessary to provide, together with the members' and
22participants' contributions, reserves on account of
23prospective annuities, supplemental annuities and the premium
24assistance program as provided in this part in accordance
25with section 8328 (relating to actuarial cost method),
26multiplied by the market value/income aid ratio of the school
27entity. For no school year shall any school entity receive
28less than the amount that would result if the market
29value/income aid ratio as defined in section 2501(14.1) of
30the Public School Code was 0.50.

1(2) The Commonwealth shall pay each school entity for
2contributions made to the fund based upon school service of
3all active members, including members on activated military
4service leave, and active participants of the plan who are
5not described in paragraph (1) one-half of the amount
6certified by the board as necessary to provide, together with
7the members' and participants' contributions, reserves on
8account of prospective annuities, supplemental annuities and
9the premium assistance program as provided in this part in
10accordance with section 8328.

11(3) School entities shall have up to five days after
12receipt of the Commonwealth's portion of the employer's
13liability to make payment to the fund. School entities are
14expected to make the full payment to the fund in accordance
15with section 8327 (relating to payments by employers) in the
16event the receipt of the Commonwealth's portion of the
17employer's liability is delayed because of delinquent salary
18reporting or other conduct by the school entities.

19Section 128. The definition of "eligible person" in section
208702(a) of Title 24 is amended to read:

21§ 8702. Definitions.

22(a) General rule.--Subject to additional definitions
23contained in subsequent provisions of this part which are
24applicable to specific provisions of this part, the following
25words and phrases when used in this part shall have the meanings
26given to them in this section unless the context clearly
27indicates otherwise:

28"Eligible person." An individual who is:

29(1) an annuitant or survivor annuitant or the spouse or
30dependent of an annuitant or survivor annuitant; or

1(2) a participant receiving distributions or a successor 
2payee, or the spouse or dependent of a participant receiving 
3distributions or successor payee.

4* * *

5ARTICLE II

6Section 201. Section 7306(a) introductory paragraph of Title 
751, amended October 24, 2012 (P.L.1436, No.181), is amended and 
8the section is amended by adding a subsection to read:

9§ 7306. Retirement rights.

10(a) Options available to employees.--Any employee who is a
11member of a retirement system other than an active member or 
12inactive member on leave without pay of the State Employees' 
13Retirement System, an active or inactive participant of the 
14School Employees' Defined Contribution Plan or an active 
15participant or inactive participant on leave without pay of the 
16State Employees' Defined Contribution Plan, at the time he is
17granted a military leave of absence shall be entitled to
18exercise any one of the following options in regard thereto:

19* * *

20(e) Participant of a defined contribution plan.--

21(1) An employee who is an active or inactive participant
22of the School Employees' Defined Contribution Plan at the
23time the employee is granted a military leave of absence
24shall be entitled to make contributions to the Public School
25Employees' Defined Contribution Trust for the leave as
26provided in 24 Pa.C.S. Pt. IV (relating to retirement for
27school employees).

28(2) An employee who is an active participant or inactive
29participant on leave without pay of the State Employees'
30Defined Contribution Plan at the time he is granted a

1military leave of absence shall be entitled to make
2contributions to the State Employees' Defined Contribution
3Trust for the leave as provided in 71 Pa.C.S. Pt. XXV
4(relating to retirement for State employees and officers).

5ARTICLE III

6Section 301. Section 5102 of Title 71, amended October 24,
72012 (P.L.1436, No.181), is amended to read:

8§ 5102. Definitions.

9The following words and phrases as used in this part, unless
10a different meaning is plainly required by the context, shall
11have the following meanings:

12"Academic administrator." A management employee in the field 
13of public education whose work is directly related to academic 
14instruction, excluding any employee in a position that is 
15nonacademic in nature, such as, without limitation, a position 
16that relates to admissions, financial aid, counseling, 
17secretarial and clerical services, records management, housing, 
18food service, maintenance and security.

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

24"Accumulated mandatory participant contributions."  The total
25of the mandatory pickup participant contributions paid into the
26trust on account of a participant's State service together with
27any investment earnings and losses and adjustments for fees,
28costs and expenses credited or charged thereon.

29"Accumulated total defined contributions."  The total of the
30accumulated mandatory participant contributions, accumulated

1employer defined contributions and accumulated voluntary
2contributions, reduced by any distributions, standing to the
3credit of a participant in an individual investment account in
4the trust.

5"Accumulated voluntary contributions."  The total of
6voluntary contributions paid into the trust by a participant and
7any amounts rolled over by a participant or transferred by a
8direct trustee-to-trustee transfer into the trust together with
9any investment earnings and losses and adjustment for fees,
10costs and expenses credited or charged thereon.

11"Active member." A State employee, or a member on leave 
12without pay, for whom pickup contributions are being made to the 
13fund or for whom such contributions otherwise required for 
14current State service are not being made solely by reason of 
15section 5502.1 (relating to waiver of regular member 
16contributions and Social Security integration member 
17contributions) or any provision of this part relating to the 
18limitations under section 401(a)(17) or section 415(b) of the 
19Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 
20401(a)(17) or 415(b)) or any provision of this part limiting 
21compensation or contributions applicable to a Subclass X member, 
22Subclass Y member or Subclass Z member.

23"Active participant."  A State employee for whom mandatory
24pickup participant contributions are being made to the trust or
25for whom such contributions otherwise required for current State
26service are not being made solely by reason of any provision of
27this part relating to the limitations under section 401(a)(17)
28or 415 of the Internal Revenue Code of 1986 (Public Law 99-514,
2926 U.S.C. § 401(a)(17) or § 415).

30"Actuarial increase factor." A factor calculated at the
 

1member's birthday by dividing the cost of a dollar annuity based 
2on the age of the member on the member's immediately previous 
3birthday by the cost of a one-year deferred dollar annuity 
4calculated at that same age. Unless the member terminates State 
5or school service on the member's birthday, the actuarial 
6increase factor for the year of termination shall be adjusted 
7by:

8(1) subtracting one from the calculated factor; then

9(2) dividing the difference by twelve; then

10(3) multiplying the resulting quotient by the number of
11whole months between the member's immediately previous
12birthday and the date of termination of service; then

13(4) adding one to the resulting product.

14"Actuarially equivalent." Equal present values, computed on 
15the basis of statutory interest and the mortality tables adopted 
16by the board.

17"Actuary." The consultant to the board who shall be:

18(1) a member of the American Academy of Actuaries; or

19(2) an individual who has demonstrated to the
20satisfaction of the Insurance Commissioner of Pennsylvania
21that he has the educational background necessary for the
22practice of actuarial science and has had at least seven
23years of actuarial experience; or

24(3) a firm, partnership, or corporation of which at
25least one member meets the requirements of (1) or (2).

26"Additional accumulated deductions." The total of the 
27additional member contributions paid into the fund on account of 
28current service or previous State or creditable nonstate 
29service, together with the statutory interest credited thereon 
30until the date of termination of service. In the case of a
 

1vestee, statutory interest shall be credited until the effective 
2date of retirement. A member's account shall not be credited 
3with statutory interest for more than two years during a leave 
4without pay.

5"Alternative investment." An investment in a private equity
6fund, private debt fund, venture fund, real estate fund, hedge
7fund or absolute return fund.

8"Alternative investment vehicle." A limited partnership,
9limited liability company or any other legal vehicle for 
10authorized investments under section 5931(i) (relating to 
11management of fund and accounts) through which the system makes 
12an alternative investment.

13"Alternate payee." Any spouse, former spouse, child or 
14dependent of a member or participant who is recognized by a 
15domestic relations order as having a right to receive all or a 
16portion of the moneys payable to that member or participant 
17under this part.

18"Annuitant." Any member on or after the effective date of
19retirement until his annuity is terminated.

20"Approved domestic relations order." Any domestic relations
21order which has been determined to be approved in accordance
22with section 5953.1 (relating to approval of domestic relations
23orders).

24"Average noncovered salary." The average of the amounts of 
25compensation received by an active member each calendar year 
26since January 1, 1956, exclusive of the amount which was or 
27could have been covered by the Federal Social Security Act[,]
28(42 U.S.C. § 301 et seq.), during that portion of the member's 
29service since January 1, 1956, for which he has received social 
30security integration credit.

1"Basic contribution rate." Five percent (5%), except that in 
2no case shall any member's rate, excluding the rate for social 
3security integration credit, be greater than his contribution 
4rate on the effective date of this part so long as he does not 
5elect additional coverage or membership in another class or 
6subclass of service.

7"Beneficiary." [The] In the case of the system, the person 
8or persons last designated in writing to the board by a member 
9to receive his accumulated deductions or a lump sum benefit upon 
10the death of such member. In the case of the plan, the spouse of 
11a participant. If the participant is not married or the spouse 
12consents, then the person or persons last designated in writing 
13to the board by the participant to receive the participant's 
14vested accumulated total defined contributions or a lump sum 
15benefit upon the death of the participant.

16"Board." The State Employees' Retirement Board or the State
17Employes' Retirement Board.

18"Class of service multiplier."

19Class of Service

 

Multiplier

 

20A

 

1

 

21[AA

22

23

24

25

26

27

for all purposes
except calculating
regular member
contributions on
compensation paid
prior to

January 1, 2002

 

 

 

 

 

 

1.25

 

28AA

29

30

 

1

2

3

4

for purposes of
calculating
regular member




contributions on
compensation paid
prior to January
1, 2002

 

 

 




 

 

1]

 

5Subclass AA-W

6

7

8

9

10

11

for all purposes
except calculating
regular member
contributions

on compensation
paid prior to
 January 1, 2002

 

 

 

 

 

 

1.25

 

12Subclass AA-W

13 

14 

15 

16 

17 

18 

for purposes of
calculating
regular member
contributions

on compensation
paid prior to
 January 1, 2002

 

 

 

 

 

 

1

 

19Subclass AA-Y

20 

21 

22 

23 

for all purposes
except
calculating
regular member
contributions

 

 

 

 

1

 

24Subclass AA-Y

25

26

27

for purposes of
calculating
regular member
contributions

 

 

 

1.25

 

28Subclass AA-Z

29

30

 

1

2

for all purposes
except
calculating




regular member
contributions

 

 

 




1.25

 

3Subclass AA-Z

4

5

6

for purposes of
calculating
regular member
contributions

 

 

 

1.95

 

7A-3

8

9

10

11

12

13

14

for all purposes
except the
calculation of
regular member
contributions and
contributions for
creditable
nonstate service

 

 

 

 

 

 

 

1

 

15A-3

16

17

18

19

20

21

for purposes of
calculating
regular member
contributions and
contributions for
creditable
nonstate service

 

 

 

 

 

 

1.25

 

22A-4

23

24

25

26

for all purposes
except the
calculation of
regular member
contributions

 

 

 

 

1.25

 

27A-4

28

29

30

for purposes of
calculating
regular member
contributions

 

 

 

1.86

 

1B

 

.625

 

2C

 

1

 

3D

 

1.25

 

4D-1

5

prior to January
1, 1973

 

1.875

 

6D-1

7

on and subsequent
to January 1, 1973

 

1.731

 

8D-2

9

prior to January
1, 1973

 

2.5

 

10D-2

11

on and subsequent
to January 1, 1973

 

1.731

 

12D-3

13

prior to January
1, 1973

 

3.75

 

14D-3

15

16

17

18

19

20

21

22

23 

24 

25 

26 

27 

on and
subsequent to
January 1, 1973

 

 

1.731

 

 

except prior
to December
1, 1974

as applied
to any
additional
legislative
compensation
as an
officer of
the General
Assembly

28

 

3.75

 

29[D-4

30

 

1

2

3

4

5

for all purposes
except calculating




regular member
contributions on
compensation paid
prior to July 1,
2001

 

 




 

 

 

1.5

 

6D-4

7

8

9

10

11

12

for purposes of
calculating
regular member
contributions on
compensation
paid prior to
July 1, 2001

 

 

 

 

 

 

1]

 

13Subclass D-4W

14

15

16

17

18

19 

for all purposes
except calculating
regular member
contributions

on compensation
paid prior to July
 1, 2001

 

 

 

 

 

 

1.5

 

20Subclass D-4W

21

22

23

24

25

26

for purposes of
calculating
regular member
contributions

on compensation
paid prior to July
 1, 2001

 

 

 

 

 

 

1

 

27Subclass D-4Y

28

29

30

for all purposes
except calculating
regular member
contributions

 

 

 

1.25

 

1Subclass D-4Y

2

3

4

for purposes of
calculating
regular member
contributions

 

 

 

1.5

 

5Subclass D-4Z

6

7

8

for all purposes
except calculating
regular member
contributions

 

 

 

1.5

 

9Subclass D-4Z

10

11

12

13 

for purposes of
calculating
regular member
contributions

 

 

 

2.2

 

14E, E-1

15

16

17

18 

19 

prior to January
1, 1973

 

2

 

for each of
the first
ten years
of judicial
service, and

20

21

22

23

24 

 

1.5

for each
subsequent
year of
judicial
service

25E, [E-1] 
26Subclass E-1W

27 

28 

29 

30 

on and subsequent
to January 1, 1973

 

1.50

 

for each of
the first
ten years of
judicial
service and

1 

2 

3 

4 

5 

 

1.125

for each
subsequent
year of
judicial
service

6Subclass E-1Y

7

8

9

10

11 

12 

13 

14 

15 

16 

17 

18 

19 

for all purposes
except calculating
regular member
contributions

 

 

 

1.75

 

 

 

for each of
the first
ten years of
judicial
service
unless those
years are
credited in
another
subclass of
service

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

 

1.25

for each
subsequent
year of
judicial
service
unless that
year is
credited in
another
subclass of
service

1Subclass E-1Y

2

3

4

5

6 

7 

8 

9 

10 

11 

12 

13 

14 

for purposes of
calculating
regular member
contributions

 

 

 

2

 

 

 

for each of
the first
ten years of
judicial
service
unless those
years are
credited in
another
subclass of
service

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

 

1.5

for each
subsequent
year of
judicial
service
unless that
year is
credited in
another
subclass of
service

26Subclass E-1Z

27

28

29

30

 

1 

2 

3 

4 

5 

6 

7 

8 

9 

for all purposes
except calculating
regular member
contributions

 

 

 

2

 

 

 

 

for each of
the first




ten years of
judicial
service
unless those
years are
credited in
another
subclass of
service

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

 

1.5

for each
subsequent
year of
judicial
service
unless that
year is
credited in
another
subclass of
service

21Subclass E-1Z

22

23

24

25

26 

27 

28 

29 

30 

 

1 

2 

3 

4 

for purposes of
calculating
regular member
contributions

 

 

 

2.7

 

 

 

for each of
the first
ten years of
judicial
service
unless those
years are




credited in
another
subclass of
service

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

 

2.2

for each
subsequent
year of
judicial
service
unless that
year is
credited in
another
subclass of
service

16[E-2] Subclass 
17E-2W

18

on and subsequent
to September 1,
 1973

 

 

1.125

 

19Subclass E-2Y

20

21

22

for all purposes
except calculating
regular member
contributions

 

 

 

1.25

 

23Subclass E-2Y

24

25

26

for purposes of
calculating
regular member
contributions

 

 

 

1.5

 

27Subclass E-2Z

28

29

30

for all purposes
except calculating
regular member
contributions

 

 

 

1.5

 

1Subclass E-2Z

2

3

4

for purposes of
calculating
regular member
contributions

 

 

 

2.2

 

5G

 

0.417

 

6H

 

0.500

 

7I

 

0.625

 

8J

 

0.714

 

9K

 

0.834

 

10L

 

1.000

 

11M

 

1.100

 

12N

 

1.250

 

13T-C (Public School

14Employees'

15Retirement Code)

1

16T-E (Public School

17Employees'

18Retirement Code)

1

19T-F (Public School

20Employees'

21Retirement Code)

1

22"Combined service employee."  A current or former State
23employee who is both a member of the system and a participant in
24the plan.

25"Commissioner." The Commissioner of the Internal Revenue
26Service.

27"Compensation." Pickup contributions and mandatory 
28participant pickup contributions plus remuneration actually 
29received as a State employee excluding refunds for expenses, 
30contingency and accountable expense allowances; excluding any
 

1severance payments or payments for unused vacation or sick 
2leave; and excluding payments for military leave and any other 
3payments made by an employer while on USERRA leave, leave of 
4absence granted under 51 Pa.C.S. § 4102 (relating to leaves of 
5absence for certain government employees), military leave of 
6absence granted under 51 Pa.C.S. § 7302 (relating to granting 
7military leaves of absence) or other types of military leave, 
8including other types of leave payments, stipends, differential 
9wage payments as defined in IRC § 414(u)(12) and any other 
10payments: Provided, however, That compensation received prior to 
11January 1, 1973, shall be subject to the limitations for 
12retirement purposes in effect December 31, 1972, if any: 
13Provided further, That the limitation under section 401(a)(17) 
14of the Internal Revenue Code of 1986 (Public Law 99-514, 26 
15U.S.C. § 401(a)(17)) taken into account for the purpose of 
16member contributions, including any additional member 
17contributions in addition to regular or joint coverage member 
18contributions and Social Security integration contributions, 
19regardless of class of service, shall apply to each member who 
20first became a member of the State Employees' Retirement System 
21on or after January 1, 1996, and who by reason of such fact is a 
22noneligible member subject to the application of the provisions 
23of section 5506.1(a) (relating to annual compensation limit 
24under IRC § 401(a)(17))and shall apply to each participant; and 
25Provided further, That the compensation applicable to Subclass X 
26members, Subclass Y members and Subclass Z members shall be 
27subject to the limitations under section 5506.2 (relating to 
28annual compensation limit for Subclass X, Subclass Y and 
29Subclass Z members).

30"Concurrent service." Service credited in more than one
 

1class of service during the same period of time.

2"Correction officer." Any full-time employee assigned to the 
3Department of Corrections or the Department of Public Welfare 
4whose principal duty is the care, custody and control of inmates 
5or direct therapeutic treatment, care, custody and control of 
6inmates of a penal or correctional institution, community 
7treatment center, forensic unit in a State hospital or secure 
8unit of a youth development center operated by the Department of 
9Corrections or by the Department of Public Welfare.

10"County service." Service credited in a retirement system or 
11pension plan established or maintained by a county to provide 
12retirement benefits for its employees to the account of county 
13employees who are transferred to State employment and become 
14State employees pursuant to 42 Pa.C.S. § 1905 (relating to 
15county-level court administrators) regardless of whether the 
16service was performed for the county or another employer or 
17allowed to be purchased in the county retirement system or 
18pension plan.

19"Creditable nonstate service." Service other than:

20(1) service as a State employee;

21(2) service converted to State service pursuant to
22section 5303.1 (relating to election to convert county
23service to State service); or

24(3) school service converted to State service pursuant
25to section 5303.2 (relating to election to convert school
26service to State service) [for which an active member may
27obtain credit]

28for which an active member may obtain credit in the system.

29"Credited service." State or creditable nonstate service for 
30which the required contributions have been made or for which the
 

1contributions otherwise required for such service were not made 
2solely by reason of section 5502.1 (relating to waiver of 
3regular member contributions and Social Security integration 
4member contributions) or any provision of this part relating to 
5the limitations under section 401(a)(17) or 415(b) of the 
6Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 
7401(a)(17) or 415(b)) or any provision of this part limiting 
8compensation or contributions applicable to a Subclass X member, 
9Subclass Y member or Subclass Z member, or for which salary 
10deductions to the system or lump sum payments have been agreed 
11upon in writing.

12"Date of termination of service." The last day of service 
13for which:

14(1) pickup contributions are made for an active member
15or for which the contributions otherwise required for such 
16service were not made solely by reason of section 5502.1 
17(relating to waiver of regular member contributions and 
18Social Security integration member contributions) or any 
19provision of this part relating to the limitations under 
20section 401(a)(17) or 415(b) of the Internal Revenue Code of 
211986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)) or 
22any provision of this part limiting compensation or 
23contributions applicable to a Subclass X member, Subclass Y 
24member or Subclass Z member [or];

25(2) in the case of an inactive member on leave without 
26pay, the date of his resignation or the date his employment 
27is formally discontinued by his employer[.];

28(3)  mandatory pickup participant contributions are made
29for an active participant;

30(4)  in the case of an inactive participant on leave

1without pay, the date of his resignation or the date his
2employment is formally discontinued by his employer; or

3(5)  in the case of a combined service employee, the
4latest of the dates in paragraphs (1), (2), (3) and (4).

5"Disability annuitant." A member on and after the effective
6date of disability until his annuity or the portion of his
7annuity payments in excess of any annuity to which he may
8otherwise be entitled is terminated.

9"Distribution." Payment of all or any portion of a person's 
10interest in either the State Employees' Retirement Fund or the 
11State Employees' Defined Contribution Trust or both which is 
12payable under this part.

13"Domestic relations order." Any judgment, decree or order, 
14including approval of a property settlement agreement, entered 
15on or after the effective date of this definition by a court of 
16competent jurisdiction pursuant to a domestic relations law 
17which relates to the marital property rights of the spouse or 
18former spouse of a member or participant, including the right to 
19receive all or a portion of the moneys payable to that member or 
20participant under this part in furtherance of the equitable 
21distribution of marital assets. The term includes orders of 
22support as that term is defined by 23 Pa.C.S. § 4302 (relating 
23to definitions) and orders for the enforcement of arrearages as 
24provided in 23 Pa.C.S. § 3703 (relating to enforcement of 
25arrearages).

26"Effective date of retirement." The first day following the 
27date of termination of service of a member if he has properly 
28filed an application for an annuity within 90 days of such date; 
29in the case of a vestee or a member who does not apply for an 
30annuity within 90 days after termination of service, the date of
 

1filing an application for an annuity or the date specified on 
2the application, whichever is later. In the case of a finding of 
3disability, the date certified by the board as the effective 
4date of disability.

5"Eligibility points." Points which are accrued by an active
6member or a multiple service member who is an active member in
7the Public School Employees' Retirement System for credited
8service or a member who has been reemployed from USERRA leave or 
9a member who dies while performing USERRA leave and are used in
10the determination of eligibility for benefits.

11"Employer defined contributions."

12(1)  Unless paragraph (2) applies, contributions equal to
134% of an active participant's compensation which are made by
14the Commonwealth or other employer for current service to the
15trust to be credited in the active participant's individual
16investment account.

17(2)  (i)  For Pennsylvania State Police, contributions
18equal to 12.2% of an active participant's compensation
19which are made by the Commonwealth for current service to
20the trust to be credited in the active participant's
21individual investment account.

22(ii)  For an enforcement officer, correction officer, 
23psychiatric security aide, Delaware River Port Authority 
24policeman, park ranger or Capitol Police officer, 
25contributions equal to 5.5% of an active participant's 
26compensation which are made by the Commonwealth or other 
27employer for current service to the trust to be credited 
28in the active participant's individual investment 
29account.

30"Enforcement officer."

1(1) Any enforcement officer or investigator of the
2Pennsylvania Liquor Control Board who is a peace officer
3vested with police power and authority throughout the
4Commonwealth and any administrative or supervisory employee
5of the Pennsylvania Liquor Control Board vested with police
6power who is charged with the administration or enforcement
7of the liquor laws of the Commonwealth.

8(2) Special agents, narcotics agents, asset forfeiture 
9agents, medicaid fraud agents and senior investigators 
10hazardous waste prosecutions unit, classified as such and 
11employed by the Office of Attorney General who have within 
12the scope of their employment as law enforcement officers the 
13power to enforce the law and make arrests under the authority 
14of the act of October 15, 1980 (P.L.950, No.164), known as 
15the Commonwealth Attorneys Act.

16(3) Parole agents, classified as such by the Executive
17Board and employed by the Pennsylvania Board of Probation and
18Parole.

19(4) Waterways conservation officers and other
20commissioned law enforcement personnel employed by the
21Pennsylvania Fish and Boat Commission who have and exercise
22the same law enforcement powers as waterways conservation
23officers. This paragraph shall not apply to deputy waterways
24conservation officers.

25"Final average salary." [The]

26(1)  For members with an effective date of retirement 
27before January 1, 2015, and for purposes of calculating 
28standard single life annuities resulting from Subclass W 
29service regardless of the effective date of retirement, the 
30highest average compensation received as a member during any
 

1three nonoverlapping periods of four consecutive calendar 
2quarters during which the member was a State employee, with 
3the compensation for part-time service being annualized on 
4the basis of the fractional portion of the year for which 
5credit is received; except if the employee was not a member 
6for three nonoverlapping periods of four consecutive calendar 
7quarters, the total compensation received as a member, 
8annualized in the case of part-time service, divided by the 
9number of nonoverlapping periods of four consecutive calendar 
10quarters of membership[;].

11(2) For members with an effective date of retirement on
12or after January 1, 2015, for purposes of calculating
13standard single life annuities resulting from Subclass X
14service, Subclass Y service or Subclass Z service, the
15highest average compensation, as adjusted under section
165506.3 (relating to adjustment of compensation for
17calculating final average salary on or after January 1,
182015), received as a member of any subclass of service during
19any five calendar years during which the member was a State
20employee, except if the employee was not an active member
21during five calendar years, the average of the number of
22calendar years during which the employee was an active
23member.

24(3) For all members and for the calculation of all 
25standard single life annuities without regard to class or 
26subclass of membership and credited service, in the case of a 
27member with multiple service, the final average salary shall 
28be determined on the basis of the compensation received by 
29him as a [State employee] member of the system or as a school 
30employee, other than as a participant in the School
 

1Employees' Defined Contribution Plan, or both; in the case of 
2a member with Class A-3 or Class A-4 service and service in 
3one or more other classes of service, the final average 
4salary shall be determined on the basis of the compensation 
5received by him in all classes of State service credited in 
6the system; and, in the case of a member who first became a 
7member on or after January 1, 1996, the final average salary 
8shall be determined as hereinabove provided but subject to 
9the application of the provisions of section 5506.1(a) 
10(relating to annual compensation limit under IRC § 401(a)
11(17)). Final average salary shall be determined by including 
12in compensation payments deemed to have been made to a member 
13reemployed from USERRA leave to the extent member 
14contributions have been made as provided in section 5302(f)
15(2) (relating to credited State service) and payments made to 
16a member on leave of absence under 51 Pa.C.S. § 4102 
17(relating to leaves of absence for certain government 
18employees) as provided in section 5302(f)(6).

19"Full coverage member." Any member for whom member pickup 
20contributions are being picked up or who has paid or has agreed 
21to pay to the fund the actuarial equivalent of regular member 
22contributions due on account of service prior to January 1, 
231982.

24"Fund." The State Employees' Retirement Fund.

25"Head of department." The chief administrative officer of
26the department, the chairman or executive director of the
27agency, authority, or independent board or commission, the Court
28Administrator of Pennsylvania, and the Chief Clerk of the
29Senate, or the Chief Clerk of the House of Representatives.

30"Inactive member." A member for whom no pickup contributions
 

1are being made to the fund, except in the case of an active 
2member for whom such contributions otherwise required for 
3current State service are not being made solely by reason of 
4section 5502.1 (relating to waiver of regular member 
5contributions and Social Security integration member 
6contributions) or any provision of this part relating to the 
7limitations under section 401(a)(17) or 415(b) of the Internal 
8Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) 
9or 415(b)) or any provision of this part limiting compensation 
10or contributions applicable to a Subclass X member, Subclass Y 
11member or Subclass Z member, but who has accumulated deductions 
12standing to his credit in the fund and who is not eligible to 
13become or has not elected to become a vestee or has not filed an 
14application for an annuity.

15"Inactive member on leave without pay." The term does not 
16include a combined service employee who is an inactive 
17participant on leave without pay.

18"Inactive participant."  A participant for whom no mandatory
19pickup participant contributions are being made to the trust,
20except in the case of an active participant for whom such
21contributions otherwise required for current State service are
22not being made solely by reason of any provision of this part
23relating to limitations under section 401(a)(17) or 415 of the
24Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
25401(a)(17) or 415), but who has vested accumulated total defined
26contributions standing to his credit in the trust and who has
27not filed an application for an annuity.

28"Inactive participant on leave without pay." The term does
29not include a combined service employee who is an inactive
30member on leave without pay.

1"Individual investment account."  The account in the trust to
2which are credited the amounts of the contributions made by a
3participant and the participant's employer in accordance with
4the provisions of this part, together with all interest and
5investment earnings after deduction for fees, costs, expenses
6and investment losses and charges for distributions.

7"Intervening military service." Active military service of a 
8member who was a State employee and active member of the system 
9immediately preceding his induction into the armed services or 
10forces of the United States in order to meet a military 
11obligation excluding any voluntary extension of such service and 
12who becomes a State employee within 90 days of the expiration of 
13such service.

14"IRC." The Internal Revenue Code of 1986, as designated and
15referred to in section 2 of the Tax Reform Act of 1986 (Public
16Law 99-514, 100 Stat. 2085, 2095). A reference in this part to
17"IRC § " shall be deemed to refer to the identically numbered
18section and subsection or other subdivision of such section in
1926 United States Code (relating to Internal Revenue Code).

20"Irrevocable beneficiary." The person or persons permanently 
21designated by a member or participant in writing to the State 
22Employees' Retirement Board pursuant to an approved domestic 
23relations order to receive all or a portion of the accumulated 
24deductions, vested accumulated total defined contributions or 
25lump sum benefit payable upon the death of such member or 
26participant.

27"Irrevocable successor payee."  The person permanently
28designated by a participant receiving distributions in writing
29to the board pursuant to an approved domestic relations order to
30receive one or more distributions from the plan upon the death

1of such participant.

2"Irrevocable survivor annuitant." The person permanently 
3designated by a member in writing to the State Employees' 
4Retirement Board pursuant to an approved domestic relations 
5order to receive an annuity upon the death of such member.

6"Joint coverage member." Any member who agreed prior to 
7January 1, 1966 to make joint coverage member contributions to 
8the fund and has not elected to become a full coverage member.

9"Joint coverage member contributions." Regular member
10contributions reduced for a joint coverage member.

11"Mandatory pickup participant contributions."  Contributions
12equal to 6.25% of compensation that are made by the Commonwealth
13or other employer for active participants for current service.

14"Member." Active member, inactive member, annuitant, vestee 
15or special vestee.

16"Member of the judiciary." Any justice of the Supreme Court, 
17any judge of the Superior Court, the Commonwealth Court, any 
18court of common pleas, the Municipal Court and the Traffic Court
19of Philadelphia, or any community court.

20"Member's annuity." The single life annuity which is
21actuarially equivalent, at the effective date of retirement, to
22the sum of the regular accumulated deductions, shared-risk 
23accumulated deductions, the additional accumulated deductions
24and the social security integration accumulated deductions
25standing to the member's credit in the members' savings account.

26"Military service." All active military service for which a 
27member has received a discharge other than an undesirable, bad 
28conduct, or dishonorable discharge.

29"Multiple service." Credited service of a member who has 
30elected to combine his credited service in both the State
 

1Employees' Retirement System and the Public School Employees' 
2Retirement System.

3"Noneligible member." For the purposes of section 5506.1 
4(relating to annual compensation limit under IRC § 401(a)(17)), 
5a member who first became a member on or after January 1, 1996.

6"Nonstudent service." Employment in an educational
7institution that is not contingent on the employee's enrollment
8as a student or maintenance of student status at such
9institution and for which only monetary compensation is
10received, excluding tuition waivers or reimbursement, academic
11credit, housing, meals and other in-kind compensation.

12"Participant."  An active participant, inactive participant
13or participant receiving distributions.

14"Participant receiving distributions."  A participant in the
15plan who has commenced receiving distributions from his
16individual investment account but who has not received a total
17distribution of his vested interest in the individual investment
18account.

19"Pickup contributions." Regular or joint coverage member 
20contributions, shared risk member contributions, social security 
21integration contributions and additional member contributions 
22which are made by the Commonwealth or other employer for active
23members for current service on and after January 1, 1982.

24"Plan."  The State Employees' Defined Contribution Plan as
25established by the provisions of this part and the board.

26"Plan document."  The documents created by the board under
27section 5402 (relating to plan document) that contain the terms
28and provisions of the plan and trust as established by the board
29regarding the establishment, administration and investment of
30the plan and trust.

1"Previous State service." Service rendered as a State 
2employee prior to his most recent entrance in the system[.], 
3provided that the State employee was not a participant in the 
4plan, was not eligible to be an optional participant in the plan 
5under section 5301(b.1) (relating to mandatory and optional 
6membership in the system and participation in the plan) or was 
7not prohibited from being a participant under section 5301(c.1) 
8during such service.

9"Psychiatric security aide." Any employee whose principal 
10duty is the care, custody and control of the criminally insane 
11inmates of a maximum security institution for the criminally 
12insane or detention facility operated by the Department of 
13Public Welfare.

14"Public School Employees' Retirement System." The retirement
15system established by the act of July 18, 1917 (P.L.1043,
16No.343), and codified by the act of June 1, 1959 (P.L.350,
17No.77).

18"Reemployed from USERRA leave." Resumption of active 
19membership or active participation as a State employee after a 
20period of USERRA leave, provided, however, that the resumption 
21of active membership or active participation was within the time 
22period and under conditions and circumstances such that the 
23State employee was entitled to reemployment rights under 38 
24U.S.C. Ch. 43 (relating to employment and reemployment rights of 
25members of the uniformed services).

26"Regular accumulated deductions." The total of the regular 
27or joint coverage member contributions paid into the fund on 
28account of current service or previous State or creditable 
29nonstate service, together with the statutory interest credited 
30thereon until the date of termination of service. In the case of
 

1a vestee or a special vestee, statutory interest shall be 
2credited until the effective date of retirement. A member's 
3account shall not be credited with statutory interest for more 
4than two years during a leave without pay.

5"Regular member contributions." The product of the basic
6contribution rate, the class of service multiplier if greater
7than one and the compensation of the member.

8"Required beginning date."  The latest date by which
9distributions of a participant's interest in his individual
10investment account must commence under section 401(a)(9) of the
11Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
12401(a)(9)).

13"Retirement counselor." The State Employees' Retirement
14System employee whose duty it shall be to advise each employee
15of his rights and duties as a member of the system.

16"Salary deductions." The amounts certified by the board, 
17deducted from the compensation of an active member or active 
18participant, or the school service compensation of a multiple 
19service member who is an active member of the Public School 
20Employees' Retirement System, and paid into the fund or trust.

21"School Employees' Defined Contribution Plan."  The defined 
22contribution plan for school employees established under 24 
23Pa.C.S. Pt. IV (relating to retirement for school employees).

24"School service." Service rendered as a public school
25employee and credited as service in the Public School Employees' 
26Retirement System.

27"Service connected disability." A disability resulting from 
28an injury arising in the course of State employment, and which 
29is compensable under the applicable provisions of the act of
30June 2, 1915 (P.L.736, No.338), known as "The Pennsylvania
 

1Workmen's Compensation Act," or the act of June 21, 1939 
2(P.L.566, No.284), known as "The Pennsylvania Occupational 
3Disease Act."

4"Shared-risk accumulated deductions." The total of the
5shared-risk member contributions paid into the fund on account
6of current service or previous State service or creditable
7nonstate service, together with the statutory interest credited
8on the contributions until the date of termination of service.
9In the case of a vestee, statutory interest shall be credited
10until the effective date of retirement. A member's account shall
11not be credited with statutory interest for more than two years
12during a leave without pay.

13"Shared-risk member contributions." The product of the 
14shared-risk contribution rate and the compensation of a member
15for service credited as Class A-3 or Class A-4.

16"Social security integration accumulated deductions." The
17total of the member contributions paid into the fund on account
18of social security integration credit, together with the
19statutory interest credited thereon until the date of
20termination of service or until the date of withdrawal thereof,
21whichever is earlier. In the case of a vestee statutory interest
22shall be credited until the effective date of retirement. A
23member's account shall not be credited with statutory interest
24for more than two years during a leave without pay.

25"Social security wage base."  The amount which was or could
26have been covered as the contribution and wage base for old age
27and survivors insurance benefits under the Federal Social
28Security Act (42 U.S.C. § 301 et seq.).

29"Special vestee." An employee of The Pennsylvania State 
30University who is a member of the State Employees' Retirement
 

1System with five or more but less than ten eligibility points 
2and who has a date of termination of service from The 
3Pennsylvania State University of June 30, 1997, because of the 
4transfer of his job position or duties to a controlled 
5organization of the Penn State Geisinger Health System or 
6because of the elimination of his job position or duties due to 
7the transfer of other job positions or duties to a controlled 
8organization of the Penn State Geisinger Health System, provided 
9that:

10(1) subsequent to termination of State service as an
11employee of The Pennsylvania State University, the member has
12not returned to State service in any other capacity or
13position as a State employee;

14(2) The Pennsylvania State University certifies to the
15board that the member is eligible to be a special vestee;

16(3) the member files an application to vest the member's
17retirement rights pursuant to section 5907(f) (relating to
18rights and duties of State employees [and], members and 
19participants) on or before September 30, 1997; and

20(4) the member elects to leave the member's total
21accumulated deductions in the fund and to defer receipt of an
22annuity until attainment of superannuation age.

23"Standard single life annuity." An annuity equal to 2% of 
24the final average salary, multiplied by the total number of 
25years and fractional part of a year of credited service of a 
26member in each class or subclass of service.

27"State employee." Any person holding a State office or 
28position under the Commonwealth, employed by the State
29Government of the Commonwealth, in any capacity whatsoever, 
30except an independent contractor or any person compensated on a
 

1fee basis or any person paid directly by an entity other than a 
2State Employees' Retirement System employer, and shall include 
3members of the General Assembly, and any officer or employee of 
4the following:

5(1) (i) The Department of Education.

6(ii) State-owned educational institutions.

7(iii) Community colleges.

8(iv) The Pennsylvania State University, except an
9employee in the College of Agriculture who is paid wholly
10from Federal funds or an employee who is participating in
11the Federal Civil Service Retirement System. The
12university shall be totally responsible for all employer
13contributions under [section] sections 5507 (relating to
14contributions to the system by the Commonwealth and other
15[employers).] employers before July 1, 2015) and 5507.1 
16(relating to contributions to the system by the 
17Commonwealth and other employers commencing July 1, 
182015).

19(2) The Pennsylvania Turnpike Commission, the Delaware
20River Port Authority, the Port Authority Transit Corporation,
21the Philadelphia Regional Port Authority, the Delaware River
22Joint Toll Bridge Commission, the State Public School
23Building Authority, The General State Authority, the State
24Highway and Bridge Authority, the Delaware Valley Regional
25Planning Commission, the Interstate Commission of the
26Delaware River Basin, and the Susquehanna River Basin
27Commission any time subsequent to its creation, provided the
28commission or authority agrees to contribute and does
29contribute to the fund or trust, from time to time, the
30moneys required to build up the reserves necessary for the

1payment of the annuities or other benefits of such officers
2and employees without any liability on the part of the
3Commonwealth to make appropriations for such purposes, and
4provided in the case of employees of the Interstate
5Commission of the Delaware River Basin, that the employee
6shall have been a member of the system for at least ten years
7prior to January 1, 1963.

8(3) Any separate independent public corporation created
9by statute, not including any municipal or quasi-municipal
10corporation, so long as he remains an officer or employee of
11such public corporation, and provided that such officer or
12employee of such public corporation was an employee of the
13Commonwealth immediately prior to his employment by such
14corporation, and further provided such public corporation
15shall agree to contribute and contributes to the fund or 
16trust, from time to time, the moneys required to build up the
17reserves necessary for the payment of the annuities or other 
18benefits of such officers and employees without any liability
19on the part of the Commonwealth to make appropriations for
20such purposes.

21"State police officer." Any officer or member of the 
22Pennsylvania State Police who, on or after July 1, 1989, shall 
23have been subject to the terms of a collective bargaining 
24agreement or binding interest arbitration award established 
25pursuant to the act of June 24, 1968 (P.L.237, No.111), referred 
26to as the Policemen and Firemen Collective Bargaining Act.

27"State service." Service converted from county service 
28pursuant to section 5303.1 (relating to election to convert 
29county service to State service), converted from school service 
30pursuant to section 5303.2 (relating to election to convert
 

1school service to State service) or rendered as a State 
2employee.

3"Statutory interest." Interest at 4% per annum, compounded
4annually.

5"Subclass W member."  A State employee who is a member of
6Subclass A-W, Subclass AA-W, Subclass A-3W, Subclass A-4W,
7Subclass D-4W, Subclass E-1W or Subclass E-2W.

8"Subclass W service."  Service performed or credited as a
9member of Subclass A-W, Subclass AA-W, Subclass A-3W, Subclass
10A-4W, Subclass D-4W, Subclass E-1W or Subclass E-2W.

11"Subclass X member."  A State employee who is a member of
12Subclass A-X, Subclass A-3X or Subclass A-4X.

13"Subclass X service."  Service performed or credited as a
14member of Subclass A-X, Subclass A-3X or Subclass A-4X.

15"Subclass Y member."  A State employee who is a member of
16Subclass AA-Y, Subclass D-4Y, Subclass E-1Y or Subclass E-2Y.

17"Subclass Y service."  Service performed or credited as a
18member of Subclass AA-Y, Subclass D-4Y, Subclass E-1Y or
19Subclass E-2Y.

20"Subclass Z member."  A State employee who is a member of
21Subclass AA-Z, Subclass D-4Z, Subclass E-1Z or Subclass E-2Z.

22"Subclass Z service."  Service performed or credited as a
23member of Subclass AA-Z, Subclass D-4Z, Subclass E-1Z or
24Subclass E-2Z.

25"Successor payee."  The person or persons last designated in
26writing to the board by a participant receiving distributions to
27receive one or more distributions upon the death of the
28participant.

29"Superannuation age." For classes of service in the system 
30other than Class A-3 and Class A-4, any age upon accrual of 35
 

1eligibility points or age 60, except for a member of the General 
2Assembly, an enforcement officer, a correction officer, a 
3psychiatric security aide, a Delaware River Port Authority 
4policeman or an officer of the Pennsylvania State Police, age 
550, and, except for a member with Class G, Class H, Class I, 
6Class J, Class K, Class L, Class M or Class N service, age 55 
7upon accrual of 20 eligibility points. For Class A-3 and Class 
8A-4 service, any age upon attainment of a superannuation score 
9of 92, provided the member has accrued 35 eligibility points, or 
10age 65, or for park rangers or capitol police officers, age 55 
11with 20 years of service as a park ranger or capitol police 
12officer, except for a member of the General Assembly, an 
13enforcement officer, a correction officer, a psychiatric 
14security aide, a Delaware River Port Authority policeman or an 
15officer of the Pennsylvania State Police, age 55. A vestee with 
16Class A-3 or Class A-4 service credit attains superannuation age 
17on the birthday the vestee attains the age resulting in a 
18superannuation score of 92, provided that the vestee has at 
19least 35 eligibility points, or attains another applicable 
20superannuation age, whichever occurs first.

21"Superannuation annuitant." An annuitant whose annuity first
22became payable on or after the attainment of superannuation age
23and who is not a disability annuitant.

24"Superannuation score." The sum of the member's age in whole 
25years on his last birthday and the amount of the member's total 
26eligibility points on the member's effective date of retirement, 
27expressed in whole years and whole eligibility points and 
28disregarding fractions of a year and fractions of total
29eligibility points.

30"Survivor annuitant." The person or persons last designated

1by a member under a joint and survivor annuity option to receive
2an annuity upon the death of such member.

3"System." The State Employees' Retirement System of 
4Pennsylvania as established by the act of June 27, 1923 
5(P.L.858, No.331), and codified by the act of June 1, 1959 
6(P.L.392, No.78) and the provisions of this part.

7"Total accumulated deductions." The sum of the regular
8accumulated deductions, additional accumulated deductions, the
9social security integration accumulated deductions, shared-risk
10member contributions and all other contributions paid into the
11fund for the purchase, transfer or conversion of credit for
12service or other coverage together with all statutory interest
13credited thereon until the date of termination of service. In
14the case of a vestee or a special vestee, statutory interest
15shall be credited until the effective date of retirement. A
16member's account shall not be credited with statutory interest
17for more than two years during a leave without pay.

18"Trust."  The State Employees' Defined Contribution Trust
19established under Chapter 54 (relating to State Employees'
20Defined Contribution Plan).

21"USERRA leave." Any period of time for service in the
22uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
23employment and reemployment rights of members of the uniformed
24services) by a State employee or former State employee who
25terminated State service to perform such service in the
26uniformed services, if the current or former State employee is
27entitled to reemployment rights under 38 U.S.C. Ch. 43 with
28respect to the uniformed service.

29"Valuation interest." Interest at 5 1/2% per annum 
30compounded annually and applied to all accounts of the fund
 

1other than the members' savings account.

2"Vestee." A member with five or more eligibility points in a 
3class of service other than Class A-3 or Class A-4 or Class T-E 
4or Class T-F in the Public School Employees' Retirement System, 
5a member with Class G, Class H, Class I, Class J, Class K, Class 
6L, Class M or Class N service with five or more eligibility 
7points, or a member with Class A-3 or Class A-4 service with ten 
8or more eligibility points who has terminated State service and 
9has elected to leave his total accumulated deductions in the
10fund and to defer receipt of an annuity.

11"Voluntary contributions."  Contributions made by a
12participant to the trust and credited to his individual
13investment account in excess of his mandatory pickup participant
14contributions, by salary deductions paid through the
15Commonwealth or other employer, or by an eligible rollover or
16direct trustee-to-trustee transfer.

17Section 302. Section 5103 of Title 71 is amended to read:

18§ 5103. Notice to members and participants.

19Notice by publication, including, without being limited to,
20newsletters, newspapers, forms, first class mail, letters,
21manuals and, to the extent authorized by a policy adopted by the
22board, electronically, including, without being limited to, e-
23mail or [World Wide Web] Internet sites, distributed or made
24available to members and participants in a manner reasonably
25calculated to give actual notice of those sections of the State
26Employees' Retirement Code that require notice to members or 
27participants shall be deemed sufficient notice for all purposes.

28Section 303. Title 71 is amended by adding a section to
29read:

30§ 5104.  Reference to State Employees' Retirement System.

1(a) Construction.--As of the effective date of this section,
2unless the context clearly indicates otherwise, any reference to
3the State Employees' Retirement System in a statutory provision
4other than this part and 24 Pa.C.S. Pt. IV (relating to
5retirement for school employees) shall include a reference to
6the State Employees' Defined Contribution Plan and any reference
7to the State Employees' Retirement Fund shall include a
8reference to the State Employees' Defined Contribution Trust.

9(b) Agreement.--The agreement of an employer listed in the
10definition of "State employee" or any other law to make
11contributions to the fund or to enroll its employees as members
12in the system shall be deemed to be an agreement to make
13contributions to the trust or to enroll its employees in the
14plan.

15Section 304. Section 5301 heading, (a), (b), (c) and (d) of
16Title 71 are amended and the section is amended by adding
17subsections to read:

18§ 5301. Mandatory and optional membership in the system and 
19participation in the plan.

20(a) Mandatory membership.--[Membership] Unless an election 
21to be a participant in the plan is made, membership in the
22system shall be mandatory as of the effective date of employment
23for all State employees except the following:

24(1) Governor.

25(2) Lieutenant Governor.

26(3) Members of the General Assembly.

27(4) Heads or deputy heads of administrative departments.

28(5) Members of any independent administrative board or
29commission.

30(6) Members of any departmental board or commission.

1(7) Members of any advisory board or commission.

2(8) Secretary to the Governor.

3(9) Budget Secretary.

4(10) Legislative employees.

5(11) School employees who have elected membership in the
6Public School Employees' Retirement System.

7(12) School employees who have elected membership in an
8independent retirement program approved by the employer,
9provided that in no case, except as hereinafter provided,
10shall the employer contribute on account of such elected
11membership at a rate greater than the employer normal
12contribution rate as determined in section 5508(b) (relating
13to actuarial cost method for fiscal years ending before July 
141, 2015). For the fiscal year 1986-1987 an employer may
15contribute on account of such elected membership at a rate
16which is the greater of 7% or the employer normal
17contribution rate as determined in section 5508(b) and for
18the fiscal year 1992-1993 and all fiscal years after that at
19a rate of 9.29%.

20(13) Persons who have elected to retain membership in
21the retirement system of the political subdivision by which
22they were employed prior to becoming eligible for membership
23in the State Employees' Retirement System.

24(14) Persons who are not members of the system and are
25employed on a per diem or hourly basis for less than 100 days
26or 750 hours in a 12-month period.

27(15) Employees of the Philadelphia Regional Port
28Authority who have elected to retain membership in the
29pension plan or retirement system in which they were enrolled
30as employees of the predecessor Philadelphia Port Corporation

1prior to the creation of the Philadelphia Regional Port
2Authority.

3(16) Employees of the Juvenile Court Judges' Commission
4who, before the effective date of this paragraph, were
5transferred from the State System of Higher Education to the
6Juvenile Court Judges' Commission as a result of an
7interagency transfer of staff approved by the Office of
8Administration and who, while employees of the State System
9of Higher Education, had elected membership in an independent
10retirement program approved by the employer.

11(17)  State employees whose most recent period of State
12service starts on or after January 1, 2015. For purposes of
13this paragraph and section 5955(c) and (e) (relating to
14construction of part), a State employee who is furloughed
15under section 802 of the act of August 5, 1941 (P.L.752,
16No.286), known as the Civil Service Act, and reemployed
17pursuant to the Civil Service Act in any class of service or
18civil service status which was previously held shall not be
19treated as having a break in State service.

20(a.1)  Mandatory participation in the plan.--

21(1) State employees listed in subsection (a)(17) who are
22not listed in subsection (a)(1) through (13) shall be
23mandatory participants as of the most recent effective date
24of State service without regard to whether or not they are
25combined service employees.

26(2) State employees listed in subsection (a)(17) who are
27employees of The Pennsylvania State University, the State 
28System of Higher Education, State-owned educational 
29institutions or community colleges and who are members of the 
30system or participants in the plan shall be mandatory
 

1participants as of the most recent effective date of State 
2service.

3(b) Optional membership in the system.--The State employees
4listed in subsection (a)(1) through (11) shall have the right to
5elect membership in the system before January 1, 2015; once such
6election is exercised, membership shall continue until the
7termination of State service or until the State employee elects 
8to be a participant in the plan.

9(b.1)  Optional participation in the plan.--The State
10employees listed in subsection (b) who do not elect membership
11in the system before January 1, 2015, and State employees listed
12in subsection (a)(17) who also are listed in subsection (a)(1)
13through (10) or who also are employees of The Pennsylvania State
14University, the State System of Higher Education, State-owned
15educational institutions or community colleges and who are not
16members of the system or participants in the plan shall have the
17right to elect participation in the plan; once such election is
18exercised, participation shall be effective as of the date of
19election and shall continue until the termination of State
20service.

21(c) Prohibited membership in the system.--The State
22employees listed in subsection (a)(12), (13), (14) [and], (15)
23and (17) shall not have the right to elect membership in the
24system.

25(c.1)  Prohibited participation in the plan.--The State
26employees listed in subsection (a)(17) who also are listed in
27subsection (a)(13) and (15) shall not be eligible to participate
28in the plan.

29(d) Return to service.--

30(1) An annuitant who returns to service as a State

1employee before January 1, 2015, shall resume active
2membership in the system as of the effective date of
3employment, except as otherwise provided in section 5706(a)
4(relating to termination of annuities), regardless of the
5optional membership category of the position.

6(2) An annuitant, inactive participant or a participant
7receiving distributions who returns to service as a State
8employee on or after January 1, 2015, shall be an active
9participant in the plan as of the effective date of
10employment unless the position is eligible for optional
11participation or is not eligible for participation in the
12plan, or except as otherwise provided in section 5706(a).

13* * *

14Section 305. Sections 5302(a), (b), (e) and (f) and 5303(b),
15(d)(1) and (e)(1) and (4) of Title 71, amended or added October
1624, 2012 (P.L.1436, No.181), are amended to read:

17§ 5302. Credited State service.

18(a) Computation of credited service.--In computing credited
19State service of a member for the determination of benefits, a
20full-time salaried State employee, including any member of the
21General Assembly, shall receive credit for service in each
22period for which contributions as required are made to the fund,
23or for which contributions otherwise required for such service
24were not made to the fund solely by reason of section 5502.1
25(relating to waiver of regular member contributions and Social
26Security integration member contributions) or any provision of
27this part relating to the limitations under IRC § 401(a)(17) or
28415(b) or a provision of this part limiting compensation or 
29contributions applicable to a Subclass X member, Subclass Y 
30member or Subclass Z member, but in no case shall he receive

1more than one year's credit for any 12 consecutive months or 26
2consecutive biweekly pay periods. A per diem or hourly State
3employee shall receive one year of credited service for each
4nonoverlapping period of 12 consecutive months or 26 consecutive
5biweekly pay periods in which he is employed and for which
6contributions are made to the fund or would have been made to 
7the fund but for such waiver under section 5502.1 or limitations
8under the IRC or limitations on compensation or contributions 
9applicable to a Subclass X member, Subclass Y member or Subclass 
10Z member for at least 220 days or 1,650 hours of employment. If
11the member was employed and contributions were made to the fund
12for less than 220 days or 1,650 hours, he shall be credited with
13a fractional portion of a year determined by the ratio of the
14number of days or hours of service actually rendered to 220 days
15or 1,650 hours, as the case may be. A part-time salaried
16employee shall be credited with the fractional portion of the
17year which corresponds to the number of hours or days of service
18actually rendered and for which contributions are or would have 
19been made to the fund in relation to 1,650 hours or 220 days, as
20the case may be. In no case shall a member who has elected
21multiple service receive an aggregate in the two systems of more
22than one year of credited service for any 12 consecutive months.

23(b) Creditable leaves of absence.--

24(1) A member on leave without pay who is studying under 
25a Federal grant approved by the head of his department or who 
26is engaged up to a maximum of two years of temporary service 
27with the United States Government, another state or a local 
28government under the Intergovernmental Personnel Act of 1970 
29(5 U.S.C. §§ 1304, 3371-3376; 42 U.S.C. §§ 4701-4772) shall 
30be eligible for credit for such service: Provided, That
 

1contributions are made in accordance with sections 5501 
2(relating to regular member contributions for current 
3service), 5501.1 (relating to shared-risk member 
4contributions for Class A-3 and Class A-4 service), 5505.1 
5(relating to additional member contributions) [and], 5507 
6(relating to contributions to the system by the Commonwealth 
7and other employers before July 1, 2015) and 5507.1 (relating 
8to contributions to the system by the Commonwealth and other 
9employers commencing July 1, 2015), the member returns from 
10leave without pay to active State service as a member of the 
11system for a period of at least one year, and he is not 
12entitled to retirement benefits for such service under a 
13retirement system administered by any other governmental 
14agency.

15(2) An active member or active participant on paid leave
16granted by an employer for purposes of serving as an elected
17full-time officer for a Statewide employee organization which
18is a collective bargaining representative under the act of 
19June 24, 1968 (P.L.237, No.111), referred to as the Policemen
20and Firemen Collective Bargaining Act, or the act of July 23, 
211970 (P.L.563, No.195), known as the Public Employe Relations
22Act, and up to 14 full-time business agents appointed by an
23employee organization that represents correction officers
24employed at State correctional institutions: Provided, That
25for elected full-time officers such leave shall not be for
26more than three consecutive terms of the same office and for
27up to 14 full-time business agents appointed by an employee
28organization that represents correction officers employed at
29State correctional institutions no more than three
30consecutive terms of the same office; that the employer shall

1fully compensate the member or active participant, including,
2but not limited to, salary, wages, pension and retirement
3contributions and benefits, other benefits and seniority, as
4if he were in full-time active service; and that the
5Statewide employee organization shall fully reimburse the
6employer for all expenses and costs of such paid leave,
7including, but not limited to, contributions and payment in
8accordance with [sections] section 5404 (relating to 
9participant contributions), 5405 (relating to mandatory 
10pickup participant contributions), 5406 (relating to employer 
11defined contributions), 5501, 5501.1, 5505.1 [and], 5507 or 
125507.1, if the employee organization either directly pays, or
13reimburses the Commonwealth or other employer for,
14contributions made in accordance with [section] sections 
155404, 5405, 5406, 5507 and 5507.1.

16* * *

17(e) Cancellation of credited service.--All credited service 
18in the system shall be cancelled if a member withdraws his total 
19accumulated deductions, except that a member with Class A-3 or 
20Class A-4 service credit and one or more other classes of 
21service credit shall not have his service credit as a member of 
22any classes of service other than as a member of Class A-3 or 
23Class A-4 cancelled when the member receives a lump sum payment 
24of accumulated deductions resulting from Class A-3 or Class A-4 
25service pursuant to section 5705.1 (relating to payment of 
26accumulated deductions resulting from Class A-3 and Class A-4 
27service). A partial or total distribution of accumulated total 
28defined contributions to a combined service employee shall not 
29cancel service credited in the system.

30(f) Credit for military service.--A State employee who has
 

1performed USERRA leave may receive credit in the system or 
2participate in the plan as follows:

3(1) For purposes of determining whether a member is
4eligible to receive credited service in the system for a
5period of active military service, other than active duty
6service to meet periodic training requirements, rendered
7after August 5, 1991, and that began before the effective
8date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73
9(relating to military leave of absence) shall apply to all
10individuals who were active members of the system when the
11period of military service began, even if not defined as an
12employee pursuant to 51 Pa.C.S. § 7301 (relating to
13definitions).

14(1.1) State employees may not receive service credit in 
15the system or exercise the options under 51 Pa.C.S. § 7306
16(relating to retirement rights) for military leaves that
17begin on or after the effective date of this subsection,
18except as otherwise provided by this subsection.

19(1.2) State employees may not participate in the plan or
20exercise the options under 51 Pa.C.S. § 7306 for military
21leaves that begin on or after the effective date of this
22paragraph, except as otherwise provided by this subsection.

23(2) A State employee who has performed USERRA leave may
24receive credit in the system as provided by this paragraph.
25The following shall apply:

26(i) A State employee who is reemployed from USERRA
27leave as an active member of the system shall be treated
28as not having incurred a break in State service by reason
29of the USERRA leave and shall be granted eligibility
30points as if the State employee had not been on the

1USERRA leave. If a State employee who is reemployed from
2USERRA leave as an active member of the system
3subsequently makes regular member contributions,
4additional member contributions, Social Security
5integration member contributions, shared-risk member
6contributions and any other member contributions in the
7amounts and in the time periods required by 38 U.S.C. Ch.
843 (relating to employment and reemployment rights of
9members of the uniformed services) and IRC § 414(u) as if
10the State employee had continued in State office or
11employment and performed State service and was
12compensated during the period of USERRA leave, then the
13State employee shall be granted State service credit for
14the period of USERRA leave. The State employee shall have
15the State employee's benefits, rights and obligations
16determined under this part as if the State employee was
17an active member who performed creditable State service
18during the USERRA leave in the job position that the
19State employee would have held had the State employee not
20been on USERRA leave and received the compensation on
21which the member contributions to receive State service
22credit for the USERRA leave were determined.

23(ii) For purposes of determining whether a State
24employee has made the required employee contributions for
25State service credit for USERRA leave, if an employee who
26is reemployed from USERRA leave as an active member of 
27the system terminates State service or dies in State
28service before the expiration of the allowed payment
29period, then State service credit for the USERRA leave
30will be granted as if the required member contributions

1were paid the day before termination or death. The amount
2of the required member contributions will be treated as
3an incomplete payment subject to the provisions of
4section 5506 (relating to incomplete payments). Upon a
5subsequent return to State service or to school service
6as a multiple service member, the required member
7contributions treated as incomplete payments shall be
8treated as member contributions that were either
9withdrawn in a lump sum at termination or paid as a lump
10sum pursuant to section 5705(a)(4) or (a.1) (relating to
11member's options), as the case may be.

12(iii) A State employee who is reemployed from USERRA
13leave as an active member of the system who does not make
14the required member contributions or makes only part of
15the required member contributions within the allowed
16payment period shall not be granted credited service for
17the period of USERRA leave for which the required member
18contributions were not timely made, shall not be eligible
19to subsequently make contributions and shall not be
20granted either State service credit or nonstate service
21credit for the period of USERRA leave for which the
22required member contributions were not timely made.

23(2.1) (i) A participant who is reemployed from USERRA
24leave shall be treated as not having incurred a break in
25State service by reason of the USERRA leave and shall be
26granted vesting credit as if the participant had not been
27on USERRA leave. If a participant who is reemployed from
28USERRA leave subsequently makes mandatory pickup
29participant contributions in the amounts and in the time
30periods required by 38 U.S.C. Ch. 43 and IRC § 414(u) as

1if the participant had continued in his State office or
2employment and performed State service and been
3compensated during the period of USERRA leave, the
4participant's employer shall make the corresponding
5employer defined contributions. Such an employee shall
6have his contributions, benefits, rights and obligations
7determined under this part as if he were an active
8participant who performed State service during the USERRA
9leave in the job position that he would have held had he
10not been on USERRA leave and received the compensation on
11which the mandatory pickup participant contributions to
12receive State service credit for the USERRA leave were
13determined, including the right to make voluntary
14contributions on such compensation as permitted by law.

15(ii)  A participant who is reemployed from USERRA
16leave who does not make the mandatory pickup participant
17contributions or makes only part of the mandatory pickup
18participant contributions within the allowed payment
19period shall not be eligible to make mandatory pickup
20participant contributions or voluntary contributions at a
21later date for the period of USERRA leave for which the
22mandatory pickup participant contributions were not
23timely made.

24(3) A State employee who is a member of the system and
25performs USERRA leave from which the employee could have been
26reemployed from USERRA leave had the State employee returned
27to State service in the time frames required by 38 U.S.C. Ch.
2843 for reemployment rights, but did not do so, shall be able
29to receive creditable nonstate service as nonintervening
30military service for the period of USERRA leave should the

1employee later return to State service as an active member of 
2the system and is otherwise eligible to purchase the service
3as nonintervening military service.

4(3.1)  A State employee who is a participant in the plan
5and performs USERRA leave from which the employee could have
6been reemployed from USERRA leave had the employee returned
7to State service in the time frames required by 38 U.S.C. Ch.
843 for reemployment rights, but did not do so, shall not be
9eligible to make mandatory pickup participant contributions
10or voluntary contributions for the period of USERRA leave
11should the employee later return to State service and be a
12participant in the plan.

13(4) [A State employee] An active member or inactive 
14member on leave without pay who on or after the effective
15date of this subsection is granted a leave of absence under
1651 Pa.C.S. § 4102 (relating to leaves of absence for certain
17government employees) or a military leave under 51 Pa.C.S.
18Ch. 73, that is not USERRA leave shall be able to receive
19creditable nonstate service as nonintervening military
20service should the employee return to State service as an 
21active member of the system and is otherwise eligible to
22purchase the service as nonintervening military service.

23(4.1) An active participant or inactive participant on
24leave without pay who on or after the effective date of this
25paragraph is granted a leave of absence under 51 Pa.C.S. §
264102 or a military leave under 51 Pa.C.S. Ch. 73 that is not
27USERRA leave shall not be able to make mandatory pickup
28participant contributions or voluntary contributions during
29or for the leave of absence or military leave and shall not
30have employer defined contributions made during such leave,

1without regard to whether or not the State employee received
2salary, wages, stipends, differential wage payments or other
3payments from his employer during the leave, notwithstanding
4any provision to the contrary under 51 Pa.C.S. § 4102 or 51
5Pa.C.S. Ch. 73.

6(5) If a member dies while performing USERRA leave, then
7the beneficiaries or survivor annuitants, as the case may be,
8of the deceased member are entitled to any additional
9benefits, including eligibility points, other than benefit
10accruals relating to the period of qualified military
11service, provided under this part had the member resumed and
12then terminated employment on account of death.

13(5.1)  If a participant dies while performing USERRA
14leave, the beneficiaries or successor payees of the deceased
15participant are entitled to any additional benefits, other
16than benefit accruals relating to the period of qualified
17military service, provided under this part had the
18participant resumed and then terminated employment on account
19of death.

20(6) A State employee who is on a leave of absence from 
21his duties as a State employee for which 51 Pa.C.S. § 4102 
22provides that he is not to suffer a loss of pay, time or 
23efficiency rating shall not be an active member, receive 
24service credit or make member contributions for the leave of 
25absence, except as provided for in this part. Notwithstanding 
26this paragraph, any pay the member receives pursuant to 51 
27Pa.C.S. § 4102 shall be included in the determination of 
28final average salary and other calculations in the system 
29utilizing compensation as if the payments were compensation 
30under this part.

1§ 5303. Retention and reinstatement of service credits.

2* * *

3(b) Eligibility points for prospective credited service.--

4(1) Every active member of the system or a multiple 
5service member who is a school employee and a member of the 
6Public School Employees' Retirement System on or after the 
7effective date of this part shall receive eligibility points 
8in accordance with section 5307 for current State service, 
9previous State service, or creditable nonstate service upon 
10compliance with sections 5501 (relating to regular member 
11contributions for current service), 5501.1 (relating to 
12shared-risk contributions for Class A-3 and Class A-4 
13service), 5504 (relating to member contributions for the 
14purchase of credit for previous State service or to become a 
15full coverage member), 5505 (relating to contributions for 
16the purchase of credit for creditable nonstate service), 
175505.1 (relating to additional member contributions) or 5506 
18(relating to incomplete payments). Subject to the limitations 
19in sections 5306.1 (relating to election to become a Class AA 
20member) and 5306.2 (relating to elections by members of the 
21General Assembly), the class or classes of service in which 
22the member may be credited for previous State service prior 
23to the effective date of this part shall be the class or 
24classes in which he was or could have at any time elected to 
25be credited for such service, except that a State employee 
26who first becomes a member of the system on or after January 
271, 2011, or on or after December 1, 2010, as a member of the 
28General Assembly and:

29(i) is credited with Class A-3 service for such
30membership, shall be credited only with Class A-3 service

1for previous State service performed before January 1,
22011, that was not previously credited in the system; or

3(ii) is credited with Class A-4 service for such 
4membership, shall be credited only with Class A-4 service 
5for previous State service performed before January 1, 
62011, that was not previously credited in the system.

7The class of service in which a member shall be credited for
8service subsequent to the effective date of this part shall
9be determined in accordance with section 5306 (relating to
10classes of service).

11(1.1) Every active member of the system who elects to
12convert county service to State service pursuant to section
135303.1 (relating to election to convert county service to
14State service) shall receive eligibility points in accordance
15with section 5307 for converted county service upon
16compliance with section 5303.1(b). The class or classes of
17service in which the member may be credited for converted
18county service shall be determined in accordance with section
195306(c).

20(1.2) Every member of the system who elects to convert
21school service to State service pursuant to section 5303.2
22(relating to election to convert school service to State
23service) shall receive eligibility points in accordance with
24section 5307 for converted school service. The class or
25classes of service in which the member may be credited for
26converted school service shall be determined in accordance
27with section 5306(d).

28(1.3) A member of the system who is reemployed from
29USERRA leave or who dies while performing USERRA leave shall
30receive eligibility points in accordance with section 5307

1for the State service that would have been performed had the
2member not performed USERRA leave.

3(1.4)  Notwithstanding paragraph (1):

4(i) If previous State service is being credited, then
5the previous State service shall be credited as Subclass
6W service of the appropriate class if it was previously
7credited, or is being credited, before January 1, 2015.

8(ii) If previous State service is first credited in
9the system on or after January 1, 2015, then it shall be
10credited as either Subclass X service or Subclass Y
11service unless the member elects to be a member of
12Subclass Z of the appropriate class of service.

13(2) A special vestee or person otherwise eligible to be
14a special vestee who returns to State service, other than as 
15a participant in the plan, or withdraws his accumulated
16deductions pursuant to section 5311 (relating to eligibility
17for refunds) or 5701 (relating to return of total accumulated
18deductions) shall receive or retain eligibility points in
19accordance with paragraph (1) but upon subsequent termination
20of State service shall only be eligible to be an annuitant,
21vestee or inactive member without regard to previous status
22as a special vestee and without regard to the provisions of
23this part providing for special vestees.

24(3) A special vestee or person otherwise eligible to be 
25a special vestee who becomes an active member of the Public 
26School Employees' Retirement System and elects multiple 
27service shall receive or retain eligibility points as 
28otherwise provided for in this part and 24 Pa.C.S. Pt. IV 
29(relating to retirement for school employees) but upon 
30subsequent termination of school service shall only be
 

1eligible to be an annuitant, vestee or inactive member as 
2otherwise eligible as a multiple service member without 
3regard to previous status as a special vestee and without 
4regard to the provisions of this part providing for special 
5vestees.

6* * *

7(d) Transfer of certain pension service credit.--

8(1) Any person who was an employee of any county in this
9Commonwealth on the personal staff of an appellate court
10judge prior to September 9, 1985, and who had that employment
11transferred to the Commonwealth pursuant to 42 Pa.C.S. § 3703
12(relating to local chamber facilities) shall be a member of
13the system for all service rendered as an employee of the
14Commonwealth on the personal staff of an appellate court
15judge subsequent to the date of the transfer unless
16specifically prohibited pursuant to section 5301(c) (relating
17to mandatory and optional membership in the system and 
18participation in the plan). The employee shall be entitled to
19have any prior service credit in that county or other
20municipal pension plan or retirement system transferred to
21the system and deemed to be State service for all purposes
22under this part. However, for those employees who were in
23continuous county employment which commenced prior to July
2422, 1983, section 5505.1 shall not apply. The transfer of
25prior service credit to the system shall occur upon the
26transfer, by the member, county or other municipal pension
27plan or retirement system, to the system of the amount of
28accumulated member contributions, pick-up contributions and
29credited interest standing in the employee's county or
30municipal pension plan or retirement system account as of the

1date that these funds are transferred to the system. In the
2event that these funds have been refunded to the member, the
3transfer of service credit shall occur when the member
4transfers an amount equal to either the refund which the
5member received from the county or municipal pension plan or
6retirement system or the amount due under section 5504, if
7less. In the case of a transfer by the member, the transfer
8shall occur by December 31, 1987, in order for the member to
9receive credit for the prior service. In the case of a
10transfer by the county or other municipal pension plan or
11retirement system, the transfer shall also occur by December
1231, 1987. If the amount transferred to the system by the
13member of a county or municipal pension plan or retirement
14system is greater than the amount that would have accumulated
15in the member's account if the employee had been a member of
16the system, all excess funds shall be returned to the
17employee within 90 days of the date on which such funds are
18credited to the member's account in the system. Within 60
19days of receipt of written notice that an employee has
20elected to transfer credits under the provisions of this
21subsection, the county or other municipal pension plans or
22retirement systems shall be required to transfer to the
23system an amount, excluding contributions due under section
245504(a), equal to the liability of the prior service in
25accordance with county or other municipal pension plan or
26retirement system benefit provisions, multiplied by the ratio
27of system actuarial value of assets for active members to the
28system actuarial accrued liability for active members. The
29Public Employee Retirement Study Commission shall determine
30the appropriate amount of employer contributions to be

1transferred to the system by the county or other municipal
2pension plans or retirement systems.

3* * *

4(e) Transfer and purchase of certain pension service credit;
5Philadelphia Regional Port Authority.--

6(1) Any employee of the Philadelphia Regional Port
7Authority who becomes a State employee, as defined in section
85102 (relating to definitions), and an active member of the 
9system shall be eligible to obtain retirement credit for
10prior uncredited service with the Philadelphia Port
11Corporation, a Pennsylvania not-for-profit corporation
12("predecessor corporation"), provided that the Commonwealth
13does not incur any liability for the funding of the annuities
14attributable to the prior, uncredited "predecessor
15corporation" service, the cost of which shall be determined
16according to paragraph (2).

17* * *

18(4) Any person who became employed by the Philadelphia
19Regional Port Authority between July 10, 1989, and passage of
20this act and who becomes a State employee, as defined in
21section 5102, and an active member of the system shall be
22eligible to obtain retirement credit for service from the
23date of employment with the Philadelphia Regional Port
24Authority, provided that the contributions are made in
25accordance with sections 5501, 5504, 5505.1 and 5506.

26* * *

27Section 306. Sections 5303.2(a) and (e), 5304(a), (b) and
28(c.1), 5305(b)(3) and 5305.1 of Title 71 are amended to read:

29§ 5303.2. Election to convert school service to State service.

30(a) Eligibility.--An active member or inactive member on

1leave without pay who was an employee transferred from the
2Department of Education to the Department of Corrections
3pursuant to section 908-B of the act of April 9, 1929 (P.L.177,
4No.175), known as The Administrative Code of 1929, and who on
5the effective date of that transfer did not participate in an
6independent retirement program approved by the Department of
7Education under 24 Pa.C.S. § 8301(a)(1) (relating to mandatory
8and optional membership) or section 5301(a)(12) (relating to
9mandatory and optional membership in the system and 
10participation in the plan), notwithstanding any other provision
11of law or any collective bargaining agreement, arbitration
12award, contract or term or conditions of any retirement system
13or pension plan, may make a one-time election to convert all
14service credited in the Public School Employees' Retirement
15System as of June 30, 1999, and transfer to the system all
16accumulated member contributions and statutory interest credited
17in the members' savings account in the Public School Employees'
18Retirement System as of June 30, 1999, plus statutory interest
19on that amount credited by the Public School Employees'
20Retirement System from July 1, 1999, to the date of transfer to
21the system.

22* * *

23(e) Transfer.--Within 180 days after the effective date of
24this subsection, the Public School Employees' Retirement System
25shall transfer to the board for each member electing to convert
26under this section the accumulated member contributions and
27statutory interest credited in the Public School Employees'
28Retirement System, plus an amount equal to the value of all
29annual employer contributions made to the Public School
30Employees' Retirement System with interest at the annual rate

1adopted by the board for the calculation of the normal
2contribution rate under section 5508(b) (relating to actuarial
3cost method for fiscal years ending before July 1, 2015), from
4the date of each contribution to the date of the transfer of the
5funds to the board. Any debt owed by a member to the Public
6School Employees' Retirement System for whatever reason shall be
7transferred to the system and shall be paid in a manner and in
8accordance with conditions prescribed by the board.

9* * *

10§ 5304. Creditable nonstate service.

11(a) Eligibility.--

12(1) An active member who first becomes an active member 
13before January 1, 2011, or before December 1, 2010, as a 
14member of the General Assembly, or a multiple service member
15who first becomes an active member before January 1, 2011, or 
16before December 1, 2010, as a member of the General Assembly, 
17and who is a school employee and an active member of the
18Public School Employees' Retirement System shall be eligible
19for Class A service credit for creditable nonstate service as
20set forth in subsections (b) and (c) except that intervening
21military service shall be credited in the class of service
22for which the member was eligible at the time of entering
23into military service and for which he makes the required
24contributions to the fund and except that a multiple service
25member who is a school employee and an active member of the
26Public School Employees' Retirement System shall not be
27eligible to purchase service credit for creditable nonstate
28service set forth in subsection (c)(5).

29(2) An active member who first becomes an active member
30on or after January 1, 2011, or on or after December 1, 2010,

1as a member of the General Assembly, or a multiple service
2member who first becomes an active member on or after January
31, 2011, or on or after December 1, 2010, as a member of the
4General Assembly, and who is a school employee and an active
5member of the Public School Employees' Retirement System
6shall be eligible for Class A-3 service credit for creditable
7nonstate service as set forth in subsections (b) and (c)
8except that intervening military service shall be credited in
9the class of service for which the member was eligible at the
10time of entering into military service and for which he makes
11the required contributions to the fund and except that a
12multiple service member who is a school employee and an
13active member of the Public School Employees' Retirement
14System shall not be eligible to purchase service credit for
15creditable nonstate service set forth in subsection (c)(5).

16* * *

17(b) Limitations on eligibility.--An active member or a
18multiple service member who is a school employee and an active
19member of the Public School Employees' Retirement System shall
20be eligible to receive credit for nonstate service provided that
21he does not have credit for such service in the system or in the
22school system and is not entitled to receive, eligible to
23receive now or in the future, or is receiving retirement
24benefits for such service in the system or under a retirement
25system administered and wholly or partially paid for by any
26other governmental agency or by any private employer, or a
27retirement program approved by the employer in accordance with
28section 5301(a)(12) (relating to mandatory and optional
29membership in the system and participation in the plan), and
30further provided, that such service is certified by the previous

1employer and contributions are agreed upon and made in
2accordance with section 5505 (relating to contributions for the
3purchase of credit for creditable nonstate service).

4* * *

5(c.1) Nonstate service exception.--Notwithstanding the
6limitations on eligibility enumerated in subsection (c)(3), any
7person who was an officer or employee in the Office of the
8Chancellor of the State System of Higher Education at any time
9between July 1, 1983, and August 4, 1991, inclusive, and was an
10active member during that period or has continued as an active
11member without interruption of service since August 4, 1991,
12shall be eligible to purchase creditable nonstate service under
13this section, subject to the same terms, conditions and
14limitations, including the calculation of the amount and method
15of paying for the purchase, as was enjoyed by officers and
16employees of the Department of Education between July 1, 1983,
17and August 4, 1991, except that any purchase made on or after 
18January 1, 2015, shall be in the subclass of service provided 
19under section 5306 (relating to classes of service). Service
20rendered in the Chancellor's Office for purposes of the purchase
21of creditable nonstate service under this subsection shall be
22deemed to be service as an officer or employee in the Department
23of Education.

24* * *

25§ 5305. Social security integration credits.

26* * *

27(b) Accrual of subsequent credits.--Any active member who
28has social security integration accumulated deductions to his
29credit or is receiving a benefit on account of social security
30integration credits may accrue one social security integration

1credit for each year of service as a State employee on or
2subsequent to March 1, 1974 and a fractional credit for a
3corresponding fractional year of service provided that
4contributions are made to the fund, or would have been made to 
5the fund but for section 5502.1 (relating to waiver of regular
6member contributions and Social Security integration member
7contributions) or the limitations under IRC § 401(a)(17) or
8415(b), in accordance with section 5502 (relating to Social
9Security integration member contributions), and he:

10* * *

11(3) terminates his status as a vestee or an annuitant
12and returns to State service as an active member of the 
13system.

14* * *

15§ 5305.1. Eligibility for actuarial increase factor.

16A person who is:

17(1) an active member;

18(2) an inactive member on leave without pay; [or]

19(3) a multiple service member who is a school employee
20and an active member of the Public School Employees'
21Retirement System; or

22(4)  a combined service employee who is an active
23participant or inactive participant on leave without pay:

24who terminates State service or school service, as the case may
25be, after attaining age 70 and who applies for a superannuation
26annuity with an effective date of retirement the day after the
27date of termination of State service or school service shall
28have that person's maximum single life annuity calculated
29pursuant to section 5702(a.1) (relating to maximum single life
30annuity).

1Section 307. Section 5306(a), (a.1)(2), (6) and (7), (a.2),
2(a.3) and (b) of Title 71 are amended, (a.1) is amended by
3adding a paragraph and the section is amended by adding a
4subsection to read:

5§ 5306. Classes of service.

6(a) Class A and Class A-3 membership.--

7(1) A State employee who is a member of Class A on the
8effective date of this part or who first becomes a member of
9the system subsequent to the effective date of this part and 
10before January 1, 2011, or before December 1, 2010, as a 
11member of the General Assembly, shall be classified as a
12Class A member and receive credit for Class A service upon
13payment of regular and additional member contributions for
14Class A service, provided that the State employee does not
15become a member of Class AA pursuant to subsection (a.1) or a
16member of Class D-4 pursuant to subsection (a.2) or a 
17participant in the plan.

18(2) A State employee who first becomes a member of the
19system on or after January 1, 2011, or on or after December
201, 2010, as a member of the General Assembly, shall be
21classified as a Class A-3 member and receive credit for Class
22A-3 service upon payment of regular member contributions and
23shared-risk member contributions for Class A-3 service
24provided that the State employee does not become a member of
25Class A-4 pursuant to subsection (a.3), except that a member
26of the judiciary shall be classified as a member of such
27other class of service for which the member of the judiciary
28is eligible, shall elect and make regular member
29contributions and further provided that the State employee 
30does not become a participant in the plan or is not eligible
 

1to be an optional participant of the plan under section 5301 
2(relating to mandatory and optional membership in the system 
3and participation in the plan).

4(3) (i) On the effective date of this paragraph Class A
5service credit and membership shall be divided into and
6comprised of the following subclasses: Subclass A-W
7service credit and membership and Subclass A-X service
8credit and membership.

9(ii) All Class A State service performed before
10January 1, 2015, for which member contributions are made
11and all Class A nonstate service credit shall be credited
12as Subclass A-W service, except that previous State
13service and creditable non-State service that were not
14first credited before January 1, 2015, shall not be
15credited as Subclass A-W service if first credited on or
16after January 1, 2015. State service and non-State
17service previously credited as Class A before January 1,
182015, but not credited on December 31, 2014, because a
19member withdrew accumulated deductions under sections
205311 (relating to eligibility for refunds) or 5701
21(relating to return of total accumulated deductions)
22shall be credited as Subclass A-W if the credit is
23reinstated under section 5303 (relating to retention and
24reinstatement of service credits) on or after January 1,
252015.

26(iii) All previously uncredited State service and
27creditable non-State service that is first credited on or
28after January 1, 2015, as Class A service and all Class A
29service performed on or after January 1, 2015, shall be
30credited as Subclass A-X service, except that any State

1service credited as Class A service by a member who is
2reemployed from USERRA leave who has made the member
3contributions under section 5302(f) (relating to credited
4State service) to receive State service credit for the
5USERRA leave shall be credited as Subclass A-W if
6credited for a period of USERRA leave performed before
7January 1, 2015.

8(4) (i) On the effective date of this paragraph Class
9A-3 service credit and membership shall be divided into
10and comprised of the following subclasses: Subclass A-3W
11service credit and membership and Subclass A-3X service
12credit and membership.

13(ii) All Class A-3 State service performed before
14January 1, 2015, for which member contributions are made
15and all Class A-3 non-State service credit shall be
16credited as Subclass A-3W service, except that previous
17State service and creditable non-State service that was
18not first credited before January 1, 2015, shall not be
19credited as Subclass A-3W service if first credited on or
20after January 1, 2015. State service and non-State
21service previously credited as Class A-3 before January
221, 2015, but not credited on December 31, 2014, because a
23member withdrew accumulated deductions under sections
245311 or 5701 shall be credited as Subclass A-3W if the
25credit is reinstated under section 5303 on or after
26January 1, 2015.

27(iii) All previously uncredited State service and
28creditable non-State service that is first credited on or
29after January 1, 2015, as Class A-3 service, and all
30Class A-3 service performed on or after January 1, 2015,

1shall be credited as Subclass A-3X service, except that
2any State service credited as Class A-3 service by a
3member who is reemployed from USERRA leave who has made
4the member contributions under section 5302(f) to receive
5State service credit for the USERRA leave shall be
6credited as Subclass A-3W if credited for a period of
7USERRA leave performed before January 1, 2015.

8(a.1) Class AA membership.--

9* * *

10(2) A person who is a State employee on June 30, 2001,
11and July 1, 2001, but is not an active member of the system
12because membership in the system is optional or prohibited
13pursuant to section 5301 (relating to mandatory and optional
14membership in the system and participation in the plan) and
15who first becomes an active member after June 30, 2001, and 
16before January 1, 2011, or before December 1, 2010, as a 
17member of the General Assembly, and who is not a State police
18officer and not employed in a position for which a class of
19service other than Class A is credited or could be elected
20shall be classified as a Class AA member and receive credit
21for Class AA State service upon payment of regular member
22contributions for Class AA service and, subject to the
23limitations contained in paragraph (7), if previously a
24member of Class A or previously employed in a position for
25which Class A service could have been earned, shall have all
26Class A State service (other than State service performed as
27a State Police officer or for which a class of service other
28than Class A was earned or could have been elected)
29classified as Class AA service.

30* * *

1(6) A State employee who after June 30, 2001, becomes a
2State police officer or who is employed in a position in
3which the member could elect membership in the system in a
4class of service other than Class AA or Class D-4 shall
5retain any Class AA service credited prior to becoming a
6State police officer or being so employed but shall be
7ineligible to receive Class AA credit thereafter and instead
8shall receive Class A credit for service as a member of the 
9judiciary if such judicial service begins before January 1, 
102015, or if he first became a member before January 1, 2011, 
11or December 1, 2010, as a member of the General Assembly, or 
12Class A-3 credit for service other than as a member of the 
13judiciary if the nonjudicial service begins before January 1, 
142015, and he first became a member on or after January 1, 
152011, or December 1, 2010, as a member of the General 
16Assembly, unless a class of membership other than Class A is
17elected.

18(7) (i) State service performed as Class A service
19before July 1, 2001, and State service for which Class A
20service could have been credited but was not credited
21because membership in the system was optional or
22prohibited pursuant to section 5301 shall be credited as
23Class AA service only upon the completion of all acts
24necessary for the State service to be credited as Class A
25service had this subsection not been enacted and upon
26payment of required Class AA member contributions as
27provided in section 5504 (relating to member
28contributions for the purchase of credit for previous
29State service or to become a full coverage member).

30(ii) A person who is not a State employee or a

1school employee on June 30, 2001, and July 1, 2001, and
2who has previous State service (except a disability
3annuitant who returns to State service after June 30,
42001, upon termination of the disability annuity) shall
5not receive Class AA service credit for State service
6performed before July 1, 2001, until such person becomes
7an active member, or an active member of the Public
8School Employees' Retirement System and a multiple
9service member, and earns three eligibility points by
10performing credited State service or credited school
11service after June 30, 2001. This Class AA service credit 
12shall be credited as Subclass AA-W service credit 
13regardless of the date the required three eligibility 
14points are finally earned unless it is first credited on 
15or after January 1, 2015.

16(8) (i) On the effective date of this paragraph Class
17AA service credit and membership shall be divided into
18and comprised of the following subclasses: Subclass AA-W
19service credit and membership, Subclass AA-Y service
20credit and membership and Subclass AA-Z service credit
21and membership.

22(ii)  All Class AA service performed before January
231, 2015, for which member contributions are made shall be
24credited as Subclass AA-W service, except that previous
25State service that was not first credited before January
261, 2015, shall not be credited as Subclass AA-W service
27if first credited on or after January 1, 2015. State
28service previously credited as Class AA before January 1,
292015, but not credited on December 31, 2014, because a
30member withdrew accumulated deductions under sections

15311 or 5701 shall be credited as Subclass AA-W if the
2credit is reinstated under section 5303 on or after
3January 1, 2015.

4(iii)  All previously uncredited State service that
5is first credited on or after January 1, 2015, as Class
6AA service, and all Class AA service performed on or
7after January 1, 2015, shall be credited as Subclass AA-Y
8service provided that the Class AA member has not elected
9to be a member of Subclass AA-Z under section 5306.4
10(relating to election to become a Subclass Z member),
11except that any State service credited as Class AA
12service by a member who is reemployed from USERRA leave
13who has made the member contributions under section
145302(f) to receive State service credit for the USERRA
15leave shall be credited as Class AA-W if credited for a
16period of USERRA leave performed before January 1, 2015.

17(iv)  A Class AA member who elects to be a member of
18Subclass AA-Z under section 5306.4 shall have all Class
19AA service that otherwise would be credited as Subclass
20AA-Y service credited as Subclass AA-Z service.

21(a.2) Class of membership for members of the General
22Assembly.--

23(1) A person who:

24(i) becomes a member of the General Assembly and an
25active member of the system after June 30, 2001, and 
26before December 1, 2010; or

27(ii) is a member of the General Assembly on July 1,
282001, but is not an active member of the system because
29membership in the system is optional pursuant to section
305301 and who becomes an active member after June 30,

12001, and before December 1, 2010;

2and who was not a State police officer on or after July 1,
31989, shall be classified as a Class D-4 member and receive
4credit as a Class D-4 member for all State service as a 
5member of the system performed as a member of the General
6Assembly upon payment of regular member contributions for
7Class D-4 service and, subject to the limitations contained
8in subsection (a.1)(7), if previously a member of Class A or
9employed in a position for which Class A service could have
10been earned, shall receive Class AA service credit for all
11Class A State service, other than State service performed as
12a State police officer or for which a class of service other
13than Class A or Class D-4 was or could have been elected or
14credited.

15(2) Provided an election to become a Class D-4 member is
16made pursuant to section 5306.2 (relating to elections by
17members of the General Assembly), a State employee who was
18not a State police officer on or after July 1, 1989, who on
19July 1, 2001, is a member of the General Assembly and an
20active member of the system and not a member of Class D-3
21shall be classified as a Class D-4 member and receive credit
22as a Class D-4 member for all State service as a member of 
23the system performed as a member of the General Assembly not
24credited as another class other than Class A upon payment of
25regular member contributions for Class D-4 service and,
26subject to the limitations contained in paragraph (a.1)(7),
27shall receive Class AA service credit for all Class A State
28service, other than State service performed as a State police
29officer or as a State employee in a position in which the
30member could have elected a class of service other than Class

1A, performed before July 1, 2001.

2(3) A member of the General Assembly who after June 30,
32001, becomes a State police officer shall retain any Class
4AA service or Class D-4 service credited prior to becoming a
5State police officer or being so employed but shall be
6ineligible to receive Class AA or Class D-4 credit thereafter
7and instead shall receive Class A credit or Class A-3 credit 
8if he first becomes a member of the system on or after 
9January 1, 2011.

10(4) Notwithstanding the provisions of this subsection,
11no service as a member of the General Assembly performed
12before December 1, 2010, that is not credited as Class D-4
13service on November 30, 2010, shall be credited as Class D-4
14service, unless such service was previously credited in the
15system as Class D-4 service and the member withdrew his total
16accumulated deductions as provided in section 5311 (relating
17to eligibility for refunds) or 5701 (relating to return of
18total accumulated deductions). No service as a member of the
19General Assembly performed on or after December 1, 2010,
20shall be credited as Class D-4 service unless the member
21previously was credited with Class D-4 service credits.

22(5) (i) On the effective date of this paragraph, Class
23D-4 service credit and membership shall be divided into
24and comprised of the following subclasses: Subclass D-4W
25service credit and membership, Subclass D-4Y service
26credit and membership and Subclass D-4Z service credit
27and membership.

28(ii) All Class D-4 service performed before January
291, 2015, for which member contributions are made shall be
30credited as Subclass D-4W service, except that previous

1State service that was not first credited before January
21, 2015, shall not be credited as Subclass D-4W service
3if first credited on or after January 1, 2015. State
4service previously credited as Class D-4 before January
51, 2015, but not credited on December 31, 2014, because a
6member withdrew accumulated deductions under sections
75311 or 5701 shall be credited as Subclass D-4W if the
8credit is reinstated under section 5303 on or after
9January 1, 2015.

10(iii)  All previously uncredited State service that
11is first credited on or after January 1, 2015, as Class
12D-4 service, and all Class D-4 service performed on or
13after January 1, 2015, shall be credited as Subclass D-4Y
14service provided that the Class D-4 member has not
15elected to be a member of Subclass D-4Z under section
165306.4, except that any State service credited as Class
17D-4 service by a member who is reemployed from USERRA
18leave who has made the member contributions under section
195302(f) to receive State service credit for the USERRA
20leave shall be credited as Class D-4W if credited for a
21period of USERRA leave performed before January 1, 2015.

22(iv)  A Class D-4 member who elects to be a member of
23Subclass D-4Z under section 5306.4 shall have all Class
24D-4 service that otherwise would be credited as Subclass
25D-4Y service credited as Subclass D-4Z service.

26(a.3) Class A-4 membership.--

27(1) Provided that an election to become a Class A-4 
28member is made pursuant to section 5306.3 (relating to 
29election to become a Class A-4 member), a State employee who 
30otherwise would be a member of Class A-3 shall be classified
 

1as a Class A-4 member and receive Class A-4 credit for all 
2creditable State service performed after the effective date 
3of membership in the system, except as a member of the 
4judiciary, upon payment of regular member contributions and 
5shared-risk member contributions for Class A-4 service.

6(2) (i) On the effective date of this paragraph, Class
7A-4 service credit and membership shall be divided into
8and comprised of the following subclasses: Subclass A-4W
9service credit and membership and Subclass A-4X service
10credit and membership.

11(ii) All Class A-4 State service performed before
12January 1, 2015, for which member contributions are made
13shall be credited as Subclass A-4W service, except that
14previous State service that was not first credited before
15January 1, 2015, shall not be credited as Subclass A-4W
16service if first credited on or after January 1, 2015.
17State service previously credited as Class A-4 before
18January 1, 2015, but not credited on December 31, 2014,
19because a member withdrew accumulated deductions under
20sections 5311 or 5701 shall be credited as Subclass A-4W
21if the credit is reinstated under section 5303 on or
22after January 1, 2015.

23(iii) All previously uncredited State service that
24is first credited on or after January 1, 2015, as Class
25A-4 service, and all Class A-4 service performed on or
26after January 1, 2015, shall be credited as Subclass A-4X
27service, except that any State service credited as Class
28A-4 service by a member who is reemployed from USERRA
29leave who has made the member contributions under section
305302(f) to receive State service credit for the USERRA

1leave shall be credited as Subclass A-4W if credited for
2a period of USERRA leave performed before January 1,
32015.

4(b) Other class membership.--

5(1) A State employee who is a member of a class of
6service other than Class A on the effective date of this part
7shall retain his membership in that class until such service
8is discontinued; any service as a member of the system
9thereafter shall be credited as Class A service, Class AA
10service or Class D-4 service as provided for in this section.

11(2) Notwithstanding any other provision of this section,
12a State employee who is appointed bail commissioner of the
13Philadelphia Municipal Court under 42 Pa.C.S. § 1123(a)(5)
14(relating to jurisdiction and venue) and is eligible to be a 
15member of the system as a bail commissioner may, within 30
16days of the effective date of this sentence or within 30 days
17of his initial appointment as a bail commissioner, whichever
18is later, elect Class E-2 service credit for service
19performed as a bail commissioner. This class of service
20multiplier for E-2 service as a bail commissioner shall be
211.5[.] until December 31, 2014, and thereafter shall be as 
22provided in this part.

23(3) (i) On the effective date of this paragraph, Class
24E-1 service credit and membership shall be divided into
25and comprised of the following subclasses: Subclass E-1W
26service credit and membership, Subclass E-1Y service
27credit and membership and Subclass E-1Z service credit
28and membership.

29(ii)  All Class E-1 service performed before January
301, 2015, for which member contributions are made shall be

1credited as Subclass E-1W service, except that previous
2State service that was not first credited before January
31, 2015, shall not be credited as Subclass E-1W service
4if first credited on or after January 1, 2015. State
5service previously credited as Class E-1 before January
61, 2015, but not credited on December 31, 2014, because a
7member withdrew accumulated deductions under sections
85311 or 5701 shall be credited as Subclass E-1W if the
9credit is reinstated under section 5303 on or after
10January 1, 2015.

11(iii)  All previously uncredited State service that
12is first credited on or after January 1, 2015, as Class
13E-1 service, and all Class E-1 service performed on or
14after January 1, 2015, shall be credited as Subclass E-1Y
15service provided that the Class E-1 member has not
16elected to be a member of Subclass E-1Z under section
175306.4, except that any State service credited as Class
18E-1 service by a member who is reemployed from USERRA
19leave who has made the member contributions under section
205302(f) to receive State service credit for the USERRA
21leave shall be credited as Class E-1W if credited for a
22period of USERRA leave performed before January 1, 2015.

23(iv) A Class E-1 member who elects to be a member of
24Subclass E-1Z under section 5306.4 shall have all Class
25E-1 service that otherwise would be credited as Subclass
26E-1Y service credited as Subclass E-1Z service.

27(4) (i) On the effective date of this paragraph, Class
28E-2 service credit and membership shall be divided into
29and comprised of the following subclasses: Subclass E-2W
30service credit and membership, Subclass E-2Y service

1credit and membership and Subclass E-2Z service credit
2and membership.

3(ii) All Class E-2 service performed before January
41, 2015, for which member contributions are made shall be
5credited as Subclass E-2W service, except that previous
6State service that was not first credited before January
71, 2015, shall not be credited as Subclass E-2W service
8if first credited on or after January 1, 2015. State
9service previously credited as Class E-2 before January
101, 2015, but not credited on December 31, 2014, because a
11member withdrew accumulated deductions under sections
125311 or 5701 shall be credited as Subclass E-2W if the
13credit is reinstated under section 5303 on or after
14January 1, 2015.

15(iii) All previously uncredited State service that
16is first credited on or after January 1, 2015, as Class
17E-2 service, and all Class E-2 service performed on or
18after January 1, 2015, shall be credited as Subclass E-2Y
19service provided that the Class E-2 member has not
20elected to be a member of Subclass E-2Z under section
215306.4, except that any State service credited as Class
22E-2 service by a member who is reemployed from USERRA
23leave who has made the member contributions under section
245302(f) to receive State service credit for the USERRA
25leave shall be credited as Class E-2W if credited for a
26period of USERRA leave performed before January 1, 2015.

27(iv) A Class E-2 member who elects to be a member of
28Subclass E-2Z under section 5306.4 shall have all Class
29E-2 service that otherwise would be credited as Subclass
30E-2Y service credited as Subclass E-2Z service.

1(5) A member of the judiciary who is a member of Class A
2on January 1, 2015, and subsequently elects to be a Class E-1
3member or Class E-2 member for service as a member of the
4judiciary shall have Subclass A-W State service performed as
5a member of the judiciary credited as either Class E-1W
6service or Class E-2W service as applicable, upon making the
7required member contributions. Any Subclass A-X State service
8performed as a member of the judiciary shall be credited as
9Subclass E-1Y or Subclass E-2Y service upon making the
10required member contributions unless the member of the
11judiciary elects to be a member of Subclass Z.

12* * *

13(e) Ineligibility for active membership and classes of 
14service.--An individual who elects to be a participant in the 
15plan or who is a State employee on January 1, 2015, but is not a 
16member of the system or who first becomes a State employee on or 
17after January 1, 2015, or who returns to State service after a 
18termination of State service, without regard to whether the 
19termination occurred before or after January 1, 2015, shall be 
20ineligible for active membership in the system or the several 
21classes of State service as otherwise provided for under this 
22section. Any such State employee, if eligible, may be a 
23participant in the plan as a result of such State service.

24Section 308. Sections 5306.1(c), 5306.2(b) and 5306.3(c) and
25(d) of Title 71 are amended to read:

26§ 5306.1. Election to become a Class AA member.

27* * *

28(c) Effect of election.--An election to become a Class AA
29member shall become effective the later of July 1, 2001, or the
30date when the election is filed with the board and shall remain

1in effect until the termination of employment or election to be 
2a participant in the plan. Upon termination and a subsequent
3reemployment that occurs before January 1, 2015, the member's
4class of service shall be credited in the class of service
5otherwise provided for in this part. If the reemployment occurs 
6on or after January 1, 2015, the State employee's eligibility 
7for membership in the system or participation in the plan shall 
8be as provided in this part.

9* * *

10§ 5306.2. Elections by members of the General Assembly.

11* * *

12(b) Effect of election.--Membership as a Class D-4 member
13shall become effective on July 1, 2001, and shall remain in
14effect until the termination of service as a member of the
15General Assembly or election to be a participant in the plan.
16Upon termination and a subsequent reemployment that occurs 
17before January 1, 2015, the member's class of service shall be
18credited in the class of service otherwise provided for in this
19part. If the reemployment occurs on or after January 1, 2015, 
20the State employee's eligibility for membership in the system or 
21participation in the plan shall be as provided in this part.

22* * *

23§ 5306.3. Election to become a Class A-4 member.

24* * *

25(c) Effect of election.--An election to become a Class A-4 
26member shall be irrevocable and shall become effective on the 
27effective date of membership in the system and shall remain in 
28effect for all future [creditable] State service creditable in 
29the system, other than service performed as a member of the 
30judiciary, but shall not apply to service performed after a
 

1termination of State service and a reemployment when the 
2reemployment occurs on or after January 1, 2015. Payment of 
3regular member contributions for Class A-4 State service 
4performed prior to the election of Class A-4 membership shall be 
5made in a form, manner and time determined by the board. Upon 
6termination of State service and a subsequent reemployment 
7before January 1, 2015, a member who elected Class A-4 
8membership shall be credited as a Class A-4 member for 
9creditable State service performed after reemployment and before 
10the next termination of State service or election to be a 
11participant, except as a member of the judiciary, regardless of 
12termination of employment, termination of membership by 
13withdrawal of accumulated deductions or status as an annuitant, 
14vestee or inactive member after the termination of service and 
15before reemployment occurring before January 1, 2015.

16(d) Effect of failure to make election.--Failure to elect to 
17become a Class A-4 member within the election period set forth 
18in subsection (b) shall result in all of the member's State 
19service, other than service performed as a member of the 
20judiciary, being credited as Class A-3 service, unless the State 
21employee elects or is required to be a participant in the plan, 
22and not subject to further election or crediting as Class A-4 
23service. Upon termination and subsequent employment, a member 
24who failed to elect to become a Class A-4 member shall not be 
25eligible to make another election to become a Class A-4 member 
26for either past or future State service.

27Section 309. Title 71 is amended by adding a section to
28read:

29§ 5306.4. Election to become a Subclass Z member.

30(a) General rule.--An active member or inactive member on

1leave without pay who otherwise would be a Subclass Y member may
2make a one-time and irrevocable election to become a Subclass Z
3member of his applicable class of service instead of a Subclass
4Y member of his applicable class of service.

5(b) Time for making election.--The election by a State
6employee who is an active member or inactive member on leave
7without pay of Class AA, Class D-4, Class E-1 or Class E-2 on
8January 1, 2015, to become a Subclass Z member of his applicable
9class of service must be made by the member filing written
10notice with the board in a form and manner determined by the
11board before July 1, 2015, before the member terminates State
12service or elects to be a participant in the plan, whichever
13occurs first. The election period for a State employee who was
14not an active member or inactive member on leave without pay of
15Class AA, Class D-4, Class E-1 or Class E-2 on January 1, 2015,
16who later becomes an active member of one of those classes of
17service shall end on the later of June 30, 2015, or 45 days
18after first becoming an active member of Class AA, Class D-4,
19Class E-1 or Class E-2 but not later than the earlier of the
20employee's date of termination of service or election to be a
21participant in the plan. A State employee who is eligible to
22elect to become a Subclass Z member who begins USERRA leave
23during the election period without having elected Subclass Z
24membership may make the election by the later of July 1, 2015,
25or 181 days after being reemployed from USERRA leave.

26(c) Effect of election.--

27(1) An election to become a Subclass Z member shall be
28effective on the following date:

29(i) January 1, 2015, if filed before January 1,
302015;

1(ii) January 1, 2015, if filed on or after January
21, 2015, by a State employee who was an active member or
3inactive member on leave without pay on January 1, 2015;
4or

5(iii) The date the member was first eligible to file
6the election, if filed on or after January 1, 2015, by a
7member who was not an active member or inactive member on
8leave without pay of Class AA, Class D-4, Class E-1 or
9Class E-2 on January 1, 2015, but later becomes a member
10of one of those classes.

11(2) An election to become a Subclass Z member shall
12result in the member paying an additional 6.05% of
13compensation as regular member contributions if the member is
14an active member performing service as a State police officer
15after December 31, 2014.

16(d) Election irrevocable.--An election to be a Subclass Z
17member shall be irrevocable, even if filed before January 1,
182015, and shall remain in effect for all subsequent State
19service creditable in the system as Class AA, Class D-4, Class
20E-1 and Class E-2 service without regard to the member's class
21of service when the election was filed. Payment of regular
22member contributions for Subclass Z State service performed
23prior to the election of Subclass Z membership plus statutory
24interest from the effective date of Subclass Z membership to the
25date of payment shall be made in a form, manner and time
26determined by the board under section 5504(b) (relating to
27member contributions for the purchase of credit for previous
28State service or to become a full coverage member).

29(e) Effect of failure to make election.--Failure to elect to
30become a Subclass Z member within the election period set forth

1in subsection (b) shall result in all of the member's Class AA
2service, Class D-4 service, Class E-1 service and Class E-2
3service not credited as Subclass W service being credited as
4Subclass Y service and not subject to further election or
5crediting as Subclass Z service and shall result in the member 
6not being able to elect to pay an additional 6.05% of 
7compensation as regular member contributions for any service as 
8a State police officer after December 31, 2014. Upon leaving
9employment as a Class AA member, Class D-4 member, Class E-1
10member or Class E-2 member and subsequent employment as a member
11of any of those classes of service, a member who failed to elect
12to become a Subclass Z member shall not be eligible to make
13another election to become a Subclass Z member for either past
14or future State service.

15Section 310. Sections 5307(b) and 5308(a) and (b) of Title
1671, amended October 24, 2012 (P.L.1436, No.181), are amended to
17read:

18§ 5307. Eligibility points.

19* * *

20(b) Transitional rule.--

21(1) In determining whether a member who is not a State 
22employee or school employee on June 30, 2001, and July 1, 
232001, and who has previous State service (except a disability 
24annuitant who returns to State service after June 30, 2001, 
25upon termination of the disability annuity) has the five 
26eligibility points required by sections 5102 (relating to 
27definitions), 5308(b) (relating to eligibility for 
28annuities), 5309 (relating to eligibility for vesting), 
295704(b) (relating to disability annuities) and 5705(a) 
30(relating to member's options), only eligibility points
 

1earned by performing credited State service as an active 
2member of the system, USERRA leave or credited school service
3as an active member of the Public School Employees' 
4Retirement System after June 30, 2001, shall be counted until 
5such member earns one eligibility point by performing 
6credited State service or credited school service after June 
730, 2001, at which time all eligibility points as determined 
8pursuant to subsection (a) shall be counted.

9(2) Any member to whom paragraph (1) applies shall be
10considered to have satisfied any requirement for five
11eligibility points contained in this part if the member:

12(i) has ten or more eligibility points as determined
13pursuant to subsection (a); or

14(ii) has Class G, Class H, Class I, Class J, Class
15L, Class M or Class N service and has eight or more
16eligibility points as determined pursuant to subsection
17(a).

18§ 5308. Eligibility for annuities.

19(a) Superannuation annuity.--Attainment of superannuation
20age by an active member [or], an inactive member on leave
21without pay or a combined service employee who is an active 
22participant or inactive participant on leave without pay with
23three or more eligibility points other than eligibility points 
24resulting from nonstate service or nonschool service shall
25entitle him to receive a superannuation annuity upon termination
26of State service and compliance with section 5907(f) (relating
27to rights and duties of State employees [and], members and 
28participants).

29(b) Withdrawal annuity.--

30(1) Any vestee or any active member [or], inactive

1member on leave without pay or a combined service employee 
2who is an active participant or inactive participant on leave 
3without pay who terminates State service having five or more
4eligibility points and who does not have Class A-3 or Class 
5A-4 service credit or Class T-E or Class T-F service credit 
6in the Public School Employees' Retirement System, or who has
7Class G, Class H, Class I, Class J, Class K, Class L, Class M
8or Class N service and terminates State service having five
9or more eligibility points, upon compliance with section
105907(f), (g) or (h) shall be entitled to receive an annuity.

11(2) Any vestee, active member [or], inactive member on
12leave without pay or combined service employee who is an 
13active participant or inactive participant on leave without 
14pay who has Class A-3 or Class A-4 service credit or Class T-
15E or Class T-F service credit in the Public School Employees'
16Retirement System who terminates State service having ten or
17more eligibility points, upon compliance with section
185907(f), (g) or (h), shall be entitled to receive an annuity.

19(3) Any vestee, active member [or], inactive member on
20leave without pay or combined service employee who is an 
21active participant or inactive participant on leave without 
22pay who has either Class A-3 or Class A-4 service credit or
23Class T-E or Class T-F service credit in the Public School
24Employees' Retirement System and also has service credited in
25the system in one or more other classes of service who has
26five or more, but fewer than ten, eligibility points, upon
27compliance with section 5907(f), (g) or (h), shall be
28eligible to receive an annuity calculated on his service
29credited in classes of service other than Class A-3 or Class
30A-4, provided that the member has five or more eligibility

1points resulting from service in classes other than Class A-3
2or Class A-4 or Class T-E or Class T-F service in the Public
3School Employees' Retirement System.

4* * *

5Section 311. Sections 5308.1(1) and 5311(a) of Title 71 are
6amended to read:

7§ 5308.1. Eligibility for special early retirement.

8Notwithstanding any provisions of this title to the contrary,
9the following special early retirement provisions shall be
10applicable to specified eligible members as follows:

11(1) During the period of July 1, 1985, to September 30,
121991, an active member who has attained the age of at least
1353 years and has accrued at least 30 eligibility points shall
14be entitled, upon termination of State service and compliance
15with section 5907(f) (relating to rights and duties of State
16employees [and], members and participants), to receive a
17maximum single life annuity calculated under section 5702
18(relating to maximum single life annuity) without a reduction
19by virtue of an effective date of retirement which is under
20the superannuation age.

21* * *

22§ 5311. Eligibility for refunds.

23(a) Total accumulated deductions.--Any active member,
24regardless of eligibility for benefits, may elect to receive his
25total accumulated deductions upon termination of service in lieu
26of any benefit from the system to which he is entitled.

27* * *

28Section 312. Title 71 is amended by adding a chapter to
29read:

30CHAPTER 54

1STATE EMPLOYEES' DEFINED CONTRIBUTION PLAN

2Sec.

35401.  Establishment.

45402.  Plan document.

55403.  Individual investment accounts.

65404.  Participant contributions.

75405.  Mandatory pickup participant contributions.

85406.  Employer defined contributions.

95407.  Eligibility for benefits.

105408.  Death benefits.

115409.  Vesting.

125410.  Termination of distributions.

135411.  Agreements with financial institutions and other
14organizations.

155412.  Powers and duties of board.

165413.  Responsibility for investment loss.

175414.  Investments based on participants' investment allocation
18choices.

195415.  Expenses.

205416.  Election by members to be participants.

215417.  Tax qualification.

22§ 5401.  Establishment.

23(a) State Employees' Defined Contribution Plan.--The State
24Employees' Defined Contribution Plan is established. The board
25shall administer and manage the plan which shall be a defined
26contribution plan exclusively for the benefit of those State
27employees who participate in the plan and their beneficiaries
28within the meaning of and in conformity with IRC § 401(a). The
29board shall determine the terms and provisions of the plan not
30inconsistent with this part, IRC or other applicable law and

1shall provide for the plan's administration.

2(b) State Employees' Defined Contribution Trust.--The State
3Employees' Defined Contribution Trust is established as part of
4the plan. The trust shall be comprised of the individual
5investment accounts and all assets and moneys in those accounts.
6The members of the board shall be the trustees of the trust,
7which shall be administered exclusively for the benefit of those
8State employees who participate in the plan and their
9beneficiaries within the meaning of and in conformity with IRC §
10401(a). The board shall determine the terms and provisions of
11the trust not inconsistent with this part, IRC or other
12applicable law and shall provide for the investment and
13administration of the trust.

14(c)  Assets held in trust.--All assets and income in the plan
15that have been or shall be withheld or contributed by the
16participants, the Commonwealth and other employers in accordance
17with this part shall be held in trust in any funding vehicle
18permitted by the applicable provisions of IRC for the exclusive
19benefit of the participants and their beneficiaries until such
20time as the funds are distributed to the participants or their
21beneficiaries in accordance with the terms of the plan document.
22The assets of the plan held in trust for the exclusive benefit
23of the participants and their beneficiaries may be used for the
24payment of the fees, costs and expenses related to the
25administration and investment of the plan and the trust.

26(d)  Name for transacting business.--All of the business of
27the plan shall be transacted, the trust invested, all
28requisitions for money drawn and payments made and all of its
29cash and securities and other property shall be held by the name
30of the "State Employees' Defined Contribution Plan."

1Notwithstanding any other law to the contrary, the board may
2establish a nominee registration procedure for the purpose of
3registering securities in order to facilitate the purchase, sale
4or other disposition of securities pursuant to the provisions of
5this part.

6§ 5402.  Plan document.

7The board shall set forth the terms and provisions of the
8plan and trust in a document containing the terms and conditions
9of the plan and in a trust declaration that shall be published
10in the Pennsylvania Bulletin. The creation of the document
11containing the terms and conditions of the plan and the trust
12declaration and the establishment of the terms and provisions of
13the plan and the trust need not be promulgated by regulation or
14formal rulemaking and shall not be subject to the act of July
1531, 1968 (P.L.769, No.240), referred to as the Commonwealth
16Documents Law. A reference in this part or other law to the plan
17shall include the plan document unless the context clearly
18indicates otherwise.

19§ 5403.  Individual investment accounts.

20The board shall establish in the trust an individual
21investment account for each participant in the plan. All
22contributions by a participant or an employer for or on behalf
23of a participant shall be credited to the participant's
24individual investment account, together with all interest and
25investment earnings and losses. Investment and administrative
26fees, costs and expenses shall be charged to the participants'
27individual investment accounts. Employer defined contributions
28shall be recorded and accounted for separately from participant
29contributions, but all interest, investment earnings and losses,
30and investment and administrative fees, costs and expenses shall

1be allocated proportionately.

2§ 5404.  Participant contributions.

3(a) Mandatory contributions.--A participant shall make
4mandatory pickup participant contributions through payroll
5deductions to the participant's individual investment account
6equal to 6.25% of compensation for current State service. The
7employer shall cause those contributions for current service to
8be made and deducted from each payroll or on such schedule as
9established by the board.

10(b)  Voluntary contributions.--A participant may make
11voluntary contributions through payroll deductions or through
12direct trustee-to-trustee transfers or through transfers of
13money received in an eligible rollover into the trust to the
14extent allowed by IRC § 402. The rollovers shall be made in a
15form and manner as determined by the board, shall be credited to
16the participant's individual investment account and shall be
17separately accounted for by the board.

18(c)  Prohibited contributions.--No contributions may be
19allowed that would cause a violation of the limitations related
20to contributions applicable to governmental plans contained in
21IRC § 415 or in other provisions of law. In the event that any
22disallowed contributions are made, any participant contributions
23in excess of the limitations and investment earnings on those
24contributions shall be refunded to the participant by the board.

25§ 5405.  Mandatory pickup participant contributions.

26(a)  Treatment for purposes of IRC § 414(h).--The
27contributions to the trust required to be made under section
285404(a) (relating to participant contributions) with respect to
29current State service rendered by an active participant shall be
30picked up by the Commonwealth or other employer and shall be

1treated as the employer's contribution for purposes of IRC §
2414(h). After the effective date of this section, an employer 
3employing a participant in the plan shall pick up the required 
4mandatory participant contributions by a reduction in the 
5compensation of the participant.

6(b)  Treatment for other purposes.--For all purposes other
7than the IRC, the mandatory pickup participant contributions
8shall be treated as contributions made by a participant in the
9same manner and to the same extent as if the contributions were
10made directly by the participant and not picked up.

11§ 5406.  Employer defined contributions.

12(a)  Contributions for current service.--The Commonwealth or
13other employer of an active participant shall make employer
14defined contributions for current service of an active
15participant that shall be credited to the active participant's
16individual investment account. Employer defined contributions
17shall be recorded and accounted for separately from participant
18contributions.

19(b)  Contributions resulting from participants reemployed
20from USERRA leave.--When a State employee reemployed from USERRA
21leave makes the mandatory pickup participant contributions
22permitted to be made for the USERRA leave, the Commonwealth or
23other employer by whom the State employee is employed at the
24time the participant contributions are made shall make whatever
25employer defined contributions would have been made under this
26section had the employee making the participant contributions
27continued to be employed in the participant's State office or
28position instead of performing USERRA leave. The employer
29defined contributions shall be placed in the participant's
30individual investment account as otherwise provided by this

1part.

2(c)  Limitations on contributions.--No contributions may be
3allowed that would cause a violation of the limitations related
4to contributions applicable to governmental plans contained in
5IRC § 415 or in other provisions of law. In the event that any
6disallowed contributions are made, any employer defined
7contributions in excess of the limitations and investment
8earnings on the contributions shall be refunded to the employer
9by the board.

10§ 5407.  Eligibility for benefits.

11(a)  Termination of service.--A participant who terminates
12State service shall be eligible to withdraw the vested
13accumulated total defined contributions standing to the
14participant's credit in the participant's individual investment
15account or a lesser amount as the participant may request.
16Payment shall be made in a lump sum unless the board has
17established other forms of distribution in the plan document,
18subject to the provisions of subsection (g). A participant who
19withdraws his vested accumulated total defined contributions
20shall no longer be a participant in the plan, notwithstanding
21that the participant may have contracted to receive an annuity
22or other form of payment from a provider retained by the board
23for such purposes.

24(b)  Required distributions.--All payments pursuant to this
25section shall start and be made in compliance with the minimum
26distribution requirements and incidental death benefit rules of
27IRC § 401(a)(9). The board shall take any action and make any
28distributions it may determine are necessary to comply with
29those requirements.

30(c)  Married participant.--A participant who is married may

1receive a lump sum distribution or other distribution directly
2from the board without the consent of the participant's spouse
3unless the plan document provides otherwise.

4(d)  Combined service employee.--A participant who is a
5combined service employee must be terminated from all positions
6that result in either membership in the system or participation
7in the plan to be eligible to receive a distribution.

8(e)  Loans.--Loans or other distributions, including hardship 
9or unforeseeable emergency distributions, from the plan to State
10employees who have not terminated State service are not
11permitted, except as required by law.

12(f)  Small individual investment accounts.--

13(1) A participant who terminates State service and whose
14vested accumulated total defined contributions are below the
15threshold established by law as of the date of termination of
16service may be paid the vested accumulated total defined
17contributions in a lump sum as provided in IRC § 401(a)(31).

18(2) The board may also provide in the plan document
19that, notwithstanding subsection (g), a participant whose
20vested accumulated employer defined contributions are below
21the thresholds established by the board may receive those
22distributions without the obligation to purchase an annuity.
23The threshold may be established as a dollar amount, an
24annuity amount, in some other form individually or in
25combination as the board determines.

26(g) Requirement to purchase annuity.--Except as prohibited
27by the IRC or as otherwise provided in this part, a participant
28who is eligible and elects to receive a distribution or vested
29accumulated employer defined contributions shall be required to
30purchase an annuity with that distribution from an annuity

1provider contracted by the board under section 5408(c) (relating
2to death benefits) and under such conditions as provided in the
3plan document. The conditions may include that the board is
4authorized to make the distribution directly to the annuity
5provider.

6§ 5408.  Death benefits.

7(a)  General rule.--In the event of the death of an active
8participant or inactive participant, the board shall pay to the
9participant's beneficiary the vested balance in the
10participant's individual investment account in a lump sum or in
11such other manner as the board may establish in the plan
12document.

13(b)  Death of participant receiving distributions.--In the
14event of the death of a participant receiving distributions, the
15board shall pay to the participant's beneficiary the vested
16balance in the participant's individual investment account in a
17lump sum or in such other manner as the board may establish in
18the plan document or, if the board has established alternative
19methods of distribution in the plan document under which the
20participant was receiving distributions, to the participant's
21beneficiary or successor payee, as the case may be, as provided
22in the plan document.

23(c)  Contracts.--The board may contract with financial
24institutions, insurance companies or other types of third-party
25providers to allow participants who receive a lump sum
26distribution to receive payments and death benefits in a form
27and manner as provided by the contract. These contracts may, but
28are not required to, provide that any payment and death benefit
29options for a married former participant be in the form of a
30joint and survivor annuity unless the spouse consents to another

1payment option.

2(d)  Spousal consent.--All nomination or change of
3beneficiaries or successor payees made by a married participant
4shall be subject to the consent of the participant's spouse as
5provided for in this part.

6§ 5409.  Vesting.

7(a) Participant and voluntary contributions.--Subject to the
8forfeiture and attachment provisions of section 5953 (relating
9to taxation, attachment and assignment of funds) or otherwise as
10provided by law, a participant shall be vested with respect to
11all mandatory pickup participant contributions and voluntary
12contributions paid by or on behalf of the participant to the
13trust in addition to interest and investment gains or losses on
14the participant contributions but not including investment fees
15and administrative charges.

16(b) Employer defined contributions.--

17(1) Subject to the forfeiture and attachment provisions
18of section 5953 or otherwise as provided by law, a
19participant shall be vested with respect to all employer
20defined contributions paid to the participant's individual
21investment account in the trust in addition to interest and
22investment gains and losses on the employer defined
23contributions but not including investment fees and
24administrative charges according to the following schedule:

25(i)  during the first and second year of State
26service as a participant in the plan, 0%;

27(ii)  at the second year until the third year of
28State service as a participant in the plan, 50%;

29(iii)  at the third year until the fourth year of
30State service as a participant in the plan, 75%;

1(iv)  at and after the fourth year of State service
2as a participant in the plan, 100%.

3(2) The board shall establish in the plan document:

4(i) How the required time periods of State service
5in the plan are determined and calculated.

6(ii) The effect of periods that State employees
7spend on paid leave or leave without pay on the
8determination of a participant's vested status in the
9plan.

10(iii) The effect of termination of State service or
11distributions from the plan on a participant's vested
12status in the plan.

13(iv) Other terms and conditions for the
14implementation and administration of this section.

15(3) Nonvested employer defined contributions and the
16interest and investment gains and losses on the nonvested
17employer defined contributions that are not distributable to
18a participant are credited to the participant's most recent
19employer's future obligation assessed under section 5509
20(relating to appropriations and assessments by the
21Commonwealth).

22(c) USERRA leave and vesting credit.--A participant in the
23plan who is reemployed from USERRA leave or who dies while
24performing USERRA leave shall receive vesting credit under this
25section for the State service that would have been performed had
26the member not performed USERRA leave.

27§ 5410.  Termination of distributions.

28(a)  Return to State service.--

29(1) A participant receiving distributions or an inactive
30participant who returns to State service shall cease

1receiving distributions and shall not be eligible to receive
2distributions until the participant subsequently terminates
3State service, without regard to whether the participant is a
4mandatory, optional or prohibited member of the system or
5participant in the plan.

6(2) This subsection shall not apply to a distribution of
7accumulated employer defined contributions or other
8distributions that the participant has received and used to
9purchase an annuity from a provider contracted by the board.

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

11(1) If a former State employee is reemployed from USERRA
12leave and received any payments or annuity from the plan
13during the USERRA leave, the employee shall return to the
14board the amount so received plus interest as provided in the
15plan document.

16(2) The amount payable shall be certified in each case
17by the board in accordance with methods approved by the
18actuary and shall be paid in a lump sum within 30 days or in
19the case of an active participant may be amortized with
20interest as provided in the plan document through salary
21deductions to the trust in amounts agreed upon by the active
22participant and the board, but for not longer than a period
23that starts with the date of reemployment and continues for
24up to three times the length of the active participant's
25immediate past period of USERRA leave. The repayment period
26shall not exceed five years.

27§ 5411.  Agreements with financial institutions and other
28organizations.

29To establish and administer the plan, the board may enter
30into written agreements with one or more financial institutions

1or other organizations relating to the plan's administration and
2investment of funds held pursuant to the plan.

3§ 5412.  Powers and duties of board.

4The board shall have the following powers and duties to
5establish the plan and trust and administer the provisions of
6this chapter and part:

7(1)  The board may commingle or pool assets with the
8assets of other persons or entities.

9(2)  The board shall pay all administrative fees, costs
10and expenses of managing, investing and administering the
11plan, the trust and the individual investment accounts from
12the balance of such individual investment accounts except as
13the General Assembly otherwise provides by appropriations
14from the General Fund.

15(3)  The board may establish investment guidelines and
16limits on the types of investments that participants may
17make, consistent with the board's fiduciary obligations.

18(4)  The board shall have the power to change the terms
19of the plan as may be necessary to maintain the tax-qualified
20status of the plan.

21(5)  The board may establish a process for election to
22participate in the plan by those State employees for whom
23participation is not mandatory.

24(6)  The board may perform an annual or more frequent
25review of any qualified fund manager for the purpose of
26assuring that the fund manager continues to meet all
27standards and criteria established.

28(7)  The board may allow for eligible rollovers and
29direct trustee-to-trustee transfers into the trust from
30qualified plans of other employers, regardless of whether the

1employers are a private employers or public employers.

2(8)  The board may allow a former participant to maintain
3the participant's individual investment account within the
4plan.

5(9)  The board shall administer the plan in compliance
6with the qualifications and other rules of the IRC.

7(10)  The board may establish procedures to provide for
8the lawful payment of benefits.

9(11)  The board shall determine what constitutes a
10termination of State service.

11(12)  The board may establish procedures for
12distributions of small accounts as required or permitted by
13the IRC.

14(13)  The board may establish procedures in the plan
15document or to promulgate rules and regulations as it deems
16necessary for the administration and management of the plan,
17including, but not limited to, establishing:

18(i) Procedures for eligible participants to change
19voluntary contribution amounts or their investment
20choices on a periodic basis or make other elections
21regarding their participation in the plan.

22(ii) Procedures for deducting mandatory pickup
23participant contributions and voluntary contributions
24from a participant's compensation.

25(iii) Procedures for rollovers and trustee-to-
26trustee transfers allowed under the IRC and permitted as
27part of the plan.

28(iv) Standards and criteria for disclosing and
29providing not less than ten options to eligible
30individuals regarding investments of amounts deferred

1under the plan, provided that one of the available
2options must serve as the default option for participants
3who do not make a timely election and that, to the extent
4commercially available, one option must have an annuity
5investment feature.

6(v) Standards and criteria for disclosing to the
7participants the anticipated and actual income
8attributable to amounts invested, property rights and all
9fees, costs and expenses to be made against amounts
10deferred to cover the fees, costs and expenses of
11administering and managing the plan or trust.

12(vi)  Procedures, standards and criteria for the
13making of distributions from the plan upon termination
14from employment or death or in other circumstances
15consistent with the purpose of the plan.

16(14)  The board may waive any reporting or information
17requirement contained in this part if the board determines
18that the information is not needed for the administration of
19the plan.

20(15)  The board may contract any services and duties in
21lieu of staff, except final adjudications and as prohibited
22by law. Any duties or responsibilities of the board not
23required by law to be performed by the board can be delegated
24to a third-party provider subject to appeal to the board.

25(16)  The board may provide that any duties of the
26employer or information provided by the participant to the
27employer be performed or received directly by the board.

28(17)  The provisions and restrictions of the act of July
292, 2010 (P.L.266, No.44), known as the Protecting
30Pennsylvania's Investments Act, shall not apply to the plan

1or trust or the investments of the plan or trust, but the
2board may offer to the plan participants investment vehicles
3that would be allowed under the Protecting Pennsylvania's
4Investments Act.

5(18) The board shall ensure that participants are
6provided with educational materials about investment options
7and choices.

8§ 5413.  Responsibility for investment loss.

9The board, the Commonwealth, an employer or other political
10subdivision shall not be responsible for any investment loss
11incurred under the plan or for the failure of any investment to
12earn any specific or expected return or to earn as much as any
13other investment opportunity, whether or not the other
14opportunity was offered to participants in the plan.

15§ 5414.  Investments based on participants' investment
16allocation choices.

17(a) Investment by participant.--All contributions, interest
18and investment earnings shall be invested based on a
19participant's investment allocation choices. All investment
20allocation choices shall be credited proportionally between
21participant contributions and employer defined contributions.
22Each participant shall be credited individually with the amount
23of contributions, interest and investment earnings.

24(b)  Investment of contributions made by entities other than
25the Commonwealth.--Investment of contributions by any
26corporation, institution, insurance company or custodial bank
27that the board has approved shall not be unreasonably delayed
28and in no case may the investment of contributions be delayed
29more than 30 days from the date of payroll deduction or the date
30voluntary contributions are made to the date that funds are

1invested. Any interest earned on the funds pending investment
2shall be allocated to the Commonwealth and credited to the
3individual investment accounts of participants who are then
4participating in the plan unless the interest is used to defray
5administrative costs and fees that would otherwise be required
6to be borne by participants who are then participating in the
7plan.

8§ 5415.  Expenses.

9All fees, costs and expenses of administering the plan and
10the trust and investing the assets of the trust shall be borne
11by the participants and paid from assessments against the
12balances of the individual investment accounts as established by
13the board, except that for fiscal years ending before July 1,
142015, the fees, costs and expenses of establishing and
15administering the plan and the trust shall be paid by the
16Commonwealth through annual appropriations from the General
17Fund, made on the basis of estimates from the board.

18§ 5416.  Election by members to be participants.

19(a)  General rule.--A State employee who is an active member
20or inactive member on leave without pay of the system on or
21after January 1, 2015, and who is employed in a position that
22would otherwise be eligible for participation in the plan may
23elect to become a participant in the plan.

24(b)  Time for making election.--An eligible State employee
25may elect to become a participant and a combined service
26employee at any time before termination of State service by
27filing a written election with the board.

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

29(1) An election to become a participant shall be
30irrevocable. Participation shall be effective at the

1beginning of the next pay period commencing after the
2election is filed with the board.

3(2) A member who elects to become a participant shall
4remain a participant for all future State service.

5(3) Any prior State or nonstate service credited in the
6system shall remain in the class or subclass of service in
7which it is credited on the effective date of participation.

8(4) A combined service employee shall not be eligible to
9receive an annuity from the system or a withdrawal of
10accumulated deductions until the employee has terminated
11State service.

12(5) A participant shall not be entitled to purchase any
13previous State service or creditable nonstate service.

14(6) The eligibility of a combined service employee for
15an annuity from the system and, if eligible, the amount of
16the annuity shall be as determined under this part.

17§ 5417.  Tax qualification.

18(a) Required distributions.--All payments pursuant to this 
19chapter shall start and be made in compliance with the minimum 
20distribution requirements and incidental death benefit rules of 
21IRC § 401(a).

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

23(1) (i) Except as provided under subparagraph (ii) and
24notwithstanding a provision of this part, a contribution
25or benefit related to the plan may not exceed any
26limitation under IRC § 415 with respect to governmental
27plans which is in effect on the date the contribution or
28benefit payment takes effect.

29(ii) An increase in a limitation under IRC § 415
30shall apply to all participants on and after the

1effective date of this section.

2(iii) For the purposes of this paragraph, the term
3"government plans" shall have the same meaning as the
4term has in IRC § 414(d).

5(2) (i) Except as provided under subparagraph (ii), an
6amendment of this part on or after the effective date of
7this section that increases contributions or benefits for
8active participants, inactive participants or
9participants receiving distributions shall not be deemed
10to provide for a contribution or benefit in excess of any
11limitation, adjusted on or after the effective date of
12this section, under IRC § 415 unless specifically
13provided by legislation.

14(ii) Notwithstanding subparagraph (i), an increase
15in benefits on or after the effective date of this
16section for a participant in the plan shall be authorized
17and apply to the fullest extent allowed by law.

18Section 313. Section 5501 of Title 71 is amended to read:

19§ 5501. Regular member contributions for current service.

20Regular member contributions shall be made to the fund on
21behalf of each active member for current service except for any
22period of current service in which the making of such
23contributions has ceased solely by reason of section 5502.1
24(relating to waiver of regular member contributions and Social
25Security integration member contributions) or any provision of
26this part relating to the limitations under IRC § 401(a)(17) or
27415(b) or any provision of this part limiting compensation or 
28contributions applicable to a Subclass X member, Subclass Y 
29member or Subclass Z member.

30Section 314. Section 5501.1(a) and (b)(7) and (8) of Title

171 are amended and subsection (b) is amended by adding a
2paragraph to read:

3§ 5501.1. Shared-risk member contributions for Class A-3 and
4Class A-4 service.

5(a) General.--Shared-risk member contributions shall be made
6to the fund on behalf of each member of Class A-3 or Class A-4
7for current service credited as Class A-3 or Class A-4 as
8provided under this section, except for any period of current
9service in which the making of the contributions has ceased
10solely by reason of any provision of this part relating to the
11limitations under IRC § 401(a)(17) or 415 or any provision of 
12this part limiting compensation or contributions applicable to a 
13Subclass X member, Subclass Y member or Subclass Z member.
14Shared-risk member contributions shall be credited to the
15members' savings account.

16(b) Determination of shared-risk contribution rate.--

17* * *

18(7) For any fiscal year in which the actual
19contributions by the Commonwealth or an employer are lower
20than those required to be made under section 5507(d)
21[(relating to contributions by the Commonwealth and other
22employers)] (relating to contributions to the system by the 
23Commonwealth and other employers before July 1, 2015) or 
245507.1 (relating to contributions to the system by the 
25Commonwealth and other employers commencing July 1, 2015),
26the prospective shared-risk contribution rate for those
27employees whose employers are not making the contributions
28required by section 5507(d) shall be zero and shall not
29subsequently be increased, except as otherwise provided in
30this section.

1(8) If the actuary certifies that the accrued liability
2contributions calculated in accordance with the actuarial
3cost method provided in [section 5508(b)] section 5508
4(relating to actuarial cost method for fiscal years ending 
5before July 1, 2015) or 5508.1 (relating to actuarial cost 
6method for fiscal years beginning on or after July 1, 2015),
7as adjusted by the experience adjustment factor, are zero or
8less, then the shared-risk contribution rate for the next
9fiscal year shall be zero and shall not subsequently be
10increased, except as otherwise provided in this section.

11(9) For periods commencing on or after July 1, 2015, the
12determination of shared-risk member contribution rate shall
13be based on the annual interest rate adopted by the board for
14the calculation of the accrued liability contribution rate
15under section 5508.1(c) (relating to actuarial cost method 
16for fiscal years beginning on or after July 1, 2015).

17Section 315. The definition of "actuarially required
18contribution rate" in section 5501.2 of Title 71 is amended to
19read:

20§ 5501.2. Definitions.

21The following words and phrases when used in this chapter
22shall have the meanings given to them in this section unless the
23context clearly indicates otherwise:

24"Actuarially required contribution rate." The employer
25contribution rate as calculated pursuant to section 5508(a),
26(b), (c), (e) and (f) (relating to actuarial cost method for 
27fiscal years ending before July 1, 2015) or 5508.1(a), (b), (c), 
28(e) and (f) (relating to actuarial cost method for fiscal years 
29beginning on or after July 1, 2015).

30* * *

1Section 316. Sections 5502, 5503.1(a) and 5504 of Title 71
2are amended to read:

3§ 5502. Social Security integration member contributions.

4Except for any period of current service in which the making
5of regular member contributions has ceased solely by reason of
6section 5502.1 (relating to waiver of regular member
7contributions and Social Security integration member
8contributions) or any provision of this part relating to
9limitations under IRC § 401(a)(17) or 415(b), contributions
10shall be made on behalf of [a] an active member of any class who
11prior to March 1, 1974, has elected Social Security integration
12coverage. The amount of such contributions shall be 6 1/4% of
13that portion of his compensation as an active member in excess
14of the maximum wages taxable under the provisions of the Social
15Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.), in
16addition to the regular member contributions which, after such
17election, shall be determined on the basis of the basic
18contribution rate of 5% and the additional member contribution
19of 1 1/4%: Provided, That a member may elect to discontinue
20Social Security integration coverage and shall thereafter be
21ineligible to accrue any further Social Security integration
22credits or any additional benefits on account of Social Security
23integration membership.

24§ 5503.1. Pickup contributions.

25(a) Treatment for purposes of IRC § 414(h).--All
26contributions to the fund required to be made under sections
275501 (relating to regular member contributions for current
28service), 5501.1 (relating to shared-risk member contributions 
29for Class A-3 and Class A-4 service), 5502 (relating to Social
30Security integration member contributions), 5503 (relating to

1joint coverage member contributions) and [section] 5505.1
2(relating to additional member contributions), with respect to
3current State service rendered by an active member on or after
4January 1, 1982, shall be picked up by the Commonwealth or other
5employer and shall be treated as the employer's contribution for
6purposes of IRC § 414(h).

7* * *

8§ 5504. Member contributions for the purchase of credit for
9previous State service or to become a full coverage
10member.

11(a) Amount of contributions for service in other than Class
12G through N.--

13(1) The contributions to be paid by an active member or
14eligible school employee for credit in the system for total
15previous State service other than service in Class G, Class
16H, Class I, Class J, Class K, Class L, Class M and Class N or
17to become a full coverage member shall be sufficient to
18provide an amount equal to the regular and additional
19accumulated deductions which would have been standing to the
20credit of the member for such service had regular and
21additional member contributions been made with full coverage
22in the class of service and at the rate of contribution
23applicable during such period of previous service and had his
24regular and additional accumulated deductions been credited
25with statutory interest during all periods of subsequent
26State service as an active member or inactive member on leave 
27without pay and school service as an active member or 
28inactive member on leave without pay of the Public School 
29Employees' Retirement System up to the date of purchase.

30(1.1)  Notwithstanding paragraph (1), any previous State

1service credited on or after January 1, 2015, under paragraph
2(1) shall have contributions made for and be credited as
3Subclass X or Subclass Y service of the appropriate class of
4service, subject to any election made by the State employee
5to be a Subclass Z member, unless previously credited before
6January 1, 2015, in which case it shall be credited as
7Subclass W service.

8(2) Notwithstanding paragraph (1), members with Class A-
93 State service shall make contributions and receive credit
10as if the previous State service was Class A-3 service, and
11members with Class A-4 State service shall make contributions
12and receive credit as if the previous State service was Class
13A-4 service, even if it would have been credited as a
14different class of service had the State employee been a
15member of the system at the time the service was performed
16unless it was mandatory that the State employee be an active
17member of the system and the previous State service is being
18credited as the result of a mandatory active membership
19requirement.

20(a.1) Converted county service.--No contributions shall be
21required to restore credit for previously credited State service
22in Class G, Class H, Class I, Class J, Class K, Class L, Class M
23and Class N. Such service shall be restored upon the
24commencement of payment of the contributions required to restore
25credit in the system for all other previous State service.

26(b) Certification and method of payment.--The amount payable
27shall be certified in each case by the board in accordance with
28methods approved by the actuary and shall be paid in a lump sum
29within 30 days or in the case of an active member or eligible
30school employee who is an active member of the Public School

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

15Section 317. Section 5505(b)(1), (c), (d) and (i)(4) of
16Title 71 are amended and the section is amended by adding a
17subsection to read:

18§ 5505. Contributions for the purchase of credit for creditable
19nonstate service.

20* * *

21(b) Nonintervening military service.--

22(1) The amount due for the purchase of credit for
23military service other than intervening military service
24shall be determined by applying the member's basic
25contribution rate, the additional contribution rate plus the
26Commonwealth normal contribution rate for active members at
27the time of entry, subsequent to such military service, of
28the member into State service to his average annual rate of
29compensation over the first three years of such subsequent
30State service and multiplying the result by the number of

1years and fractional part of a year of creditable
2nonintervening military service being purchased together with
3statutory interest during all periods of subsequent State
4service as an active member or inactive member on leave 
5without pay and school service as an active member or 
6inactive member on leave without pay of the Public School 
7Employees' Retirement System to date of purchase. Upon
8application for credit for such service, payment shall be
9made in a lump sum within 30 days or in the case of an active
10member or eligible school employee who is an active member of
11the Public School Employees' Retirement System it may be
12amortized with statutory interest through salary deductions
13to the system in amounts agreed upon by the member and the
14board. The salary deduction amortization plans agreed to by
15members and the board may include a deferral of payment
16amounts and statutory interest until the termination of
17school service or State service or beginning service as a 
18participant as the board in its sole discretion decides to
19allow. The board may limit salary deduction amortization
20plans to such terms as the board in its sole discretion
21determines. In the case of an eligible school employee who is
22an active member of the Public School Employees' Retirement
23System, the agreed upon salary deductions shall be remitted
24to the Public School Employees' Retirement Board, which shall
25certify and transfer to the board the amounts paid.
26Application may be filed for all such military service credit
27upon completion of three years of subsequent State service
28and shall be credited as Class A service.

29* * *

30(c) Intervening military service.--Contributions on account

1of credit for intervening military service shall be determined
2by the member's regular contribution rate, shared-risk 
3contribution rate, Social Security integration contribution 
4rate, the additional contribution rate which shall be applied
5only to those members who began service on or after the
6effective date of this amendatory act and compensation at the
7time of entry of the member into active military service,
8together with statutory interest during all periods of
9subsequent State service as an active member or inactive member 
10on leave without pay and school service as an active member or 
11inactive member on leave without pay of the Public School 
12Employees' Retirement System to date of purchase. Upon
13application for such credit the amount due shall be certified in
14the case of each member by the board in accordance with methods
15approved by the actuary, and contributions may be made by:

16(1) regular monthly payments during active military
17service; or

18(2) a lump sum payment within 30 days of certification;
19or

20(3) salary deductions to the system in amounts agreed
21upon by the member or eligible school employee who is an
22active member of the Public School Employees' Retirement
23System and the board.

24The salary deduction amortization plans agreed to by members and
25the board may include a deferral of payment amounts and
26statutory interest until the termination of school service or
27State service or beginning service as a participant as the board
28in its sole discretion decides to allow. The board may limit
29salary deduction amortization plans to such terms as the board
30in its sole discretion determines. In the case of an eligible

1school employee who is an active member of the Public School
2Employees' Retirement System, the agreed upon salary deductions
3shall be remitted to the Public School Employees' Retirement
4Board, which shall certify and transfer to the board the amounts
5paid.

6(d) Nonmilitary and nonmagisterial service.--Contributions 
7on account of credit for creditable nonstate service other than 
8military and magisterial service by State employees who first 
9become members of the system before January 1, 2011, or before 
10December 1, 2010, as a member of the General Assembly shall be 
11determined by applying the member's basic contribution rate, the 
12additional contribution rate plus the Commonwealth normal 
13contribution rate for active members at the time of entry 
14subsequent to such creditable nonstate service of the member 
15into State service to his compensation at the time of entry into 
16State service as a member of the system and multiplying the 
17result by the number of years and fractional part of a year of 
18creditable nonstate service being purchased together with 
19statutory interest during all periods of subsequent State 
20service as an active member or inactive member on leave without 
21pay and school service as an active member or inactive member on 
22leave without pay of the Public School Employees' Retirement 
23System to the date of purchase. Upon application for credit for 
24such service payment shall be made in a lump sum within 30 days 
25or in the case of an active member or eligible school employee 
26who is an active member of the Public School Employees' 
27Retirement System it may be amortized with statutory interest 
28through salary deductions to the system in amounts agreed upon 
29by the member and the board. The salary deduction amortization 
30plans agreed to by members and the board may include a deferral
 

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

11* * *

12(i) Purchases of nonstate service credit by State employees
13who first became members of the system on or after December 1,
142010.--

15* * *

16(4) The payment for credit purchased under this 
17subsection shall be certified in each case by the board in 
18accordance with methods approved by the actuary and shall be 
19paid in a lump sum within 30 days or in the case of an active 
20member or eligible school employee who is an active member of 
21the Public School Employees' Retirement System may be 
22amortized with statutory interest through salary deductions 
23to the system in amounts agreed upon by the member and the 
24board. The salary deduction amortization plans agreed to by 
25members and the board may include a deferral of payment 
26amounts and interest until the termination of school service 
27or State service or beginning service as a participant as the 
28board in its sole discretion decides to allow. The board may 
29limit the salary deduction amortization plans to such terms 
30as the board in its sole discretion determines. In the case
 

1of an eligible school employee who is an active member of the 
2Public School Employees' Retirement System, the agreed upon 
3salary deductions shall be remitted to the Public School 
4Employees' Retirement Board, which shall certify and transfer 
5to the board the amounts paid.

6(j)  Notwithstanding any other provision of this section, any
7creditable non-State service credited on or after January 1,
82015, shall have contributions made for and be credited as
9Subclass X or Subclass Y service of the appropriate class of
10service, subject to any election made by the State employee to
11be a Subclass Z member, unless previously credited before
12January 1, 2015, in which case it shall be credited as Subclass
13W service.

14Section 318. (Reserved).

15Section 319. (Reserved).

16Section 320. Section 5505.1 of Title 71 is amended to read:

17§ 5505.1. Additional member contributions.

18In addition to regular or joint coverage member contributions
19and social security integration contributions, contributions
20shall be made on behalf of each active member, regardless of
21class of service, at the rate of 1 1/4% of compensation until
22such time as the actuary certifies that all accrued liability
23contributions have been completed in accordance with the
24actuarial cost method provided in section 5508(b) (relating to
25actuarial cost method for fiscal years ending before July 1, 
262015).

27Section 321. Section 5506 of Title 71, amended October 24,
282012 (P.L.1436, No.181), is amended to read:

29§ 5506. Incomplete payments.

30In the event that a member terminates State service or begins
 

1service as a participant or a multiple service member who is an
2active member of the Public School Employees' Retirement System
3terminates school service before the agreed upon payments for
4credit for previous State service, USERRA leave, creditable
5nonstate service, social security integration, full coverage
6membership, election of class or subclass of membership or
7return of benefits on account of returning to State service or
8entering school service and electing multiple service have been
9completed, the member or multiple service member who is an
10active member of the Public School Employees' Retirement System
11shall have the right to pay within 30 days of termination of
12State service or school service or beginning service as a 
13participant the balance due, including interest, in a lump sum
14and the annuity shall be calculated including full credit for
15the previous State service, creditable nonstate service, social
16security integration, or full coverage membership. In the event
17a member does not pay the balance due within 30 days of
18termination of State service or beginning service as a 
19participant or in the event a member dies in State service or
20within 30 days of termination of State service or beginning 
21service as a participant or in the case of a multiple service
22member who is an active member of the Public School Employees'
23Retirement System does not pay the balance due within 30 days of
24termination of school service or dies in school service or
25within 30 days of termination of school service and before the
26agreed upon payments have been completed, the present value of
27the benefit otherwise payable shall be reduced by the balance
28due, including interest, and the benefit payable shall be
29calculated as the actuarial equivalent of such reduced present
30value.

1Section 322. Section 5506.1(a) of Title 71 is amended to
2read:

3§ 5506.1. Annual compensation limit under IRC § 401(a)(17).

4(a) General rule.--In addition to other applicable
5limitations set forth in this part, and notwithstanding any
6provision of this part to the contrary, the annual compensation
7of each noneligible member and each participant taken into
8account for benefit purposes under this part shall not exceed
9the limitation under IRC § 401(a)(17). On and after January 1,
101996, any reference in this part to the limitation under IRC §
11401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
121993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
13compensation limit set forth in this subsection. The OBRA '93
14annual compensation limit is $150,000, as adjusted by the
15commissioner for increases in the cost of living in accordance
16with IRC § 401(a)(17)(B). The cost-of-living adjustment in
17effect for a calendar year applies to any determination period
18which is a period, not exceeding 12 months, over which
19compensation is determined, beginning in such calendar year. If
20a determination period consists of fewer than 12 months, the
21OBRA '93 compensation limit will be multiplied by a fraction,
22the numerator of which is the number of months in the
23determination period and the denominator of which is 12.

24* * *

25Section 323. Title 71 is amended by adding sections to read:

26§ 5506.2.  Annual compensation limit for Subclass X, Subclass Y
27and Subclass Z members.

28For the following purposes, compensation of a Subclass X,
29Subclass Y or Subclass Z member each calendar year is limited to
30the Social Security wage base for the year without regard to

1whether the year commences before 2015 and whether the member
2made contributions or earned benefits under the Social Security
3Act (49 Stat. 620, 42 U.S.C. § 301 et seq.):

4(1) Determining regular member contributions for
5Subclass X service, Subclass Y service and Subclass Z
6service.

7(2) Determining shared-risk member contributions for
8Subclass A-3X and A-4X service.

9(3) Determining final average salary for purposes of
10calculating standard single life annuities resulting from
11Subclass X service, Subclass Y service or Subclass Z service.

12(4) Determining the member contributions to be made when
13previously uncredited State service is to be credited as
14Subclass X service, Subclass Y service or Subclass Z service.

15(5) Determining the contributions to be made for
16creditable nonstate service to be credited as Subclass X
17service, Subclass Y service or Subclass Z service.

18(6) Determining the compensation to be used for Subclass
19X service, Subclass Y service and Subclass Z service as part
20of the allocation of concurrent service between classes under
21section 5702(a)(1) (relating to maximum single life annuity).

22(7) Calculating the final average salary for the
23portions of a disability annuity calculation resulting from
24Subclass X service, Subclass Y service or Subclass Z service
25under section 5704 (relating to disability annuities).

26(8) Calculating final average salary for the portions of
27the maximum single life annuity under section 5706(b)
28(relating to termination of annuities) resulting from
29Subclass X service, Subclass Y service or Subclass Z service
30when an annuitant who has returned to service subsequently

1discontinues service.

2(9) Determining the portions of the benefit of a State
3police officer resulting from Subclass X service, Subclass Y
4service or Subclass Z service, unless the State police
5officer has 20 or more qualifying eligibility points and has
6elected to pay an additional 6.05% of compensation as regular
7member contributions.

8§ 5506.3.  Adjustment of compensation for calculating final
9average salary on or after January 1, 2015.

10For purposes of calculating final average salary for the
11determination of standard single life annuities resulting from
12Subclass X service, Subclass Y service or Subclass Z service,
13the compensation received each calendar year as a member of the
14system or, if a multiple service member, received as both a
15member of the system and as a school employee and member of the
16Public School Employees' Retirement System shall be adjusted
17first by annualizing the compensation received for any part-time
18service or for any partial year of credit on the basis of the
19fractional portion of the year for which credit is received. The
20annualized compensation and, in the case of a multiple service
21member, the combined compensation, may not exceed the Social
22Security wage base for the year. After annualization, the amount
23of compensation not exceeding the Social Security wage base in
24any calendar year shall be further adjusted downward if
25necessary so as not to exceed 110% of the average of the
26annualized compensation not exceeding the Social Security wage
27bases of the four immediately previous calendar years in which
28the State employee was an active member, or, if a multiple
29service member, an active member of the system or Public School
30Employees' Retirement System. If for any calendar year there are

1one or more, but less than four, preceding calendar years in
2which the State employee was an active member of the system or,
3if a multiple service member, also an active member of the
4Public School Employees' Retirement System, then the adjusted
5compensation may not exceed 110% of the average of the
6annualized compensation not exceeding the Social Security wage
7base of the number of preceding years of active membership in
8the system or the Public School Employees' Retirement System.

9Section 324. Section 5507(a), (b), (d), (e) and (f) of Title
1071, amended October 24, 2012 (P.L.1436, No.181), are amended to
11read:

12§ 5507. Contributions to the system by the Commonwealth and
13other employers before July 1, 2015.

14(a) Contributions on behalf of active members.--[The] Until 
15June 30, 2015, the Commonwealth and other employers whose
16employees are members of the system, and from January 1, 2015, 
17to June 30, 2015, the Commonwealth and other employers whose 
18employees are participants in the plan shall make contributions
19to the fund on behalf of all active members in such amounts as
20shall be certified by the board as necessary to provide,
21together with the members' total accumulated deductions, annuity
22reserves on account of prospective annuities other than those
23provided in sections 5708 (relating to supplemental annuities), 
245708.1 (relating to additional supplemental annuities), 5708.2 
25(relating to further additional supplemental annuities), 5708.3 
26(relating to supplemental annuities commencing 1994), 5708.4 
27(relating to special supplemental postretirement adjustment), 
285708.5 (relating to supplemental annuities commencing 1998), 
295708.6 (relating to supplemental annuities commencing 2002), 
305708.7 (relating to supplemental annuities commencing 2003) and
 

15708.8 (relating to special supplemental postretirement 
2adjustment of 2002), in accordance with the actuarial cost
3method provided in section 5508(a), (b), (c), (d) and (f)
4(relating to actuarial cost method for fiscal years ending 
5before July 1, 2015).

6(b) Contributions on behalf of annuitants.--[The] Until June 
730, 2015, the Commonwealth and other employers whose employees 
8are members of the system shall make contributions on behalf of
9annuitants in such amounts as shall be certified by the board as
10necessary to fund the liabilities for supplemental annuities in
11accordance with the actuarial cost method provided in section
125508(e) [(relating to actuarial cost method)].

13* * *

14(d) Payment of final contribution rate.--Notwithstanding the
15calculation of the actuarially required contribution rate and
16the provisions of subsections (a) and (b), the Commonwealth and
17other employers whose employees are members of the system shall
18make contributions to the fund on behalf of all active members
19and annuitants until June 30, 2015, in such amounts as shall be
20certified by the board in accordance with section 5508(i).

21(e) Benefits completion plan contributions.--In addition to 
22all other contributions required under this section and section 
235508, the Commonwealth and other employers whose employees are 
24members of the system shall make contributions until June 30, 
252015, as certified by the board pursuant to section 5941 
26(relating to benefits completion plan).

27(f) Contributions resulting from members reemployed from
28USERRA leave.--When a State employee reemployed from USERRA
29leave makes the member contributions required to be granted
30State service credit for the USERRA leave before July 1, 2015,

1either by actual payment or by actuarial debt under section 5506
2(relating to incomplete payments), then the Commonwealth
3employer or other employer by whom the State employee is
4employed at the time the member contributions are made, or the
5last employer before termination in the case of payment under
6section 5506, shall make whatever employer contributions would
7have been made under this section had the employee making the
8member contributions after being reemployed from USERRA leave
9continued to be employed in his State office or position instead
10of performing USERRA leave.

11Section 325. Title 71 is amended by adding a section to
12read:

13§ 5507.1. Contributions to the system by the Commonwealth and
14other employers commencing July 1, 2015.

15(a)  Contributions on behalf of members.--For fiscal years 
16beginning on or after July 1, 2015, the Commonwealth and other 
17employers whose employees are or were members of the system 
18shall make contributions to the fund on behalf of all members in 
19such amounts as shall be certified by the board as necessary to 
20provide, together with the members' total accumulated 
21deductions, annuity reserves on account of annuities including 
22those provided in sections 5708 (relating to supplemental 
23annuities), 5708.1 (relating to additional supplemental 
24annuities), 5708.2 (relating to further additional supplemental 
25annuities), 5708.3 (relating to supplemental annuities 
26commencing 1994), 5708.4 (relating to special supplemental 
27postretirement adjustment), 5708.5 (relating to supplemental
28annuities commencing 1998), 5708.6 (relating to supplemental 
29annuities commencing 2002), 5708.7 (relating to supplemental 
30annuities commencing 2003) and 5708.8 (relating to special
 

1supplemental postretirement adjustment of 2002), in accordance 
2with the actuarial cost method provided in section 5508.1 
3(relating to actuarial cost method for fiscal years beginning on 
4or after July 1, 2015).

5(b) Payment of employer contributions to the system.--

6(1)  Payment of employer normal contributions shall be as
7a percentage of compensation of active members.

8(2)  Payment of accrued liability contributions as
9modified by the experience adjustment factor shall be as a
10percentage of compensation of active members and active
11participants.

12(c)  Payment of final contribution rate.--Notwithstanding the
13calculation of the actuarially required contribution rate and
14the provisions of subsections (a) and (b), the Commonwealth and
15other employers whose employees are members of the system shall
16make contributions to the fund on behalf of all active members
17and annuitants after June 30, 2015, in such amounts as shall be
18certified by the board in accordance with section 5508.1(h).

19(d)  Benefits completion plan contributions.--In addition to
20the other contributions required under this section and section
215508.1, the Commonwealth and other employers whose employees are
22active members of the system shall make contributions after June
2330, 2015, as certified by the board under section 5941 (relating
24to benefits completion plan).

25(e) Contributions resulting from members reemployed from
26USERRA leave.--When a State employee reemployed from USERRA
27leave makes the member contributions required to be granted
28State service credit for the USERRA leave after June 30, 2015,
29either by actual payment or by actuarial debt under section 5506
30(relating to incomplete payments), the Commonwealth employer or

1other employer that employed the State employee when the member
2contributions are made or the last employer before termination
3in the case of payment under section 5506 shall make the
4employer contributions that would have been made under this
5section if the employee making the member contributions after he
6is reemployed from USERRA leave continued to be employed in his
7State office or position instead of performing USERRA leave.

8Section 326. Section 5508(a), (b), (c)(3), (e)(2), (f)(1),
9(h) and (i) are amended and subsection (c) is amended by adding
10a paragraph to read:

11§ 5508. Actuarial cost method for fiscal years ending before 
12July 1, 2015.

13(a) Employer contribution rate on behalf of active
14members.--[The] For the fiscal years ending before July 1, 2015, 
15the amount of the Commonwealth and other employer contributions
16on behalf of all active members shall be computed by the actuary
17as a percentage of the total compensation of all active members
18during the period for which the amount is determined and shall
19be so certified by the board. The actuarially required
20contribution rate on behalf of all active members shall consist
21of the employer normal contribution rate, as defined in
22subsection (b), and the accrued liability contribution rate as
23defined in subsection (c). The actuarially required contribution
24rate on behalf of all active members shall be modified by the
25experience adjustment factor as calculated in subsection (f).

26(b) Employer normal contribution rate.--[The] For the fiscal 
27years ending before July 1, 2015, the employer normal
28contribution rate shall be determined after each actuarial
29valuation on the basis of an annual interest rate and such
30mortality and other tables as shall be adopted by the board in

1accordance with generally accepted actuarial principles. The
2employer normal contribution rate shall be determined as a level
3percentage of the compensation of the average new active member,
4which percentage, if contributed on the basis of his prospective
5compensation through his entire period of active State service,
6would be sufficient to fund the liability for any prospective
7benefit payable to him in excess of that portion funded by his
8prospective member contributions, excluding shared-risk member 
9contributions.

10(c) Accrued liability contribution rate.--

11* * *

12(3) For the fiscal year beginning July 1, 2010, the 
13accrued liability contribution rate shall be computed as the 
14rate of total compensation of all active members which shall 
15be certified by the actuary as sufficient to fund in equal 
16dollar installments over a period of 30 years from July 1, 
172010, the present value of the liabilities for all 
18prospective benefits calculated as of the immediately prior 
19valuation date, including the supplemental benefits as 
20provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4, 
215708.5, 5708.6, 5708.7 and 5708.8, but excluding the benefits 
22payable from the retirement benefit plan established pursuant 
23to section 5941 (relating to benefits completion plan), in 
24excess of the actuarially calculated assets in the fund 
25(calculated recognizing all realized and unrealized 
26investment gains and losses each year in level annual 
27installments over five years), including the balance in the 
28supplemental annuity account, and the present value of 
29employer normal contributions and of member contributions 
30payable with respect to all active members, inactive members
 

1on leave without pay, vestees and special vestees on December 
231, 2009. If the accrued liability is changed by legislation 
3enacted subsequent to December 31, 2009, and before January 
41, 2014, such change in liability shall be funded in equal 
5dollar installments over a period of ten years from the first 
6day of July following the valuation date coincident with or 
7next following the date such legislation is enacted.

8(4) For the fiscal year beginning July 1, 2014, the
9accrued liability contribution rate shall be computed as
10provided for under this section, except that the rate shall
11be computed as a rate of total compensation of the active
12members and active participants for the fiscal year. In
13addition to any employer defined contributions made to the
14trust, the Commonwealth and other employers of participants
15shall make the accrued liability contributions to the fund
16certified by the board.

17* * *

18(e) Supplemental annuity contribution rate.--

19* * *

20(2) For fiscal years beginning on or after July 1, 2010, 
21and ending on or before June 30, 2015, contributions from the 
22Commonwealth and other employers whose employees are members 
23of the system required to provide for the payment of 
24supplemental annuities as provided in sections 5708, 5708.1, 
255708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7 and 5708.8 
26shall be paid as part of the accrued liability contribution 
27rate as provided for in subsection (c)(3), and there shall 
28not be a separate supplemental annuity contribution rate 
29attributable to those supplemental annuities. In the event 
30that supplemental annuities are increased by legislation
 

1enacted subsequent to December 31, 2009, and before January 
21, 2014, the additional liability for the increase in 
3benefits shall be funded in equal dollar installments over a 
4period of ten years from the first day of July following the 
5valuation date coincident with or next following the date 
6such legislation is enacted.

7(f) Experience adjustment factor.--

8(1) For each [year] fiscal year ending before July 1, 
92015, after the establishment of the accrued liability
10contribution rate and the supplemental annuity contribution 
11rate for the fiscal year beginning July 1, 2010, any increase
12or decrease in the unfunded accrued liability and any 
13increase or decrease in the liabilities and funding for
14supplemental annuities, due to actual experience differing
15from assumed experience (recognizing all realized and 
16unrealized investment gains and losses over a five-year 
17period), changes in contributions caused by the final 
18contribution rate being different from the actuarially 
19required contribution rate, State employees making shared-
20risk member contributions, changes in actuarial assumptions
21or changes in the terms and conditions of the benefits
22provided by the system by judicial, administrative or other
23processes other than legislation, including, but not limited
24to, reinterpretation of the provisions of this part
25recognized by the actuarial valuations on December 31, 2010, 
26and through December 31, 2013, shall be amortized in equal
27dollar annual contributions over a period of 30 years
28beginning with the July 1 succeeding the actuarial valuation
29determining said increases or decreases.

30* * *

1(h) Temporary application of collared contribution rate.--
2The collared contribution rate for each [year] fiscal year 
3ending on or before June 30, 2015, shall be determined by
4comparing the actuarially required contribution rate calculated
5without regard for costs added by legislation to the prior
6year's final contribution rate. If, for any of the fiscal years
7beginning July 1, 2011, July 1, 2012, [and on or after] July 1,
82013, and July 1, 2014, the actuarially required contribution
9rate calculated without regard for costs added by legislation is
10more than 3%, 3.5% [and 4.5%], 2.25% and 2.75%, respectively, of
11the total compensation of all active members greater than the
12prior year's final contribution rate, then the collared
13contribution rate shall be applied and be equal to the prior
14year's final contribution rate increased by the respective
15percentage above of total compensation of all active members.
16Otherwise, and for all subsequent fiscal years, the collared
17contribution rate shall not be applicable. In no case shall the
18collared contribution rate be less than 4% of total compensation
19of all active members.

20(i) Final contribution rate.--For the fiscal year beginning
21July 1, 2010, the final contribution rate shall be 5% of total
22compensation of all active members. For each subsequent fiscal
23year for which the collared contribution rate is applicable, the
24final contribution rate shall be the collared contribution rate
25plus the costs added by legislation. For all other fiscal years
26ending before July 1, 2015, the final contribution rate shall be
27the actuarially required contribution rate, provided that the
28final contribution rate shall not be less than the employer
29normal contribution rate, as defined in subsection (b).

30Section 327. Title 71 is amended by adding a section to

1read:

2§ 5508.1.  Actuarial cost method for fiscal years beginning on
3or after July 1, 2015.

4(a)  Employer contributions on behalf of members.--For fiscal
5years beginning on or after July 1, 2015, the amount of the
6Commonwealth and other employer contributions on behalf of all
7members shall be computed by the actuary and certified by the
8board as an employer normal contribution rate as provided under
9subsection (b) and the accrued liability contribution amount as
10provided under subsection (c). The accrued liability
11contribution amount shall be modified by the experience
12adjustment factor as calculated in subsection (f).

13(b)  Employer normal contribution rate.--For fiscal years
14beginning on or after July 1, 2015, the employer normal
15contribution rate for all active members of the system shall be
16the employer normal contribution rate that would have been
17applicable if the employer normal contribution rate was
18determined as part of the December 31, 2014, actuarial valuation
19under section 5508(b) (relating to actuarial cost method for
20fiscal years ending before July 1, 2015) without regard to the
21provisions of this section and the inapplicability of the rate
22to a period on or after July 1, 2015.

23(c) Accrued liability contribution amount.--

24(1) For fiscal years beginning on or after July 1, 2015,
25the accrued liability contribution rate shall be computed as
26the rate of total compensation of all active members and
27active participants that shall be determined by the actuary
28as sufficient to fund in equal dollar installments as a
29percentage of compensation of all active members and active
30participants over a period of 30 years from July 1, 2015, the

1present value of the liabilities for all prospective benefits
2of members of the system calculated as of the immediately
3prior valuation date, including the supplemental benefits as
4provided in sections 5708 (relating to supplemental
5annuities), 5708.1 (relating to additional supplemental
6annuities), 5708.2 (relating to further additional
7supplemental annuities), 5708.3 (relating to supplemental
8annuities commencing 1994), 5708.4 (relating to special
9supplemental postretirement adjustment), 5708.5 (relating to
10supplemental annuities commencing 1998), 5708.6 (relating to
11supplemental annuities commencing 2002), 5708.7 (relating to
12supplemental annuities commencing 2003) and 5708.8 (relating
13to special supplemental postretirement adjustment of 2002),
14but excluding the benefits payable from the retirement
15benefit plan established under section 5941 (relating to
16benefits completion plan) in excess of the actuarially
17calculated assets in the fund calculated recognizing the
18realized and unrealized investment gains and losses each year
19in level annual installments over five years, including the
20balance in the supplemental annuity account and the present
21value of employer normal contributions and of member
22contributions payable with respect to all active members,
23inactive members on leave without pay, vestees and special
24vestees on December 31, 2014.

25(2) If the accrued liability is changed by legislation
26enacted subsequent to December 31, 2014, the change in
27liability shall be funded in equal dollar installments as a
28percentage of compensation of all active members and active
29participants over a period of ten years from the first day of
30July following the valuation date coincident with or next

1following the date such legislation is enacted. The accrued
2liability contribution rate shall be determined after each
3actuarial valuation on the basis of an annual interest rate
4and the mortality and other tables adopted by the board in
5accordance with generally accepted actuarial principles.

6(d)  (Reserved).

7(e)  Supplemental annuity contribution amounts.--For fiscal
8years beginning on or after July 1, 2015, contributions from the
9Commonwealth and other employers whose employees are members of
10the system required to provide for the payment of supplemental
11annuities as provided in sections 5708, 5708.1, 5708.2, 5708.3,
125708.4, 5708.5, 5708.6, 5708.7 and 5708.8 shall be paid as part
13of the accrued liability contribution rate as provided for in
14subsection (c), and there shall not be a separate supplemental
15annuity contribution amount attributable to those supplemental
16annuities. In the event that supplemental annuities are
17increased by legislation enacted subsequent to December 31,
182014, the additional liability for the increase in benefits
19shall be funded in equal dollar installments as a percentage of
20compensation of all active members and active participants over
21a period of ten years from the first day of July following the
22valuation date coincident with or next following the date such
23legislation is enacted as part of the accrued liability amount
24and not as a separate supplemental annuity contribution amount.

25(f)  Experience adjustment factor.--

26(1)  For each year after the establishment of the accrued
27liability contribution amount for the fiscal year beginning
28July 1, 2015, any increase or decrease in the unfunded
29accrued liability and any increase or decrease in the
30liabilities and funding for supplemental annuities due to

1actual experience differing from assumed experience,
2recognizing all realized and unrealized investment gains and
3losses over a five-year period, changes in contributions
4caused by the final contribution rate being different from
5the actuarially required contribution rate, State employees
6making shared-risk member contributions, changes in actuarial
7assumptions or changes in the terms and conditions of the
8benefits provided by the system by judicial, administrative
9or other processes other than legislation, including, but not
10limited to, reinterpretation of the provisions of this part,
11shall be amortized in equal dollar installments as a
12percentage of compensation of all active members and active
13participants over a period of 30 years beginning with the
14July 1 succeeding the actuarial valuation determining said
15increases or decreases.

16(2) The actuarially required contribution rate shall be
17the sum of the normal contribution rate determined under
18subsection (b)(2), the accrued liability contribution rate
19and the supplemental annuity contribution rate modified by
20the experience adjustment factor as calculated in paragraph
21(1).

22(g)  Temporary application of collared contribution rate.--
23The collared contribution rate for each fiscal year beginning on 
24or after July 1, 2015, shall be determined by comparing the 
25actuarially required contribution rate calculated without regard 
26for costs added by legislation to the prior year's final 
27contribution rate. If, for fiscal years beginning July 1, 2015, 
28July 1, 2016, July 1, 2017, and on or after July 1, 2018, the 
29actuarially required contribution rate calculated without regard 
30for costs added by legislation is more than 3.25%, 3.75%, 4.25%
 

1and 4.5%, respectively, of the total compensation of all active 
2members greater than the prior year's final contribution rate, 
3then the collared contribution rate shall be applied and be 
4equal to the prior year's final contribution rate increased by 
5the respective percentage above of total compensation of all 
6active members. Otherwise and for all subsequent fiscal years, 
7the collared contribution rate shall not apply. The collared 
8contribution rate may not be less than 4% of total compensation 
9of all active members.

10(h)  Final contribution rate.--For the fiscal year beginning
11July 1, 2015, if the collared contribution rate is applicable,
12the final contribution rate shall be the collared contribution
13rate plus the costs added by legislation. For each subsequent
14fiscal year for which the collared contribution rate is
15applicable, the final contribution rate shall be the collared
16contribution rate plus the costs added by legislation. For all
17other fiscal years beginning on or after July 1, 2015, the final
18contribution rate shall be the actuarially required contribution
19rate provided the final contribution rate is not less than the
20employer normal contribution rate as provided under subsection
21(b).

22Section 328. Section 5509 of Title 71, amended October 24, 
232012 (P.L.1436, No.181), is amended to read:

24§ 5509. Appropriations and assessments by the Commonwealth.

25(a) Annual submission of budget.--The board shall prepare
26and submit annually an itemized budget consisting of the amounts
27necessary to be appropriated by the Commonwealth out of the
28General Fund and special operating funds and the amounts to be
29assessed the other employers required to meet the separate
30obligations to the fund and the trust accruing during the fiscal

1period beginning the first day of July of the following year.

2(b) Appropriation and payment.--The General Assembly shall
3make an appropriation sufficient to provide for the separate
4obligations of the Commonwealth to the fund and the trust. Such
5amount shall be paid by the State Treasurer through the
6Department of Revenue into the fund or trust, as the case may 
7be, in accordance with requisitions presented by the board. The
8contributions to the system by the Commonwealth on behalf of
9active members who are officers of the Pennsylvania State Police
10shall be charged to the General Fund and to the Motor License
11Fund in the same ratios as used to apportion the appropriations
12for salaries of members of the Pennsylvania State Police. The
13contributions to the system by the Commonwealth on behalf of
14active members who are enforcement officers and investigators of
15the Pennsylvania Liquor Control Board shall be charged to the
16General Fund and to the State Stores Fund.

17(c) Contributions from funds other than General Fund.--The 
18amounts assessed other employers who are required to make the 
19necessary separate contributions to the fund and the trust out 
20of funds other than the General Fund shall be paid by such 
21employers into the fund or trust, as the case may be, in 
22accordance with requisitions presented by the board. The General 
23Fund of the Commonwealth shall not be held liable to appropriate 
24the moneys required to build up the reserves in the fund 
25necessary for the payment of benefits from the system to 
26employees or to make the employer defined contributions for 
27employees of such other employers. In case any such other 
28employer shall fail to provide to the fund the moneys necessary 
29for such purpose, then the service of such members of the system 
30for such period for which money is not so provided shall be
 

1credited and pickup contributions with respect to such members 
2shall continue to be credited to the members' savings account. 
3The annuity to which such member is entitled shall be determined 
4as actuarially equivalent to the present value of the maximum 
5single life annuity of each such member reduced by the amount of 
6employer contributions to the system payable on account and 
7attributable to his compensation during such service, except 
8that no reduction shall be made as a result of the failure of an 
9employer to make contributions required for a period of USERRA 
10leave.

11Section 329. Sections 5701 and 5701.1 of Title 71 are
12amended to read:

13§ 5701. Return of total accumulated deductions.

14Any member upon termination of service may, in lieu of all
15benefits payable from the system under this chapter to which he
16may be entitled, elect to receive his total accumulated
17deductions.

18§ 5701.1. Transfer of accumulated deductions.

19When an employee of the Juvenile Court Judges' Commission
20elects membership in an independent retirement program pursuant
21to section 5301(f) (relating to mandatory and optional
22membership in the system and participation in the plan), the
23board shall transfer directly to the trustee or administrator of
24the independent retirement program all accumulated deductions
25resulting from service credited while an employee of the
26Juvenile Court Judges' Commission.

27Section 330. Sections 5702(a)(1) and (6), 5704(a), (c) and
28(f) and 5705(a) of Title 71 are amended and the sections are
29amended by adding subsections to read:

30§ 5702. Maximum single life annuity.

1(a) General rule.--Any full coverage member who is eligible
2to receive an annuity pursuant to the provisions of section
35308(a) or (b) (relating to eligibility for annuities) who
4terminates State service, or if a multiple service member who is
5a school employee who is an active member of the Public School
6Employees' Retirement System who terminates school service,
7before attaining age 70 shall be entitled to receive a maximum
8single life annuity attributable to his credited service and
9equal to the sum of the following single life annuities
10beginning at the effective date of retirement:

11(1) A single life annuity that is the sum of the
12standard single life [annuity multiplied by the sum of the
13products,] annuities determined separately for each class
14and subclass of service[, obtained by multiplying] multiplied 
15by the appropriate class of service multiplier [by the ratio
16of years of service credited in that class to the total
17credited service] applicable to each standard single life 
18annuity. In case the member on the effective date of
19retirement is under superannuation age for any service, a
20reduction factor calculated to provide benefits actuarially
21equivalent to an annuity starting at superannuation age shall
22be applied to the product determined for that service. The
23class of service multiplier for any period of concurrent
24service shall be multiplied by the proportion of total State
25and school compensation during such period attributable to
26State service as a member of the system. [In the event a
27member has two multipliers for one class of service the class
28of service multiplier to be used for calculating benefits for
29that class shall be the average of the two multipliers
30weighted by the proportion of compensation attributable to

1each multiplier during the three years of highest annual
2compensation in that class of service: Provided, That in the
3case of a member of Class E-1, a portion but not all of whose
4three years of highest annual judicial compensation is prior
5to January 1, 1973, two class of service multipliers shall be
6calculated on the basis of his entire judicial service, the
7one applying the judicial class of service multipliers
8effective prior to January 1, 1973 and the second applying
9the class of service multipliers effective subsequent to
10January 1, 1973. The average class of service multiplier to
11be used for calculating benefits for his judicial service
12shall be the average of the two calculated multipliers
13weighted by the proportion of compensation attributable to
14each of the calculated multipliers during the three years of
15highest annual compensation in that class of service.]

16* * *

17(6) If eligible, a single life annuity sufficient
18together with the annuity provided for in paragraph (1) as a
19Class A, Class AA, Class A-3 and Class A-4 member and the
20highest annuity provided for in paragraph (2) to which he is
21entitled, or at his option could have been entitled, to
22produce that percentage of [a] the sums of the standard
23single life [annuity] annuities adjusted by the application 
24of the class of service multiplier for Class A, Class AA, 
25Class A-3 or Class A-4 as set forth in paragraph (1) in the 
26case where any service is credited as a member of Class A, 
27Class AA, Class A-3 or Class A-4 on the effective date of
28retirement as determined by his total years of credited
29service as a member of Class A, Class AA, Class A-3 and Class 
30A-4 and by the following table:

1Total Years of

2Credited Service

3as a Member of

4Class A,

5Class AA, Class A-3

6and Class A-4

7

8

Percentage of sums of

Standard

Single Life

[Annuity] Annuities Adjusted for

Class A, Class AA,

Class A-3 and Class A-4

Class of

Service Multipliers

935-40

100%

1041

102%

1142

104%

1243

106%

1344

108%

1445 or more

110%

15* * *

16(e) Coordination of benefits.--The determination and payment
17of the maximum single life annuity under this section shall be
18in addition to any payments a combined service employee may be
19entitled to receive, has received or is receiving as a result of
20being a participant in the plan.

21§ 5704. Disability annuities.

22(a) Amount of annuity.--A member who has made application
23for a disability annuity and has been found to be eligible in
24accordance with the provisions of section 5905(c)(1) (relating
25to duties of the board regarding applications and elections of
26members) shall receive a disability annuity payable from the
27effective date of disability as determined by the board and
28continued until a subsequent determination by the board that the
29annuitant is no longer entitled to a disability annuity. The
30disability annuity shall be a single life annuity that is equal

1to [a] the sum of the standard single life [annuity] annuities 
2determined separately for each class and subclass of service
3multiplied by the appropriate class of service multiplier
4applicable to [the class of service] each standard single life 
5annuity at the time of disability if the [product of] sums of 
6the products of each such class of service multiplier and the
7[total] number of years and fractional part of a year of
8credited service in each class and subclass is greater than
916.667, otherwise [the] each standard single life annuity shall
10be multiplied by the lesser of the following ratios:

11MY*/Y or 16.667/Y

12where Y = total number of years of credited service, Y* = total
13years of credited service if the member were to continue as a
14State employee until attaining superannuation age as applicable
15at the time of disability, or if the member has attained
16superannuation age, as applicable at the time of disability,
17then the number of years of credited service and M = the class
18of service multiplier as applicable to that class or subclass of 
19service at the effective date of disability. A member of Class C
20shall receive, in addition, any annuity to which he may be
21eligible under section 5702(a)(3) (relating to maximum single
22life annuity). The member shall be entitled to the election of a
23joint and survivor annuity on that portion of the disability
24annuity to which he is entitled under section 5702.

25* * *

26(c) Reduction on account of earned income.--Subsequent to
27January 1, 1972, payments on account of disability shall be
28reduced by that amount by which the earned income of the
29annuitant, as reported in accordance with section 5908(b)
30(relating to rights and duties of annuitants), for the preceding

1calendar year together with the disability annuity payments
2provided in this section other than subsection (b), for the
3year, exceeds the product of:

4[(i)] (1) the last year's salary of the annuitant as a
5[State employee] member of the system; and

6[(ii)] (2) the ratio of the current monthly payment to
7the monthly payment at the effective date of disability;

8Provided, That the annuitant shall not receive less than his
9member's annuity or the amount to which he may be entitled under
10section 5702 whichever is greater.

11* * *

12(f) Supplement for service connected disability.--

13(1) If a member has been found to be eligible for a
14disability annuity and if the disability has been found to be
15a service connected disability and if the member is receiving
16workers' compensation payments for other than medical
17benefits, such member shall receive a supplement equal to
18[70% of his final average salary] the amount determined under 
19paragraph (2) less the sum of the annuity as determined under
20subsection (a) and any payments paid or payable on account of
21such disability under the act of June 2, 1915 (P.L.736, 
22No.338), known as the Workers' Compensation Act, the act of
23June 21, 1939 (P.L.566, No.284), known as The Pennsylvania
24Occupational Disease Act, and the Social Security Act (49 
25Stat. 620, 42 U.S.C. § 301 et seq.). Such supplement shall
26continue as long as he is determined to be disabled and is
27receiving workers' compensation payments for other than
28medical benefits on account of his service connected
29disability in accordance with the Workers' Compensation Act
30or The Pennsylvania Occupational Disease Act. If the member

1has received a lump sum workers' compensation payment in lieu
2of future weekly compensation payments, the length in weeks
3and calculation of the service connected disability
4supplement shall be determined by dividing the lump sum
5payment by the average weekly wage as determined by the
6Workers' Compensation Board.

7(2)  For a member who does not have Subclass X, Subclass
8Y or Subclass Z service, the amount to be used to determine
9eligibility for the supplement under paragraph (1) shall be
1070% of his final average salary. For a member who has
11Subclass X, Subclass Y or Subclass Z service, the amount to
12be used to determine eligibility for the supplement under
13paragraph (1) shall be calculated according to the following
14formula: 

15A = .7[( YW  multiplied by FASW)+(YXYZ  multiplied by FASXYZ)]
16 YTYT

17(3) The following apply to the formula in paragraph (2):

18(i) A equals the amount used to determine the
19supplement;

20(ii) YT equals total years of credited service;

21(iii) YW equals years of service credited in classes
22or subclasses of service other than Subclass X, Subclass
23Y or Subclass Z;

24(iv) FASW equals final average salary calculated for
25classes or subclasses of service other than Subclass X,
26Subclass Y or Subclass Z;

27(v) YXYZ equals years of service credited in Subclass
28X, Subclass Y and Subclass Z; and

29(vi) FASXYZ equals final average salary calculated 
30for service credited in Subclass X, Subclass Y and
 

1Subclass Z.

2* * *

3(h)  Coordination of benefits.--The determination and payment
4of a disability annuity under this section is in addition to any
5payments a combined service employee may be entitled to receive,
6has received or is receiving as a result of being a participant
7in the plan.

8§ 5705. Member's options.

9(a) General rule.--Any special vestee who has attained
10superannuation age, any vestee who does not have Class A-3 or 
11Class A-4 service credit having five or more eligibility points
12for service other than Class T-E or Class T-F service in the 
13Public School Employees' Retirement System, or vestee who has 
14Class A-3 or Class A-4 service credit having ten or more 
15eligibility points, any member with Class G, Class H, Class I,
16Class J, Class K, Class L, Class M or Class N service having
17five or more eligibility points or any other eligible member
18upon termination of State service who has not withdrawn his
19total accumulated deductions as provided in section 5701
20(relating to return of total accumulated deductions) may apply
21for and elect to receive either a maximum single life annuity,
22as calculated in accordance with the provisions of section 5702
23(relating to maximum single life annuity), or a reduced annuity
24certified by the actuary to be actuarially equivalent to the
25maximum single life annuity payable after reduction under 
26subsection (a.1) and in accordance with one of the following
27options; except that no member shall elect an annuity payable to
28one or more survivor annuitants other than his spouse or
29alternate payee of such a magnitude that the present value of
30the annuity payable to him for life plus any lump sum payment

1under this subsection and subsection (a.1) he may have elected
2to receive is less than 50% of the present value of his maximum
3single life annuity before reduction under subsection (a.1):

4(1) Option 1.--A life annuity to the member with a
5guaranteed total payment equal to the present value of the
6maximum single life annuity on the effective date of
7retirement with the provision that, if, at his death, he has
8received less than such present value, the unpaid balance
9shall be payable to his beneficiary.

10(2) Option 2.--A joint and survivor annuity payable
11during the lifetime of the member with the full amount of
12such annuity payable thereafter to his survivor annuitant, if
13living at his death.

14(3) Option 3.--A joint and fifty percent (50%) survivor
15annuity payable during the lifetime of the member with one-
16half of such annuity payable thereafter to his survivor
17annuitant, if living at his death.

18(4) Option 4.--Some other benefit which shall be
19certified by the actuary to be actuarially equivalent to the
20maximum single life annuity, subject to the following
21restrictions:

22(i) any annuity shall be payable without reduction
23during the lifetime of the member;

24(ii) the sum of all annuities payable to the
25designated survivor annuitants shall not be greater than
26one and one-half times the annuity payable to the member;
27and

28(iii) a portion of the benefit may be payable as a
29lump sum, except that such lump sum payment shall not
30exceed an amount equal to the total accumulated

1deductions standing to the credit of the member that are 
2not the result of contributions and statutory interest 
3made or credited as a result of Class A-3 or Class A-4 
4service. The balance of the present value of the maximum
5single life annuity adjusted in accordance with section
65702(b) shall be paid in the form of an annuity with a
7guaranteed total payment, a single life annuity, or a
8joint and survivor annuity or any combination thereof but
9subject to the restrictions of subparagraphs (i) and (ii)
10under this option. If a member's effective date of 
11retirement is on or after January 1, 2015, then the 
12portion of the benefit payable under this subparagraph is 
13further limited to the total accumulated deductions 
14standing to the credit of the member on December 31, 
152014, that are not the result of contributions and 
16statutory interest made or credited as a result of Class 
17A-3 or Class A-4 service, plus any statutory interest 
18credited on those accumulated deductions before the 
19effective date of retirement.

20(a.1) Additional lump sum withdrawal.--The following shall
21apply:

22(1) On or after January 1, 2015, if a member has elected
23to have the full amount allowed under subsection (a)(4)(iii)
24paid in lump sum, then the member may elect to receive an
25additional amount payable in a lump sum at the same time as
26the payment elected under subsection (a)(4)(iii).

27(2) The additional amount payable in a lump sum may not
28exceed an amount equal to the excess of the total accumulated
29deductions standing to the credit of the member on the
30effective date of retirement that are not the result of

1contributions and statutory interest made or credited as a
2result of Class A-3 or Class A-4 service over the amount
3payable under subsection (a)(4)(iii).

4(3) If a member elects to be paid an additional lump sum
5amount under this subsection, then the maximum single life
6annuity calculated under section 5702 and payable under
7subsection (a) shall be reduced by the additional amount
8withdrawn divided by the cost of a dollar annuity on the
9effective date of retirement computed on the basis of the
10annual interest rate adopted for that fiscal year by the
11board for the calculation of the accrued liability
12contribution rate under section 5508.1(c) (relating to
13actuarial cost method for fiscal years beginning on or after
14July 1, 2015) and the mortality tables adopted by the board
15for the determination of actuarially equivalent benefits
16under this part. The reduction in the maximum single life
17annuity under this subsection shall apply before the election
18and calculation of any reduced annuities payable under
19subsection (a).

20* * *

21Section 331. Section 5706(a), (a.1), (a.2), (b) and (c)(1)
22and (3) of Title 71 are amended to read:

23§ 5706. Termination of annuities.

24(a) General rule.--If the annuitant returns to State service
25or enters or has entered school service and elects multiple
26service membership, any annuity payable to him under this part
27shall cease effective upon the date of his return to State
28service or entering school service without regard to whether he 
29is a mandatory, optional or prohibited member of the system or 
30participant in the plan or, if a multiple service member,
 

1without regard to whether he is a mandatory, optional or 
2prohibited member or participant of the Public School Employees' 
3Retirement System or School Employees' Defined Contribution Plan
4and in the case of an annuity other than a disability annuity
5the present value of such annuity, adjusted for full coverage in
6the case of a joint coverage member who makes the appropriate
7back contributions for full coverage, shall be frozen as of the
8date such annuity ceases. An annuitant who is credited with an
9additional 10% of Class A and Class C service as provided in
10section 5302(c) (relating to credited State service) and who
11returns to State service shall forfeit such credited service and
12shall have his frozen present value adjusted as if his 10%
13retirement incentive had not been applied to his account. In the
14event that the cost-of-living increase enacted December 18, 1979
15occurred during the period of such State or school employment,
16the frozen present value shall be increased, on or after the
17member attains superannuation age, by the percent applicable had
18he not returned to service. This subsection shall not apply in
19the case of any annuitant who may render services to the
20Commonwealth in the capacity of an independent contractor or as
21a member of an independent board or commission or as a member of
22a departmental administrative or advisory board or commission
23when such members of independent or departmental boards or
24commissions are compensated on a per diem basis for not more
25than 150 days per calendar year or as a member of an independent
26board or commission requiring appointment by the Governor, with
27advice and consent of the Senate, where the annual salary
28payable to the member does not exceed $35,000 and where the
29member has been an annuitant for at least six months immediately
30preceding the appointment. Such service shall not be subject to

1member contributions or be eligible for qualification as
2creditable State service or for participation in the plan, 
3mandatory pickup participant contributions or employer defined 
4contributions.

5(a.1) Return to State service during emergency.--When, in
6the judgment of the employer, an emergency creates an increase
7in the work load such that there is serious impairment of
8service to the public, an annuitant may be returned to State
9service for a period not to exceed 95 days in any calendar year
10without loss of his annuity. In computing the number of days an
11annuitant has returned to State service, any amount of time less
12than one-half of a day shall be counted as one-half of a day.
13For agencies, boards and commissions under the Governor's
14jurisdiction, the approval of the Governor that an emergency
15exists shall be required before an annuitant may be returned to
16State service. This service shall not be subject to member 
17contributions or be eligible for qualification as creditable 
18State service or for participation in the plan, mandatory pickup 
19participant contributions or employer defined contributions.

20(a.2) Return of benefits.--In the event an annuitant whose
21annuity ceases pursuant to this section receives any annuity
22payment, including a lump sum payment pursuant to section 5705
23(relating to member's options) on or after the date of his
24return to State service or entering school service, the
25annuitant shall return to the board the amount so received plus
26statutory interest. The amount payable shall be certified in
27each case by the board in accordance with methods approved by
28the actuary and shall be paid in a lump sum within 30 days or in
29the case of an active member or school employee who is an active
30member of the Public School Employees' Retirement System may be

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

14* * *

15(b) Subsequent discontinuance of service.--Upon subsequent
16discontinuance of service, such [member] terminating State 
17employee other than a former annuitant who had the effect of his
18frozen present value eliminated in accordance with subsection
19(c) or a former disability annuitant shall be entitled to an
20annuity which is actuarially equivalent to [the sum of] the
21present value as determined under subsection (a) [and] to which 
22shall be added, if the service after reemployment was as a 
23member of the system, the present value of a maximum single life
24annuity based on years of service credited subsequent to reentry
25in the system and his final average salary computed by reference
26to his compensation as a member of the system or as a member of 
27the Public School Employees' Retirement System during his entire
28period of State and school service.

29(c) Elimination of the effect of frozen present value.--

30(1) An annuitant who returns to State service as an
 

1active member of the system and earns three eligibility
2points by performing credited State service following the
3most recent period of receipt of an annuity under this part,
4or an annuitant who enters school service other than as a 
5participant in the School Employees' Defined Contribution 
6Plan and:

7(i) is a multiple service member; or

8(ii) who elects multiple service membership, and

9earns three eligibility points by performing credited State
10service or credited school service following the most recent
11period of receipt of an annuity under this part, and who had
12the present value of his annuity frozen in accordance with
13subsection (a), shall qualify to have the effect of the
14frozen present value resulting from all previous periods of
15retirement eliminated, provided that all payments under
16Option 4 and annuity payments payable during previous periods
17of retirement plus interest as set forth in paragraph (3)
18shall be returned to the fund in the form of an actuarial
19adjustment to his subsequent benefits or in such form as the
20board may otherwise direct.

21* * *

22(3) In addition to any other adjustment to the present
23value of the maximum single life annuity that a member may be
24entitled to receive that occurs as a result of any other
25provision of law, the present value of the maximum single
26life annuity shall be reduced by all amounts paid or payable
27to him during all previous periods of retirement plus
28interest on these amounts until the date of subsequent
29retirement. The interest for each year shall be calculated
30based upon the annual interest rate adopted for that fiscal

1year by the board for the calculation of the normal
2contribution rate pursuant to section 5508(b) (relating to
3actuarial cost [method).] method for fiscal years ending 
4before July 1, 2015) or for the calculation of the accrued 
5liability contribution rate under section 5508.1(c) (relating 
6to actuarial cost method for fiscal years beginning on or 
7after July 1, 2015) for fiscal years beginning on or after 
8July 1, 2015.

9Section 332. Section 5707(a), (b) and (f) of Title 71,
10amended October 24, 2012 (P.L.1436, No.181), are amended to
11read:

12§ 5707. Death benefits.

13(a) Members eligible for annuities.--Any active member,
14inactive member on leave without pay, combined service employee 
15who is an active participant or inactive participant on leave 
16without pay, vestee or current or former State employee 
17performing USERRA leave who dies and was eligible for an annuity
18in accordance with section 5308(a) or (b) (relating to
19eligibility for annuities) or special vestee who has attained
20superannuation age and dies before applying for a superannuation
21annuity shall be considered as having applied for an annuity to
22become effective the day before his death and in the event he
23has not elected an option or such election has not been approved
24prior to his death, it shall be assumed that he elected Option
251.

26(b) Members ineligible for annuities.--In the event of the
27death of a special vestee, an active member, an inactive member
28on leave without pay, combined service employee who is an active 
29participant or inactive participant on leave without pay or a 
30current or former State employee performing USERRA leave who is

1not entitled to a death benefit as provided in subsection (a),
2his designated beneficiary shall be paid the full amount of his
3total accumulated deductions.

4* * *

5(f) Members subject to limitations under section 5702(c).--
6Subject to the limitations contained in section 401(a)(9) of the
7Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
8401(a)(9)), the present value of any annuity in excess of that
9payable under section 5702 (relating to maximum single life
10annuity) that is not subject to the limitations under section
11415(b) of the Internal Revenue Code of 1986 shall be paid in a
12lump sum to the beneficiary designated by the member after the
13death of the member. A beneficiary receiving a benefit under
14this subsection shall not be able to elect a payment method
15otherwise allowed under section 5709(b)(2) and (3) (relating to
16payment of benefits from the system).

17Section 333. Sections 5708.1(f), 5708.2(f), 5708.3(f),
185708.5(f), 5708.6(f), 5708.7(f), 5708.8(g), 5709(a) and (b) and
195901(a), (c) and (d) of Title 71 are amended to read:

20§ 5708.1. Additional supplemental annuities.

21* * *

22(f) Funding.--The actuary shall annually certify the amount
23of appropriations for the next fiscal year needed to fund, over
24a period of ten years from July 1, 2002, the additional monthly
25supplemental annuity provided for in this section, which amounts 
26shall be paid during the period beginning July 1, 2002, and 
27ending June 30, 2010. For fiscal years beginning on or after 
28July 1, 2010, the additional liability provided in this section 
29shall be funded as part of the actuarial accrued liability as 
30provided in [section 5508 (relating to actuarial cost method).]

1sections 5508 (relating to actuarial cost method for fiscal 
2years ending before July 1, 2015) and 5508.1 (relating to 
3actuarial cost method for fiscal years beginning on or after 
4July 1, 2015).

5* * *

6§ 5708.2. Further additional supplemental annuities.

7* * *

8(f) Funding.--The actuary shall annually estimate the amount
9of Commonwealth appropriations for the next fiscal year needed
10to fund, over a period of ten years from July 1, 2002, the
11additional monthly supplemental annuity provided for in this
12section, which amounts shall be paid during the period beginning 
13July 1, 2002, and ending June 30, 2010. For fiscal years 
14beginning on or after July 1, 2010, the additional liability 
15provided in this section shall be funded as part of the 
16actuarial accrued liability as provided in [section 5508 
17(relating to actuarial cost method).] sections 5508 (relating to 
18actuarial cost method for fiscal years ending before July 1, 
192015) and 5508.1 (relating to actuarial cost method for fiscal 
20years beginning on or after July 1, 2015).

21* * *

22§ 5708.3. Supplemental annuities commencing 1994.

23* * *

24(f) Funding.--For the period beginning July 1, 2002, and 
25ending June 30, 2010, the additional liability for the increase
26in benefits provided in this section shall be funded in equal
27dollar annual installments over a period of ten years beginning
28July 1, 2002. For fiscal years beginning on or after July 1, 
292010, the additional liability for the increase in benefits 
30provided in this section shall be funded as part of the
 

1actuarial accrued liability as provided in [section 5508 
2(relating to actuarial cost method).] sections 5508 (relating to 
3actuarial cost method for fiscal years ending before July 1, 
42015) and 5508.1 (relating to actuarial cost method for fiscal 
5years beginning on or after July 1, 2015).

6* * *

7§ 5708.5. Supplemental annuities commencing 1998.

8* * *

9(f) Funding.--For the period beginning July 1, 2002, and 
10ending June 30, 2010, the additional liability for the increase
11in benefits provided in this section shall be funded in equal
12dollar annual installments over a period of ten years beginning
13July 1, 2002. For fiscal years beginning on or after July 1, 
142010, the additional liability for the increase in benefits 
15provided in this section shall be funded as part of the 
16actuarial accrued liability as provided in [section 5508 
17(relating to actuarial cost method).] sections 5508 (relating to 
18actuarial cost method for fiscal years ending before July 1, 
192015) and 5508.1 (relating to actuarial cost method for fiscal 
20years beginning on or after July 1, 2015).

21* * *

22§ 5708.6. Supplemental annuities commencing 2002.

23* * *

24(f) Funding.--For the period beginning July 1, 2003, and 
25ending June 30, 2010, the additional liability for the increase
26in benefits provided in this section shall be funded in equal
27dollar annual installments over a period of ten years beginning
28July 1, 2003. For fiscal years beginning on or after July 1, 
292010, the additional liability for the increase in benefits 
30provided in this section shall be funded as part of the
 

1actuarial accrued liability as provided in [section 5508 
2(relating to actuarial cost method).] sections 5508 (relating to 
3actuarial cost method for fiscal years ending before July 1, 
42015) and 5508.1 (relating to actuarial cost method for fiscal 
5years beginning on or after July 1, 2015).

6* * *

7§ 5708.7. Supplemental annuities commencing 2003.

8* * *

9(f) Funding.--For the period beginning July 1, 2004, and 
10ending June 30, 2010, the additional liability for the increase
11in benefits provided in this section shall be funded in equal
12dollar annual installments over a period of ten years beginning
13July 1, 2004. For fiscal years beginning on or after July 1, 
142010, the additional liability for the increase in benefits 
15provided in this section shall be funded as part of the 
16actuarial accrued liability as provided in [section 5508 
17(relating to actuarial cost method).] sections 5508 (relating to 
18actuarial cost method for fiscal years ending before July 1, 
192015) and 5508.1 (relating to actuarial cost method for fiscal 
20years beginning on or after July 1, 2015).

21* * *

22§ 5708.8. Special supplemental postretirement adjustment of
232002.

24* * *

25(g) Funding.--For the period beginning July 1, 2003, and 
26ending June 30, 2010, the additional liability for the increase
27in benefits provided in this section shall be funded in equal
28dollar annual installments over a period of ten years beginning
29July 1, 2003. For fiscal years beginning on or after July 1, 
302010, the additional liability for the increase in benefits
 

1provided in this section shall be funded as part of the 
2actuarial accrued liability as provided in [section 5508 
3(relating to actuarial cost method).] sections 5508 (relating to 
4actuarial cost method for fiscal years ending before July 1, 
52015) and 5508.1 (relating to actuarial cost method for fiscal 
6years beginning on or after July 1, 2015).

7* * *

8§ 5709. Payment of benefits from the system.

9(a) Annuities.--Any annuity granted under the provisions of
10this part and paid from the fund shall be paid in equal monthly
11installments.

12(b) Death benefits.--If the amount of a death benefit
13payable from the fund to a beneficiary of a member under section
145707 (relating to death benefits) or under the provisions of
15Option 1 of section 5705(a)(1) (relating to member's options) is
16$10,000 or more, such beneficiary may elect to receive payment
17according to one of the following options:

18(1) a lump sum payment;

19(2) an annuity actuarially equivalent to the amount
20payable; or

21(3) a lump sum payment and an annuity such that the
22annuity is actuarially equivalent to the amount payable less
23the lump sum payment specified by the beneficiary.

24* * *

25§ 5901. The State Employees' Retirement Board.

26(a) Status and membership.--The board shall be an
27independent administrative board and consist of 11 members: the
28State Treasurer, ex officio, two Senators, two members of the
29House of Representatives and six members appointed by the
30Governor, one of whom shall be an annuitant of the system or a
 

1participant in the plan who has terminated State service and is 
2receiving or is eligible to receive distributions, for terms of
3four years, subject to confirmation by the Senate. At least five
4board members shall be active members of the system or active 
5participants in the plan, and at least two shall have ten or
6more years of credited State service or shall have been active 
7participants in the plan for ten calendar years. The chairman of
8the board shall be designated by the Governor from among the
9members of the board. Each member of the board who is a member
10of the General Assembly may appoint a duly authorized designee
11to act in his stead. In the event that a board member, who is 
12designated as an active participant or as a participant in the 
13plan who is receiving or is eligible to receive distributions, 
14receives a total distribution of his interest in the plan, that 
15board member may continue to serve on the board for the 
16remainder of his term.

17* * *

18(c) Oath of office.--Each member of the board shall take an
19oath of office that he will, so far as it devolves upon him,
20diligently and honestly, administer the affairs of said board, 
21the system and the plan and that he will not knowingly violate
22or willfully permit to be violated any of the provisions of law
23applicable to this part. Such oath shall be subscribed by the
24member taking it and certified by the officer before whom it is
25taken and shall be immediately filed in the Office of the
26Secretary of the Commonwealth.

27(d) Compensation and expenses.--The members of the board who
28are members of the system or participants in the plan shall
29serve without compensation but shall not suffer loss of salary
30or wages through serving on the board. The members of the board

1who are not members of the system or participants in the plan 
2shall receive $100 per day when attending meetings and all board
3members shall be reimbursed for any necessary expenses. However,
4when the duties of the board as mandated are not executed, no
5compensation or reimbursement for expenses of board members
6shall be paid or payable during the period in which such duties
7are not executed.

8* * *

9Section 334. Section 5902(a.1) introductory paragraph, (3),
10(5) and (6), (b), (c), (e), (h), (i), (j), (k), (l), (m) and (n)
11of Title 71, amended October 24, 2012 (P.L.1436, No.181), are
12amended and the section is amended by adding a subsection to
13read:

14§ 5902. Administrative duties of the board.

15* * *

16(a.1) Secretary.--The secretary shall act as chief
17administrative officer for the board with respect to both the 
18system and the plan. In addition to other powers and duties
19conferred upon and delegated to the secretary by the board, the
20secretary shall:

21* * *

22(3) Review and analyze proposed legislation and
23legislative developments affecting the system or the plan and
24present findings to the board, legislative committees, and
25other interested groups or individuals.

26* * *

27(5) Receive inquiries and requests for information
28concerning the system or the plan from the press,
29Commonwealth officials, State employees, the general public,
30research organizations, and officials and organizations from

1other states, and provide information as authorized by the
2board.

3(6) Supervise a staff of administrative, technical, and
4clerical employees engaged in record-keeping and clerical
5processing activities for both the system and the plan in
6maintaining files of members and participants, accounting for
7contributions, processing payments to annuitants and 
8terminated participants, preparing required reports, and
9retirement counseling. The board may utilize the staff of 
10employees provided for under this paragraph for both the 
11system and the plan but shall allocate the fees, costs and 
12expenses incurred under this paragraph between the system and 
13the plan as appropriate.

14(b) Professional personnel.--The board shall contract for
15the services of a chief medical examiner, an actuary, investment
16advisors and counselors, and such other professional personnel
17as it deems advisable. The board may, with the approval of the
18Attorney General, contract for legal services. The board may 
19utilize the same individuals and firms contracted under this 
20subsection for both the system and the plan but shall allocate 
21the fees, costs and expenses incurred under this subsection 
22between the system and the plan as appropriate.

23(c) Expenses.--

24(1) The board shall, through the Governor, submit to the
25General Assembly annually a budget covering the
26administrative expenses of [this part.] the system and a 
27separate budget covering the administrative expenses of the 
28plan which budgets shall include those expenses necessary to 
29establish the plan and trust.

30(2) Such expenses of the system as approved by the

1General Assembly in an appropriation bill shall be paid from
2investment earnings of the fund.

3(3) For fiscal years ending on or before June 30, 2015,
4such expenses of the plan as approved by the General Assembly
5in an appropriation bill shall be paid from the General Fund.
6For fiscal years beginning on or after July 1, 2015, such
7expenses of the plan as approved by the General Assembly
8shall be paid from interest, pursuant to section 5414(b)
9(relating to investments based on participants' investment
10allocation choices), or assessments on the balances of the
11participants' individual investment accounts.

12(4) Concurrently with its administrative budget, the
13board shall also submit to the General Assembly annually a
14list of proposed expenditures which the board intends to pay
15through the use of directed commissions, together with a list
16of the actual expenditures from the past year actually paid
17by the board through the use of directed commissions. All
18such directed commission expenditures shall be made by the
19board for the exclusive benefit of the system and its
20members.

21* * *

22(e) Records.--

23(1) The board shall keep a record of all its proceedings
24which shall be open to [inspection] access by the public,
25except as otherwise provided in this part or by other law.

26(2) Any record, material or data received, prepared,
27used or retained by the board or its employees, investment
28professionals or agents relating to an investment shall not
29constitute a public record subject to public [inspection] 
30access under the act of [June 21, 1957 (P.L.390, No.212),

1referred to as the Right-to-Know Law,] February 14, 2008 
2(P.L.6, No.3), known as the Right-to-Know Law, if, in the
3reasonable judgment of the board, the [inspection] access
4would:

5(i) in the case of an alternative investment or
6alternative investment vehicle, involve the release of
7sensitive investment or financial information relating to
8the alternative investment or alternative investment
9vehicle which the fund or trust was able to obtain only
10upon agreeing to maintain its confidentiality;

11(ii) cause substantial competitive harm to the
12person from whom sensitive investment or financial
13information relating to the investment was received; or

14(iii) have a substantial detrimental impact on the
15value of an investment to be acquired, held or disposed
16of by the fund or trust or would cause a breach of the
17standard of care or fiduciary duty set forth in this
18part.

19(3) (i) The sensitive investment or financial
20information excluded from [inspection] access under
21paragraph (2)(i), to the extent not otherwise excluded
22from [inspection] access, shall constitute a public
23record subject to public [inspection] access under the
24Right-to-Know Law once the board is no longer required by
25its agreement to maintain confidentiality.

26(ii) The sensitive investment or financial
27information excluded from [inspection] access under
28paragraph (2)(ii), to the extent not otherwise excluded
29from [inspection] access, shall constitute a public
30record subject to public [inspection] access under the

1Right-to-Know Law once:

2(A) the [inspection] access no longer causes
3substantial competitive harm to the person from whom
4the information was received; or

5(B) the entity in which the investment was made
6is liquidated;

7whichever is later.

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

14(A) the [inspection] access no longer has a
15substantial detrimental impact on the value of an
16investment of the fund or trust and would not cause a
17breach of the standard of care or fiduciary duty set
18forth in this part; or

19(B) the entity in which the investment was made
20is liquidated;

21whichever is later.

22(4) Except for the provisions of paragraph (3), nothing
23in this subsection shall be construed to designate any
24record, material or data received, prepared, used or retained
25by the board or its employees, investment professionals or
26agents relating to an investment as a public record subject
27to public [inspection] access under the Right-to-Know Law.

28(5)  Any record, material or data received, prepared,
29used or retained by the board or its employees, or agents
30relating to the contributions, account value or benefits

1payable to or on account of a participant shall not
2constitute a public record subject to public access under the
3Right-to-Know Law if, in the reasonable judgment of the
4board, the access would disclose any of the following:

5(i)  The existence, date, amount and any other
6information pertaining to the voluntary contributions,
7including rollover contributions or trustee-to-trustee
8transfers, of any participant.

9(ii)  The investment options selections of any
10participant.

11(iii)  The balance of a participant's individual
12investment account, including the amount distributed to
13the participant, investment gains or losses or rates of
14return.

15(iv)  The identity of a participant's designated
16beneficiary, successor payee or alternate payee.

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

18(6)  Nothing in this subsection shall be construed to
19designate any record, material or data received, prepared,
20used or retained by the board or its employees, or agents
21relating to the contributions, account value or benefits
22payable to or on account of a participant as a public record
23subject to public access under the Right-to-Know Law.

24(7) The following shall apply:

25(i) Nothing in this part shall be construed to mean
26that the release or publicizing of a record, material or
27data which would not constitute a public record under 
28this subsection shall be a violation of the board's
29fiduciary duties.

30(ii) This subsection shall apply to a record,

1material or data under this subsection, notwithstanding
2any of the following:

3(A) Whether the record, material or data was
4created, generated or stored before the effective
5date of this paragraph.

6(B) Whether the record, material or data was
7previously released or made public.

8(C) Whether a request for the record, material
9or data was made or is pending final response under
10the Right-to-Know Law.

11* * *

12(h) Regulations and procedures.--The board shall, with the
13advice of the Attorney General and the actuary, adopt and
14promulgate rules and regulations for the uniform administration
15of the system. The actuary shall approve in writing all
16computational procedures used in the calculation of
17contributions and benefits pertaining to the system, and the
18board shall by resolution adopt such computational procedures,
19prior to their application by the board. Such rules, regulations
20and computational procedures as so adopted from time to time and
21as in force and effect at any time, together with such tables as
22are adopted pursuant to subsection (j) as necessary for the
23calculation of annuities and other benefits, shall be as
24effective as if fully set forth in this part. Any actuarial
25assumption specified in or underlying any such rule, regulation
26or computational procedure and utilized as a basis for
27determining any benefit shall be applied in a uniform manner.

28(i) Data.--The board shall keep in convenient form such data
29as are stipulated by the actuary in order that an annual
30actuarial valuation of the various accounts of the fund can be

1completed within six months of the close of each calendar year.

2(j) Actuarial investigation and valuation.--The board shall
3have the actuary make an annual valuation of the various
4accounts of the fund within six months of the close of each
5calendar year. In the year 1975 and in every fifth year
6thereafter the board shall have the actuary conduct an actuarial
7investigation and evaluation of the system based on data
8including the mortality, service, and compensation experience
9provided by the board annually during the preceding five years
10concerning the members and beneficiaries of the system. The
11board shall by resolution adopt such tables as are necessary for
12the actuarial valuation of the fund and calculation of
13contributions, annuities and other benefits based on the reports
14and recommendations of the actuary. Within 30 days of their
15adoption, the secretary of the board shall cause those tables
16which relate to the calculation of annuities and other benefits
17to be published in the Pennsylvania Bulletin in accordance with
18the provisions of 45 Pa.C.S. § 725(a) (relating to additional
19contents of Pennsylvania Bulletin) and, unless the board
20specifies therein a later effective date, such tables shall
21become effective on such publication. The board shall include a
22report on the significant facts, recommendations and data
23developed in each five-year actuarial investigation and
24evaluation of the system in the annual financial statement
25published pursuant to the requirements of subsection (m) for the
26fiscal year in which such investigation and evaluation were
27concluded.

28(k) Certification of employer contributions to fund.--The
29board shall, each year in addition to the itemized budget
30required under section 5509 (relating to appropriations and

1assessments by the Commonwealth), certify, as a percentage of
2the members' payroll, the shared-risk contribution rate, the
3employers' contributions as determined pursuant to [section 5508
4(relating to actuarial cost method)] sections 5508 (relating to 
5actuarial cost method for fiscal years ending before July 1, 
62015) and 5508.1 (relating to actuarial cost method for fiscal 
7years beginning on or after July 1, 2015) necessary for the
8funding of prospective annuities for active members and the
9annuities of annuitants and certify the rates and amounts of the
10employers' normal contributions as determined pursuant to
11[section] sections 5508(b) and 5508.1(b), accrued liability
12contributions as determined pursuant to [section] sections
135508(c) and 5508.1(c) and (d), supplemental annuities
14contribution rate as determined pursuant to section 5508(e), the
15experience adjustment factor as determined pursuant to [section] 
16sections 5508(f) and 5508.1(f), the collared contribution rate 
17pursuant to section 5508(h) and the final contribution rate 
18pursuant to section 5508(i), which shall be paid to the fund and
19credited to the appropriate accounts. The board may allocate the 
20final contribution rate and certify various employer 
21contribution rates and amounts based upon the different benefit 
22eligibility, class of service multiplier, superannuation age, 
23final average salary calculation and other benefit differences 
24resulting from State service credited for individual members 
25even though such allocated employer contribution rate on behalf 
26of any given member may be more or less than 5% of the member's 
27compensation for the period from July 1, 2010, to June 30, 2011, 
28or may differ from the prior year's contribution for that member 
29by more or less than the percentages used to calculate the 
30collared contribution rate for that year and may be below any
 

1minimum contribution rate established for the collared 
2contribution rate or final contribution rate. These
3certifications shall be regarded as final and not subject to
4modification by the Secretary of the Budget.

5(l) Member contributions.--The board shall cause all pickup
6contributions made on behalf of a member to be credited to the
7account of the member and credit to his account any other
8payment made by such member, including, but not limited to,
9amounts collected by the Public School Employees' Retirement
10System for the reinstatement of previous State service or
11creditable nonstate service and amounts paid to return benefits
12paid after the date of return to State service or entering
13school service representing lump sum payments made pursuant to
14section 5705(a)(4)(iii) or (a.1) (relating to member's options)
15and member's annuity payments, but not including other benefits
16returned pursuant to section 5706(a.2) or (a.3) (relating to
17termination of annuities), and shall pay all such amounts into
18the fund.

19(m) Annual financial statement.--The board shall prepare and
20have published, on or before July 1 of each year, [a financial
21statement] financial statements as of the calendar year ending
22December 31 of the previous year showing the condition of the
23fund, the trust and the various accounts, including, but not
24limited to, the board's accrual and expenditure of directed
25commissions, and setting forth such other facts,
26recommendations, and data as may be of use in the advancement of
27knowledge concerning annuities and other benefits provided by
28this part. The board shall submit said financial [statement] 
29statements to the Governor and shall file copies with the head
30of each department for the use of the State employees and the

1public.

2(n) Independent [audit] audits.--The board shall provide for
3[an annual audit] annual audits of the system and the plan by
4[an] independent certified public [accountant] accountants,
5which [audit] audits shall include the board's accrual and
6expenditure of directed commissions. The board may use the same 
7independent certified public accountant for the audits of both 
8the system and the plan.

9* * *

10(p)  Participant and employer contributions to the trust.--
11The board shall, each year in addition to any fees and itemized
12budget required under section 5509 (relating to appropriations
13and assessments by the Commonwealth), certify, as a percentage
14of each participant's compensation, the employer defined
15contributions, which shall be paid to the trust and credited to
16each participant's individual investment account. These
17certifications shall be regarded as final and not subject to
18modification by the Secretary of the Budget. The board shall
19cause all mandatory pickup participant contributions made on
20behalf of a participant and all voluntary contributions made by
21a participant to be credited to the participant's individual
22investment account.

23Section 335. Section 5903 heading, (a) and (c) of Title 71
24are amended and the section is amended by adding a subsection to
25read:

26§ 5903. Duties of the board to advise and report to heads of
27departments [and], members and participants.

28(a) Manual of regulations.--The board shall, with the advice
29of the Attorney General and the actuary, prepare and provide,
30within 90 days of the effective date of this part, a manual

1incorporating rules and regulations consistent with the
2provisions of this part to the heads of departments who shall
3make the information contained therein available to the general
4membership. The board shall thereafter advise the heads of
5departments within 90 days of any changes in such rules and
6regulations due to changes in the law or due to changes in
7administrative policies. As soon as practicable after the
8commissioner's announcement with respect thereto, the board
9shall also advise the heads of departments as to any cost-of-
10living adjustment for the succeeding calendar year in the amount
11of the limitation under IRC § 401(a)(17) and the dollar amounts
12of the limitations under IRC § [415(b)] 415. As soon as
13practicable after January 1 of each year, the board shall also
14advise the heads of departments of the employees for whom,
15pursuant to section 5502.1 (relating to waiver of regular member
16contributions and Social Security integration member
17contributions), pickup contributions are not to be made.

18* * *

19(b.1)  Participant status statements.--The board shall
20furnish annually to each participant, on or before April 1 and
21more frequently as the board may agree or as required by law, a
22statement for each participant in the plan showing the
23accumulated total defined contributions credited to the
24participant's individual investment account, the nature and type
25of investments and the investment allocation of future
26contributions as of December 31 of the previous year and
27requesting the participant to make any necessary correction or
28revision regarding his designated beneficiary.

29(c) Purchase of credit and full coverage membership
30certifications.--Upon receipt of an application from an active

1member or eligible school employee to purchase credit for
2previous State or creditable nonstate service, an election for 
3membership in a specific class or subclass of service, or an
4election to become a full coverage member, the board shall
5determine and certify to the member the amount required to be
6paid by the member. When necessary, the board shall certify to
7the previous employer the amount due in accordance with sections
85504 (relating to member contributions for the purchase of
9credit for previous State service or to become a full coverage
10member) and 5505 (relating to contributions for the purchase of
11credit for creditable nonstate service).

12* * *

13Section 336. Section 5904(c)(2) of Title 71 is amended to
14read:

15§ 5904. Duties of the board to report to the Public School
16Employees' Retirement Board.

17* * *

18(c) Applications for benefits for school employees.--Upon
19receipt of notification and the required data from the Public
20School Employees' Retirement Board that a former State employee
21who elected multiple service has applied for a public school
22employees' retirement benefit or, in the event of his death, his
23legally constituted representative has applied for such benefit,
24the board shall:

25* * *

26(2) transfer to the Public School Employees' Retirement
27Fund the total accumulated deductions standing to such
28member's credit and the actuarial reserve required on account
29of years of credited service in the State system, final
30average salary determined on the basis of his compensation as
 

1a member in both systems and the average noncovered salary to
2be charged to the State accumulation account, the State
3Police benefit account or the enforcement officers' benefit
4account, as each case may require.

5* * *

6Section 337. Section 5905 heading, (b)(3), (c.1) and (g) of
7Title 71, amended October 24, 2012 (P.L.1436, No.181), are
8amended and the section is amended by adding subsections to
9read:

10§ 5905. Duties of the board regarding applications and
11elections of members and participants.

12* * *

13(b) School employees electing multiple service status.--Upon
14receipt of notification from the Public School Employees'
15Retirement Board that a former State employee has become an
16active member in the Public School Employees' Retirement System
17and has elected to become a member with multiple service status
18the board shall:

19* * *

20(3) in case of a former State employee who is not
21receiving an annuity from the system and his total
22accumulated deductions were withdrawn, certify to the former
23State employee the accumulated deductions as they would have
24been at the time of his separation had he been a full
25coverage member together with statutory interest for all
26periods of subsequent State service eligible for membership 
27in the system and school service as a member of the Public 
28School Employees' Retirement System to the date of repayment.
29Such amount shall be restored by him and shall be credited
30with statutory interest as such payments are restored.

1* * *

2(c.1) Termination of service by a member.--In the case of
3any member terminating State service who is entitled to an
4annuity and who is not then a disability annuitant, the board
5shall advise such member in writing of any benefits from the 
6system to which he may be entitled under the provisions of this
7part and shall have the member prepare, on or before the date of
8termination of State service, one of the following three forms,
9a copy of which shall be given to the member and the original of
10which shall be filed with the board:

11(1) an application for the return of total accumulated
12deductions;

13(2) an election to vest his retirement rights and, if he
14is a joint coverage member and so desires, elect to become a
15full coverage member and agree to pay within 30 days of the
16date of termination of service the lump sum required; or

17(3) an application for an immediate annuity and, if he
18desires:

19(i) an election to convert his medical, major
20medical and hospitalization insurance coverage to the
21plan for State annuitants; and

22(ii) if he is a joint coverage member, an election
23to become a full coverage member and an agreement to pay
24within 30 days of date of termination of service the lump
25sum required.

26(c.2) Termination of service by a participant.--In the case
27of a participant terminating State service, the board shall
28advise the participant and, if the participant is married, the
29board may advise the participant's spouse, in writing, of the
30vested accumulated total defined contributions credited to the

1participant's individual investment account as of the date
2stated in the writing, any notices regarding rollover or other
3matters required by IRC or other law, the obligation of the
4participant to commence distributions from the plan by the
5participant's required beginning date and the ability to receive
6all or part of the vested balance in the participant's
7individual investment account in a lump sum or in such other
8form as the board may authorize or as required by law.

9* * *

10(e.2)  Notification to inactive participants approaching
11required beginning date.--The board shall notify each inactive
12participant who has terminated State service and had not
13commenced distribution by 90 days before the participant's
14required beginning date and, if the participant is married, the
15board may advise the participant's spouse, in writing, that the
16inactive participant has an obligation to commence distributions
17by the required beginning date in a form and manner required by
18IRC § 401(a)(9) and other applicable provisions of the IRC.

19* * *

20(f.1)  Initial payment to a participant.--The board shall
21make the initial payment to a participant who has applied for a
22distribution within 60 days of the filing of his application.

23(g) Death benefits.--Upon receipt of notification from the
24head of a department of the death of an active member, a member 
25performing USERRA leave [or], a member on leave without pay, an 
26active participant, an inactive participant on leave without pay 
27or a former participant performing USERRA leave, the board shall
28advise the designated beneficiary of the benefits to which he is
29entitled, and shall make the first payment to the beneficiary
30within 60 days of receipt of certification of death and other

1necessary data. If no beneficiary designation is in effect at
2the date of the member's death or no notice has been filed with
3the board to pay the amount of the benefits to the member's
4estate, the board is authorized to pay the benefits to the
5executor, administrator, surviving spouse or next of kin of the
6deceased member, and payment pursuant hereto shall fully
7discharge the fund from any further liability to make payment of
8such benefits to any other person. If the surviving spouse or
9next of kin of the deceased member cannot be found for the
10purpose of paying the benefits for a period of seven years from
11the date of death of the member, then the benefits shall be
12escheated to the Commonwealth for the benefit of the fund. If no 
13beneficiary designation is in effect at the date of a 
14participant's death or no notice has been filed with the board 
15to pay the amount of the benefits to the participant's estate, 
16the board may pay the benefits to the surviving spouse, 
17executor, administrator or next of kin of the deceased 
18participant and payment pursuant hereto shall fully discharge 
19the fund from any further liability to make payment of such 
20benefits to any other person.

21* * *

22Section 338. Section 5905.1(a) and (b)(2) and (3) of Title
2371 are amended to read:

24§ 5905.1. Installment payments of accumulated deductions.

25(a) General rule.--Notwithstanding any other provision of
26this part, whenever a member elects to withdraw his total
27accumulated deductions pursuant to section 5311(a) (relating to
28eligibility for refunds) or 5701 (relating to return of total
29accumulated deductions) or elects to receive a portion of his
30benefit payable as a lump sum pursuant to section 5705(a)(4)


1(iii) or (a.1) (relating to member's options), the member may
2elect to receive the amount in not more than four installments.

3(b) Payment of first installment.--The payment of the first
4installment shall be made in the amount and within seven days of
5the date specified by the member, except as follows:

6* * *

7(2) In the case of an election as provided in section
85705(a)(4)(iii) or (a.1) by a member terminating service
9within 60 days prior to the end of a calendar year and upon
10receipt of all required data from the head of the department
11and, if the member has Class G, Class H, Class I, Class J,
12Class K, Class L, Class M or Class N service, any data
13required from the county retirement system or pension plan to
14which the member was a contributor before being transferred
15to State employment, the board shall not be required to pay
16the first installment prior to 21 days after the later of the
17filing of the application and the receipt of the data or the
18date of termination of service, but, unless otherwise
19directed by the member, the payment shall be made no later
20than 45 days after the filing of the application and the
21receipt of the data or the date of termination of service,
22whichever is later.

23(3) In the case of an election as provided in section
245705(a)(4)(iii) or (a.1) by a member who is not terminating
25service within 60 days prior to the end of a calendar year
26and upon receipt of all required data from the head of the
27department and, if the member has Class G, Class H, Class I,
28Class J, Class K, Class L, Class M or Class N service, any
29data required from the county retirement system or pension
30plan to which the member was a contributor before being

1transferred to State employment, the board shall not be
2required to pay the first installment prior to 45 days after
3the filing of the application and the receipt of the data or
4the date of termination of service, whichever is later.

5* * *

6Section 339. Section 5906(a)(3), (b), (d), (e), (g), (h),
7(i) and (l) of Title 71, amended October 24, 2012 (P.L.1436,
8No.181), are amended and the section is amended by adding a
9subsection to read:

10§ 5906. Duties of heads of departments.

11(a) Status of members and participants.--The head of
12department shall, at the end of each pay period, notify the
13board in a manner prescribed by the board of salary changes
14effective during that period for any members and participants
15of the department, the date of all removals from the payroll,
16and the type of leave of any members and participants of the
17department who have been removed from the payroll for any time
18during that period, and:

19* * *

20(3) if the removal is due to termination of State
21service, he shall furnish the board with a complete State
22service record, including service in other departments or
23agencies, or creditable nonstate service and;

24(i) in the case of death of the member or 
25participant the head of the department shall so notify
26the board;

27(ii) in the case of a service connected disability
28of a member the head of department shall, to the best of
29his ability, investigate the circumstances surrounding
30the disablement of the member and submit in writing to

1the board information which shall include but not
2necessarily be limited to the following: date, place and
3time of disablement to the extent ascertainable; nature
4of duties being performed at such time; and whether or
5not the duties being performed were authorized and
6included among the member's regular duties. In addition,
7the head of department shall furnish in writing to the
8board all such other information as may be related to the
9member's disablement;

10(iii) in the case of a member terminating from The
11Pennsylvania State University who is a member of the
12system with five or more but less than ten eligibility
13points and who has terminated State service on June 30,
141997, because of the transfer of his job position or
15duties to a controlled organization of the Penn State
16Geisinger Health System or because of the elimination of
17his job position or duties due to the transfer of other
18job positions or duties to a controlled organization of
19the Penn State Geisinger Health System, the head of the
20department shall so certify to the board.

21(b) Records and information.--At any time at the request of
22the board and at termination of service of a member or a 
23participant, the head of department shall furnish service and
24compensation records and such other information as the board may
25require and shall maintain and preserve such records as the
26board may direct for the expeditious discharge of its duties.

27* * *

28(c.1) Participant and employer defined contributions.--The
29head of the department shall:

30(1) Cause the mandatory pickup participant contributions

1on behalf of a participant to be made and cause to be
2deducted any voluntary contributions authorized by a
3participant.

4(2) Cause the employer defined contributions on behalf
5of a participant to be made.

6(3) Notify the board at times and in a manner prescribed
7by the board of the compensation of any participant to whom
8the limitation under IRC § 401(a)(17) either applies or is
9expected to apply and cause the participant's contributions
10to be deducted from payroll to cease at the limitation under
11IRC § 401(a)(17) on the payroll date if and when such limit
12shall be reached.

13(4) Certify to the State Treasurer the amounts picked up
14and deducted and the employer defined contributions being
15made and send the total amount picked up, deducted and
16contributed together with a duplicate of the voucher to the
17secretary of the board every pay period or on such schedule
18as established by the board.

19(d) New employees subject to mandatory membership or 
20participation.--Upon the assumption of duties of each new State
21employee whose membership in the system or plan is mandatory,
22the head of department shall cause an application for membership
23or participation and a nomination of beneficiary, who shall be 
24the participant's spouse if the participant is married, unless 
25the spouse otherwise consents, to be made by such employee and
26filed with the board and shall make pickup contributions or 
27mandatory pickup participant contributions from the effective
28date of State employment.

29(e) New employees subject to optional membership or 
30participation.--The head of department shall, upon the

1employment or entering into office of any State employee whose
2membership in the system or participation in the plan is not
3mandatory, inform such employee of his opportunity to become a
4member of the system or participant in the plan. If such
5employee so elects, the head of department shall cause an
6application for membership and a nomination of beneficiary, who 
7shall be the participant's spouse if the participant is married, 
8unless the spouse otherwise consents, to be made by him and
9filed with the board and shall cause proper contributions to be
10made from the effective date of membership or participation.

11* * *

12(g) Former school employee contributors.--

13(1) The head of department shall, upon the employment of
14a former contributor to the Public School Employees'
15Retirement System who is not an annuitant of the Public
16School Employees' Retirement System, advise such employee of
17his right to elect within 365 days of entry into the system
18to become a multiple service member, and in the case of any
19such employee who so elects and has withdrawn his accumulated
20deductions, require him to reinstate his credit in the Public
21School Employees' Retirement System. The head of the
22department shall advise the board of such election.

23(2) Paragraph (1) shall not apply to a State employee
24who is employed in a position where he is or may be a
25participant in the plan other than by an election under
26section 5416 (relating to election by members to be
27participants).

28(h) Former school employee annuitants.--

29(1) The head of department shall, upon the employment of
30an annuitant of the Public School Employees' Retirement

1System who applies for membership in the system, advise such
2employee that he may elect multiple service membership within
3365 days of entry into the system and if he so elects his
4public school employee's annuity will be discontinued
5effective upon the date of his return to State service and,
6upon termination of State service and application for an
7annuity, the annuity will be adjusted in accordance with
8section 5706 (relating to termination of annuities). The head
9of department shall advise the board of such election.

10(2) Paragraph (1) shall not apply to a State employee
11who is employed in a position where he is or may be a
12participant in the plan other than by an election under
13section 5416.

14(i) Annual statement to members.--Annually, upon receipt
15from the board, the head of department shall furnish to each
16member the statement specified in section 5903(b) (relating to
17duties of the board to advise and report to heads of departments
18[and], members and participants).

19* * *

20(l) State employees performing USERRA or military-related
21leave of absence.--The head of department shall report to the
22board any State employee who ceases to be an active member or 
23active participant to perform USERRA service, or who is granted
24a leave of absence under 51 Pa.C.S. § 4102 (relating to leaves
25of absence for certain government employees) or a military leave
26of absence under 51 Pa.C.S. § 7302 (relating to granting
27military leaves of absence), the date on which the USERRA
28service, leave of absence or military leave of absence began,
29the date on which the State employee is reemployed from USERRA
30leave or returns after the leave of absence or military leave of

1absence, if the event occurs, and any other information the
2board may require or direct.

3* * *

4Section 340. Section 5907 heading, (a), (e) and (f) of Title
571 are amended and the section is amended by adding subsections
6to read:

7§ 5907. Rights and duties of State employees [and], members and 
8participants.

9(a) Information on new employees.--Upon his assumption of
10duties each new State employee shall furnish the head of
11department with a complete record of his previous State service,
12his school service or creditable nonstate service, the name and 
13address of his spouse, if applicable, if he is, or is eligible 
14to be, a participant in the plan and proof of his date of birth
15and current status in the system and the plan and in the Public
16School Employees' Retirement System and the School Employees' 
17Defined Contribution Plan. Willful failure to provide the
18information required by this subsection to the extent available
19upon entrance into the system shall result in the forfeiture of
20the right of the member to subsequently assert any right to
21benefits based on any of the required information which he
22failed to provide. In any case in which the board finds that a
23member is receiving an annuity based on false information, the
24total amount received predicated on such false information
25together with statutory interest doubled and compounded shall be
26deducted from the present value of any remaining benefits to
27which the member is legally entitled.

28* * *

29(b.1) Application for participation.--On or after January 1, 
302015, in the case of a new employee who is not currently a
 

1participant in the plan and whose participation is mandatory, or 
2in the case of a new employee whose participation is not 
3mandatory but is permitted and who desires to become a 
4participant in the plan, the new employee shall execute an 
5application for participation and a nomination of a beneficiary, 
6who shall be the participant's spouse if the participant is 
7married, unless the spouse otherwise consents.

8* * *

9(d.2)  Contributions for USERRA leave.--Any active
10participant or inactive participant on leave without pay or
11former participant who was reemployed from USERRA leave who
12desires to make mandatory pickup participant contributions and
13voluntary contributions for his USERRA leave shall so notify the
14board within the time period required under 38 U.S.C. Ch. 43
15(relating to employment and reemployment rights of members of
16the uniformed services) and IRC § 414(u) of his desire to make
17such contributions. Upon making the permitted mandatory pickup
18participant contributions within the allowed time period, the
19head of the department shall make the corresponding employer
20defined contributions at the same time.

21(d.3) Voluntary contributions by a participant.--Any
22participant who desires to make voluntary contributions to be
23credited to his individual investment account shall notify the
24board and, upon compliance with the requirements, procedures and
25limitations established by the board in the plan document, may
26do so subject to the limitations under IRC §§ 401(a) and 415 and
27other applicable law.

28(e) Beneficiary for death benefits from system.--Every
29member shall nominate a beneficiary by written designation filed
30with the board as provided in section 5906(d) or (e) (relating

1to duties of heads of departments) to receive the death benefit
2payable under section 5707 (relating to death benefits) or the
3benefit payable under the provisions of Option 1 of section
45705(a)(1) (relating to member's options). Such nomination may
5be changed at any time by the member by written designation
6filed with the board. A member may also nominate a contingent
7beneficiary or beneficiaries to receive the death benefit
8provided under section 5707 or the benefit payable under the
9provisions of Option 1 of section 5705(a)(1).

10(e.1) Beneficiary for death benefits from plan.--Every
11participant shall nominate a beneficiary by written designation
12filed with the board as provided in section 5906(d) or (e) to
13receive the death benefit payable under section 5408 (relating
14to death benefits). A participant may also nominate a contingent
15beneficiary or beneficiaries to receive the death benefit
16provided under section 5408. The nomination may be changed at
17any time by the participant by written designation filed with
18the board, provided that, if the participant is married, the
19participant's spouse consents to the change unless the change is
20to name the spouse as beneficiary or is limited to contingent
21beneficiaries. If the spouse of a participant in the plan is 
22deemed to be the beneficiary by operation of law, the person 
23last nominated as beneficiary in writing filed with the board 
24shall become the contingent beneficiary.

25(e.2) Beneficiary for combined service employee.--A combined
26service employee may designate or nominate different persons to
27be beneficiaries, survivor annuitants and successor payees for
28his benefits from the system and the plan.

29(f)  Termination of service by members.--Each member who
30terminates State service and who is not then a disability

1annuitant shall execute on or before the date of termination of
2service the appropriate application, duly attested by the member
3or his legally constituted representative, electing to:

4(1)  withdraw his total accumulated deductions; or

5(2)  vest his retirement rights; and if he is a joint
6coverage member, and so desires, elect to become a full
7coverage member and agree to pay within 30 days of the date
8of termination of service the lump sum required; or

9(3)  receive an immediate annuity and may,

10(i)  if eligible, elect to convert his medical, major
11medical, and hospitalization coverage to the plan for
12State annuitants; and

13(ii)  if he is a joint coverage member, elect to
14become a full coverage member and agree to pay within 30
15days of date of termination of service the lump sum
16required.

17* * *

18(g.1) Deferral of retirement rights.--If a participant
19terminates State service and does not commence receiving a
20distribution, the participant shall nominate a beneficiary, who
21shall be the participant's spouse if the participant is married,
22unless the spouse otherwise consents by written designation
23filed with the board, and the participant may any time
24thereafter, but no later than the participant's required
25beginning date, withdraw the vested accumulated total defined
26contributions standing to the participant's credit or apply for
27another form of distribution required by law or authorized by
28the board.

29* * *

30(l) Continuing obligation regarding spouses.--A participant

1shall have the continuing obligation to notify the board in
2writing of any change in marital status and, if applicable, the
3name and current address of the participant's spouse.

4* * *

5Section 341. Sections 5931(b), 5932, 5934, 5935, 5936, 5937,
65938, 5939, 5951 and 5953 of Title 71 are amended to read:

7§ 5931. Management of fund and accounts.

8* * *

9(b) Crediting of interest.--The board, annually, shall allow
10the required interest on the mean amount for the preceding year
11to the credit of each of the accounts other than the individual 
12investment accounts. The amount so allowed shall be credited
13thereto by the board and transferred from the interest reserve
14account.

15* * *

16§ 5932. State Employees' Retirement Fund.

17(a) General rule.--The fund shall consist of all balances in
18the several separate accounts set apart to be used under the
19direction of the board for the benefit of members of the system;
20and the Treasury Department shall credit to the fund all moneys
21received from the Department of Revenue arising from the
22contributions relating to or on behalf of members of the system
23required under the provisions of Chapter 55 (relating to
24contributions), and any income earned by the investments or
25moneys of said fund. There shall be established and maintained
26by the board the several ledger accounts specified in sections
275933 (relating to members' savings account), 5934 (relating to
28State accumulation account), 5935 (relating to annuity reserve
29account), 5936 (relating to State Police benefit account), 5937
30(relating to enforcement officers' benefit account), 5938

1(relating to supplemental annuity account) and 5939 (relating to
2interest reserve account).

3(b) Individual investment accounts and trust.--The 
4individual investment accounts that are part of the trust shall 
5not be part of the fund. Mandatory pickup participant 
6contributions, voluntary contributions and employer defined 
7contributions made under this part and any income earned by the 
8investment of such contributions shall not be paid or credited 
9to the fund but shall be paid to the trust and credited to the 
10individual investment accounts.

11§ 5934. State accumulation account.

12The State accumulation account shall be the ledger account to 
13which shall be credited all contributions of the Commonwealth or 
14other employers whose employees are members of the system and 
15made in accordance with the provisions of [section 5507(a) or 
16(d) (relating to contributions by the Commonwealth and other 
17employers)] sections 5507(a) or (d) (relating to contributions 
18to the system by the Commonwealth and other employers before 
19July 1, 2015) and 5507.1 (relating to contributions to the 
20system by the Commonwealth and other employers commencing July 
211, 2015) except that the amounts received under the provisions 
22of the act of May 12, 1943 (P.L.259, No.120), and the amounts 
23received under the provisions of the Liquor Code, act of April 
2412, 1951 (P.L.90, No.21), shall be credited to the State Police 
25benefit account or the enforcement officers' benefit account as 
26the case may be. All amounts transferred to the fund by county 
27retirement systems or pension plans in accordance with the 
28provisions of section 5507(c) also shall be credited to the 
29State accumulation account. All amounts transferred to the fund 
30by the Public School Employees' Retirement System in accordance
 

1with section 5303.2(e) (relating to election to convert school 
2service to State service), except amounts credited to the 
3members' savings account, and all amounts paid by the Department 
4of Corrections in accordance with section 5303.2(f) also shall 
5be credited to the State accumulation account. The State 
6accumulation account shall be credited with valuation interest. 
7The reserves necessary for the payment of annuities and death 
8benefits resulting from membership in the system as approved by 
9the board and as provided in Chapter 57 (relating to benefits) 
10shall be transferred from the State accumulation account to the 
11annuity reserve account provided for in section 5935 (relating 
12to annuity reserve account), except that the reserves necessary 
13on account of a member who is an officer of the Pennsylvania 
14State Police or an enforcement officer shall be transferred from 
15the State accumulation account to the State Police benefit 
16account provided for in section 5936 (relating to State Police 
17benefit account) or to the enforcement officers' benefit account 
18as provided for in section 5937 (relating to enforcement 
19officers' benefit account) as the case may be. The reserves 
20necessary for the payment of supplemental annuities in excess of 
21those reserves credited to the supplemental annuity account on 
22June 30, 2010, shall be transferred from the State accumulation 
23account to the supplemental annuity account. In the event that 
24supplemental annuities are increased by legislation enacted 
25after December 31, 2009, the necessary reserves shall be 
26transferred from the State accumulation account to the 
27supplemental annuity account.

28§ 5935. Annuity reserve account.

29(a) Credits and charges to account.--The annuity reserve
30account shall be the ledger account to which shall be credited

1the reserves held for payment of annuities and death benefits on
2account of all annuitants except in the case of members who are
3officers of the Pennsylvania State Police or enforcement
4officers. The annuity reserve account shall be credited with
5valuation interest. After the transfers provided in sections
65933 (relating to members' savings account), 5934 (relating to
7State accumulation account) and 5938 (relating to supplemental
8annuity account), all annuity and death benefit payments
9resulting from membership in the system except those payable to
10any member who retires as an officer of the Pennsylvania State
11Police or an enforcement officer shall be charged to the annuity
12reserve account and paid from the fund.

13(b) Transfers from account.--Should an annuitant other than
14a member who was retired as an officer of the Pennsylvania State
15Police or an enforcement officer be subsequently restored to
16active service as a member of the system or as a participant in 
17the plan, the present value of his member's annuity at the time
18of reentry into State service shall be transferred from the
19annuity reserve account and placed to his individual credit in
20the members' savings account. In addition, the actuarial reserve
21for his annuity less the amount transferred to the members'
22savings account shall be transferred from the annuity reserve
23account to the State accumulation account.

24§ 5936. State Police benefit account.

25(a) Credits and charges to account.--The State Police
26benefit account shall be the ledger account to which shall be
27credited all contributions received under the provisions of the
28act of May 12, 1943 (P.L.259, No.120), and any additional
29Commonwealth or other employer contributions provided for in
30[section 5507 (relating to contributions by the Commonwealth and

1other employers)] sections 5507 (relating to contributions to 
2the system by the Commonwealth and other employers before July 
31, 2015) and 5507.1 (relating to contributions to the system by 
4the Commonwealth and other employers commencing July 1, 2015) 
5which are creditable to the State Police benefit account. The
6State Police benefit account shall be credited with the required
7interest. In addition, upon the filing of an application for an
8annuity by a member who is an officer of the Pennsylvania State
9Police, the total accumulated deductions standing to the credit
10of the member in the members' savings account and the necessary
11reserves from the State accumulation account shall be
12transferred to the State Police benefit account. Thereafter, the
13total annuity of such annuitant shall be charged to the State
14Police benefit account and paid from the fund.

15(b) Transfers from account.--Should the said annuitant be
16subsequently restored to active service as a member of the 
17system or as a participant in the plan, the present value of the
18member's annuity at the time of reentry into State service shall
19be transferred from the State Police benefit account and placed
20to his individual credit in the members' savings account. In
21addition, the actuarial reserve for his annuity calculated as if
22he had been a member of Class A if he has Class A or Class C 
23service credited; as if he had been a member of Class A-3 if the 
24annuitant has Class A-3 State service credited; or as if he had 
25been a member of Class A-4 if the annuitant has Class A-4 
26service credited, less the amount transferred to the members'
27savings account shall be transferred from the State Police
28benefit account to the State accumulation account. Upon
29subsequent retirement other than as an officer of the
30Pennsylvania State Police the actuarial reserve remaining in the

1State Police benefit account shall be transferred to the
2appropriate reserve account.

3§ 5937. Enforcement officers' benefit account.

4(a) Credits and charges to account.--The enforcement 
5officers' benefit account shall be the ledger account to which 
6shall be credited moneys transferred from the enforcement 
7officers' retirement account in the State Stores Fund according 
8to the provisions of the act of April 12, 1951 (P.L.90, No.21), 
9known as the Liquor Code, and any additional Commonwealth or 
10other employer contributions provided for in [section 5507 
11(relating to contributions by the Commonwealth and other 
12employers)] sections 5507 (relating to contributions to the 
13system by the Commonwealth and other employers before July 1, 
142015) and 5507.1 (relating to contributions to the system by the 
15Commonwealth and other employers commencing July 1, 2015) which 
16are creditable to the enforcement officers' benefit account. The 
17enforcement officers' benefit account shall be credited with the 
18required interest. In addition, upon the filing of an 
19application for an annuity by a member who is an enforcement 
20officer of the Pennsylvania Liquor Control Board, the total 
21accumulated deductions standing to the credit of the member in 
22the members' savings account and the necessary reserves from the 
23State accumulation account shall be transferred to the 
24enforcement officers' benefit account. Thereafter, the total 
25annuity of such annuitant shall be charged to the enforcement 
26officers' benefit account and paid from the fund.

27(b) Transfers from account.--Should the said annuitant be 
28subsequently restored to active service as a member of the 
29system or as a participant in the plan, the present value of the 
30member's annuity at the time of reentry into State service shall
 

1be transferred from the enforcement officers' benefit account 
2and placed to his individual credit in the members' savings 
3account. In addition, the actuarial reserve for his annuity 
4calculated as if he had been a member of Class A if the 
5annuitant does not have any Class AA, Class A-3 or Class A-4 
6service credited; as if he had been a member of Class AA if the 
7annuitant does have Class AA service credited; as if he had been 
8a member of Class A-3 if the annuitant has Class A-3 State 
9service credited; or as if he had been a member of Class A-4 if 
10the annuitant has Class A-4 service credited, less the amount 
11transferred to the members' savings account shall be transferred 
12from the enforcement officers' benefit account to the State 
13accumulation account. Upon subsequent retirement other than as 
14an enforcement officer the actuarial reserve remaining in the 
15enforcement officers' benefit account shall be transferred to 
16the appropriate reserve account.

17§ 5938. Supplemental annuity account.

18The supplemental annuity account shall be the ledger account
19to which shall be credited all contributions from the
20Commonwealth and other employers in accordance with section
215507(b) [(relating to contributions by the Commonwealth and
22other employers)] (relating to contributions to the system by 
23the Commonwealth and other employers before July 1, 2015) for
24the payment of the supplemental annuities provided in sections
255708 (relating to supplemental annuities), 5708.1 (relating to
26additional supplemental annuities), 5708.2 (relating to further
27additional supplemental annuities), 5708.3 (relating to
28supplemental annuities commencing 1994), 5708.4 (relating to
29special supplemental postretirement adjustment), 5708.5
30(relating to supplemental annuities commencing 1998), 5708.6

1(relating to supplemental annuities commencing 2002), 5708.7
2(relating to supplemental annuities commencing 2003) and 5708.8
3(relating to special supplemental postretirement adjustment of
42002) made before July 1, 2010, the amount transferred from the 
5State accumulation account to provide all additional reserves 
6necessary as of June 30, 2010, to pay such supplemental 
7annuities and adjustments, and the amounts transferred from the 
8State accumulation account to provide all additional reserves 
9necessary as a result of supplemental annuities enacted after 
10December 31, 2009. The supplemental annuity account shall be
11credited with valuation interest. The reserves necessary for the
12payment of such supplemental annuities shall be transferred from
13the supplemental annuity account to the annuity reserve account
14as provided in section 5935 (relating to annuity reserve
15account).

16§ 5939. Interest reserve account.

17The interest reserve account shall be the ledger account to
18which shall be credited all income earned by the fund and to
19which shall be charged all administrative and investment
20expenses incurred by the fund. At the end of each year the
21required interest shall be transferred from the interest reserve
22account to the credit of each of the accounts of the fund in
23accordance with the provisions of this subchapter. In addition,
24at the end of each accounting period, the interest reserve
25account shall be credited or charged with all recognized changes
26in the market valuation of the investments of the fund. The
27administrative and investment expenses of the board relating to 
28the administration of the system and investments of the fund
29shall be paid from the fund out of earnings. Any surplus or
30deficit in the interest reserve account at the end of each year

1shall be transferred to the State accumulation account.

2§ 5951. State guarantee regarding the State Employees' 
3Retirement System.

4The required interest charges payable, the maintenance of
5reserves in the fund, and the payment of all annuities and other
6benefits granted by the board from the system under the
7provisions of this part relating to the establishment and 
8administration of the system are hereby made obligations of the
9Commonwealth. All income, interest, and dividends derived from
10deposits and investments of the system authorized by this part
11shall be used for the payment of the said obligations of the
12Commonwealth and shall not be used for any obligations of the 
13plan or trust.

14§ 5953. Taxation, attachment and assignment of funds.

15(a) General rule.--

16(1) Except as provided in paragraphs (2), (3) [and], (4)
17and (5), the right of a person to any benefit or right
18accrued or accruing under the provisions of this part and the
19moneys in the fund and the trust are hereby exempt from any
20State or municipal tax, levy and sale, garnishment,
21attachment, spouse's election, the provisions of Article 
22XIII.1 of the act of April 9, 1929 (P.L.343, No.176), known 
23as The Fiscal Code, or any other process whatsoever, and no 
24participant or beneficiary, successor payee, spouse or 
25alternate payee of a participant shall have the ability to 
26commute, sell, assign, alienate, anticipate, mortgage, 
27pledge, hypothecate, commutate or otherwise transfer or 
28convey any benefit or interest in an individual investment 
29account or rights to receive or direct distributions under 
30this part or under agreements entered into under this part
 

1except as otherwise provided in this part and in the case of 
2either a member or a participant except for a set-off by the
3Commonwealth in the case provided in subparagraph (i), and
4shall be unassignable except:

5(i) To the Commonwealth in the case of a member or
6participant who is terminating State service and has been
7determined to be obligated to the Commonwealth for the
8repayment of money owed on account of his employment or
9to the fund on account of a loan from a credit union to a 
10member which has been satisfied by the board from the
11fund.

12(ii) To a credit union as security for a loan to a 
13member not to exceed $750 and interest not to exceed 6%
14per annum discounted and/or fines thereon if the credit
15union is now or hereafter organized and incorporated
16under the laws of this Commonwealth and the membership of
17such credit union is limited solely to officials and
18employees of the Commonwealth and if such credit union
19has paid to the fund $3 for each such assignment.

20(2) (i) Rights under this part shall be subject to
21forfeiture as provided by the act of July 8, 1978 
22(P.L.752, No.140), known as the Public Employee Pension
23Forfeiture Act, and by or pursuant to section 16(b) of
24Article V of the Constitution of Pennsylvania.
25Forfeitures under this subsection or under any other
26provision of law may not be applied to increase the
27benefits that any member would otherwise receive under
28this part.

29(ii) Notwithstanding this paragraph, the act of July 
308, 1978 (P.L.752, No.140), known as the Public Employee
 

1Pension Forfeiture Act, and section 16(b) of Article V of 
2the Constitution of Pennsylvania or 42 Pa.C.S. § 3352 
3(relating to pension rights), the accumulated mandatory 
4participant contributions and accumulated voluntary 
5contributions standing to the credit of a participant 
6shall not be forfeited but shall be available for payment 
7of fines and restitution as provided by law. Furthermore, 
8amounts in the trust that have been ordered to be 
9distributed to an alternate payee as the result of an 
10equitable distribution of marital property as part of an 
11approved domestic relations order entered before the date 
12of the order or action in a court or other tribunal 
13resulting in a forfeiture of a participant's interest in 
14the trust shall not be subject to the Public Employee 
15Pension Forfeiture Act or section 16(b) of Article V of 
16the Constitution of Pennsylvania or 42 Pa.C.S. § 3352. 
17Any accumulated employer defined contributions forfeited 
18as a result of this paragraph or other law shall be 
19retained by the board and notwithstanding sections 
205412(2) (relating to powers and duties of board), 5415 
21(relating to expenses) and 5902(c) (relating to 
22administrative duties of the board) used for the payment 
23of expenses of the plan.

24(3) Rights under this part shall be subject to
25attachment in favor of an alternate payee as set forth in an
26approved domestic relations order.

27(4) Effective with distributions made on or after
28January 1, 1993, and notwithstanding any other provision of
29this part to the contrary, a distributee may elect, at the
30time and in the manner prescribed by the board, to have any

1portion of an eligible rollover distribution paid directly to
2an eligible retirement plan by way of a direct rollover. For
3purposes of this paragraph, a "distributee" includes a member
4[and], a participant, a member's surviving spouse [and], a 
5participant's surviving spouse, a member's former spouse who
6is an alternate payee under an approved domestic relations
7order[.], a participant's former spouse who is an alternate 
8payee under an approved domestic relations order and anyone 
9else authorized under the IRC and the plan terms approved by 
10the board to have an eligible rollover distribution paid 
11directly to an eligible retirement plan by way of a direct 
12rollover. For purposes of this paragraph, the term "eligible 
13rollover distribution" has the meaning given such term by IRC
14§ 402(f)(2)(A), and "eligible retirement plan" has the
15meaning given such term by IRC § 402(c)(8)(B), except that a
16qualified trust shall be considered an eligible retirement
17plan only if it accepts the distributee's eligible rollover
18distribution; however, in the case of an eligible rollover
19distribution to a surviving spouse, an eligible retirement
20plan is an "individual retirement account" or an "individual
21retirement annuity" as those terms are defined in IRC §
22408(a) and (b).

23(5) No married participant may take an action
24inconsistent with the spousal consent provisions of this part
25or the plan.

26(b) Authorized payments from fund.--The board shall be
27authorized to pay from the fund:

28(1) In the case of a member or participant who is
29terminating service, the amount determined after
30certification by the head of the department that the member

1or participant is so obligated, and after review and approval
2by the department or agency's legal representative or upon
3receipt of an assignment from the member or participant in
4the amount so certified[.], except that no payment shall be 
5made from the individual investment account of a participant 
6until the participant otherwise applies for and receives a 
7distribution and shall not exceed the amount of the 
8distribution.

9(2) In the case of a loan to a member the amount of the
10loan and any fine or interest due thereon to the credit union
11except 5% of the total amount due which is to be retained in
12the fund as a collection fee:

13(i) if the member obtaining the loan shall have been
14in default in required payments for a period of not less
15than two years; or

16(ii) at such time as the Department of Banking shall
17require the credit union to charge the amount of the loan
18against the reserve fund of such credit union.

19Any member who shall have pledged such rights as
20security for a loan from a credit union and, on whose
21behalf the board shall have made any payment by reason of
22that member's default, may not thereafter pledge or
23assign such rights to a credit union.

24(3) In the case of a participant whose former spouse is
25an alternate payee of an equitable distribution of marital
26assets under an approved domestic relations order, a lump sum
27of the alternate payee's interest in the participant's
28accumulated total defined contributions. This paragraph shall
29apply without regard to whether the participant has not
30terminated, is terminating or has terminated State service.

1Section 342. (Reserved).

2Section 343. Section 5953.1(a) heading, introductory
3paragraph and (1), (b), (c) and (d) of Title 71 are amended and
4the section is amended by adding a subsection to read:

5§ 5953.1. Approval of domestic relations orders.

6(a) Certification regarding members.--A domestic relations
7order pertaining to a member of the system shall be certified as
8an approved domestic relations order by the secretary of the
9board, or his designated representative, only if that order
10meets all of the following:

11(1) Requires the system to provide any type or form of
12benefit or any option applicable to members already provided
13under this part.

14* * *

15(a.1) Certification regarding participants.--A domestic
16relations order pertaining to a participant shall be certified
17as an approved domestic relations order by the secretary of the
18board or his designated representative if that order meets all
19of the following:

20(1)  Does not require the plan to provide a type or form
21of benefit or an option applicable to members of the system
22or participants in the plan.

23(2)  Does not require the segregation of the alternate
24payee's share of the participant's individual investment
25account into a subaccount or newly established individual
26account titled in the name of the alternate payee.

27(3)  Does not require the plan to recover or distribute
28funds which were distributed to the participant or at the
29participant's direction prior to the approval of the domestic
30relations order by the secretary of the board or his

1designated representative.

2(4)  Requires the plan to pay to the alternate payee no
3more than the lesser of the vested amount of the
4participant's individual investment account specified by the
5domestic relations order or the vested amount of the
6participant's individual investment account as of the date of
7the transfer of the alternate payee's share to the alternate
8payee.

9(5)  States that the plan shall not be required to recoup
10or make good for losses in value to the participant's
11individual investment account incurred between the date of
12the valuation of the account used for equitable distribution
13purposes and the date of distribution to the alternate payee.

14(6)  Specifies the amount or percentage of the
15participant's individual investment account to be paid to the
16alternate payee and the date upon which such valuation is
17based.

18(7)  Specifies the name and last known mailing address,
19if any, of the participant and the name and last known
20mailing address of each alternate payee covered by the order
21and states that it is the responsibility of each alternate
22payee to keep a current mailing address on file with the
23plan.

24(8)  Does not grant an alternate payee the rights,
25privileges or options available to a participant.

26(9)  Requires the participant to execute an authorization
27allowing each alternate payee to monitor the participant's
28compliance with the terms of the domestic relations order
29through access to information concerning the participant
30maintained by the plan. An authorization granted pursuant to

1this section shall be construed as an authorization for the
2alternate payee to receive information concerning the
3participant which relates to the administration, calculation
4and payment of the alternate payee's share of the
5participant's account and not as an authorization to exercise
6the rights afforded to participants or obtain information
7which is not related to the administration, calculation and
8payment of alternate payee's share of the participant's
9individual investment account.

10(10)  In the case of a participant who has not yet begun
11to receive distributions as of the date the domestic
12relations order is approved by the secretary of the board or
13his designated representative, requires the immediate
14distribution of the alternate payee's share of the
15participant's individual investment account, which may be by
16direct payment, eligible rollover or trustee-to-trustee
17transfer to another eligible plan or qualified account owned
18by the alternate payee, notwithstanding any other provision
19of this part or the plan that would require a distribution of
20accumulated employer defined contributions in the form of an
21annuity or to require the purchase of an annuity.

22(11)  In the case of a participant who is currently
23receiving distributions from the trust as of the date the
24domestic relations order is approved by the secretary of the
25board or his designated representative, may not order the
26board to pay the alternate payee more than the balance
27available in the participant's individual investment account
28as of the date the order is approved or require that
29distributions continue to the alternate payee after the death
30of the participant and final settlement of the participant's

1individual investment account.

2(b) Determination by secretary.--Within a reasonable period
3after receipt of a domestic relations order, the secretary of
4the board, or his designated representative, shall determine
5whether this order is an approved domestic relations order and
6notify the member or participant and each alternate payee of
7this determination. Notwithstanding any other provision of law,
8the exclusive remedy of any member, participant or alternate
9payee aggrieved by a decision of the secretary of the board, or
10his designated representative, shall be the right to an
11adjudication by the board under 2 Pa.C.S. Ch. 5 Subch. A
12(relating to practice and procedure) with appeal therefrom to
13the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to
14judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct
15appeals from government agencies).

16(c) Other orders.--The requirements for approval identified
17in [subsection (a)] subsections (a) and (a.1) shall not apply to
18any domestic relations order which is an order for support as
19the term is defined at 23 Pa.C.S. § 4302 (relating to
20definitions) or an order for the enforcement of arrearages as
21provided in 23 Pa.C.S. § 3703 (relating to enforcement of
22arrearages). These orders shall be approved to the extent that
23they do not attach moneys in excess of the limits on attachments
24as established by the laws of the United States and this
25Commonwealth[.], require distributions of benefits in a manner 
26which would violate the laws of the United States, any other 
27state or this Commonwealth or require the distribution of funds 
28for support or enforcement of arrearages against a participant 
29who is not receiving distributions from the plan at the time the 
30order is entered. These orders may be approved notwithstanding
 

1any other provision of this part or the plan that would require 
2a distribution of accumulated employer defined contributions in 
3the form of an annuity or to require the purchase of an annuity.

4(d) Obligation discharged.--Only the requirements of this
5part and any regulations promulgated hereunder shall be used to
6govern the approval or disapproval of a domestic relations
7order. Therefore, if the secretary of the board, or his
8designated representative, acts in accordance with the
9provisions of this part and any promulgated regulations in
10approving or disapproving a domestic relations order, then the
11obligations of the system or the plan with respect to such
12approval or disapproval shall be discharged.

13Section 344. Sections 5953.2, 5953.3 and 5953.4(a) of Title
1471 are amended to read:

15§ 5953.2. Irrevocable beneficiary.

16Notwithstanding any other provision of this part, a domestic
17relations order may provide for an irrevocable beneficiary. A
18domestic relations order requiring the nomination of an
19irrevocable beneficiary shall be deemed to be one that requires
20a member or participant to nominate an alternate payee as a
21beneficiary and that prohibits the removal or change of that
22beneficiary without approval of a court of competent
23jurisdiction, except by operation of law. Such a domestic
24relations order may be certified as an approved domestic
25relations order by the secretary of the board, or his designated
26representative, after the member or participant makes such
27nomination, in which case the irrevocable beneficiary so ordered
28by the court cannot be changed by the member or participant
29without approval by the court.

30§ 5953.3. Irrevocable survivor annuitant.

1Notwithstanding any other provisions of this part, a domestic
2relations order pertaining to a member may provide for an
3irrevocable survivor annuitant. A domestic relations order
4requiring the designation of an irrevocable survivor annuitant
5shall be deemed to be one that requires a member to designate an
6alternate payee as a survivor annuitant and that prohibits the
7removal or change of that survivor annuitant without approval of
8a court of competent jurisdiction, except by operation of law.
9Such a domestic relations order may be certified as an approved
10domestic relations order by the secretary of the board, or his
11designated representative, in which case the irrevocable
12survivor annuitant so ordered by the court cannot be changed by
13the member without approval by the court. A person ineligible to
14be designated as a survivor annuitant may not be designated as
15an irrevocable survivor annuitant.

16§ 5953.4. Amendment of approved domestic relations orders.

17(a) Deceased alternate payee.--In the event that the
18alternate payee predeceases the member or the participant and
19there are benefits payable to the alternate payee, the divorce
20court may amend the approved domestic relations order to
21substitute a person for the deceased alternate payee to receive
22any benefits payable to the deceased alternate payee.

23* * *

24Section 345. Title 71 is amended by adding sections to read:

25§ 5953.6. Irrevocable successor payee.

26(a) Condition.--Notwithstanding any other provision of this
27part, a domestic relations order pertaining to a participant may
28provide for an irrevocable successor payee if the participant is
29receiving a payment pursuant to a payment option provided by the
30board that allows for a successor payee.

1(b) Determination.--A domestic relations order requiring the
2designation of an irrevocable successor payee shall be deemed to
3be one that requires a participant who is receiving payments
4from an annuity or other distribution option to designate an
5alternate payee as a successor payee and that prohibits the
6removal or change of the successor payee without approval of a
7court of competent jurisdiction, except by operation of law.

8(c) Certification.--A domestic relations order under
9subsection (b) may be certified as an approved domestic
10relations order by the secretary of the board or his designated
11representative. If a domestic relations order is certified under
12this subsection, the irrevocable successor payee ordered by the
13court shall not be changed by the participant without approval
14by the court.

15(d) Ineligibility.--A person ineligible to be designated as
16a successor payee shall not be designated as an irrevocable
17successor payee. A court shall not name an irrevocable successor
18payee if the alternate payee is eligible to receive a lump sum
19distribution of the alternate payee's portion of the marital
20portion of the pension benefit.

21§ 5953.7. Exemption from spousal consent.

22If a domestic relations order approved pursuant to section
235953.1 (relating to approval of domestic relations orders)
24requires a nomination by a participant of an irrevocable
25beneficiary or irrevocable successor payee or the selection of
26any benefit by a participant, the provisions of this part or the
27plan requiring the spouse of a married participant to be
28nominated as beneficiary, designated as successor payee or to
29grant consent to an action, election or application of a
30participant shall not apply to an action or nomination required

1by the approved domestic relations order to the extent that the
2required action or nomination is inconsistent with the rights of
3the spouse under this part.

4Section 346. Section 5954 of Title 71 is amended to read:

5§ 5954. Fraud and adjustment of errors.

6(a) Penalty for fraud.--Any person who shall knowingly make
7any false statement or shall falsify or permit to be falsified
8any record or records of this system or plan in any attempt to
9defraud the system or plan as a result of such act shall be
10guilty of a misdemeanor of the second degree.

11(b) Adjustment of errors.--Should any change or mistake in
12records result in any member, participant, beneficiary [or],
13survivor annuitant or successor payee receiving from the system
14or plan more or less than he would have been entitled to receive
15had the records been correct, then regardless of the intentional
16or unintentional nature of the error and upon the discovery of
17such error, the board shall correct the error and if the error 
18affected contributions to or payments from the system, then so
19far as practicable shall adjust the payments which may be made
20for and to such person in such a manner that the actuarial
21equivalent of the benefit to which he was correctly entitled
22shall be paid. If the error affected contributions to or 
23payments from the plan, the board shall take action as provided 
24for in the plan document.

25Section 347. Title 71 is amended by adding a section to
26read:

27§ 5954.1. Spousal consent.

28(a) General rule.--No married participant may:

29(1) take an action regarding rights in the plan;

30(2) make an election regarding benefits in the plan; or

1(3) file a valid application which requires the consent
2of the participant's spouse, unless the participant's spouse
3consents in writing to that action, election or application.
4A consent or lack of consent shall not affect the effective
5date of an action or election. A consent shall be valid only
6if the consent is:

7(i)  signed after the participant's spouse receives
8counseling or affirmatively waives the right to receive
9counseling;

10(ii)  witnessed before a notary public; and

11(iii)  filed with the board within 90 days of the
12filing of the application or within 90 days of the date
13the action or election would otherwise be valid.

14(b)  Exceptions to consent.--Spousal consent shall not be
15required if:

16(1)  The spouse cannot be located.

17(2)  Other circumstances occur as established by the
18board in the plan document.

19(c)  Legal guardians and powers of attorney.--A legal
20guardian, including the participant, may execute a valid spousal
21consent. A participant as agent under a power of attorney may
22not execute a valid spousal consent unless the spouse is
23incapacitated and had executed a valid durable power of
24attorney.

25(d) Rights, options or privileges.--This part shall not
26grant to the spouse of a participant of the plan the rights,
27options or privileges of the participant. The rights of the
28spouse shall remain derivative of the rights of the participant,
29including rights under the act of July 8, 1978 (P.L.752,
30No.140), known as the Public Employee Pension Forfeiture Act,

1and section 16(b) of Article V of the Constitution of
2Pennsylvania. The spouse may not do any of the following:

3(1) Compel the participant to take, or prevent a
4participant from taking, an action regarding membership,
5rights or benefits in the plan other than as provided under
6this part.

7(2) Take any action on behalf of the participant, except
8as provided under this part.

9(e) Waiver.--If a law allows a participant in the plan to
10waive benefits or return of contributions that the participant
11is receiving, entitled to currently receive or receive in the
12future, the waiver shall not be valid unless the spouse of the
13participant consents to the waiver as provided for under this
14part.

15Section 347.1. Section 5955 of Title 71 is amended to read:

16§ 5955. Construction of part.

17(a)  Exclusive source of rights and benefits.--Regardless of 
18any other provision of law, pension and benefit rights of State 
19employees shall be determined solely by this part or any 
20amendment thereto, and no collective bargaining agreement nor 
21any arbitration award between the Commonwealth and [its] other 
22employers and the Commonwealth's and other employer's employees 
23or their collective bargaining representatives shall be 
24construed to change any of the provisions herein, to require the 
25board to administer pension or retirement benefits not set forth 
26in this part or not established by the board in the plan 
27document, to require the board to modify, amend or change any of 
28the terms and provisions of the plan document, or otherwise 
29require action by any other government body pertaining to 
30pension or retirement benefits or rights of State employees.
 

1Notwithstanding the foregoing, any pension or retirement 
2benefits or rights previously so established by or as a result 
3of an arbitration award shall remain in effect after the 
4expiration of the current collective bargaining agreement 
5between the State employees so affected and the Commonwealth 
6until the expiration of each of the collective bargaining 
7agreements in effect on January 1, 2011, at which time the 
8classes of membership and resulting member contribution rates 
9and contributions for creditable nonstate service, eligibility 
10for vesting, withdrawal and superannuation annuities, optional 
11modification of annuities and other terms and conditions related 
12to class of membership shall be as determined by this part for 
13employees covered by those and successor collective bargaining 
14agreements. For purposes of administering this part, for those 
15State employees who are members of each such collective 
16bargaining unit, the date January 1, 2011, contained in this 
17part, except in this section, shall be replaced with the date of 
18the day immediately following the expiration of each such 
19collective bargaining agreement. The provisions of this part 
20insofar as they are the same as those of existing law are 
21intended as a continuation of such laws and not as new 
22enactments. The provisions of this part shall not affect any act 
23done, liability incurred, right accrued or vested, or any suit 
24or prosecution pending or to be instituted to enforce any right 
25or penalty or to punish any offense under the authority of any 
26repealed laws.

27(b) References.--References in this part to the Internal
28Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.)
29or the Uniformed Services Employment and Reemployment Rights Act
30of 1994 (Public Law 103-353, 108 Stat. 3149), including

1administrative regulations promulgated under the Internal
2Revenue Code of 1986 or the Uniformed Services Employment and
3Reemployment Rights Act of 1994, are intended to include laws
4and regulations:

5(1) In effect on the effective date of this subsection.

6(2) Amended, supplemented or supplanted on and after the
7effective date of this subsection.

8(c)  Officer or member of the Pennsylvania State Police.--

9(1)  Notwithstanding a provision of subsection (a) or
10section 12.1 of Act 120 of 2010, regarding the continued
11effectiveness of pension or retirement benefits or rights
12previously established by or as a result of a binding
13arbitration award issued before July 1, 1989, pursuant to the
14act of June 24, 1968 (P.L.237, No.111), referred to as the
15Policemen and Firemen Collective Bargaining Act, and
16implemented by the board, the pension or retirement benefits
17or rights of a State employee who is a current or former
18State police officer shall be as provided in this part as if
19the binding arbitration award was not issued, except as
20provided under this subsection.

21(2)  A State employee who meets the following shall be
22eligible to receive the maximum single life annuity, before
23optional modification under section 5705 (relating to
24member's options), that the State employee would have been
25eligible to receive if this subsection not been enacted:

26(i) Is a current or former State police officer.

27(ii) Has 20 or more qualifying eligibility points on
28or before December 31, 2014.

29(iii) Terminates State service.

30(3) (i)  A State employee who on December 31, 2014, is a

1current or former State police officer who has less than
220 qualifying eligibility points, who has not elected to
3pay an additional 6.05% regular member contribution and
4who terminates State service with 20 or more qualifying
5eligibility points shall be eligible to receive a maximum
6single life annuity, before optional modification under
7section 5705.

8(ii) The maximum single life annuity under
9subparagraph (i) shall be calculated with the benefit
10provided under section 5702(a)(1) replaced by an annuity
11calculated according to the formula specified in this
12subparagraph and explained by subparagraph (iii):

13(A) Divide:

14(I) YW; by

15(II) YT.

16(B) Multiply:

17(I) the quotient under clause (A); by

18(II) SH.

19(C) Multiply:

20(I) the product under clause (B); by

21(II) P.

22(D) Subtract:

23(I) YW; from

24(II) YT.

25(E) Divide:

26(I) the difference under clause (D); by

27(II) YT.

28(F) Multiply:

29(I) the quotient under clause (E); by

30(II) P.

1(G) Subtract:

2(I) YW; from

3(II) YT.

4(H) Multiply:

5(I) the difference under clause (G); by

6(II) .005.

7(I) Subtract

8(I) the product under clause (H); from

9(II) the product under clause (F).

10(J) Multiply:

11(I) the difference under clause (I); by

12(II) FASXYZ.

13(K) Add:

14(I) the product under clause (C); to

15(II) the product under clause (J).

16(iii) For the purposes of subparagraph (ii), the
17following shall apply:

18(A) P shall equal:

19(I) .5 if the member has 20 but less than 25
20qualifying eligibility points; or

21(II) .75 if the member has 25 or more
22qualifying eligibility points.

23(B) YT shall equal:

24(I) 20 if the member has 20 but less than 25
25qualifying eligibility points; or

26(II) 25 if the member has 25 or more
27qualifying eligibility points.

28(C) YW shall equal years of service credited in 
29classes or subclasses of service other than Subclass 
30X, Subclass Y or Subclass Z.

1(D) SH shall equal the member's highest year 
2compensation excluding the year in which the member 
3terminates.

4(E) FASXYZ shall equal final average salary 
5calculated for service credited in Subclass X, 
6Subclass Y and Subclass Z.

7(4) A State employee who on January 1, 2015, is a
8current or former State police officer who has less than 20
9qualifying eligibility points, who elects to pay an
10additional 6.05% regular member contributions and who
11terminates State service on or after January 1, 2015, with 20
12or more qualifying eligibility points shall be eligible to
13receive the maximum single life annuity, before optional
14modification under section 5705, that the State employee
15would have been eligible to receive if this subsection had
16not been enacted.

17(5) (i) A State employee who on January 1, 2015, is a
18State police officer who has less than 20 qualifying
19eligibility points may elect to pay an additional 6.05%
20of compensation as regular member contributions in
21addition to what otherwise would be paid by the employer
22as an active member of the system as a State police
23officer by filing written notice with the board in a form
24and manner determined by the board before July 1, 2015,
25before the member terminates State service or elects to
26be a participant in the plan, whichever occurs first. A
27State police officer who is on USERRA leave on January 1,
282015, or begins USERRA leave during the election period
29without having elected to pay an additional 6.05% of
30compensation as regular member contributions may make the

1election within 181 days after being reemployed from
2USERRA leave.

3(ii) An election to pay an additional 6.05% of
4compensation as regular member contributions shall be
5effective on January 1, 2015. Payment of the additional
6regular member contributions for service performed as a
7State police officer before the election, plus statutory
8interest from January 1, 2015, to the date of payment
9shall be made in a form, manner and time determined by
10the board under section 5504(b) (relating to member
11contributions for the purchase of credit for previous
12State service or to become a full coverage member).

13(iii) An election to pay an additional 6.05% of
14compensation as regular member contributions shall result
15in the member being a member of Subclass Z for any
16service as a Class AA member, Class D-4 member, Class E-1
17member or Class E-2 member on or after January 1, 2015.

18(6) For the purposes of this subsection, the following
19terms shall have the meanings given to them in this
20paragraph:

21"Act 120 of 2010" shall mean the act of November 23, 2010 
22(P.L. 1269, No. 120), entitled, "An act amending Titles 24 
23(Education) and 71 (State Government) of the Pennsylvania 
24Consolidated Statutes, in Title 24, further providing for 
25definitions, for mandatory and optional membership, for 
26contributions by the Commonwealth, for payments by employers, 
27for actuarial cost method, for additional supplemental 
28annuities, for further additional supplemental annuities, for 
29supplemental annuities commencing 1994, for supplemental 
30annuities commencing 1998, for supplemental annuities
 

1commencing 2002, for supplemental annuities commencing 2003, 
2for administrative duties of board, for payments to school 
3entities by Commonwealth, for eligibility points for 
4retention and reinstatement of service credits and for 
5creditable nonschool service; providing for election to 
6become a Class T-F member; further providing for classes of 
7service, for eligibility for annuities, for eligibility for 
8vesting, for regular member contributions, for member 
9contributions for creditable school service, for 
10contributions for purchase of credit for creditable nonschool 
11service, for maximum single life annuity, for disability 
12annuities, for member's options, for duties of board 
13regarding applications and elections of members and for 
14rights and duties of school employees and members; providing 
15for Independent Fiscal Office study; in Title 71, 
16establishing an independent fiscal office and making a 
17related repeal; further providing for definitions, for 
18credited State service, for retention and reinstatement of 
19service credits, for creditable nonstate service and for 
20classes of service; providing for election to become a Class 
21A-4 member; further providing for eligibility for annuities 
22and for eligibility for vesting; providing for shared-risk 
23member contributions for Class A-3 and Class A-4 service; 
24further providing for waiver of regular member contributions 
25and Social Security integration member contributions, for 
26member contributions for purchase of credit for previous 
27State service or to become a full coverage member, for 
28contributions for the purchase of credit for creditable 
29nonstate service, for contributions by the Commonwealth and 
30other employers, for actuarial cost method, for maximum
 

1single life annuity, for disability annuities and for 
2member's options; providing for payment of accumulated 
3deductions resulting from Class A-3 service; further 
4providing for additional supplemental annuities, for further 
5additional supplemental annuities, for supplemental annuities 
6commencing 1994, for supplemental annuities commencing 1998, 
7for supplemental annuities commencing 2002, for supplemental 
8annuities commencing 2003, for special supplemental 
9postretirement adjustment of 2002, for administrative duties 
10of the board, for duties of board to advise and report to 
11heads of departments and members, for duties of board 
12regarding applications and elections of members, for 
13installment payments of accumulated deductions, for rights 
14and duties of State employees and members, for members' 
15savings account, for State accumulation account, for State 
16Police Benefit Account, for Enforcement Officers' Benefit 
17Account, for supplemental annuity account and for 
18construction of part; and providing for Independent Fiscal 
19Office study, for retirement eligibility of Pennsylvania 
20State Police officers or members, for a prohibition on the 
21issuance of pension obligation bonds, for holding certain 
22public officials harmless, for construction of calculation or 
23actuarial method, for applicability and for certain 
24operational provisions."

25"Binding arbitration award." A binding arbitration award
26issued before July 1, 1989, pursuant to the act of June 24,
271968 (P.L.237, No.111), referred to as the Policemen and
28Firemen Collective Bargaining Act, and was implemented by the
29State Employees' Retirement Board.

30"Qualifying eligibility points." Eligibility points as a

1result of State service, non-State service or being
2reemployed from USERRA leave.

3(d) Adverse inference.--Nothing in this part shall be
4construed to mean that the limitations on benefits or other
5requirements under IRC § 401(a) or other applicable provisions
6of the IRC which are applicable to participants in the plan do
7not apply to the participants or to members of the system and
8the benefits payable under this part.

9(e) Applicability.--The following shall apply:

10(1) The amendment of this part regarding the
11establishment of and participation in the plan shall apply to
12current and former members of the State Employees' Retirement
13System who have returned to State service on or after July 1,
142015, after a termination of State service, notwithstanding
15the following:

16(i) Whether the termination occurred before or after
17July 1, 2015.

18(ii) Whether the State employee was an annuitant,
19inactive member, vestee or special vestee or withdrew
20accumulated deductions during the period of termination.

21(2) A terminated State employee who returns to State
22service on or after January 1, 2015, shall be subject to this
23part regarding participation in the plan or membership in the
24system which are in effect on the effective date of
25reemployment, including benefit formulas and accrual rates,
26eligibility for annuities and distributions, contribution
27rates, definitions, purchase of creditable school, nonschool,
28State and non-State service provisions and actuarial and
29funding assumptions.

30ARTICLE IV

1Section 401. The following shall apply:

2(1) The following provisions shall not create in a
3member of the Public School Employees' Retirement System, a
4participant in the School Employees' Defined Contribution
5Plan or another person claiming an interest in the account of
6a member or participant an express or implied contractual
7right in the provisions nor in a construction of 24 Pa.C.S.
8Pt. IV, 51 Pa.C.S. or rules or regulations adopted under 24
9Pa.C.S. Pt. IV or 51 Pa.C.S.:

10(i) A provision of this act which amends 51 Pa.C.S.
11or 24 Pa.C.S. Pt. IV in relation to requirements for any
12of the following:

13(A) Spousal consent.

14(B) Qualification of the School Employees'
15Defined Contribution Plan as a qualified pension plan
16under the Internal Revenue Code of 1986 (Public Law
1799-514, 26 U.S.C. §§ 401(a) and 415(b)), or
18compliance with the Uniformed Services Employment and
19Reemployment Rights Act of 1994 (Public Law 103-353,
20108 Stat. 3149).

21(C) Contributions to, participation in or
22benefits from the School Employees' Defined
23Contribution Plan or School Employees' Defined
24Contribution Trust.

25(D) Domestic relations orders regarding
26alternate payees of participants in the School
27Employees' Defined Contribution Plan.

28(ii) A construction of 24 Pa.C.S. Pt. IV or 51
29Pa.C.S. or rules or regulations adopted under 24 Pa.C.S.
30Pt. IV or 51 Pa.C.S. or a term or provision of the School

1Employees' Defined Contribution Plan or School Employees'
2Defined Contribution Trust, established by statute or in
3the plan document or trust declaration.

4(2) The provisions of 24 Pa.C.S. Pt. IV shall remain
5subject to the Internal Revenue Code of 1986 and the
6Uniformed Services Employment and Reemployment Rights Act of
71994 (Public Law 103-353, 108 Stat. 3149), and regulations
8under those statutes, and the General Assembly reserves to
9itself the further exercise of its legislative power to amend
10or supplement the provisions as may be required in order to
11maintain the qualification of the system as a qualified
12pension plan under section 401(a) and other applicable
13provisions of the Internal Revenue Code of 1986 and the
14Uniformed Services Employment and Reemployment Rights Act of
151994 (Public Law 103-353, 108 Stat. 3149).

16(3) The following provisions shall not create in a
17member of the State Employees' Retirement System, a
18participant in the State Employees' Defined Contribution Plan
19or another person claiming an interest in the account of a
20member or participant an express or implied contractual right
21in the provisions nor in a construction of 51 Pa.C.S. § 7306,
2271 Pa.C.S. Pt. XXV, or rules or regulations adopted under 51
23Pa.C.S. § 7306 or 71 Pa.C.S. Pt. XXV:

24(i) A provision of this act which amends 51 Pa.C.S.
25§ 7306 or 71 Pa.C.S. Pt. XXV in relation to requirements
26for any of the following:

27(A) Spousal consent.

28(B) Qualification of the State Employees'
29Defined Contribution Plan as a qualified pension plan
30under the Internal Revenue Code of 1986 (Public Law

199-514, 26 U.S.C. §§ 401(a) and 415(b)) or compliance
2with the Uniformed Services Employment and
3Reemployment Rights Act of 1994 (Public Law 103-353,
4108 Stat. 3149).

5(C) Contributions to, participation in or
6benefits from the State Employees' Defined
7Contribution Plan or State Employees' Defined
8Contribution Trust.

9(D) Domestic relations orders regarding
10alternate payees of participants in the State
11Employees' Defined Contribution Plan.

12(ii) A construction of 51 Pa.C.S. or 71 Pa.C.S. Pt.
13XXV or rules or regulations adopted under 51 Pa.C.S. or
1471 Pa.C.S. Pt. XXV or a term or provision of the State
15Employees' Defined Contribution Plan or State Employees'
16Defined Contribution Trust, established by statute or in
17the plan document or trust declaration.

18(4) The provisions of 71 Pa.C.S. Pt. XXV shall remain
19subject to the Internal Revenue Code of 1986 and the
20Uniformed Services Employment and Reemployment Rights Act of
211994 (Public Law 103-353, 108 Stat. 3149), and regulations
22under those statutes, and the General Assembly reserves to
23itself the further exercise of its legislative power to amend
24or supplement the provisions as may be required in order to
25maintain the qualification of the system as a qualified
26pension plan under section 401(a) and other applicable
27provisions of the Internal Revenue Code of 1986 and the
28Uniformed Services Employment and Reemployment Rights Act of
291994 (Public Law 103-353, 108 Stat. 3149).

30Section 402. The following shall apply:

1(1) Nothing in this act shall be construed to mean that
2a calculation or actuarial method used by the School
3Employees' Retirement Board, its actuaries or the Public
4School Employees' Retirement System was not in accordance
5with the provisions of 24 Pa.C.S. Pt. IV or other applicable
6law prior to the effective date of this section.

7(2) Nothing in this act shall be construed to mean that
8a calculation or actuarial method used by the State
9Employees' Retirement Board, its actuaries or the State
10Employees' Retirement System was not in accordance with the
11provisions of 71 Pa.C.S. Pt. XXV or other applicable law
12prior to the effective date of this section.

13Section 403. The following shall apply:

14(1) Notwithstanding any other provision of law, a change
15in the accrued liability of the Public School Employees'
16Retirement System created under this act shall not be
17considered to be costs added by legislation.

18(2) Notwithstanding any other provision of law, a change
19in accrued liability of the State Employees' Retirement
20System created under this act as a result of changes in
21benefits shall be funded in equal dollar installments over a
22period of 20 years beginning July 1, 2014.

23(3) (i) Except as provided under subparagraph (ii), a
24change in accrued liability as a result of amendments to
2571 Pa.C.S. §§ 5507 and 5508 or the addition of 71 Pa.C.S.
26§§ 5507.1 and 5508.1 shall be funded in equal dollar
27installments over a period of 30 years beginning July 1,
282014.

29(ii) A change in accrued liability as a result of
30changes under this act to the collared contribution rates

1shall be amortized as part of the experience adjustment
2factor as provided under 71 Pa.C.S. §§ 5508(f) and
35508.1(e).

4(4) Payments required to fund a change in accrued
5liability resulting from this act shall be subject to limits
6imposed under this act on employer contributions to the State
7Employees' Retirement System and shall not be subject to
8reamortization for 30 years under 71 Pa.C.S. § 5508.1(c).

9(5) For purposes of 71 Pa.C.S. §§ 5501.2, 5507 and 5508,
10changes under this section shall not be considered to be
11costs added by legislation.

12Section 404. The following shall apply:

13(1) This act shall be construed and administered in such
14a manner that the Public School Employees' Retirement System
15and the School Employees' Defined Contribution Plan shall
16satisfy the requirements necessary to qualify as a qualified
17pension plan under section 401(a) of the Internal Revenue
18Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)), other
19applicable provisions of the Internal Revenue Code of 1986
20and the Uniformed Services Employment and Reemployment Rights
21Act of 1994 (Public Law 103-353, 108 Stat. 3149). The rules,
22regulations and procedures adopted and promulgated by the
23Public School Employees' Retirement Board and the terms and
24conditions of the plan document and trust declaration adopted
25by the Public School Employees' Retirement Board may include
26provisions necessary to accomplish the purpose of this
27section.

28(2) This act shall be construed and administered in a 
29manner that the State Employees' Retirement System and the 
30State Employees' Defined Contribution Plan shall satisfy the
 

1requirements necessary to qualify as a qualified pension plan 
2under section 401(a) of the Internal Revenue Code of 1986 
3(Public Law 99-514, 26 U.S.C. § 401(a)), other applicable 
4provisions of the Internal Revenue Code of 1986 and the 
5Uniformed Services Employment and Reemployment Rights Act of 
61994 (Public Law 103-353, 108 Stat. 3149). The rules, 
7regulations and procedures adopted and promulgated by the 
8State Employees' Retirement Board and the terms and 
9conditions of the plan document and trust declaration adopted 
10by the State Employees' Retirement Board may include 
11provisions necessary to accomplish the purpose of this 
12section.

13Section 405. The following shall apply:

14(1) Notwithstanding any other provision of law, the
15Public School Employees' Retirement Board shall, within 15
16days of the effective date of this section, recertify to the
17Secretary of the Budget and employers for the fiscal year
18beginning July 1, 2013, the contributions, rates, factors and
19amounts under 24 Pa.C.S. § 8502(k) to reflect the impact of
20this act. The recertification shall supersede the prior
21certification.

22(2) If, prior to the effective date of this section, the 
23board certifies employer contribution rates for the fiscal 
24year beginning July 1, 2013, the board shall, notwithstanding 
25any other provision of law, recertify to the Secretary of the 
26Budget the contributions, rates, factors and amounts under 71 
27Pa.C.S. § 5902(k). The board's recertification shall reflect 
28all changes in the contributions, rates, factors and amounts 
29previously certified by the board prior to the effective date 
30of this section for the fiscal year beginning July 1, 2013,
 

1which are required to comply with 71 Pa.C.S. § 5508. The 
2recertification shall occur within 15 days of the effective 
3date of this section and shall supersede the prior 
4certification.

5Section 406. The following shall apply:

6(1) Notwithstanding any other provision of law,
7fiduciary requirement, actuarial standard of practice or
8other requirement, the members of the Public School
9Employees' Retirement Board, the actuary and employees and
10officials of the Public School Employees' Retirement System
11may not be held liable or in breach or violation of a law or
12standard as individuals, in their official capacity or as a
13governmental or corporate entity, for an action or
14calculation related to calculating and certifying a final
15contribution rate as provided under this act that is
16different from the actuarially required contribution rate as
17appropriately calculated under 24 Pa.C.S. Pt. IV.

18(2) Notwithstanding any other provision of law,
19fiduciary requirement, actuarial standard of practice or
20other requirement, the members of the State Employees'
21Retirement Board, the actuary and other employees and
22officials of the State Employees' Retirement System may not
23be held liable or in breach or violation of a law or standard
24as individuals, in their official capacity or as a
25governmental or corporate entity, for an action or
26calculation related to calculating and certifying a final
27contribution rate as provided under this act that is
28different from the actuarially required contribution rate as
29appropriately calculated under 71 Pa.C.S. Pt. XXV.

30Section 407. Nothing in this act shall be deemed to permit

1the restoration of service credit or retirement benefits which:

2(1) were or are subject to section 16 of Article V of
3the Constitution of Pennsylvania or 42 Pa.C.S. § 3352; or

4(2) the subject of an order of forfeiture under the act
5of July 8, 1978 (P.L.752, No.140), known as the Public
6Employee Pension Forfeiture Act.

7Section 408. Legal challenges to this act shall be subject
8to review as follows:

9(1) Notwithstanding 42 Pa.C.S., all legal challenges to
10the constitutionality of this act shall be filed with the
11prothonotary of the Supreme Court.

12(2) The Supreme Court shall empanel a special tribunal
13composed of seven senior judges chosen at random by lot from
14a list of the senior judges currently serving the Superior,
15Commonwealth and Common Pleas Courts.

16(3) The special tribunal under paragraph (2) shall hear
17and decide a legal challenge to the constitutionality of this
18act in the same manner in which the Supreme Court would hear
19and decide a legal challenge within its original
20jurisdiction.

21Section 409. If a provision of this act or its application
22to any person or circumstance is held invalid, the invalidity
23shall not affect other provisions or applications of this act
24that can be given effect without the invalid provision or
25application.

26Section 410. Nothing in this act shall be construed to mean
27that an interpretation or application of 71 Pa.C.S. Pt. XXV or
28benefits available to members of the State Employees' Retirement
29System was not in accordance with 71 Pa.C.S. Pt. XXV or other
30applicable law, including the Internal Revenue Code of 1986

1(Public Law 99-514, 26 U.S.C. § 1 et seq.) and the Uniformed
2Services Employment and Reemployment Rights Act of 1994 (Public
3Law 103-353, 108 Stat. 3149) before the effective date of this
4subsection.

5Section 411. This act shall take effect immediately.