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PRINTER'S NO. 1450
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
1082
Session of
2015
INTRODUCED BY BROWNE, CORMAN, SCARNATI, GORDNER AND
EICHELBERGER, DECEMBER 4, 2015
REFERRED TO FINANCE, DECEMBER 4, 2015
AN ACT
Amending Titles 24 (Education), 51 (Military Affairs) and 71
(State Government) of the Pennsylvania Consolidated Statutes,
extensively revising pension provisions: for the Public
School Employees' Retirement System, in the areas of
preliminary provisions, of membership, contributions and
benefits, of School Employee's Defined Contribution Plan and
of administration and miscellaneous provisions; for health
insurance for retired school employees, in the area of
preliminary provisions; for military pensions, in the area of
military leave of absence; for boards and offices, in the
area of Independent Fiscal Office; for the State Employees'
Retirement System, in the areas of preliminary provisions, of
membership, credited service, classes of service and
eligibility for benefits, of State Employees' Defined
Contribution Plan, of contributions, of benefits and of
administration, funds, accounts, general provisions; and
providing, as to the revisions, for construction and
administration, for applicability, for funding, for
liability, for State Employee member statements and for State
Employees Retirement Board obligations.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
ARTICLE I
Section 101. The General Assembly finds and declares as
follows:
(1) It is the intent of the General Assembly to ensure
the financial health of the Commonwealth and its school
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districts by adopting reforms to provide for the
sustainability of our public retirement system.
(2) Pennsylvania's retirement systems, SERS for State
employees and PSERS for school employees, together have an
unfunded liability of $60,121,184,000. The level of payment
by the Commonwealth and school districts required to annually
address these amounts is staggering, particularly when other
state revenues are reduced due to a struggling economy. The
current condition of Pennsylvania's unfunded system combined
with the State's structural deficit threaten the financial
well-being of current and future public employees.
(3) In order to fully fund State pensions systems,
economists estimate that contributions will continue to
require a significant portion of state revenues. In fiscal
year 2015-2016, pension expenditures are expected to exceed
$4,800,000,000 and $7,300,000,000 by 2025.
(4) The tax increases that would be required to address
increasing pension obligations would place a heavy burden on
the citizens of this Commonwealth and hamper the ability to
provide them with services vital to the public's health,
safety and welfare. Therefore, it is imperative that the
Commonwealth adopt reforms that will maintain the financial
health of the Commonwealth and its school districts.
(5) Therefore, the reforms contained in this legislation
are intended to use resources judiciously and enable the
Commonwealth to provide retirement security for Commonwealth
and school employees while reducing the burden on taxpayers.
(6) The reforms of the retirement benefits of
Commonwealth and school district employees contained in this
act are prospective and will not impact benefits earned from
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services rendered prior to the effective date of this act.
(7) The General Assembly finds that it is necessary to
advance and maintain the long-term stability of public
employee pension systems by adopting reform relating to
current and to future employees in order to:
(i) Ensure that the Commonwealth and its school
districts will have adequate funds to continue to be able
to provide retirement benefits for their employees.
(ii) To ensure that the cost of current and future
benefits does not jeopardize the ability and obligation
to provide for public education, infrastructure, programs
for the elderly and other vulnerable populations and
public safety.
(8) The General Assembly expressly finds and declares
that the situation confronting our pensions systems has
reached a critical state and that enactment of this act is
reasonable and necessary to achieve and protect the public
interests. Further, the General Assembly finds that
protecting benefits for services already rendered meets all
legal standards relating to changes in benefits.
ARTICLE II
Section 201. Section 8102 of Title 24 of the Pennsylvania
Consolidated Statutes is amended to read:
§ 8102. Definitions.
The following words and phrases when used in this part shall
have, unless the context clearly indicates otherwise, the
meanings given to them in this section:
"Accumulated deductions." The total of pickup contributions
[and], eligible roll-ins made under section 8507(l) (relating to
rights and duties of school employees, members and
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participants), the contributions paid into the fund by the
member on account of current school service, previous school
service, or creditable nonschool service, excess interest
awarded under section 8523(d) (relating to members' savings
account and cash balance account) on member contributions, and
the statutory interest credited on all such contributions.
"Accumulated employer defined contributions." The total of
the employer defined contributions paid into the trust on
account of a participant's school service together with any
investment earnings and losses and adjustments for fees, costs
and expenses credited or charged thereon.
"Accumulated mandatory participant contributions." The total
of the mandatory pickup participant contributions paid into the
trust on account of a participant's school service together with
any investment earnings and losses and adjustments for fees,
costs and expenses credited or charged thereon.
"Accumulated total defined contributions." The total of the
accumulated mandatory participant contributions, accumulated
employer defined contributions and accumulated voluntary
contributions, reduced by any distributions, standing to the
credit of a participant in an individual investment account in
the trust.
"Accumulated voluntary contributions." The total of
voluntary contributions paid into the trust by a participant and
any amounts rolled over by a participant or transferred by a
direct trustee-to-trustee transfer into the trust together with
any investment earnings and losses and adjustments for fees,
costs and expenses credited or charged thereon.
"Activated military service." Military service by a member
of a reserve component of the armed forces, pursuant to an order
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on or after July 1, 1990, and prior to July 1, 2013, to enter
into active military service, other than an order to enter into
active duty to meet periodic training requirements, who was an
active member of the system immediately preceding the order into
active military service and to whom the military leave
provisions of 51 Pa.C.S. Ch. 73 (relating to military leave of
absence) do not apply.
"Active member." A school employee for whom pickup
contributions are being made to the fund or for whom such
contributions otherwise required for current school service are
not being made solely by reason of any provision of this part
limiting compensation or relating to the limitations under
section 401(a)(17) or 415(b) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)).
"Active participant." A school employee for whom mandatory
pickup participant contributions are being made to the trust or
for whom such contributions otherwise required for current
school service are not being made solely by reason of any
provision of this part relating to the limitations under section
401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public
Law 99-514, 26 U.S.C. § 401(a)(17) or 415) or any provision of
this part limiting compensation.
"Actuarially equivalent." Equal present values, computed on
the basis of statutory interest and the mortality tables adopted
by the board.
"Actuary." The consultant to the board who shall be:
(1) a member of the American Academy of Actuaries;
(2) an individual who has demonstrated to the
satisfaction of the Insurance Commissioner of Pennsylvania
that he has the educational background necessary for the
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practice of actuarial science and has had at least seven
years of actuarial experience; or
(3) a firm, partnership, or corporation of which at
least one member meets the requirements of paragraph (1) or
(2).
"Alternate payee." Any spouse, former spouse, child or
dependent of a member or participant who is recognized by a
domestic relations order as having a right to receive all or a
portion of the moneys payable to that member or participant
under this part.
"Alternative investment." An investment in a private equity
fund, private debt fund, venture fund, real estate fund, hedge
fund or absolute return fund.
"Alternative investment vehicle." A limited partnership,
limited liability company or any other legal vehicle for
authorized investments under section 8521(i) (relating to
management of fund and accounts) through which the system makes
an alternative investment.
"Annuitant." Any member on or after the effective date of
retirement until his annuity is terminated.
"Approved domestic relations order." Any domestic relations
order which has been determined to be approved in accordance
with section 8533.1 (relating to approval of domestic relations
orders).
"Approved leave of absence." [A] As applied to all classes
of membership except Class T-I, a leave of absence for activated
military service or which has been approved by the employer for
sabbatical leave, service as an exchange teacher, service with a
collective bargaining organization or professional study. As
applied to Class T-I members, a leave of absence that has been
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approved as a contributory leave by the employer for sabbatical
leave, service as an exchange teacher, service with a collective
bargaining organization or professional study.
"Basic contribution rate." For Class T-A, T-B and T-C
service, the rate of 6 1/4%. For Class T-D service, the rate of
7 1/2%. For all active members on the effective date of this
provision who are currently paying 5 1/4% and elect Class T-D
service, the rate of 6 1/2%. For Class T-E service, the rate of
7 1/2%. For Class T-F service, the rate of 10.30%. For Class T-I
service, the rate of 3%.
"Beneficiary." [The] In the case of the system, the person
or persons last designated in writing to the board by a member
to receive his accumulated deductions or a lump sum benefit upon
the death of such member. In the case of the plan, the person or
persons last designated in writing to the board by a participant
to receive the participant's vested accumulated total defined
contributions upon the death of the participant.
"Board." The Public School Employees' Retirement Board or
the Public School Employes' Retirement Board.
"Cash balance account." The ledger account into which
members contribute cash balance member contributions, together
with employer contributions, interest and excess interest, as
provided in this part.
"Cash balance member contributions." For members in a class
other than Class T-I, the amount voluntarily contributed by such
member and eligible amounts rolled in to the cash balance
account, as provided in this part.
"Class of service multiplier."
Class of service Multiplier
T-A .714
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T-B .625
T-C 1.000
T-D 1.000
T-E 1.000
T-F 1.000
"Combined service employee." A current or former school
employee who is both a member of the system and a participant in
the plan.
"Commissioner." The Commissioner of the Internal Revenue
Service.
"Compensation." Pickup contributions and mandatory pickup
participant contributions plus any remuneration received as a
school employee excluding reimbursements for expenses incidental
to employment and excluding any bonus, severance payments, any
other remuneration or other emolument received by a school
employee during his school service which is not based on the
standard salary schedule under which he is rendering service,
payments for unused sick leave or vacation leave, bonuses or
other compensation for attending school seminars and
conventions, payments under health and welfare plans based on
hours of employment or any other payment or emolument which may
be provided for in a collective bargaining agreement which may
be determined by the Public School Employees' Retirement Board
to be for the purpose of enhancing compensation as a factor in
the determination of final average salary, and, for
participants, excluding payments for military leave and any
other payments made by an employer while on USERRA leave, leave
of absence granted under 51 Pa.C.S. § 4102 (relating to leaves
of absence for certain government employees), military leave of
absence granted under 51 Pa.C.S. § 7302 (relating to granting
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military leaves of absence), leave granted under section 1178 of
the act of March 10, 1949 (P.L.30, No.14), known as the Public
School Code of 1949, or other types of military leave, including
other types of leave payments, stipends, differential wage
payments as defined in IRC § 414(u)(12) and any other payments,
provided, however, that the limitation under section 401(a)(17)
of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17)) taken into account for the purpose of
member contributions, including regular or joint coverage member
contributions, regardless of class of service, shall apply to
each member who first became a member of the Public School
Employes' Retirement System on or after July 1, 1996, and who by
reason of such fact is a noneligible member subject to the
application of the provisions of section 8325.1 (relating to
annual compensation limit under IRC § 401(a)(17))[.] and shall
apply to each participant. Notwithstanding the above, for Class
T-E and Class T-F service performed on or after July 1, 2016,
compensation for each fiscal year, for purposes of determining
final average salary and applying the basic contribution rate,
shall not exceed the Social Security taxable wage base in effect
at the beginning of the fiscal year. The limit shall be applied
separately to each employer of a member.
"Concurrent service." Simultaneously credited school and
State service.
"Creditable nonschool service." Service other than service
as a school employee for which an active member may obtain
credit in the system.
"Credited service." School or creditable nonschool service
for which the required contributions have been made to the fund,
or for which the contributions otherwise required for such
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service were not made solely by reason of any provision of this
part limiting compensation or relating to the limitations under
section 401(a)(17) or 415(b) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)), or
for which salary deductions to the system or lump sum payments
have been agreed upon in writing.
"Date of termination of service." The latest of the
following dates:
(1) the last [date] day of service for which pickup
contributions are made for an active member or[,] for which
the contributions otherwise required for such service were
not made solely by reason of any provision of this part
limiting compensation or relating to the limitations under
section 401(a)(17) or 415 of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415;
(2) in the case of an inactive member or an inactive
participant, the effective date of his resignation or the
date his employment is formally discontinued by his employer
or two years following the last day of service for which
contributions were made, whichever is earliest[.]; or
(3) in the case of a combined service employee, the
latest of the dates in paragraph (1) or (2).
"Disability annuitant." A member on or after the effective
date of disability until his disability annuity or the portion
of his disability annuity payments in excess of any annuity to
which he may otherwise be entitled is terminated.
"Distribution." Payment of all or any portion of a person's
interest in either the Public School Employees' Retirement Fund
or the School Employees' Defined Contribution Trust, or both,
which is payable under this part.
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"Domestic relations order." Any judgment, decree or order,
including approval of a property settlement agreement, entered
on or after the effective date of this definition by a court of
competent jurisdiction pursuant to a domestic relations law
which relates to the marital property rights of the spouse or
former spouse of a member or participant, including the right to
receive all or a portion of the moneys payable to that member or
participant under this part in furtherance of the equitable
distribution of marital assets. The term includes orders of
support as that term is defined by 23 Pa.C.S. § 4302 (relating
to definitions) and orders for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages).
"Effective date of retirement." The first day following the
date of termination of service of a member if he has properly
filed an application for an annuity within 90 days of such date
or:
(1) In the case of a member who applies for an annuity
subsequent to 90 days after termination of service, the date
of filing such application or the date specified on the
application, whichever is later.
(2) In the case of a vestee who files an application for
an annuity within 90 days of his superannuation age, the
attainment of such age.
(3) In the case of a vestee who defers the filing of an
application for an annuity to a date later than 90 days
following attainment of superannuation age, the date of
filing or the date specified on the application, whichever is
later.
(4) In the case of a finding of disability, the date
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certified by the board as the effective date of disability.
"Eligible annuitants." All current and prospective
annuitants with 24 1/2 or more eligibility points and all
current and prospective disability annuitants. Beginning January
1, 1995, "eligible annuitants" shall include members other than
Class T-I members with 15 or more eligibility points who
terminated or who terminate school service on or after attaining
superannuation retirement age and who are annuitants with an
effective date of retirement after superannuation age.
"Eligibility points." Points which are accrued by an active
member, a multiple service member who is an active member of the
State Employees' Retirement System for credited service or by a
member who has been reemployed from USERRA leave or dies while
performing USERRA leave and are used in the determination of
eligibility for benefits as provided in section 8306 (relating
to eligibility points). Class T-I members shall be deemed to
accrue one eligibility point for each fiscal year in which
contributions have been made to the fund.
"Employer." Any governmental entity directly responsible for
the employment and payment of the school employee and charged
with the responsibility of providing public education within
this Commonwealth, including but not limited to: State-owned
colleges and universities, the Pennsylvania State University,
community colleges, area vocational-technical schools,
intermediate units, the State Board of Education, Scotland
School for Veterans' Children, Thaddeus Stevens College of
Technology, and the Western Pennsylvania School for the Deaf.
"Employer defined contributions." Contributions equal to
2.59% of an active participant's compensation that are made by
an employer for current service to the trust to be credited in
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the active participant's individual investment account.
"Excess interest." The investment earnings of the fund
attributable to Class T-I members and members who have elected
to contribute to the cash balance account, calculated in
accordance with section 8523(d) (relating to members' savings
account and cash balance account).
"Final average salary." The highest average compensation
received as an active member during any three nonoverlapping
periods of 12 consecutive months with the compensation for part-
time service being annualized on the basis of the fractional
portion of the school year for which credit is received; except,
if the employee was not a member for three such periods, the
total compensation received as an active member annualized in
the case of part-time service divided by the number of such
periods of membership; in the case of a member with multiple
service credit, the final average salary shall be determined by
reference to compensation received by him as a school employee
or a State employee or both; and, in the case of a noneligible
member, subject to the application of the provisions of section
8325.1 (relating to annual compensation limit under IRC § 401(a)
(17)). Final average salary shall be determined by including in
compensation, payments deemed to have been made to a member
reemployed from USERRA leave to the extent member contributions
have been made as provided in section 8302(d)(2) (relating to
credited school service) and payments made to a member on leave
of absence under 51 Pa.C.S. § 4102 (relating to leaves of
absence for certain government employees) as provided in section
8302(d)(6). Notwithstanding the above, for Class T-E and Class
T-F service performed on or after July 1, 2016, compensation to
be used for final average salary calculation shall not exceed
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the Social Security taxable wage base in effect at the beginning
of the fiscal year.
"Full coverage member." Any member for whom regular member
pickup contributions are being picked up or who has paid or has
agreed to pay to the fund the actuarial equivalent of regular
member contributions due on account of service prior to January
1, 1983.
"Fund." The Public School Employees' Retirement Fund.
"Governmental entity." Board of school directors, board of
public education, intermediate unit board of directors, area
vocational-technical board, any governing board of any agency or
authority created by them, and the Commonwealth.
"Inactive member." A member for whom no pickup contributions
are being made to the fund, except in the case of an active
member for whom such contributions otherwise required for
current school service are not being made solely by reason of
any provision of this part relating to the limitations under
section 401(a)(17) or 415(b) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)) or
because the member is on USERRA leave, who has accumulated
deductions standing to his credit in the fund and for whom
contributions have been made within the last two school years or
a multiple service member who is active in the State Employees'
Retirement System.
"Inactive participant." A participant for whom no mandatory
pickup participant contributions are being made to the trust,
except in the case of an active participant for whom such
contributions otherwise required for current school service are
not being made solely by reason of any provision of this part
relating to limitations under section 401(a)(17) or 415 of the
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Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or 415), who has vested accumulated total defined
contributions standing to his credit in the trust and who has
not filed an application for a distribution.
"Individual investment account." The account in the trust to
which are credited the amounts of the contributions made by a
participant and the participant's employer in accordance with
the provisions of this part, together with all investment
earnings after deduction for fees, costs and expenses,
investment losses and charges for distributions.
"Intervening military service." Active military service of a
member who was a school employee and an active member of the
system immediately preceding his induction into the armed
services or forces of the United States in order to meet a draft
obligation excluding any voluntary extension of such
obligational service and who becomes a school employee and an
active member of the system within 90 days of the expiration of
such service.
"IRC." The Internal Revenue Code of 1986, as designated and
referred to in section 2 of the Tax Reform Act of 1986 (Public
Law 99-514, 100 Stat. 2085, 2095). A reference in this part to
"IRC § " shall be deemed to refer to the identically numbered
section and subsection or other subdivision of such section in
26 United States Code (relating to Internal Revenue Code).
"Irrevocable beneficiary." The person or persons permanently
designated by a member or participant in writing to the board
pursuant to an approved domestic relations order to receive all
or a portion of the accumulated deductions, vested accumulated
total defined contributions or lump sum benefit payable upon the
death of such member or participant.
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"Irrevocable successor payee." The person permanently
designated in writing by a participant to the board pursuant to
an approved domestic relations order to receive one or more
distributions from the plan upon the death of such participant.
"Irrevocable survivor annuitant." The person permanently
designated by a member in writing to the board pursuant to an
approved domestic relations order to receive an annuity upon the
death of such member.
"Joint coverage member." Any member who agreed prior to
January 1, 1966 to make joint coverage member contributions to
the fund and has not elected to become a full coverage member.
"Joint coverage member contributions." Regular member
contributions reduced for a joint coverage member.
"Leave for service with a collective bargaining
organization." Paid leave granted to an active member or active
participant by an employer for purposes of working full time for
or serving full time as an officer of a Statewide employee
organization or a local collective bargaining representative
under the act of July 23, 1970 (P.L.563, No.195), known as the
Public Employe Relations Act: Provided, That greater than one-
half of the members of the employee organization are active
members of the system or active participants of the plan; that
the employer shall fully compensate the member or active
participant, including, but not limited to, salary, wages,
pension and retirement contributions and benefits, other
benefits and seniority, as if he were in full-time active
service; and that the employee organization shall fully
reimburse the employer for such salary, wages, pension and
retirement contributions and benefits and other benefits and
seniority.
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"Mandatory pickup participant contributions." Contributions
equal to 3% of compensation that are made by the employer for
active participants for current service that are picked up by
the employer and credited in the trust.
"Maternity leave of absence." An involuntary leave of
absence required by the employer because of the pregnancy of the
member and commencing prior to May 17, 1975.
"Member." Active member, inactive member, annuitant, or
vestee.
"Member's annuity." The single life annuity which is
actuarially equivalent on the effective date of retirement to
the sum of the accumulated deductions and the shared-risk member
contributions and statutory interest credited on the deductions
and contributions standing to the member's credit in the
members' savings account.
"Military service." All active military service for which a
member has received a discharge other than an undesirable, bad
conduct, or dishonorable discharge.
"Multiple service." Credited service of a member other than
a Class T-I member or Class TDB member in the State Employees'
Retirement System who has elected to combine his credited
service in both the Public School Employees' Retirement System
and the State Employees' Retirement System.
"Noneligible member." For the purposes of section 8325.1
(relating to annual compensation limit under IRC § 401(a)(17)),
a member who first became a member on or after July 1, 1996.
"Participant." An active participant, inactive participant
or participant receiving distributions.
"Participating eligible annuitants." All eligible annuitants
who are enrolled or elect to enroll in a health insurance
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program approved by the Public School Employees' Retirement
Board.
"Participant receiving distributions." A participant in the
plan who has commenced receiving distributions from his
individual investment account but who has not received a total
distribution of his vested interest in the individual investment
account.
"Pickup contributions." Regular or joint coverage member
contributions and shared-risk member contributions and mandatory
cash balance account contributions which are made by the
employer for active members for current service on and after
January 1, 1983.
"Plan." The School Employees' Defined Contribution Plan as
established by the provisions of this part and the board.
"Plan document." The documents created by the board under
section 8402 (relating to plan document) that contain the terms
and provisions of the plan and trust as established by the board
regarding the establishment, administration and investment of
the plan and trust.
"Previous school service." Service [rendered] as a school
employee including service in any summer school conducted by a
school district of the Commonwealth, but excluding service
rendered during which the school employee was or could have been
a participant in the plan, prior to the member's most recent
entrance in the system.
"Public school." Any or all classes or schools within this
Commonwealth conducted under the order and superintendence of
the Department of Education including, but not limited to: all
educational classes of any employer charged with the
responsibility of public education within this Commonwealth as
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well as those classes financed wholly or in part by the Federal
Government, State-owned colleges and universities, the
Pennsylvania State University, community colleges, area
vocational-technical schools, intermediate units, the State
Board of Education, Scotland School for Veterans' Children,
Thaddeus Stevens State School of Technology, and the
Pennsylvania State Oral School for the Deaf.
"Public School Code." The act of March 10, 1949 (P.L.30,
No.14), known as the Public School Code of 1949.
"Reemployed from USERRA leave." Resumption of active
membership or active participation as a school employee after a
period of USERRA leave, if the resumption of active membership
or active participation was within the time period and under
conditions and circumstances such that the school employee was
entitled to reemployment rights under 38 U.S.C. Ch. 43 (relating
to employment and reemployment rights of members of the
uniformed services).
"Regular member contributions." The product of the basic
contribution rate and the compensation of the member.
"Required beginning date." The latest date by which
distributions of a participant's interest in his individual
investment account must commence under the Internal Revenue Code
of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).
"Reserve component of the armed forces." The United States
Army Reserve, United States Navy Reserve, United States Marine
Corps Reserve, United States Coast Guard Reserve, United States
Air Force Reserve, Pennsylvania Army National Guard and
Pennsylvania Air National Guard.
"Salaried employee." A school employee who is compensated on
the basis of an annual salary.
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"Salary deductions." The amounts certified by the board,
deducted from the compensation of an active member or active
participant or the State service compensation of a multiple
service member who is an active member of the State Employees'
Retirement System or active participant of the School Employees'
Defined Contribution Plan and paid into the fund or trust.
"School employee." Any person engaged in work relating to a
public school for any governmental entity and for which work he
is receiving regular remuneration as an officer, administrator
or employee excluding, however, any independent contractor or a
person compensated on a fee basis.
"School entity." A school district of any class,
intermediate unit or an area vocational-technical school, as
provided for under the act of March 10, 1949 (P.L.30, No.14),
known as the Public School Code of 1949.
"School service." Service rendered as a school employee.
"School year." The 12-month period which the governmental
entity uses for purposes of administration regardless of the
actual time during which a member renders service.
"Severance payments." Any payments for unused vacation or
sick leave and any additional compensation contingent upon
retirement including payments in excess of the scheduled or
customary salaries provided for members within the same
governmental entity with the same educational and experience
qualifications who are not terminating service.
"Shared-risk contribution rate." The [additional]
contribution rate that is [added] applied to the basic
contribution rate for Class T-D, T-E and T-F members, as
provided for in section 8321(b) and (c) (relating to regular
member contributions for current service).
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"Standard single life annuity." For Class T-A, T-B and T-C
credited service of a member, an annuity equal to 2% of the
final average salary, multiplied by the total number of years
and fractional part of a year of credited service of a member in
that class. For Class T-D credited service of a member, an
annuity equal to 2.5% of the final average salary, multiplied by
the total number of years and fractional part of a year of
credited service in that class. For Class T-E credited service
of a member, an annuity equal to 2% of the final average salary,
multiplied by the total number of years and fractional part of a
year of credited service of a member. For Class T-F credited
service of a member, an annuity equal to 2.5% of the final
average salary, multiplied by the total number of years and
fractional part of a year of credited service of a member. For
Class T-I members, and for monies in the cash balance account of
members of other classes, an annuity that is actuarially
equivalent to the balance of the member's savings account or the
cash balance account, as applicable, calculated using 120% of
the mid-term Treasury note rate in effect on the effective date
of retirement of the member.
"State Employees' Defined Contribution Plan." The defined
contribution plan for State employees established by 71 Pa.C.S.
Pt. XXV (relating to retirement for State employees and
officers).
"State Employees' Retirement System." The retirement system
established by the act of June 27, 1923 (P.L.858, No.331) and
codified by the act of June 1, 1959 (P.L.392, No.78) and by Part
XXV of Title 71 (relating to retirement for State employees and
officers), added March 1, 1974 (P.L.125, No.31).
"State service." Service rendered as a State employee and
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credited as service in the State Employees' Retirement System.
"Statutory interest." Interest at 4% per annum, compounded
annually.
"Successor payee." The person or persons last designated in
writing by a participant to the board to receive one or more
distributions upon the death of such participant.
"Superannuation annuitant." An annuitant whose annuity first
became payable on or after the attainment of superannuation age
and who is not a disability annuitant.
"Superannuation or normal retirement age."
Class of service Age
T-A
62 or any age upon accrual of
35 eligibility points
T-B 62
T-C and T-D
62 or age 60 provided the
member has at least 30
eligibility points or any
age upon accrual of 35
eligibility points
T-E and T-F
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
"Survivor annuitant." The person or persons last designated
by a member or participant under a joint and survivor annuity
option to receive an annuity upon the death of such member. A
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combined service employee may designate different persons to be
survivor annuitants for the benefits from the system and
beneficiaries or successor payees for the benefits from the
plan.
"System." The Public School Employes' Retirement System of
Pennsylvania as established by the act of July 18, 1917
(P.L.1043, No.343), and codified by the act of June 1, 1959
(P.L.350, No.77).
"Total member contribution rate." The sum of the basic
contribution rate and the shared-risk contribution rate.
"Trust." The School Employees' Defined Contribution Trust
established under Chapter 84 (relating to School Employees'
Defined Contribution Plan).
"USERRA." The Uniformed Services Employment and Reemployment
Rights Act, 38 U.S.C. Ch. 43 (relating to employment and
reemployment rights of members of the uniformed services).
"USERRA leave." Any period of time for service in the
uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
employment and reemployment rights of members of the uniformed
services) by a school employee or former school employee or
participant who terminated school service to perform the service
in the uniformed services, if the current or former school
employee or participant is entitled to reemployment rights under
38 U.S.C. Ch. 43 with respect to the uniformed service.
"Valuation interest." Interest at 5 1/2% per annum,
compounded annually and applied to all accounts of the fund
other than the members' savings account.
"Vestee." A member with five or more eligibility points in a
class of service other than Class T-E, Class T-F or Class T-I
who has terminated school service, has left his accumulated
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deductions in the fund and is deferring filing of an application
for receipt of an annuity. For Class T-E and Class T-F members,
a member with ten or more eligibility points who has terminated
school service, has left his accumulated deductions in the fund
and is deferring filing of an application for receipt of an
annuity. For Class T-I members, a member who has terminated
school service, has left his accumulated deductions in the fund
and is deferring filing of an application for receipt of
annuity.
"Voluntary contributions." Contributions made by a
participant to the trust and credited to his individual
investment account in excess of his mandatory pickup participant
contributions, and contributions made by a member to the system
and credited to his cash balance account in excess of his
mandatory pickup contributions, either by salary deductions paid
through the employer or by an eligible rollover or direct
trustee-to-trustee transfers.
Section 202. Section 8103 of Title 24 is amended by adding
subsections to read:
§ 8103. Construction of part.
* * *
(c) Construction regarding inactive member and inactive
participant.--As used in this part:
(1) The term "inactive member" does not include a
combined service employee who is an "inactive participant,"
unless the combined service employee is concurrently employed
in a position in which such employee is a member of the
system.
(2) The term "inactive participant" does not include a
combined service employee who is an "inactive member," unless
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the combined service employee is concurrently employed in a
position in which such employee is a participant in the plan.
(d) Provisions severable.--The provisions of this part are
severable and if any of its provisions shall be held to be
unconstitutional, the decision of the court shall not affect or
impair any of the remaining provisions. It is hereby declared to
be the legislative intent that this part would have been adopted
had such unconstitutional provisions not been included.
(e) References to certain Federal statutes.--References in
this part to the IRC or the Uniformed Services Employment and
Reemployment Rights Act of 1994 (Public Law 103-353, 108 Stat.
3149), including administrative regulations promulgated under
the IRC or the Uniformed Services Employment and Reemployment
Rights Act of 1994, are intended to include laws and regulations
in effect on the effective date of this section and amended,
supplemented or supplanted on and after the effective date of
this section.
(f) Construction.--
(1) This part may not be construed to mean that the
limitations on benefits or other requirements under IRC §
401(a) or other applicable provisions of the IRC that are
applicable to participants in the plan do not apply to the
participants or to the members of the system and the benefits
payable under Part IV.
(2) This part may not be construed to mean that an
interpretation or application of the provisions of Part IV or
benefits available to members of the Public School Employees'
Retirement System was not in accordance with the provisions
of Part IV or other applicable law, including the IRC and the
Uniformed Services Employment and Reemployment Rights Act of
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1994 before the effective date of this section.
(3) This part may not be construed to mean that the
release or publicizing of a record, material or data that
would not constitute a public record under section 8502(e)(2)
(relating to administrative duties of board) is a violation
of the fiduciary duties of the board.
(g) Applicability.--This part shall apply to a record,
material or data under section 8502(e)(2) notwithstanding
whether:
(1) the record, material or data was created, generated
or stored before the effective date of this section;
(2) the record, material or data was previously released
or made public; or
(3) a request for the record, material or data was made
or is pending final response under the former act of June 21,
1957 (P.L.390, No.212), referred to as the Right-to-Know Law,
or the act of February 14, 2008 (P.L.6, No. 3), known as the
Right-to-Know Law.
(h) Pension rights.--Notwithstanding any other provision of
law, no collective bargaining agreement nor any arbitration
award between the school employer and its employees or their
collective bargaining representatives shall be construed to
change any of the provisions in this part, to require the board
to administer pension or retirement benefits not set forth under
this part or to require action by any other government body
pertaining to pension or retirement benefits or rights of school
employees.
Section 203. Title 24 is amended by adding sections to read:
§ 8103.1. Reference to Public School Employees' Retirement
System.
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As of the effective date of this section, unless the context
clearly indicates otherwise, a reference to the Public School
Employees' Retirement System in a statutory provision, other
than this part and 71 Pa.C.S. Pt. XXV (relating to retirement
for State employees and officers), shall include a reference to
the plan, and a reference to the Public School Employees'
Retirement Fund shall include a reference to the trust.
§ 8103.2. Notice to members and participants.
Notice by publication, including, without being limited to,
newsletters, newspapers, forms, first class mail, letters,
manuals, and electronic notice, including, but not limited to,
e-mail or internet websites distributed or made available to
members and participants in a manner reasonably calculated to
give actual notice of the provisions of this part that require
notice to members and participants shall be deemed sufficient
notice for all purposes.
Section 204. Sections 8301, 8302, 8303, 8303.1 and 8304(a)
of Title 24 are amended to read:
§ 8301. Mandatory and optional membership.
(a) Mandatory membership.--Membership in the system shall be
mandatory as of the effective date of employment for all school
employees except the following:
(1) Any officer or employee of the [Department of
Education] department, State-owned educational institutions,
community colleges, area vocational-technical schools,
technical institutes, or [the] The Pennsylvania State
University and who is a member of the State Employees'
Retirement System or a member of another retirement program
approved by the employer.
(2) Any school employee, other than a school employee
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eligible for Class T-I membership, who is not a member of the
system and who is employed on a per diem or hourly basis for
less than 80 full-day sessions or 500 hours in any fiscal
year or annuitant who returns to school service under the
provisions of section 8346(b) (relating to termination of
annuities).
(3) Any officer or employee of a governmental entity who
subsequent to December 22, 1965 and prior to July 1, 1975
administers, supervises, or teaches classes financed wholly
or in part by the Federal Government so long as he continues
in such service.
(4) Any part-time school employee, other than a school
employee eligible for Class T-I membership, who has an
individual retirement account pursuant to the Federal act of
September 2, 1974 (Public Law 93-406, 88 Stat. 829), known as
the Employee Retirement Income Security Act of 1974.
(b) Prohibited membership.--The school employees categorized
in subsection (a)(1) and (2) shall not have the right to elect
membership in the system.
(c) Optional membership.--The school employees categorized
in subsection (a)(3) and, if otherwise eligible, subsection
(a)(4) shall have the right to elect membership in the system.
Once such election is exercised, membership shall commence from
the original date of eligibility and shall continue until the
termination of such service.
(d) Mandatory participation in the plan.--A school employee
who is a mandatory member of Class T-I shall also be a mandatory
participant in the plan as of the effective date of membership
in the system.
(e) Optional participation in the plan.--Class T-E and Class
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T-F members may participate in the plan on or after July 1,
2016, to the extent that the compensation of the participant
exceeds the Social Security taxable wage base in effect at the
beginning of the fiscal year, as provided in section 8404(b)
(relating to participant contributions).
(f) Optional contributions to the cash balance account.--
Class T-C members may contribute to the cash balance account up
to 3% of compensation, as provided in this part. Class T-D,
Class T-E and Class T-F members may contribute to the cash
balance account up to 3% of compensation, but limited to the
Social Security taxable wage base in effect at the beginning of
the fiscal year, as provided in this part. Contributions may be
changed as provided in this part or as set forth in board
policy.
(g) Certain agreements.--The agreement of an employer to
make contributions to the fund or to enroll its employees as
members in the system shall be deemed to be an agreement to make
contributions to the trust or to enroll its employees in the
plan.
§ 8302. Credited school service.
(a) Computation of credited service.--In computing credited
school service of a member for the determination of benefits, a
full-time salaried school employee shall receive one year of
credit for each school year or the corresponding fraction
thereof, in accordance with the proportion of the full school
year for which the required regular member contributions have
been made to the fund, or for which such contributions otherwise
required for such service were not made to the fund solely by
reason of any provision of this part relating to the limitations
under IRC § 401(a)(17) or 415(b) or another provision of this
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part limiting compensation. A per diem or hourly school employee
shall receive one year of credited service for each
nonoverlapping period of 12 consecutive months in which he is
employed and for which contributions are made to the fund, or
would have been made to the fund but for such limitations under
the IRC, or another provision of this part limiting compensation
for at least 180 full-day sessions or 1,100 hours of employment.
If such member was employed and contributions were made to the
fund for less than 180 full-day sessions or 1,100 hours, he
shall be credited with a fractional portion of a year determined
by the ratio of the number of full-day sessions or hours of
service actually rendered and for which contributions are made
to the fund to 180 full-day sessions or 1,100 hours, as the case
may be. A part-time salaried employee shall be credited with the
fractional portion of the year which corresponds to the service
actually rendered and for which contributions are or would have
been made to the fund in relation to the service required as a
comparable full-time salaried employee. In no case shall a
member receive more than one year of credited service for any 12
consecutive months or a member who has elected multiple service
receive an aggregate in the two systems of more than one year of
credited service for any 12 consecutive months.
(b) Approved leaves of absence.--An active member shall
receive credit or vesting credit, as applicable, and an active
participant shall receive vesting credit, for an approved leave
of absence provided that:
(1) the member returns for a period at least equal to
the length of the leave or one year as a member of the system
or the participant returns to school service as an active
participant in the plan, whichever is less, to the school
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district which granted his leave, unless such condition is
waived by the employer; and
(2) the proper contributions are made by the member and
the employer[.] or by the active participant and the
employer. In the case of a Class T-I member, the proper
contributions must be made during the leave except for USERRA
leave.
* * *
(c) Cancellation of credited service.--All credited service
in the system shall be cancelled if a member withdraws his
accumulated deductions.
(d) Credit for military service.--A school employee who has
performed USERRA leave may receive credit in the system as
follows:
(1) For purposes of determining whether a member is
eligible to receive credited service in the system for a
period of active military service, other than active duty
service to meet periodic training requirements, rendered
after August 5, 1991, and that began before the effective
date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73
(relating to military leave of absence) shall apply to all
individuals who were active members of the system when the
period of military service began, notwithstanding if the
member is not defined as an employee under 51 Pa.C.S. § 7301
(relating to definitions). School employees may not receive
service credit or exercise the options under 51 Pa.C.S. §
7306(a), (b) and (c) (relating to retirement rights) for
military leaves that begin on or after the effective date of
this subsection, except otherwise provided under this
subsection.
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(2) A school employee who has performed USERRA leave may
receive credit as provided by this paragraph.
(i) A school employee who is reemployed from USERRA
leave as an active member of the system shall be treated
as not having incurred a break in school service by
reason of the USERRA leave and shall be granted
eligibility points as if the school employee had not been
on the USERRA leave. If a school employee who is
reemployed from USERRA leave as an active member of the
system subsequently makes regular member contributions,
shared-risk member contributions and any other member
contributions in the amounts and in the time periods
required by 38 U.S.C. Ch. 43 (relating to employment and
reemployment rights of members of the uniformed services)
and IRC § 414(u) as if the school employee had continued
in his school office or employment and performed school
service and been compensated during the period of USERRA
leave, then the school employee shall be granted school
service credit for the period of USERRA leave. The
employee shall have his benefits, rights and obligations
determined under this part as if he was an active member
who performed creditable school service during the USERRA
leave in the job position that he would have held had he
not been on USERRA leave and received the compensation on
which the member contributions to receive school service
credit for the USERRA leave were determined.
(ii) For purposes of determining whether a school
employee has made the required employee contributions for
school service credit for USERRA leave, if an employee
who is reemployed from USERRA leave as an active member
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terminates school service or dies in school service
before the expiration of the allowed payment period,
school service credit for the USERRA leave shall be
granted as if the required member contributions were paid
the day before termination or death. The amount of the
required member contributions shall be treated as an
incomplete payment subject to the provisions of section
8325 (relating to incomplete payments). Upon a subsequent
return to school service or to State service as a
multiple service member, the required member
contributions treated as incomplete payments shall be
treated as member contributions that were either
withdrawn in a lump sum at termination or paid as a lump
sum under section 8345(a)(4) (relating to member's
options). For this purpose, the exclusion of Class T-E
and Class T-F members from electing a form of payment
under section 8345(a)(4)(iii) shall be ignored.
(iii) A school employee who is reemployed from
USERRA leave as an active member of the system and who
does not make the required member contributions or makes
only part of the required member contributions within the
allowed payment period shall not be:
(A) Granted credited service for the period of
USERRA leave for which the required member
contributions were not timely made.
(B) Eligible to subsequently make contributions.
(C) Granted either school service credit or
nonschool service credit for the period of USERRA
leave for which the required member contributions
were not timely made.
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(3) A school employee who is a member of the system and
performs USERRA leave from which the employee could have been
reemployed from USERRA leave had the school employee returned
to school service in the time frames required by 38 U.S.C.
Ch. 43 for reemployment rights, but did not do so, shall be
able to receive creditable nonschool service as
nonintervening military service for the period of USERRA
leave if the employee later returns to school service and is
otherwise eligible to purchase the service as nonintervening
military service.
(4) [A school employee] An active or inactive member
who, on or after the effective date of this subsection, is
granted a leave of absence under section 1178 of the Public
School Code, a leave of absence under 51 Pa.C.S. § 4102
(relating to leaves of absence for certain government
employees) or a military leave under 51 Pa.C.S. Ch. 73, that
is not USERRA leave shall be able to receive creditable
nonschool service as nonintervening military service should
the employee return to school service as an active member of
the system and is otherwise eligible to purchase the service
as nonintervening military service.
(5) If a member dies while performing USERRA leave, the
beneficiaries or survivor annuitants of the deceased member
shall be entitled to any additional benefits, including
eligibility points, other than benefit accruals relating to
the period of qualified military service, provided under this
part as if the member resumed and then terminated employment
on account of death.
(6) A school employee who is on a leave of absence from
his duties as a school employee and for which 51 Pa.C.S. §
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4102 provides that he is not to suffer a loss of pay, time or
efficiency shall not be an active member, receive service
credit or make member contributions for the leave of absence
except as provided for in this part. Notwithstanding this
paragraph, any pay the member receives under section 1178 of
the Public School Code or 51 Pa.C.S. § 4102 shall be included
in the determination of final average salary and other
calculations in the system utilizing compensation as if the
payments were compensation under this part.
(e) Military service by a participant.--A participant who
has performed USERRA leave shall be treated and may make
contributions as follows:
(1) A participant who is reemployed from USERRA leave
shall be treated as not having incurred a break in school
service by reason of the USERRA leave and shall be granted
vesting credit as if the participant had not been on USERRA
leave. If a participant who is reemployed from USERRA leave
subsequently makes mandatory pickup participant contributions
in the amounts and in the time periods required by 38 U.S.C.
Ch. 43 (relating to employment and reemployment rights of
members of the uniformed services) and IRC § 414(u) as if the
participant had continued in his school employment and
performed school service and been compensated during the
period of USERRA leave, then the participant's employer shall
make the corresponding employer defined contributions. Such
an employee shall have his contributions, benefits, rights
and obligations determined under this part as if he was an
active participant who performed school service during the
USERRA leave in the job position that he would have held had
he not been on USERRA leave and received the compensation on
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which the mandatory pickup participant contributions to
receive school service credit for the USERRA leave were
determined, including the right to make voluntary
contributions on such compensation as permitted by law.
(2) A participant who is reemployed from USERRA leave
and does not make the mandatory pickup participant
contributions or makes only part of the mandatory pickup
participant contributions within the allowed payment period
shall not be eligible to make mandatory pickup participant
contributions and voluntary contributions at a later date for
the period of USERRA leave for which the mandatory pickup
participant contributions were not timely made.
(3) A participant who performs USERRA leave from which
the employee could have been reemployed from USERRA leave had
the school employee returned to school service in the time
frames required by 38 U.S.C. Ch. 43 for reemployment rights,
but did not do so, shall not be eligible to make mandatory
pickup participant contributions or voluntary contributions
for the period of USERRA leave should the employee later
return to school service and be a participant in the plan.
(4) An active participant or inactive participant who,
on or after the effective date of this subsection, is granted
a leave of absence under 51 Pa.C.S. § 4102 (relating to
leaves of absence for certain government employees) or a
military leave under 51 Pa.C.S. Ch. 73 (relating to military
leave of absence) that is not USERRA leave shall not be
eligible to make mandatory pickup participant contributions
or voluntary contributions during or for the leave of absence
or military leave, and shall not have employer defined
contributions made during such leave, without regard to
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whether or not the participant received salary, wages,
stipends, differential wage payments or other payments from
his employer during the leave, notwithstanding any provision
to the contrary in 51 Pa.C.S. § 4102 or Ch. 73.
(5) If a participant dies while performing USERRA leave,
then the beneficiaries or successor payees, as the case may
be, of the deceased participant are entitled to any
additional benefits, other than benefit accruals relating to
the period of qualified military service, provided under this
part had the participant resumed and then terminated
employment on account of death.
§ 8303. Eligibility points for retention and reinstatement of
service credits.
(a) Accrued credited service.--Eligibility points shall be
computed in accordance with section 8306 (relating to
eligibility points) with respect to all credited service accrued
as of the effective date of this part.
(b) Future school service.--Every active member of the
system other than a Class T-I member shall accrue an eligibility
point for each year of school service rendered subsequent to the
effective date of this part. Class T-I members shall be deemed
to accrue one eligibility point for each fiscal year in which
contributions have been made to the fund.
(b.1) USERRA leave.--A member who is reemployed from USERRA
leave or who dies while performing USERRA leave shall receive
eligibility points in accordance with section 8306 for the
school service that would have been performed had the member not
performed USERRA leave.
(c) Purchase of previous creditable service.--Every active
member of the system other than a Class T-I member or a multiple
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service member who is an active member of the State Employees'
Retirement System on or after the effective date of this part
may purchase credit and receive eligibility points:
(1) as a member of Class T-C, Class T-E or Class T-F for
previous creditable school service or creditable nonschool
service; or
(2) as a member of Class T-D for previous creditable
school service, provided the member elects to become a Class
T-D member pursuant to section 8305.1 (relating to election
to become a Class T-D member);
upon written agreement by the member and the board as to the
manner of payment of the amount due for credit for such service;
except, that any purchase for reinstatement of service credit
shall be for all service previously credited.
(d) Purchase of previous noncreditable service.--Class T-C
and Class T-D members who are active members on the effective
date of this subsection shall have three years from the
effective date of this subsection to file a written application
with the board to purchase any previous noncreditable school
service. Class T-C and Class T-D members who are not active
members on the effective date of this subsection but who become
active members after the effective date of this subsection and
Class T-E and class T-F members shall have 365 days from entry
into the system to file a written application with the board to
purchase any previous noncreditable school service. Class T-I
members shall not be eligible to purchase previous noncreditable
school service.
(e) Limitations.--Notwithstanding any other provision of
this part, a Class T-I member shall be permitted to receive
vesting credit or eligibility points, as applicable, for:
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(1) USERRA leave; and
(2) an approved leave of absence, provided such approved
leaves of absence leaves are contributory leaves.
§ 8303.1. Waiver of adjustments.
(a) Allowance.--Upon appeal by an affected member,
participant, beneficiary or survivor annuitant, the board may
waive an adjustment or any portion of an adjustment made under
section 8534(b) (relating to fraud and adjustment of errors) if
in the opinion of the board or the board's designated
representative:
(1) the adjustment or portion of the adjustment will
cause undue hardship to the member, participant, beneficiary
or survivor annuitant;
(2) the adjustment was not the result of erroneous
information supplied by the member, participant, beneficiary
or survivor annuitant;
(3) the member or participant had no knowledge or notice
of the error before adjustment was made, and the member,
participant, beneficiary or survivor annuitant took action
with respect to their benefits based on erroneous information
provided by the system or plan; and
(4) the member, participant, beneficiary or survivor
annuitant had no reasonable grounds to believe the erroneous
information was incorrect before the adjustment was made.
(b) Time period.--
(1) In order to obtain consideration of a waiver under
this section, the affected member, participant, beneficiary
or survivor annuitant must appeal to the board in writing
within 30 days after receipt of notice that benefits have
been adjusted or, if no notice was given, within 30 days
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after the adjustment was known or should have been known to
the affected member, participant, beneficiary or survivor
annuitant.
(2) For any adjustments made prior to the effective date
of this subsection for which the member, participant,
beneficiary or survivor annuitant appealed to the board and
was denied, an appeal under this section must be filed within
90 days of the effective date of this subsection.
Section 2. Section 8304(a) of Title 24 is amended to read:
§ 8304. Creditable nonschool service.
(a) Eligibility.--An active member, other than a Class T-I
member, or a multiple service member who is an active member of
the State Employees' Retirement System shall be eligible to
receive Class T-C, Class T-E or Class T-F service credit for
creditable nonschool service and Class T-D, Class T-E or Class
T-F service for intervening military service, provided the
member becomes a Class T-D member pursuant to section 8305.1
(relating to election to become a Class T-D member) or Class T-F
member pursuant to section 8305.2 (relating to election to
become a Class T-F member) or 8305 (relating to classes of
service), as set forth in subsection (b) provided that he is not
entitled to receive, eligible to receive now or in the future,
or is receiving retirement benefits for such service under a
retirement system administered and wholly or partially paid for
by any other governmental agency or by any private employer, or
a retirement program approved by the employer in accordance with
section 8301(a)(1) (relating to mandatory and optional
membership), and further provided that such service is certified
by the previous employer and the manner of payment of the amount
due is agreed upon by the member, the employer, and the board.
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* * *
Section 205. Section 8305(b) of Title 24 is amended and the
section is amended by adding a subsection to read:
§ 8305. Classes of service.
* * *
(b) Other class membership.--A school employee who is a
member of a class of service other than Class T-C on the
effective date of this part may elect to become a member of
Class T-C or Class T-D or may retain his membership in such
other class until the service is discontinued or he elects to
become a full coverage member or elects to purchase credit for
previous school or creditable nonschool service. Any service
[thereafter] as a member of the system shall be credited as
Class T-C [or T-D], Class T-D or Class T-I service as
applicable.
* * *
(f) Class T-I membership.--Notwithstanding any other
provision, a person who first becomes a school employee and an
active member and active participant, or a person who first
becomes a multiple service member or participant who is a State
employee and a member of the State Employees' Retirement System,
on or after July 1, 2016, shall be classified as a Class T-I
member upon payment of regular member contributions and
participant contributions, as applicable.
Section 206. Section 8305.1(c) of Title 24 is amended to
read:
§ 8305.1. Election to become a Class T-D member.
* * *
(c) Effect of election.--An election to become a Class T-D
member shall remain in effect until the termination of
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employment except as otherwise provided in this part. Those
members who, on the effective date of this section, contribute
at the rate of 5 1/4% shall be deemed to have accepted the basic
contribution rate of 6 1/2% for all Class T-D service performed
on or after January 1, 2002. Those members who, on the effective
date of this section, contribute at the rate of 6 1/4% shall be
deemed to have accepted the basic contribution rate of 7 1/2%
for all Class T-D service performed on or after January 1, 2002.
Upon termination and a subsequent reemployment that occurs
before July 1, 2016, the class of service of the school employee
shall be credited in the class of service otherwise provided for
in this part. If the reemployment occurs on or after July 1,
2016, the school employee's eligibility for membership in the
system or participation in the plan shall be as provided in this
part.
* * *
Section 207. (Reserved).
Section 208. Section 8306 of Title 24 is amended to read:
§ 8306. Eligibility points.
(a) General rule.--An active member of the system other than
a Class T-I member shall accrue one eligibility point for each
year of credited service as a member of the school or State
retirement system. A member shall accrue an additional two-
thirds of an eligibility point for each year of Class D-3
credited service under the State Employees' Retirement System.
In the case of a fractional part of a year of credited service,
a member shall accrue the corresponding fractional portion of an
eligibility point. Class T-I members shall be deemed to accrue
one eligibility point for each fiscal year in which
contributions have been made to the fund.
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(a.1) USERRA leave.--A member or participant who is
reemployed from USERRA leave or who dies while performing USERRA
leave shall be granted the eligibility points that he would have
accrued had he continued in his school office or employment
instead of performing USERRA leave. If a school employee who is
reemployed from USERRA leave makes the member or mandatory
pickup participant contributions to be granted school service
credit for the USERRA leave, no additional eligibility points
may be granted.
(b) Transitional rule.--For the purposes of the transition:
(1) In determining whether a member, other than a
disability annuitant who returns to school service after June
30, 2001, upon termination of the disability annuity, who is
not a school employee or a State employee on June 30, 2001,
and July 1, 2001, and who has previous school service, has
the five eligibility points required by the definition of
"vestee" in sections 8102 (relating to definitions), 8307
(relating to eligibility for annuities), 8308 (relating to
eligibility for vesting) and 8345 (relating to member's
options), only eligibility points earned by performing
credited school service as an active member of the system,
USERRA leave or credited State service as an active member of
the State Employee's Retirement System after June 30, 2001,
shall be counted until such member earns one eligibility
point by performing credited school service or credited State
service after June 30, 2001, at which time all eligibility
points as determined under subsection (a) shall be counted.
(2) A member subject to paragraph (1) shall be
considered to have satisfied any requirement for five
eligibility points contained in this part if the member has
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at least ten eligibility points determined under subsection
(a).
Section 209. Section 8307 of Title 24 is amended and the
section is amended by adding subsections to read:
§ 8307. Eligibility for annuities.
(a) Superannuation annuity.--An active or an inactive
member, other than a Class T-I member, who attains
superannuation age shall be entitled to receive a superannuation
annuity upon termination of service and filing of a proper
application. A combined service employee who is an active or
inactive participant and attains superannuation age in the
system shall be entitled to receive a superannuation annuity
upon termination of service and filing of a proper application.
(b) Withdrawal annuity.--A vestee in Class T-C or Class T-D
with five or more eligibility points or an active or inactive
Class T-C or Class T-D member who terminates school service
having five or more eligibility points shall, upon filing a
proper application, be entitled to receive an early annuity. A
vestee in Class T-E or Class T-F with ten or more eligibility
points or an active or inactive Class T-E or Class T-F member
who terminates school service having ten or more eligibility
points shall, upon filing a proper application, be entitled to
receive an early annuity.
(c) Disability annuity.--An active or inactive member, other
than a Class T-I member, who has credit for at least five years
of service shall, upon filing of a proper application, be
entitled to a disability annuity if he becomes mentally or
physically incapable of continuing to perform the duties for
which he is employed and qualifies for an annuity in accordance
with the provisions of section 8505(c)(1) (relating to duties of
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board regarding applications and elections of members).
(d) Class T-I members.--A Class T-I member who terminates
school service shall, upon filing of a proper application, be
entitled to receive an annuity.
(e) Multiple classes of service.--A member with more than
one class of service who vests his retirement benefits in any
class of service may not receive distributions from other
classes of service until his effective date of retirement,
regardless of whether his benefits resulting from such other
classes of service are vested or he is eligible to receive an
annuity. A member with service credited in more than one class
of service may not separately vest those benefits and receive
annuities from different classes of service with different
effective dates.
Section 210. Sections 8308, 8310, 8321, 8322.1(a), 8323(a)
and (d), 8324(b), (c) and (d), 8325, 8325.1 and 8326(a) and (c)
of Title 24 are amended to read:
§ 8308. Eligibility for vesting.
(a) General rule.--Any Class T-C or Class T-D member who
terminates school service, or if a multiple service member and
an active member of the State Employees Retirement System,
terminates State service, with five or more eligibility points
shall be entitled to vest his retirement benefits until
attainment of superannuation age. Any Class T-E or Class T-F
member who terminates school service, or if a multiple service
member and an active member of the State Employees Retirement
System, terminates State service, with ten or more eligibility
points shall be entitled to vest his retirement benefits until
attainment of superannuation age. A Class T-I member who
terminates school service shall be entitled to vest his
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retirement benefits until the member ' s required beginning date,
provided the balance of his members ' savings account and cash
balance account exceeds the requirements of a de minimis account
under section 8349(d) (relating to payment of benefits).
(b) Multiple classes of service.--A member with more than
one class of service who vests his retirement benefits in any
class of service may not receive distributions from other
classes of service until his effective date of retirement,
regardless of whether his benefits resulting from such other
classes of service are vested or he is eligible to receive an
annuity. A member with service credited in more than one class
of service may not separately vest those benefits and receive
annuities from different classes of service with different
effective dates.
§ 8310. Eligibility for refunds.
Upon termination of service any active member, regardless of
eligibility for benefits, may elect to receive his accumulated
deductions in lieu of any benefit from the system to which he is
entitled.
§ 8321. Regular member contributions and cash balance member
contributions for current service.
(a) General.--Regular member contributions and cash balance
member contributions shall be made to the fund on behalf of each
active member for current service except for any period of
current service in which the making of such contributions has
ceased solely by reason of any provision of this part limiting
such contributions, or relating to the limitations under IRC §
401(a)(17) or 415(b).
(b) Class T-E and Class T-F shared-risk contributions.--
(1) Commencing with the annual actuarial valuation
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performed under section 8502(j) (relating to administrative
duties of board), for the period ending June 30, 2014, and
every three years thereafter, the board shall compare the
actual investment rate of return, net of fees, to the annual
interest rate adopted by the board for the calculation of the
normal contribution rate, based on the market value of
assets, for the prior ten-year period. If the actual
investment rate of return, net of fees, is less than the
annual interest rate adopted by the board by an amount of 1%
or more, the shared-risk contribution rate of Class T-D, T-E
and T-F members will increase by .5%. If the actual
investment rate of return, net of fees, is equal to or
exceeds the annual interest rate adopted by the board, the
shared-risk contributions rate of Class T-D, T-E and T-F
members will decrease by .5%[.], provided the total member
contribution rate on the date of the actuarial valuation is
above the member ' s total contribution rate in effect on the
effective date of this paragraph. If the actual investment
rate of return, net of fees, is more than the annual interest
rate adopted by the board by an amount of 1% or more, the
shared risk contribution rate of Class T-D, T-E and T-F
members will decrease by .5%. If the actual investment rate
of return, net of fees, is equal to or below the annual
interest rate adopted by the board, the shared risk
contribution rate of Class T-D, T-E and T-F members will
increase by .5%, provided the total member contribution rate
on the date of the actuarial valuation is below the member ' s
total contribution rate in effect on the effective date of
this paragraph. Class T-D, T-E and T-F members will
contribute at the total member contribution rate in effect
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when they are hired. [The]
(2) Notwithstanding paragraph (1), the total member
contribution rate for Class T-D and T-E members who are
currently paying 7.5% on the effective date of this paragraph
shall not be less than [7.5%] 5.5%, nor more than 9.5%. The
total member contribution rate for Class T-F members shall
not be less than [10.3%] 8.3%, nor more than 12.3%. The total
member contribution rate for Class T-D members who are
currently paying 6.5% on the effective date of this paragraph
shall not be less than 4.5%, nor more than 8.5%.
(3) Notwithstanding this subsection, if the system's
actuarial funded status is 100% or more as of the date used
for the comparison required under this subsection, as
determined in the current annual actuarial valuation, and the
total contribution rate of the member is above the basic
contribution rate, the shared-risk contribution rate shall be
zero.
(4) In the event that the annual interest rate adopted
by the board for the calculation of the normal contribution
rate is changed during the period used to determine the
shared-risk contribution rate, the board, with the advice of
the actuary, shall determine the applicable rate during the
entire period, expressed as an annual rate.
[(1)] (5) Until the system has a ten-year period of
investment rate of return experience following the effective
date of this subsection, the look-back period shall begin not
earlier than the effective date of this subsection.
[(2)] (6) For any fiscal year in which the employer
contribution rate is lower than the final contribution rate
under section 8328(h) (relating to actuarial cost method),
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the total member contribution rate for Class T-D, T-E and T-F
members shall be prospectively reset to the basic
contribution rate.
[(3)] (7) There shall be no increase in the member
contribution rate if there has not been an equivalent
increase to the employer contribution rate over the previous
three-year period.
§ 8322.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions required to be made to the fund under sections
8321 (relating to regular member contributions for current
service) and 8322 (relating to joint coverage member
contributions), with respect to current school service rendered
by an active member on or after January 1, 1983, shall be picked
up by the employer and shall be treated as the employer's
contribution for purposes of IRC § 414(h).
* * *
§ 8323. Member contributions for creditable school service.
(a) Previous school service, sabbatical leave and full
coverage.--The contributions to be paid by an active member or
an eligible State employee for credit in the system for
reinstatement of all previously credited school service, school
service not previously credited, sabbatical leave as if he had
been in full-time daily attendance, or full-coverage membership
shall be sufficient to provide an amount equal to the
accumulated deductions which would have been standing to the
credit of the member for such service had regular member
contributions been made with full coverage at the rate of
contribution necessary to be credited as Class T-C service,
Class T-D service if the member is a Class T-D member, Class T-E
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service if the member is a Class T-E member or Class T-F service
if the member is a Class T-F member and had such contributions
been credited with statutory interest during the period the
contributions would have been made and during all periods of
subsequent school service as an active member or inactive member
and State service as an active member or inactive member on
leave without pay up to the date of purchase.
* * *
(d) Certification and payment of contributions.--
(1) In all cases other than for the purchase of credit
for sabbatical leave and activated military service leave
beginning before the effective date of paragraph (2), the
amount payable shall be certified by the board in accordance
with methods approved by the actuary and may be paid in a
lump sum within 90 days or in the case of an active member or
an eligible State employee who is an active member of the
State Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to
such terms as the board in its sole discretion determines. In
the case of an eligible State employee who is an active
member of the State Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer
to the board the amounts paid.
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(2) In the case of activated military service leave
beginning before the effective date of this paragraph, the
amount payable may be paid according to this subsection or
subsection (c.1), but all lump sum payments must be made
within one year of the termination of activated military
service leave.
§ 8324. Contributions for purchase of credit for creditable
nonschool service and noncreditable school service.
* * *
(b) Nonintervening military service.--The amount due for the
purchase of credit for military service other than intervening
military service shall be determined by applying the member's
basic contribution rate plus the normal contribution rate as
provided in section 8328 (relating to actuarial cost method) at
the time of entry of the member into school service subsequent
to such military service to one-third of his total compensation
received during the first three years of such subsequent
credited school service and multiplying the product by the
number of years and fractional part of a year of creditable
nonintervening military service being purchased together with
statutory interest during all periods of subsequent school
service as an active member or inactive member and State service
as an active member or inactive member on leave without pay to
date of purchase. Upon certification of the amount due, payment
may be made in a lump sum within 90 days or in the case of an
active member or an eligible State employee who is an active
member of the State Employees' Retirement System it may be
amortized with statutory interest through salary deductions to
the system in amounts agreed upon by the member and the board.
The salary deduction amortization plans agreed to by members and
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the board may include a deferral of payment amounts and
statutory interest until the termination of school service or
State service or becoming a participant and a combined service
employee as the board in its sole discretion decides to allow.
The board may limit salary deduction amortization plans to such
terms as the board in its sole discretion determines. In the
case of an eligible State employee who is an active member of
the State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees' Retirement
Board, which shall certify and transfer to the board the amounts
paid. Application may be filed for all such military service
credit upon completion of three years of subsequent credited
school service and shall be credited as Class T-C service. In
the event that a Class T-E member makes a purchase of credit for
such military service, then such service shall be credited as
Class T-E service. In the event that a Class T-F member makes a
purchase of credit for such military service, then such service
shall be credited as Class T-F service.
(c) Intervening military service.--Contributions on account
of credit for intervening military service shall be determined
by the member's basic contribution rate and compensation at the
time of entry of the member into active military service,
together with statutory interest during all periods of
subsequent school service as an active member or inactive member
and State service as an active member or inactive member on
leave without pay to date of purchase. Upon application for such
credit the amount due shall be certified in the case of each
member by the board, in accordance with methods approved by the
actuary, and contributions may be made by one of the following
methods:
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(1) Regular monthly payments during active military
service.
(2) A lump sum payment within 90 days of certification
of the amount due.
(3) Salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by the members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service or
becoming a participant and a combined service employee as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as
the board in its sole discretion determines. In the case of
an eligible State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
(d) Other creditable nonschool service and noncreditable
school service.--
(1) Contributions on account of Class T-C credit for
creditable nonschool service other than military service
shall be determined by applying the member's basic
contribution rate plus the normal contribution rate as
provided in section 8328 at the time of the member's entry
into school service subsequent to such creditable nonschool
service to his total compensation received during the first
year of subsequent credited school service and multiplying
the product by the number of years and fractional part of a
year of creditable nonschool service being purchased together
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with statutory interest during all periods of subsequent
school service as an active member or inactive member or
State service as an active member or inactive member on leave
without pay to the date of purchase, except that in the case
of purchase of credit for creditable nonschool service as set
forth in section 8304(b)(5) (relating to creditable nonschool
service) the member shall pay only the employee's share
unless otherwise provided by law. Upon certification of the
amount due, payment may be made in a lump sum within 90 days
or in the case of an active member or an eligible State
employee who is an active member of the State Employees'
Retirement System it may be amortized with statutory interest
through salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by the members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service or
becoming a participant and a combined service employee as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as
the board in its sole discretion determines. In the case of
an eligible State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
(2) Contributions on account of Class T-E or Class T-F
credit for creditable nonschool service other than military
service shall be the present value of the full actuarial cost
of the increase in the projected superannuation annuity
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caused by the additional service credited on account of the
purchase. Upon certification of the amount due, payment may
be made in a lump sum within 90 days or, in the case of an
active member or an eligible State employee who is an active
member of the State Employees' Retirement System, it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
the members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service or becoming a participant and
combined service employee as the board in its sole discretion
decides to allow. The board may limit salary deduction
amortization plans to the terms as the board in its sole
discretion determines. In the case of an eligible State
employee who is an active member of the State Employees'
Retirement System, the agreed upon salary deductions shall be
remitted to the State Employees' Retirement Board, which
shall certify and transfer to the board the amounts paid.
(3) Contributions on account of Class T-E or Class T-F
credit for noncreditable school service other than military
service shall be the present value of the full actuarial cost
of the increase in the projected superannuation annuity
caused by the additional service credited on account of the
purchase. Upon certification of the amount due, payment may
be made in a lump sum within 90 days or, in the case of an
active member or an eligible State employee who is an active
member of the State Employees' Retirement System, it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
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board. The salary deduction amortization plans agreed to by
the members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service or becoming a participant and
combined service employee as the board in its sole discretion
decides to allow. The board may limit salary deduction
amortization plans to the terms as the board in its sole
discretion determines. In the case of an eligible State
employee who is an active member of the State Employees'
Retirement System, the agreed upon salary deductions shall be
remitted to the State Employees' Retirement Board, which
shall certify and transfer to the board the amounts paid.
* * *
§ 8325. Incomplete payments.
(a) Right to pay balance due.--In the event that a member
terminates school service or becomes a participant or a multiple
service member who is an active member of the State Employees'
Retirement System terminates State service before any agreed
upon payments, including USERRA leave, or return of benefits on
account of returning to school service or entering State service
and electing multiple service have been completed, the member or
multiple service member who is an active member of the State
Employees' Retirement System shall have the right to pay within
30 days of termination of school service or State service or
becoming a participant the balance due, including interest, in a
lump sum, and the annuity shall be calculated including full
credit for the previous school service, creditable nonschool
service, or full-coverage membership.
(b) Effect of failure to pay balance due.--In the event a
member does not pay the balance due within 30 days of
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termination of school service or becoming a participant or in
the event a member dies in school service or within 30 days of
termination of school service or in the case of a multiple
service member who is an active member of the State Employees'
Retirement System does not pay the balance due within 30 days of
termination of State service or dies in State service or within
30 days of termination of State service or becoming a
participant and before the agreed upon payments have been
completed, the present value of the benefit otherwise payable
shall be reduced by the balance due, including interest, and the
benefit payable shall be calculated as the actuarial equivalent
of such reduced present value.
§ 8325.1. Annual compensation limit under IRC § 401(a)(17).
(a) General rule.--In addition to other applicable
limitations set forth in this part, and notwithstanding any
provision of this part to the contrary, the annual compensation
of each noneligible member and each participant taken into
account for benefit purposes under this subchapter shall not
exceed the limitation under IRC § 401(a)(17). On and after July
1, 1996, any reference in this part to the limitation under IRC
§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
compensation limit set forth in this subsection. The OBRA '93
annual compensation limit is $150,000, as adjusted by the
commissioner for increases in the cost of living in accordance
with IRC § 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any determination period
which is a period, not exceeding 12 months, over which
compensation is determined, beginning in such calendar year. If
a determination period consists of fewer than 12 months, the
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OBRA '93 compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period and the denominator of which is 12.
* * *
§ 8326. Contributions by the Commonwealth.
(a) Contributions on behalf of active members and
participants.--The Commonwealth shall make contributions into
the fund on behalf of all active members and participants,
including members and participants on activated military service
leave, in an amount equal to one-half the amount certified by
the board as necessary to provide, together with the members'
contributions, annuity reserves on account of prospective
annuities as provided in this part in accordance with section
8328 (relating to actuarial cost method). In case a school
employee has elected membership in a retirement program approved
by the employer, the Commonwealth shall contribute to such
program on account of his membership an amount no greater than
the amount it would have contributed had the employee been a
member of the Public School Employees' Retirement System.
* * *
(c) Contributions after June 30, 1995.--
(1) The Commonwealth shall make contributions into the
fund on behalf of all active members and participants,
including members on activated military service leave, for
service performed after June 30, 1995, in the following
manner:
(i) For members and participants who are employees
of employers that are school entities, no Commonwealth
contributions shall be made.
(ii) For members and participants who are employees
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of employers that are not school entities, the amount
computed under subsection (a).
(2) The Commonwealth shall make contributions into the
fund on behalf of annuitants for all amounts due to the fund
after June 30, 1995, including, but not limited to, amounts
due pursuant to section 8328(d) and (f), in the following
manner:
(i) For members and participants who are employees
of employers who are school entities, no Commonwealth
contributions shall be made.
(ii) For members and participants who are employees
of employers who are not school entities, the amount
computed under subsection (b).
* * *
Section 211. Section 8327(a), (b) and (c) of Title 24 are
amended and the section is amended by adding subsections to
read:
§ 8327. Payments by employers.
(a) General rule.--[Each]
(1) For payments before June 30, 2016, each employer,
including the Commonwealth as employer of employees of the
Department of Education, State-owned colleges and
universities, Thaddeus Stevens College of Technology, Western
Pennsylvania School for the Deaf, Scotland School for
Veterans' Children[,] and [the] The Pennsylvania State
University, shall make payments to the fund each quarter in
an amount equal to one-half the sum of the percentages, as
determined under section 8328 (relating to actuarial cost
method), applied to the total compensation during the pay
periods in the preceding quarter of all its employees who
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were members of the system during such period, including
members on activated military service leave. In the event a
member on activated military service leave does not return to
service for the necessary time or receives an undesirable,
bad conduct or dishonorable discharge or does not elect to
receive credit for activated military service under section
8302(b.1)(3) (relating to credited school service), the
contributions made by the employer on behalf of such member
shall be returned with valuation interest upon application by
the employer.
(2) For payments after June 30, 2016, each employer,
including the Commonwealth as employer of employees of the
Department of Education, State-owned colleges and
universities, Thaddeus Stevens College of Technology, Western
Pennsylvania School for the Deaf, Scotland School for
Veterans' Children and The Pennsylvania State University,
shall make payments to the fund each quarter in an amount
equal to one-half the sum of the percentages, as determined
under section 8328, applied to the total compensation during
the pay periods in the preceding quarter of all its employees
who were members of the system during such period, including
members on activated military service leave or USERRA leave,
plus the accrued liability contribution rate applied to the
total compensation of all active participants in the plan. In
the event a member on activated military service leave or
USERRA leave does not return to service for the necessary
time or receives an undesirable, bad conduct or dishonorable
discharge or does not elect to receive credit for activated
military service under section 8302(b.1)(3), the
contributions made by the employer on behalf of such member
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shall be returned with valuation interest upon application by
the employer.
(b) Deduction from appropriations.--
(1) To facilitate the payment of amounts due from any
employer to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from the amount of any moneys due
to any employer on account of any appropriation for schools
or other purposes amounts equal to the employer and pickup
contributions which an employer is required to pay to the
fund and the trust, as certified by the board, and as remains
unpaid on the date such appropriations would otherwise be
paid to the employer. Such amount shall be credited to the
appropriate accounts in the fund and the trust.
(2) To facilitate the payments of amounts due from any
charter school, as defined in Article XVII-A of the act of
March 10, 1949 (P.L.30, No.14), known as the Public School
Code of 1949, to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from any funds appropriated to
the Department of Education for basic education of the
chartering school district of a charter school and public
school employees' retirement contributions amounts equal to
the employer and pickup contributions which a charter school
is required to pay to the fund and the trust, as certified by
the board, and as remains unpaid on the date such
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appropriations would otherwise be paid to the chartering
school district or charter school. Such amounts shall be
credited to the appropriate accounts in the fund and the
trust. Any reduction in payments to a chartering school
district made pursuant to this section shall be deducted from
the amount due to the charter school district pursuant to the
Public School Code of 1949.
(c) Payments by employers after June 30, 1995, and before
July 1, 2016.--After June 30, 1995, and before July 1, 2016,
each employer, including the Commonwealth as employer of
employees of the Department of Education, State-owned colleges
and universities, Thaddeus Stevens College of Technology,
Western Pennsylvania School for the Deaf, Scotland School for
Veterans' Children and The Pennsylvania State University, shall
make payments to the fund and the trust each quarter in an
amount computed in the following manner:
(1) For an employer that is a school entity, the amount
shall be the sum of the percentages as determined under
section 8328 applied to the total compensation during the pay
periods in the preceding quarter of all employees who were
active members of the system or active participants of the
plan during such period, including members or active
participants on activated military service leave. In the
event a member on activated military service leave does not
return to service for the necessary time or receives an
undesirable, bad conduct or dishonorable discharge or does
not elect to receive credit for activated military service
under section 8302(b.1)(3), the contribution made by the
employer on behalf of such member shall be returned with
valuation interest upon application by the employer.
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(2) For an employer that is not a school entity, the
amount computed under subsection (a).
(3) For any employer, whether or not a school entity, in
computing the amount of payment due each quarter, there shall
be excluded from the total compensation referred to in this
subsection and subsection (a) any amount of compensation of a
noneligible member on the basis of which member or
participant contributions have not been made by reason of the
limitation under IRC § 401(a)(17), except as otherwise
provided in this part. Any amount of contribution to the fund
or trust paid by the employer on behalf of a noneligible
member or participant on the basis of compensation which was
subject to exclusion from total compensation in accordance
with the provisions of this paragraph shall, upon the board's
determination or upon application by the employer, be
returned to the employer with valuation interest.
(d) Payments by employers after June 30, 2016.--After June
30, 2016, each employer, including the Commonwealth as employer
of employees of the Department of Education, State-owned
colleges and universities, Thaddeus Stevens College of
Technology, Western Pennsylvania School for the Deaf, Scotland
School for Veterans' Children and The Pennsylvania State
University, shall make payments to the fund and the trust each
quarter in an amount computed in the following manner:
(1) For an employer that is a school entity, the amount
shall be the sum of the percentages as determined under
section 8328 applied to the total compensation during the pay
periods in the preceding quarter of all employees who were
active members of the system during such period, including
members on activated military service leave and USERRA leave,
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plus the accrued liability contribution rate applied to the
total compensation of all active participants in the plan. In
the event a member on activated military service leave or
USERRA leave does not return to service for the necessary
time or receives an undesirable, bad conduct or dishonorable
discharge or does not elect to receive credit for activated
military service under section 8302(b.1)(3) or 8302(d), the
contribution made by the employer on behalf of such member
shall be returned with valuation interest upon application by
the employer.
(2) For an employer that is not a school entity, the
amount computed under subsection (a).
(3) For any employer, whether or not a school entity, in
computing the amount of payment due each quarter, there shall
be excluded from the total compensation referred to in this
subsection and subsection (a) any amount of compensation of a
noneligible member or participant on the basis of which
member or participant contributions have not been made by
reason of the limitation under IRC § 401(a)(17). Any amount
of contribution to the fund paid by the employer on behalf of
a noneligible member or participant on the basis of
compensation which was subject to exclusion from total
compensation in accordance with the provisions of this
paragraph shall, upon the board's determination or upon
application by the employer, be returned to the employer with
valuation interest.
(e) Deemed agreed to.--The agreement of an employer listed
in the definition of school employee under section 8102
(relating to definitions) or any other law to make contributions
to the fund or to enroll its employees as members in the system
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shall be deemed to be an agreement to make contributions to the
trust or enroll its employees in the plan.
(f) Contributions.--The employer employing a participant
shall pick up the required mandatory participant contributions
by a reduction in the compensation of the participant.
(g) Contributions resulting from members reemployed from
USERRA leave.--When a school employee reemployed from USERRA
leave makes the member contributions required to be granted
school service credit for the USERRA leave after June 30, 2016,
either by actual payment or by actuarial debt under section 8325
(relating to incomplete payments), the employer that employed
the school employee when the member contributions are made or
the last employer before termination in the case of payment
under section 8325 shall make the employer contributions that
would have been made under this section if the employee making
the member contributions after he is reemployed from USERRA
leave continued to be employed in his school office or position
instead of performing USERRA leave.
Section 212. Section 8328(a), (b), (c)(4) and (g) are
amended and subsections (c) and (g) are amended by adding
paragraphs to read:
§ 8328. Actuarial cost method.
(a) Employer contribution rate.--The amount of the total
employer contributions shall be computed by the actuary as a
percentage of the total compensation of all active members and
active participants, as applicable, during the period for which
the amount is determined and shall be so certified by the board.
The total employer contribution rate shall be the sum of the
final contribution rate as computed in subsection (h) plus the
premium assistance contribution rate as computed in subsection
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(f). The actuarially required contribution rate shall consist of
the normal contribution rate as defined in subsection (b), the
accrued liability contribution rate as defined in subsection (c)
and the supplemental annuity contribution rate as defined in
subsection (d). Beginning July 1, 2004, the actuarially required
contribution rate shall be modified by the experience adjustment
factors as calculated in subsection (e).
(b) Normal contribution rate.--[The]
(1) For the fiscal year ending on or before June 30,
2015, the normal contribution rate shall be determined after
each actuarial valuation. Until all accrued liability
contributions have been completed, the normal contribution
rate shall be determined, on the basis of an annual interest
rate and such mortality and other tables as shall be adopted
by the board in accordance with generally accepted actuarial
principles, as a level percentage of the compensation of the
average new active member, which percentage, if contributed
on the basis of his prospective compensation through the
entire period of active school service, would be sufficient
to fund the liability for any prospective benefit payable to
him, in excess of that portion funded by his prospective
member contributions, excluding the shared-risk
contributions.
(2) For fiscal years beginning on or after July 1, 2016,
the normal contribution rate shall be determined after each
actuarial valuation. Until all accrued liability
contributions have been completed, the normal contribution
rate shall be determined, on the basis of an annual interest
rate and such mortality and other tables as shall be adopted
by the board in accordance with generally accepted actuarial
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principles, as a level percentage of the compensation of all
active members, which percentage, if contributed on the basis
of the member's prospective compensation through the entire
period of active school service, would be sufficient to fund
the liability for any prospective benefit payable to him, in
excess of that portion funded by his prospective member
contributions, excluding the shared-risk contributions.
(c) Accrued liability contribution rate.--
* * *
(4) For the fiscal year beginning July 1, 2011, the
accrued liability contribution rate shall be computed as the
rate of total compensation of all active members which shall
be certified by the actuary as sufficient to fund as a level
percentage of compensation over a period of 24 years from
July 1, 2011, the present value of the liabilities for all
prospective benefits calculated as of June 30, 2010,
including the supplemental benefits as provided in sections
8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and
8348.7, in excess of the actuarially calculated assets in the
fund (calculated recognizing all realized and unrealized
investment gains and losses each year in level annual
installments over a ten-year period). In the event that the
accrued liability is increased by legislation enacted
subsequent to June 30, 2010, as a result of an increase in
benefits determined on a total plan basis, such additional
liability shall be funded as a level percentage of
compensation over a period of ten years from the July 1
second succeeding the date such legislation is enacted.
(5) For the actuarial valuation for the fiscal years
ending on or after June 30, 2017, the actuarially calculated
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assets in the fund determined in accordance with paragraph
(4) shall be no less than 70% and no more than 130% of market
value.
* * *
(g) Temporary application of collared contribution rate.--
(1) The collared contribution rate for each fiscal year
shall be determined by comparing the actuarially required
contribution rate, calculated without regard for the costs
added by legislation, to the prior year's final contribution
rate.
(2) If, for any of the fiscal years beginning July 1,
2011, July 1, 2012, and on or after July 1, 2013, the
actuarially required contribution rate, calculated without
regard for the costs added by legislation, is more than 3%,
3.5% and 4.5%, respectively, of the total compensation of all
active members greater than the prior year's final
contribution rate, then the collared contribution rate shall
be applied and be equal to the prior year's final
contribution rate increased by 3%, 3.5% and 4.5%,
respectively, of total compensation of all active members.
Otherwise, and for all other fiscal years, the collared
contribution rate shall not be applicable. In no case shall
the collared contribution rate be less than 4% of the total
compensation of all active members.
(3) For purposes of applying the collared contribution
rate, compensation for determining the normal contribution
rate and the accrued liability contribution rate shall be
defined as the total compensation of all active members and
active participants.
* * *
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Section 213. Section 8330 of Title 24 is amended to read:
§ 8330. Appropriations by the Commonwealth.
(a) Annual submission of budget.--The board shall prepare
and through the Governor submit annually to the General Assembly
an itemized budget consisting of the amounts necessary to be
appropriated by the Commonwealth out of the General Fund
required to meet the separate obligations to the fund and the
trust accruing during the fiscal period beginning July 1 of the
following year.
(b) Appropriation and payment.--The General Assembly shall
make an appropriation sufficient to provide for the separate
obligations of the Commonwealth to the fund and the trust. Such
amount shall be paid by the State Treasurer through the
Department of Revenue into the fund or the trust, as the case
may be, within 30 days of receipt of the requisition presented
each quarter by the board.
Section 214. Title 24 is amended by adding a section to
read:
§ 8331. Employer funding mandate protection.
(a) Limited expansion of contractual right to funding.--
Beginning on the July 1 after the actuarial valuation in which
the actuary certifies that final contribution rate is the
actuarially required contribution, each active member shall have
a contractual right to the timely payment of the annual
actuarially required contributions pursuant to section 8328
(relating to actuarial cost method) and section 8502 (k)
(relating to administrative duties of the board) by such
member's employer. The following apply:
(1) The failure of a member's employer to make the
annually required contribution to the fund will be deemed to
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be an impairment of the contractual right of such member.
(2) Any claim of contract impairment shall be brought
against the employer of the member for whom contributions
were not paid and neither the board nor the system or their
employees or agents shall be a defendant in any such action
or liable for any payments or damages arising from such
impairment.
(b) Jurisdiction of Supreme Court.--Notwithstanding 2
Pa.C.S. (relating to administrative law and procedure), 42
Pa.C.S. (relating to judiciary and judicial procedure) or any
other provision of law, the Pennsylvania Supreme Court shall
have exclusive jurisdiction to do as follows:
(1) hear any claim of contract impairment for failure to
pay certified contributions;
(2) render a declaratory judgment or take such other
action as it deems appropriate, consistent with the Supreme
Court retaining jurisdiction over such matter; and
(3) to find facts or to expedite a final judgment in
connection with such a challenge or request for declaratory
relief.
(c) Sovereign immunity waived.--Sovereign immunity is hereby
waived, and the provisions of 42 Pa.C.S. Ch. 85 (relating to
matters affecting government units) or lack of jurisdiction by
the Supreme Court shall not be raised as a defense against a
claim brought against an employer under this section.
(d) Attorney's fees.--A member who prevails in a claim
brought under this part may be awarded reasonable attorney's
fees.
(e) Limitation of contract right.--Nothing in this section
shall be construed to create a contract right or claim of
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contract impairment in any member as to any benefit formula,
benefit payment option, or any other provision of this part
other than the funding mandate of the member's employer, or to
change the jurisdiction of the board or the courts regarding any
claim other than for payment of the annual actuarially required
contributions.
(f) Employer contributions.--Nothing in this section shall
be construed to supersede or conflict with the rights and
obligations set forth in section 8330 (relating to
appropriations by the Commonwealth).
(g) Board action.--The board is authorized but not required
to bring an action under this section on behalf of itself or any
member; and if the board prevails, it may be awarded reasonable
attorney's fees.
Section 215. Sections 8341 and 8342 of Title 24 are amended
to read:
§ 8341. Return of accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable from the system under this chapter to which he
may be entitled, elect to receive his accumulated deductions.
§ 8342. Maximum single life annuity.
(a) General rule.--Upon termination of service, any full
coverage member who is eligible to receive an annuity pursuant
to the provisions of section 8307(a) or (b) (relating to
eligibility for annuities) and has made an application in
accordance with the provisions of section 8507(f) (relating to
rights and duties of school employees [and members], members and
participants) shall be entitled to receive a maximum single life
annuity attributable to his credited service and equal to the
sum of the following single life annuities beginning at the
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effective date of retirement and, in case the member on the
effective date of retirement is under superannuation age,
multiplied by a reduction factor calculated to provide benefits
actuarially equivalent to an annuity starting at superannuation
age: Provided however, That on or after July 1, 1976, in the
case of any member who has attained age 55 and has 25 or more
eligibility points such sum of single life annuities shall be
reduced by a percentage determined by multiplying the number of
months, including a fraction of a month as a full month, by
which the effective date of retirement precedes superannuation
age by 1/4%: Further provided, In no event shall a Class T-E or
Class T-F member receive an annual benefit, calculated as of the
effective date of retirement, greater than the member's final
average salary:
(1) A [standard single life annuity multiplied by the]
single life annuity that is the sum of annuities determined
separately for each class of service [multiplier], and
calculated on the basis of the number of years of credited
school service other than concurrent service.
(2) A standard single life annuity multiplied by the
class of service multiplier and calculated on the basis of
the number of years of concurrent service other than service
credited as a member of Class T-I and multiplied by the ratio
of total compensation received in the school system other
than service credited as a member of Class T-I or State
service as a member of Class TBD during the period of
concurrent service to the total compensation received during
such period.
(3) A supplemental annuity such that the total annuity
prior to any optional modification or any reduction due to
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retirement prior to superannuation age shall be at least $100
for each full year of credited service.
(4) A standard single life annuity based on monies
credited to a Class T-I member, as provided in this part.
(5) If applicable, a standard single life annuity based
on monies credited in the member's cash balance account, as
provided in this part.
(b) Present value of annuity.--The present value of the
maximum single life annuity as calculated in accordance with
subsection (a) shall be determined, for all classes other than
Class T-I, by multiplying the maximum single life annuity by the
cost of a dollar annuity on the effective date of retirement.
Such present value for all classes shall be decreased only as
specifically provided in this part.
(c) Limitation regarding annual benefit under IRC §
415(b).--Notwithstanding any provision of this part to the
contrary, no benefit shall be payable to the extent that such
benefit exceeds any limitation under IRC § 415(b) in effect with
respect to governmental plans, as such term is defined in IRC §
414(d), on the date the benefit payment becomes effective.
(d) Coordination of benefits.--The determination and payment
of the maximum single life annuity under this section shall be
in addition to any payments a combined service employee may be
entitled to receive, has received or is receiving as a result of
being a participant in the plan.
Section 216. Section 8344(a) and (b) of Title 24 are amended
and the section is amended by adding a subsection to read:
§ 8344. Disability annuities.
(a) Amount of annuity.--A member other than a member of
Class T-I who has made application for a disability annuity as
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provided in section 8507(k) (relating to rights and duties of
school employees [and members], members and participants) and
has been found to be eligible in accordance with the provisions
of sections 8307(c) (relating to eligibility for annuities) and
8505(c)(1) (relating to duties of board regarding applications
and elections of members) shall receive a disability annuity
payable from the effective date of disability and continued
until a subsequent determination by the board that the annuitant
is no longer entitled to a disability annuity. The disability
annuity shall be a single life annuity that is equal to a sum of
the standard single life [annuity] annuities determined
separately for each class of service if the total number of
years of credited service is greater than 16.667, otherwise
[the] each standard single life annuity shall be multiplied by
the lesser of the following ratios:
Y*/Y or 16.667/Y
where Y = total number of years of credited service and Y* =
total years of credited service if the member were to continue
as a school employee until attaining superannuation age, or if
the member has attained superannuation age then the number of
years of credited service. In no event shall the disability
annuity plus any cost-of-living increases be less than $100 for
each full year of credited service. The member shall be entitled
to the election of a joint and survivor annuity on that portion
of the disability annuity to which he is entitled under section
8342 (relating to maximum single life annuity).
(b) Reduction on account of earned income.--Payments on
account of disability shall be reduced by that amount by which
the earned income of the annuitant, as reported in accordance
with section 8508(b) (relating to rights and duties of
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annuitants) for the preceding year together with the disability
annuity payments for the year, exceeds the greater of $5,000 or
the last year's salary of the annuitant as a [school employee]
member of the system, provided that the annuitant shall not
receive less than his member's annuity or the amount to which he
may be entitled under section 8342, whichever is greater.
* * *
(f) Coordination of benefits.--The determination and payment
of a disability annuity under this section shall be in addition
to any payments a Class T-I member is entitled to receive, or to
any payments a combined service employee may be entitled to
receive, has received or is receiving as a result of being a
participant in the plan.
Section 217. Section 8345(a)(4)(iii), 8346(a), (a.1), (b),
(b.1), (c) and (d)(1), 8347 and 8349 of Title 24 are amended to
read:
§ 8345. Member's options.
(a) General rule.--Any Class T-C or Class T-D member who is
a vestee with five or more eligibility points, any Class T-E or
Class T-F member who is a vestee with ten or more eligibility
points, or any [other] eligible member upon termination of
school service [who has not withdrawn his accumulated deductions
as provided in section 8341 (relating to return of accumulated
deductions)] who is eligible to receive an annuity, may apply
for and elect to receive either a maximum single life annuity,
as calculated in accordance with the provisions of section 8342
(relating to maximum single life annuity), or a reduced annuity
certified by the actuary to be actuarially equivalent to the
maximum single life annuity and in accordance with one of the
following options, except that no member shall elect an annuity
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payable to one or more survivor annuitants other than his spouse
or alternate payee of such a magnitude that the present value of
the annuity payable to him for life plus any lump sum payment he
may have elected to receive is less than 50% of the present
value of his maximum single life annuity. In no event shall a
Class T-E or Class T-F member receive an annual benefit,
calculated as of the effective date of retirement, greater than
the member's final average salary.
* * *
(4) Option 4.--Some other benefit which shall be
certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
* * *
(iii) A portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the accumulated deductions
standing to the credit of the member. The balance of the
present value of the maximum single life annuity adjusted
in accordance with section 8342(b) shall be paid in the
form of an annuity with a guaranteed total payment, a
single life annuity, or a joint and survivor annuity or
any combination thereof but subject to the restrictions
of subparagraphs (i) and (ii) of this paragraph. This
subparagraph shall not apply to a Class T-E or Class T-F
member. For purposes of this subparagraph, the term
"actuarially equivalent," as applied to any lump sum
withdrawal attributable to contributions credited to the
member's savings account of Class T-C and Class T-D
members on or after July 1, 2016, together with all
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interest thereon, shall mean equal present values,
computed on the basis of the interest rate and such
mortality and other tables as adopted by the board
pursuant to section 8328(b) (relating to actuarial cost
method) in effect on the effective date of retirement of
the member. Any partial lump sum withdrawal shall be
applied first to contributions and interest credited to
the member's savings account before July 1, 2016.
* * *
§ 8346. Termination of annuities.
(a) General rule.--If an annuitant returns to school service
or enters or has entered State service and elects multiple
service membership, any annuity payable to him under this part
shall cease effective upon the date of his return to school
service or entering State service without regard to whether he
is a mandatory, optional or prohibited member of the system or
participant in the plan or, if a multiple service member,
whether he is a mandatory, optional or prohibited member or
participant of the State Employee's Retirement System or State
Employee's Defined Contribution Plan and in the case of an
annuity other than a disability annuity the present value of
such annuity, adjusted for full coverage in the case of a joint
coverage member who makes the appropriate back contributions for
full coverage, shall be frozen as of the date such annuity
ceases. An annuitant who is credited with an additional 10% of
membership service as provided in section 8302(b.2) (relating to
credited school service) and who returns to school service,
except as provided in subsection (b), shall forfeit such
credited service and shall have his frozen present value
adjusted as if his 10% retirement incentive had not been applied
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to his account. In the event that the cost-of-living increase
enacted December 18, 1979, occurred during the period of such
State or school employment, the frozen present value shall be
increased, on or after the member attains superannuation age, by
the percent applicable had he not returned to service.
(a.1) Return of benefits.--In the event an annuitant whose
annuity from the system ceases pursuant to this section receives
any annuity payment, including a lump sum payment pursuant to
section 8345 (relating to member's options) on or after the date
of his return to school service or entering State service, the
annuitant shall return to the board the amount so received from
the system plus statutory interest. The amount payable shall be
certified in each case by the board in accordance with methods
approved by the actuary and shall be paid in a lump sum within
90 days or in the case of an active member or a State employee
who is an active member of the State Employees' Retirement
System may be amortized with statutory interest through salary
deductions to the system in amounts agreed upon by the member
and the board. The salary deduction amortization plans agreed to
by the member and the board may include a deferral of payment
amounts and statutory interest until the termination of school
service or State service as the board in its sole discretion
decides to allow. The board may limit salary deduction
amortization plans to such terms as the board in its sole
discretion determines. In the case of a State employee who is an
active member of the State Employees' Retirement System, the
agreed upon salary deductions shall be remitted to the State
Employees' Retirement Board, which shall certify and transfer to
the board the amounts paid.
* * *
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(b) Return to school service during emergency.--When, in the
judgment of the employer, an emergency creates an increase in
the work load such that there is serious impairment of service
to the public or in the event of a shortage of appropriate
subject certified teachers or other personnel, an annuitant or
participant receiving distributions may be returned to school
service for a period not to extend beyond the school year during
which the emergency or shortage occurs, without loss of his
annuity or distributions. The annuitant shall not be entitled to
earn any credited service, and no contributions may be made by
the annuitant, the employer or the Commonwealth on account of
such employment. Such service shall not be subject to member
contributions or be eligible for qualification as creditable
school service or for participation in the plan, mandatory
pickup participant contributions or employer defined
contributions.
(b.1) Return to school service in an extracurricular
position.--
(1) An annuitant or participant receiving distributions
may be employed under separate contract by a public school or
charter school in an extracurricular position performed
primarily outside regular instructional hours and not part of
mandated curriculum without loss of annuity. [Neither the]
The annuitant [nor], the participant receiving distributions
and the employer shall not make contributions to the member's
savings account, the individual investment account or State
accumulation account respectively for such service. Further,
such contract shall contain a waiver whereby the annuitant
waives any potential retirement benefits that could arise
from the contract and releases the employer and the board
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from any liability for such benefits. Such service shall not
be subject to member or participant contributions or be
eligible for qualification as creditable school service or
for participation in the plan, mandatory pickup participant
contributions or employer defined contributions.
* * *
(c) Subsequent discontinuance of service.--Upon subsequent
discontinuance of service, such [member] terminating school
employee other than a former annuitant who had the effect of his
frozen present value eliminated in accordance with subsection
(d) or a former disability annuitant shall be entitled to an
annuity which is actuarially equivalent to [the sum of] the
present value as determined under subsection (a) [and] to which
shall be added, if the service after reemployment was as a
member of the system, the present value of a maximum single life
annuity based on years of service credited subsequent to reentry
in the system and his final average salary computed by reference
to his compensation as a member of the system or as a member of
the State Employees' Retirement System during his entire period
of school and State service.
(d) Elimination of the effect of frozen present value.--
(1) An annuitant who returns to school service as an
active member of the system and earns three eligibility
points by performing credited school service or reemployment
from USERRA leave following the most recent period of receipt
of an annuity under this part, or an annuitant who enters
State service other than a participant in the State
Employees' Defined Contribution Plan and:
(i) is a multiple service member; or
(ii) who elects multiple service membership, and
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earns three eligibility points by performing credited State
service, reemployment from USERRA leave or credited school
service following the most recent period of receipt of an
annuity under this part, and who had the present value of his
annuity frozen in accordance with subsection (a), shall
qualify to have the effect of the frozen present value
resulting from all previous periods of retirement eliminated,
provided that all payments under Option 4 and annuity
payments payable during previous periods of retirement plus
interest as set forth in paragraph (3) shall be returned to
the fund in the form of an actuarial adjustment to his
subsequent benefits or in such form as the board may
otherwise direct.
* * *
§ 8347. Death benefits.
(a) Members eligible for annuities.--Any member or former
member on USERRA leave, other than an annuitant, who dies and
was eligible for an annuity from the system in accordance with
section 8307(a) or (b) (relating to eligibility for annuities)
shall be considered as having applied for an annuity to become
effective the day before his death; and, in the event he has not
elected an option, it shall be assumed that he elected Option 1
and assigned as beneficiary that person last designated in
writing to the board.
(b) Members ineligible for annuities.--In the event of the
death of any member or former member on USERRA leave, other than
an annuitant, who is not entitled to a death benefit from the
system as provided in subsection (a), his designated beneficiary
shall be paid the full amount of his accumulated deductions.
(c) Disability annuitants.--In the event of the death of a
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disability annuitant who has elected to receive a maximum
disability annuity from the system before he has received in
annuity payments an amount equal to the present value, on the
effective date of disability, of the benefits to which he would
have been entitled under subsection (a) had he died while in
school service, the balance of such amount shall be paid to his
designated beneficiary, except that in the event of the death of
a disability annuitant who was not entitled to receive benefits
under subsection (a), his beneficiary shall be paid the
accumulated deductions standing to his credit on the effective
date of disability less the total payments received on account
of his member's annuity.
(d) Other annuitants.--In the event of the death of an
annuitant who has elected to receive the maximum single life
annuity from the system before he has received in total annuity
payments an amount equal to the full amount of the accumulated
deductions standing to his credit on the effective date of
retirement, the difference between the total payments made to
the date of death and the accumulated deductions shall be paid
to his designated beneficiary.
§ 8349. Payment of benefits from the system.
(a) Annuities.--Any annuity granted under the provisions of
this part and paid from the fund shall be paid in equal monthly
installments.
(b) Death benefits.--If the amount of a death benefit
payable from the fund to a beneficiary of a member under section
8347 (relating to death benefits) or under the provisions of
Option 1 of section 8345(a)(1) (relating to member's options) is
$10,000 or more, such beneficiary may elect to receive payment
according to one of the following options:
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(1) A lump sum payment.
(2) An annuity actuarially equivalent to the amount
payable.
(3) A lump sum payment and an annuity such that the
annuity is actuarially equivalent to the amount payable less
the lump sum payment specified by the beneficiary.
(c) Death or absence of beneficiary.--If the beneficiary
designated by a member should predecease him or die within 30
days of his death, or if a valid nomination of a beneficiary is
not in effect at his death, any money payable to a beneficiary
shall be paid to the estate of the member.
(d) De minimis accounts.--A member with only Class T-I
service credit as a member of the system who terminates school
service and whose balance in the members' savings account is
$5,000 or less as of the date of termination of service (or such
other higher amount as may be permitted under IRC §411(a)(11) or
417(e)) shall receive such balance in one lump sum payment as
provided in IRC §401(a)(31). This balance shall not be eligible
for installment payments under section 8505.1 (relating to
installment payments of accumulated deductions), but shall be
considered a lump sum payment for purposes of section 8505.1(d).
Section 218. Title 24 is amended by adding a chapter to
read:
CHAPTER 84
SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN
Sec.
8401. Establishment.
8402. Plan document.
8403. Individual investment accounts.
8404. Participant contributions.
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8405. Mandatory pickup participant contributions.
8406. Employer defined contributions.
8407. Eligibility for benefits.
8408. Death benefits.
8409. Vesting.
8410. Termination of distributions.
8411. Agreements with financial institutions and other
organizations.
8411.1. Relation of administrators of School Employees' Defined
Contribution Plan to providers of 403(b) plans.
8412. Powers and duties of board.
8413. Responsibility for investment loss.
8414. Investments based on participants' investment allocation
choices.
8415. Expenses.
8416. Election by members to be participants.
8417. Tax qualification.
§ 8401. Establishment.
(a) School Employees' Defined Contribution Plan.--The School
Employees' Defined Contribution Plan is established. The board
shall administer and manage the plan, which shall be a defined
contribution plan exclusively for the benefit of those school
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
board shall determine the terms and provisions of the plan not
inconsistent with this part, the IRC and other applicable law
and shall provide for the plan's administration.
(b) School Employees' Defined Contribution Trust.--The
School Employees' Defined Contribution Trust is established as
part of the plan in accordance with this part. The trust shall
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be comprised of the individual investment accounts and all
assets and moneys in those accounts. The members of the board
shall be the trustees of the trust, which shall be administered
exclusively for the benefit of those school employees who
participate in the plan and their beneficiaries within the
meaning of and in conformity with IRC § 401(a). The board shall
determine the terms and provisions of the trust not inconsistent
with this part, the IRC and other applicable law and shall
provide for the investment and administration of the trust.
(c) Assets held in trust.--All assets and income in the plan
that have been or shall be withheld or contributed by the
participants, the Commonwealth and employers in accordance with
this part shall be held in trust in any funding vehicle
permitted by the applicable provisions of the IRC for the
exclusive benefit of the plan's participants and their
beneficiaries until such time as the funds are distributed to
the participants or their beneficiaries in accordance with the
terms of the plan document. The assets of the plan held in trust
for the exclusive benefit of the participants and their
beneficiaries may be used for the payment of the fees, costs and
expenses related to the administration and investment of the
plan and the trust.
(d) Name for transacting business.--By the name of "The
School Employees' Defined Contribution Plan," all of the
business of the plan shall be transacted, the trust invested,
all requisitions for money drawn and payments made and all of
its cash and securities and other property shall be held, except
that, any other law to the contrary notwithstanding, the board
may establish a nominee registration procedure for the purpose
of registering securities in order to facilitate the purchase,
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sale or other disposition of securities pursuant to the
provisions of this part.
§ 8402. Plan document.
The board shall set forth the terms and provisions of the
plan and trust in a document containing the terms and conditions
of the plan and in a trust declaration that shall be published
in the Pennsylvania Bulletin. The creation of the document
containing the terms and conditions of the plan and the trust
declaration and the establishment of the terms and provisions of
the plan and the trust need not be promulgated by regulation or
formal rulemaking and shall not be subject to the act of July
31, 1968 (P.L.769, No.240), referred to as the Commonwealth
Documents Law. A reference in this part or other law to the plan
shall include the plan document unless the context clearly
indicates otherwise.
§ 8403. Individual investment accounts.
The board:
(1) shall establish in the trust an individual
investment account for each participant in the plan. All
contributions by a participant or an employer for or on
behalf of a participant shall be credited to the
participant's individual investment account, together with
all interest and investment earnings and losses. Investment
and administrative fees, costs and expenses shall be charged
to the participants' individual investment accounts. Employer
defined contributions shall be recorded and accounted for
separately from participant contributions, but all interest,
investment earnings and losses, and investment and
administrative fees, costs and expenses shall be allocated
proportionately;
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(2) shall separately track participant contributions,
including investment gains and losses, and employer
contributions, including investment gains and losses, but all
interest, investment gains and losses and administrative
fees, costs and expenses shall be allocated proportionately;
and
(3) may contract with financial institutions, insurance
companies or other types of third-party providers and other
vendors to allow participants to deposit participant
contributions into the individual investment accounts in a
form and manner as provided by the contract.
§ 8404. Participant contributions.
(a) Mandatory contributions.--A participant shall make
mandatory pickup participant contributions through payroll
deductions to the participant's individual investment account
equal to 3% of compensation for current school service. The
employer shall cause such contributions for current service to
be made and deducted from each payroll or on such schedule as
established by the board.
(b) Voluntary contributions.--
(i) A participant may make voluntary contributions
up to an additional amount equal to 3% of compensation
for current school service.
(ii) Class T-E and Class T-F members may make
voluntary contributions to the plan in an amount of not
less than 3% nor more than 6% of compensation that
exceeds the limit of compensation for such members, as
set forth in section 8102 (relating to definitions).
(iii) The employer shall cause the contributions
made under this section to be made and deducted from each
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payroll or on such schedule as established by the board.
(iv) Voluntary contributions made under this section
shall not be picked up.
(c) Prohibition on contributions.--No contributions shall be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any participant contributions
in excess of the limitations and investment earnings on those
contributions shall be refunded to the participant by the board.
§ 8405. Mandatory pickup participant contributions.
(a) Treatment for purposes of IRC § 414(h).--The
contributions to the trust required to be made under section
8404(a) (relating to participant contributions) with respect to
current school service rendered by an active participant shall
be picked up by the employer and shall be treated as the
employer's contribution for purposes of IRC § 414(h). An
employer employing a participant in the plan shall pick up the
required mandatory participant contributions by a reduction in
the compensation of the participant.
(b) Treatment for other purposes.--For all other purposes
under this part and otherwise, such mandatory pickup participant
contributions shall be treated as contributions made by a
participant in the same manner and to the same extent as if the
contributions were made directly by the participant and not
picked up.
§ 8406. Employer defined contributions.
(a) Contributions for current service.--The employer of a
participant shall make employer defined contributions for
current service of an active participant that shall be credited
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to the active participant's individual investment account.
Employer defined contributions shall be recorded and accounted
for separately from participant contributions.
(b) Contributions resulting from participants reemployed
from USERRA leave.--When a school employee reemployed from
USERRA leave makes the mandatory pickup participant
contributions permitted to be made for the USERRA leave, the
employer by whom the school employee is employed at the time the
participant contributions are made shall make whatever employer
defined contributions would have been made under this section
had the employee making the participant contributions after
being reemployed from USERRA leave continued to be employed in
the employee's school position instead of performing USERRA
leave. Such employer defined contributions shall be placed in
the participant's individual investment account as otherwise
provided by this part.
(c) Limitations on contributions.--No contributions shall be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any employer defined
contributions in excess of the limitations and investment
earnings thereon shall be refunded to the employer by the board.
§ 8407. Eligibility for benefits.
(a) Termination of service.--A participant who terminates
school service shall be eligible to withdraw the vested
accumulated total defined contributions standing to the
participant's credit in the participant's individual investment
account or a lesser amount as the participant may request.
Payment shall be made in a lump sum unless the board has
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established other forms of distribution in the plan document,
subject to the provisions of subsection (f). A participant who
withdraws the vested accumulated total defined contributions
shall no longer be a participant in the plan, notwithstanding
that the participant may continue to be a member of the system,
or contract to receive an annuity or other form of payment from
a provider retained by the board for such purposes.
(b) Required distributions.--All payments pursuant to this
section shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9). The board shall take any action and make any
distribution it may determine is necessary to comply with those
requirements.
(c) Combined service employee.--A participant who is a
combined service employee must be terminated from all positions
that result in either membership in the system or participation
in the plan to be eligible to receive a distribution.
(d) Loans.--Loans or other distributions, including hardship
or unforeseeable emergency distributions, from the plan to
school employees who have not terminated school service are not
permitted, except as required by law.
(e) Small individual investment accounts.--
(1) A participant who terminates school service and
whose vested accumulated total defined contributions are
below the threshold established by law as of the date of
termination of service may be paid the vested accumulated
total defined contributions in a lump sum as provided in IRC
§ 401(a)(31).
(2) The board may also provide in the plan document
that, notwithstanding subsection (f), a participant whose
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vested accumulated employer defined contributions are below
the thresholds established by the board may receive the
distributions of vested accumulated employer defined
contributions without the obligation to purchase an annuity.
The threshold may be established as a dollar amount, an
annuity amount, in some other form individually or in
combination as the board determines.
(f) Requirement to purchase annuity.--Except as prohibited
by the IRC or as otherwise provided in this part, a participant
who is eligible and elects to receive a distribution of vested
accumulated employer defined contributions shall be required to
purchase an annuity with the distribution under such conditions
as provided in the plan document. The conditions may include
that the board is authorized to make the distribution directly
to the annuity provider.
§ 8408. Death benefits.
(a) General rule.--In the event of the death of an active
participant or inactive participant, the board shall pay to the
participant's beneficiary the vested balance in the
participant's individual investment account in a lump sum or in
such other manner as the board may establish in the plan
document.
(b) Death of participant receiving distributions.--In the
event of the death of a participant receiving distributions, the
board shall pay to the participant's beneficiary the vested
balance in the participant's individual investment account in a
lump sum or in such other manner as the board may establish in
the plan document or, if the board has established alternative
methods of distribution in the plan document under which the
participant was receiving distributions, to the participant's
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beneficiary or successor payee as provided in the plan document.
(c) Contracts.--The board may contract with financial
institutions, insurance companies or other types of third-party
providers to allow participants who receive a lump sum
distribution to receive payments and death benefits in a form
and manner as provided by the contract.
§ 8409. Vesting.
(a) Participant and voluntary contributions.--Subject to the
forfeiture and attachment provisions of section 8533 (relating
to taxation, attachment and assignment of funds) or otherwise as
provided by law, a participant shall be immediately vested with
respect to all mandatory pickup participant contributions and
voluntary contributions paid by or on behalf of the participant
to the trust plus interest and investment earnings on the
participant contributions but minus investment fees and
administrative charges.
(b) Employer defined contributions.--
(1) Subject to the forfeiture and attachment provisions
of section 8533 or otherwise as provided by law, a
participant shall be vested with respect to employer defined
contributions paid to the participant's individual investment
account plus interest and investment earnings by or on behalf
of the participant to the trust according to the following
schedule:
(i) At and after the first year of school service as
a participant in the plan, 25%.
(ii) At and after the second year of school service
as a participant in the plan, 50%.
(iii) At and after the third year of school service
as a participant in the plan, 75%.
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(iv) At and after the fourth year of school service
as a participant in the plan, 100%.
(2) For purposes of this section, a participant shall
accrue one year of school service for each fiscal year in
which the participant makes contributions to the plan.
(3) The board shall establish in the plan document other
terms and conditions for the implementation and
administration of this section.
(4) Accumulated employer defined contributions that are
not vested as of the participant's date of termination of
service shall be credited against the next contribution due
from the participant's employer for the remaining or future
participants of the employer.
(c) USERRA leave and vesting credit.--A participant in the
plan who is reemployed from USERRA leave or who dies while
performing USERRA leave shall receive vesting credit under this
section for the school service that would have been performed
had the member not performed USERRA leave.
§ 8410. Termination of distributions.
(a) Return to school service.--
(1) A participant receiving distributions or an inactive
participant who returns to school service shall cease
receiving distributions and shall not be eligible to receive
distributions until the participant subsequently terminates
school service, without regard to whether the participant is
a mandatory, optional or prohibited member of the system or
participant in the plan.
(2) This subsection shall not apply to a distribution of
accumulated employer defined contributions or other
distributions that the participant has received and used to
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purchase an annuity from a provider contracted by the board.
(b) Return of benefits paid during USERRA leave.--
(1) If a former school employee is reemployed from
USERRA leave and received any payments or annuity from the
plan during the USERRA leave, the employee shall return to
the board the amount so received plus interest as provided in
the plan document.
(2) The amount payable shall be certified in each case
by the board in accordance with methods approved by the
actuary and shall be paid in a lump sum within 30 days or, in
the case of an active participant, may be amortized with
interest as provided in the plan document through salary
deductions to the trust in amounts agreed upon by the active
participant and the board, but not longer than a period that
starts with the date of reemployment and continuing for up to
three times the length of the active participant's immediate
past period of USERRA leave. The repayment period shall not
exceed five years.
§ 8411. Agreements with financial institutions and other
organizations.
(a) Written agreement.--To establish and administer the
plan, the board may enter into a written agreement with one or
more financial institutions or pension management organizations
to administer the plan and the investment of funds held pursuant
to the plan. The administrator shall be selected in accordance
with the following:
(1) The board shall solicit proposals from financial
institutions and pension management organizations.
(2) The board shall publish the solicitation in the
Pennsylvania Bulletin.
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(3) Proposals received shall be evaluated based on
specific criteria adopted by the board. The criteria shall
include experience, customer service history and other
relevant criteria.
(b) Rebid.--A contract to administer the plan under
subsection (a) shall be rebid at least once every ten years.
§ 8411.1. Relation of administrators of School Employees'
Defined Contribution Plan to providers of 403(b)
plans.
(a) General rule.--A financial institution or pension
management organization entering into a written agreement
pursuant to section 8411 (relating to agreements with financial
institutions and other organizations) may offer or provide
services to any plan established or maintained by a school
district under IRC § 403(b) or 457 if the written agreement for
the administration of the School Employees' Defined Contribution
Plan is not combined with any other written agreement for the
administration of a school district's 403(b) plan or 457 plan.
Each school district that provides a 403(b) plan shall make
available, in the manner provided by subsection (c), to
participants, multiple financial institutions or pension
management organizations that have not entered into a written
agreement pursuant to section 8411 and which provide services to
the school district's 403(b) plan or 457 plan.
(b) Plan transparency and administration.--A financial
institution or pension management organization providing
services for any plan established or maintained by a school
district under IRC § 403(b) or 457 shall:
(1) enter into an agreement with the school district or
the school district's independent compliance administrator
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that shall require the financial institution or pension
management organization to provide in an electronic format
all data necessary for the administration of the 403(b) plan
or 457 plan as determined by the school district or the
school district's compliance administrator; and
(2) provide all data required by the school district or
a school district's compliance administrator to facilitate
disclosure of all fees, charges, expenses, commissions,
compensation and payments to third parties related to
investments offered under the 403(b) plan or 457 plan.
(c) Provider selection.--A school district that establishes
or maintains a plan under IRC § 403(b) or 457 shall select a
minimum of four financial institutions or pension management
organizations, in addition to the financial institution or
pension management organization that entered into an agreement
pursuant to section 8411, to provide services to the 403(b) plan
or 457 plan. If fewer than four such additional financial
institutions or pension management organizations are determined
to be available or able to meet the requirements established in
this section, then the school district shall select the number
of available providers able to meet the school district's
requirements. A financial institution or pension management
organization shall be designated a 403(b) plan or 457 plan
provider if the financial institution or pension management
organization enters into an agreement in accordance with
subsection (b).
§ 8412. Powers and duties of board.
The board shall have the following powers and duties to
establish the plan and trust and to administer the provisions of
this part:
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(1) The board may commingle or pool assets with the
assets of other persons or entities.
(2) The board shall pay all administrative fees, costs
and expenses of managing, investing and administering the
plan, the trust and the individual investment accounts from
the balance of such individual investment accounts, except as
the General Assembly otherwise provides through
appropriations from the General Fund.
(3) The board may establish investment guidelines and
limits on the types of investments that participants may
make, consistent with the board's fiduciary obligations.
(4) The board may change the terms of the plan as may be
necessary to maintain the tax-qualified status of the plan.
(5) The board may establish a process for election to
participate in the plan by those school employees for whom
participation is not mandatory.
(6) The board may perform an annual or more frequent
review of any qualified fund manager for the purpose of
assuring it continues to meet all standards and criteria
established.
(7) The board may allow for eligible rollovers and
direct trustee-to-trustee transfers into the trust from
qualified plans of other employers, regardless of whether the
employers are private employers or public employers.
(8) The board may allow a former participant to maintain
the participant's individual investment account within the
plan.
(9) The board shall administer or ensure the
administration of the plan in compliance with the
qualification and other rules of IRC.
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(10) The board may establish procedures to provide for
the lawful payment of benefits.
(11) The board shall determine what constitutes a
termination of school service.
(12) The board may establish procedures for
distributions of small accounts as required or permitted by
IRC.
(13) The board may establish procedures in the plan
document or promulgate rules and regulations as it deems
necessary for the administration and management of the plan,
including, but not limited to, establishing:
(i) Procedures by which eligible participants may
change voluntary contribution amounts or their investment
choices on a periodic basis or make other elections
regarding their participation in the plan.
(ii) Procedures for deducting mandatory pickup
participant contributions and voluntary contributions
from a participant's compensation.
(iii) Procedures for rollovers and trustee-to-
trustee transfers allowed under the IRC and permitted by
the board as part of the plan.
(iv) Standards and criteria for providing not less
than ten options in accordance with three or more
providers of investment options to eligible individuals
regarding investment of amounts deferred under the plan.
The standards and criteria shall provide for a variety of
investment options and shall be reviewed in accordance
with criteria established by the board. One of the
available options shall serve as the default option for
participants who do not make a timely election and, to
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the extent commercially available, one option shall have
an annuity.
(v) Standards and criteria for disclosing to the
participants the anticipated and actual income
attributable to amounts invested, property rights and all
fees, costs and expenses to be made against amounts
deferred to cover the costs and expenses of administering
and managing the plan or trust.
(vi) Procedures, standards and criteria for the
making of distributions from the plan upon termination
from employment or death or in other circumstances
consistent with the purpose of the plan.
(14) The board may waive any reporting or information
requirement contained in this part if the board determines
that the information is not needed for the administration of
the plan.
(15) The board may contract any services and duties in
lieu of staff except final adjudications and as prohibited by
law. Any duties or responsibilities of the board not required
by law to be performed by the board may be delegated to a
third-party provider subject to appeal to the board.
(16) The board may provide that any duties of the
employer or information provided by the participant to the
employer be performed or received directly by the board.
(17) The board shall ensure that participants are
provided with educational materials about investment options
and choices.
§ 8413. Responsibility for investment loss.
The Commonwealth, the board, an employer or a school entity
or other political subdivision shall not be responsible for any
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investment loss incurred under the plan or for the failure of
any investment to earn any specific or expected return or to
earn as much as any other investment opportunity, whether or not
such other opportunity was offered to participants in the plan.
§ 8414. Investments based on participant investment allocation
choices.
(a) Investment by participant.--All contributions, interest
and investment earnings shall be invested based on a
participant's investment allocation choices. All investment
allocation choices shall be credited proportionately between
contributions from the participant and employer defined
contributions. Each participant shall be credited individually
with the amount of contributions, interest and investment
earnings.
(b) Investment of contributions made by entities other than
Commonwealth.--Investment of contributions by any corporation,
institution, insurance company or custodial bank or other entity
that the board has approved shall not be unreasonably delayed
and in no case shall the investment of contributions be delayed
more than 30 days from the date of payroll deduction or
voluntary contributions are made to the date that funds are
invested. Any interest earned on the funds pending investment
shall be allocated to the employers and credited to the
individual investment accounts of participants who are then
participating in the plan, unless the interest is used to defray
administrative costs and fees that would otherwise be required
to be borne by participants who are then participating in the
plan.
§ 8415. Expenses.
All expenses, fees and costs of administering the plan and
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the trust and investing the assets of the trust shall be borne
by the participants and paid from assessments against the
balances of the individual investment accounts as established by
the board, except that for fiscal years ending before July 1,
2016, the expenses, fees and costs of establishing and
administering the plan and trust shall be paid by the
Commonwealth through annual appropriations from the General
Fund, made on the basis of estimates from the board.
§ 8416. Election by Class T-E and Class T-F members to be
participants.
(a) General rule.--Any Class T-E or Class T-F member who is
an active member or inactive member on or after July 1, 2016,
who is employed in a position that would otherwise be eligible
for participation in the plan may elect to become a participant
in the plan to the extent that such member's compensation
exceeds the Social Security taxable wage base in effect at the
beginning of the fiscal year.
(b) Time for making election.--An eligible Class T-E or
Class T-F member may elect to become a participant and a
combined service employee at any time before termination of
school service by filing a written election with the board, as
provided in the plan document.
(c) Effect of election.--The following apply:
(1) An election to become a participant shall continue
until the termination of service. Contributions from
compensation that exceeds the Social Security taxable wage
base in effect at the beginning of the fiscal year shall be
deducted as soon as administratively feasible after receipt
of a properly filed election and shall be deducted thereafter
in accordance with section 8412 (relating to powers and
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duties of board) and 8506 (relating to duties of employers).
(2) A combined service employee shall not be eligible to
receive an annuity from the system or a withdrawal of
accumulated deductions until the employee has terminated
school service.
(3) A participant shall not be entitled to purchase any
previous school service or creditable nonschool service.
(4) The eligibility of a combined service employee for
an annuity from the system and, if eligible, the amount of
the annuity shall be as determined under this part.
§ 8417. Tax qualification.
(a) Required distributions.--All payments under this chapter
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a).
(b) Limitations.--The following shall apply:
(1) (i) Except as provided under subparagraph (ii)
and notwithstanding a provision of this part, a
contribution or benefit related to the plan may not
exceed a limitation under IRC § 415 with respect to
governmental plans that is in effect on the date the
contribution or benefit payment takes effect.
(ii) An increase in a limitation under IRC § 415
shall apply to the participants on or after the effective
date of this section.
(iii) For the purposes of this paragraph, the term
"government plans" shall have the same meaning as in IRC
§ 414(d).
(2) (i) Except as provided under subparagraph (ii),
an amendment of this part on or after the effective date
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of this section that increases contributions or benefits
for active participants, inactive participants or
participants receiving distributions may not be deemed to
provide for a contribution or benefit in excess of a
limitation, adjusted on or after the effective date of
this section, under IRC § 415 unless specifically
provided by legislation.
(ii) Notwithstanding subparagraph (i), an increase
in benefits on or after the effective date of this
section for a participant in the plan shall be authorized
and apply to the fullest extent allowed by law.
Section 219. Sections 8501(a), (c), (d) and (e) of Title 24
are amended and the section is amended by adding a subsection to
read:
§ 8501. Public School Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and shall consist of [15] 16
members: the Secretary of Education, ex officio; the State
Treasurer, ex officio; the Secretary of Banking and Securities,
ex officio; two Senators; two members of the House of
Representatives; the executive secretary of the Pennsylvania
School Boards Association, ex officio; two to be appointed by
the Governor, at least one of whom shall not be a school
employee or an officer or employee of the State; three to be
elected by the active professional members of the system and
active professional participants of the plan from among their
number; one to be elected by annuitants or participants of the
plan who have terminated school service and are receiving or are
eligible to receive distributions from among their number; one
to be elected by the active nonprofessional members of the
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system or active nonprofessional participants of the plan from
among their number; and one to be elected by members of
Pennsylvania public school boards from among their number. The
appointments made by the Governor shall be confirmed by the
Senate and each election shall be conducted in a manner approved
by the board. The terms of the appointed and nonlegislative
elected members shall be three years. The members from the
Senate shall be appointed by the President pro tempore of the
Senate and shall consist of one member from the majority and one
member from the minority. The members from the House of
Representatives shall be appointed by the Speaker of the House
of Representatives and shall consist of one member from the
majority and one member from the minority. The legislative
members shall serve on the board for the duration of their
legislative terms and shall continue to serve until 30 days
after the convening of the next regular session of the General
Assembly after the expiration of their respective legislative
terms or until a successor is appointed for the new term,
whichever occurs first. The chairman of the board shall be
elected by the board members. No member of the board who
represents active members or annuitants or is a current member
of the General Assembly can serve as chairman. Each ex officio
member of the board and each legislative member of the board may
appoint a duly authorized designee to act in his stead. In the
event that a board member, who is designated as an active
participant or as the participant in the plan who is receiving
or is eligible to receive distributions, receives a total
distribution of the board member's interest in the plan, that
board member may continue to serve on the board for the
remainder of his term.
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* * *
(c) Oath of office.--Each member of the board shall take an
oath of office that he will, so far as it devolves upon him,
diligently and honestly administer the affairs of said board,
the system and the plan and that he will not knowingly violate
or willfully permit to be violated any of the provisions of law
applicable to this part. Such oath shall be subscribed by the
member making it and certified by the officer before whom it is
taken and shall be immediately filed in the office of the
Secretary of the Commonwealth.
(d) Compensation and expenses.--The members of the board who
are members of the system or participants in the plan shall
serve without compensation. Members of the board who are members
of the system or participants in the plan and who are employed
by a governmental entity shall not suffer loss of salary or
wages through serving on the board. The board, on request of the
employer of any member of the board who is an active
professional or nonprofessional member of the system or active
professional or nonprofessional participant in the plan, may
reimburse such employer for the salary or wages of the member or
participant, or for the cost of employing a substitute for such
member or participant, while the member or participant is
necessarily absent from employment to execute the duties of the
board. The members of the board who are not members of either
the school system or the State Employees' Retirement System may
be paid $100 per day when attending meetings and all board
members shall be reimbursed for any necessary expenses. However,
when the duties of the board as mandated are not executed, no
compensation or reimbursement for expenses of board members
shall be paid or payable during the period in which such duties
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are not executed.
(e) Corporate power and legal advisor.--For the purposes of
this part, the board shall possess the power and privileges of a
corporation. [The Attorney General of the Commonwealth shall be
the legal advisor of the board.] Legal counsel to the board
shall serve independently from the Governor's Office of Chief
Counsel, the General Assembly and the Attorney General.
(f) Board training.--Each member of the board will be
required to obtain eight hours of mandatory training in
investment strategies, actuarial cost analysis and retirement
portfolio management on an annual basis.
Section 220. Section 8502(a), (b), (c), (e), (h), (i), (j),
(k), (m), (n) and (o) are amended and the section is amended by
adding subsections to read:
§ 8502. Administrative duties of board.
(a) Employees.--
(1) Effective 30 days after the effective date of this
paragraph, the positions of secretary, assistant secretary
and investment professional shall be placed under the
unclassified service provisions of the act of August 5, 1941
(P.L.752, No.286), known as the Civil Service Act, as those
positions are vacated. All other positions of the board shall
be placed in either the classified or unclassified service
according to the definition of the terms under the Civil
Service Act.
(2) Notwithstanding any other provision of law, the
compensation of investment professionals shall be established
by the board. The compensation of all other officers and
employees of the board who are not covered by a collective
bargaining agreement shall be established by the board
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consistent with the standards of compensation established by
the Executive Board of the Commonwealth.
(3) The board may utilize the staff of employees
provided for under this subsection for both the system and
the plan, but shall allocate the fees, costs and expenses
incurred under this subsection between the system and the
plan as appropriate.
(b) Professional personnel.--
(1) The board shall contract for the services of a chief
medical examiner, an actuary, investment advisors,
counselors, an investment coordinator, and such other
professional personnel as it deems advisable.
(2) The board may utilize the same individuals and firms
contracted under this subsection for both the system and the
plan, but shall allocate the fees, costs and expenses
incurred under this subsection between the system and the
plan as appropriate.
(c) Expenses.--
(1) The board shall, through the Governor, submit to the
General Assembly annually a budget covering the
administrative expenses of [this part.] the system and a
separate budget covering the administrative expenses of the
plan. The separate budget shall include those expenses
necessary to establish the plan and trust.
(2) Such expenses of the system as approved by the
General Assembly in an appropriation bill shall be paid from
investment earnings of the fund.
(3) For fiscal years ending on or before June 30, 2017,
such expenses of the plan as approved by the General Assembly
through an appropriation shall be paid from the General Fund.
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For fiscal years beginning on or after July 1, 2017, such
expenses of the plan as approved by the General Assembly
shall be paid from interest, under section 8414(b) (relating
to investments based on participant investment allocation
choices) or assessments on the balances of the participants'
individual investment accounts.
(4) Concurrently with its administrative budget, the
board shall also submit to the General Assembly annually a
list of proposed expenditures which the board intends to pay
through the use of directed commissions, together with a list
of the actual expenditures from the past year actually paid
by the board through the use of directed commissions. All
such directed commission expenditures shall be made by the
board for the exclusive benefit of the system and its members
and for the exclusive benefit of the plan and its
participants, respectively.
* * *
(e) Records.--
(1) The board shall keep a record of all its proceedings
which shall be [open to inspection by] accessible to the
public, except as otherwise provided in this part or by other
law.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public [inspection]
access under the act of [June 21, 1957 (P.L.390, No.212),
referred to] February 14, 2008 (P.L.6, No.3), known as the
Right-to-Know Law, if, in the reasonable judgment of the
board, the [inspection] access would:
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(i) in the case of an alternative investment or
alternative investment vehicle involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust, or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) (i) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(i), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once the board is no longer required by
its agreement to maintain confidentiality.
(ii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(ii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer causes
substantial competitive harm to the person from whom
the information was received; or
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(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(iii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer has a
substantial detrimental impact on the value of an
investment of the fund or trust and would not cause a
breach of the standard of care or fiduciary duty set
forth in this part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public [inspection] access under the Right-to-Know Law.
(5) Notwithstanding the provisions of this subsection,
the following information regarding an alternative investment
vehicle shall be subject to public [inspection] access under
the Right-to-Know Law:
(i) The name, address and vintage year of the
alternative investment vehicle.
(ii) The identity of the manager of the alternative
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investment vehicle.
(iii) The dollar amount of the commitment made by
the system or plan to the alternative investment vehicle.
(iv) The dollar amount of cash contributions made by
the system or plan to the alternative investment vehicle
since inception.
(v) The dollar amount of cash distributions received
by the system or plan from the alternative investment
vehicle since inception.
(vi) The net internal rate of return of the
alternative investment vehicle since inception, provided
that the system or plan shall not be required to disclose
the net internal rate of return under circumstances in
which, because of the limited number of portfolio assets
remaining in the alternative investment vehicle, the
disclosure could reveal the values of specifically
identifiable remaining portfolio assets to the detriment
of the alternative investment.
(vii) The aggregate value of the remaining portfolio
assets attributable to the system's or plan's investment
in the alternative investment vehicle, provided that the
system or plan shall not be required to disclose the
value under circumstances in which, because of the
limited number of portfolio assets remaining in the
alternative investment vehicle, the disclosure could
reveal the values of specifically identifiable remaining
portfolio assets to the detriment of the alternative
investment.
(viii) The dollar amount of total management fees
and costs paid to the alternative investment vehicle by
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the system or plan on an annual fiscal year-end basis.
(6) Any record, material or data received, prepared,
used or retained by the board or its employees or agents
relating to a participant shall not constitute a public
record subject to public access under the Right-to-Know Law,
if, in the reasonable judgment of the board, the access would
disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions and trustee-to-trustee
transfers, of any participant.
(ii) The investment option selections of any
participant.
(iii) The balance of a participant's individual
investment account, including the amount distributed to
the participant, and any investment gains or losses, or
rates of return.
(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The benefit payment option of a participant.
(7) The following shall apply:
(i) Nothing in this part shall be construed to mean
that the release or publicizing of a record, material, or
data that would not constitute a public record under this
subsection shall be a violation of the board's fiduciary
duties.
(ii) This subsection shall apply to a record,
material or data under this subsection notwithstanding
whether:
(A) the record, material or data was created,
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generated or stored before the effective date of this
paragraph;
(B) the record, material or data was previously
released or made public; or
(C) a request for the record, material or data
was made or is pending final response under the
former act of June 21, 1957 (P.L.390, No.212),
referred to as the Right-to-Know Law, or the act of
February 14, 2008 (P.L.6, No.3), known as the Right-
to-Know Law.
* * *
(h) Regulations and procedures.--The board shall, with the
advice of the Attorney General and the actuary, adopt and
promulgate rules and regulations for the uniform administration
of the system. The actuary shall approve in writing all
computational procedures used in the calculation of
contributions and benefits pertaining to the system, and the
board shall by resolution adopt such computational procedures,
prior to their application by the board. Such rules, regulations
and computational procedures as so adopted from time to time and
as in force and effect at any time, together with such tables as
are adopted and published pursuant to subsection (j) as
necessary for the calculation of annuities and other benefits,
shall be as effective as if fully set forth in this part. Any
actuarial assumption specified in or underlying any such rule,
regulation or computational procedure and utilized as a basis
for determining any benefit shall be applied in a uniform
manner.
(i) Data.--The board shall keep in convenient form such data
as are stipulated by the actuary in order that an annual
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actuarial valuation of the various accounts of the fund can be
completed within six months of the close of each fiscal year.
The board shall have final authority over the means by which
data is collected, maintained and stored and in so doing shall
protect the rights of its membership as to privacy and
confidentiality.
(j) Actuarial investigation and valuation.--The board shall
have the actuary make an annual valuation of the various
accounts of the fund within six months of the close of each
fiscal year. In the fiscal year 1975 and in every fifth year
thereafter, the board shall have the actuary conduct an
actuarial investigation and evaluation of the system based on
data including the mortality, service, and compensation
experience provided by the board annually during the preceding
five years concerning the members and beneficiaries of the
system. The board shall by resolution adopt such tables as are
necessary for the actuarial valuation of the fund and
calculation of contributions, annuities, and other benefits
based on the reports and recommendations of the actuary. Within
30 days of their adoption, the secretary of the board shall
cause those tables which relate to the calculation of annuities
and other benefits to be published in the Pennsylvania Bulletin
in accordance with the provisions of 45 Pa.C.S. § 725(a)
(relating to additional contents of Pennsylvania Bulletin) and,
unless the board specifies therein a later effective date, such
tables shall become effective on such publication. The board
shall include a report on the significant facts, recommendations
and data developed in each five-year actuarial investigation and
evaluation of the system in the annual financial statement
published pursuant to the requirements of subsection (n) for the
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fiscal year in which such investigation and evaluation were
concluded.
(k) Certification of employer contributions to the fund.--
The board shall, each year in addition to the itemized budget
required under section 8330 (relating to appropriations by the
Commonwealth), certify to the employers and the Commonwealth the
employer contribution rate expressed as a percentage of members'
payroll necessary for the funding of prospective annuities for
active members and the annuities of annuitants, and certify the
rates and amounts of the normal contributions as determined
pursuant to section 8328(b) (relating to actuarial cost method),
accrued liability contributions as determined pursuant to
section 8328(c), supplemental annuities contribution rate as
determined pursuant to section 8328(d), the experience
adjustment factor as determined pursuant to section 8328(e),
premium assistance contributions as determined pursuant to
section 8328(f), the costs added by legislation as determined
pursuant to section 8328(i), the actuarial required contribution
rate as determined pursuant to section 8328(i), the collared
contribution rate as determined pursuant to section 8328(g), the
final contribution rate as determined pursuant to section
8328(h) and the shared-risk contribution rate as determined
under section 8321(b) (relating to regular member contributions
for current service), which shall be paid to the fund and
credited to the appropriate accounts. These certifications shall
be regarded as final and not subject to modification by the
Secretary of the Budget.
* * *
(m) Member contributions and interest.--The board shall
cause each member's contributions, including payroll deductions,
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pickup contributions, shared-risk contributions and all other
payments, including, but not limited to, amounts collected by
the State Employees' Retirement System for the reinstatement of
previous school service or creditable nonschool service and
amounts paid to return benefits paid after the date of return to
school service or entering State service representing lump sum
payments made pursuant to section 8345(a)(4)(iii) (relating to
member's options) and member's annuity payments, but not
including other benefits returned pursuant to section 8346(a.1)
and (a.2) (relating to termination of annuities), to be credited
to the account of such member and shall pay all such amounts
into the fund. Such contributions shall be credited with
statutory interest until date of termination of service, except
in the case of a vestee, who shall have such interest credited
until the effective date of retirement or until the return of
his accumulated deductions, if he so elects; and in the case of
a multiple service member who shall have such interest credited
until termination of service in both the school and the State
systems.
(m.1) Amounts credited to the members' savings account and
cash balance account.--Subject to the forfeiture and attachment
provisions of section 8533 (relating to taxation, attachment,
and assignment of funds), members shall be fully vested with
respect to all employee contributions. Such monies in the
accounts shall be credited with interest at the long term
treasury rate, or its equivalent, in effect on the July 1 of the
fiscal year in which the member earns compensation, not to
exceed 4%. Such monies shall also be credited with excess
interest, if such excess interest is awarded.
(n) Annual financial statement.--The board shall prepare and
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have published, on or before January 1 of each year, [a
financial statement] financial statements as of the fiscal year
ending June 30 of the previous year showing the condition of the
fund, the trust and the various accounts, including, but not
limited to, the board's accrual and expenditure of directed
commissions, and setting forth such other facts, recommendations
and data as may be of use in the advancement of knowledge
concerning annuities and other benefits provided by this part.
The board shall submit said financial [statement] statements to
the Governor and shall make copies available to the employers
for the use of the school employees and the public.
(o) Independent [audit] audits.--The board shall provide for
[an annual audit] annual audits of the system and the plan by an
independent certified public accounting firm, which [audit]
audits shall include the board's accrual and expenditure of
directed commissions. The board may use the same independent
certified public accounting firm for the audits of both the
system and the plan.
* * *
(q) Participant and employer contributions to trust.--The
board shall, each year in addition to any fees and itemized
budget required under subsection (c), certify, as a percentage
of each participant's compensation, the employer defined
contributions, which shall be paid to the trust and credited to
each participant's individual investment account. These
certifications shall be regarded as final and not subject to
modification by the Secretary of the Budget. The board shall
cause all mandatory pickup participant contributions made on
behalf of a participant and all voluntary contributions made by
a participant to be credited to the participant's individual
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investment account.
(r) Excess interest.--
(1) The board may allow excess interest to be credited
to the members' savings account for active Class T-I members,
and to the cash balance account for members in other classes
of service, as provided under section 8523(d) (relating to
members' savings account and cash balance account).
(2) The crediting of excess interest shall be made with
the advice of the actuary employing actuarial assumptions
that reflect the nature of the liability.
Section 221. Section 8502.2(a) of Title 24 is amended to
read:
§ 8502.2. Health insurance.
(a) Authority.--The board may sponsor a participant-funded
group health insurance program for annuitants, participants
receiving distributions, spouses of annuitants and participants
receiving distributions, survivor annuitants and their
dependents. The board may promulgate regulations regarding the
prudent and efficient operation of the program, including, but
not limited to:
(1) Establishment of an annual budget and disbursements
in accordance with the budget.
(2) Determination of the benefits structure.
(3) Determination of enrollment procedures.
(4) Establishment of premium rates sufficient to fully
fund the program, including administrative expenses.
(5) Contracting for goods, equipment, services,
consultants and other professional personnel as needed to
operate the program.
* * *
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Section 222. Section 8503 heading, (a) and (b) of Title 24
are amended and the section is amended by adding subsections to
read:
§ 8503. Duties of board to advise and report to employers
[and], members and participants.
(a) Manual of regulations.--The board shall, with the advice
of the Attorney General and the actuary, prepare, within 90 days
of the effective date of this part, a manual incorporating rules
and regulations consistent with the provisions of this part for
the employers who shall make information contained therein
available to the general membership. The board shall thereafter
advise the employers within 90 days of any changes in such rules
and regulations due to changes in the law or due to changes in
administrative policies. As soon as practicable after the
commissioner's publication with respect thereto, the board shall
also advise the employers as to any cost-of-living adjustment
for the succeeding calendar year in the amount of the limitation
under IRC § 401(a)(17) and the dollar amounts of the limitations
under IRC § [415(b)] 415.
(b) Member status statements.--The board shall furnish
annually on or before December 31, a statement to each member
showing the accumulated deductions standing to the credit of the
member and the number of years and fractional part of a year of
service credited in each class of service, as applicable, as of
June 30 of that year. Each member's statement shall [be mailed
to his home address and shall] include a request that the member
make any necessary corrections or revisions regarding his
designated beneficiary, whose name at the request of the member
shall remain confidential and not appear on this statement.
(b.1) Participant status statements.--The board shall have
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furnished annually to each participant on or before December 31,
and more frequently as the board may agree or as required by
law, a statement showing the accumulated total defined
contributions credited to the participant's individual
investment account, the nature and type of investments and the
investment allocation of future contributions as of June 30 of
the current year and requesting the participant to make any
necessary correction or revision regarding his designated
beneficiary.
(b.2) Cash balance status statements.--The board shall have
furnished annually on or before December 31, a statement to each
member showing the accumulated total amount in the cash balance
account standing to the credit of the member. Each member's
statement shall include a request that the member make any
necessary corrections or revisions regarding his designated
beneficiary.
* * *
Section 223. Section 8504(c) of Title 24 is amended to read:
§ 8504. Duties of board to report to State Employees'
Retirement Board.
* * *
(c) Applications for benefits for State employees.--Upon
receipt of notification and the required data from the State
Employees' Retirement Board that a former school employee who
elected multiple service has applied for a State employee's
retirement benefit or, in the event of his death, his legally
constituted representative has applied for such benefit, the
board shall:
(1) Certify to the State Employees' Retirement Board:
(i) The salary history as a member of the Public
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School Employees' Retirement System and the final average
salary as calculated on the basis of the compensation
received as a State and school employee.
(ii) The annuity or benefit which the member or his
beneficiary is entitled to receive under this part and
modified according to the option selected.
(2) Transfer to the State Employees' Retirement Fund the
accumulated deductions standing to such member's credit and
the actuarial reserve required on account of the member's
years of credited service in the school system and his final
average salary determined on the basis of his compensation as
a member in both systems.
Section 224. Sections 8505(a), (b), (e), (f), (g), (h) and
(i), 8506(a), (d), (e), (g), (h), (i) and (k) and 8507(a), (e),
(f) and (i) of Title 24 are amended and the sections are amended
by adding subsections to read:
§ 8505. Duties of board regarding applications and elections of
members and participants.
(a) Statement to new members.--As soon as practicable after
each member shall have joined the system, the board shall issue
to him a statement as to the aggregate length of total previous
school service and creditable nonschool service, as applicable,
for which he may receive credit.
(b) State employees electing multiple service status.--Upon
receipt of notification from the State Employees' Retirement
Board that a former school employee has become an active member
in the State Employees' Retirement System and has elected to
become a member with multiple service status, the board shall:
(1) In case of a member who is receiving an annuity from
the system:
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(i) Discontinue payments, transfer the present value
of the member's annuity at the time of entering State
service, plus the amount withdrawn in a lump sum payment,
on or after the date of entering State service, pursuant
to section 8345 (relating to member's options), with
statutory interest to date of transfer, minus the amount
to be returned to the board on account of return to
service that the board has determined is to be credited
in the members' savings account, from the annuity reserve
account to the members' savings account and resume
crediting of statutory interest on the amount restored to
his credit.
(ii) Transfer the balance of the present value of
the total annuity, minus the amount to be returned to the
board on account of return to service that the board has
determined is to be credited in the State accumulation
account, from the annuity reserve account to the State
accumulation account.
(iii) Certify to the member the amount of lump sum
and annuity payments with statutory interest the member
is to return to the board and, of those amounts, which
amount shall be credited to the members' savings account
and credited with statutory interest as such payments are
returned and which amount shall be credited to the State
accumulation account.
(2) In case of a member who is not receiving an annuity
from the system and who has not withdrawn his accumulated
deductions, continue or resume the crediting of statutory
interest on his accumulated deductions.
(3) In case of a member who is not receiving an annuity
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from the system and his accumulated deductions were
withdrawn, certify to the member the accumulated deductions
as they would have been at the time of his separation had he
been a full coverage member together with statutory interest
for all periods of subsequent State service eligible for
membership in the State Employees' Retirement System and
school service eligible for membership in the system to the
date of repayment. Such amount shall be restored by him and
shall be credited with statutory interest as such payments
are restored.
* * *
(e) Certification to vestees terminating service.--The board
shall certify to a vestee within one year of termination of
service of such member:
(1) The accumulated deductions standing to his credit at
the date of termination of service.
(2) The number of years and fractional part of a year of
credit in each class of service, as applicable.
(3) The maximum single life annuity to which the vestee
shall become entitled upon the attainment of superannuation
age, if applicable, and the filing of an application for such
annuity.
(e.1) Certification to participants terminating service.--
The board shall certify to a participant in writing, within one
year of termination of service of such participant, of the
vested accumulated total defined contributions credited to the
participant's individual investment account as of the date
stated in the writing, any notices regarding rollover or other
matters required by IRC or other law, the obligation of the
participant to commence distributions from the plan by the
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participant's required beginning date and the ability to receive
all or part of the vested balance in the participant's
individual investment account in a lump sum or in such other
form as the board may authorize or as required by law.
(f) Notification to vestees approaching superannuation
age.--The board shall notify each vestee in writing 90 days
prior to his attainment of superannuation age that he shall
apply for his annuity within 90 days of attainment of
superannuation age; that, if he does so apply, his effective
date of retirement will be the date of attainment of
superannuation age; that, if he does not so apply but defers his
application to a later date, his effective date of retirement
will be the date of filing the application or the date specified
on the application, whichever is later; and that, if he does not
file an application within seven years after attaining
superannuation age, he shall be deemed to have elected to
receive his accumulated deductions upon attainment of
superannuation age.
(f.1) Notification to inactive participants approaching
required beginning date.--The board shall notify in writing each
inactive participant who has terminated school service and for
whom distribution has not commenced by 90 days before the
participant's required beginning date, that the participant has
an obligation to commence distributions by the required
beginning date in a form and manner required by IRC §401(a)(9)
and other applicable provisions of the IRC.
(g) Initial annuity payment and certification.--The board
shall make the first monthly payment to a member who is eligible
for an annuity within 60 days of the filing of his application
for an annuity or, in the case of a vestee who has deferred the
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filing of his application to a date later than 90 days following
attainment of superannuation age, within 60 days of his
effective date of retirement, and receipt of the required data
from the employer of the member. Concurrently the board shall
certify to such member:
(1) The accumulated deductions standing to his credit
showing separately the amount contributed by the member, the
pickup contribution, the shared-risk contributions and the
interest credited to the date of termination of service.
(2) The number of years and fractional part of a year
credited in each class of service, as applicable.
(3) The final average salary on which his annuity is
based, if applicable, as well as any applicable reduction
factors due to age or election of an option or both.
(4) The total annuity payable under the option elected
and the amount and effective date of any future reduction on
account of social security old-age insurance benefits.
(g.1) Initial payment to a participant.--The board shall
make the initial payment to a participant who has applied for a
distribution within 60 days of the filing of the application and
receipt of the required data from the employer of the
participant and other necessary data.
(h) Death benefits.--Upon receipt of notification of the
death of a member, an active participant, an inactive
participant or former member or participant on USERRA leave, the
board shall notify the designated beneficiary or survivor
annuitant of the benefits to which he is entitled and shall make
the first payment to the beneficiary under the plan elected by
the beneficiary within 60 days of receipt of certification of
death and other necessary data. If no beneficiary designation is
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in effect at the date of the member's or participant's death or
no notice has been filed with the board to pay the amount of
such benefits to the member's or participant's estate, the board
is authorized to pay such benefits to the executor,
administrator, surviving spouse or next-of-kin of the deceased
member or participant, and payment pursuant hereto shall fully
discharge the fund or plan from any further liability to make
payment of such benefits to any other person. If the surviving
spouse or next-of-kin of the deceased member or participant
cannot be found for the purpose of paying such benefits for a
period of seven years from the date of death of the member or
participant, then such benefits shall be escheated to the
Commonwealth for the benefit of the fund[.] or plan. If no
beneficiary designation is in effect at the date of a
participant's death or no notice has been filed with the board
to pay the amount of the benefits to the participant's estate,
the board may pay the benefits to the surviving spouse,
executor, administrator or next-of-kin of the deceased
participant, and payment pursuant hereto shall fully discharge
the fund from any further liability to make payment of such
benefits to any other person.
(i) Medical insurance coverage.--Upon receipt of
notification from an insurance carrier offering a health
insurance program approved by the board that an annuitant of the
system or participant in the plan who has attained age 65 has
elected medical, major medical, and hospitalization insurance
coverage or notification that annuitants of the system or
participants in the plan with less than 24 1/2 eligibility
points (other than disability annuitants of the system), spouses
of annuitants and participants in the plan and survivor
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annuitants eligible to elect to enroll in the approved health
insurance program have elected participation in such health
insurance program, the board may deduct from the annuity
payments, from payments to a participant receiving
distributions, or from a successor payee the appropriate annual
charges in equal monthly installments. Such deductions shall be
transmitted to the insurance carrier.
* * *
§ 8506. Duties of employers.
(a) Status of members and participants.--The employer shall,
each month, notify the board in a manner prescribed by the board
of the salary changes effective during the past month, the date
of all removals from the payroll, and the type of leave of any
member or participant who has been removed from the payroll for
any time during that month, and:
(1) if the removal is due to leave without pay, the
employer shall furnish the board with the date of beginning
leave, the date of return to service, and the reason for
leave;
(2) if the removal is due to a transfer to another
employer, the former employer shall furnish such employer and
the board with a complete school service record, including
credited or creditable nonschool service; or
(3) if the removal is due to termination of school
service, the employer shall furnish the board with a complete
school service record including credited or creditable
nonschool service and in the case of death of the member or
participant the employer shall so notify the board.
* * *
(c.1) Participant and employer defined contributions.--The
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employer shall cause the mandatory pickup participant
contributions on behalf of a participant to be made and shall
cause to be deducted any voluntary contributions authorized by a
participant. The employer shall also cause the employer defined
contributions on behalf of a participant to be made. The
employer shall notify the board at times and in a manner
prescribed by the board of the compensation of any participant
to whom the limitation under IRC § 401(a)(17) either applies or
is expected to apply and shall cause the participant's
contributions to be deducted from payroll to cease at the
limitation under IRC § 401(a)(17) on the payroll date if and
when such limit shall be reached. The employer shall certify to
the board the amounts picked up and deducted and the employer
defined contributions being made and shall send the total amount
picked up, deducted and contributed together with a duplicate of
such voucher to the secretary of the board every pay period or
on such schedule as established by the board.
(d) New employees subject to mandatory membership or
participation.--Upon the assumption of duties of each new school
employee whose membership in the system or plan is mandatory,
the employer shall no later than 30 days thereafter cause an
application for membership or participation, which application
shall include the employee's home address, birthdate certified
by the employer, previous school or State service and any other
information requested by the board, and a nomination of
beneficiary to be made by such employee and filed with the board
and shall make pickup contributions or mandatory pickup
participant contributions from the effective date of school
employment.
(d.1) Cash balance account contributions.--The employer
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shall cause the voluntary contributions to the cash balance
account on behalf of a Class T-C, Class T-D, Class T-E or Class
T-F member to be made and deducted as authorized by the member.
The employer shall certify to the board the amounts deducted and
the employer contributions being made and shall send the total
amount deducted and contributed together with a duplicate of
such voucher to the secretary of the board every pay period or
on such schedule as established by the board.
(e) New employees subject to optional membership or
participation.--The employer shall inform any eligible school
employee whose membership in the system or participation in the
plan is not mandatory of his opportunity to become a member of
the system or participant in the plan provided that he elects to
purchase credit for all such continuous creditable service. If
such employee so elects, the employer shall no later than 30
days thereafter cause an application for membership which
application shall include the employee's home address, birthdate
certified by the employer, previous school or State service and
any other information requested by the board, and a nomination
of beneficiary to be made by him and filed with the board and
shall cause proper contributions to be made from the date of
election of membership or participation.
* * *
(g) Former State employee contributors.--
(1) The employer shall, upon the employment of a former
member of the State Employees' Retirement System who is not
an annuitant of the State Employees' Retirement System,
advise such employee of his right to elect multiple service
membership within 365 days of entry into the system and, in
the case any such employee who so elects has withdrawn his
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accumulated deductions, require him to restore his
accumulated deductions as they would have been at the time of
his separation had he been a full coverage member, together
with statutory interest for all periods of subsequent State
and school service to date of repayment. The employer shall
advise the board of such election.
(2) Paragraph (1) shall not apply to a school employee
who is employed in a position where the school employee is or
could be a participant in the plan other than a member who
elects to become a participant in the plan.
(h) Former State employee annuitants.--
(1) The employer shall, upon the employment of an
annuitant of the State Employees' Retirement System who
applies for membership in the system, advise such employee
that he may elect multiple service membership within 365 days
of entry into the system and that if he so elects his annuity
from the State Employees' Retirement System will be
discontinued effective upon the date of his return to school
service and, upon termination of school service and
application for an annuity, the annuity will be adjusted in
accordance with section 8346 (relating to termination of
annuities). The employer shall advise the board of such
election.
(2) Paragraph (1) shall not apply to a school employee
who is employed in a position where the school employee is or
could be a participant in the plan other than a member who
elects to become a participant in the plan.
(i) Termination of service by members.--The employer shall,
in the case of any member terminating school service, advise
such member in writing of any benefits from the system to which
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he may be entitled under the provisions of this part and shall
have the member prepare, on or before the date of termination of
school service, one or more of the following three forms, a copy
of which shall be given to the member and the original of which
shall be filed with the board:
(1) An application for the return of accumulated
deductions.
(2) An election to vest his retirement rights, if
eligible, and, if he is a joint coverage member and so
desires, an election to become a full coverage member and an
agreement to pay within 30 days of the date of termination of
service the lump sum required.
(3) An application for an immediate annuity, if
eligible, and, if he is a joint coverage member and so
desires, an election to become a full coverage member and an
agreement to pay within 30 days of date of termination of
service the lump sum required.
* * *
(k) School employees performing USERRA or military-related
leave of absence.--The employer shall report to the board all of
the following:
(1) Any school employee who:
(i) ceases to be an active member or active
participant to perform USERRA service; or
(ii) is granted a leave of absence under 51 Pa.C.S.
§ 4102 (relating to leaves of absence for certain
government employees) or a military leave of absence
under 51 Pa.C.S. § 7302 (relating to granting military
leaves of absence).
(2) The date on which the USERRA service, leave of
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absence or military leave of absence began.
(3) The date on which the school employee is reemployed
from USERRA leave or returns after the leave of absence or
military leave of absence, if applicable.
(4) Any other information the board may require.
(l) Differential wage payments and military leave of absence
payments.--Notwithstanding the exclusion of differential wage
payments as defined in IRC § 414(u)(12) from compensation under
this part, the employer of any school employee on USERRA leave
shall report differential wage payments made to the employee to
the board, and the employer of any school employee on leave of
absence pursuant to 51 Pa.C.S. § 4102 shall report any payment
made to the employee, in the form and manner established by the
board.
§ 8507. Rights and duties of school employees [and], members
and participants.
(a) Information on new employees.--Upon his assumption of
duties, each new school employee shall furnish his employer with
a complete record of his previous school or State service, or
creditable nonschool service, proof of his date of birth, his
home address, his current status in the system and the plan and
in the State Employees' Retirement System and the State
Employees' Defined Contribution Plan and such other information
as the board may require. Willful failure to provide the
information required by this subsection to the extent available
or the provision of erroneous information upon entrance into the
system shall result in the forfeiture of the right of the member
to subsequently assert any right to benefits based on erroneous
information or on any of the required information which he
failed to provide. In any case in which the board finds that a
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member is receiving an annuity based on false information, the
additional amounts received predicated on such false information
together with statutory interest doubled and compounded shall be
deducted from the present value of any remaining benefits to
which the member is legally entitled and such remaining benefits
shall be correspondingly decreased.
* * *
(b.1) Application for participation.--On or after July 1,
2016, in the case of a new employee who is not currently a
participant in the plan and whose participation is mandatory, or
in the case of a new employee whose participation is not
mandatory but is permitted and who desires to become a
participant in the plan, the new employee shall execute an
application for participation and a nomination of a beneficiary.
* * *
(d.2) Contributions for USERRA leave.--Any active participant
or inactive participant or former participant who was reemployed
from USERRA leave and who desires to make mandatory pickup
participant contributions and voluntary contributions for his
USERRA leave shall so notify the board within the time period
required under 38 U.S.C. Ch. 43 (relating to employment and
reemployment rights of members of the uniformed services) and
IRC § 414(u) of his desire to make such contributions. Upon
making the permitted mandatory pickup participant contributions
within the allowed time period, the employer shall make the
corresponding employer defined contributions at the same time.
(d.3) Voluntary contributions by a participant.--Any
participant who desires to make voluntary contributions to be
credited to his individual investment account shall notify the
board and, upon compliance with the requirements, procedures and
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limitations established by the board in the plan document, may
do so subject to the limitations under IRC §§ 401(a) and 415 and
as otherwise provided in this part.
(d.4) Voluntary contributions to cash balance account by
member.--Any member who desires to make voluntary contributions
to be credited to his cash balance account shall notify the
board and, upon compliance with the requirements, procedures and
limitations established by the board, may do so subject to the
limitations under IRC §§ 401(a) and 415 and as otherwise
provided in this part.
(e) Beneficiary for death benefits from system.--Every
member shall nominate a beneficiary by written designation filed
with the board to receive the death benefit or the benefit
payable under the provisions of Option 1. Such nomination may be
changed at any time by the member by written designation filed
with the board. A member may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit or the
benefit payable under the provisions of Option 1.
(e.1) Beneficiary for death benefits from plan.--Every
participant shall nominate a beneficiary by written designation
filed with the board as provided in section 8506 (relating to
duties of employers) to receive the death benefit payable under
section 8408 (relating to death benefits). A participant may
also nominate a contingent beneficiary or beneficiaries to
receive the death benefit provided under section 8408 (relating
to death benefits). Such nomination may be changed at any time
by the participant by written designation filed with the board.
(e.2) Beneficiary for combined service employee.--A combined
service employee may designate or nominate different persons to
be beneficiaries, survivor annuitants and successor payees for
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his benefits from the system and the plan.
(f) Termination of service by members.--Each member who
terminates school service from the system and who is not then a
disability annuitant shall execute on or before the date of
termination of service a written application, duly attested by
the member or his legally constituted representative, electing
to do one of the following:
(1) Withdraw his accumulated deductions.
(2) Vest his retirement rights, if eligible, and if he
is a joint coverage member, and so desires, elect to become a
full coverage member and agree to pay within 30 days of the
date of termination of service the lump sum required.
(3) Receive an immediate annuity, if eligible, and may,
if he is a joint coverage member, elect to become a full
coverage member and agree to pay within 30 days of date of
termination of service the lump sum required.
* * *
(g.1) Deferral of distribution by participant.--If a
participant terminates school service and does not commence
receiving a distribution, he shall nominate a beneficiary by
written designation filed with the board, and he may anytime
thereafter, but no later than his required beginning date,
withdraw the vested accumulated total defined contributions
standing to his credit or apply for another form of distribution
required by law or authorized by the board.
(g.2) Deferral of distribution of cash balance account by
member.--If a member terminates school service and does not
commence receiving a distribution of monies in the cash balance
account, he shall nominate a beneficiary by written designation
filed with the board, and he may anytime thereafter, but no
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later than his required beginning date, withdraw the vested
accumulated contributions standing to his credit or apply for
another form of distribution required by law or authorized by
the board.
* * *
(i) Failure to apply for annuity.--If a member is eligible
to receive an annuity from the system and does not file a proper
application within 90 days of termination of service, he shall
be deemed to have elected to vest, and his annuity will become
effective as of the date an application is filed with the board
or the date designated on the application whichever is later.
* * *
(l) Eligible roll-in.--An active Class T-I member may
transfer money received in an eligible rollover distribution to
the members' savings account to purchase USERRA leave, to the
extent allowed by IRC §402. Such rollover shall be made in a
form and manner as determined by the board, shall be credited to
the Class T-I member's accumulated deductions, and shall be
separately accounted for by the board.
Section 225. Sections 8521(b), 8522, 8523, 8524, 8525 and
8531 of Title 24 are amended to read:
§ 8521. Management of fund and accounts.
* * *
(b) Crediting of interest.--The board annually shall allow
statutory interest, excluding the individual investment
accounts, to the credit of the members' savings account on the
mean amount of the accumulated deductions of all members for
whom interest is payable for the preceding year and valuation
interest on the mean amount of the annuity reserve account for
the preceding year to the credit of that account. The board
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annually shall allow valuation interest calculated on the mean
amount for the preceding year of the balance in the State
accumulation account excluding any earnings of the fund credited
to the account during that year. In the event the total earnings
for the year do not exceed 5 1/2% of the mean amount for the
preceding year of the total assets of the fund less earnings
credited to the fund during that year plus the administrative
expenses of the board, the difference required to be
appropriated from the General Fund shall be credited to the
State accumulation account.
* * *
§ 8522. Public School Employees' Retirement Fund.
(a) General rule.--The fund shall consist of all moneys in
the several separate funds in the State Treasury set apart to be
used under the direction of the board for the benefit of members
of the system; and the Treasury Department shall credit to the
fund all moneys received from the Department of Revenue arising
from the contributions relating to or on behalf of the members
of the system required under the provisions of Chapter 83
(relating to membership, contributions and benefits) and all
earnings from investments or moneys of said fund. There shall be
established and maintained by the board the several ledger
accounts specified in sections 8523 (relating to members'
savings account), 8524 (relating to State accumulation account),
8525 (relating to annuity reserve account) and 8526 (relating to
health insurance account).
(b) Individual investment accounts and trust.--The
individual investment accounts that are part of the trust are
not part of the fund. Mandatory pickup participant
contributions, voluntary contributions and employer defined
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contributions made under this part and any income earned by the
investment of such contributions shall not be paid or credited
to the fund but instead shall be paid to the trust and credited
to the individual investment accounts.
§ 8523. Members' savings account and cash balance account.
(a) Credits to members' savings account.--The members'
savings account shall be the ledger account to which shall be
credited the amounts of the pickup contributions made by the
employer and contributions or lump sum payments made by active
members in accordance with the provisions of Chapter 83
(relating to membership, contributions and benefits).
(a.1) Credits to cash balance account.--The cash balance
account shall be the ledger account to which shall be credited
the amounts of cash balance member contributions made by active
members, amounts credited by the employer, and contributions or
lump sum payments made by active members, together with interest
and excess interest, as applicable, in accordance with the
provisions of Chapter 83 (relating to membership, contributions
and benefits).
(b) Interest and transfers from account.--The individual
member accounts to which interest is payable shall be credited
with statutory interest. The accumulated deductions credited to
the account of a member who dies in service or whose application
for an annuity has been approved shall be transferred from the
members' savings account or from the cash balance account, as
applicable, to the annuity reserve account provided for in
section 8525 (relating to annuity reserve account).
(c) Charges to account.--Upon the election of a member to
withdraw his accumulated deductions, the payment of such amount
shall be charged to the members' savings account.
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(d) Excess Interest.--
(1) As part of the annual actuarial valuation performed
under subsection 8502(j) (relating to administrative duties
of board) for fiscal year 2017, and for each subsequent
fiscal year, the board shall determine the amount potentially
available from that year for distribution as excess interest.
That amount shall be one half of the investment gains and
losses, net of investment and administrative fees and costs,
above or below the actuarially assumed investment return of
the total assets in the fund multiplied by the ratio of the
total amount credited in the members' savings account of
Class T-I members and the cash balance savings account of
members who have elected to contribute to the cash balance
account, to the sum of the total amount credited in the
members' savings account plus the accrued actuarial liability
of all benefits derived from all the service of all members
in all classes of service other than Class T-I. This product
shall be available in equal annual installments over five
years.
(2) After the actuarial valuation made for fiscal year
2019 and after the actuarial valuations for each subsequent
fiscal year, the board shall determine if excess interest is
to be awarded to those members who have Class T-I service
credit, or those members who have contributions in the cash
balance savings account, on the date of the applicable
actuarial valuation.
(3) For each determination period, excess interest shall
be granted if the sum of the amounts determined under
paragraph (1) for all the years of the determination period
is positive. If so, then the percentage rate of excess
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interest shall be determined by dividing this sum by the
total amount credited in the members savings account
attributable to Class T-I service credit and those members
who have contributions in the cash balance savings account,
on the last day of the determination period. Each Class T-I
member who has monies in the members' savings account, and
each member who has monies in the cash balance savings
account, on the last day of the determination period and who
has monies in such accounts on the next following June 30,
shall have excess interest at this rate credited to his total
members' savings account balance cash balance savings
account, as applicable.
(4) The determination period for the period ending with
the actuarial valuation for fiscal year 2019 shall be fiscal
years 2016, 2017 and 2018. The determination period for the
period ending with the actuarial valuation for fiscal year
2020 shall be fiscal years 2016, 2017, 2018, and 2019. The
determination period for the periods ending with fiscal year
2021 and subsequent years shall be the ending fiscal year and
the four immediately previous fiscal years.
§ 8524. State accumulation account.
The State accumulation account shall be the ledger account to
which shall be credited all contributions of the Commonwealth
and other employers as well as the earnings of the fund, except
the premium assistance contributions and earnings thereon in the
health insurance account. Valuation interest shall be allowed on
the total amount of such account less any earnings of the fund
credited during the year. The reserves necessary for the payment
of annuities and death benefits resulting from membership in the
system as approved by the board and as provided in Chapter 83
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(relating to membership, contributions and benefits) shall be
transferred from the State accumulation account to the annuity
reserve account. At the end of each year the required interest
shall be transferred from the State accumulation account to the
credit of the members' savings account and the annuity reserve
account. The administrative expenses of the board shall be
charged to the State accumulation account. Employer defined
contributions, mandatory pickup contributions and a
participant's voluntary contributions, together with any income
or interest earned thereon, may be temporarily placed into the
State accumulation account pending allocation or distribution to
the participant's individual investment account.
§ 8525. Annuity reserve account.
(a) Credits and charges to account.--The annuity reserve
account shall be the ledger account to which shall be credited
the reserves held for the payment of annuities and death
benefits resulting from membership in the system on account of
all annuitants and the contributions from the Commonwealth and
other employers as determined in accordance with section 8328
(relating to actuarial cost method) for the payment of the
supplemental annuities provided in sections 8348 (relating to
supplemental annuities), 8348.1 (relating to additional
supplemental annuities), 8348.2 (relating to further additional
supplemental annuities), 8348.3 (relating to supplemental
annuities commencing 1994), 8348.4 (relating to special
supplemental postretirement adjustment), 8348.5 (relating to
supplemental annuities commencing 1998), 8348.6 (relating to
supplemental annuities commencing 2002) and 8348.7 (relating to
supplemental annuities commencing 2003). The annuity reserve
account shall be credited with valuation interest. After the
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transfers provided in sections 8523 (relating to members'
savings account) and 8524 (relating to State accumulation
account), all annuity and death benefit payments shall be
charged to the annuity reserve account and paid from the fund.
(b) Transfers from account.--Should an annuitant be
subsequently restored to active service, either as a member of
the system or participant in the plan, the present value of his
member's annuity at the time of reentry into school service
shall be transferred from the annuity reserve account and placed
to his individual credit in the members' savings account. In
addition, the actuarial reserve for his annuity less the amount
transferred to the members' savings account shall be transferred
from the annuity reserve account to the State accumulation
account.
§ 8531. State guarantee regarding the system.
Statutory interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and other
benefits granted by the board from the system under the
provisions of this part relating to the establishment and
administration of the system are hereby made obligations of the
Commonwealth. All income, interest, and dividends derived from
deposits and investments authorized by this part shall be used
for the payment of the said obligations of the Commonwealth and
shall not be used for any obligations of the plan or trust.
Section 226. Section 8533(a), (b) and (d) of Title 24 are
amended to read:
§ 8533. Taxation, attachment and assignment of funds.
(a) General rule.--Except as provided in subsections (b),
(c) and (d), the right of a person to a member's annuity, a
State annuity, or retirement allowance, to the return of
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contributions, any benefit or right accrued or accruing to any
person under the provisions of this part, and the moneys in the
fund and the trust are hereby exempt from any State or municipal
tax, and exempt from levy and sale, garnishment, attachment, the
provisions of Article XIII.1 of the act of April 9, 1929
(P.L.343, No.176), known as The Fiscal Code, or any other
process whatsoever, and shall be unassignable.
(a.1) Individual investment accounts and distributions.--No
participant or beneficiary, successor payee, spouse or alternate
payee of a participant shall have the ability to commute, sell,
assign, alienate, anticipate, mortgage, pledge, hypothecate,
commutate or otherwise transfer or convey any benefit or
interest in an individual investment account or rights to
receive or direct distributions under this part or under
agreements entered into under this part except as otherwise
provided in this part and in the case of either a member or a
participant.
(b) Forfeiture.--
(1) Rights under this part shall be subject to
forfeiture as provided by the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture Act.
Forfeitures under this subsection or under any other
provision of law may not be applied to increase the benefits
that any member would otherwise receive under this part.
(2) In accordance with section 16(b) of Article V of the
Constitution of Pennsylvania and notwithstanding paragraph
(1), the act of July 8, 1978 (P.L.752, No.140), known as the
Public Employee Pension Forfeiture Act, or 42 Pa.C.S. § 3352
(relating to pension rights), the accumulated mandatory
participant contributions and accumulated voluntary
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contributions standing to the credit of a participant shall
not be forfeited but shall be available for payment of fines
and restitution as provided by law. In accordance with
section 16(b) of Article V of the Constitution of
Pennsylvania, amounts in the trust that have been ordered to
be distributed to an alternate payee as the result of an
equitable distribution of marital property as part of an
approved domestic relations order entered before the date of
the order or action in a court or other tribunal resulting in
a forfeiture of a participant's interest in the trust shall
not be subject to the Public Employee Pension Forfeiture Act,
section 16(b) of the Article V of the Constitution of
Pennsylvania or 42 Pa.C.S. § 3352. Any accumulated employer
defined contributions forfeited as a result of this
subsection or other law shall be retained by the board and
used for the payment of expenses of the plan.
* * *
(d) Direct rollover.--Effective with distributions made on
or after January 1, 1993, and notwithstanding any other
provision of this part to the contrary, a distributee may elect,
at the time and in the manner prescribed by the board, to have
any portion of an eligible rollover distribution paid directly
to an eligible retirement plan by way of a direct rollover. For
purposes of this subsection, a "distributee" includes a member
[and], a participant, a spouse, a member's surviving spouse
[and], a participant's surviving spouse, a member's former
spouse who is an alternate payee under an approved domestic
relations order and a participant's former spouse who is an
alternate payee under an approved domestic relations order and
anyone else authorized under IRC and the plan terms approved by
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the board to have an eligible rollover distribution paid
directly to an eligible retirement plan by way of a direct
rollover. For purposes of this subsection, the term "eligible
rollover distribution" has the meaning given such term by IRC §
402(f)(2)(A) and "eligible retirement plan" has the meaning
given such term by IRC § 402(c)(8)(B), except that a qualified
trust shall be considered an eligible retirement plan only if it
accepts the distributee's eligible rollover distribution;
however, in the case of an eligible rollover distribution to a
surviving spouse, an eligible retirement plan is an "individual
retirement account" or an "individual retirement annuity" as
those terms are defined in IRC § 408(a) and (b).
Section 227. Sections 8533.1, 8533.2, 8533.3 and 8533.4(a)
of Title 24 are amended to read:
§ 8533.1. Approval of domestic relations orders.
(a) Certification regarding members.--A domestic relations
order pertaining to a member of the system shall be certified as
an approved domestic relations order by the secretary of the
board, or his designated representative, only if such order
meets all of the following:
(1) Requires the system to provide any type or form of
benefit or any option applicable to members already provided
under this part.
(2) Requires the system to provide no more than the
total amount of benefits than the member would otherwise
receive (determined on the basis of actuarial value) unless
increased benefits are paid to the member or alternate payee
based upon cost-of-living increases or increases based on
other than actuarial value.
(3) Specifies the amount or percentage of the member's
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benefits to be paid by the system to each such alternate
payee or the manner in which the amount or percentage is to
be determined.
(4) Specifies the retirement option to be selected by
the member upon retirement or states that the member may
select any retirement option offered by this part upon
retirement.
(5) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(6) Does not grant an alternate payee any of the rights,
options or privileges of a member under this part.
(7) Requires the member to execute an authorization
allowing each alternate payee to monitor the member's
compliance with the terms of the domestic relations order
through access to information concerning the member
maintained by the system.
(a.1) Certification regarding participants.--A domestic
relations order pertaining to a participant shall be certified
as an approved domestic relations order by the secretary of the
board, or his designated representative, only if that order
meets all of the following:
(1) Does not require the plan to provide any type or
form of benefit or any option applicable to members of the
system or participants in the plan.
(2) Does not require the segregation of the alternate
payee's share of the participant's individual investment
account into a subaccount or newly established individual
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account titled in the name of the alternate payee.
(3) Does not require the plan to recover or distribute
any funds which were distributed to the participant or at the
participant's direction prior to the approval of the domestic
relations order by the secretary of the board or his
designated representative.
(4) Requires the plan to pay to the alternate payee no
more than the lesser of the vested amount of the
participant's individual investment account specified by the
domestic relations order or the vested amount of the
participant's individual investment account as of the date of
the transfer of the alternate payee's share to the alternate
payee.
(5) States that the plan shall not be required to recoup
or make good for losses in value to the participant's
individual investment account incurred between the date of
the valuation of the account used for equitable distribution
purposes and the date of distribution to the alternate payee.
(6) Specifies the amount or percentage of the
participant's individual investment account to be paid to the
alternate payee and the date upon which such valuation is
based.
(7) Specifies the name and last known mailing address,
if any, of the participant and the name and last known
mailing address of each alternate payee covered by the order
and states that it is the responsibility of each alternate
payee to keep a current mailing address on file with the
system.
(8) Does not grant an alternate payee the rights,
privileges or options available to a participant.
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(9) Requires the participant to execute an authorization
allowing each alternate payee to monitor the participant's
compliance with the terms of the domestic relations order
through access to information concerning the participant
maintained by the plan. Any authorization granted under this
section shall be construed only as an authorization for the
alternate payee to receive information concerning the
participant which relates to the administration, calculation
and payment of the alternate payee's share of the
participant's account and not as an authorization to exercise
the rights afforded to participants or obtain information
that is not related to the administration, calculation and
payment of the alternate payee's share of the participant's
individual investment account, notwithstanding any other
provision of this part or the plan that would require a
distribution of accumulated employer defined contributions in
the form of an annuity or to require the purchase of an
annuity.
(10) In the case of participants who have not yet begun
to receive distributions as of the date the domestic
relations order is approved by the secretary of the board or
his designated representative, requires the immediate
distribution of the alternate payee's share of the
participant's individual investment account, which may be
made by direct payment, eligible rollover or trustee-to-
trustee transfer to another eligible plan or qualified
account owned by the alternate payee, notwithstanding any
other provision of this part or the plan that would otherwise
require a distribution of accumulated employer defined
contributions in the form of an annuity or to require the
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purchase of an annuity.
(11) In the case of a participant who is currently
receiving distributions from the trust as of the date the
domestic relations order is approved by the secretary of the
board or his designated representative, the domestic
relations order may not order the board to pay the alternate
payee more than the balance available in the participant's
individual investment account as of the date the order is
approved or require that distributions continue to the
alternate payee after the death of the participant and final
settlement of the participant's individual investment
account.
(b) Determination by secretary.--Within a reasonable period
of time after receipt of a domestic relations order, the
secretary of the board, or his designated representative, shall
determine whether this order is an approved domestic relations
order and notify the member or participant and each alternate
payee of this determination. Notwithstanding any other provision
of law, the exclusive remedy of any member, participant or
alternate payee aggrieved by a decision of the secretary of the
board, or his designated representative, shall be the right to
an adjudication by the board under 2 Pa.C.S. Ch. 5 (relating to
practice and procedure) with appeal therefrom to the
Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to judicial
review) and 42 Pa.C.S. § 763(a)(1) (relating to direct appeals
from government agencies).
(c) Other orders.--The requirements for approval identified
in [subsection (a)] subsections (a) and (a.1) shall not apply to
any domestic relations order which is an order for support as
that term is defined in 23 Pa.C.S. § 4302 (relating to
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definitions) or an order for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages). These orders shall be approved to the extent that
they do not attach moneys in excess of the limits on attachments
as established by the laws of this Commonwealth and the United
States[.], require distributions of benefits in a manner that
would violate the laws of the United States, any other state or
this Commonwealth or require the distribution of funds for
support or enforcement of arrearages against any participant who
is not receiving distributions from the plan at the time such
order is entered. These orders may be approved notwithstanding
any other provision of this part or the plan that would
otherwise require a distribution of accumulated employer defined
contributions in the form of an annuity or to require the
purchase of an annuity.
(d) Obligation discharged.--Only the requirements of this
part and any regulations promulgated hereunder shall be used to
govern the approval or disapproval of a domestic relations
order. Therefore, if the secretary of the board, or his
designated representative, acts in accordance with the
provisions of this part and any promulgated regulations in
approving or disapproving a domestic relations order, then the
obligations of the system or plan with respect to such approval
or disapproval shall be discharged.
§ 8533.2. Irrevocable beneficiary.
Notwithstanding any other provision of this part, a domestic
relations order may provide for an irrevocable beneficiary. A
domestic relations order requiring the nomination of an
irrevocable beneficiary shall be deemed to be one that requires
a member or participant to nominate an alternate payee as a
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beneficiary and that prohibits the removal or change of that
beneficiary without approval of a court of competent
jurisdiction, except by operation of law. Such a domestic
relations order may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, after the member or participant makes such
nomination, in which case the irrevocable beneficiary so ordered
by the court cannot be changed by the member or participant
without approval by the court.
§ 8533.3. Irrevocable survivor annuitant.
Notwithstanding any other provisions of this part, a domestic
relations order pertaining to a member may provide for an
irrevocable survivor annuitant. A domestic relations order
requiring the designation of an irrevocable survivor annuitant
shall be deemed to be one that requires a member to designate an
alternate payee as a survivor annuitant and that prohibits the
removal or change of that survivor annuitant without approval of
a court of competent jurisdiction, except by operation of law.
Such a domestic relations order may be certified as an approved
domestic relations order by the secretary of the board, or his
designated representative, in which case the irrevocable
survivor annuitant so ordered by the court cannot be changed by
the member without approval by the court. A person ineligible to
be designated as a survivor annuitant may not be designated an
irrevocable survivor annuitant.
§ 8533.4. Amendment of approved domestic relations orders.
(a) Deceased alternate payee.--In the event that the
alternate payee predeceases the member or participant and there
are benefits payable to the alternate payee, the divorce court
may amend the approved domestic relations order to substitute a
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person for the deceased alternate payee to receive any benefits
payable to the deceased alternate payee.
* * *
Section 228. Title 24 is amended by adding a section to
read:
§ 8533.5. Irrevocable successor payee.
(a) Condition.--Notwithstanding any other provisions of this
part, a domestic relations order pertaining to a participant may
provide for an irrevocable successor payee, only if the
participant is receiving a payment pursuant to a payment option
provided by the board that allows for a successor payee.
(b) Determination.--A domestic relations order requiring the
designation of an irrevocable successor payee shall be deemed to
be one that requires a participant who is receiving payments
from an annuity or other distribution option to designate an
alternate payee as a successor payee and that prohibits the
removal or change of that successor payee without approval of a
court of competent jurisdiction, except by operation of law.
(c) Certification.--A domestic relations order under
subsection (b) may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, in which case the irrevocable successor payee so
ordered by the court cannot be changed by the participant
without approval by the court.
(d) Ineligibility.--A person ineligible to be designated as
a successor payee may not be designated as an irrevocable
successor payee. A court may not name an irrevocable successor
payee if the alternate payee is eligible to receive a lump sum
distribution of the alternate payee's portion of the marital
portion of the pension benefit.
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Section 229. Sections 8534 and 8535 of Title 24 are amended
to read:
§ 8534. Fraud and adjustment of errors.
(a) Penalty for fraud.--Any person who shall knowingly make
any false statement or shall falsify or permit to be falsified
any record or records of this system or plan in any attempt to
defraud the system or plan as a result of such act shall be
guilty of a misdemeanor of the second degree.
(b) Adjustment of errors.--Should any change or mistake in
records result in any member, participant, beneficiary, [or]
survivor annuitant or successor payee receiving from the system
or plan more or less than he would have been entitled to receive
had the records been correct, then regardless of the intentional
or unintentional nature of the error and upon the discovery of
such error, the board shall correct the error and if the error
affects contributions to or payments from the system, then so
far as practicable shall adjust the payments which may be made
for and to such person in such a manner that the actuarial
equivalent of the benefit to which he was correctly entitled
shall be paid. If the error affects contributions to or payments
from the plan, the board shall take such action as shall be
provided for in the plan document.
§ 8535. Payments to school entities by Commonwealth.
For each school year beginning with the 1995-1996 school year
and ending with the 2015-2016 school year, each school entity
shall be paid by the Commonwealth for contributions based upon
school service of active members of the system after June 30,
1995, as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
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Fund based upon school service of all active members,
including members on activated military service leave, whose
effective dates of employment with their school entities are
after June 30, 1994, and who also had not previously been
employed by any school entity within this Commonwealth an
amount equal to the amount certified by the Public School
Employees' Retirement Board as necessary to provide, together
with the members' contributions, reserves on account of
prospective annuities, supplemental annuities and the premium
assistance program as provided in this part in accordance
with section 8328 (relating to actuarial cost method),
multiplied by the market value/income aid ratio of the school
entity. For no school year shall any school entity receive
less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code of 1949 was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
Fund based upon school service of all active members,
including members on activated military service leave, who
are not described in paragraph (1), one-half of the amount
certified by the Public School Employees' Retirement Board as
necessary to provide, together with the members'
contributions, reserves on account of prospective annuities,
supplemental annuities and the premium assistance program as
provided in this part in accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to make payment to the Public School Employees'
Retirement Fund. School entities are expected to make the
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full payment to the Public School Employees' Retirement Fund
in accordance with section 8327 (relating to payments by
employers) in the event the receipt of the Commonwealth's
portion of the employer's liability is delayed because of
delinquent salary reporting or other conduct by the school
entities.
Section 230. Title 24 is amended by adding sections to read:
§ 8535.1. Payments to school entities by Commonwealth
commencing with the 2016-2017 school year.
(a) General rule.--For each school year, beginning with the
2016-2017 school year, each school entity shall be paid by the
Commonwealth for contributions based upon school service of
active members of the system and active participants of the plan
after June 30, 2016, as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the fund or the trust based upon school
service of all active members or active participants,
including members or participants on activated military
service leave and USERRA leave, and active participants of
the plan whose effective dates of employment with their
school entities are after June 30, 1994, and who also had not
previously been employed by any school entity within this
Commonwealth, an amount equal to the amount certified by the
board as necessary to provide, together with the members' and
participants' contributions, reserves on account of
prospective annuities, supplemental annuities and the premium
assistance program as provided in this part in accordance
with section 8328 (relating to actuarial cost method),
multiplied by the market value/income aid ratio of the school
entity. For no school year shall any school entity receive
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less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the fund or the trust based upon school
service of all active members or active participants,
including members or participants on activated military
service leave and USERRA leave, and active participants of
the plan who are not described in paragraph (1) one-half of
the amount certified by the board as necessary to provide,
together with the members' and participants' contributions,
reserves on account of prospective annuities, supplemental
annuities and the premium assistance program as provided in
this part in accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to make payment to the fund. School entities are
expected to make the full payment to the fund in accordance
with section 8327 (relating to payments by employers) in the
event the receipt of the Commonwealth's portion of the
employer's liability is delayed because of delinquent salary
reporting or other conduct by the school entities.
(4) Employers whose payments to the Public School
Employees' Retirement Fund are delinquent shall be charged
interest by the Public School Employees' Retirement Fund at
the annual interest rate adopted by the board pursuant to
section 8328 (relating to actuarial cost method) in effect in
the fiscal year in which the payments are required to be
paid.
§ 8537. Public Pension Management and Asset Investment Review
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Commission.
(a) Establishment.--A Public Pension Management and Asset
Investment Review Commission shall be established, which shall
be composed of three appointees of each of the following:
(1) Speaker of the House;
(2) President Pro tempore of the Senate; and
(3) Governor.
The appointees shall be investment professionals and
retirement advisors and shall be appointed within 90 days of
the effective date of this section.
(b) Duties.--The duties of the Public Pension Management and
Asset Investment Review Commission are as follows:
(1) Study the performance of current investment
strategies and procedures of the Public School Employees'
Retirement System, comparing realized rates of return to
established benchmarks and considering associated fees paid
for active and passive management.
(2) Study the costs and benefits of both active and
passive investment strategies in relation to future
investment activities of the Public School Employees'
Retirement System.
(3) Study alternative future investment strategies with
available assets of the Public School Employees' Retirement
System that will maximize future rates of return net of fees.
(4) Publish extensive and detailed findings on-line,
including findings about:
(i) assets;
(ii) returns;
(iii) financial managers;
(iv) consultants;
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(v) requests for Proposals; and
(vi) investment performance measured against
benchmarks.
(5) Report its findings and recommendations to the
Governor and the General Assembly within 6 months of its
first organizational meeting.
(c) Quorum.--A majority of appointed members shall
constitute a quorum for the purpose of conducting business. The
members shall select one of their number to be chairperson and
another to be the vice-chairperson.
(d) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission shall be subject to the
following laws:
(1) The act of February 14, 2008 (P.L.6, No.3), known as
the Right-to-Know Law.
(2) The act of July 3, 1986 (P.L.388, No.84), known as
the Sunshine Act.
(3) The act of October 4, 1978 (P.L.883, No.170), known
as the Public Official and Employee Ethics Act.
(4) The act of July 19, 1957 (P.L.1017, No.451), known
as the State Adverse Interest Act.
(e) Information gathering.--The Public Pension Management
and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate and necessary to fulfill its duties.
(f) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate.
(g) Logistical and other support.--The Public Pension
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Management and Asset Investment Review Commission shall receive
logistical and other support from the Joint State Government
Commission and may employ additional temporary staff as needed.
(h) Reimbursement.--The members of the Public Pension
Management and Asset Investment Review Commission shall be
reimbursed for reasonable expenses.
(i) Expiration.--The Public Pension Management and Asset
Investment Review Commission shall expire 60 days after delivery
of its report in accordance with subsection (b)(5). Any unspent
appropriation shall lapse back to the General Fund.
Section 231. The definition of "eligible person" in section
8702(a) of Title 24 is amended to read:
§ 8702. Definitions.
(a) General rule.--Subject to additional definitions
contained in subsequent provisions of this part which are
applicable to specific provisions of this part, the following
words and phrases when used in this part shall have the meanings
given to them in this section unless the context clearly
indicates otherwise:
"Eligible person." An individual who is:
(1) an annuitant or survivor annuitant or the spouse or
dependent of an annuitant or survivor annuitant[.]; or
(2) a participant receiving distributions or a successor
payee, or the spouse or dependent of a participant receiving
distributions or successor payee.
* * *
ARTICLE III
Section 301. Section 7306(a) introductory paragraph of Title
51 is amended and the section is amended by adding a subsection
to read:
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§ 7306. Retirement rights.
(a) Options available to employees.--Any employee who is a
member of a retirement system other than an active member or
inactive member on leave without pay of the State Employees'
Retirement System, an active or inactive participant of the
School Employees' Defined Contribution Plan, an active
participant or inactive participant on leave without pay of the
State Employees' Defined Contribution Plan or an active or
inactive member of the Public School Employees' Retirement
System at the time he is granted a military leave of absence
shall be entitled to exercise any one of the following options
in regard thereto:
* * *
(f) Participant of a defined contribution plan.--
(1) An employee who is an active or inactive participant
of the School Employees' Defined Contribution Plan at the
time the employee is granted a military leave of absence
shall be entitled to make contributions to the Public School
Employees' Defined Contribution Trust for the leave as
provided in 24 Pa.C.S. Pt. IV (relating to retirement for
school employees).
(2) An employee who is an active participant or inactive
participant on leave without pay of the State Employees'
Defined Contribution Plan at the time he is granted a
military leave of absence shall be entitled to make
contributions to the State Employees' Defined Contribution
Trust for the leave as provided in 71 Pa.C.S. Pt. XXV
(relating to retirement for State employees and officers).
ARTICLE IV
Section 401. Sections 4104(a)(7), 5102 and 5103 of Title 71
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are amended to read:
§ 4104. Duties of office.
(a) Mandatory.--The office shall:
* * *
(7) Study and analyze the impact of shared-risk
contributions under 24 Pa.C.S. § 8321(b) (relating to regular
member contributions for current service) and section 5501.1
(relating to shared-risk member contributions and shared-gain
adjustments for regular member contributions for Class A-3
and Class A-4 service).
* * *
§ 5102. Definitions.
The following words and phrases as used in this part, unless
a different meaning is plainly required by the context, shall
have the following meanings:
"Academic administrator." A management employee in the field
of public education whose work is directly related to academic
instruction, excluding any employee in a position that is
nonacademic in nature, such as, without limitation, a position
that relates to admissions, financial aid, counseling,
secretarial and clerical services, records management, housing,
food service, maintenance and security.
"Accumulated employer defined contributions." The total of
the employer defined contributions paid into the trust on
account of a participant's State service together with any
investment earnings and losses and adjustment for fees, costs
and expenses credited or charged thereon.
"Accumulated mandatory participant contributions." The total
of the mandatory participant contributions paid into the trust
on account of a participant's State service together with any
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investment earnings and losses and adjustments for fees, costs
and expenses credited or charged thereon.
"Accumulated total defined contributions." The total of the
accumulated mandatory participant contributions, accumulated
employer defined contributions and accumulated voluntary
contributions, reduced by any distributions, standing to the
credit of a participant in an individual investment account in
the trust.
"Accumulated voluntary contributions." The total of
voluntary contributions paid into the trust by a participant and
any amounts rolled over by a participant or transferred by a
direct trustee-to-trustee transfer into the trust together with
any investment earnings and losses and adjustment for fees,
costs and expenses credited or charged thereon.
"Active member." A State employee, or a member on leave
without pay, for whom pickup contributions or cash balance
member contributions are being made to the fund or for whom such
contributions otherwise required for current State service are
not being made solely by reason of section 5502.1 (relating to
waiver of regular member contributions and Social Security
integration member contributions) or any provision of this part
relating to the limitations under section 401(a)(17) or section
[415(b)] 415 of the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. § 401(a)(17) or [415(b)).] 415) or limitations
on contributions to the system applicable to a Class A-3 member
or Class A-4 member who has exceeded the Class A-3 and Class A-4
compensation limit.
"Active participant." A State employee for whom mandatory
participant contributions are being made to the trust or for
whom such contributions otherwise required for current State
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service are not being made solely by reason of any provision of
this part relating to the limitations under section 401(a)(17)
or 415 of the Internal Revenue Code of 1986 (Public Law 99-514,
26 U.S.C. § 401(a)(17) or § 415).
"Actuarial increase factor." A factor calculated at the
member's birthday by dividing the cost of a dollar annuity based
on the age of the member on the member's immediately previous
birthday by the cost of a one-year deferred dollar annuity
calculated at that same age. Unless the member terminates State
or school service on the member's birthday, the actuarial
increase factor for the year of termination shall be adjusted
by:
(1) subtracting one from the calculated factor; then
(2) dividing the difference by twelve; then
(3) multiplying the resulting quotient by the number of
whole months between the member's immediately previous
birthday and the date of termination of service; then
(4) adding one to the resulting product.
"Actuarially equivalent." [Equal] Except when determining
benefits and present values related to Class CB service, cash
balance member accumulated deductions or total cash balance
accumulated deductions, equal present values, computed on the
basis of statutory interest and the mortality tables adopted by
the board. When determining benefits and present values related
to Class CB service, cash balance member accumulated deductions
or total cash balance accumulated deductions, equal present
values, computed on the basis of the applicable Federal rate on
the effective date of the determination and the mortality tables
adopted by the board.
"Actuary." The consultant to the board who shall be:
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(1) a member of the American Academy of Actuaries; or
(2) an individual who has demonstrated to the
satisfaction of the Insurance Commissioner of Pennsylvania
that he has the educational background necessary for the
practice of actuarial science and has had at least seven
years of actuarial experience; or
(3) a firm, partnership, or corporation of which at
least one member meets the requirements of (1) or (2).
"Additional accumulated deductions." The total of the
additional member contributions paid into the fund on account of
current service or previous State or creditable nonstate
service, together with the statutory interest credited thereon
until the date of termination of service. In the case of a
vestee, statutory interest shall be credited until the effective
date of retirement. A member's account shall not be credited
with statutory interest for more than two years during a leave
without pay.
"Alternative investment." An investment in a private equity
fund, private debt fund, venture fund, real estate fund, hedge
fund or absolute return fund.
"Alternative investment vehicle." A limited partnership,
limited liability company or any other legal vehicle for
authorized investments under section 5931(i) (relating to
management of fund and accounts) through which the system makes
an alternative investment.
"Alternate payee." Any spouse, former spouse, child or
dependent of a member or participant who is recognized by a
domestic relations order as having a right to receive all or a
portion of the moneys payable to that member or participant
under this part.
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"Annuitant." Any member on or after the effective date of
retirement until his annuity is terminated.
"Applicable Federal rate." Interest at a rate equal to the
applicable Federal rate prescribed by the Internal Revenue
Service and published by revenue ruling under IRC § 7520 and
that is in effect on the operative date of the calculation for
which such rate is being used, compounded annually.
"Approved domestic relations order." Any domestic relations
order which has been determined to be approved in accordance
with section 5953.1 (relating to approval of domestic relations
orders).
"Average noncovered salary." The average of the amounts of
compensation received each calendar year since January 1, 1956
exclusive of the amount which was or could have been covered by
the Federal Social Security Act, 42 U.S.C. § 301 et seq., during
that portion of the member's service since January 1, 1956 for
which he has received social security integration credit.
"Basic contribution rate." Five percent (5%), except that in
no case shall any member's rate, excluding the rate for social
security integration credit, be greater than his contribution
rate on the effective date of this part so long as he does not
elect additional coverage or membership in another class of
service.
"Beneficiary." [The] In the case of the system, the person
or persons last designated in writing to the board by a member
to receive his accumulated deductions or a lump sum benefit upon
the death of such member. In the case of the plan, the person or
persons last designated in writing to the board by the
participant to receive the participant's vested accumulated
total defined contributions or a lump sum benefit upon the death
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of the participant.
"Board." The State Employees' Retirement Board or the State
Employes' Retirement Board.
"Cash balance member accumulated deductions." The total of
the cash balance member contributions paid into the fund on
account of a member's service as a member of Class CB together
with treasury bond interest and excess interest thereon until
the date of termination of service. In the case of a vestee,
treasury bond interest and excess interest shall be credited
until the effective date of retirement.
"Cash balance member contributions." The product of the
basic contribution rate, the class of service multiplier and the
compensation of the member for service credited as Class CB.
"Class A-3 and Class A-4 compensation limit." For a Class A-
3 or Class A-4 member for each calendar year starting on or
after January 1, 2016, the amount of compensation as an active
member which would not have been subject to Social Security
integration member contributions under section 5502 had the
member been eligible to elect to earn Social Security
integration credits under section 5305 and did so, without
regard to the calendar year starting after March 1, 1974.
"Class of service multiplier."
Class of Service Multiplier
A 1
AA
for all purposes
except
calculating
regular member
contributions on
compensation
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paid prior to
January 1, 2002 1.25
AA
for purposes of
calculating
regular member
contributions
on compensation
paid prior to
January 1, 2002 1
A-3
for all purposes
except the
calculation of
regular member
contributions
and
contributions
for creditable
nonstate service 1
A-3
for purposes of
calculating
regular member
contributions
and
contributions
for creditable
nonstate service 1.25
A-4
for all purposes
except the
calculation of
regular member
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contributions 1.25
A-4
for purposes of
calculating
regular member
contributions 1.86
B .625
C 1
CB for all purposes
except
calculating cash
balance member
contributions 1
CB
for purposes of
calculating cash
balance member
contributions
0.6 unless a
lower
multiplier is
elected under
section 5306.5
D 1.25
D-1
prior to January
1, 1973 1.875
D-1
on and
subsequent to
January 1, 1973 1.731
D-2
prior to January
1, 1973 2.5
D-2
on and
subsequent to
January 1, 1973 1.731
D-3
prior to January
1, 1973 3.75
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D-3
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
3.75
D-4
for all purposes
except
calculating
regular member
contributions
on compensation
paid prior to
July 1, 2001 1.5
D-4
for purposes of
calculating
regular member
contributions on
compensation
paid prior to
July 1, 2001 1
E, E-1
prior to January
1, 1973 2 for each of
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the first ten
years of
judicial
service, and
1.5 for each
subsequent
year of
judicial
service
E, E-1 on and
subsequent to
January 1, 1973 1.50 for each of
the first ten
years of
judicial
service and
1.125 for each
subsequent
year of
judicial
service
E-2 prior to
September 1,
1973 1.5
E-2
on and
subsequent to
September 1,
1973 1.125
G 0.417
H 0.500
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I 0.625
J 0.714
K 0.834
L 1.000
M 1.100
N 1.250
T-C (Public School
Employees'
Retirement Code)
1
T-E (Public School
Employees'
Retirement Code)
1
T-F (Public School
Employees'
Retirement Code)
1
"Combined service employee." A current or former State
employee who is both a member of the system and a participant in
the plan.
"Commissioner." The Commissioner of the Internal Revenue
Service.
"Compensation." Pickup contributions plus remuneration
actually received as a State employee excluding refunds for
expenses, contingency and accountable expense allowances;
excluding any severance payments or payments for unused vacation
or sick leave; and excluding payments for military leave and any
other payments made by an employer while on USERRA leave, leave
of absence granted under 51 Pa.C.S. § 4102 (relating to leaves
of absence for certain government employees), military leave of
absence granted under 51 Pa.C.S. § 7302 (relating to granting
military leaves of absence) or other types of military leave,
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including other types of leave payments, stipends, differential
wage payments as defined in IRC § 414(u)(12) and any other
payments: Provided, however, That compensation received prior to
January 1, 1973, shall be subject to the limitations for
retirement purposes in effect December 31, 1972, if any:
Provided further, That the limitation under section 401(a)(17)
of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17)) taken into account for the purpose of
member contributions, including any additional member
contributions in addition to regular or joint coverage member
contributions and Social Security integration contributions,
regardless of class of service, shall apply to each member who
first became a member of the State Employees' Retirement System
on or after January 1, 1996, and who by reason of such fact is a
noneligible member subject to the application of the provisions
of section 5506.1(a) (relating to annual compensation limit
under IRC § 401(a)(17)) and shall apply to each participant.
"Concurrent service." Service credited in more than one
class of service during the same period of time.
"Correction officer." Any full-time employee assigned to the
Department of Corrections or the Department of Public Welfare
whose principal duty is the care, custody and control of inmates
or direct therapeutic treatment, care, custody and control of
inmates of a penal or correctional institution, community
treatment center, forensic unit in a State hospital or secure
unit of a youth development center operated by the Department of
Corrections or by the Department of Public Welfare.
"County service." Service credited in a retirement system or
pension plan established or maintained by a county to provide
retirement benefits for its employees to the account of county
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employees who are transferred to State employment and become
State employees pursuant to 42 Pa.C.S. § 1905 (relating to
county-level court administrators) regardless of whether the
service was performed for the county or another employer or
allowed to be purchased in the county retirement system or
pension plan.
"Creditable nonstate service." Service for which an active
member may obtain credit in the system, other than:
(1) service as a State employee;
(2) service converted to State service pursuant to
section 5303.1 (relating to election to convert county
service to State service); or
(3) school service converted to State service pursuant
to section 5303.2 (relating to election to convert school
service to State service) [for which an active member may
obtain credit].
"Credited service." State or creditable nonstate service for
which the required contributions have been made to the fund or
for which the contributions otherwise required for such service
were not made solely by reason of section 5502.1 (relating to
waiver of regular member contributions and Social Security
integration member contributions) or any provision of this part
relating to the limitations under section 401(a)(17) or [415(b)]
415 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17) or [415(b)),] 415), or limitations on
contributions to the system applicable to a Class A-3 member or
Class A-4 member or for which salary deductions or lump sum
payments to the system have been agreed upon in writing.
"Date of termination of service." The latest of the
following dates:
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(1) the last day of service for which pickup
contributions are made for an active member or for which the
contributions otherwise required for such service were not
made solely by reason of section 5502.1 (relating to waiver
of regular member contributions and social security
integration member contributions) or any provision of this
part relating to the limitations under section 401(a)(17) or
415 of the Internal Revenue Code of 1986 (Public Law 99-514,
26 U.S.C. § 401(a)(17) or 415) or limitations on
contributions to the system applicable to a Class A-3 member
or Class A-4 member;
(2) the last day of service for which mandatory
participant contributions are made for an active participant;
(3) in the case of an inactive member on leave without
pay or an inactive participant on leave without pay, the date
of his resignation or the date his employment is formally
discontinued by his employer[.]; or
(4) in the case of a combined service employee, the
latest of the dates in paragraphs (1), (2) and (3).
"DC plan exempt employee." Any of the following:
(1) A sworn police officer.
(2) An enforcement officer.
(3) A wildlife conservation officer or other
commissioned law enforcement personnel employed by the
Pennsylvania Game Commission who has and exercises the same
law enforcement powers as a wildlife conservation officer.
The term shall not include a deputy wildlife conservation
officer.
(4) A Delaware River Port Authority policeman.
(5) A park ranger.
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(6) A Capitol Police officer.
(7) A campus police officer employed by a State-owned
educational institution, community college or The
Pennsylvania State University.
(8) A police officer employed by Fort Indiantown Gap or
other designated Commonwealth military installation or
facility.
(9) A correction officer.
"Disability annuitant." A member on and after the effective
date of disability until his annuity or the portion of his
annuity payments in excess of any annuity to which he may
otherwise be entitled is terminated.
"Distribution." Payment of all or any portion of a person's
interest in either the State Employees' Retirement Fund or the
State Employees' Defined Contribution Trust or both which is
payable under this part.
"Domestic relations order." Any judgment, decree or order,
including approval of a property settlement agreement, entered
on or after the effective date of this definition by a court of
competent jurisdiction pursuant to a domestic relations law
which relates to the marital property rights of the spouse or
former spouse of a member or participant, including the right to
receive all or a portion of the moneys payable to that member or
participant under this part in furtherance of the equitable
distribution of marital assets. The term includes orders of
support as that term is defined by 23 Pa.C.S. § 4302 (relating
to definitions) and orders for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages).
"Effective date of retirement." The first day following the
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date of termination of service of a member if he has properly
filed an application for an annuity within 90 days of such date;
in the case of a vestee or a member who does not apply for an
annuity within 90 days after termination of service, the date of
filing an application for an annuity or the date specified on
the application, whichever is later. In the case of a finding of
disability, the date certified by the board as the effective
date of disability.
"Elected officer." An individual who is elected or reelected
to a term of office that begins after December 31, 2015, as a
member of the General Assembly.
"Eligibility points." Points which are accrued by an active
member or a multiple service member who is an active member in
the Public School Employees' Retirement System for credited
service or a member who has been reemployed from USERRA leave or
a member who dies while performing USERRA leave and are used in
the determination of eligibility for benefits.
"Employer defined contributions."
(1) Unless paragraph (2) applies, contributions equal to
4% of an active participant's compensation which are made by
the Commonwealth or other employer for current service to the
trust to be credited in the active participant's individual
investment account.
(2) For a psychiatric security aide , contributions equal
to 5.5% of an active participant's compensation which are
made by the Commonwealth or other employer for current
service to the trust to be credited in the active
participant's individual investment account.
"Enforcement officer."
(1) Any enforcement officer or investigator of the
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Pennsylvania Liquor Control Board who is a peace officer
vested with police power and authority throughout the
Commonwealth and any administrative or supervisory employee
of the Pennsylvania Liquor Control Board vested with police
power who is charged with the administration or enforcement
of the liquor laws of the Commonwealth.
(2) Special agents, narcotics agents, asset forfeiture
agents, medicaid fraud agents and senior investigators
hazardous waste prosecutions unit, classified as such and
employed by the Office of Attorney General who have within
the scope of their employment as law enforcement officers the
power to enforce the law and make arrests under the authority
of the act of October 15, 1980 (P.L.950, No.164), known as
the Commonwealth Attorneys Act.
(3) Parole agents, classified as such by the Executive
Board and employed by the Pennsylvania Board of Probation and
Parole.
(4) Waterways conservation officers and other
commissioned law enforcement personnel employed by the
Pennsylvania Fish and Boat Commission who have and exercise
the same law enforcement powers as waterways conservation
officers. This paragraph shall not apply to deputy waterways
conservation officers.
"Final average salary." [The] As follows:
(1) For members with an effective date of retirement
before January 1, 2016, and for purposes of calculating
standard single life annuities resulting from credited
service other than post-January 2016 service regardless of
the effective date of retirement, the highest average
compensation received as a member during any three
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nonoverlapping periods of four consecutive calendar quarters
during which the member was a State employee, with the
compensation for part-time service being annualized on the
basis of the fractional portion of the year for which credit
is received; except if the employee was not a member for
three nonoverlapping periods of four consecutive calendar
quarters, the total compensation received as a member,
annualized in the case of part-time service, divided by the
number of nonoverlapping periods of four consecutive calendar
quarters of membership[;].
(2) For members with an effective date of retirement on
or after January 1, 2016, for purposes of calculating
standard single life annuities resulting from post-January
2016 service, the larger of:
(i) the highest average total compensation received
as a member of any class of service during any five
calendar years during which the member was a state
employee, with the compensation for part-time service or
for any partial year of credit annualized on the basis of
the fractional portion of the year for which credit is
received, and subject to any limitation as applied under
section 5506.2 (relating to application of Class A-3 and
Class A-4 compensation limit) if the member has Class A-3
service credit or class A-4 service credit, except if the
employee was not an active member during five calendar
years, the average of the number of calendar years during
which the employee was an active member; or
(ii) the highest average compensation received as a
member of any class of service during any three calendar
years during which the member was a state employee
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excluding remuneration received after December 31, 2015,
for any overtime service as a member of the system, with
the compensation of part-time service or for any partial
year of credit annualized on the basis of the fractional
portion of the year for which credit is received, and
subject to any limitation as applied under section 5506.2
if the member has Class A-3 service credit or class A-4
service credit, except if the employee was not an active
member during three calendar years, the average of the
number of calendar years during which the employee was an
active member.
(3) For all members and for the calculation of all
standard single life annuities without regard to class of
membership and credited service, in the case of a member with
multiple service, the final average salary shall be
determined on the basis of the compensation received by him
as a [State employee] member of the system or as a school
employee, other than as a participant in the School
Employees' Defined Contribution Plan, or both; in the case of
a member with Class A-3 or Class A-4 service and service in
one or more other classes of service, the final average
salary shall be determined on the basis of the compensation
received by him in all classes of State service credited in
the system other than as a member of Class CB; and, in the
case of a member who first became a member on or after
January 1, 1996, the final average salary shall be determined
as hereinabove provided but subject to the application of the
provisions of section 5506.1(a) (relating to annual
compensation limit under IRC § 401(a)(17)). Final average
salary shall be determined by including in compensation
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payments deemed to have been made to a member reemployed from
USERRA leave to the extent member contributions have been
made as provided in section 5302(f)(2) (relating to credited
State service) and payments made to a member on leave of
absence under 51 Pa.C.S. § 4102 (relating to leaves of
absence for certain government employees) as provided in
section 5302(f)(6).
"Full coverage member." Any member for whom member pickup
contributions are being picked up or who has paid or has agreed
to pay to the fund the actuarial equivalent of regular member
contributions due on account of service prior to January 1,
1982.
"Fund." The State Employees' Retirement Fund.
"Head of department." The chief administrative officer of
the department, the chairman or executive director of the
agency, authority, or independent board or commission, the Court
Administrator of Pennsylvania, and the Chief Clerk of the
Senate, or the Chief Clerk of the House of Representatives.
"Inactive member." A member for whom no pickup contributions
or cash balance member contributions are being made to the fund,
except in the case of an active member for whom such
contributions otherwise required for current State service are
not being made solely by reason of section 5502.1 (relating to
waiver of regular member contributions and Social Security
integration member contributions) or any provision of this part
relating to the limitations under section 401(a)(17) or 415(b)
of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17) or 415(b)) or limitations on contributions
to the system applicable to a Class A-3 member or Class A-4
member, but who has accumulated deductions or cash balance
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member accumulated deductions standing to his credit in the fund
and who is not eligible to become or has not elected to become a
vestee or has not filed an application for an annuity.
"Inactive member on leave without pay." The term does not
include a combined service employee who is an inactive
participant on leave without pay unless the combined service
employee concurrently is employed in an office or position in
which the combined service employee is a member of the system.
"Inactive participant." A participant for whom no mandatory
participant contributions are being made to the trust, except in
the case of an active participant for whom such contributions
otherwise required for current State service are not being made
solely by reason of any provision of this part relating to
limitations under section 401(a)(17) or 415 of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17)
or 415), but who has vested accumulated total defined
contributions standing to his credit in the trust and who has
not filed an application for an annuity.
"Inactive participant on leave without pay." The term does
not include a combined service employee who is an inactive
member on leave without pay unless the combined service employee
concurrently is employed in an office or position in which the
combined service employee is a participant in the plan.
"Individual investment account." The account in the trust to
which are credited the amounts of the contributions made by a
participant and the participant's employer in accordance with
the provisions of this part, together with all interest and
investment earnings after deduction for fees, costs, expenses
and investment losses and charges for distributions.
"Intervening military service." Active military service of a
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member who was a State employee and an active member of the
system immediately preceding his induction into the armed
services or forces of the United States in order to meet a
military obligation excluding any voluntary extension of such
service and who becomes a State employee within 90 days of the
expiration of such service.
"IRC." The Internal Revenue Code of 1986, as designated and
referred to in section 2 of the Tax Reform Act of 1986 (Public
Law 99-514, 100 Stat. 2085, 2095). A reference in this part to
"IRC § " shall be deemed to refer to the identically numbered
section and subsection or other subdivision of such section in
26 United States Code (relating to Internal Revenue Code).
"Irrevocable beneficiary." The person or persons permanently
designated by a member or participant in writing to the State
Employees' Retirement Board pursuant to an approved domestic
relations order to receive all or a portion of the accumulated
deductions, vested accumulated total defined contributions or
lump sum benefit payable upon the death of such member or
participant.
"Irrevocable successor payee." The person permanently
designated by a participant receiving distributions in writing
to the board pursuant to an approved domestic relations order to
receive one or more distributions from the plan upon the death
of such participant.
"Irrevocable survivor annuitant." The person permanently
designated by a member in writing to the State Employees'
Retirement Board pursuant to an approved domestic relations
order to receive an annuity upon the death of such member.
"Joint coverage member." Any member who agreed prior to
January 1, 1966 to make joint coverage member contributions to
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the fund and has not elected to become a full coverage member.
"Joint coverage member contributions." Regular member
contributions reduced for a joint coverage member.
"Mandatory participant contributions." Contributions equal
to 3% of compensation that are made by active participants for
current service.
"Member." Active member, inactive member, annuitant, vestee
or special vestee.
"Member of the judiciary." Any justice of the Supreme Court,
any judge of the Superior Court, the Commonwealth Court, any
court of common pleas, the Municipal Court and the Traffic Court
of Philadelphia, or any community court.
"Member's annuity." The single life annuity which is
actuarially equivalent, at the effective date of retirement, to
the sum of the regular accumulated deductions, shared-risk
accumulated deductions, the additional accumulated deductions,
cash balance member accumulated deductions and the social
security integration accumulated deductions standing to the
member's credit in the members' savings account.
"Military service." All active military service for which a
member has received a discharge other than an undesirable, bad
conduct, or dishonorable discharge.
"Multiple service." Credited service of a member who has
elected to combine his credited service in both the State
Employees' Retirement System and the Public School Employees'
Retirement System.
"Noneligible member." For the purposes of section 5506.1
(relating to annual compensation limit under IRC § 401(a)(17)),
a member who first became a member on or after January 1, 1996.
"Nonstudent service." Employment in an educational
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institution that is not contingent on the employee's enrollment
as a student or maintenance of student status at such
institution and for which only monetary compensation is
received, excluding tuition waivers or reimbursement, academic
credit, housing, meals and other in-kind compensation.
"Participant." An active participant, inactive participant
or participant receiving distributions.
"Participant receiving distributions." A participant in the
plan who has commenced receiving distributions from his
individual investment account but who has not received a total
distribution of his vested interest in the individual investment
account.
"Pickup contributions." Regular or joint coverage member
contributions, shared risk member contributions, social security
integration contributions and additional member contributions
which are made by the Commonwealth or other employer for active
members for current service on and after January 1, 1982.
"Plan." The State Employees' Defined Contribution Plan as
established by the provisions of this part and the board.
"Plan document." The documents created by the board under
section 5402 (relating to plan document) that contain the terms
and provisions of the plan and trust as established by the board
regarding the establishment, administration and investment of
the plan and trust.
"Post-January 2016 service." All previously uncredited state
service and creditable nonstate service that is first credited
on or after January 1, 2016, and all State service performed on
or after January 1, 2016, except that any State service credited
by a member who is reemployed from USERRA leave who has made the
member contributions under section 5302(f) (relating to credited
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State service) to receive State service credit shall not be
post-January 2016 service if credited for a period of USERRA
leave performed before January 1, 2016.
"Previous State service." Service rendered as a State
employee prior to his most recent entrance in the system[.],
provided that the State employee was not a participant in the
plan, was not eligible to be an optional participant in the plan
under section 5301(b.1) (relating to mandatory and optional
membership in the system and participation in the plan) or was
not prohibited from being a participant under section 5301(c.1)
during such service.
"Psychiatric security aide." Any employee whose principal
duty is the care, custody and control of the criminally insane
inmates of a maximum security institution for the criminally
insane or detention facility operated by the Department of
Public Welfare.
"Public School Employees' Retirement System." The retirement
system established by the act of July 18, 1917 (P.L.1043,
No.343), and codified by the act of June 1, 1959 (P.L.350,
No.77).
"Reemployed from USERRA leave." Resumption of active
membership or active participation as a State employee after a
period of USERRA leave, provided, however, that the resumption
of active membership or active participation was within the time
period and under conditions and circumstances such that the
State employee was entitled to reemployment rights under 38
U.S.C. Ch. 43 (relating to employment and reemployment rights of
members of the uniformed services).
"Regular accumulated deductions." The total of the regular
or joint coverage member contributions paid into the fund on
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account of current service or previous State or creditable
nonstate service, together with the statutory interest credited
thereon until the date of termination of service. In the case of
a vestee or a special vestee, statutory interest shall be
credited until the effective date of retirement. A member's
account shall not be credited with statutory interest for more
than two years during a leave without pay.
"Regular member contributions." The product of the basic
contribution rate, the class of service multiplier if greater
than one and the compensation of the member[.] for service in a
class other than Class CB, subject to any adjustment under
section 5501.1(c) (relating to shared risk member contributions
and shared-gain adjustments to regular member contributions for
Class A-3 and Class A-4 service) or 5501.3 (relating to
contribution savings program for members of Class AA and Class
D-4).
"Required beginning date." The latest date by which
distributions of a member's interest in the system or a
participant's interest in his individual investment account must
commence under section 401(a)(9) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).
"Retirement counselor." The State Employees' Retirement
[System] Board employee whose duty it shall be to advise each
employee of his rights and duties as a member of the system or
as a participant of the plan.
"Salary deductions." The amounts certified by the board,
deducted from the compensation of an active member or active
participant, or the school service compensation of a multiple
service member who is an active member of the Public School
Employees' Retirement System, and paid into the fund.
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"School Employees' Defined Contribution Plan." The defined
contribution plan for school employees established under 24
Pa.C.S. Pt. IV (relating to retirement for school employees).
"School service." Service rendered as a public school
employee and credited as service in the Public School Employees'
Retirement System.
"Service connected disability." A disability resulting from
an injury arising in the course of State employment, and which
is compensable under the applicable provisions of the act of
June 2, 1915 (P.L.736, No.338), known as "The Pennsylvania
Workmen's Compensation Act," or the act of June 21, 1939
(P.L.566, No.284), known as "The Pennsylvania Occupational
Disease Act."
"Shared-risk accumulated deductions." The total of the
shared-risk member contributions paid into the fund on account
of current service or previous State service or creditable
nonstate service, together with the statutory interest credited
on the contributions until the date of termination of service.
In the case of a vestee, statutory interest shall be credited
until the effective date of retirement. A member's account shall
not be credited with statutory interest for more than two years
during a leave without pay.
"Shared-risk member contributions." The product of the
applicable shared-risk contribution rate and the compensation of
a member for service credited as Class A-3 or Class A-4 up to
the Class A-3 and Class A-4 compensation limit.
"Social security integration accumulated deductions." The
total of the member contributions paid into the fund on account
of social security integration credit, together with the
statutory interest credited thereon until the date of
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termination of service or until the date of withdrawal thereof,
whichever is earlier. In the case of a vestee statutory interest
shall be credited until the effective date of retirement. A
member's account shall not be credited with statutory interest
for more than two years during a leave without pay.
"Special vestee." An employee of The Pennsylvania State
University who is a member of the State Employees' Retirement
System with five or more but less than ten eligibility points
and who has a date of termination of service from The
Pennsylvania State University of June 30, 1997, because of the
transfer of his job position or duties to a controlled
organization of the Penn State Geisinger Health System or
because of the elimination of his job position or duties due to
the transfer of other job positions or duties to a controlled
organization of the Penn State Geisinger Health System, provided
that:
(1) subsequent to termination of State service as an
employee of The Pennsylvania State University, the member has
not returned to State service in any other capacity or
position as a State employee;
(2) The Pennsylvania State University certifies to the
board that the member is eligible to be a special vestee;
(3) the member files an application to vest the member's
retirement rights pursuant to section 5907(f) (relating to
rights and duties of State employees [and], members and
participants) on or before September 30, 1997; and
(4) the member elects to leave the member's total
accumulated deductions in the fund and to defer receipt of an
annuity until attainment of superannuation age or the
member's required beginning date.
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"Standard single life annuity." An annuity equal to 2% of
the final average salary, multiplied by the total number of
years and fractional part of a year of credited service of a
member in each class of service other than service credited as a
member of Class CB.
"State employee." Any person holding a State office or
position under the Commonwealth, employed by the State
Government of the Commonwealth, in any capacity whatsoever,
except an independent contractor or any person compensated on a
fee basis or any person paid directly by an entity other than a
State Employees' Retirement System employer, and shall include
members of the General Assembly, and any officer or employee of
the following:
(1) (i) The Department of Education.
(ii) State-owned educational institutions.
(iii) Community colleges.
(iv) The Pennsylvania State University, except an
employee in the College of Agriculture who is paid wholly
from Federal funds or an employee who is participating in
the Federal Civil Service Retirement System. The
university shall be totally responsible for all employer
contributions under section 5507 (relating to
contributions by the Commonwealth and other employers).
(2) The Pennsylvania Turnpike Commission, the Delaware
River Port Authority, the Port Authority Transit Corporation,
the Philadelphia Regional Port Authority, the Delaware River
Joint Toll Bridge Commission, the State Public School
Building Authority, The General State Authority, the State
Highway and Bridge Authority, the Delaware Valley Regional
Planning Commission, the Interstate Commission of the
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Delaware River Basin, and the Susquehanna River Basin
Commission any time subsequent to its creation, provided the
commission or authority agrees to contribute and does
contribute to the fund or trust, from time to time, the
moneys required to build up the reserves necessary for the
payment of the annuities or other benefits of such officers
and employees without any liability on the part of the
Commonwealth to make appropriations for such purposes, and
provided in the case of employees of the Interstate
Commission of the Delaware River Basin, that the employee
shall have been a member of the system for at least ten years
prior to January 1, 1963.
(3) Any separate independent public corporation created
by statute, not including any municipal or quasi-municipal
corporation, so long as he remains an officer or employee of
such public corporation, and provided that such officer or
employee of such public corporation was an employee of the
Commonwealth immediately prior to his employment by such
corporation, and further provided such public corporation
shall agree to contribute and contributes to the fund or
trust, from time to time, the moneys required to build up the
reserves necessary for the payment of the annuities or other
benefits of such officers and employees without any liability
on the part of the Commonwealth to make appropriations for
such purposes.
"State police officer." Any officer or member of the
Pennsylvania State Police who, on or after July 1, 1989, shall
have been subject to the terms of a collective bargaining
agreement or binding interest arbitration award established
pursuant to the act of June 24, 1968 (P.L.237, No.111) ,
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referred to as the Policemen and Firemen Collective Bargaining
Act.
"State service." Service converted from county service
pursuant to section 5303.1 (relating to election to convert
county service to State service), converted from school service
pursuant to section 5303.2 (relating to election to convert
school service to State service) or rendered as a State
employee.
"Statutory interest." Interest at 4% per annum, compounded
annually.
"Successor payee." The person or persons last designated in
writing to the board by a participant receiving distributions to
receive one or more distributions upon the death of the
participant.
"Superannuation age." For classes of service in the system
other than Class A-3 [and], Class A-4 and Class CB, any age upon
accrual of 35 eligibility points or age 60, except for a member
of the General Assembly, an enforcement officer, a correction
officer, a psychiatric security aide, a Delaware River Port
Authority policeman or an officer of the Pennsylvania State
Police, age 50, and, except for a member with Class G, Class H,
Class I, Class J, Class K, Class L, Class M or Class N service,
age 55 upon accrual of 20 eligibility points. For Class A-3 and
Class A-4 service, any age upon attainment of a superannuation
score of 92 , provided the member has accrued 35 eligibility
points , or age 65, or for park rangers or capitol police
officers, age 55 with 20 years of service as a park ranger or
capitol police officer, except for a member of the General
Assembly, an enforcement officer, a correction officer, a
psychiatric security aide, a Delaware River Port Authority
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policeman or an officer of the Pennsylvania State Police, age
55. A vestee with Class A-3 or Class A-4 service credit attains
superannuation age on the birthday the vestee attains the age
resulting in a superannuation score of 92, provided that the
vestee has at least 35 eligibility points, or attains another
applicable superannuation age, whichever occurs first.
"Superannuation annuitant." An annuitant whose annuity first
became payable on or after the attainment of superannuation age
and who is not a disability annuitant.
"Superannuation score." The sum of the member's age in whole
years on his last birthday and the amount of the member's total
eligibility points on the member's effective date of retirement,
expressed in whole years and whole eligibility points and
disregarding fractions of a year and fractions of total
eligibility points.
"Survivor annuitant." The person or persons last designated
by a member under a joint and survivor annuity option to receive
an annuity upon the death of such member.
"Sworn police officer." A State police officer who is
employed and serving as an officer of the Pennsylvania State
Police.
"System." The State Employees' Retirement System of
Pennsylvania as established by the act of June 27, 1923
(P.L.858, No.331), and codified by the act of June 1, 1959
(P.L.392, No.78) and the provisions of this part.
"Total accumulated deductions." The sum of the regular
accumulated deductions, additional accumulated deductions, the
social security integration accumulated deductions, shared-risk
member contributions and all other contributions other than cash
balance member contributions and other amounts credited to the
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cash balance savings account paid into the fund for the
purchase, transfer or conversion of credit for service or other
coverage together with all statutory interest credited thereon
until the date of termination of service. In the case of a
vestee or a special vestee, statutory interest shall be credited
until the effective date of retirement. A member's account shall
not be credited with statutory interest for more than two years
during a leave without pay.
"Total cash balance accumulated deductions." The sum of the
cash balance member accumulated deductions and amounts credited
by the board as provided by section 5902(p) (relating to
administrative duties of the board) together with all treasury
bond interest and excess interest thereon credited to a member's
cash balance savings account until the date of termination of
service. In the case of a vestee, treasury bond interest and
excess interest shall be credited until the effective date of
retirement.
"Treasury bond interest." For each calendar year, interest
at the Constant Maturity Treasury rate of the 30-year Treasury
Bond in effect on the immediately prior December 31 as published
by the United States Department of Treasury, provided however,
that such rate shall not be greater than 4%, compounded
annually. If no such rate was in effect as of the immediately
prior December 31, then the board shall establish an alternate
rate based upon the Constant Maturity Treasury rate of the
closest maturing bond issued by the United States Treasury as of
that date as published by the United States Department of
Treasury, provided however, that such rate shall not be greater
than 4%, compounded annually.
"Trust." The State Employees' Defined Contribution Trust
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established under Chapter 54 (relating to State Employees'
Defined Contribution Plan).
"USERRA leave." Any period of time for service in the
uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
employment and reemployment rights of members of the uniformed
services) by a State employee or former State employee who
terminated State service to perform such service in the
uniformed services, if the current or former State employee is
entitled to reemployment rights under 38 U.S.C. Ch. 43 with
respect to the uniformed service.
"Valuation interest." Interest at 5 1/2% per annum
compounded annually and applied to all accounts of the fund
other than the members' savings account and the cash balance
savings account.
"Vestee." A member with five or more eligibility points in a
class of service other than Class A-3 or Class A-4 or Class T-E
or Class T-F in the Public School Employees' Retirement System,
a member with Class G, Class H, Class I, Class J, Class K, Class
L, Class M or Class N service with five or more eligibility
points, or a member with Class A-3 or Class A-4 service with ten
or more eligibility points, or a member with Class CB service,
who has terminated State service and has elected to leave his
total accumulated deductions and cash balance member accumulated
deductions in the fund and to defer receipt of an annuity.
"Voluntary contributions." Contributions made by a
participant to the trust and credited to his individual
investment account in excess of his mandatory participant
contributions, either by salary deductions paid through the
Commonwealth or other employer, or by an eligible rollover or
direct trustee-to-trustee transfer.
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§ 5103. Notice to members and participants.
Notice by publication, including, without being limited to,
newsletters, newspapers, forms, first class mail, letters,
manuals and, to the extent authorized by a policy adopted by the
board, electronically, including, without being limited to, e-
mail or [World Wide Web sites] Internet websites, distributed or
made available to members and participants in a manner
reasonably calculated to give actual notice of [those sections
of the State Employees' Retirement Code] the provisions of this
part that require notice to members or participants shall be
deemed sufficient notice for all purposes.
Section 402. Title 71 is amended by adding a section to
read:
§ 5104. Reference to State Employees' Retirement System.
(a) Construction.--As of the effective date of this section,
unless the context clearly indicates otherwise, any reference to
the State Employees' Retirement System in a statutory provision
other than this part and 24 Pa.C.S. Pt. IV (relating to
retirement for school employees) shall include a reference to
the State Employees' Defined Contribution Plan and any reference
to the State Employees' Retirement Fund shall include a
reference to the State Employees' Defined Contribution Trust.
(b) Agreement.--The agreement of an employer listed in the
definition of "State employee" or any other law to make
contributions to the fund or to enroll its employees as members
in the system shall be deemed to be an agreement to make
contributions to the trust or to enroll its employees in the
plan.
Section 403. Section 5301(a), (b), (c) and (d) of Title 71
are amended and the section is amended by adding subsections to
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read:
§ 5301. Mandatory and optional membership in the system and
participation in the plan.
(a) Mandatory membership.--Membership in the system for all
classes of service other than Class CB shall be mandatory as of
the effective date of employment for all State employees except
the following and shall be determined without regard to current
or former membership in Class CB:
(1) Governor.
(2) Lieutenant Governor.
(3) Members of the General Assembly.
(4) Heads or deputy heads of administrative departments.
(5) Members of any independent administrative board or
commission.
(6) Members of any departmental board or commission.
(7) Members of any advisory board or commission.
(8) Secretary to the Governor.
(9) Budget Secretary.
(10) Legislative employees.
(11) School employees who have elected membership in the
Public School Employees' Retirement System.
(12) School employees who have elected membership in an
independent retirement program approved by the employer,
provided that in no case, except as hereinafter provided,
shall the employer contribute on account of such elected
membership at a rate greater than the employer normal
contribution rate as determined in section 5508(b) (relating
to actuarial cost method). For the fiscal year 1986-1987 an
employer may contribute on account of such elected membership
at a rate which is the greater of 7% or the employer normal
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contribution rate as determined in section 5508(b) and for
the fiscal year 1992-1993 and all fiscal years after that at
a rate of 9.29%.
(13) Persons who have elected to retain membership in
the retirement system of the political subdivision by which
they were employed prior to becoming eligible for membership
in the State Employees' Retirement System.
(14) Persons who are not members of the system and are
employed on a per diem or hourly basis for less than 100 days
or 750 hours in a [12-month period] calendar year.
(15) Employees of the Philadelphia Regional Port
Authority who have elected to retain membership in the
pension plan or retirement system in which they were enrolled
as employees of the predecessor Philadelphia Port Corporation
prior to the creation of the Philadelphia Regional Port
Authority.
(16) Employees of the Juvenile Court Judges' Commission
who, before the effective date of this paragraph, were
transferred from the State System of Higher Education to the
Juvenile Court Judges' Commission as a result of an
interagency transfer of staff approved by the Office of
Administration and who, while employees of the State System
of Higher Education, had elected membership in an independent
retirement program approved by the employer.
(17) State employees who are not DC plan exempt
employees and who were not previously a member of the system
and whose most recent period of State service starts on or
after January 1, 2016.
(18) Elected officers.
(a.1) Mandatory participation in the plan.--
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(1) State employees listed in subsection (a)(17) who are
not listed in subsection (a)(1) through (13) shall be
mandatory participants as of the most recent effective date
of State service except for service performed as a DC plan
exempt employee.
(2) (Reserved).
(3) An elected officer who is a member of the system or
a participant in the plan, shall be a mandatory participant
for his or her service as an elected officer as of the start
of the first term of office beginning after December 31,
2015, notwithstanding that either immediately or at any time
prior to the start of that term he or she was an active
member of the system or an inactive member on leave without
pay.
(4) A State employee who is a mandatory participant in
the plan shall be a participant for all State service until
the termination of State service.
(b) Optional membership in the system.--
(1) The State employees listed in subsection (a)(1)
through [(11)] (10) shall have the right to elect membership
in the system before January 1, 2016; once such election is
exercised, membership shall be effective from the effective
date of employment and shall continue until the termination
of State service[.] or the State employee is required to be a
participant in the plan as an elected officer.
(2) The State employees listed under subsection (a)(11)
shall have the right to elect membership in the system
instead of membership in the Public School Employees'
Retirement System. Once the election to be in the system is
exercised, membership shall continue until the termination of
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State service.
(3) This subsection shall be applied without regard to
current or former membership in Class CB or eligibility for
future active membership in Class CB and shall not authorize
an election of membership in only Class CB.
(b.1) Optional participation in the plan.--
(1) Individuals who become elected officers who are not
mandatory participants in the plan, State employees listed in
subsection (b)(1) who are not DC plan exempt employees and
who do not elect membership in the system before January 1,
2016, and State employees listed in subsection (a)(17) who
also are listed in subsection (a)(1) through (10) and who are
not DC plan exempt employees or who also are employees of the
Pennsylvania State University, the State system of Higher
Education, State-owned educational institutions or community
colleges and who are not members of the system in a class of
service other than Class CB or participants in the plan and
who are not DC plan exempt employees shall have the right to
elect participation in the plan; once such election is
exercised, participation shall be effective as of the date of
election for all State service except for service performed
as a DC plan exempt employee and shall continue until the
termination of State service.
(2) Active members of Class A-3 or Class A-4 whose
compensation in a calendar year exceeds Class A-3 and Class
A-4 compensation limits may be active participants in the
plan as provided in section 5416 (relating to participation
in the plan by members of Class A-3 or Class A-4).
(c) Prohibited membership in the system.--The State
employees listed in subsection (a)(12), (13), (14) [and], (15),
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(17) and (18) shall not have the right to elect membership in
the system. Elected officers who are members of the system prior
to January 1, 2016, shall have any active membership in the
system other than membership in Class CB terminated and shall
not be eligible for active membership in a class of service
other than Class CB after December 31, 2016, for service as an
elected officer. Upon cessation of service as an elected
officer, an individual who remains or becomes a State employee
shall be a mandatory, optional or prohibited member of the
system and participant in the plan as provided in this part.
(c.1) Prohibited participation in the plan.--The State
employees listed in subsection (a)(17) who also are listed in
subsection (a)(13) and (15) shall not be eligible to participate
in the plan. An active member of the system in a class of
service other than Class CB, and other than an active member of
Class A-3 or Class A-4 who has exceeded the Class A-3 and Class
A-4 compensation limit, shall not be eligible to be an active
participant in the plan. A DC plan exempt employee shall not be
eligible to participate in the plan for service performed as a
DC plan exempt employee.
(c.2) Class CB membership.--
(1) An active participant in the plan shall also be an
active member of Class CB, effective with the effective date
of active participation.
(2) An active member of the system in a class of service
other than Class CB may elect to be an active member of Class
CB as provided in section 5306.5 (relating to election to
become a member of Class CB).
(3) A State employee cannot be an active member of Class
CB without also concurrently being an active member of a
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Class of service other than Class CB or an active participant
in the plan.
(d) Return to service.--
(1) An annuitant who first became a member of the system
in a class of service before January 1, 2016, returns to
service as a State employee other than as an elected officer,
or an annuitant who returns to State service as a DC plan
exempt employee after December 31, 2015, shall resume active
membership in the system as of the effective date of
employment, except as otherwise provided in section 5706(a)
(relating to termination of annuities), regardless of the
optional membership category of the position.
(2) An annuitant who never had service other than Class
CB credited in the system, an inactive participant or a
participant receiving distributions who returns to service as
a State employee on or after January 1, 2016, other than as a
DC plan exempt employee shall be an active participant in the
plan as of the effective date of employment, except as
otherwise provided in section 5706(a), regardless of the
optional participation category of the position.
* * *
Section 404. Section 5302(a), (b), (e) and (f) of Title 71
are amended to read:
§ 5302. Credited State service.
(a) Computation of credited service.--In computing credited
State service of a member for the determination of benefits, a
full-time salaried State employee, including any member of the
General Assembly, shall receive credit for service in each
period for which contributions as required are made to the fund,
or for which contributions otherwise required for such service
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were not made to the fund solely by reason of section 5502.1
(relating to waiver of regular member contributions and Social
Security integration member contributions) or any provision of
this part relating to the limitations under IRC § 401(a)(17) or
415(b), or limitations on contributions applicable to a Class A-
3 member or Class A-4 member but in no case shall he receive
more than one year's credit for any 12 consecutive months or 26
consecutive biweekly pay periods. A per diem or hourly State
employee shall receive one year of credited service for each
nonoverlapping period of 12 consecutive months or 26 consecutive
biweekly pay periods in which he is employed and for which
contributions are made to the fund or would have been made to
the fund but for such waiver under section 5502.1 or limitations
under the IRC or limitations on contributions applicable to a
Class A-3 member or Class A-4 member for at least 220 days or
1,650 hours of employment. If the member was employed and
contributions were made to the fund for less than 220 days or
1,650 hours, he shall be credited with a fractional portion of a
year determined by the ratio of the number of days or hours of
service actually rendered to 220 days or 1,650 hours, as the
case may be. A part-time salaried employee shall be credited
with the fractional portion of the year which corresponds to the
number of hours or days of service actually rendered and for
which contributions are or would have been made to the fund
except for the waiver under section 5502.1 or limitations under
the IRC or limitations on contributions applicable to a Class A-
3 member or Class A-4 member in relation to 1,650 hours or 220
days, as the case may be. In no case shall a member who has
elected multiple service receive an aggregate in the two systems
of more than one year of credited service for any 12 consecutive
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months.
(b) Creditable leaves of absence.--
(1) A member on leave without pay who is studying under
a Federal grant approved by the head of his department or who
is engaged up to a maximum of two years of temporary service
with the United States Government, another state or a local
government under the Intergovernmental Personnel Act of 1970
(5 U.S.C. §§ 1304, 3371-3376; 42 U.S.C. §§ 4701-4772) shall
be eligible for credit for such service: Provided, That
contributions are made in accordance with sections 5501
(relating to regular member contributions and cash balance
member contributions for current service), 5501.1 (relating
to shared-risk member contributions [for Class A-3 and Class
A-4 service] and shared-gain adjustments to regular member
contributions for Class A-3 and Class A-4 service), 5505.1
(relating to additional member contributions) and 5507
(relating to contributions to the system by the Commonwealth
and other employers), the member returns from leave without
pay to active State service as a member of the system for a
period of at least one year, and he is not entitled to
retirement benefits for such service under a retirement
system administered by any other governmental agency.
(2) An active member or active participant on paid leave
granted by an employer for purposes of serving as an elected
full-time officer for a Statewide employee organization which
is a collective bargaining representative under the act of
June 24, 1968 (P.L.237, No.111), referred to as the Policemen
and Firemen Collective Bargaining Act, or the act of July 23,
1970 (P.L.563, No.195), known as the Public Employe Relations
Act, and up to 14 full-time business agents appointed by an
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employee organization that represents correction officers
employed at State correctional institutions: Provided, That
for elected full-time officers such leave shall not be for
more than three consecutive terms of the same office and for
up to 14 full-time business agents appointed by an employee
organization that represents correction officers employed at
State correctional institutions no more than three
consecutive terms of the same office; that the employer shall
fully compensate the member or active participant, including,
but not limited to, salary, wages, pension and retirement
contributions and benefits, other benefits and seniority, as
if he were in full-time active service; and that the
Statewide employee organization shall fully reimburse the
employer for all expenses and costs of such paid leave,
including, but not limited to, contributions and payment in
accordance with sections 5404 (relating to participant
contributions), 5501, 5501.1, 5505.1 and 5507, if the
employee organization either directly pays, or reimburses the
Commonwealth or other employer for, contributions made in
accordance with [section] sections 5404, 5406 and 5507.
* * *
(e) Cancellation of credited service.--
(1) All credited service in the system shall be
cancelled if a member withdraws his total accumulated
deductions and cash balance member accumulated deductions,
except that:
(i) a member with Class A-3 or Class A-4 service
credit and one or more other classes of service credit
shall not have his service credit as a member of any
classes of service other than as a member of Class A-3 or
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Class A-4 cancelled when the member receives a lump sum
payment of accumulated deductions resulting from Class A-
3 or Class A-4 service pursuant to section [5705.1]
5705.1(a) (relating to payment of accumulated deductions
resulting from [Class A-3 and Class A-4] more than one
class of service)[.];
(ii) a member with Class CB service credit and one
or more other classes of service credit shall not have
his service credit as a member of Class CB canceled when
the member receives a lump sum payment of total
accumulated deductions resulting from the other classes
of service pursuant to section 5705.1(b) (relating to
payment of accumulated deductions resulting from more
than one class of service).
(2) A partial or total distribution of accumulated total
defined contributions to a participant who is a combined
service member shall not cancel service credited in the
system.
(f) Credit for military service.--A State employee who has
performed USERRA leave may receive credit in the system or
participate in the plan as follows:
(1) For purposes of determining whether a member is
eligible to receive credited service in the system for a
period of active military service, other than active duty
service to meet periodic training requirements, rendered
after August 5, 1991, and that began before the effective
date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73
(relating to military leave of absence) shall apply to all
individuals who were active members of the system when the
period of military service began, even if not defined as an
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employee pursuant to 51 Pa.C.S. § 7301 (relating to
definitions).
(1.1) State employees may not receive service credit in
the system or exercise the options under 51 Pa.C.S. § 7306
(relating to retirement rights) for military leaves that
begin on or after the effective date of this subsection,
except as otherwise provided by this subsection.
(1.2) State employees may not participate in the plan or
exercise the options under 51 Pa.C.S. § 7306 (relating to
retirement rights) for military leaves that begin on or after
the effective date of this paragraph, except as otherwise
provided by this subsection.
(2) A State employee who has performed USERRA leave may
receive credit in the system as provided by this paragraph.
The following shall apply:
(i) A State employee who is reemployed from USERRA
leave as an active member of the system shall be treated
as not having incurred a break in State service by reason
of the USERRA leave and shall be granted eligibility
points as if the State employee had not been on the
USERRA leave. If a State employee who is reemployed from
USERRA leave as an active member of the system
subsequently makes regular member contributions,
additional member contributions, Social Security
integration member contributions, shared-risk member
contributions and any other member contributions in the
amounts and in the time periods required by 38 U.S.C. Ch.
43 (relating to employment and reemployment rights of
members of the uniformed services) and IRC § 414(u) as if
the State employee had continued in State office or
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employment and performed State service and was
compensated during the period of USERRA leave, then the
State employee shall be granted State service credit for
the period of USERRA leave. The State employee shall have
the State employee's benefits, rights and obligations
determined under this part as if the State employee was
an active member who performed creditable State service
during the USERRA leave in the job position that the
State employee would have held had the State employee not
been on USERRA leave and received the compensation on
which the member contributions to receive State service
credit for the USERRA leave were determined.
(ii) For purposes of determining whether a State
employee has made the required employee contributions for
State service credit for USERRA leave, if an employee who
is reemployed from USERRA leave as an active member of
the system terminates State service or dies in State
service before the expiration of the allowed payment
period, then State service credit for the USERRA leave
will be granted as if the required member contributions
were paid the day before termination or death. The amount
of the required member contributions will be treated as
an incomplete payment subject to the provisions of
section 5506 (relating to incomplete payments). Upon a
subsequent return to State service or to school service
as a multiple service member, the required member
contributions treated as incomplete payments shall be
treated as member contributions that were either
withdrawn in a lump sum at termination or paid as a lump
sum pursuant to section 5705(a)(4) or (a.1) (relating to
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member's options), as the case may be.
(iii) A State employee who is reemployed from USERRA
leave as an active member of the system who does not make
the required member contributions or makes only part of
the required member contributions within the allowed
payment period shall not be granted credited service for
the period of USERRA leave for which the required member
contributions were not timely made, shall not be eligible
to subsequently make contributions and shall not be
granted either State service credit or nonstate service
credit for the period of USERRA leave for which the
required member contributions were not timely made.
(2.1) (i) A participant who is reemployed from USERRA
leave shall be treated as not having incurred a break in
State service by reason of the USERRA leave and shall be
granted eligibility points as if the participant had not
been on USERRA leave. If a participant who is reemployed
from USERRA leave subsequently makes mandatory
participant contributions in the amounts and in the time
periods required by 38 U.S.C. Ch. 43 and IRC § 414(u) as
if the participant had continued in his State office or
employment and performed State service and been
compensated during the period of USERRA leave, the
participant's employer shall make the corresponding
employer defined contributions. The employee shall have
his contributions, benefits, rights and obligations
determined under this part as if he were an active
participant who performed State service during the USERRA
leave in the job position that he would have held had he
not been on USERRA leave and received the compensation on
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which the mandatory participant contributions to receive
State service credit for the USERRA leave were
determined.
(ii) A participant who is reemployed from USERRA
leave who does not make the mandatory participant
contributions or makes only part of the mandatory
participant contributions within the allowed payment
period shall not be eligible to make mandatory
participant contributions at a later date for the period
of USERRA leave for which the mandatory participant
contributions were not timely made.
(3) A State employee who is a member of the system and
performs USERRA leave from which the employee could have been
reemployed from USERRA leave had the State employee returned
to State service in the time frames required by 38 U.S.C. Ch.
43 for reemployment rights, but did not do so, shall be able
to receive creditable nonstate service as nonintervening
military service for the period of USERRA leave should the
employee later return to State service as an active member of
the system and is otherwise eligible to purchase the service
as nonintervening military service.
(3.1) A State employee who is a participant in the plan
and performs USERRA leave from which the employee could have
been reemployed from USERRA leave had the employee returned
to State service in the time frames required by 38 U.S.C. Ch.
43 for reemployment rights, but did not do so, shall not be
eligible to make mandatory participant contributions or
voluntary contributions for the period of USERRA leave should
the employee later return to State service and be a
participant in the plan.
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(4) [A State employee] An active member or inactive
member on leave without pay who on or after the effective
date of this subsection is granted a leave of absence under
51 Pa.C.S. § 4102 (relating to leaves of absence for certain
government employees) or a military leave under 51 Pa.C.S.
Ch. 73, that is not USERRA leave shall be able to receive
creditable nonstate service as nonintervening military
service should the employee return to State service as an
active member of the system and is otherwise eligible to
purchase the service as nonintervening military service.
(4.1) An active participant or inactive participant on
leave without pay who on or after the effective date of this
paragraph is granted a leave of absence under 51 Pa.C.S. §
4102 or a military leave under 51 Pa.C.S. Ch. 73 that is not
USERRA leave shall not be able to make mandatory participant
contributions or voluntary contributions during or for the
leave of absence or military leave and shall not have
employer defined contributions made during such leave,
without regard to whether or not the State employee received
salary, wages, stipends, differential wage payments or other
payments from his employer during the leave, notwithstanding
any provision to the contrary under 51 Pa.C.S. § 4102 or 51
Pa.C.S. Ch. 73.
(5) If a member dies while performing USERRA leave, then
the beneficiaries or survivor annuitants, as the case may be,
of the deceased member are entitled to any additional
benefits, including eligibility points, other than benefit
accruals relating to the period of qualified military
service, provided under this part had the member resumed and
then terminated employment on account of death.
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(5.1) If a participant dies while performing USERRA
leave, the beneficiaries or successor payees of the deceased
participant are entitled to any additional benefits, other
than benefit accruals relating to the period of qualified
military service, provided under this part had the
participant resumed and then terminated employment on account
of death.
(6) A State employee who is on a leave of absence from
his duties as a State employee for which 51 Pa.C.S. § 4102
provides that he is not to suffer a loss of pay, time or
efficiency rating shall not be an active member, receive
service credit or make member contributions for the leave of
absence, except as provided for in this part. Notwithstanding
this paragraph, any pay the member receives pursuant to 51
Pa.C.S. § 4102 shall be included in the determination of
final average salary and other calculations in the system
utilizing compensation as if the payments were compensation
under this part.
Section 405. Section 5303(b), (d) and (e) of Title 71 is
amended and the section is amended by adding a subsection to
read:
§ 5303. Retention and reinstatement of service credits.
* * *
(b) Eligibility points for prospective credited service.--
(1) [Every] Subject to the limitations in subsection
(i), an active member of the system or a multiple service
member who is a school employee and a member of the Public
School Employees' Retirement System on or after the effective
date of this part shall receive eligibility points in
accordance with section 5307 for current State service,
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previous State service, or creditable nonstate service upon
compliance with sections 5501 (relating to regular member
contributions and cash balance member contributions for
current service), 5501.1 (relating to shared-risk
contributions [for Class A-3 and Class A-4] and shared-gain
adjustments to regular member contributions for Class A-3 and
Class A-4 service), 5504 (relating to member contributions
for the purchase of credit for previous State service or to
become a full coverage member), 5505 (relating to
contributions for the purchase of credit for creditable
nonstate service), 5505.1 (relating to additional member
contributions) or 5506 (relating to incomplete payments).
Subject to the limitations in subsection (i) and sections
5306.1 (relating to election to become a Class AA member) and
5306.2 (relating to elections by members of the General
Assembly), the class or classes of service in which the
member may be credited for previous State service prior to
the effective date of this part shall be the class or classes
in which he was or could have at any time elected to be
credited for such service, except that a State employee who
first becomes a member of the system on or after January 1,
2011, or on or after December 1, 2010, as a member of the
General Assembly and:
(i) is credited with Class A-3 service for such
membership, shall be credited only with Class A-3 service
for previous State service performed before January 1,
2011, that was not previously credited in the system; or
(ii) is credited with Class A-4 service for such
membership, shall be credited only with Class A-4 service
for previous State service performed before January 1,
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2011, that was not previously credited in the system.
The class of service in which a member shall be credited for
service subsequent to the effective date of this part shall
be determined in accordance with subsection (i) and section
5306 (relating to classes of service).
(1.1) Every active member of the system who elects to
convert county service to State service pursuant to section
5303.1 (relating to election to convert county service to
State service) shall receive eligibility points in accordance
with section 5307 for converted county service upon
compliance with section 5303.1(b). The class or classes of
service in which the member may be credited for converted
county service shall be determined in accordance with section
5306(c).
(1.2) Every member of the system who elects to convert
school service to State service pursuant to section 5303.2
(relating to election to convert school service to State
service) shall receive eligibility points in accordance with
section 5307 for converted school service. The class or
classes of service in which the member may be credited for
converted school service shall be determined in accordance
with section 5306(d).
(1.3) A member of the system who is reemployed from
USERRA leave or who dies while performing USERRA leave shall
receive eligibility points in accordance with section 5307
for the State service that would have been performed had the
member not performed USERRA leave.
(2) A special vestee or person otherwise eligible to be
a special vestee who returns to State service or withdraws
his accumulated deductions pursuant to section 5311 (relating
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to eligibility for refunds) or 5701 (relating to return of
total accumulated deductions and cash balance member
accumulated deductions) shall receive or retain eligibility
points in accordance with paragraph (1) but upon subsequent
termination of State service shall only be eligible to be an
annuitant vestee or inactive member without regard to
previous status as a special vestee and without regard to the
provisions of this part providing for special vestees.
(3) A special vestee or person otherwise eligible to be
a special vestee who becomes an active member of the Public
School Employees' Retirement System and elects multiple
service shall receive or retain eligibility points as
otherwise provided for in this part and 24 Pa.C.S. Pt. IV
(relating to retirement for school employees) but upon
subsequent termination of school service shall only be
eligible to be an annuitant, vestee or inactive member as
otherwise eligible as a multiple service member without
regard to previous status as a special vestee and without
regard to the provisions of this part providing for special
vestees.
* * *
(d) Transfer of certain pension service credit.--
(1) Any person who was an employee of any county in this
Commonwealth on the personal staff of an appellate court
judge prior to September 9, 1985, and who had that employment
transferred to the Commonwealth pursuant to 42 Pa.C.S. § 3703
(relating to local chamber facilities) shall be a member of
the system for all service rendered as an employee of the
Commonwealth on the personal staff of an appellate court
judge subsequent to the date of the transfer unless
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specifically prohibited pursuant to section 5301(c) (relating
to mandatory and optional membership in the system and
participation in the plan). The employee shall be entitled to
have any prior service credit in that county or other
municipal pension plan or retirement system transferred to
the system and deemed to be State service for all purposes
under this part. However, for those employees who were in
continuous county employment which commenced prior to July
22, 1983, section 5505.1 shall not apply. The transfer of
prior service credit to the system shall occur upon the
transfer, by the member, county or other municipal pension
plan or retirement system, to the system of the amount of
accumulated member contributions, pick-up contributions and
credited interest standing in the employee's county or
municipal pension plan or retirement system account as of the
date that these funds are transferred to the system. In the
event that these funds have been refunded to the member, the
transfer of service credit shall occur when the member
transfers an amount equal to either the refund which the
member received from the county or municipal pension plan or
retirement system or the amount due under section 5504, if
less. In the case of a transfer by the member, the transfer
shall occur by December 31, 1987, in order for the member to
receive credit for the prior service. In the case of a
transfer by the county or other municipal pension plan or
retirement system, the transfer shall also occur by December
31, 1987. If the amount transferred to the system by the
member of a county or municipal pension plan or retirement
system is greater than the amount that would have accumulated
in the member's account if the employee had been a member of
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the system, all excess funds shall be returned to the
employee within 90 days of the date on which such funds are
credited to the member's account in the system. Within 60
days of receipt of written notice that an employee has
elected to transfer credits under the provisions of this
subsection, the county or other municipal pension plans or
retirement systems shall be required to transfer to the
system an amount, excluding contributions due under section
5504(a), equal to the liability of the prior service in
accordance with county or other municipal pension plan or
retirement system benefit provisions, multiplied by the ratio
of system actuarial value of assets for active members to the
system actuarial accrued liability for active members. The
Public Employee Retirement Study Commission shall determine
the appropriate amount of employer contributions to be
transferred to the system by the county or other municipal
pension plans or retirement systems.
(2) If the member died prior to the effective date of
this subsection, the personal representative for the estate
of the member may make any transfer or request that the
county or other municipal pension or retirement system make
any transfer necessary to receive credit for the prior
service authorized in paragraph (1). In order to receive
credit for the prior service, the transfer must be made by
December 31, 1987. If the member dies on or after the
effective date of this subsection and before January 1, 1988,
without making the transfer or requesting the transfer
necessary to receive credit for the prior service authorized
in paragraph (1), the personal representative for the estate
of the member may make any transfer or request that the
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county or other municipal pension or retirement system make
any transfer necessary to receive credit for the prior
service. In order to receive credit for the prior service,
the transfer must be made by March 31, 1988. If the member
dies after December 31, 1987, without making the transfer or
requesting the transfer necessary to receive credit for the
prior service authorized in paragraph (1), neither the member
or his estate shall receive credit for the prior service.
(e) Transfer and purchase of certain pension service credit;
Philadelphia Regional Port Authority.--
(1) Any employee of the Philadelphia Regional Port
Authority who becomes a State employee, as defined in section
5102 (relating to definitions), and an active member of the
system in a class of service other than Class CB shall be
eligible to obtain retirement credit for prior uncredited
service with the Philadelphia Port Corporation, a
Pennsylvania not-for-profit corporation ("predecessor
corporation"), provided that the Commonwealth does not incur
any liability for the funding of the annuities attributable
to the prior, uncredited "predecessor corporation" service,
the cost of which shall be determined according to paragraph
(2).
(2) The employee shall be entitled to have any prior
service in the "predecessor corporation" transferred to the
system and deemed to be State service for all purposes under
this part. However, for those employees who were in
continuous employment which commenced prior to July 22, 1983,
the provisions of section 5505.1 shall not apply. The
transfer of prior service credit to the system shall occur
upon the transfer by the member or the "predecessor
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corporation" to the system of the amount of accumulated
member contributions, pick-up contributions and credited
interest standing in the employee's pension plan or
retirement system account as of the date that these funds are
transferred to the system. In the event that these funds have
been refunded to the member, the transfer of service credit
shall occur when the member transfers an amount equal to
either the refund which the member received from the member's
pension plan or retirement system or the amount due under
section 5504, if less. In the case of a transfer by the
member, the transfer shall occur by June 30, 1992, in order
for the member to receive credit for the prior service. In
the case of a transfer by the "predecessor corporation"
pension plan or retirement system, the transfer shall also
occur by June 30, 1992. Notwithstanding the provisions of
section 5504, the Philadelphia Regional Port Authority shall
pay as pick-up contributions the difference between the
amount credited to the member's account and the amount
otherwise due under section 5504. Such additional
contributions paid by the Philadelphia Regional Port
Authority shall not be considered compensation for the
purposes of this part. If the amount transferred to the
system by the member is greater than the amount that would
have accumulated in the member's account if the employee had
been a member of the system, all excess funds shall be
returned to the employee within 90 days of the date on which
such funds are credited to the member's account in the
system. Within 60 days of receipt of written notice that an
employee has elected to transfer credits under the provisions
of this subsection, the pension plan or retirement system in
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which the employee was enrolled prior to the creation of the
Philadelphia Regional Port Authority shall be required to
transfer to the system an amount, excluding contributions due
under section 5504(a), equal to the liability of the prior
service multiplied by the ratio of system actuarial value of
assets for active members to the system actuarial accrued
liability for active members so long as the amount to be
transferred is equal to or less than the total employer
contributions made on behalf of the employee. In the event
that the amount required to be transferred is greater than
the total employer contributions made on behalf of the
employee, the total employer contributions made on behalf of
the employee shall be transferred to the system, and the
Philadelphia Regional Port Authority shall be required to
transfer to the system the additional funds needed to satisfy
the requirements of the calculation in this paragraph. If the
amount required to be transferred is less than the total
employer contributions made on behalf of the employee, the
pension plan or retirement system in which the employee was
enrolled prior to the creation of the Philadelphia Regional
Port Authority may retain the amount not needed for transfer.
(3) If the member dies on or after the effective date of
this subsection and before July 1, 1992, without making the
transfer or requesting the transfer necessary to receive
credit for the prior service authorized in paragraph (2), the
personal representative for the estate of the member may make
any transfer or may request that the Philadelphia Regional
Port Authority make any transfer necessary to receive credit
for the prior service. In order to receive credit for the
prior service, the transfer must be made by September 30,
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1992. If the member dies after June 30, 1992, without making
the transfer or without requesting the transfer necessary to
receive credit for the prior service authorized in paragraph
(2), neither the member nor his estate shall receive credit
for the prior service.
(4) Any person who became employed by the Philadelphia
Regional Port Authority between July 10, 1989, and passage of
this act and who becomes a State employee, as defined in
section 5102, and an active member of the system in a class
of service other than Class CB, shall be eligible to obtain
retirement credit for service from the date of employment
with the Philadelphia Regional Port Authority, provided that
the contributions are made in accordance with sections 5501,
5504, 5505.1 and 5506.
* * *
(i) Ineligibility to purchase previous State service
credit.--A State employee who is active member only of Class CB
or a multiple service member who is an active member only of
Class T-I in the Public School Employees' Retirement System
shall not be eligible to purchase service credit for previous
State service, except to the extent that any other provision of
law requires or allows the crediting of any period of leave to
be purchased as State service after the member returns from the
leave to State service as an active member, and shall not be
eligible to purchase creditable nonstate service. An active
member of Class CB who concurrently is performing service in a
class of service other than Class CB may purchase State service
previously credited in a class of service other than Class CB,
previously uncredited State service if it is eligible to be
credited in a class of service other than Class CB and
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creditable nonstate service as otherwise provided in this part.
Section 406. Sections 5303.2(a) and 5304(a) and (b) of Title
71 are amended to read:
§ 5303.2. Election to convert school service to State service.
(a) Eligibility.--An active member or inactive member on
leave without pay who was an employee transferred from the
Department of Education to the Department of Corrections
pursuant to section 908-B of the act of April 9, 1929 (P.L.177,
No.175), known as The Administrative Code of 1929, and who on
the effective date of that transfer did not participate in an
independent retirement program approved by the Department of
Education under 24 Pa.C.S. § 8301(a)(1) (relating to mandatory
and optional membership) or section 5301(a)(12) (relating to
mandatory and optional membership in the system and
participation in the plan), notwithstanding any other provision
of law or any collective bargaining agreement, arbitration
award, contract or term or conditions of any retirement system
or pension plan, may make a one-time election to convert all
service credited in the Public School Employees' Retirement
System as of June 30, 1999, and transfer to the system all
accumulated member contributions and statutory interest credited
in the members' savings account in the Public School Employees'
Retirement System as of June 30, 1999, plus statutory interest
on that amount credited by the Public School Employees'
Retirement System from July 1, 1999, to the date of transfer to
the system.
* * *
§ 5304. Creditable nonstate service.
(a) Eligibility.--
(1) An active member who first becomes an active member
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before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly and who is an active member of
a class of service other than Class CB, or a multiple service
member who first becomes an active member before January 1,
2011, or before December 1, 2010, as a member of the General
Assembly, and who is a school employee and an active member
of the Public School Employees' Retirement System in a class
of service other than Class T-I shall be eligible for Class A
service credit for creditable nonstate service as set forth
in subsections (b) and (c) except that intervening military
service shall be credited in the class of service for which
the member was eligible at the time of entering into military
service and for which he makes the required contributions to
the fund and except that a multiple service member who is a
school employee and an active member of the Public School
Employees' Retirement System shall not be eligible to
purchase service credit for creditable nonstate service set
forth in subsection (c)(5).
(2) An active member who first becomes an active member
on or after January 1, 2011, and is an active member of a
class of service other than Class CB, or on or after December
1, 2010, as a member of the General Assembly and is an active
member of a class of service other than Class CB, or a
multiple service member who first becomes an active member on
or after January 1, 2011, or on or after December 1, 2010, as
a member of the General Assembly, and who is a school
employee and an active member of the Public School Employees'
Retirement System in a class of service other than Class T-I
shall be eligible for Class A-3 service credit for creditable
nonstate service as set forth in subsections (b) and (c)
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except that intervening military service shall be credited in
the class of service for which the member was eligible at the
time of entering into military service and for which he makes
the required contributions and except that a multiple service
member who is a school employee and an active member of the
Public School Employees' Retirement System shall not be
eligible to purchase service credit for creditable nonstate
service set forth in subsection (c)(5).
(3) Notwithstanding paragraph (2) and subsection (b), an
active member of a class of service other than Class CB who
has service credited in Class CB, shall be eligible for
credit for nonstate service as provided in this part to the
extent that the member would be otherwise eligible based
solely on the member's service in classes other than Class
CB.
* * *
(b) Limitations on eligibility.--An active member who is an
active member of a class of service other than Class CB or a
multiple service member who is a school employee and an active
member of the Public School Employees' Retirement System and is
an active member of a class of service other than Class T-I
shall be eligible as provided under subsection (a) to receive
credit for nonstate service provided that he does not have
credit for such service in the system or in the [school system]
Public School Employees' Retirement System and is not entitled
to receive, eligible to receive now or in the future, or is
receiving retirement benefits for such service in the system or
under a retirement system administered and wholly or partially
paid for by any other governmental agency or by any private
employer, or a retirement program approved by the employer in
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accordance with section 5301(a)(12) (relating to mandatory and
optional membership in the system and participation in the
plan), and further provided, that such service is certified by
the previous employer and contributions are agreed upon and made
in accordance with section 5505 (relating to contributions for
the purchase of credit for creditable nonstate service).
* * *
Section 407. Section 5305(b) of Title 71 is amended and the
section is amended by adding a subsection to read:
§ 5305. Social security integration credits.
* * *
(b) Accrual of subsequent credits.--Any active member who
has social security integration accumulated deductions to his
credit or is receiving a benefit on account of social security
integration credits may accrue one social security integration
credit for each year of service as a State employee on or
subsequent to March 1, 1974 and a fractional credit for a
corresponding fractional year of service provided that
contributions are made to the fund, or would have been made to
the fund but for section 5502.1 (relating to waiver of regular
member contributions and Social Security integration member
contributions) or the limitations under IRC § 401(a)(17) or
415(b) or limitations on contributions to the system applicable
to a Class A-3 member or Class A-4 member, in accordance with
section 5502 (relating to Social Security integration member
contributions), and he:
(1) continues subsequent to March 1, 1974 as an active
member in either the [State or school system;] system in a
class of service other than Class CB or, if a multiple
service member, as an active member in the Public School
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Employees' Retirement System in a class of service other than
Class T-I;
(2) terminates such continuous service in the [State or
school] system or the Public School Employees' Retirement
System and returns to active membership in the [State] system
in a class of service other than Class CB within six months;
or
(3) terminates his status as a vestee or an annuitant
and returns to State service as an active member of the
system in a class of service other than Class CB.
* * *
(e) Class CB service ineligible for credit.--No social
security integration credits shall accrue for any service
performed or credited in the system solely as Class CB service.
Section 408. Section 5305.1 of Title 71 is amended to read:
§ 5305.1. Eligibility for actuarial increase factor.
A person who has credit for a class of service other than
Class CB and is:
(1) an active member;
(2) an inactive member on leave without pay; [or]
(3) a multiple service member who is a school employee
and an active member of the Public School Employees'
Retirement System; or
(4) a combined service employee who is an active
participant or inactive participant on leave without pay;
who terminates State service or school service, as the case may
be, after attaining age 70 and who applies for a superannuation
annuity with an effective date of retirement the day after the
date of termination of State service or school service shall
have that person's maximum single life annuity calculated
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pursuant to section 5702(a.1) (relating to maximum single life
annuity).
Section 409. Section 5306(a), (a.1), (a.2), (a.3) and (b) of
Title 71 are amended and the section is amended by adding
subsections to read:
§ 5306. Classes of service.
(a) Class A and Class A-3 membership.--
(1) A State employee who is a member of Class A on the
effective date of this part or who first becomes a member of
the system subsequent to the effective date of this part and
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, shall be classified as a
Class A member and receive credit for Class A service upon
payment of regular and additional member contributions for
Class A service, provided that the State employee does not
become a member of Class AA pursuant to subsection (a.1) or a
member of Class D-4 pursuant to subsection (a.2)[.] or a
participant in the plan. A State employee who is a member of
Class A on December 31, 2015, shall not be eligible to later
become a member of Class AA or Class D-4.
(2) A State employee who first becomes a member of the
system other than as a member of Class CB on or after January
1, 2011, or on or after December 1, 2010, as a member of the
General Assembly, and, unless a DC plan exempt employee,
before January 1, 2016, shall be classified as a Class A-3
member and receive credit for Class A-3 service upon payment
of regular member contributions and shared-risk member
contributions for Class A-3 service provided that the State
employee does not become a member of Class A-4 pursuant to
subsection (a.3), except that a member of the judiciary shall
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be classified as a member of such other class of service for
which the member of the judiciary is eligible, shall elect
and make regular member contributions[.] and further provided
that the State employee does not become a participant in the
plan or is not eligible to be an optional participant of the
plan under section 5301 (relating to mandatory and optional
membership in the system and participation in the plan).
(a.1) Class AA membership.--
(1) A person who becomes a State employee and an active
member of the system after June 30, 2001, and who first
became an active member before January 1, 2011, or before
December 1, 2010, as a member of the General Assembly, and
who is not a State police officer and not employed in a
position for which a class of service other than Class A or
Class CB is credited or could be elected shall be classified
as a Class AA member and receive credit for Class AA State
service upon payment of regular member contributions for
Class AA service and, subject to the limitations contained in
paragraph (7) and section 5303(i) (relating to retention and
reinstatement of service credits), if previously a member of
Class A or previously employed in a position for which Class
A service could have been earned, shall have all Class A
State service (other than State service performed as a State
police officer or for which a class of service other than
Class A was earned or could have been elected) classified as
Class AA service.
(2) A person who is a State employee on June 30, 2001,
and July 1, 2001, but is not an active member of the system
because membership in the system is optional or prohibited
pursuant to section 5301 (relating to mandatory and optional
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membership in the system and participation in the plan) and
who first becomes an active member after June 30, 2001, and
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, and who is not a State police
officer and not employed in a position for which a class of
service other than Class A or Class CB is credited or could
be elected shall be classified as a Class AA member and
receive credit for Class AA State service upon payment of
regular member contributions for Class AA service and,
subject to the limitations contained in paragraph (7) and
section 5303(i), if previously a member of Class A or
previously employed in a position for which Class A service
could have been earned, shall have all Class A State service
(other than State service performed as a State Police officer
or for which a class of service other than Class A was earned
or could have been elected) classified as Class AA service.
(3) Provided that an election to become a Class AA
member is made pursuant to section 5306.1 (relating to
election to become a Class AA member), a State employee,
other than a State employee who is a State police officer on
or after July 1, 1989, who on June 30, 2001, and July 1,
2001, is:
(i) a member of Class A, other than a member of
Class A who could have elected membership in a Class C,
Class D-3, Class E-1 or Class E-2; or
(ii) an inactive member on a leave without pay from
a position in which the State employee would be a Class A
active member if the employee was not on leave without
pay, other than a position in which the State employee
could elect membership in Class C, Class D-3, Class E-1
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or Class E-2;
shall be classified as a Class AA member and receive credit
for Class AA State service performed after June 30, 2001,
upon payment of regular member contributions for Class AA
service and, subject to the limitations contained in
paragraph (7) and section 5303(i), shall receive Class AA
service credit for all Class A State service, other than
State service performed as a State police officer or as a
State employee in a position for which the member could have
elected membership in Class C, Class D-3, Class E-1 or Class
E-2, performed before July 1, 2001.
(4) Provided that an election to become a Class AA
member is made pursuant to section 5306.1, a former State
employee, other than a former State employee who was a State
police officer on or after July 1, 1989, who on June 30,
2001, and July 1, 2001, is a multiple service member and a
school employee and a member of the Public School Employees'
Retirement System, subject to the limitations contained in
paragraph (7) and section 5303(i), shall receive Class AA
service credit for all Class A State service, other than
State service performed as a State police officer or as a
State employee in a position in which the former State
employee could have elected a class of service other than
Class A, performed before July 1, 2001.
(5) A former State employee who first becomes a member
before January 1, 2011, or before December 1, 2010, as a
member of the General Assembly, other than a former State
employee who was a State police officer on or after July 1,
1989, who is a school employee and who on or after July 1,
2001, becomes a multiple service member, subject to the
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limitations contained in paragraph (7) and section 5303(i),
shall receive Class AA service credit for all Class A State
service other than State service performed as a State
employee in a position in which the former State employee
could have elected a class of service other than Class A.
(6) A State employee who after June 30, 2001, becomes a
State police officer or who is employed in a position in
which the member could elect membership in the system in a
class of service other than Class CB, Class AA or Class D-4
shall retain any Class AA service credited prior to becoming
a State police officer or being so employed but shall be
ineligible to receive Class AA credit thereafter and instead
shall receive Class A credit for service as a member of the
judiciary if such judicial service begins before January 1,
2016, or if he first became a member before January 1, 2011,
or December 1, 2010, as a member of the General Assembly, or
Class A-3 credit for service other than as a member of the
judiciary if the nonjudicial service is as a DC plan exempt
employee or begins before January 1, 2016, and is not service
as an elected officer, and he first became a member on or
after January 1, 2011, or December 1, 2010, as a member of
the General Assembly, unless a class of membership other than
Class A is elected.
(7) (i) State service performed as Class A service
before July 1, 2001, and State service for which Class A
service could have been credited but was not credited
because membership in the system was optional or
prohibited pursuant to section 5301 shall be credited as
Class AA service only upon the completion of all acts
necessary for the State service to be credited as Class A
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service had this subsection not been enacted and upon
payment of required Class AA member contributions as
provided in section 5504 (relating to member
contributions for the purchase of credit for previous
State service or to become a full coverage member).
(ii) A person who is not a State employee or a
school employee on June 30, 2001, and July 1, 2001, and
who has previous State service (except a disability
annuitant who returns to State service after June 30,
2001, upon termination of the disability annuity) shall
not receive Class AA service credit for State service
performed before July 1, 2001, until and unless such
person becomes an active member, or an active member of
the Public School Employees' Retirement System and a
multiple service member, before January 1, 2016, and
earns three eligibility points by performing credited
State service in a class of service other than Class CB
or credited school service in a class of service other
than Class T-I after June 30, 2001.
(iii) Nothing in this paragraph shall be construed
to authorize a member of Class CB or a multiple service
member who is a member of Class T-I in the Public School
Employees' Retirement System to reinstate or purchase
credit for previously credited or uncredited State
service other than as allowed under section 5303(i).
(a.2) Class of membership for members of the General
Assembly.--
(1) A person who:
(i) becomes a member of the General Assembly and an
active member of the system after June 30, 2001, and
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before December 1, 2010; or
(ii) is a member of the General Assembly on July 1,
2001, but is not an active member of the system because
membership in the system is optional pursuant to section
5301 and who becomes an active member after June 30,
2001, and before December 1, 2010;
and who was not a State police officer on or after July 1,
1989, shall be classified as a Class D-4 member and unless he
later becomes a participant in the plan and a member of Class
CB receive credit as a Class D-4 member for all State service
as a member of the system performed as a member of the
General Assembly upon payment of regular member contributions
for Class D-4 service and, subject to the limitations
contained in subsection (a.1)(7) and section 5303(i), if
previously a member of Class A or employed in a position for
which Class A service could have been earned, shall receive
Class AA service credit for all Class A State service, other
than State service performed as a State police officer or for
which a class of service other than Class A or Class D-4 was
or could have been elected or credited.
(2) Provided an election to become a Class D-4 member is
made pursuant to section 5306.2 (relating to elections by
members of the General Assembly), a State employee who was
not a State police officer on or after July 1, 1989, who on
July 1, 2001, is a member of the General Assembly and an
active member of the system and not a member of Class D-3
shall be classified as a Class D-4 member and unless he later
becomes a participant in the plan and a member of Class CB
receive credit as a Class D-4 member for all State service as
a member of the system performed as a member of the General
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Assembly not credited as another class other than Class A
upon payment of regular member contributions for Class D-4
service and, subject to the limitations contained in
paragraph (a.1)(7), shall receive Class AA service credit for
all Class A State service, other than State service performed
as a State police officer or as a State employee in a
position in which the member could have elected a class of
service other than Class A, performed before July 1, 2001.
(3) A member of the General Assembly who after June 30,
2001, becomes a State police officer shall retain any Class
AA service or Class D-4 service credited prior to becoming a
State police officer or being so employed but shall be
ineligible to receive Class AA or Class D-4 credit thereafter
and instead shall receive Class A credit or Class A-3 credit
if he first becomes a member of the system on or after
January 1, 2011, and before January 1, 2016, or as a DC plan
exempt employee.
(4) Notwithstanding the provisions of this subsection,
no service as a member of the General Assembly performed
before December 1, 2010, that is not credited as Class D-4
service on November 30, 2010, shall be credited as Class D-4
service, unless such service was previously credited in the
system as Class D-4 service and the member withdrew his total
accumulated deductions as provided in section 5311 (relating
to eligibility for refunds) or 5701 (relating to return of
total accumulated deductions and cash balance member
accumulated deductions). No service as a member of the
General Assembly performed on or after December 1, 2010,
shall be credited as Class D-4 service unless the member
previously was credited with Class D-4 service credits.
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(a.3) Class A-4 membership.--Provided that an election to
become a Class A-4 member is made pursuant to section 5306.3
(relating to election to become a Class A-4 member), a State
employee who first becomes a member before January 1, 2016, or
is a DC plan exempt employee who otherwise would be a member of
Class A-3 shall be classified as a Class A-4 member and unless
he later becomes a participant in the plan and a member of Class
CB receive Class A-4 credit for all creditable State service
performed as a member of the system after the effective date of
membership in the system, except as a member of the judiciary,
upon payment of regular member contributions and shared-risk
member contributions for Class A-4 service.
(a.4) Class CB membership.--
(1) A State employee who is an active participant in the
plan shall be an active member of Class CB concurrently and
shall receive credit for Class CB service upon payment of
cash balance member contributions for Class CB service.
(2) A State employee who is an active member of a class
of service other than Class CB who elects under section
5306.5 to be an active member of Class CB concurrently shall
receive credit for Class CB service upon payment of cash
balance member contributions concurrently with service in
other classes other than service as a member of Class A-3 or
Class A-4 where Class A-3 or Class A-4 contributions are not
being made due to or any provision of this part relating to
the limitations on contributions to the system applicable to
a Class A-3 member or Class A-4 member who have exceeded the
Class A-3 and Class A-4 compensation limit.
(b) Other class membership.--
(1) A State employee who is a member of a class of
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service other than Class A on the effective date of this part
shall retain his membership in that class until such service
is discontinued or until the member becomes a participant in
the plan; any service as a member of the system thereafter
shall be credited as Class A service, Class AA service [or],
Class D-4 service or Class CB service as provided for in this
section.
(2) Notwithstanding any other provision of this section,
a State employee who is appointed [bail commissioner]
arraignment court magistrate of the Philadelphia Municipal
Court under 42 Pa.C.S. § 1123(a)(5) (relating to jurisdiction
and venue) before January 1, 2016, may, within 30 days of the
effective date of this sentence or within 30 days of his
initial appointment as [a bail commissioner] an arraignment
court magistrate, whichever is later, elect Class E-2 service
credit for service performed as [a bail commissioner] an
arraignment court magistrate. This class of service
multiplier for E-2 service as [a bail commissioner] an
arraignment court magistrate shall be 1.5.
* * *
(e) Ineligibility for active membership and classes of
service.--An individual who is an elected officer or who is a
State employee on January 1, 2016, but is not a member of the
system or who first becomes a State employee on or after January
1, 2016, shall be ineligible for active membership in the system
other than as a member of Class CB if a participant in the plan,
or the several classes of State service other than for service
performed as a DC plan exempt employee as otherwise provided for
under this section. Any such State employee, if eligible, may be
a participant in the plan and a member of Class CB as a result
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of such State service.
Section 410. Sections 5306.1(c), 5306.2(b) and 5306.3(c) and
(d) of Title 71 are amended to read:
§ 5306.1. Election to become a Class AA member.
* * *
(c) Effect of election.--An election to become a Class AA
member shall become effective the later of July 1, 2001, or the
date when the election is filed with the board and shall remain
in effect until the termination of employment or becoming a
participant in the plan. Upon termination and a subsequent
reemployment that occurs before January 1, 2016, the member's
class of service shall be credited in the class of service
otherwise provided for in this part. If the reemployment occurs
on or after January 1, 2016, the State employee's eligibility
for membership in the system or participation in the plan shall
be as provided in this part.
* * *
§ 5306.2. Elections by members of the General Assembly.
* * *
(b) Effect of election.--Membership as a Class D-4 member
shall become effective on July 1, 2001, and shall remain in
effect until the termination of service as a member of the
General Assembly or becoming a participant in the plan. Upon
termination and a subsequent reemployment that occurs before
January 1, 2016, the member's class of service shall be credited
in the class of service otherwise provided for in this part. If
the reemployment occurs on or after January 1, 2016, the State
employee's eligibility for membership in the system or
participation in the plan shall be as provided in this part.
* * *
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§ 5306.3. Election to become a Class A-4 member.
* * *
(c) Effect of election.--An election to become a Class A-4
member shall be irrevocable and shall become effective on the
effective date of membership in the system and shall remain in
effect for all future [creditable] State service creditable in
the system, other than service performed as a member of the
judiciary, but shall not apply to service performed after
December 31, 2015, as an elected officer. Payment of regular
member contributions for Class A-4 State service performed prior
to the election of Class A-4 membership shall be made in a form,
manner and time determined by the board. Upon termination of
State service and a subsequent reemployment, a member who
elected Class A-4 membership shall be credited as a Class A-4
member for creditable State service performed after reemployment
unless the reemployment is as an elected officer and, except as
a member of the judiciary, regardless of termination of
employment, termination of membership by withdrawal of
accumulated deductions or status as an annuitant, vestee or
inactive member after the termination of service.
(d) Effect of failure to make election.--Failure to elect to
become a Class A-4 member within the election period set forth
in subsection (b) shall result in all of the member's State
service, other than service performed as a member of the
judiciary, being credited as Class A-3 service, unless the State
employee is required to be a participant in the plan, and not
subject to further election or crediting as Class A-4 service.
Upon termination and subsequent employment, a member who failed
to elect to become a Class A-4 member shall not be eligible to
make another election to become a Class A-4 member for either
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past or future State service.
Section 411. Title 71 is amended by adding sections to read:
§ 5306.4. (Reserved).
§ 5306.5. Election to become a member of Class CB.
(a) General rule.--An active member or an inactive member on
leave without pay in any class of service other than solely a
member of Class CB may elect to become a member of Class CB in
addition to being a member of their current class of service.
(b) Time for making election.--The election to become a
member of Class CB must be made by the member filing written
notice with the board in a form and manner determined by the
board during periodic enrollment periods established by the
board after the effective date of this section.
(c) Effect of election.--An election under this section
shall be revocable by the member during periodic enrollment
periods established by the board after the effective date of
this section. The Class CB class of service multiplier to
determine cash balance member contributions for a State employee
who makes an election under this section shall be 0.6 unless a
lower class of service multiplier is elected by the member for
their Class CB service. An election to become a Class CB member
and the class of service multiplier elected shall be effective
for all service as an active member after the effective date of
such election and shall remain effective until the election is
revoked or modified by the member during any subsequent
enrollment period.
Section 412. Sections 5307, 5308, 5308.1 introductory
paragraph and (1), 5309, 5309.1 and 5311 of Title 71 are amended
to read:
§ 5307. Eligibility points.
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(a) General rule.--An active member of the system shall
accrue one eligibility point for each year of credited service
as a member of the [State or] system and if a multiple service
member as a member of the Public School Employees' Retirement
System. A member shall accrue an additional two-thirds of an
eligibility point for each year of Class D-3 credited service.
In the case of a fractional part of a year of credited service,
a member shall accrue the corresponding fractional portion of
eligibility points to which the class of service entitles him.
(a.1) USERRA leave.--A member of the system or participant
in the plan who is reemployed from USERRA leave or who dies
while performing USERRA leave shall be granted the eligibility
points that he would have accrued had he continued in his State
office or employment instead of performing USERRA leave. In the
event that a State employee who is reemployed from USERRA leave
makes the member contributions or mandatory participant
contributions to be granted State service credit for the USERRA
leave, no additional eligibility points will be granted.
(b) Transitional rule.--
(1) In determining whether a member who is not a State
employee or school employee on June 30, 2001, and July 1,
2001, and who has previous State service (except a disability
annuitant who returns to State service after June 30, 2001,
upon termination of the disability annuity) has the five
eligibility points required by sections 5102 (relating to
definitions), 5308(b) (relating to eligibility for
annuities), 5309 (relating to eligibility for vesting),
5704(b) (relating to disability annuities) and 5705(a)
(relating to member's options), only eligibility points
earned by performing credited State service as an active
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member of the system, USERRA leave or credited school service
as an active member of the Public School Employees'
Retirement System after June 30, 2001, shall be counted until
such member earns one eligibility point by performing
credited State service or credited school service after June
30, 2001, at which time all eligibility points as determined
pursuant to subsection (a) shall be counted.
(2) Any member to whom paragraph (1) applies shall be
considered to have satisfied any requirement for five
eligibility points contained in this part if the member:
(i) has ten or more eligibility points as determined
pursuant to subsection (a); or
(ii) has Class G, Class H, Class I, Class J, Class
L, Class M or Class N service and has eight or more
eligibility points as determined pursuant to subsection
(a).
(c) Class CB concurrent service.--An active member who is
earning Class CB service concurrently with service in another
class of service shall receive service credit and eligibility
points only for the other class of service. No additional
service credit or eligibility points will be earned for the
concurrent Class CB service.
§ 5308. Eligibility for annuities.
(a) Superannuation annuity.--Attainment of superannuation
age by an active member [or], an inactive member on leave
without pay or combined service employee who is an active
participant or inactive participant on leave without pay with
three or more eligibility points other than eligibility points
resulting from nonstate service or nonschool service shall
entitle him to receive a superannuation annuity upon termination
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of State service and compliance with section 5907(f) (relating
to rights and duties of State employees [and], members and
participants).
(b) Withdrawal annuity.--
(1) Any vestee or any active member [or], inactive
member on leave without pay or combined service employee who
is an active participant or inactive participant on leave
without pay who terminates State service having five or more
eligibility points and who does not have Class A-3 or Class
A-4 service credit or, if a multiple service member, Class T-
E or Class T-F service credit in the Public School Employees'
Retirement System, or who has Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service and
terminates State service having five or more eligibility
points, upon compliance with section 5907(f), (g) or (h)
shall be entitled to receive an annuity.
(2) Any vestee, active member [or], inactive member on
leave without pay or combined service employee who is an
active participant or inactive participant on leave without
pay who has Class A-3 or Class A-4 service credit or, if a
multiple service member, Class T-E or Class T-F service
credit in the Public School Employees' Retirement System who
terminates State service having ten or more eligibility
points, upon compliance with section 5907(f), (g) or (h),
shall be entitled to receive an annuity.
(3) Any vestee, active member [or], inactive member on
leave without pay or combined service employee who is an
active participant or inactive participant on leave without
pay who has either Class A-3 or Class A-4 service credit or,
if a multiple service member, Class T-E or Class T-F service
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credit in the Public School Employees' Retirement System and
also has service credited in the system in one or more other
classes of service who has five or more, but fewer than ten,
eligibility points, upon compliance with section 5907(f), (g)
or (h), shall be eligible to receive an annuity calculated on
his service credited in classes of service other than Class
A-3 or Class A-4, provided that the member has five or more
eligibility points resulting from service in classes other
than Class A-3 or Class A-4 or Class T-E or Class T-F service
in the Public School Employees' Retirement System.
(c) Disability annuity.--An active member or inactive member
on leave without pay who has five or more eligibility points
other than eligibility points resulting from membership in the
Public School Employees' Retirement System or any active member
or inactive member on leave without pay who is an officer of the
Pennsylvania State Police or an enforcement officer shall, upon
compliance with section 5907(k), be entitled to a disability
annuity if he becomes mentally or physically incapable of
continuing to perform the duties for which he is employed and
qualifies in accordance with the provisions of section 5905(c)
(1) (relating to duties of the board regarding applications and
elections of members and participants)[.]; provided, that no
disability annuity shall be paid to a combined service employee
who is an active participant.
(d) Eligibility of employees with Class CB service for
annuities and benefits.--Subject to the limitation on
eligibility points for a member who is performing concurrent
service in Class CB and in another class of service under
section 5307 (relating to eligibility points), eligibility
points earned as a result of credited service in Class CB shall
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be included in determining if a member who has Class CB service
credit and service credit in one or more other classes of
service is eligible for an annuity under this section or
eligibility for other rights and benefits under this part,
unless provided otherwise. Eligibility points earned by a
multiple service member as a result of Class T-I credited
service in the Public School Employees' Retirement System
similarly shall be included if eligibility points for school
service in the Public School Employees 'Retirement System are
used to determine eligibility. Nothing in this subsection amends
or waives any other requirement to be eligible for an annuity or
other benefit. Upon termination of State service and compliance
with section 5907(f) a member with Class CB service credit is
eligible for an annuity as calculated under section 5702(a)(7)
(relating to maximum single life annuity).
(e) Required beginning date.--Members eligible for an
annuity must commence receiving the annuity by the member's
required beginning date.
§ 5308.1. Eligibility for special early retirement.
Notwithstanding any provisions of this title to the contrary,
the following special early retirement provisions shall be
applicable to specified eligible members [as follows]:
(1) During the period of July 1, 1985, to September 30,
1991, an active member who has attained the age of at least
53 years and has accrued at least 30 eligibility points shall
be entitled, upon termination of State service and compliance
with section 5907(f) (relating to rights and duties of State
employees [and], members and participants), to receive a
maximum single life annuity calculated under section 5702
(relating to maximum single life annuity) without a reduction
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by virtue of an effective date of retirement which is under
the superannuation age.
* * *
§ 5309. Eligibility for vesting.
Any member who:
(1) Does not have Class A-3 [or], Class A-4 or Class CB
service credit or, if a multiple service member, Class T-E or
Class T-F service credit in the Public School Employees'
Retirement System and terminates State service, or if a
multiple service member and an active member of the Public
School Employees' Retirement System terminates school
service, with five or more eligibility points, or any member
with Class G, Class H, Class I, Class J, Class K, Class L,
Class M or Class N service with five or more eligibility
points, shall be eligible until [attainment of superannuation
age] required beginning date to vest his retirement benefits.
(2) Has only Class A-3 or Class A-4 service credit [or]
and, if a multiple service member, only Class T-E or Class T-
F service credit in the Public School Employees' Retirement
System and terminates State service, or if a multiple service
member and an active member of the Public School Employees'
Retirement System terminates school service, with ten or more
eligibility points shall be eligible until [attainment of
superannuation age] his required beginning date to vest his
retirement benefits.
(3) Has either Class A-3 or Class A-4 service credit
[or] and, if a multiple service member, Class T-E or Class T-
F service credit in the Public School Employees' Retirement
System, also has service credited in the system in one or
more other classes of service other than Class CB and has
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five or more, but fewer than ten, eligibility points and
terminates State service, or if a multiple service member and
an active member of the Public School Employees' Retirement
System terminates school service, shall be eligible until
[the attainment of superannuation age] his required beginning
date to vest his retirement benefits calculated on his
service credited in classes of service other than Class A-3
or Class A-4 and to be credited with statutory interest on
total accumulated deductions, regardless of whether or not
any part of his accumulated deductions are a result of Class
A-3 or Class A-4 service credit.
(4) Has only Class CB service credit and terminates
State service shall be eligible to vest his retirement
benefits based on Class CB service except that a member who
has a small cash balance account subject to distribution as
provided in section 5709(d) (relating to payment of benefits)
shall not be permitted to vest until his required beginning
date unless otherwise required under the IRC.
(5) Has Class CB service credit and service credited in
one or more other classes or service and terminates State
service, or if a multiple service member and an active member
of the Public School Employees' Retirement System terminates
school service, shall be eligible to vest his retirement
benefits based on Class CB service and, if he has five or
more eligibility points, to vest his retirement benefits on
all other classes of service other than Class A-3 or Class A-
4 until the attainment of the applicable superannuation age
and if he has 10 or more eligibility points to vest his
retirement benefits on all classes of service until
superannuation age. Any such member shall be credited with
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statutory interest on his total accumulated deductions and
treasury bond interest, but not excess interest on his total
cash balance accumulated deductions until the effective date
of retirement.
(6) A member with more than one class of credited
service who vests his retirement benefits in any class of
service may not receive distributions from other classes of
service until his effective date of retirement, regardless of
whether his benefits resulting from such other classes of
service are vested or he is eligible to receive an annuity. A
member with service credited in more than one class of
service may not separately vest those benefits and receive
annuities from different classes of service with different
effective dates.
§ 5309.1. Eligibility for special vesting.
Any employee of The Pennsylvania State University who is a
member of the system with five or more but less than ten
eligibility points and who has a date of termination of service
from The Pennsylvania State University of June 30, 1997, because
of the transfer of his job position or duties to a controlled
organization of the Penn State Geisinger Health System or
because of the elimination of his job position or duties due to
the transfer of other job positions or duties to a controlled
organization of the Penn State Geisinger Health System shall be
eligible until the attainment of superannuation age or his
required beginning date to vest his retirement benefits
according to the terms and conditions of this part.
§ 5311. Eligibility for refunds.
(a) Total accumulated deductions.--Any active member,
regardless of eligibility for benefits, may elect to receive his
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total accumulated deductions and his cash balance member
accumulated deductions by the required beginning date upon
termination of service in lieu of any benefit from the system to
which he is entitled.
(b) Social security integration accumulated deductions.--Any
active member at any time may elect to receive his social
security integration accumulated deductions and thereby to have
all his social security integration credits and benefits
therefor cancelled, and shall not be entitled to accrue any
further social security integration credits or benefits; except
that a disability annuitant who returns to State service in a
class of service other than Class CB shall have the right to
reinstate his social security integration accumulated deductions
and credits therefor.
Section 413. Title 71 is amended by adding a chapter to
read:
CHAPTER 54
STATE EMPLOYEES' DEFINED CONTRIBUTION PLAN
Sec.
5401. Establishment.
5402. Plan document.
5403. Individual investment accounts.
5404. Participant contributions.
5405. Mandatory pickup participant contributions.
5406. Employer defined contributions.
5407. Eligibility for benefits.
5408. Death benefits.
5409. Vesting.
5410. Termination of distributions.
5411. Agreements with financial institutions and other
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organizations.
5412. Powers and duties of board.
5413. Responsibility for investment loss.
5414. Investments based on participants' investment allocation
choices.
5415. Expenses.
5416. Participation in the plan by members of Class A-3 or
Class A-4.
5417. Tax qualification.
§ 5401. Establishment.
(a) State Employees' Defined Contribution Plan.--The State
Employees' Defined Contribution Plan is established. The board
shall administer and manage the plan which shall be a defined
contribution plan exclusively for the benefit of those State
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
board shall determine the terms and provisions of the plan not
inconsistent with this part, the IRC or other applicable law and
shall provide for the plan's administration.
(b) State Employees' Defined Contribution Trust.--The State
Employees' Defined Contribution Trust is established as part of
the plan. The trust shall be comprised of the individual
investment accounts and all assets and money in those accounts.
The members of the board shall be the trustees of the trust,
which shall be administered exclusively for the benefit of those
State employees who participate in the plan and their
beneficiaries within the meaning of and in conformity with IRC §
401(a). The board shall determine the terms and provisions of
the trust not inconsistent with this part, IRC or other
applicable law and shall provide for the investment and
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administration of the trust.
(c) Assets held in trust.--All assets and income in the plan
that have been or shall be withheld or contributed by the
participants, the Commonwealth and other employers in accordance
with this part shall be held in trust in any funding vehicle
permitted by the applicable provisions of the IRC for the
exclusive benefit of the participants and their beneficiaries
until such time as the funds are distributed to the participants
or their beneficiaries in accordance with the terms of the plan
document. The assets of the plan held in trust for the exclusive
benefit of the participants and their beneficiaries may be used
for the payment of the fees, costs and expenses related to the
administration and investment of the plan and the trust.
(d) Name for transacting business.--All of the business of
the plan shall be transacted, the trust invested, all
requisitions for money drawn and payments made and all of its
cash and securities and other property shall be held by the name
of the "State Employees' Defined Contribution Plan."
Notwithstanding any other law to the contrary, the board may
establish a nominee registration procedure for the purpose of
registering securities in order to facilitate the purchase, sale
or other disposition of securities under the provisions of this
part.
§ 5402. Plan document.
The board shall set forth the terms and provisions of the
plan and trust in a document containing the terms and conditions
of the plan and in a trust declaration that shall be published
in the Pennsylvania Bulletin. The creation of the document
containing the terms and conditions of the plan and the trust
declaration and the establishment of the terms and provisions of
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the plan and the trust need not be promulgated by regulation or
formal rulemaking and shall not be subject to the act of July
31, 1968 (P.L.769, No.240), referred to as the Commonwealth
Documents Law. A reference in this part or other law to the plan
shall include the plan document unless the context clearly
indicates otherwise.
§ 5403. Individual investment accounts.
The board shall establish in the trust an individual
investment account for each participant in the plan. All
contributions by a participant or an employer for or on behalf
of a participant shall be credited to the participant's
individual investment account, together with all interest and
investment earnings and losses. Investment and administrative
fees, costs and expenses shall be charged to the participants'
individual investment accounts. Employer defined contributions
shall be recorded and accounted for separately from participant
contributions, but all interest, investment earnings and losses,
and investment and administrative fees, costs and expenses shall
be allocated proportionately.
§ 5404. Participant contributions.
(a) Mandatory contributions.--A participant shall make
mandatory participant contributions through payroll deductions
to the participant's individual investment account equal to
3.00% of compensation for current State service. The employer
shall cause those contributions for current service to be made
and deducted from each payroll or on such schedule as
established by the board.
(b) Voluntary contributions.--A participant may make
voluntary contributions through payroll deductions or through
direct trustee-to-trustee transfers or through transfers of
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money received in an eligible rollover into the trust to the
extent allowed by IRC § 402. The rollovers shall be made in a
form and manner as determined by the board, shall be credited to
the participant's individual investment account and shall be
separately accounted for by the board.
(c) Prohibited contributions.--No contributions may be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any participant contributions
in excess of the limitations and investment earnings on those
contributions shall be refunded to the participant by the board.
§ 5405. Mandatory pickup participant contributions.
(a) Treatment for purposes of IRC § 414(h).--The
contributions to the trust required to be made under section
5404 (relating to participant contributions) with respect to
current State service rendered by an active participant shall be
picked up by the employer and shall be treated as the employer's
contribution for purposes of IRC § 414(h). An employer employing
a participant in the plan shall pick up the required mandatory
participant contributions by a reduction in the compensation of
the participant.
(b) Treatment for other purposes.--For all other purposes
under this part and otherwise, such mandatory pickup participant
contributions shall be treated as contributions made by a
participant in the same manner and to the same extent as if the
contributions were made directly by the participant and not
picked up.
§ 5406. Employer defined contributions.
(a) Contributions for current service.--The Commonwealth or
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other employer of an active participant shall make employer
defined contributions for current service of an active
participant that shall be credited to the active participant's
individual investment account. Employer defined contributions
shall be recorded and accounted for separately from participant
contributions.
(b) Contributions resulting from participants reemployed
from USERRA leave.--When a State employee reemployed from USERRA
leave makes the mandatory participant contributions permitted to
be made for the USERRA leave, the Commonwealth or other employer
by whom the State employee is employed at the time the
participant contributions are made shall make whatever defined
contributions would have been made under this section had the
employee making the participant contributions continued to be
employed in the participant's State office or position instead
of performing USERRA leave. The employer defined contributions
shall be placed in the participant's individual investment
account as otherwise provided by this part.
(c) Limitations on contributions.--No contributions may be
allowed that would cause a violation of the limitations related
to contributions applicable to governmental plans contained in
IRC § 415 or in other provisions of law. In the event that any
disallowed contributions are made, any employer defined
contributions in excess of the limitations and investment
earnings on the contributions shall be refunded to the employer
by the board.
§ 5407. Eligibility for benefits.
(a) Termination of service.--A participant who terminates
State service shall be eligible to withdraw the vested
accumulated total defined contributions standing to the
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participant's credit in the participant's individual investment
account or a lesser amount as the participant may request.
Payment shall be made in a lump sum unless the board has
established other forms of distribution in the plan document,
subject to the provisions of subsection (g). A participant who
withdraws his vested accumulated total defined contributions
shall no longer be a participant in the plan, notwithstanding
that the former State employee may continue to be a member of
the system or may have contracted to receive an annuity or other
form of payment from a provider retained by the board for such
purposes.
(b) Required distributions.--All payments under this section
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9). The board shall take any action and make any
distributions it may determine are necessary to comply with
those requirements.
(c) (Reserved).
(d) Prohibited distributions.--A State employee must be
terminated from all positions that result in either membership
in the system or participation in the plan to be eligible to
receive a distribution.
(e) Loans.--Loans or other distributions, including hardship
or unforeseeable emergency distributions, from the plan to State
employees who have not terminated State service are not
permitted, except as required by law.
(f) Small individual investment accounts.--
(1) A participant who terminates State service and whose
vested accumulated total defined contributions are below the
threshold established by law as of the date of termination of
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service may be paid the vested accumulated total defined
contributions in a lump sum as provided in IRC § 401(a)(31).
(2) The board may also provide in the plan document
that, notwithstanding subsection (g), a participant whose
vested accumulated employer defined contributions are below
the thresholds established by the board may receive those
distributions without the obligation to purchase an annuity.
The threshold may be established as a dollar amount, an
annuity amount, in some other form individually or in
combination as the board determines.
(g) Requirement to purchase annuity.--Except as prohibited
by the IRC or as otherwise provided in this part, a participant
who is eligible and elects to receive a distribution of vested
accumulated employer defined contributions shall be required to
purchase an annuity with that distribution from an annuity
provider contracted by the board under section 5409(c) (relating
to death benefits) and under such conditions as provided in the
plan document. The conditions may include that the board is
authorized to make the distribution directly to the annuity
provider.
§ 5408. Death benefits.
(a) General rule.--In the event of the death of an active
participant or inactive participant, the board shall pay to the
participant's beneficiary the vested balance in the
participant's individual investment account in a lump sum or in
such other manner as the board may establish in the plan
document.
(b) Death of participant receiving distributions.--In the
event of the death of a participant receiving distributions, the
board shall pay to the participant's beneficiary the vested
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balance in the participant's individual investment account in a
lump sum or in such other manner as the board may establish in
the plan document or, if the board has established alternative
methods of distribution in the plan document under which the
participant was receiving distributions, to the participant's
beneficiary or successor payee, as the case may be, as provided
in the plan document.
(c) Contracts.--The board may contract with financial
institutions, insurance companies or other types of third-party
providers to allow participants who receive a lump sum
distribution to receive payments and death benefits in a form
and manner as provided by the contract.
§ 5409. Vesting.
(a) Participant and voluntary contributions.--Subject to the
forfeiture and attachment provisions of section 5953 (relating
to taxation, attachment and assignment of funds) or otherwise as
provided by law, a participant shall be immediately vested with
respect to all mandatory participant contributions and voluntary
contributions paid by or on behalf of the participant to the
trust in addition to interest and investment gains or losses on
the participant contributions but not including investment fees
and administrative charges.
(b) Employer defined contributions.--
(1) Subject to the forfeiture and attachment provisions
of section 5953 or otherwise as provided by law, a
participant shall be vested with respect to all employer
defined contributions paid to the participant's individual
investment account in the trust in addition to interest and
investment gains and losses on the employer defined
contributions but not including investment fees and
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administrative charges according to the following schedule:
(i) Until such time as a participant has earned two
eligibility points as a member of the system, 0%.
(ii) Upon the attainment of two eligibility points
as a member of the system, 50%.
(iii) Upon the attainment of three eligibility
points as a member of the system, 75%.
(iv) At and after the attainment of four eligibility
points as a member of the system, 100%.
(2) For purposes of this subsection, all eligibility
points credited to a member of the system in any class of
service shall be used for determining vested status in the
plan even if the employee was not a participant in the plan
at the time the eligibility points were earned.
(3) Nonvested employer defined contributions and the
interest and investment gains and losses on the nonvested
employer defined contributions that are forfeited when a
participant terminates State service before accruing four
eligibility points are credited to the participant's most
recent employer's future obligation assessed under section
5509 (relating to appropriations and assessments by the
Commonwealth).
(c) USERRA leave and eligibility points.--A participant in
the plan who is reemployed from USERRA leave or who dies while
performing USERRA leave shall receive eligibility points under
this section for the State service that would have been
performed had the member not performed USERRA leave.
§ 5410. Termination of distributions.
(a) Return to State service.--
(1) A participant receiving distributions or an inactive
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participant who returns to State service shall cease
receiving distributions and shall not be eligible to receive
distributions until the participant subsequently terminates
State service, without regard to whether the participant is a
mandatory, optional or prohibited member of the system or
participant in the plan.
(2) This subsection shall not apply to a distribution of
accumulated employer defined contributions or other
distributions that the participant has received and used to
purchase an annuity from a provider contracted by the board.
(b) Return of benefits paid during USERRA leave.--
(1) If a former State employee is reemployed from USERRA
leave and received any payments or annuity from the plan
during the USERRA leave, the employee shall return to the
board the amount so received plus interest as provided in the
plan document.
(2) The amount payable shall be certified in each case
by the board in accordance with methods approved by the
actuary and shall be paid in a lump sum within 30 days or in
the case of an active participant may be amortized with
interest as provided in the plan document through salary
deductions to the trust in amounts agreed upon by the active
participant and the board, but for not longer than a period
that starts with the date of reemployment and continues for
up to three times the length of the active participant's
immediate past period of USERRA leave. The repayment period
shall not exceed five years.
§ 5411. Agreements with financial institutions and other
organizations.
(a) Written agreement.--To establish and administer the
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plan, the board shall enter into a written agreement with one or
more financial institutions or other organizations to administer
the plan and the investment of funds held under the plan. The
administrator shall be selected in accordance with the
following:
(1) The board shall solicit proposals from financial
institutions and other organizations.
(2) The board shall publish the solicitation in the
Pennsylvania Bulletin.
(3) Proposals received shall be evaluated based on
specific criteria adopted by the board. The criteria shall
include experience, customer service history and other
criteria.
(b) Rebid.--A contract to administer the plan under
subsection (a) shall be rebid at least once every ten years.
§ 5412. Powers and duties of board.
The board shall have the following powers and duties to
establish the plan and trust and administer the provisions of
this chapter and part:
(1) The board may commingle or pool assets with the
assets of other persons or entities.
(2) The board shall pay all administrative fees, costs
and expenses of managing, investing and administering the
plan, the trust and the individual investment accounts from
the balance of such individual investment accounts except as
otherwise provided in this part or as the General Assembly
otherwise provides by appropriations from the General Fund.
(3) The board may establish investment guidelines and
limits on the types of investments that participants may
make, consistent with the board's fiduciary obligations.
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(4) The board shall have the power to change the terms
of the plan as may be necessary to maintain the tax-qualified
status of the plan.
(5) The board may establish a process for election to
participate in the plan by those State employees eligible to
do so for whom participation is not mandatory.
(6) The board may perform an annual or more frequent
review of any qualified fund manager for the purpose of
assuring that the fund manager continues to meet all
standards and criteria established.
(7) The board may allow for eligible rollovers and
direct trustee-to-trustee transfers into the trust from
qualified plans of other employers, regardless of whether the
employers are a private employer or a public employer.
(8) The board may allow an inactive participant to
maintain the participant's individual investment account
within the plan.
(9) The board shall administer or ensure the
administration of the plan in compliance with the
qualifications and other rules of the IRC.
(10) The board may establish procedures to provide for
the lawful payment of benefits.
(11) The board shall determine what constitutes a
termination of State service.
(12) The board may establish procedures for
distributions of small accounts as required or permitted by
the IRC.
(13) The board may establish procedures in the plan
document or to promulgate rules and regulations as it deems
necessary for the administration and management of the plan,
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including, but not limited to, establishing:
(i) Procedures for eligible participants to change
voluntary contribution amounts or their investment
choices on a periodic basis or make other elections
regarding their participation in the plan.
(ii) Procedures for deducting mandatory participant
contributions and voluntary contributions from a
participant's compensation.
(iii) Procedures for rollovers and trustee-to-
trustee transfers allowed under the IRC and permitted as
part of the plan.
(iv) Standards and criteria for providing not less
than 10 options in accordance with three or more
providers of investment options to eligible individuals
regarding investments of amounts deferred under the plan.
The standards and criteria must provide for a variety of
investment options and shall be reviewed in accordance
with criteria established by the board. One of the
available options must serve as the default option for
participants who do not make a timely election and, to
the extent commercially available, one option must have
an annuity.
(v) Standards and criteria for disclosing to the
participants the anticipated and actual income
attributable to amounts invested, property rights and all
fees, costs and expenses to be made against amounts
deferred to cover the fees, costs and expenses of
administering and managing the plan or trust.
(vi) Procedures, standards and criteria for the
making of distributions from the plan upon termination
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from employment or death or in other circumstances
consistent with the purpose of the plan.
(14) The board may waive any reporting or information
requirement contained in this part if the board determines
that the information is not needed for the administration of
the plan.
(15) The board may contract any services and duties in
lieu of staff, except final adjudications and as prohibited
by law. Any duties or responsibilities of the board not
required by law to be performed by the board can be delegated
to a third-party provider subject to appeal to the board.
(16) The board may provide that any duties of the
employer or information provided by the participant to the
employer be performed or received directly by the board.
(17) The board shall ensure that participants are
provided with educational materials about investment options
and choices.
§ 5413. Responsibility for investment loss.
The board, the Commonwealth, an employer or other political
subdivision shall not be responsible for any investment loss
incurred under the plan or for the failure of any investment to
earn any specific or expected return or to earn as much as any
other investment opportunity, whether or not the other
opportunity was offered to participants in the plan.
§ 5414. Investments based on participant's investment
allocation choices.
(a) Investment by participant.--All contributions, interest
and investment earnings shall be invested based on a
participant's investment allocation choices. All investment
allocation choices shall be credited proportionally between
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participant contributions and employer-defined contributions.
Each participant shall be credited individually with the amount
of contributions, interest and investment earnings.
(b) Investment of contributions made by entities other than
the Commonwealth.--Investment of contributions by any
corporation, institution, insurance company, custodial bank or
other entity that the board has approved shall not be
unreasonably delayed and in no case may the investment of
contributions be delayed more than 30 days from the date of
payroll deduction or the date voluntary contributions are made
to the date that funds are invested. Any interest earned on the
funds pending investment shall be allocated to the Commonwealth
and credited to the individual investment accounts of
participants who re then participating in the plan unless
notwithstanding sections 5412(2) (relating to powers and duties
of board), 5415 (relating to expenses) and 5902(c) (relating to
administrative duties of the board), the interest is used to
defray administrative costs and fees that would otherwise be
required to be borne by participants who are then participating
in the plan.
§ 5415. Expenses.
All fees, costs and expenses of administering the plan and
the trust and investing the assets of the trust shall be borne
by the participants and paid from assessments against the
balances of the individual investment accounts as established by
the board, except that for fiscal years ending before July 1,
2016, the fees, costs and expenses of establishing and
administering the plan and the trust shall be paid by the
Commonwealth through annual appropriations from the General
Fund, made on the basis of estimates from the board.
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§ 5416. Participation in the plan by members of Class A-3 or
Class A-4.
(a) General rule.--For any calendar year in which the
compensation of a member of Class A-3 or Class A-4 exceeds the
Class A-3 and Class A-4 compensation limit, the member shall
cease making contributions to the fund and, unless the plan
provides otherwise, shall become an active participant of the
plan and a member of Class CB unless the member elects not to be
a participant in the plan and a member of Class CB.
(b) Time for making the election.--An eligible member of
Class a-3 or Class A-4 may elect not to become a participant in
the plan and a member of Class CB by filing a written notice
with the board in a form and manner determined by the board
during periodic election periods established by the board or the
plan after the effective date of this section.
(c) Effect of election.--An election not to become a
participant and a member of Class CB shall be effective until
the end of the calendar year for which the election is made,
unless the plan provides otherwise. The effective date of active
participation in the plan shall be as established in the plan. A
state employee who does not elect out of participation in the
plan and membership in Class CB shall make mandatory participant
contributions to the plan, and unless the State employee elects
otherwise, will make voluntary contributions of 3.25%, if a
Class A-3 member, or voluntary contributions of 6.3%, if a Class
A-4 member. The Class CB class of service multiplier to
determine cash balance member contributions for a member of
Class CB who elects to be a participant in the plan shall be 0.6
while an active participant of the plan. A State employee cannot
elect to not be an active participant and remain an active
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member of Class CB and cannot elect to not be an active member
of Class CB while remaining an active participant in the plan.
§ 5417. Tax qualification.
(a) Required distributions.--All payments under this chapter
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a).
(b) Limitations.--The following shall apply:
(1) (i) Except as provided under subparagraph (ii) and
notwithstanding a provision of this part, a contribution
or benefit related to the plan may not exceed any
limitation under IRC § 415 with respect to governmental
plans which is in effect on the date the contribution or
benefit payment takes effect.
(ii) An increase in a limitation under IRC § 415
shall apply to all participants on and after the
effective date of this section.
(iii) For the purposes of this paragraph, the term
"government plans" shall have the same meaning as the
term has in IRC § 414(d).
(2) (i) Except as provided under subparagraph (ii), an
amendment of this part on or after the effective date of
this section that increases contributions or benefits for
active participants, inactive participants or
participants receiving distributions shall not be deemed
to provide for a contribution or benefit in excess of any
limitation, adjusted on or after the effective date of
this section, under IRC § 415 unless specifically
provided by legislation.
(ii) Notwithstanding subparagraph (i), an increase
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in benefits on or after the effective date of this
section for a participant in the plan shall be authorized
and apply to the fullest extent allowed by law.
Section 414. Sections 5501 and 5501.1 of Title 71 are
amended to read:
§ 5501. Regular member contributions and cash balance member
contributions for current service.
Regular member contributions or cash balance member
contributions shall be made to the fund on behalf of each active
member for current service except for any period of current
service in which the making of such contributions has ceased
solely by reason of section 5502.1 (relating to waiver of
regular member contributions and Social Security integration
member contributions) or any provision of this part relating to
the limitations under IRC § 401(a)(17) or [415(b)] 415 or
limitations on contributions to the system applicable to a Class
A-3 member or Class A-4 member.
§ 5501.1. Shared-risk member contributions [for Class A-3 and
Class A-4 service] and shared-gain adjustments to
regular member contributions for Class A-3 and Class
A-4 service.
(a) General.--Shared-risk member contributions shall be made
to the fund on behalf of each member of Class A-3 or Class A-4
for current service credited as Class A-3 or Class A-4 as
provided under this section, except for any period of current
service in which the making of the contributions has ceased
solely by reason of any provision of this part relating to the
limitations under IRC § 401(a)(17) or 415. Shared-risk member
contributions shall be credited to the members' savings account.
A shared-gain adjustment to regular member contributions for
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Class A-3 and Class A-4 service shall be made as provided under
this section.
(b) Determination of shared-risk contribution rate.--
(1) For the period from the effective date of this
section until June 30, 2014, the shared-risk contribution
rate for Class A-3 and Class A-4 service shall be zero.
* * *
(7) For any fiscal year in which the actual
contributions by the Commonwealth or an employer are lower
than those required to be made under section 5507(d)
(relating to contributions to the system by the Commonwealth
and other employers), the prospective shared-risk
contribution rate for those employees whose employers are not
making the contributions required by section 5507(d) shall be
zero and shall not subsequently be increased, except as
otherwise provided in this section.
* * *
(c) Determination of shared-gain adjustment to regular
member contributions for Class A-3 or Class A-4 service.--The
regular member contributions for Class A-3 or Class A-4 service
shall be determined as follows:
(1) For the period from the effective date of this
section until June 30, 2017, the regular member contributions
for Class A-3 of Class A-4 service shall be determined as
otherwise provided in this part.
(2) For the period from July 1, 2017, to June 30, 2020,
if the shared-risk contribution rate is zero and annual
interest rate adopted by the board for use during the period
from January 1, 2011, to December 31, 2016, for the
calculation of the normal contribution rate is more than 1%
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lower than the actual rate of return, net of fees, of the
investments of the fund based on market value over the
period, then the regular member contribution rate of each
member for Class A-3 or Class A-4 service shall be reduced by
0.5%. In all other situations, the regular member
contributions shall be determined as otherwise provided in
this part.
(3) For each subsequent three-year period, the regular
member contribution rate shall be decreased by 0.5% if the
annual interest rate adopted by the board for use during the
previous ten-year period for the calculation of the normal
contribution rate is more than 1% lower than the actual rate
of return, net of fees, of the investments of the fund based
on market value over the period. The regular member
contribution rate shall be increased by 0.5% if the annual
interest rate adopted by the board for use during the
previous ten-year period for the calculation of the normal
contribution rate is equal to or greater than the actual rate
of return, net of fees, of the investments of the fund based
on market value over that period.
(4) Notwithstanding paragraphs (2) and (3), the regular
member contribution rate may not be greater than the product
of the basic contribution rate and the class of service
multiplier; and the amount of the adjustment to a lower
regular member contribution rate may not be greater than the
reduction in the actuarially required contribution rate by
the experience adjustment factor resulting from investment
gains or losses in effect on the first day when the new rate
would be applied, expressed as a percentage of member
compensation. In no event may the adjustment to the regular
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member contribution rate be more than 2%. For the
determination of the regular member contribution rate to be
effective July 1, 2020, the determination period shall be
January 1, 2011, through December 31, 2019.
(5) The shared-gain adjustment to the regular member
contribution rate and the factors entering into its
calculation must be certified by the actuary as part of the
annual valuations and the actuarial investigation and
evaluation of the system conducted every five years under
section 5902(j) (relating to administrative duties of the
board).
(6) If the annual interest rate adopted by the board for
the calculation is changed during the period used to
determine the shared-gain adjustment to the regular member
contribution rate, the board, with the advice of the actuary,
shall determine the applicable rate during the entire period,
expressed as an annual rate.
(d) Calculation of regular member contribution rate.--For
purposes of this subsection, the regular member contribution
rate for each member is the product of the basic contribution
rate and the class of service multiplier used to determine the
regular member contributions for each member.
Section 415. Title 71 is amended by adding sections to read:
§ 5501.3. Contribution savings program for members of Class AA
and Class D-4.
The regular member contributions for Class AA and Class D-4
service of members shall be determined as follows:
(1) For the period from the effective date of this
section until June 30, 2019, the regular member contributions
for Class AA and Class D-4 service of members shall be
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determined as otherwise provided in this part.
(2) For the period from July 1, 2019, to June 30, 2022,
if the annual interest rate adopted by the board for use
during the period from January 1, 2016, to December 31, 2019,
for the calculation of the normal contribution rate is 1% or
more lower than the actual rate of return, net of fees, of
the investments of the fund based on market value over the
period, then the regular member contribution rate for Class
AA and Class D-4 service of members shall be reduced by 0.5%
for each percentage point that the annual interest rate is
lower than the actual rate of return. For the three fiscal
years starting July 1, 2022, and each subsequent period of
three fiscal years, the following apply:
(i) Except as set forth in subparagraph (ii), the
regular member contribution rate shall be as otherwise
provided in this part.
(ii) If the annual interest rate adopted by the
board for use during the prior three calendar years for
the calculation of the normal contribution rate is 1% or
more lower than the actual rate of return, net of fees,
of the investments of the fund based on market value over
the three calendar year period, then the regular member
contribution rate for Class AA and Class D-4 service of
members shall be reduced by 0.5% for each percentage
point that the annual interest rate is lower than the
actual rate of return.
(3) Notwithstanding paragraph (2), the regular member
contribution rate may not be greater than the product of the
basic contribution rate and the class of service multiplier;
and in no event may the amount of the adjustment to the
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regular member contribution rate be more than 5%.
(4) The contribution savings program adjustment to the
regular member contribution rate and the factors entering
into its calculation must be certified by the actuary as part
of the annual valuations and the actuarial investigation and
evaluation of the system conducted every five years under
section 5902(j) (relating to administrative duties of the
board).
(5) If the annual interest rate adopted by the board for
the calculation is changed during the period used to
determine the contribution savings program adjustment to the
regular member contribution rate, the board, with the advice
of the actuary, shall determine the applicable rate during
the entire period, expressed as an annual rate.
Section 416. Sections 5502.1, 5503.1(a) and 5504 of Title 71
are amended to read:
§ 5502.1. Waiver of regular member contributions and Social
Security integration member contributions.
(a) General rule.--Notwithstanding the provisions of
sections 5501 (relating to regular member contributions and cash
balance member contributions for current service) and 5502
(relating to Social Security integration member contributions),
no regular member contributions or Social Security integration
member contributions shall be made by an active member for the
period from July 1 to the following June 30 if the maximum
single life annuity to which the member would have been entitled
to receive had the member retired with an effective date of
retirement on the preceding January 1 is greater than 110% of
the highest calendar year compensation of the member, provided
the member files a written election as prescribed by the board.
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(b) Applicability.--This section shall not apply to any
member who has Class A-3 [or], Class A-4 or Class CB service
credit.
§ 5503.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions to the fund required to be made under sections
5501 (relating to regular member contributions for current
service and cash balance member contributions), 5501.1 (relating
to shared-risk member contributions [for Class A-3 and Class A-4
service] and shared-gain adjustments to regular member
contributions for Class A-3 and Class A-4 service), 5502
(relating to Social Security integration member contributions),
5503 (relating to joint coverage member contributions) and
section 5505.1 (relating to additional member contributions),
with respect to current State service rendered by an active
member on or after January 1, 1982, shall be picked up by the
Commonwealth or other employer and shall be treated as the
employer's contribution for purposes of IRC § 414(h).
* * *
§ 5504. Member contributions for the purchase of credit for
previous State service or to become a full coverage
member.
(a) Amount of contributions for service in other than Class
G through N and Class CB.--
(1) The contributions to be paid by an active member or
eligible school employee for credit [for] in the system for
the portion of total previous State service other than
service in Class G, Class H, Class I, Class J, Class K, Class
L, Class M and Class N and Class CB that a member is eligible
to have credited or to become a full coverage member shall be
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sufficient to provide an amount equal to the regular and
additional accumulated deductions which would have been
standing to the credit of the member for such service had
regular and additional member contributions been made with
full coverage in the class of service and at the rate of
contribution applicable during such period of previous
service and had his regular and additional accumulated
deductions been credited with statutory interest during all
periods of subsequent State service as an active member or
inactive member on leave without pay and school service as an
active member or inactive member on leave without pay of the
Public School Employees' Retirement System up to the date of
purchase. A State employee who is an active member of the
system as a result of concurrently performing service in more
than one position or office at the time previously uncredited
State service is credited shall elect which position or
office is used for the determination of required
contributions and crediting and classification of the
previously uncredited service.
(2) Notwithstanding paragraph (1), active members [with]
who perform State service credited as Class A-3 [State]
service shall make contributions and receive credit for
previously uncredited State service as if the previous State
service was Class A-3 service, and active members [with] who
perform State service credited as Class A-4 [State] service
shall make contributions and receive credit as if the
previous State service was Class A-4 service, even if it
would have been credited as a different class of service had
the State employee been a member of the system at the time
the service was performed unless it was mandatory that the
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State employee be an active member of the system and the
previous State service is being credited as the result of a
mandatory active membership requirement.
(3) (Reserved).
(4) Notwithstanding paragraph (1), if a member is
purchasing credit for previously uncredited State service
that is first credited after December 31, 2015, the regular
member contributions shall be calculated without regard to
any adjustments that would have been applicable under
sections 5501.1(c) (relating to shared-risk member
contributions and shared-gain adjustments to regular member
contributions for Class A-3 and Class A-4 service) or 5501.3
(relating to contribution savings program for members of
Class AA and Class D-4) had regular member contributions been
made during such period of previous service.
(a.1) Converted county service.--No contributions shall be
required to restore credit for previously credited State service
in Class G, Class H, Class I, Class J, Class K, Class L, Class M
and Class N. Such service shall be restored upon the
commencement of payment of the contributions by an active member
of a class of service other than Class CB required to restore
credit in the system for all other previous State service other
than Class CB service.
(b) Certification and method of payment.--The amount payable
shall be certified in each case by the board in accordance with
methods approved by the actuary and shall be paid in a lump sum
within 30 days or in the case of an active member or eligible
school employee who is an active member of the Public School
Employees' Retirement System may be amortized with statutory
interest through salary deductions to the system in amounts
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agreed upon by the member and the board. The salary deduction
amortization plans agreed to by members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service or
beginning service as a participant without concurrently being an
active member or inactive member on leave without pay as the
board in its sole discretion decides to allow. The board may
limit the salary deduction amortization plans to such terms as
the board in its sole discretion determines. In the case of an
eligible school employee who is an active member of the Public
School Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the board
the amounts paid.
Section 417. Section 5505(b), (c), (d) and (i)(4) of Title
71 are amended and the section is amended by adding subsections
to read:
§ 5505. Contributions for the purchase of credit for creditable
nonstate service.
* * *
(b) Nonintervening military service.--
(1) The amount due for the purchase of credit for
military service other than intervening military service
shall be determined by applying the member's basic
contribution rate, the additional contribution rate plus the
Commonwealth normal contribution rate for active members at
the time of entry, subsequent to such military service, of
the member into State service to his average annual rate of
compensation over the first three years of such subsequent
State service, excluding any compensation for Class A-3
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service or Class A-4 service in excess of the Class A-3 and
Class A-4 compensation limit, and multiplying the result by
the number of years and fractional part of a year of
creditable nonintervening military service being purchased
together with statutory interest during all periods of
subsequent State service as an active member or inactive
member on leave without pay and school service as an active
member or inactive member on leave without pay of the Public
School Employees' Retirement System to date of purchase. Upon
application for credit for such service, payment shall be
made in a lump sum within 30 days or in the case of an active
member or eligible school employee who is an active member of
the Public School Employees' Retirement System it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service or beginning service as a
participant without concurrently being an active member or
inactive member on leave without pay as the board in its sole
discretion decides to allow. The board may limit salary
deduction amortization plans to such terms as the board in
its sole discretion determines. In the case of an eligible
school employee who is an active member of the Public School
Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid. Application may be filed for all such
military service credit upon completion of three years of
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subsequent State service and shall be credited as Class A
service.
(2) Applicants may purchase credit as follows:
(i) one purchase of the total amount of creditable
nonintervening military service; or
(ii) one purchase per 12-month period of a portion
of creditable nonintervening military service.
The amount of each purchase shall be not less than one year
of creditable nonintervening military service.
(c) Intervening military service.--Contributions on account
of credit for intervening military service shall be determined
by the member's regular contribution rate, shared-risk
contribution rate, Social Security integration contribution
rate, the additional contribution rate which shall be applied
only to those members who began service on or after the
effective date of this amendatory act and compensation at the
time of entry of the member into active military service,
excluding any compensation for Class A-3 service or Class A-4
service in excess of the Class A-3 and Class A-4 compensation
limit, together with statutory interest during all periods of
subsequent State service as an active member or inactive member
on leave without pay and school service as an active member or
inactive member on leave without pay of the Public School
Employees' Retirement System to date of purchase. Upon
application for such credit the amount due shall be certified in
the case of each member by the board in accordance with methods
approved by the actuary, and contributions may be made by:
(1) regular monthly payments during active military
service; or
(2) a lump sum payment within 30 days of certification;
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or
(3) salary deductions to the system in amounts agreed
upon by the member or eligible school employee who is an
active member of the Public School Employees' Retirement
System and the board.
The salary deduction amortization plans agreed to by members and
the board may include a deferral of payment amounts and
statutory interest until the termination of school service or
State service or beginning service as a participant without
concurrently being an active member or inactive member on leave
without pay as the board in its sole discretion decides to
allow. The board may limit salary deduction amortization plans
to such terms as the board in its sole discretion determines. In
the case of an eligible school employee who is an active member
of the Public School Employees' Retirement System, the agreed
upon salary deductions shall be remitted to the Public School
Employees' Retirement Board, which shall certify and transfer to
the board the amounts paid.
(d) Nonmilitary and nonmagisterial service.--Contributions
on account of credit for creditable nonstate service other than
military and magisterial service by State employees who first
become members of the system before January 1, 2011, or before
December 1, 2010, as a member of the General Assembly shall be
determined by applying the member's basic contribution rate, the
additional contribution rate plus the Commonwealth normal
contribution rate for active members at the time of entry
subsequent to such creditable nonstate service of the member
into State service to his compensation at the time of entry into
State service as a member of the system and excluding any
compensation for Class A-3 service or Class A-4 service in
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excess of the Class A-3 and Class A-4 compensation limit and
multiplying the result by the number of years and fractional
part of a year of creditable nonstate service being purchased
together with statutory interest during all periods of
subsequent State service as an active member or inactive member
on leave without pay and school service as an active member or
inactive member on leave without pay of the Public School
Employees' Retirement System to the date of purchase. Upon
application for credit for such service payment shall be made in
a lump sum within 30 days or in the case of an active member or
eligible school employee who is an active member of the Public
School Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by members and the board
may include a deferral of payment amounts and statutory interest
until the termination of school service or State service or
beginning service as a participant without concurrently being an
active member or inactive member on leave without pay as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as the
board in its sole discretion determines. In the case of an
eligible school employee who is an active member of the Public
School Employees' Retirement System, the agreed upon salary
deduction shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the board
the amounts paid.
* * *
(i) Purchases of nonstate service credit by State employees
who first became members of the system on or after December 1,
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2010.--
* * *
(4) The payment for credit purchased under this
subsection shall be certified in each case by the board in
accordance with methods approved by the actuary and shall be
paid in a lump sum within 30 days or in the case of an active
member or eligible school employee who is an active member of
the Public School Employees' Retirement System may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
members and the board may include a deferral of payment
amounts and interest until the termination of school service
or State service or beginning service as a participant
without concurrently being an active member or inactive
member on leave without pay as the board in its sole
discretion decides to allow. The board may limit the salary
deduction amortization plans to such terms as the board in
its sole discretion determines. In the case of an eligible
school employee who is an active member of the Public School
Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the Public School Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
(j) Inapplicability of adjustments.--If a member is
purchasing creditable nonstate service that is first credited on
or after January 1, 2016, the regular member contributions
necessary to purchase such credit shall be determined without
regard to any adjustments applicable under sections 5501.1(c)
(relating to shared-risk member contributions and shared-gain
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adjustments to regular member contributions for Class A-3 and
Class A-4 service) or 5501.3 (relating to contribution savings
program for members of Class AA and Class D-4).
(k) Calculation of employee contributions after December 31,
2015.--If employee contributions for the payment of creditable
nonstate service purchased under this subsection are determined
all or in part by the Commonwealth normal contribution rate
after December 31, 2015, the Commonwealth normal contribution
for that purpose shall be the higher of the applicable actual
employer normal contribution rate determined under section
5508(b) (relating to actuarial cost method), or the employer
normal contribution rated determined as part of the actuarial
valuation for December 31, 2014.
Section 418. Sections 5506 and 5506.1(a) of Title 71 are
amended to read:
§ 5506. Incomplete payments.
In the event that a member terminates State service or begins
service as a participant without concurrently being an active
member or inactive member on leave without pay or a multiple
service member who is an active member of the Public School
Employees' Retirement System terminates school service before
the agreed upon payments for credit for previous State service,
USERRA leave, creditable nonstate service, social security
integration, full coverage membership or return of benefits on
account of returning to State service or entering school service
and electing multiple service have been completed, the member or
multiple service member who is an active member of the Public
School Employees' Retirement System shall have the right to pay
within 30 days of termination of State service or school service
or beginning service as a participant the balance due, including
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interest, in a lump sum and the annuity shall be calculated
including full credit for the previous State service, creditable
nonstate service, social security integration, or full coverage
membership. In the event a member does not pay the balance due
within 30 days of termination of State service or beginning
service as a participant or in the event a member dies in State
service or within 30 days of termination of State service or
beginning service as a participant or in the case of a multiple
service member who is an active member of the Public School
Employees' Retirement System does not pay the balance due within
30 days of termination of school service or dies in school
service or within 30 days of termination of school service and
before the agreed upon payments have been completed, the present
value of the benefit otherwise payable shall be reduced by the
balance due, including interest, and the benefit payable shall
be calculated as the actuarial equivalent of such reduced
present value.
§ 5506.1. Annual compensation limit under IRC § 401(a)(17).
(a) General rule.--In addition to other applicable
limitations set forth in this part, and notwithstanding any
provision of this part to the contrary, the annual compensation
of each noneligible member and each participant taken into
account for benefit purposes under this part shall not exceed
the limitation under IRC § 401(a)(17). On and after January 1,
1996, any reference in this part to the limitation under IRC §
401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
compensation limit set forth in this subsection. The OBRA '93
annual compensation limit is $150,000, as adjusted by the
commissioner for increases in the cost of living in accordance
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with IRC § 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any determination period
which is a period, not exceeding 12 months, over which
compensation is determined, beginning in such calendar year. If
a determination period consists of fewer than 12 months, the
OBRA '93 compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period and the denominator of which is 12.
* * *
Section 419. Title 71 is amended by adding a section to
read:
§ 5506.2. Application of Class A-3 and Class A-4 compensation
limit.
(a) General rule.--The Class A-3 and Class A-4 compensation
limit shall be applied to the total compensation received each
calendar year for service as a member of Class A-3 or Class A-4
and, if a multiple service member, for service in Class T-E and
Class T-F in the Public School Employees' Retirement System.
(b) Final average salary adjustment required.--For purposes
of calculating final average salary for the determination of
standard single life annuities and other benefits resulting from
post-January 2016 service as a member of Class A-3 or Class A-4,
the total compensation received, and the compensation received
excluding remuneration received for any overtime service as a
member of the system, each calendar year for Class A-3 service
and Class A-4 service and, if a multiple service member, as a
school employee for service as a Class T-E member and Class T-F
member of the Public School Employees' Retirement System, shall
be adjusted first by annualizing the compensation received for
any part-time service or for any partial year of credit on the
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basis of the fractional portion of the year for which credit is
received. After annualization, the amount of compensation in any
calendar year resulting from Class A-3 service or Class A-4
service shall be further adjusted downward so as to not exceed
the Class A-3 and Class A-4 compensation limit for that year.
(c) Member contribution limits.--For purposes of determining
regular member contributions and shared-risk member
contributions resulting from post-January 2016 service as a
member of Class A-3 or Class A-4 service, the compensation each
year is limited to the Class A-3 and Class A-4 compensation
limit for that year.
Section 420. Sections 5507 heading and (a) and (b), 5508(a),
(b), (c), (f), (h) and (i) and 5509 of Title 71 are amended to
read:
§ 5507. Contributions to the system by the Commonwealth and
other employers.
(a) Contributions on behalf of active members.--The
Commonwealth and other employers whose employees are members of
the system shall make contributions to the fund on behalf of all
active members in such amounts as shall be certified by the
board as necessary to provide, together with the members' total
accumulated deductions and cash balance member accumulated
deductions, annuity reserves on account of prospective annuities
other than those provided in sections 5708 (relating to
supplemental annuities), 5708.1 (relating to additional
supplemental annuities), 5708.2 (relating to further additional
supplemental annuities), 5708.3 (relating to supplemental
annuities commencing 1994), 5708.4 (relating to special
supplemental postretirement adjustment), 5708.5 (relating to
supplemental annuities commencing 1998), 5708.6 (relating to
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supplemental annuities commencing 2002), 5708.7 (relating to
supplemental annuities commencing 2003) and 5708.8 (relating to
special supplemental postretirement adjustment of 2002), in
accordance with the actuarial cost method provided in section
5508(a), (b), (c), (d) and (f) (relating to actuarial cost
method).
(b) Contributions on behalf of annuitants.--The Commonwealth
and other employers whose employees are members of the system
shall make contributions on behalf of annuitants in such amounts
as shall be certified by the board as necessary to fund the
liabilities for supplemental annuities in accordance with the
actuarial cost method provided in section 5508(e) [(relating to
actuarial cost method)].
* * *
§ 5508. Actuarial cost method.
(a) Employer contribution rate on behalf of active
members.--[The] For each fiscal year, the amount of the
Commonwealth and other employer contributions on behalf of all
active members shall be computed by the actuary as a percentage
of the total compensation of all active members during the
period for which the amount is determined and shall be so
certified by the board. The actuarially required contribution
rate on behalf of all active members shall consist of the
employer normal contribution rate, as defined in subsection (b),
and the accrued liability contribution rate as defined in
subsection (c). The actuarially required contribution rate on
behalf of all active members shall be modified by the experience
adjustment factor as calculated in subsection (f).
(b) Employer normal contribution rate.--The employer normal
contribution rate shall be determined after each actuarial
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valuation on the basis of an annual interest rate and such
mortality and other tables as shall be adopted by the board in
accordance with generally accepted actuarial principles. The
employer normal contribution rate shall be determined as a level
percentage of the compensation of the average new active member,
which percentage, if contributed on the basis of his prospective
compensation through his entire period of active State service,
would be sufficient to fund the liability for any prospective
benefit payable to him in excess of that portion funded by his
prospective member contributions, excluding shared-risk member
contributions. In no case shall the employer normal contribution
rate be less than zero.
(c) Accrued liability contribution rate.--
(1) For the fiscal years beginning July 1, 2002, and
July 1, 2003, the accrued liability contribution rate shall
be computed as the rate of total compensation of all active
members which shall be certified by the actuary as sufficient
to fund over a period of ten years from July 1, 2002, the
present value of the liabilities for all prospective
benefits, except for the supplemental benefits as provided in
sections 5708 (relating to supplemental annuities), 5708.1
(relating to additional supplemental annuities), 5708.2
(relating to further additional supplemental annuities),
5708.3 (relating to supplemental annuities commencing 1994),
5708.4 (relating to special supplemental postretirement
adjustment), 5708.5 (relating to supplemental annuities
commencing 1998), 5708.6 (relating to supplemental annuities
commencing 2002), 5708.7 (relating to supplemental annuities
commencing 2003) and 5708.8 (relating to special supplemental
postretirement adjustment of 2002), in excess of the total
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assets in the fund (calculated recognizing all investment
gains and losses over a five-year period), excluding the
balance in the supplemental annuity account, and the present
value of employer normal contributions and of member
contributions payable with respect to all active members on
December 31, 2001, and excluding contributions to be
transferred by county retirement systems or pension plans
pursuant to section 5507(c) (relating to contributions by the
Commonwealth and other employers). The amount of each annual
accrued liability contribution shall be equal to the amount
of such contribution for the fiscal year beginning July 1,
2002, except that, if the accrued liability is increased by
legislation enacted subsequent to June 30, 2002, but before
July 1, 2003, such additional liability shall be funded over
a period of ten years from the first day of July, coincident
with or next following the effective date of the increase.
The amount of each annual accrued liability contribution for
such additional legislative liabilities shall be equal to the
amount of such contribution for the first annual payment.
(2) Notwithstanding any other provision of law,
beginning July 1, 2004, and ending June 30, 2010, the
outstanding balance of the increase in accrued liability due
to the change in benefits enacted in 2001 shall be amortized
in equal dollar annual contributions over a period that ends
30 years after July 1, 2002, and the outstanding balance of
the net actuarial loss incurred in calendar year 2002 shall
be amortized in equal dollar annual contributions over a
period that ends 30 years after July 1, 2003. For fiscal
years beginning on or after July 1, 2004, and ending June 30,
2010, if the accrued liability is increased by legislation
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enacted subsequent to June 30, 2003, but before January 1,
2009, such additional liability shall be funded in equal
dollar annual contributions over a period of ten years from
the first day of July coincident with or next following the
effective date of the increase.
(3) For the fiscal year beginning July 1, 2010, the
accrued liability contribution rate shall be computed as the
rate of total compensation of all active members which shall
be certified by the actuary as sufficient to fund in equal
dollar installments over a period of 30 years from July 1,
2010, the present value of the liabilities for all
prospective benefits calculated as of the immediately prior
valuation date, including the supplemental benefits as
provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4,
5708.5, 5708.6, 5708.7 and 5708.8, but excluding the benefits
payable from the retirement benefit plan established pursuant
to section 5941 (relating to benefits completion plan), in
excess of the actuarially calculated assets in the fund
(calculated recognizing all realized and unrealized
investment gains and losses each year in level annual
installments over five years), including the balance in the
supplemental annuity account, and the present value of
employer normal contributions and of member contributions
payable with respect to all active members, inactive members
on leave without pay, vestees and special vestees on December
31, 2009. If the accrued liability is changed by legislation
enacted subsequent to December 31, 2009, such change in
liability shall be funded in equal dollar installments as a
percentage of compensation of all active members over a
period of ten years from the first day of July following the
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valuation date coincident with or next following the date
such legislation is enacted.
* * *
(f) Experience adjustment factor.--
(1) For each fiscal year after the establishment of the
accrued liability contribution rate and the supplemental
annuity contribution rate for the fiscal year beginning July
1, 2010, any increase or decrease in the unfunded accrued
liability and any increase or decrease in the liabilities and
funding for supplemental annuities, due to actual experience
differing from assumed experience (recognizing all realized
and unrealized investment gains and losses over a five-year
period), changes in contributions caused by the final
contribution rate being different from the actuarially
required contribution rate, State employees making shared-
risk member contributions, adjustments to the regular member
contributions under sections 5501.1 (relating to shared-risk
member contributions and shared-gain adjustments to regular
member contributions for Class A-3 and Class A-4 service) and
5501.3 (relating to contribution savings program for members
of Class AA and Class D-4), changes in actuarial assumptions
or changes in the terms and conditions of the benefits
provided by the system by judicial, administrative or other
processes other than legislation, including, but not limited
to, reinterpretation of the provisions of this part, shall be
amortized in equal dollar annual contributions as a
percentage of compensation of all active members over a
period of 30 years beginning with the July 1 succeeding the
actuarial valuation determining said increases or decreases.
(2) The actuarially required contribution rate shall be
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the sum of the normal contribution rate, the accrued
liability contribution rate and the supplemental annuity
contribution rate, modified by the experience adjustment
factor as calculated in paragraph (1).
* * *
(h) Temporary application of collared contribution rate.--
The collared contribution rate for each fiscal year shall be
determined by comparing the actuarially required contribution
rate calculated without regard for costs added by legislation to
the prior year's final contribution rate. If, for any of the
fiscal years beginning July 1, 2011, July 1, 2012, and on or
after July 1, 2013, the actuarially required contribution rate
calculated without regard for costs added by legislation is more
than 3%, 3.5% and 4.5%, respectively, of the total compensation
of all active members greater than the prior year's final
contribution rate, then the collared contribution rate shall be
applied and be equal to the prior year's final contribution rate
increased by the respective percentage above of total
compensation of all active members. Otherwise, and for all
subsequent fiscal years, the collared contribution rate shall
not [be applicable] apply. In no case shall the collared
contribution rate be less than 4% of total compensation of all
active members.
(i) Final contribution rate.--For the fiscal year beginning
July 1, 2010, the final contribution rate shall be 5% of total
compensation of all active members. For each subsequent fiscal
year for which the collared contribution rate is applicable, the
final contribution rate shall be the collared contribution rate
plus the costs added by legislation. For all other fiscal years,
the final contribution rate shall be the actuarially required
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contribution rate, provided that the final contribution rate
shall not be less than the employer normal contribution rate, as
defined in subsection (b).
§ 5509. Appropriations and assessments by the Commonwealth.
(a) Annual submission of budget.--The board shall prepare
and submit annually an itemized budget consisting of the amounts
necessary to be appropriated by the Commonwealth out of the
General Fund and special operating funds and the amounts to be
assessed the other employers required to meet the separate
obligations to the fund and the trust accruing during the fiscal
period beginning the first day of July of the following year.
(b) Appropriation and payment.--The General Assembly shall
make an appropriation sufficient to provide for the separate
obligations of the Commonwealth to the fund and the trust. Such
amount shall be paid by the State Treasurer through the
Department of Revenue into the fund or trust, as the case may
be, in accordance with requisitions presented by the board. The
contributions to the system by the Commonwealth on behalf of
active members who are officers of the Pennsylvania State Police
shall be charged to the General Fund and to the Motor License
Fund in the same ratios as used to apportion the appropriations
for salaries of members of the Pennsylvania State Police. The
contributions to the system by the Commonwealth on behalf of
active members who are enforcement officers and investigators of
the Pennsylvania Liquor Control Board shall be charged to the
General Fund and to the State Stores Fund.
(c) Contributions from funds other than General Fund.--The
amounts assessed other employers who are required to make the
necessary separate contributions to the fund and the trust out
of funds other than the General Fund shall be paid by such
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employers into the fund or trust, as the case may be, in
accordance with requisitions presented by the board. The General
Fund of the Commonwealth shall not be held liable to appropriate
the moneys required to build up the reserves in the fund
necessary for the payment of benefits from the system to
employees or to make the employer defined contributions for
employees of such other employers. In case any such other
employer shall fail to provide to the fund the moneys necessary
for such purpose, then the service of such members of the system
for such period for which money is not so provided shall be
credited and pickup contributions and cash balance member
contributions with respect to such members shall continue to be
credited to the members' savings account and the cash balance
savings account. The annuity to which such member is entitled
shall be determined as actuarially equivalent to the present
value of the maximum single life annuity of each such member
reduced by the amount of employer contributions to the system
payable on account and attributable to his compensation during
such service, except that no reduction shall be made as a result
of the failure of an employer to make contributions required for
a period of USERRA leave.
Section 421. Title 71 is amended by adding a section to
read:
§ 5510. Employer funding mandate protection.
(a) Limited expansion of contractual right to funding.--
Commencing on the July 1 following the actuarial valuation in
which the actuary certifies that the final contribution rate is
the actuarially required contribution, each active member of
shall have a contractual right to the timely payment of the
annual actuarially required contributions pursuant to section
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5508 (relating to actuarial cost method) and section 5902(k)
(relating to administrative duties of the board) by such
member's employer. The following apply:
(1) The failure of a member's employer to make the
annually required contribution to the fund will be deemed to
be an impairment of the contractual right of such member.
(2) Any claim of contract impairment shall be brought
against the employer of the member for whom contributions
were not paid, and neither the board nor the system or their
employees or agents shall be a defendant in any such action
or liable for any payments or damages arising from such
impairment.
(b) Jurisdiction of Supreme Court.--Notwithstanding any
provision of 2 Pa.C.S. (relating to administrative law and
procedure), 42 Pa.C.S. (relating to judiciary and judicial
procedure) or any other provision of law, the Pennsylvania
Supreme Court shall have exclusive jurisdiction to do as
follows:
(1) hear any claim of contract impairment for failure to
pay certified contributions;
(2) render a declaratory judgment or take such other
action as it deems appropriate, consistent with the Supreme
Court retaining jurisdiction over such matter; and
(3) find facts or expedite a final judgment in
connection with such a challenge or request for declaratory
relief.
(c) Sovereign immunity waived.--Sovereign immunity is hereby
waived, and the provisions of 42 Pa.C.S. Ch. 85 (relating to
matters affecting government units) or lack of jurisdiction by
the Supreme Court shall not be raised as a defense against a
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claim brought against an employer under this section.
(d) Attorney fees.--A member who prevails in a claim brought
under this part may be awarded reasonable attorney fees.
(e) Limitation of contract right.--Nothing in this section
shall be construed to create a contract right or claim of
contract impairment in any member as to any benefit formula,
benefit payment option, or any other provision of this part
other than the funding mandate of the member's employer, or to
change the jurisdiction of the board or the courts regarding any
claim other than for payment of the annual actuarially required
contributions.
(f) Employer contributions.--Nothing in this section shall
be deemed to supersede or conflict with the rights and
obligations set forth in section 5509 (relating to
appropriations and assessments by the Commonwealth).
(g) Board action.--The board is authorized but not required
to bring an action under this section on behalf of itself or any
member, and, if the board prevails, it may be awarded reasonable
attorney fees.
Section 422. Sections 5701 and 5701.1 of Title 71 are
amended to read:
§ 5701. Return of total accumulated deductions and cash balance
member accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable from the system under this chapter to which he
may be entitled, elect to receive his total accumulated
deductions and his cash balance member accumulated deductions by
his required beginning date.
§ 5701.1. Transfer of accumulated deductions.
When an employee of the Juvenile Court Judges' Commission
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elects membership in an independent retirement program pursuant
to section 5301(f) (relating to mandatory and optional
membership in the system and participation in the plan), the
board shall transfer directly to the trustee or administrator of
the independent retirement program all accumulated deductions
resulting from service credited while an employee of the
Juvenile Court Judges' Commission.
Section 423. Sections 5702(a), (a.1) and (b) and 5704(a),
(c), (e) and (f) of Title 71 are amended and the sections are
amended by adding subsections to read:
§ 5702. Maximum single life annuity.
(a) General rule.--Any full coverage member who is eligible
to receive an annuity pursuant to the provisions of section
5308(a) or (b) (relating to eligibility for annuities) who
terminates State service, or if a multiple service member who is
a school employee who is an active member of the Public School
Employees' Retirement System who terminates school service,
before attaining age 70 shall be entitled to receive a maximum
single life annuity attributable to his credited service and
equal to the sum of the following single life annuities
beginning at the effective date of retirement:
(1) A single life annuity that is the sum of the
standard single life [annuity multiplied by the sum of the
products,] annuities determined separately for each class of
service, [obtained by multiplying] multiplied by the
appropriate class of service multiplier [by the ratio of
years of service credited in that class to the total credited
service] applicable to each standard single life annuity. In
case the member on the effective date of retirement is under
superannuation age for any service, a reduction factor
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calculated to provide benefits actuarially equivalent to an
annuity starting at superannuation age shall be applied to
the product determined for that service. The class of service
multiplier for any period of concurrent service determined
without regard to service in Class CB shall be multiplied by
the proportion of total State and school compensation during
such period attributable to State service as a member of the
system. In the event a member has two multipliers for one
class of service [the class of service multiplier to be used
for calculating benefits for that class shall be the average
of the two multipliers weighted by the proportion of
compensation attributable to each multiplier during the three
years of highest annual compensation in that class of
service: Provided, That in the case of a member of Class E-1,
a portion but not all of whose three years of highest annual
judicial compensation is prior to January 1, 1973, two class
of service multipliers shall be calculated on the basis of
his entire judicial service, the one applying the judicial
class of service multipliers effective prior to January 1,
1973 and the second applying the class of service multipliers
effective subsequent to January 1, 1973. The average class of
service multiplier to be used for calculating benefits for
his judicial service shall be the average of the two
calculated multipliers weighted by the proportion of
compensation attributable to each of the calculated
multipliers during the three years of highest annual
compensation in that class of service.], separate standard
single life annuities shall be calculated for the portion of
service in such class applicable to each class of service
multiplier.
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(2) If eligible, a single life annuity of 2% of his
average noncovered salary for each year of social security
integration credit as provided for in section 5305 (relating
to social security integration credits) multiplied, if on the
effective date of retirement the member is under
superannuation age for any service, by the actuarially
determined reduction factor for that service.
(3) If eligible, a single life annuity which is
actuarially equivalent to the regular and additional
accumulated deductions attributable to contributions as a
member of Class C, but not less than such annuity determined
as if the member were age 60 on the effective date of
retirement, actuarially reduced in the event the member is
under superannuation age on the effective date of retirement.
(4) If eligible, a single life annuity which is
actuarially equivalent to the amount by which his regular and
additional accumulated deductions attributable to any
credited service other than as a member of Class C are
greater than one-half of the actuarially equivalent value on
the effective date of retirement of the annuity as provided
in paragraph (1) attributable to service other than Class C
for which regular or joint coverage member contributions were
made. This paragraph shall not apply to any member with State
service credited as Class A-3 or Class A-4.
(5) If eligible, a single life annuity which is
actuarially equivalent to the amount by which his social
security integration accumulated deductions are greater than
one-half of the actuarially equivalent value on the effective
date of retirement of the annuity provided for under
paragraph (2).
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(6) If eligible, a single life annuity sufficient
together with the annuity provided for in paragraph (1) as a
Class A, Class AA, Class A-3 and Class A-4 member and the
highest annuity provided for in paragraph (2) to which he is
entitled, or at his option could have been entitled, to
produce that percentage of [a] the sums of the standard
single life [annuity] annuities adjusted by the application
of the class of service multiplier for Class A, Class AA,
Class A-3 or Class A-4 as set forth in paragraph (1) in the
case where any service is credited as a member of Class A,
Class AA, Class A-3 or Class A-4 on the effective date of
retirement as determined by his total years of credited
service as a member of Class A, Class AA, Class A-3 and Class
A-4 and by the following table:
Total Years of
Credited Service
as a Member of
Class A,
Class AA, Class A-3
and Class A-4
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
35-40 100%
41 102%
42 104%
43 106%
44 108%
45 or more 110%
(7) If eligible, a single life annuity which is
actuarially equivalent to the total cash balance accumulated
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deductions credited to the member's individual cash balance
savings account.
(a.1) Rule for terminations after attaining age 70.--
(1) Any full coverage member who is eligible to receive
an annuity pursuant to the provisions of section 5308(a) who
terminates State service, or if a multiple service member who
is a school employee and an active member of the Public
School Employees' Retirement System who terminates school
service, on or after attaining age 70 and who applies for a
superannuation annuity to be effective the day after the
termination of State service or school service, as the case
may be, shall be entitled to receive a maximum single life
annuity as of a determination date that is equal to the
greater of subparagraph (i) or (ii), plus any annuity the
member may be eligible to receive under subsection (a)(7):
(i) the sum of the annuities provided in subsection
(a)(1) through (6) calculated as of the determination
date; and
(ii) the greater of [clause (A) or (B)]:
(A) the sum of the annuities provided in
subsection (a)(1), (3), (4) and (6) as of the
preceding determination date adjusted by the
actuarial increase factor, plus the annuities
provided in subsection (a)(2) and (5) as of the
determination date; [and] or
(B) the maximum single life annuity calculated
without including any annuity payable under
subsection (a)(7) as of the preceding determination
date adjusted by the actuarial increase factor.
The maximum single life annuity calculated without including
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any annuity payable under subsection (a)(7) shall be
calculated for each determination date.
(2) For purposes of this subsection, the determination
date shall be:
(i) the member's birthday, provided that as of such
date the member qualifies for a maximum single life
annuity under this subsection, determined excluding
eligibility for annuity payable under subsection (a)(7);
or
(ii) if the member's maximum single life annuity is
being determined as of the member's effective date of
retirement, then the determination date shall be the
member's effective date of retirement.
(3) In the event an active member, an inactive member on
leave without pay or a multiple service member who is a
school employee and an active member of the Public School
Employees' Retirement System has attained age 70 before the
effective date of this subsection, or enters State service or
school service, as the case may be, after attaining age 70,
then section 5305.1 (relating to eligibility for actuarial
increase factor) and subsections (a) and (a.1) shall be
effective prospectively with respect to such member at the
member's next birthday after the effective date of this
subsection, entry into State service, or school service.
Nothing in this subsection shall be construed to provide an
actuarial increase factor for any period of service prior to the
effective date of this subsection.
(b) Present value of annuity.--The present value of the
maximum single life annuity as calculated in accordance with
subsection (a) of this section shall be the sum of the products
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determined by:
(1) multiplying the maximum single life annuity
calculated without including any annuity payable under
subsection (a)(7) by the cost of a dollar annuity applicable
to subsection (a)(1), (2), (3), (4), (5) and (6) on the
effective date of retirement[.]; and
(2) multiplying the annuity, if any, payable under
section (a)(7) by the cost of a dollar annuity applicable to
subsection (a)(7).
Such present value shall be decreased only as required under the
provisions of section 5506 (relating to incomplete payments),
5509(c) (relating to appropriations and assessments by the
Commonwealth) or 5703 (relating to reduction of annuities on
account of social security old-age insurance benefits).
* * *
(e) Coordination of benefits.--The determination and payment
of the maximum single life annuity under this section shall be
in addition to any payments a combined service employee, as a
result of being a participant in the plan, may be entitled to
receive, has received or is receiving.
§ 5704. Disability annuities.
(a) Amount of annuity.--
(1) A member who has credit in one or more classes of
service other than Class CB and who has made application for
a disability annuity and has been found to be eligible in
accordance with the provisions of section 5905(c)(1)
(relating to duties of the board regarding applications and
elections of members) shall receive a disability annuity
payable from the effective date of disability as determined
by the board and continued until a subsequent determination
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by the board that the annuitant is no longer entitled to a
disability annuity. The disability annuity shall be a single
life annuity that is equal to [a] the sum of the standard
single life [annuity] annuities determined separately for
each class of service other than Class CB multiplied by the
appropriate class of service multiplier applicable to the
class of service at the time of disability if the [product
of] sums of the products of each such class of service
multiplier and the [total] number of years and fractional
part of a year of credited service in each class, plus the
number of years and fractional part of a year of service
credited in Class CB, if any, is greater than 16.667[,];
otherwise [the] each standard single life annuity shall be
multiplied by the lesser of the following ratios:
MY*/Y or 16.667/Y
[where] Where Y = total number of years of credited service[,];
Y* = total years of credited service if the member were to
continue as a State employee until attaining superannuation age
for each class of service other than Class CB as applicable at
the time of disability, or if the member has attained
superannuation age for a class of service other than Class CB,
as applicable at the time of disability, then the number of
years of credited service; and M = the class of service
multiplier as applicable to that class of service at the
effective date of disability. A member of Class C shall receive,
in addition, any annuity to which he may be eligible under
section 5702(a)(3) (relating to maximum single life annuity).
[The member shall be entitled to the election of a joint and
survivor annuity on that portion of the disability annuity to
which he is entitled under section 5702.]
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(2) In addition to the amount of disability annuity
payable under paragraph (1), a member who has Class CB
service credit shall be entitled to a separate annuity
calculated under section 5702(a)(7) on the effective date of
disability.
(3) The member shall be entitled to the election of a
joint and survivor annuity on that portion of the disability
annuity to which he is entitled under section 5702.
* * *
(c) Reduction on account of earned income.--Subsequent to
January 1, 1972, payments on account of disability shall be
reduced by that amount by which the earned income of the
annuitant, as reported in accordance with section 5908(b)
(relating to rights and duties of annuitants), for the preceding
calendar year together with the disability annuity payments
provided in this section other than subsection (b), for the
year, exceeds the product of:
[(i)] (1) the last year's salary of the annuitant as a
[State employee] member of the system; and
[(ii)] (2) the ratio of the current monthly payment to
the monthly payment at the effective date of disability;
Provided, That the annuitant shall not receive less than his
member's annuity or the amount to which he may be entitled under
section 5702 whichever is greater.
* * *
(e) Termination of State service.--Upon termination of
disability annuity payments in excess of an annuity calculated
in accordance with section 5702, a disability annuitant who:
(1) does not have Class A-3 or Class A-4 service credit;
or
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(2) has Class A-3 or Class A-4 service credit and fewer
than ten eligibility points;
and who does not return to State service may file an application
with the board for an amount equal to the excess, if any, of the
sum of the shared-risk accumulated deductions plus the regular
and additional accumulated deductions and cash balance member
accumulated deductions standing to his credit at the effective
date of disability over one-third of the total disability
annuity payments received. If the annuitant on the date of
termination of service was eligible for an annuity as provided
in section 5308(a) or (b) (relating to eligibility for
annuities), he may file an application with the board for an
election of an optional modification of his annuity.
(f) Supplement for service connected disability.--
(1) If a member has been found to be eligible for a
disability annuity and if the disability has been found to be
a service connected disability and if the member is receiving
workers' compensation payments for other than medical
benefits, such member shall receive a supplement equal to
[70% of his final average salary] the amount determined under
paragraph (2) less the sum of the annuity as determined under
subsection (a) and any payments paid or payable on account of
such disability under the act of June 2, 1915 (P.L.736,
No.338), known as the Workers' Compensation Act, the act of
June 21, 1939 (P.L.566, No.284), known as The Pennsylvania
Occupational Disease Act, and the Social Security Act (49
Stat. 620, 42 U.S.C. § 301 et seq.). Such supplement shall
continue as long as he is determined to be disabled and is
receiving workers' compensation payments for other than
medical benefits on account of his service connected
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disability in accordance with the Workers' Compensation Act
or The Pennsylvania Occupational Disease Act. If the member
has received a lump sum workers' compensation payment in lieu
of future weekly compensation payments, the length in weeks
and calculation of the service connected disability
supplement shall be determined by dividing the lump sum
payment by the average weekly wage as determined by the
Workers' Compensation Board.
(2) For a member who does not have post-January 2016
service, the amount to be used to determine eligibility for
the supplement under paragraph (1) shall be 70% of the
member's final average salary. For a member who has post-
January 2016 service, the amount to be used to determine
eligibility for the supplement under paragraph (1) shall be
calculated according to the following formula:
A = .7[(Y
W
multiplied by FAS
W
)+(Y
XYZ
multiplied by
FAS
XYZ
)]
Y
T
Y
T
(3) The following apply to the formula in paragraph (2):
(i) A equals the amount used to determine the
supplement;
(ii) Y
T
equals total years of credited service;
(iii) Y
W
equals years of credited service that are
not post-January 2016 service;
(iv) FAS
W
equals final average salary calculated for
credited service other than post-January 2016 service;
(v) Y
XYZ
equals years of service credited as post-
January 2016 service; and
(vi) FAS
XYZ
equals final average salary calculated
for service credited as post-January 2016 service.
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* * *
(h) Coordination of benefits.--The determination and payment
of a disability annuity under this section is in addition to any
payments a combined service employee, as a result of being a
participant in the plan, may be entitled to receive, has
received or is receiving. A disability annuity may not be paid
to a combined service employee who is an active participant.
Section 424. Sections 5705, 5705.1, 5706(a), (a.1), (a.2),
(b) and (c) and 5707 of Title 71 are amended to read:
§ 5705. Member's options.
(a) General rule.--Any special vestee [who has attained
superannuation age, any vestee who does not have Class A-3 or
Class A-4 service credit having five or more eligibility points
for service other than Class T-E or Class T-F service in the
Public School Employees' Retirement System, or vestee who has
Class A-3 or Class A-4 service credit having ten or more
eligibility points, any member with Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service having
five or more eligibility points or any other eligible member
upon termination of State service who has not withdrawn his
total accumulated deductions as provided in section 5701
(relating to return of total accumulated deductions)], vestee or
other member upon termination of State service who is eligible
to receive an annuity as provided in section 5308(a) or (b)
(relating to eligibility for annuities) may apply for and elect
to receive either a maximum single life annuity, as calculated
in accordance with the provisions of section 5702 (relating to
maximum single life annuity), or a reduced annuity certified by
the actuary to be actuarially equivalent to the maximum single
life annuity payable after reduction under subsection (a.1) and
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in accordance with one of the following options; except that no
member shall elect an annuity payable to one or more survivor
annuitants other than his spouse or alternate payee of such a
magnitude that the present value of the annuity payable to him
for life plus any lump sum payment under this subsection and
subsection (a.1) he may have elected to receive is less than 50%
of the present value of his maximum single life annuity[:]; and
no member may elect a payment option that would provide benefits
that do not satisfy the minimum distribution requirements or
would violate the incidental death benefit rules of IRC 401(a)
(9):
(1) Option 1.--A life annuity to the member with a
guaranteed total payment equal to the present value of the
maximum single life annuity on the effective date of
retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
(2) Option 2.--A joint and survivor annuity payable
during the lifetime of the member with the full amount of
such annuity payable thereafter to his survivor annuitant, if
living at his death.
(3) Option 3.--A joint and fifty percent (50%) survivor
annuity payable during the lifetime of the member with one-
half of such annuity payable thereafter to his survivor
annuitant, if living at his death.
(4) Option 4.--Some other benefit which shall be
certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
(i) any annuity shall be payable without reduction
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during the lifetime of the member;
(ii) the sum of all annuities payable to the
designated survivor annuitants shall not be greater than
one and one-half times the annuity payable to the member;
and
(iii) a portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the total accumulated
deductions standing to the credit of the member that are
not the result of contributions and statutory interest
made or credited as a result of Class A-3 or Class A-4
service. The balance of the present value of the maximum
single life annuity adjusted in accordance with section
5702(b) shall be paid in the form of an annuity with a
guaranteed total payment, a single life annuity, or a
joint and survivor annuity or any combination thereof but
subject to the restrictions of subparagraphs (i) and (ii)
under this option. If a member's effective date of
retirement is on or after January 1, 2016, then the
portion of the benefit payable under this subparagraph
shall be further limited to the total accumulated
deductions standing to the credit of the member on
December 31, 2015, that are not the result of
contributions and statutory interest made or credited as
a result of Class A-3 or Class A-4 service, plus any
statutory interest credited on those accumulated
deductions before the effective date of retirement.
(a.1) Additional lump sum withdrawal.--The following shall
apply:
(1) After December 31, 2015, if a member has elected to
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have the full amount allowed under subsection (a)(4)(iii)
paid in lump sum, then the member may elect to receive an
additional amount payable in a lump sum at the same time as
the payment elected under subsection (a)(4)(iii).
(2) The additional amount payable in a lump sum may not
exceed the sum of:
(i) an amount equal to the excess of the total
accumulated deductions standing to the credit of the
member on the effective date of retirement that are not
the result of contributions and statutory interest made
or credited as a result of Class A-3 or Class A-4 service
over the amount payable under subsection (a)(4)(iii); and
(ii) an amount equal to the cash balance member
accumulated deductions standing to the credit of the
member.
(3) If a member elects to be paid an additional lump sum
amount under this subsection, then the maximum single life
annuity calculated under section 5702 and payable under
subsection (a) shall be reduced by the additional amount
withdrawn divided by the cost of a dollar annuity on the
effective date of retirement computed on the basis of the
annual interest rate adopted for that fiscal year by the
board for the calculation of the employer normal contribution
rate under section 5508(b) (relating to actuarial cost
method) and the mortality tables adopted by the board for the
determination of actuarially equivalent benefits under this
part. The reduction in the maximum single life annuity under
this paragraph shall apply before the election and
calculation of any reduced annuities payable under subsection
(a).
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(b) Present value of joint coverage annuity.--In calculating
an annuity payable to a member of the joint coverage group, the
present value of such adjusted annuity shall be determined by
taking into account prospectively the reduction applicable upon
the attainment of the age at which full social security benefits
are payable.
§ 5705.1. Payment of accumulated deductions resulting from
[Class A-3 and Class A-4] more than one class of
service.
(a) Payment of accumulated deduction resulting from Class A-
3 and Class A-4 service.--Any superannuation or withdrawal
annuitant who:
(1) has Class A-3 or Class A-4 service credit;
(2) has service credited in one or more classes of
service; and
(3) because he has five or more, but fewer than ten,
eligibility points is not eligible to receive an annuity on
his Class A-3 or Class A-4 service
shall receive in a lump sum at the time of his retirement, in
addition to any other annuity or lump sum payment which he may
elect, his accumulated deductions resulting from his Class A-3
or Class A-4 service credit. Payment of these accumulated
deductions resulting from Class A-3 or Class A-4 service credit
shall not be eligible for installment payments pursuant to
section 5905.1 (relating to installment payments of accumulated
deductions) but shall be considered a lump sum payment for
purposes of section 5905.1(d).
(b) Payment of cash balance member accumulated deductions
resulting from Class CB service.--Any annuitant who is a member
with Class CB service credit and one or more other classes of
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service credit and who is receiving an annuity based on his
Class CB service but is not eligible to receive an annuity based
on his service credited in one or more of his other classes of
service shall receive in a lump sum at the time of his
retirement, in addition to any other annuity which he may elect
for his Class CB service, his accumulated deductions resulting
from his service credit in classes of service other than Class
CB for which he is not eligible to receive an annuity. Payment
of these accumulated deductions resulting from service credit in
classes of service other than Class CB shall not be eligible for
installment payments under section 5905.1, but shall be
considered a lump sum payment for purposes of section 5905.1(d).
§ 5706. Termination of annuities.
(a) General rule.--If the annuitant returns to State service
or enters or has entered school service and elects multiple
service membership, any annuity payable to him under this part
shall cease effective upon the date of his return to State
service or entering school service, without regard to whether he
is a mandatory, optional or prohibited member of the system or
participant in the plan or, if a multiple service member,
without regard to whether he is a mandatory, optional or
prohibited member or participant of the Public School Employees'
Retirement System or School Employees' Defined Contribution
Plan; and, in the case of an annuity other than a disability
annuity the present value of such annuity, other than the
portion of the annuity that is being paid under section 5702(a)
(7) (relating to maximum single life annuity), adjusted for full
coverage in the case of a joint coverage member who makes the
appropriate back contributions for full coverage, shall be
frozen as of the date such annuity ceases[.] and the present
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value of the portion of the annuity that is being paid under
section 5702(a)(7) shall be placed in the member's individual
cash balance saving account. An annuitant who is credited with
an additional 10% of Class A and Class C service as provided in
section 5302(c) (relating to credited State service) and who
returns to State service shall forfeit such credited service and
shall have his frozen present value adjusted as if his 10%
retirement incentive had not been applied to his account. In the
event that the cost-of-living increase enacted December 18, 1979
occurred during the period of such State or school employment,
the frozen present value shall be increased, on or after the
member attains superannuation age, by the percent applicable had
he not returned to service. This subsection shall not apply in
the case of any annuitant who may render services to the
Commonwealth in the capacity of an independent contractor or as
a member of an independent board or commission or as a member of
a departmental administrative or advisory board or commission
when such members of independent or departmental boards or
commissions are compensated on a per diem basis for not more
than 150 days per calendar year or as a member of an independent
board or commission requiring appointment by the Governor, with
advice and consent of the Senate, where the annual salary
payable to the member does not exceed $35,000 and where the
member has been an annuitant for at least six months immediately
preceding the appointment. Such service shall not be subject to
member contributions [or]; not, result in additions, interest or
excess interest to the member's individual cash balance saving
account; and not be eligible for qualification as creditable
State service or for participation in the plan, mandatory
participant contributions or employer defined contributions.
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(a.1) Return to State service during emergency.--When, in
the judgment of the employer, an emergency creates an increase
in the work load such that there is serious impairment of
service to the public, an annuitant may be returned to State
service for a period not to exceed 95 days in any calendar year
without loss of his annuity. In computing the number of days an
annuitant has returned to State service, any amount of time less
than one-half of a day shall be counted as one-half of a day.
For agencies, boards and commissions under the Governor's
jurisdiction, the approval of the Governor that an emergency
exists shall be required before an annuitant may be returned to
State service. This service shall not be subject to member
contributions; not result in additions, interest or excess
interest to the member's individual cash balance savings
account; and not be eligible for qualification as creditable
State service or for participation in the plan, mandatory
participant contributions or employer defined contributions.
(a.2) Return of benefits.--In the event an annuitant whose
annuity from the system ceases pursuant to this section receives
any annuity payment, including a lump sum payment pursuant to
section 5705 (relating to member's options) on or after the date
of his return to State service or entering school service, the
annuitant shall return to the board the amount so received from
the system plus statutory interest. The amount payable shall be
certified in each case by the board in accordance with methods
approved by the actuary and shall be paid in a lump sum within
30 days or in the case of an active member or school employee
who is an active member of the Public School Employees'
Retirement System may be amortized with statutory interest
through salary deductions to the system in amounts agreed upon
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by the member and the board. The salary deduction amortization
plans agreed to by the member and the board may include a
deferral of payment amounts and statutory interest until the
termination of school service or State service or beginning of
service as a participant without concurrently being an active
member or inactive member on leave without pay as the board in
its sole discretion decides to allow. The board may limit salary
deduction amortization plans to such terms as the board in its
sole discretion determines. In the case of a school employee who
is an active member of the Public School Employees' Retirement
System, the agreed upon salary deductions shall be remitted to
the Public School Employees' Retirement Board, which shall
certify and transfer to the board the amounts paid.
* * *
(b) Subsequent discontinuance of service.--Upon subsequent
discontinuance of service, such [member] terminating State
employee other than a former annuitant who had the effect of his
frozen present value eliminated in accordance with subsection
(c) or a former disability annuitant shall be entitled to an
annuity which is actuarially equivalent to the sum of:
(1) the frozen present value as determined under
subsection (a) [and];
(2) if the service after reemployment was a member of
the system, the present value of a maximum single life
annuity, calculated excluding any annuity payable under
section 5702(a)(7), based on years of service credited
subsequent to reentry in the system and his final average
salary computed by reference to his compensation as a member
of the system or as a member of the Public School Employees'
Retirement System during his entire period of State and
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school service[.], including only compensation received for
service performed as a member of a class of service other
than Class CB or Class T-I in the Public School Employees'
Retirement System; and
(3) if eligible, an annuity payable under section
5702(a)(7) based on the total cash balance accumulated
deductions credited to the former annuitant in the cash
balance savings account.
(c) Elimination of the effect of frozen present value.--
(1) An annuitant who returns to State service as an
active member of the system in a class of service other than
Class CB and earns three eligibility points by performing
credited State service following the most recent period of
receipt of an annuity under this part, or an annuitant who
enters school service other than as a participant in the
School Employees' Defined Contribution Plan or as member of
Class T-I and:
(i) is a multiple service member; or
(ii) who elects multiple service membership, and
earns three eligibility points in classes of service other
than Class CB or Class T-I by performing credited State
service or credited school service following the most recent
period of receipt of an annuity under this part, and who had
the present value of his annuity frozen in accordance with
subsection (a), shall qualify to have the effect of the
frozen present value resulting from all previous periods of
retirement eliminated, provided that all lump sum payments
under Option 4 or under section 5705(a.1) and annuity
payments, except those made under section 5702(a)(7), payable
during previous periods of retirement plus interest as set
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forth in paragraph (3) shall be returned to the fund in the
form of an actuarial adjustment to his subsequent benefits or
in such form as the board may otherwise direct.
(2) Upon subsequent discontinuance of service and the
filing of an application for an annuity, a former annuitant
who qualifies to have the effect of a frozen present value
eliminated under this subsection shall be entitled to receive
the higher of either:
(i) an annuity (prior to optional modification)
calculated as if the freezing of the former annuitant's
account pursuant to subsection (a) had not occurred,
adjusted by crediting Class A State service as Class AA
service as provided for in section 5306(a.1) (relating to
classes of service) and further adjusted according to
paragraph (3), provided that a former annuitant of the
system or a former annuitant of the Public School
Employees' Retirement System who retired under a
provision of law granting additional service credit if
termination of State or school service or retirement
occurred during a specific period of time shall not be
permitted to retain the additional service credit under
the prior law when the annuity is computed for his most
recent retirement; or
(ii) an annuity (prior to optional modification)
calculated as if the former annuitant did not qualify to
have the effect of the frozen present value eliminated,
unless the former annuitant notifies the board in writing
by the later of the date the application for annuity is filed
or the effective date of retirement that the former annuitant
wishes to receive the lower annuity.
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(3) In addition to any other adjustment to the present
value of the maximum single life annuity that a member may be
entitled to receive that occurs as a result of any other
provision of law, the present value of the maximum single
life annuity shall be reduced by all amounts paid or payable
to him during all previous periods of retirement, except
those made under section 5702(a)(7), plus interest on these
amounts until the date of subsequent retirement. The interest
for each year shall be calculated based upon the annual
interest rate adopted for that fiscal year by the board for
the calculation of the normal contribution rate pursuant to
section 5508(b) (relating to actuarial cost method).
§ 5707. Death benefits.
(a) Members without Class CB service eligible for
annuities.--Any active member, inactive member on leave without
pay, combined service employee who is an active participant or
inactive participant on leave without pay, vestee or current or
former State employee performing USERRA leave who dies and does
not have Class CB service credit and was eligible for an annuity
in accordance with section 5308(a) or (b) (relating to
eligibility for annuities) or special vestee who has attained
superannuation age and dies before applying for a superannuation
annuity shall be considered as having applied for an annuity to
become effective the day before his death and in the event he
has not elected an option or such election has not been approved
prior to his death, it shall be assumed that he elected Option
1.
(b) Members without Class CB service ineligible for
annuities.--In the event of the death of a special vestee, an
active member, an inactive member on leave without pay, a
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combined service employee who is an active participant or an
inactive participant on leave without pay or a current or former
State employee performing USERRA leave who does not have Class
CB service credit and who is not entitled to a death benefit as
provided in subsection (a), his designated beneficiary shall be
paid the full amount of his total accumulated deductions.
(c) Disability annuitants eligible for withdrawal annuity.--
In the event of the death of a disability annuitant who has
elected to receive a maximum disability annuity before he has
received in annuity payments, excluding any disability annuity
payments under section 5704(a)(2) (relating to disability
annuities), an amount equal to the present value, on the
effective date of disability, of the benefits to which he would
have been entitled under subsection (a) had he died while in
State service, the balance of such amount shall be paid to his
designated beneficiary. In addition, if the disability annuitant
was receiving disability annuity payments under section 5704(a)
(2), he may receive, if eligible, the total cash balance
accumulated deductions credited to his individual cash balance
savings account on the effective date of disability over one-
third of the disability payments received under section 5704(a)
(2). For purposes of this subsection, the determination of
benefits to which the disability annuitant would have been
entitled under subsection (a) shall be made even though the
disability annuitant may have Class CB service.
(d) Disability annuitants ineligible for withdrawal
annuity.--In the event of the death of a disability annuitant
who was not entitled to receive benefits under subsection (a),
except for the reason of having Class CB service credit, his
beneficiary shall be paid the excess of the sum of the regular
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and additional accumulated deductions standing to his credit on
the effective date of disability over one-third of the total
disability payments received[.], excluding any disability
annuity payments under section 5704(a)(2). In addition, if he
was receiving disability annuity payments under section 5704(a)
(2), he may receive, if eligible, the total cash balance
accumulated deductions credited to his individual cash balance
savings account on the effective date of disability over one-
third of the disability payments received under section 5704(a)
(2).
(e) Annuitants electing maximum single life annuity.--In the
event of the death of an annuitant who has elected to receive
the maximum single life annuity before he has received in
annuity payments the full amount of the total accumulated
deductions and, if he was eligible for an annuity under section
5702(a)(7) (relating to maximum single life annuity), the total
cash balance accumulated deductions standing to his credit on
the effective date of retirement, the balance shall be paid to
his designated beneficiary.
(f) Members subject to limitations under section 5702(c).--
Subject to the limitations contained in section 401(a)(9) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(9)), the present value of any annuity in excess of that
payable under section 5702 [(relating to maximum single life
annuity)] that is not subject to the limitations under section
415(b) of the Internal Revenue Code of 1986 shall be paid in a
lump sum to the beneficiary designated by the member after the
death of the member. A beneficiary receiving a benefit under
this subsection shall not be able to elect a payment method
otherwise allowed under section 5709(b)(2) and (3) (relating to
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payment of benefits from the system).
(g) Members with Class CB service.--An active member,
inactive member on leave without pay or vestee who has Class CB
service credit who dies shall be paid the total cash balance
accumulated deductions credited to him in addition to any other
payments he would be eligible to receive under subsection (a) or
(b) calculated without regard to any annuity payable under
section 5702(a)(7).
(h) Required distributions.--All payments under this section
shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9).
Section 425. Section 5709(a) and (b) of Title 71 are amended
and the section is amended by adding subsections to read:
§ 5709. Payment of benefits from the system.
(a) Annuities.--Any annuity granted under the provisions of
this part and paid from the fund shall be paid in equal monthly
installments.
(b) Death benefits.--If the amount of a death benefit
payable from the fund to a beneficiary of a member under section
5707 (relating to death benefits) or under the provisions of
Option 1 of section 5705(a)(1) (relating to member's options) is
$10,000 or more, such beneficiary may elect to receive payment
according to one of the following options:
(1) a lump sum payment;
(2) an annuity actuarially equivalent to the amount
payable; or
(3) a lump sum payment and an annuity such that the
annuity is actuarially equivalent to the amount payable less
the lump sum payment specified by the beneficiary.
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* * *
(d) Small cash balance accounts.--A member with only Class
CB service who terminates State service and whose total cash
balance accumulated deductions are equal to or less than the
amount established under IRC §401(a)(31) as of the date of
termination of service shall be paid his accumulated deductions
in a lump sum as provided in IRC § 401(a)(31) and have all Class
CB service credit canceled. This payment of total cash balance
accumulated deductions shall not be eligible for installment
payments under section 5905.1 (relating to installment payments
of accumulated deductions) but shall be considered a lump sum
payment for purposes of section 5905.1(d).
(e) Required distributions.--All payments under this section
shall start and be made in compliance with the required
beginning date, minimum distribution requirements and incidental
death benefit rules of IRC § 401(a)(9).
Section 426. Section 5901(a), (c), (d) and (e) of Title 71
are amended and the section is amended by adding a subsection to
read:
§ 5901. The State Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and consist of [11] 12 members:
the State Treasurer, ex officio, the Secretary of Banking and
Securities, ex officio, two Senators, two members of the House
of Representatives and six members appointed by the Governor,
one of whom shall be an annuitant of the system or a participant
in the plan who has terminated State service and is receiving or
is eligible to receive distributions, for terms of four years,
subject to confirmation by the Senate. At least five board
members shall be active members of the system or active
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participants in the plan, and at least two shall have ten or
more years of credited State service[.] or shall have been
active participants in the plan for ten calendar years or have a
combination of years of credited State service in the system and
calendar years as active participants in the plan equal to ten
or more years. The chairman of the board shall be designated by
the Governor from among the members of the board. No member of
the board who represents active members or annuitants or is a
current member of the General Assembly can serve as chairman.
Each member of the board who is a member of the General Assembly
may appoint a duly authorized designee to act in his stead. In
the event that a board member, who is designated as an active
participant or as a participant in the plan who is receiving or
is eligible to receive distributions, receives a total
distribution of his interest in the plan, that board member may
continue to serve on the board for the remainder of his term.
* * *
(c) Oath of office.--Each member of the board shall take an
oath of office that he will, so far as it devolves upon him,
diligently and honestly, administer the affairs of said board,
the system and the plan and that he will not knowingly violate
or willfully permit to be violated any of the provisions of law
applicable to this part. Such oath shall be subscribed by the
member taking it and certified by the officer before whom it is
taken and shall be immediately filed in the Office of the
Secretary of the Commonwealth.
(d) Compensation and expenses.--The members of the board who
are members of the system or participants in the plan shall
serve without compensation but shall not suffer loss of salary
or wages through serving on the board. The members of the board
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who are not members of the system or participants in the plan
shall receive $100 per day when attending meetings and all board
members shall be reimbursed for any necessary expenses. However,
when the duties of the board as mandated are not executed, no
compensation or reimbursement for expenses of board members
shall be paid or payable during the period in which such duties
are not executed.
(e) Corporate power and legal advisor.--For the purposes of
this part, the board shall possess the power and privileges of a
corporation. [The Attorney General of the Commonwealth shall be
the legal advisor of the board.] Legal counsel to the board
shall serve independently from the Governor's Office of Chief
Counsel, the General Assembly and the Attorney General.
(f) Board training.--Each member of the board will be
required to obtain eight hours of mandatory training in
investment strategies, actuarial cost analysis and retirement
portfolio management on an annual basis.
Section 427. Section 5902(a.1), (b), (c), (e), (h), (i),
(j), (k), (l), (m) and (n) of Title 71 are amended and the
section is amended by adding subsections to read:
§ 5902. Administrative duties of the board.
* * *
(a.1) Secretary.--The secretary shall act as chief
administrative officer for the board with respect to both the
system and the plan. In addition to other powers and duties
conferred upon and delegated to the secretary by the board, the
secretary shall:
(1) Serve as the administrative agent of the board.
(2) Serve as liaison between the board and applicable
legislative committees, the Treasury Department, the
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Department of the Auditor General, and between the board and
the investment counsel and the mortgage supervisor in
arranging for investments to secure maximum returns to the
fund.
(3) Review and analyze proposed legislation and
legislative developments affecting the system or the plan and
present findings to the board, legislative committees, and
other interested groups or individuals.
(4) Direct the maintenance of files and records and
preparation of periodic reports required for actuarial
evaluation studies.
(5) Receive inquiries and requests for information
concerning the system or the plan from the press,
Commonwealth officials, State employees, the general public,
research organizations, and officials and organizations from
other states, and provide information as authorized by the
board.
(6) Supervise a staff of administrative, technical, and
clerical employees engaged in record-keeping and clerical
processing activities for both the system and the plan in
maintaining files of members and participants, accounting for
contributions, processing payments to annuitants and
terminated participants, preparing required reports, and
retirement counseling. The board may utilize the staff of
employees provided for under this paragraph for both the
system and the plan but shall allocate the fees, costs and
expenses incurred under this paragraph between the system and
the plan as appropriate.
(b) Professional personnel.--The board shall contract for
the services of a chief medical examiner, an actuary, investment
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advisors and counselors, and such other professional personnel
as it deems advisable. The board may, with the approval of the
Attorney General, contract for legal services. The board may
utilize the same individuals and firms contracted under this
subsection for both the system and the plan but shall allocate
the fees, costs and expenses incurred under this subsection
between the system and the plan as appropriate.
(c) Expenses.--
(1) The board shall, through the Governor, submit to the
General Assembly annually a budget covering the
administrative expenses of [this part.] the system and a
separate budget covering the administrative expenses of the
plan. Budgets under this paragraph shall include those
expenses necessary to establish the plan and trust.
(2) Such expenses of the system as approved by the
General Assembly in an appropriation bill shall be paid from
investment earnings of the fund.
(3) For fiscal years ending before July 1, 2016, such
expenses of the plan as approved by the General Assembly in
an appropriation bill shall be paid from the General Fund.
For fiscal years beginning after June 30, 2016, such expenses
of the plan as approved by the General Assembly shall be paid
from interest, under section 5414(b) (relating to investments
based on participants' investment allocation choices),
assessments on the balances of the participants' individual
investment accounts or as otherwise provided in this part.
(4) Concurrently with its administrative budget, the
board shall also submit to the General Assembly annually a
list of proposed expenditures which the board intends to pay
through the use of directed commissions, together with a list
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of the actual expenditures from the past year actually paid
by the board through the use of directed commissions. All
such directed commission expenditures shall be made by the
board for the exclusive benefit of the system and its
members.
* * *
(e) Records.--
(1) The board shall keep a record of all its proceedings
which shall be open to [inspection] access by the public,
except as otherwise provided in this part or by other law.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public [inspection]
access under the act of [June 21, 1957 (P.L.390, No.212),
referred to as the Right-to-Know Law,] February 14, 2008
(P.L.6, No.3), known as the Right-to-Know Law, if, in the
reasonable judgment of the board, the [inspection] access
would:
(i) in the case of an alternative investment or
alternative investment vehicle, involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
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of by the fund or trust or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) The following apply:
(i) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(i), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once the board is no longer required by
its agreement to maintain confidentiality.
(ii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(ii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer causes
substantial competitive harm to the person from whom
the information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from [inspection] access under
paragraph (2)(iii), to the extent not otherwise excluded
from [inspection] access, shall constitute a public
record subject to public [inspection] access under the
Right-to-Know Law once:
(A) the [inspection] access no longer has a
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substantial detrimental impact on the value of an
investment of the fund or trust and would not cause a
breach of the standard of care or fiduciary duty set
forth in this part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public [inspection] access under the Right-to-Know Law.
(5) Any record, material or data received, prepared,
used or retained by the board or its employees, or agents
relating to the contributions, account value or benefits
payable to or on account of a participant shall not
constitute a public record subject to public access under the
Right-to-Know Law if, in the reasonable judgment of the
board, the access would disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions or trustee-to-trustee
transfers, of any participant.
(ii) The investment options selections of any
participant.
(iii) The balance of a participant's individual
investment account, including the amount distributed to
the participant, investment gains or losses or rates of
return.
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(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The benefit payment option of a participant.
(6) Nothing in this subsection shall be construed to
designate any record, material or data received, prepared,
used or retained by the board or its employees, or agents
relating to the contributions, account value or benefits
payable to or on account of a participant as a public record
subject to public access under the Right-to-Know Law.
(7) The following apply:
(i) Nothing in this part shall be construed to mean
that the release or publicizing of a record, material or
data which would not constitute a public record under
this subsection shall be a violation of the board's
fiduciary duties.
(ii) This subsection shall apply to a record,
material or data under this subsection, notwithstanding
any of the following:
(A) Whether the record, material or data was
created, generated or stored before the effective
date of this paragraph.
(B) Whether the record, material or data was
previously released or made public.
(C) Whether a request for the record, material
or data was made or is pending final response under
the Right-to-Know Law.
* * *
(h) Regulations and procedures.--The board shall, with the
advice of the Attorney General and the actuary, adopt and
promulgate rules and regulations for the uniform administration
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of the system. The actuary shall approve in writing all
computational procedures used in the calculation of
contributions and benefits pertaining to the system, and the
board shall by resolution adopt such computational procedures,
prior to their application by the board. Such rules, regulations
and computational procedures as so adopted from time to time and
as in force and effect at any time, together with such tables as
are adopted pursuant to subsection (j) as necessary for the
calculation of annuities and other benefits, shall be as
effective as if fully set forth in this part. Any actuarial
assumption specified in or underlying any such rule, regulation
or computational procedure and utilized as a basis for
determining any benefit shall be applied in a uniform manner.
(i) Data.--The board shall keep in convenient form such data
as are stipulated by the actuary in order that an annual
actuarial valuation of the various accounts of the fund can be
completed within six months of the close of each calendar year.
(j) Actuarial investigation and valuation.--The board shall
have the actuary make an annual valuation of the various
accounts of the fund within six months of the close of each
calendar year. In the year 1975 and in every fifth year
thereafter the board shall have the actuary conduct an actuarial
investigation and evaluation of the system based on data
including the mortality, service, and compensation experience
provided by the board annually during the preceding five years
concerning the members and beneficiaries of the system. The
board shall by resolution adopt such tables as are necessary for
the actuarial valuation of the fund and calculation of
contributions, annuities and other benefits based on the reports
and recommendations of the actuary. Within 30 days of their
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adoption, the secretary of the board shall cause those tables
which relate to the calculation of annuities and other benefits
to be published in the Pennsylvania Bulletin in accordance with
the provisions of 45 Pa.C.S. § 725(a) (relating to additional
contents of Pennsylvania Bulletin) and, unless the board
specifies therein a later effective date, such tables shall
become effective on such publication. The board shall include a
report on the significant facts, recommendations and data
developed in each five-year actuarial investigation and
evaluation of the system in the annual financial statement
published pursuant to the requirements of subsection (m) for the
fiscal year in which such investigation and evaluation were
concluded.
(k) Certification of employer contributions to the fund.--
The board shall, each year in addition to the itemized budget
required under section 5509 (relating to appropriations and
assessments by the Commonwealth), certify, as a percentage of
the members' payroll, the shared-risk contribution rate, the
employers' contributions as determined pursuant to section 5508
(relating to actuarial cost method) necessary for the funding of
prospective annuities for active members and the annuities of
annuitants and certify the rates and amounts of the employers'
normal contributions as determined pursuant to section 5508(b),
accrued liability contributions as determined pursuant to
section 5508(c), supplemental annuities contribution rate as
determined pursuant to section 5508(e), the experience
adjustment factor as determined pursuant to section 5508(f), the
collared contribution rate pursuant to section 5508(h) and the
final contribution rate pursuant to section 5508(i), which shall
be paid to the fund and credited to the appropriate accounts.
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The board may allocate the final contribution rate and certify
various employer contribution rates and amounts based upon the
different benefit eligibility, class of service multiplier,
superannuation age, final average salary calculation,
compensation limits and other benefit differences resulting from
State service credited for individual members even though such
allocated employer contribution rate on behalf of any given
member may be more or less than 5% of the member's compensation
for the period from July 1, 2010, to June 30, 2011, or may
differ from the prior year's contribution for that member by
more or less than the percentages used to calculate the collared
contribution rate for that year and may be below any minimum
contribution rate established for the collared contribution rate
or final contribution rate. These certifications shall be
regarded as final and not subject to modification by the
Secretary of the Budget.
(l) Member contributions.--The board shall cause all pickup
contributions and cash balance member contributions made on
behalf of a member to be credited to the account of the member
and credit to his account any other payment made by such member,
including, but not limited to, amounts collected by the Public
School Employees' Retirement System for the reinstatement of
previous State service or creditable nonstate service and
amounts paid to return benefits paid after the date of return to
State service or entering school service representing lump sum
payments made pursuant to section 5705(a)(4)(iii) or (a.1)
(relating to member's options) and member's annuity payments,
but not including other benefits returned pursuant to section
5706(a.2) or (a.3) (relating to termination of annuities), and
shall pay all such amounts into the fund.
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(m) Annual financial statement.--The board shall prepare and
have published, on or before July 1 of each year, [a financial
statement] financial statements as of the calendar year ending
December 31 of the previous year showing the condition of the
fund, the trust and the various accounts, including, but not
limited to, the board's accrual and expenditure of directed
commissions, and setting forth such other facts,
recommendations, and data as may be of use in the advancement of
knowledge concerning annuities and other benefits provided by
this part. The board shall submit said financial [statement]
statements to the Governor and shall file copies with the head
of each department for the use of the State employees and the
public.
(n) Independent [audit] audits.--The board shall provide for
[an annual audit] annual audits of the system and the plan by
[an] independent certified public [accountant, which audit]
accountants. The audits shall include the board's accrual and
expenditure of directed commissions. The board may use the same
independent certified public accountant for the audits of both
the system and the plan.
* * *
(p) Additional amounts credited to the members' cash balance
savings accounts.--In addition to cash balance member
contributions and treasury bond interest on the contributions,
the board shall credit to the individual members' cash balance
savings accounts 0% of their compensation. The credited amounts
shall be credited with treasury bond interest. The board shall
further credit to the members' individual savings accounts
excess interest, if any is determined to be creditable, as
determined under subsection (q), allocated proportionally
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between the cash balance member accumulated deductions and the
percentages of compensation credited under this section, plus
past treasury bond interest and excess interest.
(q) Determination of excess interest.--
(1) As part of the actuarial valuation made under
subsection (j) for calendar year 2016, and for each
subsequent calendar year, the board shall determine the
amount potentially available from that year for distribution
as excess interest as follows:
(i) The amount shall be the product of:
(A) one-half of the investment gains and losses,
net of investment and administrative fees and costs,
above or below a rate of return of the annual
interest rate adopted by the board for the
calculation of the normal contribution rate of the
total assets in the fund; and
(B) the ratio of:
(I) the total amount credited in the cash
balance savings account; to
(II) the sum of:
(a) the total amount credited in the
cash balance savings account; and
(b) the accrued actuarial liability of
all benefits derived from all the service of
all members in all classes of service other
than Class CB.
(ii) The product under subparagraph (i) shall be
available in equal annual installments over five years.
(2) After the actuarial valuation made for calendar year
2018 and after the actuarial valuations for each subsequent
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calendar year, the board shall determine if excess interest
is to be awarded to those active members, inactive members on
leave without pay, and vestees who have Class CB service
credit on the date of the applicable actuarial valuation.
(3) For each determination period, excess interest shall
be granted if the sum of the amounts determined under
paragraph (1) for all the years of the determination period
is positive. If the sum is positive, then the percentage rate
of excess interest shall be determined by dividing this sum
by the total amount credited in the cash balance savings
account on the last day of the determination period. Each
member or inactive member on leave without pay who is not a
Class CB exempt employee and who has Class CB cash balance
member accumulated deductions on the last day of the
determination period and who is an active member, inactive
member on leave without pay or vestee on the next following
December 31 shall have excess interest at this rate credited
to his total cash balance accumulated deductions, which shall
be credited proportionally between the cash balance member
accumulated deductions and other amounts credited to his
individual cash balance savings account.
(4) The determination period for the period ending with
the actuarial valuation for calendar year 2018 shall be
calendar years 2016, 2017 and 2018. The determination period
for the period ending with the actuarial valuation for
calendar year 2019 shall be calendar years 2016, 2017, 2018
and 2019. The determination period for the periods ending
with calendar year 2020 and subsequent years shall be the
ending year and the four immediately previous calendar years.
(r) Participant and employer contributions to the trust.--
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The board shall, each year in addition to any fees and itemized
budget required under section 5509, certify, as a percentage of
each participant's compensation, the employer defined
contributions, which shall be paid to the trust and credited to
each participant's individual investment account. Certifications
under this subsection shall be regarded as final and not subject
to modification by the Secretary of the Budget. The board shall
cause all mandatory participant contributions made on behalf of
a participant and all voluntary contributions made by a
participant to be credited to the participant's individual
investment account.
Section 428. Section 5903(a) and (b) of Title 71 are amended
and the section is amended by adding a subsection to read:
§ 5903. Duties of the board to advise and report to heads of
departments [and], members and participants.
(a) Manual of regulations.--The board shall, with the advice
of the Attorney General and the actuary, prepare and provide,
within 90 days of the effective date of this part, a manual
incorporating rules and regulations consistent with the
provisions of this part to the heads of departments who shall
make the information contained therein available to the general
membership. The board shall thereafter advise the heads of
departments within 90 days of any changes in such rules and
regulations due to changes in the law or due to changes in
administrative policies. As soon as practicable after the
commissioner's announcement with respect thereto, the board
shall also advise the heads of departments as to any cost-of-
living adjustment for the succeeding calendar year in the amount
of the limitation under IRC § 401(a)(17) and the dollar amounts
of the limitations under IRC § [415(b)] 415. As soon as
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practicable after January 1 of each year, the board shall also
advise the heads of departments of the employees for whom,
pursuant to section 5502.1 (relating to waiver of regular member
contributions and Social Security integration member
contributions), pickup contributions are not to be made.
(b) Member status statements and certifications.--The board
shall furnish annually to the head of each department on or
before April 1, a statement for each member employed in such
department showing the total accumulated deductions and total
cash balance accumulated deductions standing to his credit as of
December 31 of the previous year and requesting the member to
make any necessary corrections or revisions regarding his
designated beneficiary. In addition, for each member employed in
any department and for whom the department has furnished the
necessary information, the board shall certify the number of
years and fractional part of a year of credited service
attributable to each class of service, the number of years and
fractional part of a year attributable to social security
integration credits in each class of service and, in the case of
a member eligible to receive an annuity, the benefit to which he
is entitled upon the attainment of superannuation age.
(b.1) Participant status statements.--The board shall
furnish annually to each participant, by April 1 and more
frequently as the board may agree or as required by law, a
statement for each participant in the plan showing the
accumulated total defined contributions credited to the
participant's individual investment account, the nature and type
of investments and the investment allocation of future
contributions as of December 31 of the previous year and shall
request the participant to make any necessary correction or
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revision regarding the designated beneficiary.
* * *
Section 429. Section 5904(c) of Title 71 is amended to read:
§ 5904. Duties of the board to report to the Public School
Employees' Retirement Board.
* * *
(c) Applications for benefits for school employees.--Upon
receipt of notification and the required data from the Public
School Employees' Retirement Board that a former State employee
who elected multiple service has applied for a public school
employees' retirement benefit or, in the event of his death, his
legally constituted representative has applied for such benefit,
the board shall:
(1) certify to the Public School Employees' Retirement
Board;
(i) the salary history as a member of the State
Employees' Retirement System and the final average salary
as calculated on the basis of the compensation received
as a State and school employee; and
(ii) the annuity or benefit to which the member or
his beneficiary is entitled as modified according to the
option selected; and
(2) transfer to the Public School Employees' Retirement
Fund the total accumulated deductions and cash balance member
accumulated deductions standing to such member's credit and
the actuarial reserve required on account of years of
credited service in the State system, final average salary
determined on the basis of his compensation as a member in
both systems and the average noncovered salary to be charged
to the State accumulation account, the State Police benefit
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account or the enforcement officers' benefit account, as each
case may require.
* * *
Section 430. Section 5905(b), (c.1), (e), (e.1), (f) and (g)
of Title 71 are amended and the section is amended by adding
subsections to read:
§ 5905. Duties of the board regarding applications and
elections of members.
* * *
(b) School employees electing multiple service status.--Upon
receipt of notification from the Public School Employees'
Retirement Board that a former State employee has become an
active member in the Public School Employees' Retirement System
and has elected to become a member with multiple service status
the board shall:
(1) in case of a member receiving an annuity from the
system:
(i) discontinue payments, transfer the present value
of the member's annuity other than any portion of the
member's annuity derived from cash balance member
accumulated deductions at the time of entering school
service, plus the amount withdrawn in a lump sum payment,
on or after the date of entering school service, pursuant
to section 5705 (relating to member's options), with
statutory interest to date of transfer, minus the amount
to be returned to the board on account of return to
service, that the board has determined is to be credited
in the members' savings account, from the annuity reserve
account to the members' savings account and resume
crediting of statutory interest on the amount restored to
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his credit[;] and make a similar transfer of the present
value of any portion of the member's annuity derived from
cash balance member accumulated deductions from the
annuity reserve account to the cash balance savings
account and resume crediting of treasury bond interest on
the amount so restored;
(ii) transfer the balance of the present value of
the total annuity, minus the amount to be returned to the
board on account of return to service that the board has
determined is to be credited in the State accumulation
account and the cash balance savings account, from the
annuity reserve account to the State accumulation
account; and
(iii) certify to the member the amount of lump sum
and annuity payments with statutory interest the member
is to return to the board and, of those amounts, which
amount shall be credited to the members' savings account
or the cash balance savings account and credited with
statutory interest or treasury bond interest as such
payments are returned and which amount shall be credited
to the State accumulation account; or
(2) in case of a member who is not receiving an annuity
and has not withdrawn his total accumulated deductions and
cash balance member accumulated deductions, continue or
resume the crediting of statutory interest on his total
accumulated deductions and treasury bond interest on his
total cash balance accumulated deductions during the period
his total accumulated deductions and cash balance member
accumulated deductions remain in the fund; or
(3) in case of a former State employee who is not
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receiving an annuity from the system and his total
accumulated deductions were withdrawn, certify to the former
State employee the accumulated deductions as they would have
been at the time of his separation had he been a full
coverage member together with statutory interest for all
periods of subsequent State service eligible for membership
in the system and school service as a member of the Public
School Employees' Retirement System to the date of repayment.
Such amount shall be restored by him and shall be credited
with statutory interest as such payments are restored.
* * *
(c.1) Termination of service by a member.--In the case of
any member terminating State service who is entitled to an
annuity and who is not then a disability annuitant, the board
shall advise such member in writing of any benefits from the
system to which he may be entitled under the provisions of this
part and shall have the member prepare, on or before the date of
termination of State service, one of the following three forms,
a copy of which shall be given to the member and the original of
which shall be filed with the board:
(1) an application for the return of total accumulated
deductions and cash balance member accumulated deductions;
(2) if eligible, an election to vest his retirement
rights and, if he is a joint coverage member and so desires,
elect to become a full coverage member and agree to pay
within 30 days of the date of termination of service the lump
sum required; or
(3) if eligible, an application for an immediate annuity
and, if he desires:
(i) an election to convert his medical, major
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medical and hospitalization insurance coverage to the
plan for State annuitants; and
(ii) if he is a joint coverage member, an election
to become a full coverage member and an agreement to pay
within 30 days of date of termination of service the lump
sum required.
(c.2) Termination of service by a participant.--In the case
of a participant terminating State service, the board shall
advise the participant in writing, of the vested accumulated
total defined contributions credited to the participant's
individual investment account as of the date stated in the
writing, any notices regarding rollover or other matters
required by IRC or other law, the obligation of the participant
to commence distributions from the plan by the participant's
required beginning date and the ability to receive all or part
of the vested balance in the participant's individual investment
account in a lump sum or in such other form as the board may
authorize or as required by law.
(e) Certification to vestees and special vestees terminating
service.--The board shall certify to a vestee or to a special
vestee within one year of termination of State service of such
member:
(1) the total accumulated deductions and total cash
balance accumulated deductions standing to his credit at the
date of termination of service;
(2) the number of years and fractional part of a year of
credit in each class of service; and
(3) the maximum single life annuity to which the vestee
or special vestee shall become entitled upon the attainment
of superannuation age and the filing of an application for
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such annuity.
(4) the obligation of the member to commence
distribution by the member's required beginning date.
(e.1) Notification to vestees and special vestees
approaching superannuation age.--The board shall notify each
vestee and special vestee who is not an active participant or
inactive participant on leave without pay in writing 90 days
prior to his attainment of superannuation age that he shall
apply for his annuity within 90 days of attainment of
superannuation age; that, if he does so apply, his effective
date of retirement will be the date of attainment of
superannuation age; that, if he does not so apply but defers his
application to a later date, then he has an obligation to apply
by his required beginning date and that his effective date of
retirement will be the later of the date of filing such
application or the date specified on the application[, whichever
is later; and that, if he does not file an application within
seven years after attaining superannuation age, he shall be
deemed to have elected to receive his total accumulated
deductions upon attainment of superannuation age.] which shall
not be later than his required beginning date.
(e.2) Notification to inactive participants approaching
required beginning date.--The board shall notify in writing each
inactive participant who has terminated State service and has
not commenced distribution by 90 days before the participant's
required beginning date, that the inactive participant has an
obligation to commence distributions by the required beginning
date in a form and manner required by IRC § 401(a)(9) and other
applicable provisions of the IRC.
(f) Initial annuity payment and certification.--The board
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shall make the first monthly payment to a member who is eligible
for an annuity within 60 days of the filing of his application
for an annuity or, in the case of a vestee or special vestee who
has deferred the filing of his application to a date later than
90 days following attainment of superannuation age, within 60
days of the effective date of retirement, and receipt of the
required data from the head of the department and, if the member
has Class G, Class H, Class I, Class J, Class K, Class L, Class
M or Class N service, any data required from the county
retirement system or pension plan to which the member was a
contributor before being a State employee. Concurrently, the
board shall certify to such member:
(1) the total accumulated deductions and total cash
balance accumulated deductions standing to his credit showing
separately the amount contributed by the member, the pickup
contribution and the interest credited to the date of
termination of service;
(2) the number of years and fractional part of a year
credited in each class of service;
(3) the final average salary on which his annuity is
based as well as any applicable reduction factors due to age
and/or election of an option; and
(4) the total annuity payable under the option elected
and the amount and effective date of any future reduction
under section 5703 (relating to reduction of annuities on
account of social security old-age insurance benefits).
(f.1) Initial payment to participants.--The board shall make
the initial payment to a participant who has applied for a
distribution within 60 days of the receipt of all information
necessary to process the application for a distribution.
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(g) Death benefits.--Upon receipt of notification from the
head of a department of the death of an active member, a member
performing USERRA leave [or], a member on leave without pay, an
active participant, an inactive participant on leave without pay
or a former participant performing USERRA leave, the board shall
advise the designated beneficiary of the benefits to which he is
entitled, and shall make the first payment to the beneficiary
within 60 days of receipt of certification of death and other
necessary data. If no beneficiary designation is in effect at
the date of the member's death or no notice has been filed with
the board to pay the amount of the benefits to the member's
estate, the board is authorized to pay the benefits to the
executor, administrator, surviving spouse or next of kin of the
deceased member, and payment pursuant hereto shall fully
discharge the fund from any further liability to make payment of
such benefits to any other person. If the surviving spouse or
next of kin of the deceased member cannot be found for the
purpose of paying the benefits for a period of seven years from
the date of death of the member, then the benefits shall be
escheated to the Commonwealth for the benefit of the fund. If no
beneficiary designation is in effect at the date of a
participant's death or no notice has been filed with the board
to pay the amount of the benefits to the participant's estate,
the board may pay the benefits to the surviving spouse,
executor, administrator or next of kin of the deceased
participant and payment pursuant hereto shall fully discharge
the fund from any further liability to make payment of such
benefits to any other person.
* * *
Section 431. Section 5905.1(a), (b) and (d) of Title 71 are
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amended to read:
§ 5905.1. Installment payments of accumulated deductions.
(a) General rule.--Notwithstanding any other provision of
this part, whenever a member elects to withdraw his total
accumulated deductions and cash balance member accumulated
deductions pursuant to section 5311(a) (relating to eligibility
for refunds) or 5701 (relating to return of total accumulated
deductions and cash balance member accumulated deductions) or
elects to receive a portion of his benefit payable as a lump sum
pursuant to section 5705(a)(4)(iii) or (a.1) (relating to
member's options), the member may elect to receive the amount in
not more than four installments.
(b) Payment of first installment.--The payment of the first
installment shall be made in the amount and within seven days of
the date specified by the member, except as follows:
(1) Upon receipt of a member's application to withdraw
his total accumulated deductions and cash balance member
accumulated deductions as provided in section 5311(a) or 5701
and upon receipt of all required data from the head of the
department and, if the member has Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service, any
data required from the county retirement system or pension
plan to which the member was a contributor before being
transferred to State employment, the board shall not be
required to pay the first installment prior to 45 days after
the filing of the application and the receipt of the data or
the date of termination of service, whichever is later.
(2) In the case of an election as provided in section
5705(a)(4)(iii) or (a.1) by a member terminating service
within 60 days prior to the end of a calendar year and upon
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receipt of all required data from the head of the department
and, if the member has Class G, Class H, Class I, Class J,
Class K, Class L, Class M or Class N service, any data
required from the county retirement system or pension plan to
which the member was a contributor before being transferred
to State employment, the board shall not be required to pay
the first installment prior to 21 days after the later of the
filing of the application and the receipt of the data or the
date of termination of service, but, unless otherwise
directed by the member, the payment shall be made no later
than 45 days after the filing of the application and the
receipt of the data or the date of termination of service,
whichever is later.
(3) In the case of an election as provided in section
5705(a)(4)(iii) or (a.1) by a member who is not terminating
service within 60 days prior to the end of a calendar year
and upon receipt of all required data from the head of the
department and, if the member has Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service, any
data required from the county retirement system or pension
plan to which the member was a contributor before being
transferred to State employment, the board shall not be
required to pay the first installment prior to 45 days after
the filing of the application and the receipt of the data or
the date of termination of service, whichever is later.
* * *
(d) [Statutory interest] Interest.--Any lump sum, including
a lump sum payable pursuant to section 5705.1 (relating to
payment of accumulated deductions resulting from [Class A-3 and
Class A-4] more than one class of service), or installment
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payable shall include statutory interest credited to the date of
payment on all amounts other than payment of cash balance member
accumulated deductions which shall include treasury bond
interest credited to the date of payment, except in the case of
a member, other than a vestee or special vestee, who has not
filed his application prior to 90 days following his termination
of service.
Section 432. Sections 5906(a), (b), (c), (d), (e), (g), (h),
(i), (j) and (l) and 5907(a), (c), (d), (e), (f), (g), (h) and
(i) of Title 71 are amended and the sections are amended by
adding subsections to read:
§ 5906. Duties of heads of departments.
(a) Status of members and participants.--The head of
department shall, at the end of each pay period, notify the
board in a manner prescribed by the board of salary changes
effective during that period for any members and participants of
the department, the date of all removals from the payroll, and
the type of leave of any members and participants of the
department who have been removed from the payroll for any time
during that period, and:
* * *
(i) in the case of death of the member or
participant the head of the department shall so notify
the board;
(ii) in the case of a service connected disability
of a member the head of department shall, to the best of
his ability, investigate the circumstances surrounding
the disablement of the member and submit in writing to
the board information which shall include but not
necessarily be limited to the following: date, place and
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time of disablement to the extent ascertainable; nature
of duties being performed at such time; and whether or
not the duties being performed were authorized and
included among the member's regular duties. In addition,
the head of department shall furnish in writing to the
board all such other information as may be related to the
member's disablement;
* * *
(b) Records and information.--At any time at the request of
the board and at termination of service of a member or a
participant, the head of department shall furnish service and
compensation records and such other information as the board may
require and shall maintain and preserve such records as the
board may direct for the expeditious discharge of its duties.
(c) Member contributions.--The head of department shall
cause the required pickup contributions and cash balance member
contributions for current service to be made and shall cause to
be deducted any other required member contributions, including,
but not limited to, contributions owed by an active member with
multiple service membership for school service and creditable
nonschool service in the Public School Employees' Retirement
System and amounts certified by the Public School Employees'
Retirement Board as due and owing on account of termination of
annuities, from each payroll. The head of department shall
notify the board at times and in a manner prescribed by the
board of the compensation of any noneligible member to whom the
limitation under IRC § 401(a)(17) either applies or is expected
to apply and shall cause such member's contributions deducted
from payroll to cease at the limitation under IRC § 401(a)(17)
on the payroll date if and when such limit shall be reached. The
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head of department shall certify to the State Treasurer the
amounts picked up and deducted amounts of cash balance member
contributions deducted and shall send the total amount picked up
[and] or deducted together with a duplicate of such voucher to
the secretary of the board every pay period. The head of
department shall pay pickup contributions and cash balance
member contributions from the same source of funds which is used
to pay other compensation to the employee. On or before January
31, 1997, and on or before January 31 of each year thereafter,
the head of department shall, at the time when the income and
withholding information required by law is furnished to each
member, also furnish the amount of pickup contributions and cash
balance member contributions made on his behalf and notify the
board, if it has not been previously notified, of any
noneligible member whose compensation in the preceding year
exceeded the annual compensation limit under IRC § 401(a)(17).
If the board shall determine that the member's savings account
or cash balance savings account shall have been credited with
pickup contributions or cash balance member contributions for a
noneligible member in the preceding year which are attributable
to compensation in excess of the limitation under IRC § 401(a)
(17), or with total member contributions including contributions
as a result of Class CB service for such member which would
cause such member's contributions or benefits to exceed any
applicable limitation under IRC § 401(a)(17) or 415(b), the
board shall as soon as practicable refund to the member from his
individual member account such amount, together with the
statutory interest or treasury bond interest thereon, as will
cause the member's total member contributions including
contributions as a result of Class CB service in the preceding
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year not to exceed the applicable limit. The payment of any such
refund to the member shall be charged to the member's savings
account or the member's individual cash balance savings account,
as the case may be.
(c.1) Participant and employer defined contributions.--The
head of the department shall:
(1) Cause the mandatory participant contributions on
behalf of a participant to be made and cause to be deducted
any voluntary contributions authorized by a participant.
(2) Cause the employer defined contributions on behalf
of a participant to be made.
(3) Notify the board at times and in a manner prescribed
by the board of the compensation of any participant to whom
the limitation under IRC § 401(a)(17) either applies or is
expected to apply and cause the participant's contributions
to be deducted from payroll to cease at the limitation under
IRC § 401(a)(17) on the payroll date if and when such limit
shall be reached.
(4) Certify to the State Treasurer the amounts deducted
and the employer defined contributions being made and send
the total amount picked up, deducted and contributed together
with a duplicate of the voucher to the secretary of the board
every pay period or on such schedule as established by the
board.
(d) New employees subject to mandatory membership or
participation.--Upon the assumption of duties of each new State
employee whose membership in the system or plan is mandatory,
the head of department shall cause an application for membership
or participation and a nomination of beneficiary to be made by
such employee and filed with the board and shall make pickup
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contributions, cash balance member contributions or mandatory
participant contributions from the effective date of State
employment.
(e) New employees subject to optional membership or
participation.--The head of department shall, upon the
employment or entering into office of any State employee whose
membership in the system or participation in the plan is not
mandatory, inform such employee of his opportunity to become a
member of the system or participant in the plan. If such
employee so elects, the head of department shall cause an
application for membership or participation and a nomination of
beneficiary to be made by him and filed with the board and shall
cause proper contributions to be made from the effective date of
membership or participation.
* * *
(g) Former school employee contributors.--
(1) The head of department shall, upon the employment of
a former contributor to the Public School Employees'
Retirement System who is not an annuitant of the Public
School Employees' Retirement System, advise such employee of
his right to elect within 365 days of entry into the system
to become a multiple service member, and in the case of any
such employee who so elects and has withdrawn his accumulated
deductions, require him to reinstate his credit in the Public
School Employees' Retirement System. The head of the
department shall advise the board of such election.
(2) Paragraph (1) shall not apply to a State employee
who has only Class CB service credit in the system or who has
only Class T-I credit in the Public School Employees'
Retirement System.
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(h) Former school employee annuitants.--
(1) The head of department shall, upon the employment of
an annuitant of the Public School Employees' Retirement
System who applies for membership in the system, advise such
employee that he may elect multiple service membership within
365 days of entry into the system and if he so elects his
public school employee's annuity will be discontinued
effective upon the date of his return to State service and,
upon termination of State service and application for an
annuity, the annuity will be adjusted in accordance with
section 5706 (relating to termination of annuities). The head
of department shall advise the board of such election.
(2) Paragraph (1) shall not apply to a State employee
who has only Class CB service credit in the system or who has
only Class T-I credit in the Public School Employees'
Retirement System.
(i) Annual statement to members.--Annually, upon receipt
from the board, the head of department shall furnish to each
member the statement specified in section 5903(b) (relating to
duties of the board to advise and report to heads of departments
[and], members and participants).
(j) Termination of service.--The head of department shall,
in the case of any member who does not have Class CB service,
who is terminating State service and who is ineligible for an
annuity before attainment of superannuation age, advise such
member in writing of any benefits to which he may be entitled
under the provisions of this part and shall have the member
prepare, on or before the date of termination of State service,
an application for the return of total accumulated deductions
or, on or before September 30, 1997, an application to be vested
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as a special vestee, if eligible.
* * *
(l) State employees performing USERRA or military-related
leave of absence.--The head of department shall report to the
board any State employee who ceases to be an active member or
active participant to perform USERRA service, or who is granted
a leave of absence under 51 Pa.C.S. § 4102 (relating to leaves
of absence for certain government employees) or a military leave
of absence under 51 Pa.C.S. § 7302 (relating to granting
military leaves of absence), the date on which the USERRA
service, leave of absence or military leave of absence began,
the date on which the State employee is reemployed from USERRA
leave or returns after the leave of absence or military leave of
absence, if the event occurs, and any other information the
board may require or direct.
* * *
§ 5907. Rights and duties of State employees and members.
(a) Information on new employees.--Upon his assumption of
duties or becoming a participant each new State employee or
participant shall furnish the head of department with a complete
record of his previous State service, his school service or
creditable nonstate service, and proof of his date of birth and
current status in the system and the plan and in the Public
School Employees' Retirement System and the School Employees'
Defined Contribution Plan. Willful failure to provide the
information required by this subsection to the extent available
upon entrance into the system shall result in the forfeiture of
the right of the member to subsequently assert any right to
benefits based on any of the required information which he
failed to provide. In any case in which the board finds that a
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member is receiving an annuity based on false information, the
total amount received predicated on such false information
together with statutory interest doubled and compounded shall be
deducted from the present value of any remaining benefits to
which the member is legally entitled.
* * *
(b.1) Application for participation.--On or after January 1,
2016, in the case of an employee who is not currently a
participant in the plan and whose participation is mandatory, or
in the case of an employee whose participation is not mandatory
but is permitted and who desires to become a participant in the
plan, the employee shall execute an application for
participation and a nomination of a beneficiary.
(c) Multiple service membership.--[Any active member] Any
State employee who is an active member in a class of service
other than Class CB and who was formerly an active member in the
Public School Employees' Retirement System in a class of service
other than Class T-I may elect to become a multiple service
member. Such election shall occur no later than 365 days after
becoming an active member in this system. A State employee who
is eligible to elect to become a multiple service member who
begins USERRA leave during the election period without having
elected multiple service membership may make the election within
365 days after being reemployed from USERRA leave.
(d) Credit for previous service or change in membership
status.--Any active member or eligible school employee who
desires to receive credit for the portion of his total previous
State service or creditable nonstate service to which he is
entitled, or a joint coverage member who desires to become a
full coverage member, shall so notify the board and upon written
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agreement by the member and the board as to the manner of
payment of the amount due, the member shall receive credit for
such service as of the date of such agreement.
* * *
(d.2) Contributions for USERRA leave.--Any active
participant or inactive participant on leave without pay or
former participant who was reemployed from USERRA leave who
desires to make mandatory participant contributions and
voluntary contributions for his USERRA leave shall so notify the
board within the time period required under 38 U.S.C. Ch. 43
(relating to employment and reemployment rights of members of
the uniformed services) and IRC § 414(u) of his desire to make
such contributions. Upon making the permitted mandatory
participant contributions within the allowed time period, the
head of the department shall make the corresponding employer
defined contributions at the same time.
(d.3) Voluntary contributions by a participant.--Any
participant who desires to make voluntary contributions to be
credited to his individual investment account shall notify the
board and, upon compliance with the requirements, procedures and
limitations established by the board in the plan document, may
do so subject to the limitations under IRC §§ 401(a) and 415 and
other applicable law.
(e) Beneficiary for death benefits from system.--Every
member shall nominate a beneficiary by written designation filed
with the board as provided in section 5906(d) or (e) (relating
to duties of heads of departments) to receive the death benefit
payable under section 5707 (relating to death benefits) or the
benefit payable under the provisions of Option 1 of section
5705(a)(1) (relating to member's options). Such nomination may
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be changed at any time by the member by written designation
filed with the board. A member may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit
provided under section 5707 or the benefit payable under the
provisions of Option 1 of section 5705(a)(1).
(e.1) Beneficiary for death benefits from the plan.--Every
participant shall nominate a beneficiary by written designation
filed with the board as provided in section 5906(d) or (e) to
receive the death benefit payable under section 5408 (relating
to death benefits). A participant may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit
provided under section 5408. Such nomination may be changed at
any time by the participant by written designation filed with
the board.
(e.2) Beneficiary for combined service employee.--A combined
service employee may designate or nominate different persons to
be beneficiaries, survivor annuitants and successor payees for
his benefits from the system and the plan.
(f) Termination of service by members.--Each member who
terminates State service and who is not then a disability
annuitant shall execute on or before the date of termination of
service the appropriate application, duly attested by the member
or his legally constituted representative, electing to:
(1) withdraw his total accumulated deductions and cash
balance member accumulated deductions; or
* * *
(g) Vesting of retirement rights.--If a member elects to
vest his retirement rights he shall nominate a beneficiary by
written designation filed with the board and, if the member is
not an active participant or inactive participant on leave
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without pay, he may anytime thereafter but no later than his
required beginning date, withdraw the total accumulated
deductions and cash balance member accumulated deductions
standing to his credit or apply for an annuity.
(g.1) Deferral of retirement rights.--If a participant
terminates State service and does not commence receiving a
distribution, he shall nominate a beneficiary, and he may
anytime thereafter, but no later than his required beginning
date, withdraw the vested accumulated total defined
contributions standing to his credit or apply for another form
of distribution required by law or authorized by the board.
(h) Vestees and special vestees attaining superannuation
age.--Upon attainment of superannuation age a vestee or special
vestee who is not an active participant or inactive participant
on leave without pay shall execute and file an application for
an annuity. Any such application filed within 90 days after
attaining superannuation age shall be effective as of the date
of attainment of superannuation age. Any application filed after
such period shall be filed by the member's required beginning
date and shall be effective as of the date it is filed with the
board, subject to the provisions of section 5905(f) (relating to
duties of the board regarding applications and elections of
members and participants). If a vestee or special vestee who is
not an active participant or inactive participant on leave
without pay does not file an application within seven years
after attaining superannuation age, he shall be deemed to have
elected to receive his total accumulated deductions upon
attainment of superannuation age.
(i) Failure to apply for annuity.--If a member is eligible
to receive an annuity and does not file a proper application
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within 90 days of termination of service, his annuity will
become effective as of the later of the date the application is
filed with the board or the date designated on the application
[whichever is later] which shall not be later than his required
beginning date.
* * *
Section 433. Sections 5931(b), 5932, 5933(a), 5934, 5935,
5936, 5937, 5938 and 5939 of Title 71 are amended to read:
§ 5931. Management of fund and accounts.
* * *
(b) Crediting of interest.--The board, annually, shall allow
the required interest on the mean amount for the preceding year
to the credit of each of the accounts other than the individual
investment accounts and except excess interest credited to the
cash balance savings account. The amount so allowed shall be
credited thereto by the board and transferred from the interest
reserve account. Excess interest, if any, shall be credited to
the cash balance savings account as set forth in section 5902(q)
(relating to administrative duties of the board).
* * *
§ 5932. State Employees' Retirement Fund.
(a) General rule.--The fund shall consist of all balances in
the several separate accounts set apart to be used under the
direction of the board for the benefit of members of the system;
and the Treasury Department shall credit to the fund all moneys
received from the Department of Revenue arising from the
contributions relating to or on behalf of members of the system
required under the provisions of Chapter 55 (relating to
contributions), and any income earned by the investments or
moneys of said fund. There shall be established and maintained
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by the board the several ledger accounts specified in sections
5933 (relating to members' savings account), 5934 (relating to
State accumulation account), 5935 (relating to annuity reserve
account), 5936 (relating to State Police benefit account), 5937
(relating to enforcement officers' benefit account), 5938
(relating to supplemental annuity account) and 5939 (relating to
interest reserve account) and 5942 (relating to cash balance
savings account).
(b) Individual investment accounts and trust.--The
individual investment accounts that are part of the trust shall
not be part of the fund. Mandatory participant contributions,
voluntary contributions and employer defined contributions made
under this part and any income earned by the investment of such
contributions shall not be paid or credited to the fund but
shall be paid to the trust and credited to the individual
investment accounts.
§ 5933. Members' savings account.
(a) Credits to account.--The members' savings account shall
be the ledger account to which shall be credited the amounts of
the pickup contributions made by the Commonwealth or other
employer and contributions or lump sum payments made by active
members, other than for Class CB service, in accordance with the
provisions of sections 5501 (relating to regular member
contributions and cash balance member contributions for current
service), 5501.1 (relating to shared-risk member contributions
[for Class A-3 and Class A-4 service] and shared-gain
adjustments to regular member contributions for Class A-3 and
Class A-4 service), 5502 (relating to social security
integration member contributions), 5503 (relating to joint
coverage member contributions), 5504 (relating to member
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contributions for the purchase of credit for previous State
service or to become a full coverage member), 5505.1 (relating
to additional member contributions) and 5505 (relating to
contributions for the purchase of credit for creditable nonstate
service) and transferred from the members' savings account of
the Public School Employees' Retirement System in accordance
with the provisions of section 5303.2 (relating to election to
convert school service to State service).
* * *
§ 5934. State accumulation account.
The State accumulation account shall be the ledger account to
which shall be credited all contributions of the Commonwealth or
other employers whose employees are members of the system and
made in accordance with the provisions of section 5507(a) or (d)
(relating to contributions to the system by the Commonwealth and
other employers) except that the amounts received under the
provisions of the act of May 12, 1943 (P.L.259, No.120), and the
amounts received under the provisions of the Liquor Code, act of
April 12, 1951 (P.L.90, No.21), shall be credited to the State
Police benefit account or the enforcement officers' benefit
account as the case may be. All amounts transferred to the fund
by county retirement systems or pension plans in accordance with
the provisions of section 5507(c) also shall be credited to the
State accumulation account. All amounts transferred to the fund
by the Public School Employees' Retirement System in accordance
with section 5303.2(e) (relating to election to convert school
service to State service), except amounts credited to the
members' savings account, and all amounts paid by the Department
of Corrections in accordance with section 5303.2(f) also shall
be credited to the State accumulation account. The State
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accumulation account shall be credited with valuation interest.
The reserves necessary for the payment of annuities and death
benefits resulting from membership in the system as approved by
the board and as provided in Chapter 57 (relating to benefits),
other than annuities and benefits resulting from Class CB
service, shall be transferred from the State accumulation
account to the annuity reserve account provided for in section
5935 (relating to annuity reserve account), except that the
reserves necessary on account of a member who is an officer of
the Pennsylvania State Police or an enforcement officer shall be
transferred from the State accumulation account to the State
Police benefit account provided for in section 5936 (relating to
State Police benefit account) or to the enforcement officers'
benefit account as provided for in section 5937 (relating to
enforcement officers' benefit account) as the case may be. The
reserves necessary for the payment of supplemental annuities in
excess of those reserves credited to the supplemental annuity
account on June 30, 2010, shall be transferred from the State
accumulation account to the supplemental annuity account. In the
event that supplemental annuities are increased by legislation
enacted after December 31, 2009, the necessary reserves shall be
transferred from the State accumulation account to the
supplemental annuity account. The amounts credited to the
members' individual cash balance savings accounts as provided
for in section 5902(p) shall be transferred from the State
accumulation account.
§ 5935. Annuity reserve account.
(a) Credits and charges to account.--The annuity reserve
account shall be the ledger account to which shall be credited
the reserves held for payment of annuities and death benefits on
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account of all annuitants except in the case of members who are
officers of the Pennsylvania State Police or enforcement
officers. The annuity reserve account shall be credited with
valuation interest. After the transfers provided in sections
5933 (relating to members' savings account), 5934 (relating to
State accumulation account) [and], 5938 (relating to
supplemental annuity account) and 5942 (relating to cash balance
savings account), all annuity and death benefit payments
resulting from membership in the system except those payable to
any member who retires as an officer of the Pennsylvania State
Police or an enforcement officer shall be charged to the annuity
reserve account and paid from the fund.
(b) Transfers from account.--Should an annuitant other than
a member who was retired as an officer of the Pennsylvania State
Police or an enforcement officer be subsequently restored to
active service as a member of the system or as a participant in
the plan, the present value of his member's annuity at the time
of reentry into State service shall be transferred from the
annuity reserve account and placed to his individual credit in
the members' savings account or individual cash balance savings
account, as appropriate. In addition, the actuarial reserve for
his annuity based on all classes of credited service other than
Class CB less the amount transferred to the members' savings
account shall be transferred from the annuity reserve account to
the State accumulation account. The present value of the annuity
provided by section 5702(a)(7)(relating to maximum single life
annuity) at the time of reentry in State service shall be
transferred from the annuity reserve account and placed to the
member's individual credit in the cash balance savings account.
§ 5936. State Police benefit account.
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(a) Credits and charges to account.--The State Police
benefit account shall be the ledger account to which shall be
credited all contributions received under the provisions of the
act of May 12, 1943 (P.L.259, No.120), referred to as the
Foreign Casualty Insurance Premium Tax Allocation Law, and any
additional Commonwealth or other employer contributions provided
for in section 5507 (relating to contributions to the system by
the Commonwealth and other employers) which are creditable to
the State Police benefit account. The State Police benefit
account shall be credited with the required interest. In
addition, upon the filing of an application for an annuity by a
member who is an officer of the Pennsylvania State Police, the
total accumulated deductions standing to the credit of the
member in the members' savings account, the total cash balance
accumulated deductions standing to the credit of the member in
the cash balance savings account and the necessary reserves from
the State accumulation account shall be transferred to the State
Police benefit account. Thereafter, the total annuity of such
annuitant shall be charged to the State Police benefit account
and paid from the fund.
(b) Transfers from account.--Should the said annuitant be
subsequently restored to active service as a member of the
system or as a participant in the plan, the present value of the
member's annuity at the time of reentry into State service shall
be transferred from the State Police benefit account and placed
to his individual credit in the members' savings account or
individual cash balance savings account, as appropriate. In
addition, the actuarial reserve for his annuity, based on all
classes of credited service other than Class CB, calculated as
if he had been a member of Class A if he has Class A or Class C
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service credited; as if he had been a member of Class A-3 if the
annuitant has Class A-3 State service credited; or as if he had
been a member of Class A-4 if the annuitant has Class A-4
service credited, less the amount transferred to the members'
savings account shall be transferred from the State Police
benefit account to the State accumulation account. The present
value of the annuity provided by section 5702(a)(7) (relating to
maximum single life annuity) at the time of reentry into State
service shall be transferred from the State Police benefit
account and placed to his individual credit in the cash balance
savings account. Upon subsequent retirement other than as an
officer of the Pennsylvania State Police the actuarial reserve
remaining in the State Police benefit account shall be
transferred to the appropriate reserve account.
§ 5937. Enforcement officers' benefit account.
(a) Credits and charges to account.--The enforcement
officers' benefit account shall be the ledger account to which
shall be credited moneys transferred from the enforcement
officers' retirement account in the State Stores Fund according
to the provisions of the act of April 12, 1951 (P.L.90, No.21),
known as the Liquor Code, and any additional Commonwealth or
other employer contributions provided for in section 5507
(relating to contributions to the system by the Commonwealth and
other employers) which are creditable to the enforcement
officers' benefit account. The enforcement officers' benefit
account shall be credited with the required interest. In
addition, upon the filing of an application for an annuity by a
member who is an enforcement officer of the Pennsylvania Liquor
Control Board, the total accumulated deductions standing to the
credit of the member in the members' savings account, the total
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cash balance accumulated deductions standing to the credit of
the member in the cash balance savings account and the necessary
reserves from the State accumulation account shall be
transferred to the enforcement officers' benefit account.
Thereafter, the total annuity of such annuitant shall be charged
to the enforcement officers' benefit account and paid from the
fund.
(b) Transfers from account.--Should the said annuitant be
subsequently restored to active service as a member of the
system or as a participant in the plan, the present value of the
member's annuity at the time of reentry into State service shall
be transferred from the enforcement officers' benefit account
and placed to his individual credit in the members' savings
account or individual cash balance savings account, as
appropriate. In addition, the actuarial reserve for his annuity,
based on all classes of credited service other than Class CB,
calculated as if he had been a member of Class A if the
annuitant does not have any Class AA, Class A-3 or Class A-4
service credited; as if he had been a member of Class AA if the
annuitant does have Class AA service credited; as if he had been
a member of Class A-3 if the annuitant has Class A-3 State
service credited; or as if he had been a member of Class A-4 if
the annuitant has Class A-4 service credited, less the amount
transferred to the members' savings account shall be transferred
from the enforcement officers' benefit account to the State
accumulation account. The present value of the annuity provided
by section 5702(a)(7)(relating to maximum single life annuity)
at the time of reentry into State service shall be transferred
from the enforcement officers' benefit account and placed to his
individual credit in the cash balance savings account. Upon
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subsequent retirement other than as an enforcement officer the
actuarial reserve remaining in the enforcement officers' benefit
account shall be transferred to the appropriate reserve account.
§ 5938. Supplemental annuity account.
The supplemental annuity account shall be the ledger account
to which shall be credited all contributions from the
Commonwealth and other employers in accordance with section
5507(b) (relating to contributions to the system by the
Commonwealth and other employers) for the payment of the
supplemental annuities provided in sections 5708 (relating to
supplemental annuities), 5708.1 (relating to additional
supplemental annuities), 5708.2 (relating to further additional
supplemental annuities), 5708.3 (relating to supplemental
annuities commencing 1994), 5708.4 (relating to special
supplemental postretirement adjustment), 5708.5 (relating to
supplemental annuities commencing 1998), 5708.6 (relating to
supplemental annuities commencing 2002), 5708.7 (relating to
supplemental annuities commencing 2003) and 5708.8 (relating to
special supplemental postretirement adjustment of 2002) made
before July 1, 2010, the amount transferred from the State
accumulation account to provide all additional reserves
necessary as of June 30, 2010, to pay such supplemental
annuities and adjustments, and the amounts transferred from the
State accumulation account to provide all additional reserves
necessary as a result of supplemental annuities enacted after
December 31, 2009. The supplemental annuity account shall be
credited with valuation interest. The reserves necessary for the
payment of such supplemental annuities shall be transferred from
the supplemental annuity account to the annuity reserve account
as provided in section 5935 (relating to annuity reserve
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account).
§ 5939. Interest reserve account.
The interest reserve account shall be the ledger account to
which shall be credited all income earned by the fund and to
which shall be charged all administrative and investment
expenses incurred by the fund. At the end of each year the
required interest shall be transferred from the interest reserve
account to the credit of each of the accounts of the fund in
accordance with the provisions of this subchapter. In addition,
at the end of each accounting period, the interest reserve
account shall be credited or charged with all recognized changes
in the market valuation of the investments of the fund. The
administrative and investment expenses of the board relating to
the administration of the system and investments of the fund
shall be paid from the fund out of earnings. Any surplus or
deficit in the interest reserve account at the end of each year
shall be transferred to the State accumulation account.
Section 434. Title 71 is amended by adding a section to
read:
§ 5942. Cash balance savings account.
(a) Credits to account.--The cash balance savings account
shall be the ledger account to which shall be credited the
amounts of the cash balance member contributions made by the
Commonwealth or other employers on behalf of members of Class CB
and additional amounts credited to the individual members' cash
balance savings accounts in accordance with the provisions of
section 5501 (relating to regular member contributions and cash
balance member contributions for current service) and 5902(p)
(relating to administrative duties of the board).
(b) Interest and transfers from account.--The cash balance
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savings account in total and the individual member accounts
shall be credited with treasury bond interest, and if applicable
excess interest. The total cash balance accumulated deductions
credited to a member whose application for an annuity has been
approved shall be transferred from the cash balance savings
account to the annuity reserve account provided for under
section 5935 (relating to annuity reserve account), except in
the case of a member who is an officer of the Pennsylvania State
Police or an enforcement officer the total cash balance
accumulated deductions to his credit shall be transferred from
the cash balance savings account to the State Police benefit
account provided for under section 5936 (relating to State
Police benefit account) or to the enforcement officers' benefit
account provided for under section 5937 (relating to enforcement
officers' benefit account), as the case may be.
(c) Charges to account.--Upon the election of a member to
withdraw his cash balance member accumulated deductions without
receiving a benefit or upon payment of a small cash balance
account in a lump sum as provided for under section 5709(d)
(relating to payment of benefits), the payment of such amount
shall be charged to the individual member's cash balance savings
account. Any amounts remaining in an individual member's cash
balance savings account after these charges shall be transferred
to the State accumulation account.
Section 435. Sections 5951, 5953, 5953.1, 5953.2, 5953.3 and
5953.4(a) of Title 71 are amended to read:
§ 5951. State guarantee regarding the State Employees'
Retirement System.
The required interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and other
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benefits granted by the board from the system under the
provisions of this part relating to the establishment and
administration of the system are hereby made obligations of the
Commonwealth. All income, interest, and dividends derived from
deposits and investments of the system authorized by this part
shall be used for the payment of the said obligations of the
Commonwealth and shall not be used for any obligations of the
plan or trust.
§ 5953. Taxation, attachment and assignment of funds.
(a) General rule.--
(1) Except as provided in paragraphs (2), (3) and (4),
the right of a person to any benefit or right accrued or
accruing under the provisions of this part and the moneys in
the fund and the trust are hereby exempt from any State or
municipal tax, levy and sale, garnishment, attachment,
spouse's election, the provisions of Article XIII.1 of the
act of April 9, 1929 (P.L.343, No.176), known as The Fiscal
Code, or any other process whatsoever, and no participant or
beneficiary, successor payee, or alternate payee of a
participant shall have the ability to commute, sell, assign,
alienate, anticipate, mortgage, pledge, hypothecate,
commutate or otherwise transfer or convey any benefit or
interest in an individual investment account or rights to
receive or direct distributions under this part or under
agreements entered into under this part except as otherwise
provided in this part and in the case of either a member or a
participant except for a set-off by the Commonwealth in the
case provided in subparagraph (i), and shall be unassignable
except:
(i) To the Commonwealth in the case of a member or
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participant who is terminating State service and has been
determined to be obligated to the Commonwealth for the
repayment of money owed on account of his employment or
to the fund on account of a loan from a credit union to a
member which has been satisfied by the board from the
fund.
(ii) To a credit union as security for a loan to a
member not to exceed $750 and interest not to exceed 6%
per annum discounted and/or fines thereon if the credit
union is now or hereafter organized and incorporated
under the laws of this Commonwealth and the membership of
such credit union is limited solely to officials and
employees of the Commonwealth and if such credit union
has paid to the fund $3 for each such assignment.
(2) (i) Rights under this part shall be subject to
forfeiture as provided by the act of July 8, 1978
(P.L.752, No.140), known as the Public Employee Pension
Forfeiture Act, and by or pursuant to section 16(b) of
Article V of the Constitution of Pennsylvania.
Forfeitures under this subsection or under any other
provision of law may not be applied to increase the
benefits that any member would otherwise receive under
this part.
(ii) In accordance with section 16(b) of Article V
of the Constitution of Pennsylvania and notwithstanding
this paragraph, the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture
Act, or 42 Pa.C.S. § 3352 (relating to pension rights),
the accumulated mandatory participant contributions and
accumulated voluntary contributions standing to the
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credit of a participant shall not be forfeited but shall
be available for payment of fines and restitution as
provided by law. In accordance with section 16(b) of
Article V of the Constitution of Pennsylvania, amounts in
the trust that have been ordered to be distributed to an
alternate payee as the result of an equitable
distribution of marital property as part of an approved
domestic relations order entered before the date of the
order or action in a court or other tribunal resulting in
a forfeiture of a participant's interest in the trust
shall not be subject to the provisions of the Public
Employee Pension Forfeiture Act or 42 Pa.C.S. § 3352. Any
accumulated employer defined contributions forfeited as a
result of this paragraph or other law shall be retained
by the board and notwithstanding sections 5812(2)
(relating to powers and duties of board), 5815 (relating
to expenses) and 5902(c) (relating to administrative
duties of the board) used for the payment of expenses of
the plan.
(3) Rights under this part shall be subject to
attachment in favor of an alternate payee as set forth in an
approved domestic relations order.
(4) Effective with distributions made on or after
January 1, 1993, and notwithstanding any other provision of
this part to the contrary, a distributee may elect, at the
time and in the manner prescribed by the board, to have any
portion of an eligible rollover distribution paid directly to
an eligible retirement plan by way of a direct rollover. For
purposes of this paragraph, a "distributee" includes a member
[and], a participant, a member's surviving spouse [and], a
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participant's surviving spouse, a member's former spouse who
is an alternate payee under an approved domestic relations
order[.], a participant's former spouse who is an alternate
payee under an approved domestic relations order and anyone
else authorized under the IRC and the plan terms approved by
the board to have an eligible rollover distribution paid
directly to an eligible retirement plan by way of a direct
rollover. For purposes of this paragraph, the term "eligible
rollover distribution" has the meaning given such term by IRC
§ 402(f)(2)(A), and "eligible retirement plan" has the
meaning given such term by IRC § 402(c)(8)(B), except that a
qualified trust shall be considered an eligible retirement
plan only if it accepts the distributee's eligible rollover
distribution; however, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement
plan is an "individual retirement account" or an "individual
retirement annuity" as those terms are defined in IRC §
408(a) and (b).
(b) Authorized payments from fund and trust.--The board
shall be authorized to pay from the fund and the trust:
(1) In the case of a member or participant who is
terminating service, the amount determined after
certification by the head of the department that the member
or participant is so obligated, and after review and approval
by the department or agency's legal representative or upon
receipt of an assignment from the member or participant in
the amount so certified[.], except that no payment shall be
made from the individual investment account of a participant
until the participant otherwise applies for and receives a
distribution and shall not exceed the amount of the
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distribution.
(2) In the case of a loan to a member the amount of the
loan and any fine or interest due thereon to the credit union
except 5% of the total amount due which is to be retained in
the fund as a collection fee:
(i) if the member obtaining the loan shall have been
in default in required payments for a period of not less
than two years; or
(ii) at such time as the Department of Banking shall
require the credit union to charge the amount of the loan
against the reserve fund of such credit union.
Any member who shall have pledged such rights as
security for a loan from a credit union and, on whose
behalf the board shall have made any payment by reason of
that member's default, may not thereafter pledge or
assign such rights to a credit union.
(3) In the case of a participant whose former spouse is
an alternate payee of an equitable distribution of marital
assets under an approved domestic relations order, a lump sum
of the alternate payee's interest in the participant's
accumulated total defined contributions. This paragraph shall
apply without regard to whether the participant has not
terminated, is terminating or has terminated State service.
§ 5953.1. Approval of domestic relations orders.
(a) Certification regarding members.--A domestic relations
order pertaining to a member of the system shall be certified as
an approved domestic relations order by the secretary of the
board, or his designated representative, only if that order
meets all of the following:
(1) Requires the system to provide any type or form of
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benefit or any option applicable to members already provided
under this part.
(2) Requires the system to provide no more than the
total amount of benefits than the member would otherwise
receive (determined on the basis of actuarial value) unless
increased benefits are paid to the member or alternate payee
based upon cost-of-living increases or increases based on
other than actuarial value.
(3) Specifies the amount or percentage of the member's
benefits to be paid by the system to each such alternate
payee or the manner in which such amount or percentage is to
be determined.
(4) Specifies the retirement option to be selected by
the member upon retirement or states that the member may
select any retirement option offered by this part upon
retirement.
(5) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(6) Does not grant an alternate payee any of the rights,
options or privileges of a member under this part.
(7) Requires the member to execute an authorization
allowing each alternate payee to monitor the member's
compliance with the terms of the domestic relations order
through access to information concerning the member
maintained by the system. An authorization granted pursuant
to this section shall be construed as an authorization for
the alternate payee to receive information concerning the
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administration, calculation and payment of the alternate
payee's share of the benefits payable pursuant to this part
and not as an authorization to exercise the rights afforded
to members or obtain information which is not related to the
administration, calculation and payment of alternate payee's
share of the benefits payable pursuant to this part.
(a.1) Certification regarding participants.--A domestic
relations order pertaining to a participant shall be certified
as an approved domestic relations order by the secretary of the
board or his designated representative if that order meets all
of the following:
(1) Does not require the plan to provide a type or form
of benefit or an option applicable to members of the system
or participants in the plan.
(2) Does not require the segregation of the alternate
payee's share of the participant's individual investment
account into a subaccount or newly established individual
account titled in the name of the alternate payee.
(3) Does not require the plan to recover or distribute
funds which were distributed to the participant or at the
participant's direction prior to the approval of the domestic
relations order by the secretary of the board or his
designated representative.
(4) Requires the plan to pay to the alternate payee no
more than the lesser of the vested amount of the
participant's individual investment account specified by the
domestic relations order or the vested amount of the
participant's individual investment account as of the date of
the transfer of the alternate payee's share to the alternate
payee.
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(5) States that the plan shall not be required to recoup
or make good for losses in value to the participant's
individual investment account incurred between the date of
the valuation of the account used for equitable distribution
purposes and the date of distribution to the alternate payee.
(6) Specifies the amount or percentage of the
participant's individual investment account to be paid to the
alternate payee and the date upon which such valuation is
based.
(7) Specifies the name and last known mailing address,
if any, of the participant and the name and last known
mailing address of each alternate payee covered by the order
and states that it is the responsibility of each alternate
payee to keep a current mailing address on file with the
plan.
(8) Does not grant an alternate payee the rights,
privileges or options available to a participant.
(9) Requires the participant to execute an authorization
allowing each alternate payee to monitor the participant's
compliance with the terms of the domestic relations order
through access to information concerning the participant
maintained by the plan. An authorization granted pursuant to
this section shall be construed as an authorization for the
alternate payee to receive information concerning the
participant which relates to the administration, calculation
and payment of the alternate payee's share of the
participant's account and not as an authorization to exercise
the rights afforded to participants or obtain information
which is not related to the administration, calculation and
payment of alternate payee's share of the participant's
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individual investment account.
(10) Requires the immediate distribution of the
alternate payee's share of the participant's individual
investment account, which may be by direct payment, eligible
rollover or trustee-to-trustee transfer to another eligible
plan or qualified account owned by the alternate payee,
notwithstanding any other provision of this part or the plan
that would require a distribution of accumulated employer
defined contributions in the form of an annuity or to require
the purchase of an annuity.
(11) In the case of a participant who is currently
receiving distributions from the trust as of the date the
domestic relations order is approved by the secretary of the
board or his designated representative, may not order the
board to pay the alternate payee more than the balance
available in the participant's individual investment account
as of the date the order is approved or require that
distributions continue to the alternate payee after the death
of the participant and final settlement of the participant's
individual investment account.
(b) Determination by secretary.--Within a reasonable period
after receipt of a domestic relations order, the secretary of
the board, or his designated representative, shall determine
whether this order is an approved domestic relations order and
notify the member or participant and each alternate payee of
this determination. Notwithstanding any other provision of law,
the exclusive remedy of any member, participant or alternate
payee aggrieved by a decision of the secretary of the board, or
his designated representative, shall be the right to an
adjudication by the board under 2 Pa.C.S. Ch. 5 Subch. A
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(relating to practice and procedure) with appeal therefrom to
the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to
judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct
appeals from government agencies).
(c) Other orders.--The requirements for approval identified
in [subsection (a)] subsections (a) and (a.1) shall not apply to
any domestic relations order which is an order for support as
the term is defined at 23 Pa.C.S. § 4302 (relating to
definitions) or an order for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages). These orders shall be approved to the extent that
they do not attach moneys in excess of the limits on attachments
as established by the laws of the United States and this
Commonwealth[.], require distributions of benefits in a manner
which would violate the laws of the United States, any other
state or this Commonwealth or require the distribution of funds
for support or enforcement of arrearages against a participant
who is not receiving distributions from the plan at the time the
order is entered. These orders may be approved notwithstanding
any other provision of this part or the plan that would require
a distribution of accumulated employer defined contributions in
the form of an annuity or to require the purchase of an annuity.
(d) Obligation discharged.--Only the requirements of this
part and any regulations promulgated hereunder shall be used to
govern the approval or disapproval of a domestic relations
order. Therefore, if the secretary of the board, or his
designated representative, acts in accordance with the
provisions of this part and any promulgated regulations in
approving or disapproving a domestic relations order, then the
obligations of the system or the plan with respect to such
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approval or disapproval shall be discharged.
§ 5953.2. Irrevocable beneficiary.
Notwithstanding any other provision of this part, a domestic
relations order may provide for an irrevocable beneficiary. A
domestic relations order requiring the nomination of an
irrevocable beneficiary shall be deemed to be one that requires
a member or participant to nominate an alternate payee as a
beneficiary and that prohibits the removal or change of that
beneficiary without approval of a court of competent
jurisdiction, except by operation of law. Such a domestic
relations order may be certified as an approved domestic
relations order by the secretary of the board, or his designated
representative, after the member or participant makes such
nomination, in which case the irrevocable beneficiary so ordered
by the court cannot be changed by the member or participant
without approval by the court.
§ 5953.3. Irrevocable survivor annuitant.
Notwithstanding any other provisions of this part, a domestic
relations order pertaining to a member may provide for an
irrevocable survivor annuitant. A domestic relations order
requiring the designation of an irrevocable survivor annuitant
shall be deemed to be one that requires a member to designate an
alternate payee as a survivor annuitant and that prohibits the
removal or change of that survivor annuitant without approval of
a court of competent jurisdiction, except by operation of law.
Such a domestic relations order may be certified as an approved
domestic relations order by the secretary of the board, or his
designated representative, in which case the irrevocable
survivor annuitant so ordered by the court cannot be changed by
the member without approval by the court. A person ineligible to
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be designated as a survivor annuitant may not be designated as
an irrevocable survivor annuitant.
§ 5953.4. Amendment of approved domestic relations orders.
(a) Deceased alternate payee.--In the event that the
alternate payee predeceases the member or the participant and
there are benefits payable to the alternate payee, the divorce
court may amend the approved domestic relations order to
substitute a person for the deceased alternate payee to receive
any benefits payable to the deceased alternate payee.
* * *
Section 436. Title 71 is amended by adding a section to
read:
§ 5953.6. Irrevocable successor payee.
(a) Condition.--Notwithstanding any other provision of this
part, a domestic relations order pertaining to a participant may
provide for an irrevocable successor payee if the participant is
receiving a payment pursuant to a payment option provided by the
board that allows for a successor payee.
(b) Determination.--A domestic relations order requiring the
designation of an irrevocable successor payee shall be deemed to
be one that requires a participant who is receiving payments
from an annuity or other distribution option to designate an
alternate payee as a successor payee and that prohibits the
removal or change of the successor payee without approval of a
court of competent jurisdiction, except by operation of law.
(c) Certification.--A domestic relations order under
subsection (b) may be certified as an approved domestic
relations order by the secretary of the board or his designated
representative. If a domestic relations order is certified under
this subsection, the irrevocable successor payee named in such
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order shall not be changed by the participant without approval
by the court.
(d) Ineligibility.--A person ineligible to be designated as
a successor payee shall not be designated as an irrevocable
successor payee. A court shall not name an irrevocable successor
payee if the alternate payee is eligible to receive a lump sum
distribution of the alternate payee's portion of the marital
portion of the pension benefit.
Section 437. Sections 5954, 5955 and 5957 of Title 71 are
amended to read:
§ 5954. Fraud and adjustment of errors.
(a) Penalty for fraud.--Any person who shall knowingly make
any false statement or shall falsify or permit to be falsified
any record or records of this system or plan in any attempt to
defraud the system or plan as a result of such act shall be
guilty of a misdemeanor of the second degree.
(b) Adjustment of errors.--Should any change or mistake in
records result in any member, participant, beneficiary [or],
survivor annuitant or successor payee receiving from the system
or plan more or less than he would have been entitled to receive
had the records been correct, then regardless of the intentional
or unintentional nature of the error and upon the discovery of
such error, the board shall correct the error and if the error
affected contributions to or payments from the system, then so
far as practicable shall adjust the payments which may be made
for and to such person in such a manner that the actuarial
equivalent of the benefit to which he was correctly entitled
shall be paid. If the error affected contributions to or
payments from the plan, the board shall take action as provided
for in the plan document.
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§ 5955. Construction of part.
(a) Exclusive source of rights and benefits.--Regardless of
any other provision of law, pension and benefit rights of State
employees shall be determined solely by this part or any
amendment thereto or the plan document established by the board,
and no collective bargaining agreement nor any arbitration award
between the Commonwealth and [its] other employers and the
Commonwealth's and other employer's employees or their
collective bargaining representatives shall be construed to
change any of the provisions herein, to require the board to
administer pension or retirement benefits not set forth in this
part or not established by the board in the plan document, to
require the board to modify, amend or change any of the terms
and provisions of the plan document, or otherwise require action
by any other government body pertaining to pension or retirement
benefits or rights of State employees. Notwithstanding the
foregoing, any pension or retirement benefits or rights
previously so established by or as a result of an arbitration
award shall remain in effect after the expiration of the current
collective bargaining agreement between the State employees so
affected and the Commonwealth until the expiration of each of
the collective bargaining agreements in effect on January 1,
2011, at which time the classes of membership and resulting
member contribution rates and contributions for creditable
nonstate service, eligibility for vesting, withdrawal and
superannuation annuities, optional modification of annuities and
other terms and conditions related to class of membership shall
be as determined by this part for employees covered by those and
successor collective bargaining agreements. For purposes of
administering this part, for those State employees who are
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members of each such collective bargaining unit, the date
January 1, 2011, contained in this part, except in this section,
shall be replaced with the date of the day immediately following
the expiration of each such collective bargaining agreement. The
provisions of this part insofar as they are the same as those of
existing law are intended as a continuation of such laws and not
as new enactments. The provisions of this part shall not affect
any act done, liability incurred, right accrued or vested, or
any suit or prosecution pending or to be instituted to enforce
any right or penalty or to punish any offense under the
authority of any repealed laws.
(b) References.--References in this part to the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.)
or the Uniformed Services Employment and Reemployment Rights Act
of 1994 (Public Law 103-353, 108 Stat. 3149), including
administrative regulations promulgated under the Internal
Revenue Code of 1986 or the Uniformed Services Employment and
Reemployment Rights Act of 1994, are intended to include laws
and regulations:
(1) In effect on the effective date of this subsection.
(2) Amended, supplemented or supplanted on and after the
effective date of this subsection.
(c) Officer or member of the Pennsylvania State Police.--
(1) Notwithstanding a provision of subsection (a) or
section 12.1 of Act 120 of 2010, regarding the continued
effectiveness of pension or retirement benefits or rights
previously established by or as a result of a binding
arbitration award issued before July 1, 1989, pursuant to the
act of June 24, 1968 (P.L.237, No.111), referred to as the
Policemen and Firemen Collective Bargaining Act, and
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implemented by the board, the pension or retirement benefits
or rights of a State employee who is a current or former
State police officer shall be as provided in this part as if
the binding arbitration award was not issued, except as
provided under this subsection.
(2) A State employee who is a current or former State
police officer who terminates State service before January 1,
2016, shall be eligible to receive the maximum single life
annuity, before optional modification under section 5705
(relating to member's options), which the State employee
would have been eligible to receive if paragraph (1) had not
been enacted.
(3) A State employee who meets the following shall be
eligible to receive the maximum single life annuity, before
optional modification under section 5705, which the State
employee would have been eligible to receive if paragraph (1)
had not been enacted:
(i) is a current or former State police officer;
(ii) has 20 or more qualifying eligibility points;
(iii) does not have service credited in Class CB;
and
(iv) terminates State service on or after January 1,
2016.
(4) A State employee who meets all of the requirements
in paragraph (3) other than the requirement in paragraph (3)
(iii) shall be able to receive an annuity calculated under
section 5702(a)(7) in addition to the maximum single life
annuity, before optional modification under section 5705,
which the State employee would have been eligible to receive
if paragraph (1) had not been enacted.
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(5) A State employee who is a current or former State
police officer who does not have 20 or more qualifying
eligibility points shall be eligible to receive a maximum
single life annuity before optional modification under
section 5705 equal to the maximum single life annuity that
the State employee is eligible to receive under this part ,
including an annuity calculated under section 5702(a)(7) .
(6) To the extent that any officer or member of the
Pennsylvania State Police who is eligible to retire after
June 30, 1989, as provided in a binding arbitration award
issued before July 1, 1989, under the act of June 24, 1968
(P.L.237, No.111), referred to as the Policemen and Firemen
Collective Bargaining Act, as implemented by the board, with
a benefit based on 50% of highest year salary upon accruing
at least 20 years of credited State service or nonstate
service in the system or based on 75% of highest year salary
upon accruing at least 25 years of credited State or nonstate
service in the system, the eligibility shall be determined
solely on service credited, compensation paid and
contributions made as a member of the system other than as a
member of Class CB.
(7) Service as a State police officer credited in the
system shall not operate to prevent any State employee from
being a participant in the plan for any State service that
would otherwise result in participation in the plan. Any
State service performed, compensation paid and contributions
made as a participant in the plan or as a member of Class CB
shall not be included in determining eligibility for and the
amount of benefits provided from the system , except as
provided in paragraphs (4) and (5), provided that actual
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payment and receipt of benefits is subject to the provisions
of this part regarding employment and termination as a State
employee. Any benefit resulting from participation in the
plan shall be in addition to any benefit a State police
officer may be eligible to receive as a member of the system.
(8) For the purposes of this subsection, the following
terms shall have the meanings given to them in this
paragraph:
"Act 120 of 2010." The act of November 23, 2010
(P.L.1269, No.120), entitled "An act amending Titles 24
(Education) and 71 (State Government) of the Pennsylvania
Consolidated Statutes, in Title 24, further providing for
definitions, for mandatory and optional membership, for
contributions by the Commonwealth, for payments by employers,
for actuarial cost method, for additional supplemental
annuities, for further additional supplemental annuities, for
supplemental annuities commencing 1994, for supplemental
annuities commencing 1998, for supplemental annuities
commencing 2002, for supplemental annuities commencing 2003,
for administrative duties of board, for payments to school
entities by Commonwealth, for eligibility points for
retention and reinstatement of service credits and for
creditable nonschool service; providing for election to
become a Class T-F member; further providing for classes of
service, for eligibility for annuities, for eligibility for
vesting, for regular member contributions, for member
contributions for creditable school service, for
contributions for purchase of credit for creditable nonschool
service, for maximum single life annuity, for disability
annuities, for member's options, for duties of board
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regarding applications and elections of members and for
rights and duties of school employees and members; providing
for Independent Fiscal Office study; in Title 71,
establishing an independent fiscal office and making a
related repeal; further providing for definitions, for
credited State service, for retention and reinstatement of
service credits, for creditable nonstate service and for
classes of service; providing for election to become a Class
A-4 member; further providing for eligibility for annuities
and for eligibility for vesting; providing for shared-risk
member contributions for Class A-3 and Class A-4 service;
further providing for waiver of regular member contributions
and Social Security integration member contributions, for
member contributions for purchase of credit for previous
State service or to become a full coverage member, for
contributions for the purchase of credit for creditable
nonstate service, for contributions by the Commonwealth and
other employers, for actuarial cost method, for maximum
single life annuity, for disability annuities and for
member's options; providing for payment of accumulated
deductions resulting from Class A-3 service; further
providing for additional supplemental annuities, for further
additional supplemental annuities, for supplemental annuities
commencing 1994, for supplemental annuities commencing 1998,
for supplemental annuities commencing 2002, for supplemental
annuities commencing 2003, for special supplemental
postretirement adjustment of 2002, for administrative duties
of the board, for duties of board to advise and report to
heads of departments and members, for duties of board
regarding applications and elections of members, for
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installment payments of accumulated deductions, for rights
and duties of State employees and members, for members'
savings account, for State accumulation account, for State
Police Benefit Account, for Enforcement Officers' Benefit
Account, for supplemental annuity account and for
construction of part; and providing for Independent Fiscal
Office study, for retirement eligibility of Pennsylvania
State Police officers or members, for a prohibition on the
issuance of pension obligation bonds, for holding certain
public officials harmless, for construction of calculation or
actuarial method, for applicability and for certain
operational provisions."
"Binding arbitration award." A binding arbitration award
issued before July 1, 1989, pursuant to the act of June 24,
1968 (P.L.237, No.111), referred to as the Policemen and
Firemen Collective Bargaining Act, and was implemented by the
State Employees' Retirement Board.
"Qualifying eligibility points." Eligibility points as a
result of State service in a class of service other than
class CB, nonstate service or being reemployed from USERRA
leave.
(d) Adverse inference.--Nothing in this part shall be
construed to mean that the limitations on benefits or other
requirements under IRC § 401(a) or other applicable provisions
of the IRC which are applicable to participants in the plan do
not apply to the participants or to members of the system and
the benefits payable under this part.
(e) Applicability.--The amendment of this part regarding the
establishment of and participation in the plan shall apply to an
elected officer who is elected or reelected to a term of office
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that begins on or after January 1, 2016, notwithstanding that
either immediately or at any time prior to beginning a term of
office on or after January 1, 2016, the elected officer was an
active member of the system or inactive member on leave without
pay. An individual who is elected or reelected to a term of
office as a member of the General Assembly that begins on or
after January 1, 2016:
(1) does so with the knowledge of the provisions, terms
and conditions of this part, including those provisions,
terms and conditions establishing the plan and determining
participation in the plan and membership in the system; and
(2) expressly consents to those provisions, terms and
conditions and the resulting contributions, obligations,
benefits and rights, or lack of contributions, obligations,
benefits and rights in the system and the plan.
(f) Furloughs.--For purposes of sections 5301(a)(17)
(relating to credited State service), 5306 (relating to classes
of service) and this section, a State employee who is furloughed
under section 802 of the act of August 5, 1941 (P.L.752,
No.286), known as the Civil Service Act, and reemployed pursuant
to the Civil Service Act in any class of service or civil
service status which was previously held, shall not be treated
as having been terminated from State service and beginning a new
period of State service.
§ 5957. Independent Fiscal Office study.
The Independent Fiscal Office shall study and analyze the
implementation of shared-risk contributions under section 5501.1
(relating to shared-risk member contributions [for Class A-3 and
Class A-4 service] and shared-gain adjustments to regular member
contributions for Class A-3 and Class A-4 service) and its
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impact on the system. The study shall be completed by December
31, 2015, and shall be transmitted to the Appropriations
Committee and the Finance Committee of the Senate, the
Appropriations Committee and the Finance Committee of the House
of Representatives and to the Governor.
Section 438. Title 71 is amended by adding a section to
read:
§ 5958. Public Pension Management and Asset Investment Review
Commission.
(a) Establishment.--A Public Pension Management and Asset
Investment Review Commission shall be established, which shall
be composed of three appointees of each of the following:
(1) Governor;
(2) President Pro tempore of the Senate; and
(3) Speaker of the House of Representatives.
The appointees shall be investment professionals and retirement
advisors and shall be appointed within 90 days of the effective
date of this section.
(b) Duties.--The duties of the Public Pension Management and
Asset Investment Review Commission are as follows:
(1) Study the performance of current investment
strategies and procedures of the State Employees' Retirement
System, comparing realized rates of return to established
benchmarks and considering associated fees paid for active
and passive management.
(2) Study the costs and benefits of both active and
passive investment strategies in relation to future
investment activities of the State Employees' Retirement
System.
(3) Study alternative future investment strategies with
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available assets of the State Employees' Retirement System
that will maximize future rates of return net of fees.
(4) Publish extensive and detailed findings on-line,
including findings about:
(i) assets;
(ii) returns;
(iii) financial managers;
(iv) consultants;
(v) requests for proposals; and
(vi) investment performance measured against
benchmarks.
(5) Report its findings and recommendations to the
Governor and the General Assembly within six months of its
first organizational meeting.
(c) Quorum.--A majority of appointed members shall
constitute a quorum for the purpose of conducting business. The
members shall select one of their number to be chairperson and
another to be the vice-chairperson.
(d) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission shall be subject to the
following laws:
(1) The act of July 19, 1957 (P.L.1017, No.451), known
as the State Adverse Interest Act.
(2) The act of October 4, 1978 (P.L.883, No.170), known
as the Public Official and Employee Ethics Act.
(3) The act of July 3, 1986 (P.L.388, No.84), known as
the Sunshine Act.
(4) The act of February 14, 2008 (P.L.6, No.3), known as
the Right-to-Know Law.
(e) Information gathering.--The Public Pension Management
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and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate and necessary to fulfill its duties.
(f) Transparency and ethics.--The Public Pension Management
and Asset Investment Review Commission may conduct hearings and
otherwise gather pertinent information and analysis that it
considers appropriate.
(g) Logistical and other support.--The Public Pension
Management and Asset Investment Review Commission shall receive
logistical and other support from the Joint State Government
Commission and may employ additional temporary staff as needed.
(h) Reimbursement.--The members of the Public Pension
Management and Asset Investment Review Commission shall be
reimbursed for reasonable expenses.
(i) Expiration.--The Public Pension Management and Asset
Investment Review Commission shall expire 60 days after delivery
of its report in accordance with subsection (b)(5). Any unspent
appropriation shall lapse back to the General Fund.
ARTICLE V
Section 501. The following shall apply:
(1) The following provisions shall not create in a
member of the Public School Employees' Retirement System, a
participant in the School Employees' Defined Contribution
Plan or another person claiming an interest in the account of
a member or participant an express or implied contractual
right in the provisions nor in a construction of 24 Pa.C.S.
Pt. IV, 51 Pa.C.S. or regulations adopted under 24 Pa.C.S.
Pt. IV or 51 Pa.C.S.:
(i) A provision of this act which amends 51 Pa.C.S.
or 24 Pa.C.S. Pt. IV in relation to requirements for any
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of the following:
(A) (Reserved).
(B) Qualification of the School Employees'
Defined Contribution Plan as a qualified pension plan
under the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. §§ 401(a) and 415(b)), or
compliance with the Uniformed Services Employment and
Reemployment Rights Act of 1994 (Public Law 103-353,
108 Stat. 3149).
(C) Contributions to, participation in or
benefits from the School Employees' Defined
Contribution Plan or School Employees' Defined
Contribution Trust.
(D) Domestic relations orders regarding
alternate payees of participants in the School
Employees' Defined Contribution Plan.
(ii) A construction of 24 Pa.C.S. Pt. IV or 51
Pa.C.S. or regulations adopted under 24 Pa.C.S. Pt. IV or
51 Pa.C.S. or a term or provision of the School
Employees' Defined Contribution Plan or School Employees'
Defined Contribution Trust, established by statute or in
the plan document or trust declaration.
(2) The provisions of 24 Pa.C.S. Pt. IV shall remain
subject to the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), and regulations
under those statutes, and the General Assembly reserves to
itself the further exercise of its legislative power to amend
or supplement the provisions as may be required in order to
maintain the qualification of the system as a qualified
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pension plan under section 401(a) and other applicable
provisions of the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149).
(3) The following provisions shall not create in a
member of the State Employees' Retirement System, a
participant in the State Employees' Defined Contribution Plan
or another person claiming an interest in the account of a
member or participant an express or implied contractual right
in the provisions nor in a construction of 51 Pa.C.S. § 7306,
71 Pa.C.S. Pt. XXV, or regulations adopted under 51 Pa.C.S. §
7306 or 71 Pa.C.S. Pt. XXV:
(i) A provision of this act which amends 51 Pa.C.S.
§ 7306 or 71 Pa.C.S. Pt. XXV in relation to requirements
for any of the following:
(A) (Reserved)
(B) Qualification of the State Employees'
Defined Contribution Plan as a qualified pension plan
under the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. §§ 401(a) and 415(b)) or compliance
with the Uniformed Services Employment and
Reemployment Rights Act of 1994 (Public Law 103-353,
108 Stat. 3149).
(C) Contributions to, participation in or
benefits from the State Employees' Defined
Contribution Plan or State Employees' Defined
Contribution Trust.
(D) Domestic relations orders regarding
alternate payees of participants in the State
Employees' Defined Contribution Plan.
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(ii) A construction of 51 Pa.C.S. or 71 Pa.C.S. Pt.
XXV or regulations adopted under 51 Pa.C.S. or 71 Pa.C.S.
Pt. XXV or a term or provision of the State Employees'
Defined Contribution Plan or State Employees' Defined
Contribution Trust, established by statute or in the plan
document or trust declaration.
(4) The provisions of 71 Pa.C.S. Pt. XXV shall remain
subject to the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), and regulations
under those statutes, and the General Assembly reserves to
itself the further exercise of its legislative power to amend
or supplement the provisions as may be required in order to
maintain the qualification of the system as a qualified
pension plan under section 401(a) and other applicable
provisions of the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149).
Section 502. The following shall apply:
(1) Nothing in this act shall be construed to mean that
a calculation or actuarial method used by the School
Employees' Retirement Board, its actuaries or the Public
School Employees' Retirement System was not in accordance
with the provisions of 24 Pa.C.S. Pt. IV or other applicable
law prior to the effective date of this section.
(2) Nothing in this act shall be construed to mean that
a calculation or actuarial method used by the State
Employees' Retirement Board, its actuaries or the State
Employees' Retirement System was not in accordance with the
provisions of 71 Pa.C.S. Pt. XXV or other applicable law
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prior to the effective date of this section.
Section 503. The following shall apply:
(1) (i) Payments required to fund a change in accrued
liability resulting from this act shall be subject to
limits imposed under 24 Pa.C.S. § 8328(g) on employer
contributions to the Public School Employees' Retirement
System.
(ii) For purposes of 24 Pa.C.S. §§ 8326, 8327, and
8328, changes under this act shall not be considered to
be costs added by legislation.
(2) Notwithstanding any other provision of law, a change
in accrued liability of the State Employees' Retirement
System created under this act as a result of changes in
benefits shall be funded in equal dollar installments over a
period of 30 years beginning July 1, 2016.
(3) (Reserved).
(4) Payments required to fund a change in accrued
liability resulting from this act shall be subject to limits
imposed under 71 Pa.C.S § 5508(h) on employer contributions
to the State Employees' Retirement System.
(5) For purposes of 71 Pa.C.S. §§ 5501.2, 5507 and 5508,
changes under this act shall not be considered to be costs
added by legislation.
Section 504. The following shall apply:
(1) This act shall be construed and administered in such
a manner that the Public School Employees' Retirement System
and the School Employees' Defined Contribution Plan shall
satisfy the requirements necessary to qualify as a qualified
pension plan under section 401(a) of the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)), other
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applicable provisions of the Internal Revenue Code of 1986
and the Uniformed Services Employment and Reemployment Rights
Act of 1994 (Public Law 103-353, 108 Stat. 3149). The rules,
regulations and procedures adopted and promulgated by the
Public School Employees' Retirement Board and the terms and
conditions of the plan document and trust declaration adopted
by the Public School Employees' Retirement Board may include
provisions necessary to accomplish the purpose of this
section.
(2) This act shall be construed and administered in a
manner that the State Employees' Retirement System and the
State Employees' Defined Contribution Plan shall satisfy the
requirements necessary to qualify as a qualified pension plan
under section 401(a) of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 401(a)), other applicable
provisions of the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149). The rules,
regulations and procedures adopted and promulgated by the
State Employees' Retirement Board and the terms and
conditions of the plan document and trust declaration adopted
by the State Employees' Retirement Board may include
provisions necessary to accomplish the purpose of this
section.
Section 505. The following shall apply:
(1) Notwithstanding any other provision of law,
fiduciary requirement, actuarial standard of practice or
other requirement, the members of the Public School
Employees' Retirement Board, the actuary and employees and
officials of the Public School Employees' Retirement System
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may not be held liable or in breach or violation of a law or
standard as individuals, in their official capacity or as a
governmental or corporate entity, for an action or
calculation related to calculating and certifying a final
contribution rate as provided under this act that is
different from the actuarially required contribution rate as
appropriately calculated under 24 Pa.C.S. Pt. IV.
(2) Notwithstanding any other provision of law,
fiduciary requirement, actuarial standard of practice or
other requirement, the members of the State Employees'
Retirement Board, the actuary and other employees and
officials of the State Employees' Retirement System may not
be held liable or in breach or violation of a law or standard
as individuals, in their official capacity or as a
governmental or corporate entity, for an action or
calculation related to calculating and certifying a final
contribution rate as provided under this act that is
different from the actuarially required contribution rate as
appropriately calculated under 71 Pa.C.S. Pt. XXV.
Section 506. Nothing in this act shall be deemed to permit
the restoration of service credit or retirement benefits which:
(1) were or are subject to section 16 of Article V of
the Constitution of Pennsylvania or 42 Pa.C.S. § 3352; or
(2) were or are the subject of an order of forfeiture
under the act of July 8, 1978 (P.L.752, No.140), known as the
Public Employee Pension Forfeiture Act.
Section 507. (Reserved).
Section 508. If a provision of this act or its application
to any person or circumstance is held invalid, the invalidity
shall not affect other provisions or applications of this act
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that can be given effect without the invalid provision or
application.
Section 509. Nothing in this act shall be construed to mean
that an interpretation or application of 71 Pa.C.S. Pt. XXV or
benefits available to members of the State Employees' Retirement
System was not in accordance with 71 Pa.C.S. Pt. XXV or other
applicable law, including the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.) and the Uniformed
Services Employment and Reemployment Rights Act of 1994 (Public
Law 103-353, 108 Stat. 3149) before the effective date of this
section.
Section 510. Notwithstanding the provisions of 71 Pa.C.S. §
5903(b), the statement for each member prepared by the State
Employees' Retirement Board for the period ending December 31,
2015, and any other statements or estimates of benefits prepared
by the board pursuant to the provisions of 71 Pa.C.S. Pt. XXV
from the effective date of this section to June 30, 2016, shall
not be required to reflect the provisions of this act.
Section 511. Notwithstanding the provisions of 71 Pa.C.S.
Pt. XXV, the obligation of the State Employees' Retirement Board
to make payments to any individual whose rights, benefits and
obligations are affected by this act within specified time
periods of the receipt of applications for benefits or other
information shall not apply from the effective date of this
section to June 30, 2016.
Section 512. Section 502 of the act of October 15, 1980
(P.L.950, No.164), known as the Commonwealth Attorneys Act, is
repealed insofar as it is inconsistent with the amendment of 24
Pa.C.S. § 8501 and 71 Pa.C.S. § 5901.
Section 513. This act shall take effect immediately.
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