I intend to introduce legislation to amend the Municipal Pension Plan Funding Standard and Recovery Act (Act 205 of 1984) to provide that up to 0.5% of the General Municipal Pension System State Aid Program amount may be paid to the Public Employee Retirement Commission (Commission) as specifically appropriated by the General Assembly to provide for its costs in oversight and administration of the municipal pension system. The revenue account is funded from proceeds of the insurance premium tax on foreign (out-of-state) casualty insurance companies.
The Public Employee Retirement Commission has three primary responsibilities:
(1) to monitor public retirement plans in the Commonwealth and to assure their actuarial viability through a review of any proposed legislative changes in those plans:
(2) to study the subject of the retirement needs of public employees in order to formulate principles, develop objectives and recommend legislation; and
(3) to administer Acts 205 and 293 mandating actuarial reports for all municipal pension systems.
By law, the Commission is required to annually certify the pension costs of the more than 3,200 municipal pension plans operating in the Commonwealth.
The legislation will also require that only those municipal pension plans with 100 or more active members will need to advertise and bid for the most qualified person for a professional services contract. Currently all municipal pension plans regardless of their respective size are subject to this unfunded state mandate which is time consuming and costly if they wish to change professional consultants. Professional consultant services may be for investment, legal, real estate or other matters.
Additionally, if a municipality selects a new method of determining actuarial value of pension plan assets, the municipality must use that method for at least the next two actuarial valuation reports. This will prevent the manipulation of asset smoothing methods to artificially lower short-term funding requirements.
This legislation also provides technical amendments relating to the frequency of actuarial reporting and reporting of noncompliance with the actuarial funding standard. With the termination of the Act 205 Supplemental State Assistance program in 2003, this technical amendment will change the frequency of the Commission’s noncompliance reports to be biennially rather than annually.