PRINTER'S NO. 2934
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2081
Session of
2019
INTRODUCED BY GREINER, GROVE, ZIMMERMAN, RYAN, B. MILLER,
KEEFER, GILLEN, RADER, DALEY, DUSH, JAMES, WHEELAND, SCHMITT
AND COMITTA, NOVEMBER 20, 2019
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, NOVEMBER 20, 2019
AN ACT
Providing for management of municipal pension plans and for
penalties.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Municipal
Pension Plan Sustainability Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Board." The Pennsylvania Municipal Retirement Board.
"Compensation." As follows:
(1) A member's base salary or wages paid by an employer,
including overtime payments to the member up to an amount no
greater than 10% of the member's base salary.
(2) A member's compensation for a calendar year may not
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exceed the limit prescribed by section 401(a)(17) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. ยง
401(a)(17)).
(3) The term includes any disability pay paid by an
employer as a result of a service-based disability.
(4) The term does not include reimbursements, bonuses,
incentive pay, longevity increases, payments in lieu of
benefits, allowances paid for food or clothing, overtime,
payments in excess of 10% of base salary or payouts of
accrued sick or vacation pay or any other form of used or
unused paid time off.
"Final average salary." The average monthly salary
determined by computing the compensation paid to a member by the
employer during the last 60 months of qualified employment and
dividing by 60.
"Municipal pension plan." A retirement plan created by a
municipality for its police officers or firefighters under any
of the following:
(1) The act of May 28, 1915 (P.L.596, No.259), referred
to as the Second Class City Employe Pension Law.
(2) The act of May 29, 1956 (1955 P.L.1804, No.600),
referred to as the Municipal Police Pension Law.
(3) The act of September 23, 1959 (P.L.970, No.400),
referred to as the Second Class A City Employe Pension Law.
(4) Any other legal authority, excluding the act of
February 1, 1974 (P.L.34, No.15), known as the Pennsylvania
Municipal Retirement Law.
(5) The provision of 11 Pa.C.S. Pt. 5 (relating to third
class cities).
"Municipality." A city of the second class, city of the
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second class A, city of the third class, home rule municipality,
borough, town or township.
"Pension plan." A pension plan established under the act of
December 18, 1984 (P.L.1005, No.205), known as the Municipal
Pension Plan Funding Standard and Recovery Act, the act of May
29, 1956 (1955 P.L.1804, No.600), referred to as the Municipal
Police Pension Law, or any other pension plan established under
a municipal code.
"Superannuation age." As follows:
(1) For uniformed employees, any age with the accrual of
25 years of credited service and age 55.
(2) For nonuniformed employees, any age with the accrual
of 30 years of credited service or age 65.
Section 3. Management of pension plans.
The governing body of each pension plan that has fewer than
100 active members shall select the most qualified person to
enter into a contract to administer, manage or service the
pension plan. To ensure that the availability of the contract is
provided to potential participants, the governing body shall:
(1) Announce the availability of the contract at two
consecutive regularly scheduled public meetings.
(2) Post the availability of the contract on the
municipality's publicly accessible Internet website, if any,
for a period of no less than two weeks.
Section 4. Assumed actuarial rate of return.
(a) General rule.--Except as provided under subsection (d),
within 10 years of the effective date of this section and each
year thereafter, a municipality shall use an assumed actuarial
rate of return not to exceed the actuarial rate of return
established by the board plus 1%.
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(b) Transition.--Within the 10-year period provided under
subsection (a), a municipality shall adjust its assumed
actuarial rate of return and reduce the assumed rate of return
in 10 equal installments to comply with subsection (a).
(c) Adjustment.--A pension shall adjust its assumed
actuarial rate of return to the assumed actuarial rate of return
established by the board for calculating all mandatory minimum
obligations.
(d) Exception.--A municipality with a municipal pension plan
that is managed by the board shall be exempt from the
requirements under this section.
Section 5. Mandatory minimum obligation.
(a) General rule.--By the end of each fiscal year, a
municipality shall submit proof to the Auditor General that the
municipality has made the necessary mandatory minimum obligation
payment consistent with its reporting obligations under existing
law.
(b) Funding.--If the Auditor General determines that a
municipality has failed to make the mandatory minimum obligation
payment as determined under this act, the Auditor General shall
withhold an appropriate portion of the State aid for which the
municipality is eligible under this act for the succeeding
fiscal year.
(c) Penalty.--If a municipality fails to meet its mandatory
minimum obligation payments, and if the Auditor General
withholds a portion of the municipality's State aid, then the
municipality must satisfy their minimum payment plus an
additional 20% before the Auditor General may release the State
aid funds being withheld from the municipality.
Section 6. Restriction on State aid.
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State aid received by a municipality may not be used for the
payment of administrative fees expended for the management of
the municipality's pension.
Section 7. Changes to pension plans.
(a) Plan terms.--A pension plan negotiated after the
effective date of this act shall comply with the provisions for
compensation, final average salary and superannuation age under
this act and shall apply to employees hired after the effective
date of this act.
(b) Plan changes.--A proposed change to a pension plan shall
comply with all of the following:
(1) No municipality may make a change to the
municipality's pension plan document that would cause the
pension plan's fund ratio to be below 80%.
(2) A municipality shall submit proposed changes to the
municipality's pension plan documents to the Auditor General
for approval if the pension plan has an actuarial funding
ratio under 80% for two consecutive actuarial evaluations.
(3) The Auditor General shall reject changes to the
pension plan only if the changes would fail to improve the
overall funding ratio of the pension plan.
(4) A change to the pension plan that is rejected by the
Auditor General shall be returned to the municipality with
recommendations on how the municipality may improve the
funding ratio of the existing pension plan.
(5) Any award through collective bargaining or
arbitration under the act of June 24, 1968 (P.L.237, No.111),
referred to as the Policemen and Firemen Collective
Bargaining Act, shall comply with the provisions of this
section.
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Section 8. General accounting standards.
At the beginning of each evaluation period a municipality
shall certify in writing to the Auditor General that the
municipality is using generally accepted accounting principals
as outlined by the Governmental Accounting Standards Board with
the mandatory minimum obligation payments under section 5.
Section 9. Public disclosure.
(a) Publication.--By January 1 of each year, as part of its
annual budget report, a municipality shall disclose the
information under subsection (b):
(1) on the municipality's publicly accessible Internet
website; or
(2) in a local newspaper of general circulation, if the
municipality does not maintain a publicly accessible Internet
website.
(b) Contents.--A municipality shall disclose the following
information regarding the cost of any pension plan controlled by
the municipality:
(1) An itemization of the administrative fees.
(2) The mandatory minimum obligation payment amount.
(3) Any other pension-related expenses, including those
that are contained in the municipality's adopted general fund
budget.
Section 10. Deferred retirement option plans.
A member of a pension plan shall be ineligible for
participation in a deferred retirement option plan under Chapter
11 of the act of December 18, 1984 (P.L.1005, No.205), known as
the Municipal Pension Plan Funding Standard and Recovery Act
after the effective date of this section.
Section 11. Effective date.
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This act shall take effect immediately.
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