PRIOR PRINTER'S NO. 2983 PRINTER'S NO. 3306
No. 2338 Session of 1978
INTRODUCED BY MESSRS. KOWALYSHYN, KNEPPER, MRS. GILLETTE,
MESSRS. ZEARFOSS, SCHMITT, MELUSKEY, BORSKI, GIAMMARCO,
McLANE, MILLIRON, W. W. FOSTER, MADIGAN, LIVENGOOD, DeVERTER,
HALVERSON, FISHER, A. C. FOSTER JR., DUFFY, MOWERY, RUGGIERO,
REED, PRENDERGAST, KUKOVICH, MRS. HARPER, MESSRS. STUBAN,
ARTHURS, SCHWEDER, ZWIKL, RITTER AND ZELLER, APRIL 10, 1978
AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 1, 1978
AN ACT
1 Creating the Public Employees' Retirement Study PENSION REVIEW <--
2 Commission and imposing powers and duties on the commission
3 and certain other agencies of State Government.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the "Public
8 Employees' Retirement Study PENSION REVIEW Commission Act." <--
9 Section 2. Legislative findings and intent.
10 (a) Findings.--The General Assembly finds and declares as
11 follows:
12 (1) The State Employees' Retirement System costs
13 taxpayers approximately $250,000,000 annually and the <--
14 system's unfunded liability exceeded $1,000,000,000 in 1974.
15 The Commonwealth's contribution to the system was 7% of
16 payroll in 1972 and has risen to 15% of payroll in 1978.
1 HUNDREDS OF MILLIONS OF DOLLARS ANNUALLY. <--
2 (2) A Pennsylvania Economy League study found the Public
3 School Employees' Retirement System had unfunded liability of <--
4 3.8 billion dollars in 1974 HAS ENORMOUS UNFUNDED LIABILITY <--
5 and the same study indicated that the high cost of
6 Commonwealth retirement systems results partially from the
7 General Assembly's failure to develop and enforce a policy
8 governing retirement of public employees and its failure to
9 examine proposed pension changes for long-range costs.
10 (3) The Department of Community Affairs has investigated
11 local government pension funds pursuant to the act of
12 December 6, 1972 (P.L.1383, No.293) and has found
13 considerable serious and growing unfunded liabilities in
14 local government pension funds.
15 (4) The General Assembly has passed legislation creating
16 three independent Statewide pension systems pursuant to:
17 (i) Act of February 1, 1974 (P.L.34, No.15), known
18 as the "Pennsylvania Municipal Retirement Law."
19 (ii) 71 Pa.C.S. Part XXV, known as the "State
20 Employees' Retirement Code."
21 (iii) 24 Pa.C.S. Part IV, known as the "Public
22 School Employee's Retirement Code"
23 all of which shall serve as the foundation for further study
24 and implementation of actuarily sound public employee pension
25 systems.
26 (5) Various states have established commissions to
27 continuously monitor and recommend reforms for public
28 employee pension systems.
29 (6) Public employee pension policy is of vital concern
30 to both the executive and legislative branches of State
19780H2338B3306 - 2 -
1 Government.
2 (b) Intent.--It is the intent of the General Assembly in
3 establishing the Public Employee Retirement Study Commission to
4 provide an ongoing mechanism to monitor public employee pension
5 plans and assure their actuarial viability by review of proposed
6 changes and reforms in the plans AND TO REVIEW RELEVANT <--
7 STATUTES.
8 Section 3. Definitions.
9 The following words and phrases shall have the meanings given
10 to them in this section unless the context clearly indicates
11 otherwise:
12 "ACTUARIALLY SOUND PLAN." A PLAN OPERATED UNDER SUPERVISION <--
13 OF AN ACTUARY AND WHICH IS BEING FUNDED ANNUALLY AT A LEVEL NOT
14 LOWER THAN THE NORMAL COST OF THE PLAN PLUS AMORTIZATION OF THE
15 UNFUNDED ACCRUED LIABILITY WITHIN AN ESTABLISHED PERIOD OF TIME
16 AFTER THE EFFECTIVE DATE OF THE ACT CREATING THE SYSTEM.
17 "Commission." The Public Employee Retirement Study
18 Commission created pursuant to this act.
19 "Public Employee Pension Plan." Any of the following:
20 (1) State Employees' Retirement System created pursuant
21 to 71 Pa.C.S. Part XXV.
22 (2) Public School Employees' Retirement System created
23 pursuant to 24 Pa.C.S. Part IV.
24 (3) Municipal Retirement System created pursuant to the
25 act of February 1, 1974 (P.L.34, No.15).
26 (4) Any other independent pension plan for public
27 officers and employees in the Commonwealth.
28 (5) PENSIONS PLANS CREATED PURSUANT TO THE ACT OF JUNE <--
29 23, 1931 (P.L.932, NO.317), KNOWN AS "THE THIRD CLASS CITY
30 CODE."
19780H2338B3306 - 3 -
1 (6) PENSION PLANS CREATED PURSUANT TO THE ACT OF MAY 29,
2 1956 (1955 P.L.1804, NO.600), REFERRED TO AS THE MUNICIPAL
3 POLICE PENSION LAW.
4 Section 4. Public Employees' Retirement Study PENSION REVIEW <--
5 Commission created.
6 There is hereby created the Public Employees' Retirement <--
7 Study PENSION REVIEW Commission to review legislation affecting <--
8 public employee pension plans and to study on a continuing basis
9 public employee pension and retirement policy as implemented at
10 both the State and local level, the interrelationships of the
11 several systems, and their actuarial soundness and cost.
12 Section 5. Commission membership.
13 (a) Legislative members.--
14 (1) The President pro tempore of the Senate, after
15 consultation with the Senate Minority Leader, shall appoint
16 two members of the Senate, one from the majority and one from
17 the minority, to serve on the commission.
18 (2) The Speaker of the House of Representatives, after
19 consultation with the House Minority Leader, shall appoint
20 two members of the House, one from the majority and one from
21 the minority, to serve on the commission.
22 (3) The legislative members of the commission shall
23 serve on the commission for the duration of the terms for
24 which they were elected.
25 (b) Ex officio members.-- <--
26 (1) The following public officials or their designees
27 shall serve on the commission:
28 (i) Secretary of Community Affairs.
29 (ii) Secretary of the Pennsylvania Municipal
30 Retirement system.
19780H2338B3306 - 4 -
1 (iii) Secretary of the State Employees' Retirement
2 System.
3 (iv) Secretary of the Public School Employees'
4 Retirement System.
5 (2) The ex officio members of the commission shall serve
6 on the commission as long as they hold their qualifying
7 offices.
8 (c) (B) Gubernatorial appointments.-- <--
9 (1) The Governor shall appoint eight FIVE additional <--
10 members to the commission with the advice and consent of a
11 majority of the Senate pursuant to the procedure established
12 in section 207.1, act of April 9, 1929 (P.L.177, No.175),
13 known as "The Administrative Code of 1929."
14 (2) The members appointed by the Governor shall be
15 selected as follows: <--
16 (i) One employee of the Commonwealth or any
17 political subdivision thereof.
18 (ii) One representative from a city of any class.
19 (iii) One representative from a borough.
20 (iv) One representative from a township of any
21 class.
22 (v) One representative from a county of any class.
23 (vi) One representative from a school district of
24 any class.
25 (vii) Two representatives from the general public,
26 neither of whom is an active or retired member of a
27 public employee pension plan but who both shall have
28 knowledge in the area of pension policy. REPRESENTATIVES <--
29 FROM THE GENERAL PUBLIC, NONE OF WHOM IS AN ACTIVE OR
30 RETIRED MEMBER OF A PUBLIC EMPLOYEE PENSION PLAN BUT WHO
19780H2338B3306 - 5 -
1 SHALL HAVE KNOWLEDGE IN THE AREA OF PENSION POLICY.
2 (3) The members of the commission appointed by the
3 Governor shall serve terms of six years, except those members
4 initially selected, two ONE OF WHOM SHALL SERVE FOR TWO <--
5 YEARS, ONE of whom shall serve for three years, two ONE for <--
6 four years, two ONE for five years and two ONE for six years. <--
7 (d) Vacancies.--Vacancies in office shall be filled by the
8 appointing authority for the balance of the unexpired term.
9 (e) Organization.--The commission shall meet within 60 days
10 of its establishment for the purpose of organizing and selecting
11 officers who shall be chosen from its membership. Thereafter,
12 the commission shall meet as necessary at the call of the
13 commission chairman.
14 Section 6. Powers and duties.
15 The commission shall have the following powers and duties:
16 (1) To study and evaluate on a continuing basis all
17 aspects of public employee pension plans.
18 (2) To analyze any bill relating to public employee
19 pension plans and issue actuarial notes pursuant to section
20 7.
21 (3) To cooperate with the several State and municipal
22 retirement and pension boards on matters of mutual concern.
23 (4) To adopt bylaws for the conduct of its official
24 business.
25 (5) To monitor and evaluate periodically all the laws
26 and regulations which relate to public employee pension plans
27 in the Commonwealth.
28 (6) TO REVIEW PLANS FOR ACTUARIAL SOUNDNESS. <--
29 (7) TO ESTABLISH A DATA BANK AND UPDATE CONTINUALLY.
30 (8) TO SUBMIT ANNUAL PUBLIC REPORTS TO THE HOUSE OF
19780H2338B3306 - 6 -
1 REPRESENTATIVES AND THE SENATE INSURANCE COMMITTEES AND TO
2 THE RETIREMENT SYSTEMS.
3 (9) TO ESTABLISH PRINCIPLES OF RETIREMENT
4 ADMINISTRATION.
5 (10) TO STUDY THE RELATIONSHIP OF RETIREMENT POLICY TO
6 OTHER RESPECTS OF PUBLIC PERSONNEL POLICY.
7 (11) TO RECOMMEND CHANGE IN THE PROCESS OF LEGISLATIVE
8 CONSIDERATION OF PENSIONS.
9 Section 7. Actuarial notes.
10 (a) Note required for bills.--No bill, joint resolution, or
11 simple or concurrent resolution proposing any change relative to
12 a public employee pension plan shall be given second
13 consideration in either House of the General Assembly, until the
14 commission has attached an actuarial note which shall include a
15 reliable estimate of the cost and actuarial effect of the
16 proposed change in any such retirement system.
17 (b) Note required for amendments.--No amendment to any bill
18 or resolution, concerning any public employee pension plan shall
19 be considered by the General Assembly until an actuarial note
20 has been attached.
21 (c) Preparation of note.--The commission shall prepare an
22 actuarial note which shall include a reliable estimate of the
23 financial and actuarial effect of the proposed change in any
24 such retirement system. The actuarial note shall be attached to
25 the original copy of the bill or resolution before it is given
26 second consideration by either House of the General Assembly.
27 (d) Contents of note.--The actuarial note shall be factual,
28 and shall, if possible, provide a reliable estimate of both the
29 immediate cost and effect of the bill and, if determinable or
30 reasonably foreseeable, the long range actuarial cost and effect
19780H2338B3306 - 7 -
1 of the measure.
2 Section 8. Staff.
3 The commission shall be staffed by employees of the
4 Department of Community Affairs, the Pennsylvania Municipal
5 Retirement System, the Public School Employees' Retirement
6 System, and the State Employees' Retirement System appointed by
7 the secretaries of the departments and the systems after joint
8 consultation. In no event shall the commission hire any staff. <--
9 Section 9. Rules and regulations.
10 (a) Promulgation.--The Department of Community Affairs <--
11 COMMISSION, after consultation with representatives of the <--
12 Pennsylvania Municipal Retirement Board, the Public School
13 Employees' Retirement System and the State Employees' Retirement
14 System, shall promulgate such rules and regulations as are
15 necessary for the implementation of this act.
16 (b) Submission to the General Assembly.--The Department of <--
17 Community Affairs COMMISSION shall submit the promulgated rules <--
18 and regulations to the General Assembly. Both Houses of the
19 General Assembly shall approve or disapprove the rules and
20 regulations by concurrent resolution within 60 calendar days.
21 Failure of both Houses to take action on the rules and
22 regulations within 60 days shall be considered approval of such
23 rules and regulations. The rules and regulations shall be
24 effective upon the date of approval.
25 Section 10. Automatic termination of commission. <--
26 The function and operation of the commission, if not
27 terminated sooner, shall cease five years from the effective
28 date of this act unless the General Assembly, by legislation,
29 extends the provisions of this section.
30 SECTION 10. REVIEW OF COMMISSION ACTIVITIES. <--
19780H2338B3306 - 8 -
1 (A) JOINT REVIEW.--IF NO OTHER STATUTE REQUIRES AGENCIES OF
2 THE COMMONWEALTH TO UNDERGO A PERIODIC REVIEW OF THEIR
3 ACTIVITIES, THE PUBLIC PENSION REVIEW COMMISSION SHALL, EACH
4 FIVE YEARS AFTER ITS ESTABLISHMENT, UNDERGO A JOINT REVIEW OF
5 ITS USEFULNESS BY THE SENATE INSURANCE COMMITTEE AND THE HOUSE
6 OF REPRESENTATIVES INSURANCE COMMITTEE. THE COMMITTEES SHALL
7 REPORT THEIR FINDINGS TO THE GENERAL ASSEMBLY.
8 (B) PERIODIC REVIEW.--IF ANOTHER STATUTE REQUIRES THE
9 PERIODIC REVIEW OF AGENCIES OF THE COMMONWEALTH, THE PUBLIC
10 PENSION REVIEW COMMISSION SHALL BE SUBJECT TO THAT STATUTE.
11 Section 11. Effective date.
12 This act shall take effect immediately.
D7L47ACVV/19780H2338B3306 - 9 -