PRINTER'S NO. 1452
No. 1157 Session of 1985
INTRODUCED BY HOWARD, OCTOBER 16, 1985
REFERRED TO FINANCE, OCTOBER 16, 1985
AN ACT
1 Amending Title 24 (Education) of the Pennsylvania Consolidated
2 Statutes, revising provisions relating to retirement for
3 school employees.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Part IV of Title 24 of the Pennsylvania
7 Consolidated Statutes is amended by adding a subpart heading to
8 read:
9 PART IV
10 RETIREMENT FOR SCHOOL EMPLOYEES
11 SUBPART A
12 PUBLIC SCHOOL EMPLOYEES' RETIREMENT CODE OF 1975
13 Section 2. Section 8101 of Title 24 is amended to read:
14 § 8101. Short title of [part] subpart.
15 This [part] subpart shall be known and may be cited as the
16 ["Public] Public School Employees' Retirement [Code."] Code.
17 Section 3. The introductory paragraph of section 8102 of
18 Title 24 is amended to read:
1 § 8102. Definitions.
2 [The following words and phrases when used in this part shall
3 have, unless the context clearly indicates otherwise, the
4 meanings given to them in this section:] Subject to additional
5 definitions contained in subsequent provisions of this subpart
6 which are applicable to specific provisions of this subpart, the
7 following words and phrases when used in this subpart shall have
8 the meanings given to them in this section unless the context
9 clearly indicates otherwise:
10 * * *
11 Section 4. Title 24 is amended by adding a section to read:
12 § 8301.1. Participation in new retirement system.
13 (a) Members not electing participation in new system.--A
14 person who is a member of the system established by this subpart
15 on the effective date of this section and who does not elect at
16 any time to become a participant of the system established under
17 Chapter 87 (relating to Public School Employees' Retirement Code
18 of 1985) is entitled to remain a member of the system
19 established by this subpart, without change of benefits or
20 conditions of membership, so long as he remains in continuous,
21 uninterrupted employment.
22 (b) Ineligibility of persons for membership in existing
23 system.--A person who is not a member of the system established
24 by this subpart on the effective date of this section or who
25 begins or returns to active school employment after that date
26 shall not be eligible for membership in the system established
27 by this subpart.
28 (c) Members electing participation in new system.--A person
29 who is an active member of the system established by this
30 subpart may, within three years of the effective date of this
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1 section , elect to transfer to the system established by Chapter
2 87, as follows:
3 (1) An active member who elects to transfer to the
4 system established by Chapter 87 shall be entitled to a
5 refund of the total accumulated deductions standing to his
6 credit as of the effective date of the transfer.
7 (2) An active member who elects to transfer to the
8 system established by Chapter 87 within three years of the
9 effective date of this section shall be entitled to a refund
10 of the total accumulated deductions standing to his credit as
11 of the effective date of transfer or, at his option, to have
12 all or any part of his accumulated deductions transferred to
13 a single deposit investment account which shall be
14 established by the board in accordance with section 8767
15 (relating to single deposit investment account for transfer
16 participants).
17 (d) Effect of transfer to new system on rights and
18 benefits.--A person who, while an active member of the system
19 established by this subpart, elects to transfer under subsection
20 (c) to the system established by Chapter 87 shall forfeit all
21 rights and benefits to which he may be entitled under this
22 system. These persons shall, however, receive service credits
23 and vesting credits in the new system in direct proportion to
24 the eligibility points forfeited in this system upon the
25 transfer.
26 (e) Entitlements of returning employees who withdrew
27 contributions.--In the event of a return to active employment of
28 any former member of the system established by this subpart
29 whose active membership was terminated and who withdrew
30 contributions in accordance with section 8341 (relating to
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1 return of total accumulated deductions), the person shall be
2 entitled to service credits and vesting credits in the system
3 established by Chapter 87 equal to the eligibility points
4 forfeited upon termination.
5 Section 5. Sections 8303, 8305(a), 8322.1, 8326(b), 8328,
6 8346(a), 8349(a), 8501(b), (c) and (e), 8502(a), (c), (f) and
7 (n), 8503(a), 8504(c), 8505(j), 8506(i), 8521(a) and (l), 8531,
8 8532 and 8533 of Title 24 are amended to read:
9 § 8303. Eligibility points for retention and reinstatement of
10 service credits.
11 (a) Accrued credited service.--Eligibility points shall be
12 computed in accordance with section 8306 (relating to
13 eligibility points) with respect to all credited service accrued
14 as of the effective date of this [part] subpart.
15 (b) Future school service.--Every active member of the
16 system shall accrue an eligibility point for each year of school
17 service rendered subsequent to the effective date of this [part]
18 subpart.
19 (c) Purchase of previous creditable service.--Every active
20 member of the system or a multiple service member who is an
21 active member of the State Employees' Retirement System on or
22 after the effective date of this [part] subpart may purchase
23 credit and receive eligibility points as a member of Class T-C
24 for previous school service or creditable nonschool service upon
25 written agreement by the member and the board as to the manner
26 of payment of the amount due for credit for such service;
27 except, that any purchase for reinstatement of service credit
28 shall be for all service previously credited.
29 § 8305. Classes of service.
30 (a) Class T-C membership.--A school employee who is a member
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1 of Class T-C on the effective date of this [part] subpart or who
2 becomes a member of the system subsequent to the effective date
3 of this [part] subpart shall be classified as a Class T-C
4 member.
5 * * *
6 § 8322.1. Pickup contributions.
7 All contributions required to be made under sections 8321
8 (relating to regular member contributions for current service)
9 and 8322 (relating to joint coverage member contributions), with
10 respect to current school service rendered by an active member
11 on or after January 1, 1983, shall be picked up by the employer
12 and shall be treated as the employer's contribution in
13 determining tax treatment under the United States Internal
14 Revenue Code for Federal tax purposes. For all other purposes,
15 under this [part] subpart and otherwise, the pickup
16 contributions shall be treated as contributions made by a member
17 in the same manner and to the same extent as contributions made
18 by a member prior to January 1, 1983.
19 § 8326. Contributions by the Commonwealth.
20 * * *
21 (b) Contributions on behalf of annuitants.--The Commonwealth
22 shall make contributions on behalf of all annuitants in an
23 amount equal to one-half of the amount certified by the board as
24 necessary to fund the additional liabilities for minimum and
25 supplemental annuities in accordance with section [8328(d)] 8328
26 (c).
27 § 8328. Actuarial cost method.
28 (a) Employer contribution rate on behalf of active
29 members.--The amount of the total employer contributions on
30 behalf of all active members shall be computed by the actuary as
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1 a percentage of the total compensation of all active members
2 during the period for which the amount is determined and shall
3 be so certified by the board. The total contribution rate on
4 behalf of all active members shall consist of the normal
5 contribution rate and the accrued liability contribution rate.
6 (b) Normal contribution rate.--The normal contribution rate
7 shall be determined after each actuarial valuation. Until all
8 accrued liability contributions have been completed, the normal
9 contribution rate shall be determined, on the basis of an
10 [annual 5 1/2%] interest rate and such mortality and other
11 tables as shall be adopted by the board[, as a level percentage
12 of the compensation of the average new active member, which
13 percentage, if contributed on the basis of his prospective
14 compensation through the entire period of active school service,
15 would be sufficient to fund the liability for any prospective
16 benefit payable to him, in excess of that portion funded by his
17 prospective member contributions. After all accrued liability
18 contributions have been completed, the normal contribution rate
19 shall be determined by deducting from the present value of the
20 liabilities for all prospective benefits of active members, the
21 sum of the total assets in the fund on the valuation date,
22 excluding the balance in the annuity reserve account, and the
23 present value of prospective member contributions, and dividing
24 the remainder by the present value of the future compensation of
25 all active members]. The employer's normal contribution rate
26 shall be determined as a level percentage of the compensation of
27 participants utilizing the entry age actuarial cost method. This
28 is a method under which the actuarial present value of the
29 projected benefits of each individual included in an actuarial
30 valuation is allocated on a level basis over the earnings of the
19850S1157B1452 - 6 -
1 individual between entry age and assumed exit age. The portion
2 of this actuarial present value allocated to a valuation year is
3 called the normal cost. The portion of this actuarial present
4 value not provided for at a valuation date by the actuarial
5 present value of future normal costs is called the actuarial
6 accrued liability.
7 (c) Accrued liability contribution rate.--[For the fiscal
8 year beginning July 1, 1967, the accrued liability contribution
9 rate shall be computed as the rate of total compensation of all
10 active members which shall be certified by the actuary as
11 sufficient to fund over a period of 30 years from such date the
12 present value of the liabilities for all prospective benefits of
13 active members in excess of the total assets in the fund,
14 excluding the balance in the annuity reserve account, and of the
15 present value of normal contributions and of member
16 contributions payable with respect to all active members on such
17 date during the remainder of their active service. Thereafter,
18 the amount of each annual accrued liability contribution shall
19 be at least 4% greater than the amount of such contribution for
20 the previous fiscal year, except that, if the accrued liability
21 is increased by legislation enacted subsequent to July 1, 1967,
22 such additional liability shall be funded over a period of 30
23 years from the first day of July, coincident with or next
24 following the effective date of the increase on the basis that
25 each succeeding annual additional accrued liability contribution
26 shall be at least 4% greater than the amount of such additional
27 contribution for the previous fiscal year. The accrued liability
28 contributions under this section shall be discontinued as soon
29 as the total assets in the fund, excluding the balance in the
30 annuity reserve account, equals the present value of the
19850S1157B1452 - 7 -
1 liability for all prospective benefits of active members, less
2 the present value of the prospective normal contributions and of
3 member contributions payable with respect to all active members
4 on such date during the remainder of their active service.] The
5 accrued liability contribution rate shall be the sum of:
6 (1) A 30-year level dollar amortization payment on the
7 unfunded actuarial accrued liability as of the December 31
8 next following the date of enactment of Chapter 87 (relating
9 to Public School Employees' Retirement Code of 1985).
10 (2) A 20-year level dollar amortization payment on any
11 increment in the unfunded actuarial accrued liability
12 attributable to a change in actuarial assumptions or to a
13 modification in the benefit plan applicable to active
14 members.
15 (3) A 10-year level dollar amortization payment on any
16 increment in the unfunded actuarial accrued liability
17 attributable to a modification in the benefit plan applicable
18 to retired members and the benefit recipients.
19 (4) A 15-year level dollar amortization payment (credit)
20 on any net unfunded actuarial accrued liability attributable
21 to an actuarial experience loss (gain).
22 [(d) Supplemental annuity contribution rate.--Contributions
23 from the Commonwealth and other employers required to provide
24 for the payment of supplemental annuities to annuitants as
25 provided in section 8348 (relating to supplemental annuities)
26 shall be determined as a percentage of the total compensation of
27 all active members during the period for which the amount is
28 certified as sufficient to fund the liabilities of the
29 supplemental retirement allowance account as a level percentage
30 over a period of 30 years from July 1, 1967. In the event that
19850S1157B1452 - 8 -
1 annuities are increased by legislation enacted subsequent to
2 July 1, 1974, the additional liability for the increase in
3 benefits to annuitants shall be funded similarly as a level
4 percentage over a period of 20 years from the first day of July
5 coincident with or next following the effective date of such
6 legislation. Notwithstanding the foregoing, the additional
7 liability on account of any increase in annuities which is
8 effective July 1, 1979 shall be funded by level annual payments
9 over a period of 20 years beginning July 1, 1980. The additional
10 liability on account of any increase in annuities which is
11 effective July 1, 1984 shall be funded by level annual payments
12 over a period of 20 years beginning July 1, 1984.]
13 § 8346. Termination of annuities.
14 (a) General rule.--If an annuitant returns to school service
15 or enters State service and elects multiple service membership,
16 any annuity payable to him under this [part] subpart shall cease
17 and in the case of an annuity other than a disability annuity
18 the present value of such annuity, adjusted for full coverage in
19 the case of a joint coverage member who makes the appropriate
20 back contributions for full coverage, shall be frozen as of the
21 date such annuity ceases. In the event that the cost-of-living
22 increase enacted December 18, 1979 occurred during the period of
23 such State or school employment, the frozen present value shall
24 be increased, on or after the member attains superannuation age,
25 by the percent applicable had he not returned to service.
26 * * *
27 § 8349. Payment of benefits.
28 (a) Annuities.--Any annuity granted under the provisions of
29 this [part] subpart shall be paid in equal monthly installments.
30 * * *
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1 § 8501. Public School Employees' Retirement Board.
2 * * *
3 (b) Appointment and terms of initial members.--For the
4 purposes of securing an orderly transition and staggered terms,
5 the elected members of the board serving on the effective date
6 of this [part] subpart shall serve until the expiration of their
7 respective terms. The board member initially elected by members
8 of Pennsylvania public school boards shall serve until January
9 1, 1976. The board member initially elected by the active
10 nonprofessional members of the system shall serve until January
11 1, 1977. One of the initial board members appointed by the
12 Governor after the effective date of this [part] subpart shall
13 serve until January 1, 1976 and the second appointed board
14 member shall serve until January 1, 1977. A vacancy occurring
15 during the term of any member shall be filled for the unexpired
16 term by a successor appointed or elected as the case may be in
17 the same manner as his predecessor.
18 (c) Oath of office.--Each member of the board shall take an
19 oath of office that he will, so far as it devolves upon him,
20 diligently and honestly administer the affairs of said board and
21 that he will not knowingly violate or willfully permit to be
22 violated any of the provisions of law applicable to this [part]
23 subpart. Such oath shall be subscribed by the member making it
24 and certified by the officer before whom it is taken and shall
25 be immediately filed in the office of the Secretary of the
26 Commonwealth.
27 * * *
28 (e) Corporate power and legal advisor.--For the purposes of
29 this [part] subpart, the board shall possess the power and
30 privileges of a corporation. The Attorney General of the
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1 Commonwealth shall be the legal advisor of the board.
2 § 8502. Administrative duties of board.
3 (a) Employees.--The secretary, clerical and other employees
4 of the board and their successors whose positions on the
5 effective date of this [part] subpart are under the classified
6 service provisions of the act of August 5, 1941 (P.L.752,
7 No.286), known as the ["Civil Service Act,"] Civil Service Act,
8 shall continue under such provisions. The compensation and
9 classification of all other persons appointed shall be
10 determined by the board and shall be consistent with the
11 standards established by the Executive Board of the
12 Commonwealth.
13 * * *
14 (c) Expenses.--The board shall, through the Governor, submit
15 to the General Assembly annually a budget covering the
16 administrative expenses of this [part] subpart. Such expenses as
17 approved by the General Assembly in an appropriation bill shall
18 be paid from investment earnings of the fund.
19 * * *
20 (f) Functions.--The board shall perform such other functions
21 as are required for the execution of this [part] subpart and
22 shall have the right to inspect the employment records of
23 employers.
24 * * *
25 (n) Annual financial statement.--The board shall prepare and
26 have published, on or before January 1 of each year, a financial
27 statement as of the fiscal year ending June 30 of the previous
28 year showing the condition of the fund and the various accounts
29 and setting forth such other facts, recommendations and data as
30 may be of use in the advancement of knowledge concerning
19850S1157B1452 - 11 -
1 annuities and other benefits provided by this [part] subpart.
2 The board shall submit said financial statement to the Governor
3 and shall make copies available to the employers for the use of
4 the school employees and the public.
5 * * *
6 § 8503. Duties of board to advise and report to employers and
7 members.
8 (a) Manual of regulations.--The board shall, with the advice
9 of the Attorney General and the actuary, prepare within 90 days
10 of the effective date of this [part] subpart, a manual
11 incorporating rules and regulations consistent with the
12 provisions of this [part] subpart for the employers who shall
13 make information contained therein available to the general
14 membership. The board shall thereafter advise the employers
15 within 90 days of any changes in such rules and regulations due
16 to changes in the law or due to changes in administrative
17 policies.
18 * * *
19 § 8504. Duties of board to report to State Employees'
20 Retirement Board.
21 * * *
22 (c) Applications for benefits for State employees.--Upon
23 receipt of notification and the required data from the State
24 Employees' Retirement Board that a former school employee who
25 elected multiple service has applied for a State employee's
26 retirement benefit or, in the event of his death, his legally
27 constituted representative has applied for such benefit, the
28 board shall:
29 (1) Certify to the State Employees' Retirement Board:
30 (i) The salary history as a member of the Public
19850S1157B1452 - 12 -
1 School Employees' Retirement System and the final average
2 salary as calculated on the basis of the compensation
3 received as a State and school employee.
4 (ii) The annuity or benefit which the member or his
5 beneficiary is entitled to receive under this [part]
6 subpart and modified according to the option selected.
7 (2) Transfer to the State Employees' Retirement Fund the
8 accumulated deductions standing to such member's credit and
9 the actuarial reserve required on account of the member's
10 years of credited service in the school system and his final
11 average salary determined on the basis of his compensation in
12 both systems.
13 § 8505. Duties of board regarding applications and elections of
14 members.
15 * * *
16 (j) Joint coverage annuitants.--The board shall notify in
17 writing each joint coverage annuitant who retired prior to July
18 1, 1962 that he may elect any time prior to, but not later than,
19 one year following the effective date of this [part] subpart, to
20 receive his annuity without reduction attributable to social
21 security coverage. The board shall within 60 days of such
22 election certify in writing to each annuitant who so elects the
23 amount required to be paid. Upon receipt of a lump sum payment
24 within 60 days in the amount certified to such annuitant, the
25 board shall recompute the annuity payable to such annuitant and
26 the annuity and/or lump sum, if any, payable upon his death to
27 his beneficiary or survivor annuitant as though he had been a
28 full coverage member on the effective date of retirement. Such
29 recomputed annuity shall be paid beginning with the second
30 monthly payment next following the month in which the lump sum
19850S1157B1452 - 13 -
1 payment is received.
2 § 8506. Duties of employers.
3 * * *
4 (i) Termination of service.--The employer shall, in the case
5 of any member terminating school service, advise such member in
6 writing of any benefits to which he may be entitled under the
7 provisions of this [part] subpart and shall have the member
8 prepare, on or before the date of termination of school service,
9 one of the following three forms, a copy of which shall be given
10 to the member and the original of which shall be filed with the
11 board:
12 (1) An application for the return of accumulated
13 deductions.
14 (2) An election to vest his retirement rights and, if he
15 is a joint coverage member and so desires, an election to
16 become a full coverage member and an agreement to pay within
17 30 days of the date of termination of service the lump sum
18 required.
19 (3) An application for an immediate annuity and, if he
20 is a joint coverage member and so desires, an election to
21 become a full coverage member and an agreement to pay within
22 30 days of date of termination of service the lump sum
23 required.
24 * * *
25 § 8521. Management of fund and accounts.
26 (a) Control and management of fund.--The members of the
27 board shall be the trustees of the fund and shall have exclusive
28 control and management of the said fund and full power to invest
29 the same, subject, however, to the exercise of that degree of
30 judgment and care under the circumstances then prevailing which
19850S1157B1452 - 14 -
1 persons of prudence, discretion and intelligence who are
2 familiar with such matters exercise in the management of their
3 own affairs not in regard to speculation, but in regard to the
4 permanent disposition of the fund, considering the probable
5 income to be derived therefrom as well as the probable safety of
6 their capital, and further subject to all the terms, conditions,
7 limitations, and restrictions imposed by this [part] subpart or
8 other law upon the making of investments. Subject to like terms,
9 conditions, limitations, and restrictions, said trustees shall
10 have the power to hold, purchase, sell, lend, assign, transfer,
11 or dispose of any of the securities and investments in which any
12 of the moneys in the fund shall have been invested as well as of
13 the proceeds of said investments and of any moneys belonging to
14 said fund.
15 * * *
16 (l) Additional board power on investments.--Regardless of
17 any limitations, conditions or restrictions imposed on the
18 making of investments by this [part] subpart or other law, the
19 board may, at its discretion, invest a maximum of 10% of the
20 book value of the assets of the fund in any investments not
21 otherwise specifically authorized, provided that such
22 investments are made with the exercise of that degree of
23 judgment and care under the circumstances then prevailing which
24 persons of prudence, discretion and intelligence who are
25 familiar with such matters exercise in the management of their
26 own affairs not in regard to speculation, but in regard to the
27 permanent disposition of the fund, considering the probable
28 income to be derived therefrom as well as the probable safety of
29 their capital.
30 * * *
19850S1157B1452 - 15 -
1 § 8531. State guarantee.
2 Statutory interest charges payable, the maintenance of
3 reserves in the fund, and the payment of all annuities and other
4 benefits granted by the board under the provisions of this
5 [part] subpart are hereby made obligations of the Commonwealth.
6 All income, interest, and dividends derived from deposits and
7 investments authorized by this [part] subpart shall be used for
8 the payment of the said obligations of the Commonwealth.
9 § 8532. State supervision.
10 The fund and ledger accounts provided for by this [part]
11 subpart shall be subject to the supervision of the State
12 Insurance Department.
13 § 8533. Taxation, attachment and assignment of funds.
14 (a) General rule.--Except as provided in subsection (b), the
15 right of a person to a member's annuity, a State annuity, or
16 retirement allowance, to the return of contributions, any
17 benefit or right accrued or accruing to any person under the
18 provisions of this [part] subpart, and the moneys in the fund
19 are hereby exempt from any State or municipal tax, and exempt
20 from levy and sale, garnishment, attachment, or any other
21 process whatsoever, and shall be unassignable.
22 (b) Forfeiture.--Rights under this [part] subpart shall be
23 subject to forfeiture as provided by the act of July 8, 1978
24 (P.L.752, No.140), known as the ["Public Employee Pension
25 Forfeiture Act."] Public Employee Pension Forfeiture Act.
26 Section 6. Title 24 is amended by adding a subpart to read:
27 SUBPART B
28 PUBLIC SCHOOL EMPLOYEES' RETIREMENT CODE OF 1985
29 Chapter
30 87. Public School Employees' Retirement Code of 1985
19850S1157B1452 - 16 -
1 CHAPTER 87
2 PUBLIC SCHOOL EMPLOYEES' RETIREMENT CODE OF 1985
3 Subchapter
4 A. Preliminary Provisions
5 B. Participation
6 C. Service Credits, Vesting Credits and Vesting
7 D. Benefits
8 E. Administration
9 F. Public School Employees' Retirement Trust Fund and
10 Accounts
11 G. Contributions
12 H. Miscellaneous Provisions
13 SUBCHAPTER A
14 PRELIMINARY PROVISIONS
15 Sec.
16 8701. Short title of chapter.
17 8702. Definitions.
18 § 8701. Short title of chapter.
19 This chapter shall be known and may be cited as the Public
20 School Employees' Retirement Code of 1985.
21 § 8702. Definitions.
22 The following words and phrases when used in this chapter
23 shall have the meanings given to them in this section unless the
24 context clearly indicates otherwise:
25 "Active participant." A participant who is currently
26 accruing vesting credits or service credits or both. All persons
27 employed by any governmental entity directly responsible for the
28 employment and payment of the school employee and charged with
29 the responsibility of providing public education within this
30 Commonwealth, including, but not limited to, State-owned
19850S1157B1452 - 17 -
1 universities, The Pennsylvania State University, community
2 colleges, area vocational-technical schools, intermediate units,
3 the State Board of Education, Scotland School for Veterans'
4 Children, Thaddeus Stevens Trade School and the Pennsylvania
5 State Oral School for the Deaf, in any capacity whatsoever,
6 whether permanent or temporary, full time or part time, shall be
7 active participants beginning with the effective date of
8 employment. The term does not include the following:
9 (1) An independent contractor or person compensated on a
10 fee basis.
11 (2) A person enrolled as a full-time student at a State-
12 owned educational institution or The Pennsylvania State
13 University who may perform compensable services for the
14 institution or university, as the case may be, during any
15 term while so enrolled. In the event the person is employed
16 elsewhere in a position that would otherwise qualify for
17 participation, the person shall not be excluded from
18 participation while in that employment by virtue of the fact
19 that the person is also a full-time student at a State-owned
20 educational institution or The Pennsylvania State University.
21 (3) A person who is initially employed or who continues
22 to be employed by the aforementioned governmental entity who
23 is at or beyond the age at which full social security
24 benefits become payable without any reduction for early
25 receipt, which shall in no case be prior to 65 years of age.
26 (4) A person who is employed prior to 22 years of age
27 until reaching 22 years of age.
28 "Actuarially equivalent." Equal actuarial present values,
29 computed on the basis of interest and the mortality tables
30 adopted by the board. The interest rates shall be adjusted each
19850S1157B1452 - 18 -
1 January 1 based on the yield on ten-year Treasury Bonds during
2 the first quarter of the preceding calendar year rounded to the
3 nearest 0.5%. The mortality tables shall be based on the most
4 recent available United States life expectancy tables developed
5 by the United States Census Bureau.
6 "Actuary." The consultant to the board, who shall be one of
7 the following:
8 (1) A member of the American Academy of Actuaries.
9 (2) An individual who has demonstrated to the
10 satisfaction of the Insurance Commissioner that the
11 individual has the educational background necessary for the
12 practice of actuarial science and has had at least seven
13 years of actuarial experience.
14 (3) A firm, partnership or corporation of which at least
15 one member meets the requirements of paragraph (1) or (2).
16 "Beneficiary." The person or persons last designated by the
17 participant to receive any benefits payable in the event of his
18 death.
19 "Board." The Public School Employees' Retirement Board.
20 "Compensable service." Service performed by a participant
21 for the employer for which compensation is actually received.
22 "Creditable nonschool service." Service other than as a
23 participant for which a participant may receive service credits
24 and vesting credits.
25 "Date of termination of service." The last day of service
26 for which a participant receives remuneration from the employer
27 or, in the case of an inactive participant on leave without pay,
28 the date of his resignation or the date his employment if
29 formally discontinued by the employer.
30 "Deferred retirement." The result of a participant
19850S1157B1452 - 19 -
1 terminating participatory employment prior to being eligible to
2 receive an immediate retirement allowance, but being eligible to
3 receive a retirement allowance benefit at a future date, the
4 date to be determined on the basis of age and vesting credits in
5 accordance with the schedules provided in section 8732 (relating
6 to service retirement eligibility), as appropriate.
7 "Effective date of retirement."
8 (1) The first date following the date of termination of
9 compensable service of a participant if he has properly filed
10 an application for a retirement allowance within 90 days of
11 that date.
12 (2) In the case of a deferred retirement or a
13 participant who does not apply for a retirement allowance
14 within 90 days after termination of compensable service, the
15 date of filing an application for a retirement allowance or
16 the date specified on the application, whichever is later.
17 "Final average salary or FAS." The highest average annual
18 remuneration received as a participant during any five
19 consecutive nonoverlapping periods of four consecutive calendar
20 quarters chosen from the most recent 40 calendar quarters of
21 participation, with the remuneration for part-time service being
22 annualized on the basis of the fractional portion of the year
23 for which service credit is received.
24 "Fund." The Public School Employees' Retirement Trust Fund
25 established by this chapter.
26 "Governmental entity." A board of school directors, board of
27 public education, intermediate unit board of directors, area
28 vocational-technical board, or any governing board of any agency
29 or authority created by them, and the Commonwealth.
30 "Hours compensated." Units of time for which a participant
19850S1157B1452 - 20 -
1 receives compensation as reported by the employer and used in
2 the determination of service credits and vesting credits. Each
3 hour for which a participant is compensated at a premium rate
4 (i.e., at a rate greater than one time the normal rate of pay
5 for each complete hour) shall be counted as a single hour for
6 both service credits and vesting credits, irrespective of the
7 level or rate of pay. Each hour for which a participant is
8 compensated at a rate of pay which is a fraction of the normal
9 rate of pay for each complete hour shall be counted as a
10 corresponding fraction of an hour for both service credits and
11 vesting credits. There shall be no hours compensated credited to
12 a participant based on any compensation received in the form of
13 severance payments, unused leave payments, special bonuses,
14 awards or other similar emoluments or any refunds for expenses
15 or contingency or accountable expense allowances.
16 "Inactive participant."
17 (1) A participant who is not earning service credits or
18 vesting credits, including one on leave without pay, but who
19 has accumulated service credits and vesting credits standing
20 to his credit in the plan and who is not eligible for or has
21 not elected to receive a deferred retirement or who has not
22 filed an application for a retirement allowance.
23 (2) A participant who continues to be employed by the
24 employer beyond the age at which Social Security benefits
25 become payable without any reduction for early receipt, which
26 shall in no case be prior to 65 years of age, until
27 termination of employment.
28 "Intervening military service." Active military service of a
29 participant who was an active participant immediately preceding
30 induction into the armed forces of the United States, excluding
19850S1157B1452 - 21 -
1 any voluntary extension of that service, and who returns to
2 active employment within 90 days of the expiration of military
3 service, for which both service credits and vesting credits
4 shall be earned.
5 "Military service." Active military service for which a
6 participant has received a discharge other than an undesirable,
7 bad conduct or dishonorable discharge.
8 "Normal retirement age." The age at which Social Security
9 benefits become payable without any reduction for early receipt,
10 which shall in no case be prior to 65 years of age, or three
11 years prior to that age upon accrual of 30 vesting credits, or
12 five years prior to that age upon accrual of 35 vesting credits.
13 "Participant." An active participant, inactive participant,
14 retiree or participant who has elected to receive a deferred
15 retirement allowance.
16 "Percent vested." A percentage based on a combination of
17 vesting credits and age in accordance with the vesting schedule
18 for the plan.
19 "Plan." The plan incorporated into the Public School
20 Employees' Retirement System under this chapter.
21 "Plan year." September 1 through August 31.
22 "Remuneration." Compensation received by a participant from
23 his employer in the form of gross salary or wages for services
24 performed. The term does not include compensation received for
25 overtime, paid leave time and on-call or stand-by time;
26 compensation received in the form of severance payments, unused
27 leave payments, special bonuses, awards or other similar
28 emoluments; or refunds for expenses or contingency or
29 accountable expense allowances. For the purposes of the system,
30 remuneration shall be limited to base salary or wages or both.
19850S1157B1452 - 22 -
1 "Retiree." A participant who is receiving a monthly
2 retirement allowance.
3 "School year." The 12-month period which the governmental
4 entity uses for purposes of administration regardless of the
5 actual time during which a member renders service.
6 "Service credits." Units of credit earned by a participant
7 beginning at 25 years of age through the performance of
8 compensable service for the employer which are used in the
9 determination of the amount of benefits payable to a
10 participant.
11 "Survivor." The person last designated by a participant
12 under a joint and survivor annuity option to receive an annuity
13 upon the death of the participant.
14 "Survivor annuitant." A survivor who is in receipt of a
15 monthly retirement allowance.
16 "System." The Public School Employees' Retirement System, as
17 established by this chapter.
18 "Transfer participant." A person who has elected to transfer
19 school and nonschool service credits credited in the Public
20 School Employees' Retirement system established by Subpart A
21 (relating to Public School Employees' Retirement Code of 1975)
22 to the plan of the Public SChool Employees' Retirement System
23 established under this chapter.
24 "Vestee." A participant who is at least 50% vested in
25 accordance with the vesting schedule and who has terminated
26 active participation in the system and has not yet applied for a
27 deferred retirement allowance.
28 "Vesting credits." Units of credit earned by a participant
29 beginning at 22 years of age through the performance of
30 compensable services which are used to determine the
19850S1157B1452 - 23 -
1 participant's eligibility for benefits and the amount of
2 benefits.
3 SUBCHAPTER B
4 PARTICIPATION
5 Sec.
6 8711. Participation in general.
7 8712. Determination of eligibility to participate.
8 8713. Return to service.
9 § 8711. Participation in general.
10 (a) General rule.--Persons employed by a governmental entity
11 in any capacity whatsoever, whether permanent or temporary, full
12 time or part time, shall be participants of the plan beginning
13 with the effective date of employment except the following:
14 (1) An independent contractor or person compensated on a
15 fee basis.
16 (2) A person enrolled as a full-time student at a State-
17 owned educational institution or The Pennsylvania State
18 University who may perform compensable services for the
19 institution or university, as the case may be, during any
20 term while so enrolled. In the event the person is employed
21 elsewhere in a position that would otherwise qualify for
22 participation, the person shall not be excluded from
23 participation while in that employment by virtue of the fact
24 that the person is also a full-time student at a State-owned
25 educational institution or The Pennsylvania State University.
26 (3) A person who is initially employed or continues to
27 be employed by a governmental agency who is at or beyond the
28 age at which full Social Security benefits become payable
29 without any reduction for early receipt, which shall in no
30 case be prior to 65 years of age.
19850S1157B1452 - 24 -
1 (4) A person who is employed prior to 22 years of age
2 until reaching 22 years of age.
3 (b) Transfer from former system.--A person who is an active
4 member of the system established by Subpart A (relating to
5 Public School Employees' Retirement Code of 1975) may within
6 three years of the effective date of this chapter elect to
7 transfer to the system established by this chapter. Upon the
8 transfer, the participant shall be credited with service credits
9 and vesting credits in direct proportion to the eligibility
10 points forfeited in the predecessor system. The participant
11 shall then be entitled to the rights and benefits provided by
12 this system for all service credits and vesting credits
13 transferred and any additional credits that may be earned for
14 additional service.
15 (c) Cessation of credit accumulation and salary accrual.--
16 The accumulation of service credits and vesting credits or the
17 accrual of final average salary shall cease upon the attainment
18 of normal retirement age, but in no case prior to 65 years of
19 age.
20 § 8712. Determination of eligibility to participate.
21 The employing governmental entity shall be responsible for
22 the initial determination of the individual employee's
23 eligibility to participate under the rules of the plan in
24 accordance with the establishment of an employer-employee
25 relationship. In all cases of doubt regarding the existence of
26 an employer-employee relationship, the determination shall be
27 made on the basis of whether or not the employer pays the
28 employers' share of the Federal Social Security tax on behalf of
29 the individual. Only those for whom the employer pays the
30 employer tax shall be deemed employees for the purposes of the
19850S1157B1452 - 25 -
1 plan. In the event the employer is not a participant under the
2 Federal Social Security program, the existence or nonexistence
3 of an employer-employee relationship shall be based on other
4 criteria established by the board. In all cases of doubt
5 regarding an individual's eligibility to participate, the
6 decision of the board shall be final.
7 § 8713. Return to service.
8 (a) General rule.--Upon the return to active employment of a
9 retiree prior to the age at which Social Security benefits
10 become payable without any reduction for early receipt, which
11 age shall in no case be prior to 65 years of age, the retirement
12 benefit payable shall be suspended and converted to a single
13 life annuity effective as of the date of return to service.
14 (b) Benefit entitlement upon subsequent retirement.--Upon
15 subsequent retirement, the participant's maximum benefit
16 entitlement shall consist of the suspended single life annuity
17 and the additional benefit the participant earned by virtue of
18 the additional service.
19 (1) For purposes of determining the benefit derived from
20 the additional service only, vesting credits shall be
21 cumulative for all periods of service. Vesting credits and
22 service credits earned by service rendered subsequent to the
23 return to employment from retirement shall in no way affect
24 the amount of the original suspended benefit.
25 (2) For purposes of determining the benefit derived from
26 the additional service, final average salary shall be
27 calculated as defined, including the compensation from prior
28 periods of participatory employment in the event the
29 participant has not accumulated sufficient additional service
30 to make a final average salary determination.
19850S1157B1452 - 26 -
1 (3) The sum of the combined single life annuities may be
2 paid as such or in the form of a ten-year term certain and
3 continuous annuity of a joint and survivor option provided
4 the participant has more than one additional year of service
5 subsequent to the date of return from retirement. If a joint
6 and survivor option is selected by the participant, it shall
7 be calculated as the actuarially equivalent to the combined
8 single life annuities.
9 (4) In the event a retiree returns to active
10 participation and retires again within one year of the
11 effective date of return, the retiree shall be precluded from
12 selecting a different payment plan option or, in the case of
13 a joint and survivor annuity, different designated survivor
14 than that in effect immediately preceding the return to
15 service.
16 (c) Temporary service during emergency.--When, in the
17 judgment of the employer, an emergency creates an increase in
18 the workload to the extent that there is serious impairment of
19 service to the public, a retiree may be returned to school
20 service without loss of retirement benefits, for a period not to
21 exceed 75 days in any school year. For purposes of determining
22 the 75-day limitation, each day that the individual is
23 compensated, irrespective of the amount of the compensation or
24 the number of hours worked that day, shall count as a full day.
25 In the event a retiree is employed under this subsection,
26 subsections (a) and (b) shall not be applicable. However, in the
27 event an employee under this subsection exceeds the 75-day
28 limitation, the requirements of subsections (a) and (b) shall be
29 applied to the date the employment first occurred. In these
30 circumstances, the employee shall be required to return any
19850S1157B1452 - 27 -
1 improperly received retirement benefit payments together with
2 compound interest calculated on the basis of the most recent
3 actuarial interest rate adopted by the board.
4 (d) Return of retiree of normal retirement age.--In the
5 event a retiree returns to active employment with any member
6 employer at normal retirement age or older, the retirement
7 benefit then payable shall be suspended and the retiree shall be
8 precluded from active participation. In these cases, no further
9 vesting credits or service credits may be earned by this service
10 nor may there be any adjustment of the retiree's final average
11 salary. The suspension of benefit payments shall continue so
12 long as the retiree remains in active employment status. Upon
13 the termination of the active employment, benefit payments shall
14 be resumed under the same payment plan in effect immediately
15 preceding the suspension of benefit.
16 (e) Death of retiree during subsequent employment.--In the
17 event a retiree returns to employment and subsequently dies
18 within one year of the effective date of return, payment of any
19 death benefits shall be made in accordance with the payment plan
20 option and beneficiary or survivor designation in effect
21 immediately preceding the return to service.
22 (f) Service credits and vesting credits.--In the event of a
23 return to active employment of any former member of the system
24 established by Subpart A (relating to Public School Employees'
25 Retirement Code of 1975) whose active membership was terminated
26 and who withdrew his contributions in accordance with section
27 8341 (relating to return of accumulated deductions), the person
28 shall be entitled to service credits and vesting credits in this
29 system in direct proportion to the eligibility points forfeited
30 upon termination from the predecessor system. In the event of a
19850S1157B1452 - 28 -
1 return to active employment of any former participant of this
2 system, all previous service credits and vesting credits shall
3 be reinstated.
4 SUBCHAPTER C
5 SERVICE CREDITS, VESTING CREDITS AND VESTING
6 Sec.
7 8721. Service credits and vesting credits.
8 8722. Vesting schedule.
9 § 8721. Service credits and vesting credits.
10 (a) General rule.--Service credits and vesting credits shall
11 be credited to participants each school year on the basis of
12 hours compensated. Credits shall be earned by the participant on
13 the basis of the employment relationship as compared to service
14 rendered as a full-time faculty employee.
15 (1) A participant shall earn one vesting credit for each
16 school year in which he is considered to be a full-time
17 employee.
18 (2) A participant shall earn service credit for each
19 school year in which he earns a vesting credit.
20 (3) Members may earn fractional service credits and
21 vesting credits in school years in which employment eligible
22 for participation commences or terminates.
23 (4) Fractional vesting credits shall be earned by a
24 participant. The credit shall be calculated and credited as
25 the percentage of that full school year the participant was
26 employed.
27 (5) Fractional service credits shall be earned by
28 participants when service qualifies for vesting credits under
29 paragraph (4). Credit shall be calculated and credited in
30 direct proportion to that service required for one service
19850S1157B1452 - 29 -
1 credit to be earned by a full-time member.
2 (b) Intervening military service.--A ¢participant who is on
3 intervening military service shall be deemed upon return from
4 such military service to have been in continuous, uninterrupted
5 full-time employment. A participant shall earn both service
6 credits and vesting credits, or fractional parts thereof, for
7 any periods of intervening military service on a date-to-date
8 basis determined by dividing the number of calendar days the
9 participant was on active military duty in each calendar quarter
10 by 90 and multiplying the result by one-fourth.
11 (c) Time of allocation of credits and compensation.--Service
12 credits, vesting credits and hours compensated shall be credited
13 to the period in which the remuneration for service is
14 constructively received by the participant, except in the case
15 of retroactive pay or personnel actions resulting from
16 collective bargaining agreements, arbitration awards, civil
17 service adjudications, court orders or similar actions. In these
18 exceptional situations, the service credits, vesting credits and
19 hours compensated shall be credited to the plan year for which
20 the retroactive remuneration is applicable.
21 § 8722. Vesting schedule.
22 Participants shall receive vested status in accordance with
23 the following schedule:
24 Vesting Credits Earned Percent Vested at Age
25 Normal Retirement Under Normal
26 At Least But Less Than Age and Over Retirement Age
27 0 5 0% 0%
28 5 6 100% 50%
29 6 7 100% 60%
30 7 8 100% 70%
19850S1157B1452 - 30 -
1 8 9 100% 80%
2 9 10 100% 90%
3 10 and over 100% 100%
4 SUBCHAPTER D
5 BENEFITS
6 Sec.
7 8731. Service retirement allowance formula.
8 8732. Service retirement eligibility.
9 8733. Optional payment plans.
10 8734. Death in active service.
11 8735. Death of retiree.
12 8736. Automatic cost-of-living adjustments.
13 8737. Special provisions on payment of benefits.
14 § 8731. Service retirement allowance formula.
15 The annual service retirement allowance shall be a maximum
16 single life annuity calculated as follows:
17 0.0115 x final average salary x service credits x percent
18 vested.
19 § 8732. Service retirement eligibility.
20 (a) Full retirement allowance.--A participant shall be
21 eligible to receive a full service retirement allowance,
22 unreduced for age, on or after normal retirement age.
23 (b) Deferred retirement allowance.--A deferred retirement
24 allowance, unreduced for age, shall become payable at normal
25 retirement age. A vestee who is less than 100% vested in
26 accordance with the vesting schedule shall be eligible for a
27 deferred retirement allowance only upon attainment of normal
28 retirement age. A participant who is less than 100% vested at
29 the time of termination of participatory employment shall not
30 become vested to a higher percentage on the basis of age.
19850S1157B1452 - 31 -
1 (c) Early retirement allowance.--A participant may, upon
2 termination of participatory employment with 25 or more vesting
3 credits, elect to receive an early retirement allowance
4 beginning no sooner than ten years prior to normal retirement
5 age. The benefit shall be calculated by the retirement allowance
6 formula specified in section 8731 (relating to service
7 retirement allowance formula) and reduced by 0.5% for each
8 month, or fraction thereof, that the participant is under the
9 age at which full Social Security benefits become payable, but
10 not earlier than 65 years of age.
11 § 8733. Optional payment plans.
12 (a) General rule.--At the time of retirement, a participant
13 of the system shall elect to receive retirement benefit payments
14 under one of the following payment plan options:
15 (1) A maximum single life annuity, payable to the
16 retired participant throughout his lifetime with all payments
17 to cease at death.
18 (2) An actuarially reduced ten-year term certain and
19 continuous annuity, payable to the retired participant
20 throughout his lifetime with payments guaranteed to be paid
21 to the retired participant or to his designated beneficiary
22 or beneficiaries for a period of ten years from the effective
23 date of retirement. In the event the retired participant
24 receives payment for ten years or more, payments will
25 continue for his lifetime and will cease at death.
26 (3) An actuarially reduced joint and 100% survivor
27 annuity.
28 (4) An actuarially reduced joint and 50% survivor
29 annuity.
30 (b) Ten-year term certain and continuous annuity.--A
19850S1157B1452 - 32 -
1 retiring participant who chooses a ten-year term certain and
2 continuous annuity may name one or more beneficiaries and may
3 change beneficiaries at any time. In the case of multiple
4 beneficiaries, any payments due upon the death of the retired
5 participant shall be divided equally among the named
6 beneficiaries and paid monthly until the expiration of the ten-
7 year term at which time all payments shall cease.
8 (c) Joint and survivor annuity.--
9 (1) A retiring participant who chooses a joint and
10 survivor annuity shall be limited to the designation of a
11 single survivor annuitant, which designation may not be
12 changed except under one of the following circumstances:
13 (i) The death of the designated survivor.
14 (ii) The divorce of the retiree and the designated
15 survivor.
16 (iii) The marriage of the retiree subsequent to the
17 effective date of retirement.
18 (2) In the event of the retired participant's election
19 to change a designated survivor annuitant under any of the
20 conditions listed in paragraph (1), the amount of the
21 retirement allowance then being paid to the retiree shall be
22 treated as a single life annuity and the appropriate
23 reduction shall be calculated thereon based on the age of the
24 retiree and the new designated survivor on the effective date
25 of change.
26 (3) In the event a retired participant under a joint and
27 survivor annuity elects to name a new designated survivor
28 under paragraph (1), the change in designated survivor and
29 the appropriate reduction in payments to the retired
30 participant shall be effective on the first day of the month,
19850S1157B1452 - 33 -
1 next following, one year from the date the election is
2 received in the offices of the system.
3 § 8734. Death in active service.
4 (a) Contingent retirement benefit applicant participants.--
5 An active participant who is eligible to receive an immediate
6 retirement allowance upon termination of employment may file a
7 contingent retirement benefit application under one of the
8 optional payment plans provided for in section 8733 (relating to
9 optional payment plans) to be effective in the event of death
10 while still in active service. In that event, the participant
11 shall be deemed to have retired effective the day before death
12 and the benefits shall become payable as such under the
13 provisions of the payment plan option specified by the
14 participant. The contingent application may be withdrawn or
15 changed by the participant at any time during active service and
16 shall not be binding upon the participant at the time of actual
17 retirement.
18 (b) Other participants.--In the event an active participant
19 who is eligible to receive an immediate retirement allowance
20 upon termination of employment does not file a contingent
21 retirement application in accordance with subsection (a) and
22 dies while still in active service, he shall be deemed to have
23 retired the day preceding death under the provisions of a joint
24 and 100% survivor annuity. The survivor benefits thereunder
25 shall become payable to the deceased participant's surviving
26 spouse. In the event there is no surviving spouse, no death
27 benefits shall be payable under this subsection.
28 (c) Vestees.--In the event of the death of a vestee who has
29 25 or more vesting credits and who is 55 years of age or older,
30 the vestee shall be deemed to have retired under section 8732(a)
19850S1157B1452 - 34 -
1 or (b) (relating to service retirement eligibility) the day
2 preceding death under the provisions of a joint and 50% survivor
3 annuity. The survivor benefits thereunder shall become payable
4 to the deceased vestee's surviving spouse. In the event there is
5 no surviving spouse, no death benefits shall be payable under
6 this subsection.
7 § 8735. Death of retiree.
8 Death benefits will be paid to a retired participant's
9 designated beneficiary-survivor in accordance with the payment
10 plan chosen by the participant.
11 § 8736. Automatic cost-of-living adjustments.
12 (a) General rule.--Beginning with July 1 which next follows
13 a participant's effective date of retirement by at least 12
14 months, and each succeeding July 1 thereafter, the retirement
15 allowance then payable to the retired participant, irrespective
16 of the type of retirement, shall be increased by a percentage,
17 rounded to the nearest 0.5%, and not exceeding 3%, determined as
18 one-half of the lesser of the following:
19 (1) The increase in the Consumer Price Index for All
20 Urban Consumers as published by the Bureau of Labor
21 Statistics, United States Department of Labor, for the
22 previous 12-month period ending December 31.
23 (2) The increase in the Employer Cost Index covering
24 compensation rates for workers in the civilian nonfarm
25 economy as published by the Bureau of Labor Statistics,
26 United States Department of Labor, for the previous 12-month
27 period ending December 31.
28 (3) The average percentage general salary and wage
29 increase for all State employees for the previous 12-month
30 period ending December 31.
19850S1157B1452 - 35 -
1 (b) Effect of decline or no change in measures.--No
2 adjustment shall occur in the event of a decline or no change in
3 any of the measures in subsection (a).
4 (c) Deferred retirement allowance retirees.--Irrespective of
5 any other provisions in this section, the increases provided by
6 this section shall not be payable to those participants who
7 retired under section 8732(b) (relating to service retirement
8 eligibility).
9 § 8737. Special provisions on payment of benefits.
10 (a) Frequency and time of payment.--All retirement benefit
11 payments shall be payable monthly and shall be made on the first
12 day of the month for which they are due.
13 (b) Reduction of accrued benefits prohibited.--Once a
14 participant is eligible to retire, the accrued benefits to which
15 the participant is entitled cannot be reduced for any reason.
16 (c) Restriction on change of payment options.--
17 (1) The selection of a payment plan option by a retiring
18 participant shall become final and binding on the date of the
19 participant's termination from active employment or the date
20 the application for retirement allowance is received in the
21 offices of the system, whichever is later, and may not be
22 changed for any reason thereafter, except as otherwise
23 provided in paragraph (2).
24 (2) The board may make exceptions to the prohibition in
25 paragraph (1), but only in cases where the board has found
26 that the participant was not properly informed of his rights
27 and privileges under the plan or that the participant was not
28 competent to make the selection. The changes, in the board's
29 sole discretion, may be made only when the board is so
30 notified by the participant, or someone acting on behalf of
19850S1157B1452 - 36 -
1 the participant, within 90 days of the board's mailing or
2 deposit, as the case may be, of the first annuity payment.
3 SUBCHAPTER E
4 ADMINISTRATION
5 Sec.
6 8751. Administration in general.
7 8752. Administrative duties of board.
8 8753. Duties of board to advise and report to employers and
9 participants.
10 8754. Duties of board regarding applications and elections of
11 participants.
12 8755. Duties of employers.
13 8756. Rights and duties of participants.
14 § 8751. Administration in general.
15 (a) General rule.--The administration of this chapter shall
16 be under the direction of the Public School Employees'
17 Retirement Board established under Subpart A (relating to Public
18 School Employees' Retirement Code of 1975). The secretary,
19 clerical and other employees of the board and their successors
20 who are employed under Subpart A shall similarly be responsible
21 to the system established under this chapter.
22 (b) Status of system.--The Public School Employees'
23 Retirement System established under this chapter shall be
24 considered a public corporation and, for the purposes of this
25 chapter, the board shall possess the power and privileges of a
26 corporation.
27 § 8752. Administrative duties of board.
28 (a) Employees.--The secretary, clerical and other employees
29 of the board and their successors whose positions on the
30 effective date of this chapter are under the classified service
19850S1157B1452 - 37 -
1 provisions of the act of August 5, 1941 (P.L.752, No.286), known
2 as the Civil Service Act, shall continue under those provisions.
3 The compensation of all other persons appointed shall be
4 determined by the board and shall be consistent with the
5 standards established by the Executive Board of the
6 Commonwealth.
7 (b) Professional personnel.--The board shall contract for
8 the services of an actuary, investment advisors and counselors
9 and any other professional personnel it deems advisable.
10 (c) Expenses.--The board shall, through the Governor, submit
11 to the General Assembly annually a budget covering the
12 administrative expenses of this chapter. The expenses as
13 approved by the General Assembly in an appropriation bill shall
14 be paid from the fund. Expenses related to the management of the
15 investment portfolio of the fund shall be paid from the
16 investment earnings of the fund. The investment management
17 expenses shall not be considered as a part of the administrative
18 expense appropriation but shall be considered an integral part
19 of the cost of investments. The board shall annually report to
20 the Governor and the General Assembly the cost of all outside
21 investment management contracts.
22 (d) Meetings.--The board shall hold at least six regular
23 meetings annually and any other meetings it deems necessary.
24 (e) Records.--The board shall keep a record of all its
25 proceedings which shall be open to inspection by the public.
26 (f) Functions.--The board shall perform such other functions
27 as are required for the execution of this chapter.
28 (g) Performance of employer duties.--In the event the
29 employer fails to comply with the procedures as mandated in
30 section 8755 (relating to duties of employers), the board shall
19850S1157B1452 - 38 -
1 perform those duties and bill such employer for the cost
2 incurred.
3 (h) Regulations and procedures.--The board shall, with the
4 advice of the General Counsel and the actuary, promulgate rules
5 and regulations for the uniform administration of the system.
6 The actuary shall approve in writing all computational
7 procedures used in the calculation of contributions and benefits
8 prior to their application by the board.
9 (i) Data.--The board shall keep in convenient form such data
10 as are stipulated by the actuary in order that an annual
11 actuarial valuation of the various accounts can be completed
12 within six months of the close of each fiscal year.
13 (j) Actuarial investigation and valuation.--The board shall
14 have the actuary make an annual valuation of the various
15 accounts within six months of the close of each fiscal year. In
16 the fiscal year ending 1987 and in every fifth year thereafter,
17 the board shall have the actuary conduct an actuarial
18 investigation and evaluation of the system based on data
19 including the mortality, service and compensation experience
20 provided by the board annually during the preceding five years
21 concerning the participants and survivor annuitants. The board
22 shall adopt such tables as are necessary for the actuarial
23 valuation of the fund and calculation of contributions and
24 benefits based on the reports and recommendations of the
25 actuary.
26 (k) Certification of employer contributions.--The board
27 shall, each year, in addition to the itemized budget required
28 under subsection (c), certify to the employers and the
29 Commonwealth, as a percentage of the participants' payroll, the
30 employers' contributions necessary for the funding of
19850S1157B1452 - 39 -
1 prospective benefits for participants and certify the rates and
2 amounts of the employers' total contributions which shall be
3 paid to the fund. These certifications shall be regarded as
4 final and not subject to modification by the Secretary of the
5 Budget.
6 (l) Commonwealth payments.--The board shall within 30 days
7 following the end of each quarter determine the amount due to
8 the fund from the Commonwealth during that quarter and submit at
9 that time a requisition for the amount determined to be due from
10 the Commonwealth to the State Treasurer.
11 (m) Annual financial statement.--The board shall prepare,
12 according to generally accepted accounting principles, and have
13 published on or before January 1 of each year, a financial
14 statement as of the calendar year ending June 30 of the previous
15 year showing the condition of the fund and the various accounts
16 and setting forth any other facts, recommendations and data as
17 may be of use in the advancement of knowledge concerning
18 annuities and other benefits provided by this chapter. The board
19 shall submit the financial statement to the Governor and members
20 of the General Assembly and shall make copies available to the
21 employers for the use of the participants and the public.
22 (n) Independent annual audit.--The board shall provide for
23 an annual audit of the system by an independent certified public
24 accountant.
25 § 8753. Duties of board to advise and report to employers and
26 participants.
27 (a) Manual of regulations.--The board shall, with the advice
28 of the General Counsel and the actuary, prepare and provide,
29 within 90 days of the effective date of this chapter, a manual
30 incorporating rules and regulations consistent with this chapter
19850S1157B1452 - 40 -
1 for the employers who shall make the information contained in
2 the manual available to the general membership. The board shall
3 thereafter advise the employers within 90 days of any changes in
4 the rules and regulations due to changes in the law or due to
5 changes in administrative policies.
6 (b) Participant status statements and certifications.--The
7 board shall furnish annually to each participant, on or before
8 December 31, a statement showing a certification of the number
9 of service credits and vesting credits and, in the case of a
10 participant eligible to receive an annuity, the benefit to which
11 he is entitled. In addition, the board shall request the
12 participant to make any necessary corrections or revisions
13 regarding his designated beneficiary. Each member's statement
14 shall be mailed to his home address and shall include a request
15 that the member make any necessary corrections or revisions
16 regarding his designated beneficiary, whose name at the request
17 of the member shall remain confidential and not appear on this
18 statement.
19 § 8754. Duties of board regarding applications and elections of
20 participants.
21 (a) Statement to new participants.--As soon as practicable
22 after a person has become an active participant in the system,
23 the board shall issue a statement certifying the aggregate
24 number of service credits and vesting credits credited to his
25 account based on previous service.
26 (b) Certification to vestees terminating service.--The board
27 shall certify to a vestee within one year of termination of
28 school service of the participant:
29 (1) The number of service credits and vesting credits
30 credited to his account.
19850S1157B1452 - 41 -
1 (2) The maximum single life annuity to which the vestee
2 is entitled upon attainment of normal retirement age and the
3 filing of an application for an annuity.
4 (c) Initial annuity payment and certification.--The board
5 shall make the first monthly payment to a participant who is
6 eligible for an annuity within 60 days of the filing of his
7 application for an annuity and receipt of the required data from
8 the employer. Concurrently, the board shall certify to the
9 participant:
10 (1) The number of service credits and vesting credits
11 earned.
12 (2) The final average salary on which the annuity is
13 based as well as any applicable reduction factors due to
14 early retirement and election of an option.
15 (3) The total annuity payable under the option elected.
16 (d) Death benefits.--Upon receipt of notification from the
17 employer of the death of an active vested participant or a
18 vested participant on leave without pay, the board shall advise
19 the designated beneficiary of the benefits to which he is
20 entitled and shall make the first payment to the beneficiary
21 within 60 days of receipt of certification of death and other
22 necessary data.
23 § 8755. Duties of employers.
24 (a) Status of participants.--The employer shall, each month,
25 notify the board in a manner prescribed by the board of salary
26 changes effective during the past month, the date of all
27 removals from the payroll and the type of leave of any
28 participants who have been removed from the payroll for any time
29 during that month, and:
30 (1) if the removal is due to leave without pay, the
19850S1157B1452 - 42 -
1 employer shall furnish the board with the date of beginning
2 leave, the date of return to service and the reason for
3 leave;
4 (2) if the removal is due to a transfer to another
5 employer, the former employer shall furnish such employer and
6 the board with a complete school service record, including
7 credited and creditable nonschool service; or
8 (3) if the removal is due to termination of school
9 service, the employer shall furnish the board with a complete
10 school service record, including credited and creditable
11 nonschool service and, in the case of death of the
12 participant, the employer shall so notify the board.
13 (b) Records and information.--At any time at the request of
14 the board and at termination of service of a participant, the
15 employer shall furnish service and compensation records and any
16 other information the board requires and shall maintain and
17 preserve any records the board directs for the expeditious
18 discharge of its duties.
19 (c) Application for participation by new employees.--Upon
20 the assumption of duties of each new employee, the employer
21 shall cause an application for participation to be made by the
22 employee and filed with the board.
23 (d) Annual statement to participants.--Annually, upon
24 receipt from the board, the employer shall furnish to each
25 participant the statement specified in section 8753 (relating to
26 duties of board to advise and report to employers and
27 participants).
28 (e) Termination of service.--The employer shall, in the case
29 of any participant terminating school service, advise the
30 participant in writing of any benefits to which he may be
19850S1157B1452 - 43 -
1 entitled under this chapter and, in the case of eligibility for
2 benefits, shall have the participant prepare, on or before the
3 date of termination of school service, one of the following two
4 forms, a copy of which shall be given to the participant and the
5 original of which shall be filed with the board:
6 (1) An election to vest his retirement rights.
7 (2) An application for an immediate annuity.
8 (f) Date of application for benefits.--An application
9 properly executed and filed under subsection (e) with the
10 employer shall be deemed to have been filed with the board on
11 the date filed with the employer and in that case all required
12 data shall be furnished to the board immediately.
13 § 8756. Rights and duties of participants.
14 (a) Information on new participants.--Upon the assumption of
15 duties, each new active participant shall furnish the employer
16 with a complete record of previous creditable service and proof
17 of his date of birth and current status in the system. Willful
18 failure to provide the information required by this subsection
19 to the extent available upon entrance into the system shall
20 result in the forfeiture of the right of the participant to
21 subsequently assert any right to benefits based on any of the
22 required information which he failed to provide. In any case in
23 which the board finds that a participant is receiving an annuity
24 based on false information, the annuity payments shall be
25 suspended until one and one-half times the total amount received
26 predicated on the false information has been withheld, after
27 which the participant shall receive the benefits to which he is
28 legally entitled.
29 (b) Application for participation.--In the case of a new
30 employee who is not currently a participant, the new employee
19850S1157B1452 - 44 -
1 shall execute an application for participation.
2 (c) Application for contingent retirement allowance.--An
3 active participant eligible for an immediate retirement
4 allowance may file a contingent retirement benefit application
5 under section 8734(a) (relating to death in active service).
6 (d) Termination of service.--A participant who is eligible
7 for benefits and who terminates school service shall execute on
8 or before the date of termination of service the appropriate
9 application, duly attested by the participant or his legally
10 constituted representative, electing to do either of the
11 following:
12 (1) Vest his retirement rights.
13 (2) Receive an immediate annuity.
14 (e) Vesting of retirement rights.--A participant who elects
15 to vest his retirement rights shall nominate a beneficiary by
16 written designation filed with the board.
17 (f) Vestees attaining normal retirement age.--Upon
18 attainment of normal retirement age, a vestee shall execute and
19 file an application for an annuity. An application filed within
20 90 days after attaining normal retirement age shall be effective
21 as of the date of attainment of normal retirement age. An
22 application filed after that period shall be effective as of the
23 date it is filed with the board.
24 (g) Failure to apply for annuity.--If a participant is
25 eligible to receive an annuity and does not file a proper
26 application within 90 days of termination of service, the
27 annuity will become effective as of the date the application is
28 filed with the board or the date designated on the application,
29 whichever is later.
30 (h) Nomination of beneficiary or survivor annuitant.--A
19850S1157B1452 - 45 -
1 participant who is eligible and elects to receive a reduced
2 annuity under the ten-year term certain and continuous annuity,
3 actuarially reduced joint and 100% survivor annuity or
4 actuarially reduced joint and 50% survivor annuity shall
5 nominate a beneficiary or a survivor annuitant, as the case may
6 be, by written designation filed with the board at the time of
7 his retirement. A participant who has elected the ten-year term
8 certain and continuous annuity may change his designated
9 beneficiary at any time. A participant having designated a
10 survivor annuitant at the time of retirement shall not be
11 permitted to nominate a new survivor annuitant unless the
12 designated survivor annuitant dies, the designated survivor
13 annuitant becomes divorced from the participant or the retiree
14 becomes married subsequent to the effective date of retirement.
15 In these cases, the annuitant shall have the right to reelect an
16 option and to nominate a beneficiary or a new survivor annuitant
17 and to have the annuity recomputed to be actuarially equivalent
18 as of the date of recomputation to the annuity in effect
19 immediately prior to the recomputation. Should an annuitant
20 elect a new survivor annuitant, the change and the appropriate
21 adjustment in annuity payments shall be effective in accordance
22 with section 8733(c) (relating to optional payment plans). In no
23 other case shall a benefit plan be changed by an annuitant.
24 SUBCHAPTER F
25 PUBLIC SCHOOL EMPLOYEES' RETIREMENT TRUST FUND
26 AND ACCOUNTS
27 Sec.
28 8761. Public School Employees' Retirement Trust Fund.
29 8762. Fund accounting in general.
30 8763. Management of fund and accounts.
19850S1157B1452 - 46 -
1 8764. Investment in general.
2 8765. Investment in corporate stocks.
3 8766. Investment in real estate and mortgages.
4 8767. Single deposit investment account for transfer
5 participants.
6 § 8761. Public School Employees' Retirement Trust Fund.
7 (a) General rule.--There shall be established in the State
8 Treasury the Public School Employees' Retirement Trust Fund
9 which shall consist of the total combined assets, liabilities
10 and reserve accounts for the plan established under this
11 chapter.
12 (b) Receipts and disbursements.--All receipts of the plan
13 shall be paid into the fund and all disbursements of the plan
14 shall be made from the fund.
15 § 8762. Fund accounting in general.
16 The board will account for the fund in accordance with
17 generally accepted accounting principles in order to maintain
18 accountability for the plan. The board may establish accounts
19 within the fund as necessary for the implementation of the
20 specific plans. The board will maintain the necessary ledger
21 accounts to segregate properly the contributions, expenses and
22 reserves of the plan and to provide adequate actuarial data,
23 investment management information and appropriate asset and
24 liability transfers within the plan.
25 § 8763. Management of fund and accounts.
26 (a) Control and management of fund.--The members of the
27 board shall be the trustees of the Public School Employees'
28 Retirement Trust Fund and shall have exclusive control and
29 management of the fund.
30 (b) Custodian of fund.--The State Treasurer shall be the
19850S1157B1452 - 47 -
1 custodian of the fund.
2 (c) Payments from fund.--All payments from the fund shall be
3 made by the State Treasurer in accordance with requisitions
4 signed by the secretary of the board, or his designee, and
5 ratified by resolution of the board.
6 (d) Fiduciary status of board.--The members, employees and
7 agents of the board shall stand in a fiduciary relationship to
8 the participants of the system regarding the investments and
9 disbursements of any of the moneys of the fund and shall not
10 profit either directly or indirectly with respect thereto.
11 (e) Name for transacting business.--By the name of the
12 Public School Employees' Retirement System of 1985 all of the
13 business of the system shall be transacted, the Public School
14 Employees' Retirement Trust Fund invested, all requisitions for
15 money drawn and payments made and all of its cash and securities
16 and other property shall be held, except that, any other law to
17 the contrary notwithstanding, the board may establish a nominee
18 registration procedure for the purpose of registering securities
19 in order to facilitate the purchase, sale or other disposition
20 of securities pursuant to the provisions of this chapter.
21 (f) Deposits in banks and trust companies.--For the purpose
22 of meeting disbursements for annuities and other payments in
23 excess of the receipts, there shall be kept available by the
24 State Treasurer an amount, not exceeding 10% of the total amount
25 in the fund, on deposit in any bank or banks in this
26 Commonwealth organized under the laws thereof or under the laws
27 of the United States or with any trust company or companies
28 incorporated by any law of this Commonwealth. The banks or trust
29 companies shall furnish adequate security for the deposit and
30 the sum deposited in any one bank or trust company shall not
19850S1157B1452 - 48 -
1 exceed 25% of the paid-up capital and surplus of the bank or
2 trust company.
3 § 8764. Investments in general.
4 (a) General rule.--The board shall have full power to invest
5 the fund, subject, however, to the exercise of that degree of
6 judgment, skill and care under the circumstances then prevailing
7 which persons of prudence, discretion and intelligence, who are
8 familiar with such matters, exercise in the management of their
9 own affairs not in regard to speculation, but in regard to the
10 permanent disposition of the funds, considering the probable
11 income to be derived therefrom as well as the probable safety of
12 their capital, and further subject to all the terms, conditions,
13 limitations and restrictions imposed by this chapter or other
14 law upon the making of investments.
15 (b) Investment in Federal obligations.--Regardless of any
16 other provision of law, obligations of the Federal Government
17 and its agencies shall be authorized investments of the fund.
18 (c) Investments not specifically authorized.--Regardless of
19 any limitations, conditions or restrictions imposed on the
20 making of investments by this chapter or other law, the board
21 may, at its discretion, invest a maximum of 10% of the cost
22 value of the assets of the fund in any investments not otherwise
23 specifically authorized, provided that the investments are made
24 with the exercise of that degree of judgment, skill and care
25 under the circumstances then prevailing which persons of
26 prudence, discretion and intelligence, who are familiar with
27 such matters, exercise in the management of their own affairs
28 not in regard to speculation, but in regard to the permanent
29 disposition of the funds, considering the probable income to be
30 derived therefrom as well as the probable safety of their
19850S1157B1452 - 49 -
1 capital.
2 (d) Investments to promote employment in Commonwealth.--The
3 board shall, when possible and consistent with the terms,
4 conditions, limitations, responsibilities and restrictions
5 imposed by this chapter or other law, invest in any project or
6 business which promotes employment of residents of this
7 Commonwealth.
8 (e) Transactions involving securities and moneys.--Subject
9 to like terms, conditions, limitations and restrictions, the
10 trustees shall have the power to hold, purchase, sell, lend,
11 assign, transfer or dispose of any of the securities and
12 investments in which any of the moneys in the fund shall have
13 been invested as well as of the proceeds of the investments and
14 of any moneys belonging to the fund.
15 § 8765. Investment in corporate stocks.
16 (a) General rule.--Preferred and common stock of any
17 corporation organized under the laws of the United States or of
18 any commonwealth or state thereof or of the District of Columbia
19 and preferred and common stock of any corporation whose shares
20 are traded in United States dollars on the New York Stock
21 Exchange shall be authorized investments of the fund, regardless
22 of any other provision of law provided, subject to the
23 following:
24 (1) No investment in common stock may be made which at
25 that time would case the cost value of the investments in
26 common stock to exceed 50% of the cost value of the total
27 assets of the fund.
28 (2) The amount invested in the common stock of any one
29 company may not exceed at cost 2% of the cost value of the
30 assets of the fund at the time of purchase and shall not
19850S1157B1452 - 50 -
1 exceed 5% of the number of issued and outstanding common
2 stock shares of that company.
3 (3) No investment in the stock of corporations not
4 organized under the laws of the United States or of any
5 commonwealth or state thereof or of the District of Columbia
6 may be made which would cause the cost value of the
7 investment to exceed 5% of the cost value of the total assets
8 of the fund.
9 (4) No sale or other liquidation of any investment may
10 be required solely because of any change in market values
11 whereby the percentages of stocks set forth in paragraph (1),
12 (2) or (3) are exceeded.
13 (b) Definitions.--As used in this section the following
14 words and phrases shall have the meanings given to them in this
15 subsection:
16 "Common stock." Includes the stock certificates,
17 certificates of beneficial interests or trust participation
18 certificates issued by any corporation or unincorporated
19 association included under the definition of corporation.
20 "Corporation." Includes a voluntary association, a joint-
21 stock association or company, a business trust, a Massachusetts
22 trust, a common-law trust and any other organization organized
23 and existing for any lawful purpose and which, like a
24 corporation, continues to exist, notwithstanding changes in the
25 personnel of its members or participants and conducts its
26 affairs through a committee, a board or some other group acting
27 in a representative capacity.
28 § 8766. Investment in real estate and mortgages.
29 (a) General rule.--Real estate subject to a lease to one or
30 more financially responsible tenants, which lease shall not
19850S1157B1452 - 51 -
1 require managerial responsibility by the board, and bonds, notes
2 and deeds of trust of individuals or corporations secured by
3 mortgages on real estate located in any state, district or
4 territory of the United States shall be an authorized investment
5 of the fund regardless of any other provision of law. The board
6 shall promulgate regulations to implement this subsection to
7 insure the safety of investments made under this subsection
8 which regulations shall be in accordance with generally accepted
9 standards and investment principles for pension funds of
10 comparable size. All instruments, transfers of interest and
11 records pertaining to real estate, mortgages or bonds invested
12 in by the board shall be open to public inspection. Reports as
13 requested by the board shall be submitted on all real estate and
14 mortgage investments by investment advisors.
15 (b) Institutional real estate.--Institutional real estate
16 funds shall be an authorized investment of the fund, but no
17 investment shall be made which, at the time of purchase, would
18 cause the cost value of the investments to exceed 15% of the
19 cost value of the total assets of the fund.
20 § 8767. Single deposit investment account for transfer
21 participants.
22 (a) Establishment.--The board shall through contract with a
23 private carrier establish a single deposit investment account
24 for those members of the system established by Subpart A
25 (relating to Public School Employees' Retirement Code of 1975)
26 who elect to transfer to the system established by this chapter
27 and further elect to have their accumulated deductions or a
28 portion thereof deposited in the separate deferral account. The
29 single deposit investment account shall be an investment vehicle
30 solely intended to hold the accumulated deductions deferred in
19850S1157B1452 - 52 -
1 accordance with transfer participants' wishes. The objectives of
2 establishing this single deposit investment account are to:
3 (1) Allow each member the opportunity to defer the tax
4 consequences that would result if the member were to elect a
5 refund of the member's accumulated deduction balance.
6 (2) Provide a guarantee of principal with respect to the
7 amounts deferred to the single deposit investment account.
8 (3) Allow for payment in a lump sum or in installments
9 at the time of distribution.
10 (b) Duration and time for distribution.--The single deposit
11 investment account shall be open for a period of three years
12 from the effective date of this chapter. The contract shall
13 provide that amounts deferred to the single deposit investment
14 account shall be distributed to participants upon the occurrence
15 of any of the following:
16 (1) Termination of employment as a public school
17 employee.
18 (2) Disability.
19 (3) Death.
20 (4) Retirement.
21 (c) Amount and method of distribution.--The amount paid to
22 the participant will be the amount directed to the single
23 deposit investment account plus all interest credited to the
24 account from the date of deposit to the date of distribution. In
25 the event of the participant's death, the amount will be paid to
26 the participant's named beneficiary. The contract shall provide
27 that upon termination of school employment for any reason a
28 participant who has deferred his accumulated deductions in this
29 single deposit investment account shall be eligible to elect to
30 receive a distribution of his account under one of the following
19850S1157B1452 - 53 -
1 methods:
2 (1) A lump sum payment.
3 (2) A life annuity payable to the participant throughout
4 his lifetime with all payments to cease at death.
5 (3) An actuarially reduced ten-year certain and
6 continuous annuity payable to the retired participant
7 throughout his lifetime with payments guaranteed to be paid
8 to the participant or to his designated beneficiary for a
9 period of ten years from the effective date of the beginning
10 of the distribution. In the event the participant receives
11 payment for ten years or more, payments will continue for his
12 lifetime and will cease at death.
13 (4) An actuarially reduced joint and 100% survivor
14 annuity.
15 (5) An actuarially reduced joint and 50% survivor
16 annuity.
17 SUBCHAPTER G
18 CONTRIBUTIONS
19 Sec.
20 8771. Contributions by Commonwealth and other employers.
21 8772. Actuarial cost method.
22 8773. Appropriations and assessments by Commonwealth.
23 § 8771. Contributions by Commonwealth and other employers.
24 (a) Commonwealth contributions.--The Commonwealth shall make
25 contributions to the fund on behalf of all active participants
26 in an amount equal to one-half the amount certified by the board
27 as necessary to provide annuity reserves on account of
28 prospective annuities in accordance with the actuarial cost
29 method provided in section 8772 (relating to actuarial cost
30 method).
19850S1157B1452 - 54 -
1 (b) Contributions by employers.--Each employer, including
2 the Commonwealth as employer of employees of the Department of
3 Education, State-owned universities, Thaddeus Stevens Trade
4 School, Pennsylvania State Oral School for the Deaf, Scotland
5 School for Veterans' Children and The Pennsylvania State
6 University, shall make payments to the fund each quarter in an
7 amount equal to one-half the sum of the percentages, as
8 determined under section 8772, applied to the total compensation
9 during the pay periods in the preceding quarter of all its
10 employees who were members of the system during such period.
11 (c) Deduction from appropriations.--To facilitate the
12 payment of amounts due from any employer to the fund through the
13 State Treasurer and to permit the exchange of credits between
14 the State Treasurer and any employer, the Secretary of Education
15 and the State Treasurer shall cause to be deducted and paid into
16 the fund from the amount of any moneys due to any employer on
17 account of any appropriation for schools or other purposes such
18 amount due to the fund as certified by the board and as remains
19 unpaid on the date such appropriations would otherwise be paid
20 to the employer, and such amount shall be credited to the
21 employer's account in the fund.
22 § 8772. Actuarial cost method.
23 (a) Total employer contribution rate.--The Commonwealth and
24 other employer contributions on behalf of all active
25 participants shall be computed by the actuary as a percentage of
26 the total compensation of all active participants during the
27 period for which the amount is determined and shall be so
28 certified by the board. The total employer contribution rate on
29 behalf of all active participants shall consist of the employer
30 normal contribution rate and the accrued liability contribution
19850S1157B1452 - 55 -
1 rate.
2 (b) Employer normal contribution.--The employer normal
3 contribution shall be determined after each actuarial valuation
4 on the basis of the interest rates and mortality and other
5 tables adopted by the board.
6 (c) Employer normal contribution rate.--The employer normal
7 contribution rate shall be determined as a level percentage of
8 the compensation of participants utilizing the entry age
9 actuarial cost method. This is a method under which the
10 actuarial present value of the projected benefits of each
11 individual included in an actuarial valuation is allocated on a
12 level basis over the earnings of the individual between entry
13 age and assumed retirement age. The portion of the actuarial
14 present value allocated to a valuation year is called the normal
15 cost. The portion of the actuarial present value not provided
16 for at a valuation date by the actuarial present value of future
17 normal costs is called the actuarial accrued liability.
18 (d) Accrued liability contribution rate.--The accrued
19 liability contribution rate shall be the sum of the following:
20 (1) A 30-year level dollar amortization payment of the
21 unfunded actuarial accrued liability as of the December 31
22 next following the date of enactment of this chapter.
23 (2) A 20-year level dollar amortization payment on any
24 increment in the unfunded actuarial accrued liability
25 attributable to a change in the actuarial assumptions or to a
26 modification in the benefit plan applicable to active
27 participants.
28 (3) A 10-year level dollar amortization payment in any
29 increment in the unfunded actuarial accrued liability
30 attributable to a modification other than that provided by
19850S1157B1452 - 56 -
1 section 8736 (relating to automatic cost-of-living
2 adjustments) in the benefit plan applicable to retired
3 participants and the benefit recipients.
4 (4) A 15-year level dollar amortization payment (credit)
5 on any net unfunded actuarial accrued liability attributable
6 to an actuarial experience loss (gain).
7 § 8773. Appropriations and assessments by Commonwealth.
8 (a) Annual submission of budget.--The board shall prepare
9 and submit annually an itemized budget consisting of the amounts
10 necessary to be appropriated by the Commonwealth out of the
11 General Fund and the special operating funds and the amounts to
12 be assessed the other employers required to meet the obligations
13 accruing during the fiscal period beginning July 1 of the
14 following year.
15 (b) Appropriations and payments.--The General Assembly shall
16 make appropriations sufficient to provide for the obligations of
17 the Commonwealth. These amounts shall be paid by the State
18 Treasurer through the Department of Revenue into the fund in
19 accordance with requisitions presented by the board.
20 SUBCHAPTER H
21 MISCELLANEOUS PROVISIONS
22 Sec.
23 8781. State guarantee.
24 8782. Taxation, attachment and assignment of funds.
25 8783. Fraud and adjustment of errors.
26 8784. Construction of chapter.
27 § 8781. State guarantee.
28 The maintenance of reserves in the fund and the payment of
29 all annuities and other benefits granted by the board under this
30 chapter are hereby made obligations of the Commonwealth. All
19850S1157B1452 - 57 -
1 income, interest and dividends derived from deposits and
2 investments authorized by this chapter shall be used for the
3 payment of the obligations of the Commonwealth.
4 § 8782. Taxation, attachment and assignment of funds.
5 (a) General rule.--The right of a person to any benefit or
6 right accrued or accruing under this chapter is hereby exempt
7 from any State or municipal tax, levy and sale, garnishment,
8 attachment, spouse's election or any other process whatsoever
9 and shall be unassignable, but may be subject to a set-off by or
10 assignment to the employer in the case of a participant who is
11 terminating school service and is eligible for a benefit and has
12 been determined to be obligated to the Commonwealth for the
13 repayment of money owed on account of his employment.
14 (b) Authorized payments.--In the case of participant who is
15 terminating service, the board is authorized to pay from the
16 participant's benefit entitlement the amount determined after
17 certification by the employer that the participant is so
18 obligated and after review and approval by the employer or his
19 legal representative or upon receipt of an assignment from the
20 participant in the amount so certified.
21 § 8783. Fraud and adjustment of errors.
22 (a) Penalty for fraud.--A person who knowingly makes any
23 false statement or falsifies or permits to be falsified any
24 record or records of the system in an attempt to defraud the
25 system as a result of the act commits a misdemeanor of the
26 second degree.
27 (b) Adjustment of errors.--Should any change or mistake in
28 records result in any participant, beneficiary or survivor
29 annuitant receiving from the system more or less than he would
30 have been entitled to receive had the records been correct, then
19850S1157B1452 - 58 -
1 regardless of the intentional or unintentional nature of the
2 error and upon the discovery of the error, the board shall
3 correct the error and so far as practicable adjust the payments
4 which may be made for and to the person in a manner that the
5 actuarial equivalent of the benefit to which he was correctly
6 entitled shall be paid.
7 § 8784. Construction of chapter.
8 The pension rights of participants shall be determined solely
9 by this chapter or any amendment thereto, and no collective
10 bargaining agreement between the Commonwealth or any member
11 employer and their employees shall be construed to change any of
12 the provisions of this chapter.
13 Section 7. This act shall take effect January 1, April 1,
14 July 1 or October 1 which next follows the date of final
15 enactment by more than 120 days.
H1L24DGS/19850S1157B1452 - 59 -