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                                 SENATE AMENDED
        PRIOR PRINTER'S NOS. 311, 615, 1081           PRINTER'S NO. 1749

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 26 Session of 2001


        INTRODUCED BY STRITTMATTER, LUCYK, NICKOL, SCHULER, ARMSTRONG,
           BUNT, CALTAGIRONE, CAPPABIANCA, CURRY, GEORGE, GODSHALL,
           HENNESSEY, HERSHEY, LESCOVITZ, STAIRS, E. Z. TAYLOR, THOMAS,
           TIGUE, TULLI, YOUNGBLOOD, PISTELLA, WILT, GEIST, R. MILLER,
           HORSEY, CREIGHTON, STEELMAN, L. I. COHEN, WATERS, FRANKEL AND
           WASHINGTON, JANUARY 31, 2001

        SENATOR TILGHMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS
           AMENDED, APRIL 30, 2001

                                     AN ACT

     1  Amending Titles 24 (Education) and 71 (State Government) of the
     2     Pennsylvania Consolidated Statutes, further providing for
     3     mandatory and optional membership, for credited school
     4     service, FOR TERMINATION OF ANNUITIES, for membership of the   <--
     5     Public School Employees' Retirement Board and the State
     6     Employees' Retirement Board, for administrative duties of
     7     board and for management of fund and accounts.

     8     The General Assembly of the Commonwealth of Pennsylvania
     9  hereby enacts as follows:
    10     Section 1.  Sections 8301, 8302(a), 8346, 8501(a) and (b),     <--
    11  8502(g), 8521(h), (i) and (j) of Title 24 of the Pennsylvania
    12  Consolidated Statutes are amended to read:
    13  § 8301.  Mandatory and optional membership.
    14     (a)  Mandatory membership.--Membership in the system shall be
    15  mandatory as of the effective date of employment for all school
    16  employees except the following:
    17         (1)  Any officer or employee of the Department of


     1     Education, State-owned educational institutions, community
     2     colleges, area vocational-technical schools, technical
     3     institutes, or the Pennsylvania State University and who is a
     4     member of the State Employees' Retirement System or a member
     5     of another retirement program approved by the employer.
     6         (2)  Any school employee who is employed on a per diem or
     7     hourly basis for less than 80 full-day sessions or 500 hours
     8     in any fiscal year or annuitant who returns to school service
     9     under the provisions of section 8346(b) (relating to
    10     termination of annuities).
    11         (3)  Any officer or employee of a governmental entity who
    12     subsequent to December 22, 1965 and prior to July 1, 1975
    13     administers, supervises, or teaches classes financed wholly
    14     or in part by the Federal Government so long as he continues
    15     in such service.
    16         (4)  Any part-time school employee who has an individual
    17     retirement account pursuant to the Federal act of September
    18     2, 1974 (Public Law 93-406, 88 Stat. 829), known as the
    19     Employee Retirement Income Security Act of 1974.
    20         (5)  Employees of a charter school, as defined in Article
    21     XVII-A of the act of March 10, 1949 (P.L.30, No.14), known as
    22     the Public School Code of 1949.
    23     (b)  Prohibited membership.--The school employees categorized
    24  in subsection (a)(1) and (2) shall not have the right to elect
    25  membership in the system.
    26     (c)  Optional membership.--
    27         (1)  The school employees categorized in subsection
    28     (a)(3) and, if otherwise eligible, subsection (a)(4) shall
    29     have the right to elect membership in the system. Once such
    30     election is exercised, membership shall commence from the
    20010H0026B1749                  - 2 -

     1     original date of eligibility and shall continue until the
     2     termination of such service.
     3         (2)  Notwithstanding anything to the contrary in Article
     4     XVII-A of the act of March 10, 1949 (P.L.30, No.14), known as
     5     the Public School Code of 1949, employees of a charter school
     6     shall only be eligible for membership in the system if the
     7     charter school in which they are employed affirmatively
     8     elects to have its employees to be eligible for membership in
     9     the system. Said election shall be in writing on a form
    10     prescribed by the board and filed with the system. Once such
    11     election is exercised, membership for eligible employees
    12     shall commence from the original date of their eligibility
    13     and shall continue until the termination of such service.
    14  § 8302.  Credited school service.
    15     (a)  Computation of credited service.--In computing credited
    16  school service of a member for the determination of benefits, a
    17  full-time salaried school employee shall receive one year of
    18  credit for each school year or the corresponding fraction
    19  thereof, in accordance with the proportion of the full school
    20  year for which both the required regular member and employer
    21  contributions have been made, or for which such contributions
    22  otherwise required for such service were not made solely by
    23  reason of any provision of this part relating to the limitation
    24  under IRC § 401(a)(17). A per diem or hourly school employee
    25  shall receive one year of credited service for each
    26  nonoverlapping period of 12 consecutive months in which he is
    27  employed and for which both member and employer contributions
    28  are made, or would have been made but for such limitation under
    29  the IRC, for at least 180 full-day sessions or 1,100 hours of
    30  employment. If such member was employed and member or employer
    20010H0026B1749                  - 3 -

     1  contributions were made for less than 180 full-day sessions or
     2  1,100 hours, he shall be credited with a fractional portion of a
     3  year determined by the ratio of the number of full-day sessions
     4  or hours of service actually rendered to 180 full-day sessions
     5  or 1,100 hours, as the case may be. A part-time salaried
     6  employee shall be credited with the fractional portion of the
     7  year which corresponds to the service actually rendered in
     8  relation to the service required as a comparable full-time
     9  salaried employee and for which both member and employer
    10  contributions were made. In no case shall a member receive more
    11  than one year of credited service for any 12 consecutive months
    12  or a member who has elected multiple service receive an
    13  aggregate in the two systems of more than one year of credited
    14  service for any 12 consecutive months.
    15     * * *
    16  § 8346.  TERMINATION OF ANNUITIES.                                <--
    17     (A)  GENERAL RULE.--IF AN ANNUITANT RETURNS TO SCHOOL SERVICE
    18  OR ENTERS STATE SERVICE AND ELECTS MULTIPLE SERVICE MEMBERSHIP,
    19  ANY ANNUITY PAYABLE TO HIM UNDER THIS PART SHALL CEASE AND IN
    20  THE CASE OF AN ANNUITY OTHER THAN A DISABILITY ANNUITY THE
    21  PRESENT VALUE OF SUCH ANNUITY, ADJUSTED FOR FULL COVERAGE IN THE
    22  CASE OF A JOINT COVERAGE MEMBER WHO MAKES THE APPROPRIATE BACK
    23  CONTRIBUTIONS FOR FULL COVERAGE, SHALL BE FROZEN AS OF THE DATE
    24  SUCH ANNUITY CEASES. AN ANNUITANT WHO IS CREDITED WITH AN
    25  ADDITIONAL 10% OF MEMBERSHIP SERVICE AS PROVIDED IN SECTION
    26  8302(B.2) (RELATING TO CREDITED SCHOOL SERVICE) AND WHO RETURNS
    27  TO SCHOOL SERVICE, EXCEPT AS PROVIDED IN SUBSECTION (B), SHALL
    28  FORFEIT SUCH CREDITED SERVICE AND SHALL HAVE HIS FROZEN PRESENT
    29  VALUE ADJUSTED AS IF HIS 10% RETIREMENT INCENTIVE HAD NOT BEEN
    30  APPLIED TO HIS ACCOUNT. IN THE EVENT THAT THE COST-OF-LIVING
    20010H0026B1749                  - 4 -

     1  INCREASE ENACTED DECEMBER 18, 1979, OCCURRED DURING THE PERIOD
     2  OF SUCH STATE OR SCHOOL EMPLOYMENT, THE FROZEN PRESENT VALUE
     3  SHALL BE INCREASED, ON OR AFTER THE MEMBER ATTAINS
     4  SUPERANNUATION AGE, BY THE PERCENT APPLICABLE HAD HE NOT
     5  RETURNED TO SERVICE.
     6     (B)  RETURN TO SCHOOL SERVICE DURING EMERGENCY.--WHEN, IN THE
     7  JUDGMENT OF THE EMPLOYER, AN EMERGENCY CREATES AN INCREASE IN
     8  THE WORK LOAD SUCH THAT THERE IS SERIOUS IMPAIRMENT OF SERVICE
     9  TO THE PUBLIC OR IN THE EVENT OF A SHORTAGE OF APPROPRIATE
    10  SUBJECT CERTIFIED TEACHERS, AN ANNUITANT MAY BE RETURNED TO
    11  SCHOOL SERVICE FOR A PERIOD NOT TO EXCEED [95] 120 FULL-DAY
    12  SESSIONS IN ANY SCHOOL YEAR WITHOUT LOSS OF HIS ANNUITY. IN
    13  COMPUTING THE NUMBER OF DAYS AN ANNUITANT HAS RETURNED TO SCHOOL
    14  SERVICE, ANY AMOUNT OF TIME LESS THAN ONE-HALF OF A DAY SHALL BE
    15  COUNTED AS ONE-HALF OF A DAY.
    16     (C)  SUBSEQUENT DISCONTINUANCE OF SERVICE.--UPON SUBSEQUENT
    17  DISCONTINUANCE OF SERVICE, SUCH MEMBER OTHER THAN A FORMER
    18  ANNUITANT WHO HAD THE EFFECT OF HIS FROZEN PRESENT VALUE
    19  ELIMINATED IN ACCORDANCE WITH SUBSECTION (D) OR A FORMER
    20  DISABILITY ANNUITANT SHALL BE ENTITLED TO AN ANNUITY WHICH IS
    21  ACTUARIALLY EQUIVALENT TO THE SUM OF THE PRESENT VALUE AS
    22  DETERMINED UNDER SUBSECTION (A) AND THE PRESENT VALUE OF A
    23  MAXIMUM SINGLE LIFE ANNUITY BASED ON YEARS OF SERVICE CREDITED
    24  SUBSEQUENT TO REENTRY IN THE SYSTEM AND HIS FINAL AVERAGE SALARY
    25  COMPUTED BY REFERENCE TO HIS COMPENSATION DURING HIS ENTIRE
    26  PERIOD OF SCHOOL AND STATE SERVICE.
    27     (D)  ELIMINATION OF THE EFFECT OF FROZEN PRESENT VALUE.--
    28         (1)  AN ANNUITANT WHO RETURNS TO SCHOOL SERVICE AND EARNS
    29     THREE ELIGIBILITY POINTS BY PERFORMING CREDITED SCHOOL
    30     SERVICE FOLLOWING THE MOST RECENT PERIOD OF RECEIPT OF AN
    20010H0026B1749                  - 5 -

     1     ANNUITY UNDER THIS PART, OR AN ANNUITANT WHO ENTERS STATE
     2     SERVICE AND:
     3             (I)  IS A MULTIPLE SERVICE MEMBER; OR
     4             (II)  WHO ELECTS MULTIPLE SERVICE MEMBERSHIP, AND
     5     EARNS THREE ELIGIBILITY POINTS BY PERFORMING CREDITED STATE
     6     SERVICE OR CREDITED SCHOOL SERVICE FOLLOWING THE MOST RECENT
     7     PERIOD OF RECEIPT OF AN ANNUITY UNDER THIS PART, AND WHO HAD
     8     THE PRESENT VALUE OF HIS ANNUITY FROZEN IN ACCORDANCE WITH
     9     SUBSECTION (A), SHALL QUALIFY TO HAVE THE EFFECT OF THE
    10     FROZEN PRESENT VALUE RESULTING FROM ALL PREVIOUS PERIODS OF
    11     RETIREMENT ELIMINATED, PROVIDED THAT ALL PAYMENTS UNDER
    12     OPTION 4 AND ANNUITY PAYMENTS PAYABLE DURING PREVIOUS PERIODS
    13     OF RETIREMENT PLUS INTEREST AS SET FORTH IN PARAGRAPH (3)
    14     SHALL BE RETURNED TO THE FUND IN THE FORM OF AN ACTUARIAL
    15     ADJUSTMENT TO HIS SUBSEQUENT BENEFITS OR IN SUCH FORM AS THE
    16     BOARD MAY OTHERWISE DIRECT.
    17         (2)  UPON SUBSEQUENT DISCONTINUANCE OF SERVICE AND THE
    18     FILING OF AN APPLICATION FOR AN ANNUITY, A FORMER ANNUITANT
    19     WHO QUALIFIES TO HAVE THE EFFECT OF A FROZEN PRESENT VALUE
    20     ELIMINATED UNDER THIS SUBSECTION SHALL BE ENTITLED TO RECEIVE
    21     THE HIGHER OF EITHER:
    22             (I)  AN ANNUITY (PRIOR TO OPTIONAL MODIFICATION)
    23         CALCULATED AS IF THE FREEZING OF THE FORMER ANNUITANT'S
    24         ACCOUNT PURSUANT TO SUBSECTION (A) HAD NOT OCCURRED,
    25         ADJUSTED ACCORDING TO PARAGRAPH (3), PROVIDED THAT A
    26         FORMER ANNUITANT OF THE SYSTEM OR A FORMER ANNUITANT OF
    27         THE STATE EMPLOYEES' RETIREMENT SYSTEM WHO RETIRED UNDER
    28         A PROVISION OF LAW GRANTING ADDITIONAL SERVICE CREDIT IF
    29         TERMINATION OF SCHOOL OR STATE SERVICE OR RETIREMENT
    30         OCCURRED DURING A SPECIFIC PERIOD OF TIME SHALL NOT BE
    20010H0026B1749                  - 6 -

     1         PERMITTED TO RETAIN THE ADDITIONAL SERVICE CREDIT UNDER
     2         THE PRIOR LAW WHEN THE ANNUITY IS COMPUTED FOR HIS MOST
     3         RECENT RETIREMENT; OR
     4             (II)  AN ANNUITY (PRIOR TO OPTIONAL MODIFICATION)
     5         CALCULATED AS IF THE FORMER ANNUITANT DID NOT QUALIFY TO
     6         HAVE THE EFFECT ON THE FROZEN PRESENT VALUE ELIMINATED,
     7     UNLESS THE FORMER ANNUITANT NOTIFIES THE BOARD IN WRITING BY
     8     THE LATER OF THE DATE THE APPLICATION FOR ANNUITY IS FILED OR
     9     THE EFFECTIVE DATE OF RETIREMENT THAT THE FORMER ANNUITANT
    10     WISHES TO RECEIVE THE LOWER ANNUITY.
    11         (3)  IN ADDITION TO ANY OTHER ADJUSTMENT TO THE PRESENT
    12     VALUE OF THE MAXIMUM SINGLE LIFE ANNUITY THAT A MEMBER MAY BE
    13     ENTITLED TO RECEIVE THAT OCCURS AS A RESULT OF ANY OTHER
    14     PROVISION OF LAW, THE PRESENT VALUE OF THE MAXIMUM SINGLE
    15     LIFE ANNUITY SHALL BE REDUCED BY ALL AMOUNTS PAID OR PAYABLE
    16     TO HIM DURING ALL PREVIOUS PERIODS OF RETIREMENT PLUS
    17     INTEREST ON THESE AMOUNTS UNTIL THE DATE OF SUBSEQUENT
    18     RETIREMENT. THE INTEREST FOR EACH YEAR SHALL BE CALCULATED
    19     BASED UPON THE ANNUAL INTEREST RATE ADOPTED FOR THAT SCHOOL
    20     YEAR BY THE BOARD FOR THE CALCULATION OF THE NORMAL
    21     CONTRIBUTION RATE PURSUANT TO SECTION 8328(B) (RELATING TO
    22     ACTUARIAL COST METHOD).
    23  § 8501.  Public School Employees' Retirement Board.
    24     (a)  Status and membership.--The board shall be an
    25  independent administrative board and shall consist of 15
    26  members: the Secretary of Education, ex officio; the State
    27  Treasurer, ex officio; two Senators; two members of the House of
    28  Representatives; the executive secretary of the Pennsylvania
    29  School Boards Association, ex officio; two to be appointed by
    30  the Governor, at least one of whom shall not be a school
    20010H0026B1749                  - 7 -

     1  employee or an officer or employee of the State; three to be
     2  elected by the active professional members of the system from
     3  among their number; one to be elected by annuitants from among
     4  their number; one to be elected by the active nonprofessional
     5  members of the system from among their number; and one to be
     6  elected by members of Pennsylvania public school boards from
     7  among their number. The appointments made by the Governor shall
     8  be confirmed by the Senate and each election shall be conducted
     9  in a manner approved by the board. The terms of the appointed
    10  and nonlegislative elected members shall be three years. The
    11  members from the Senate shall be appointed by the President pro
    12  tempore of the Senate and shall consist of one member from the
    13  majority and one member from the minority. The members from the
    14  House of Representatives shall be appointed by the Speaker of
    15  the House of Representatives and shall consist of one member
    16  from the majority and one member from the minority. The
    17  legislative members shall serve on the board for the duration of
    18  [the terms for which they were elected] their legislative terms
    19  and shall continue to serve until 30 days after the convening of
    20  the next regular session of the General Assembly after the
    21  expiration of their respective legislative terms, or until a
    22  successor is appointed for the new term, whichever occurs first.
    23  The chairman of the board shall be elected by the board members.
    24  Each ex officio member of the board and each legislative member
    25  of the board may appoint a duly authorized designee to act in
    26  his stead.
    27     (b)  [Appointment and terms of initial members.--For the
    28  purposes of securing an orderly transition and staggered terms,
    29  the elected members of the board serving on the effective date
    30  of this part shall serve until the expiration of their
    20010H0026B1749                  - 8 -

     1  respective terms. The board member initially elected by members
     2  of Pennsylvania public school boards shall serve until January
     3  1, 1976. The board member initially elected by the active
     4  nonprofessional members of the system shall serve until January
     5  1, 1977. One of the initial board members appointed by the
     6  Governor after the effective date of this part shall serve until
     7  January 1, 1976 and the second appointed board member shall
     8  serve until January 1, 1977.] Vacancies.--A vacancy occurring
     9  during the term of any member shall be filled for the unexpired
    10  term by a successor appointed or elected as the case may be in
    11  the same manner as his predecessor.
    12     * * *
    13  § 8502.  Administrative duties of board.
    14     * * *
    15     (g)  Performance of employer duties.--In the event the
    16  employer fails to comply with the procedures as mandated in
    17  section 8506 (relating to duties of employers), the board shall
    18  perform such duties and bill the employer who shall pay for the
    19  cost of same. In the event the employer is delinquent in the
    20  payment of:
    21         (1)  the board's bill for the cost of the board to
    22     perform the duties of the employer mandated in section 8506;
    23         (2)  the employer contributions required in accordance
    24     with section 8327 (relating to payments by employers)[,]; or
    25         (3)  the member contributions required in accordance with
    26     section 8506,
    27  then the board shall notify the Secretary of Education and the
    28  State Treasurer of such delinquency and certify the actual or
    29  estimated amount thereof. Within 30 days of the receipt of the
    30  board's delinquency notice, the Secretary of Education shall pay
    20010H0026B1749                  - 9 -

     1  to the board the amount so certified that remains unpaid as of
     2  the date of secretary's payment. All such amounts paid by the
     3  Secretary of Education shall be credited by the board to the
     4  appropriate account in the fund. The Secretary of Education
     5  shall be entitled to exercise the remedy set forth in section
     6  8327(b) to recover any amounts paid to the board pursuant to
     7  this subsection. In the event the Secretary of Education
     8  exercises the remedy set forth in section 8327(b) to recover any
     9  amounts paid to the board, as a consequence of a delinquency
    10  caused by a charter school, and reduces the amount of funds paid
    11  to a chartering school district, as defined in Article XVII-A of
    12  the act of March 10, 1949 (P.L.30, No.14), known as the Public
    13  School Code of 1949, the chartering school district shall reduce
    14  the amount of funds paid to the charter school by any amount
    15  deducted by the Secretary of Education that would have otherwise
    16  been paid to the chartering school district.
    17     * * *
    18  § 8521.  Management of fund and accounts.
    19     * * *
    20     (h)  Venture capital[.--Venture capital investments shall be
    21  limited to not more than 2% of the book value of the total
    22  assets of the fund as determined for financial statement
    23  purposes as of June 30 next preceding the date of investment. An
    24  investment shall be deemed a venture capital investment if it
    25  results in the acquisition of equity interests or a combination
    26  of debt and equity interests in a business which is expected to
    27  grow substantially in the future and in which the expected
    28  return on investment is to come predominantly from an increase
    29  in value of the equity interests and are not interests in or
    30  secured by real estate. A venture capital investment may be made
    20010H0026B1749                 - 10 -

     1  only if, in the judgment of the board, the investment is
     2  reasonably likely to enhance the general welfare of this
     3  Commonwealth and its citizens and meets the standard of prudence
     4  set forth in subsection (a). In determining whether the
     5  investment meets the standard of prudence, the board may
     6  consider, together with the expected return on and the risk
     7  characteristics of the particular investment, the actual and
     8  expected future returns and the risk characteristics of the
     9  total venture capital investments held by the board at the time
    10  and the degree to which the proposed new investment would
    11  promote further diversification within the venture capital asset
    12  class.], private placement and alternative investments.--The
    13  board in its prudent discretion may make any venture capital
    14  investment, private placement investment or other alternative
    15  investment of any kind, structure or manner which meets the
    16  standard of prudence set forth in subsection (a).
    17     (i)  Vehicles for authorized investments.--The board in its
    18  prudent discretion may make any investments which meet the
    19  standard of prudence set forth in subsection (a) by [becoming a
    20  limited partner in partnerships that will hold such investments,
    21  or by acquiring shares or units of participation or otherwise
    22  participating beneficially in bank collective trusts or in the
    23  separate accounts of any insurance company authorized to do
    24  business in this Commonwealth, or by acquiring stocks or shares
    25  or units of participation or otherwise participating
    26  beneficially in the fund of any corporation or trust organized
    27  or created and existing under the laws of the United States or
    28  of any state, district or territory thereof which fund is
    29  maintained for and consists of assets of employees' benefit
    30  trusts, including governmental plans as defined in IRC § 414(d)
    20010H0026B1749                 - 11 -

     1  or which meet the requirements for qualification under IRC §
     2  401] acquiring any type of interest in a business organization
     3  existing under the laws of any jurisdiction, provided that, in
     4  any such case, the liability of the Public School Employees'
     5  Retirement Fund shall be limited to the amount of its
     6  investment.
     7     (j)  Legislative declaration concerning certain authorized
     8  investments.--The General Assembly finds and declares that
     9  authorized investments of the fund made by or on behalf of the
    10  board under this section whereby the board becomes a joint owner
    11  or stockholder in any company, corporation [or], association or
    12  other lawful business organization are outside the scope of the
    13  original intent of and therefor do not violate the prohibition
    14  set forth in section 8 of Article VIII of the Constitution of
    15  Pennsylvania.
    16     Section 2.  Sections 5901(a) and (b) and 5931(h), (i) and (j)
    17  of Title 71 are amended to read:
    18  § 5901.  The State Employees' Retirement Board.
    19     (a)  Status and membership.--The board shall be an
    20  independent administrative board and consist of 11 members: the
    21  State Treasurer, ex officio, two Senators [or former Senators],
    22  two members [or former members] of the House of Representatives
    23  and six members appointed by the Governor, one of whom shall be
    24  an annuitant of the system, for terms of four years, subject to
    25  confirmation by the Senate. At least five board members shall be
    26  active members of the system, and at least two shall have ten or
    27  more years of credited State service. The chairman of the board
    28  shall be designated by the Governor from among the members of
    29  the board. Each member of the board who is a member of the
    30  General Assembly may appoint a duly authorized designee to act
    20010H0026B1749                 - 12 -

     1  in his stead.
     2     (b)  Appointments and terms.--The two members elected by the
     3  board and serving on the effective date of this title shall
     4  continue to serve until the expiration of their respective
     5  terms. The members [or former members] of the Senate shall be
     6  appointed by the President pro tempore of the Senate and shall
     7  consist of a majority and a minority member [or former member].
     8  The members [or former members] of the House of Representatives
     9  shall be appointed by the Speaker of the House of
    10  Representatives and shall consist of a majority and a minority
    11  member [or former member]. The legislative members shall serve
    12  on the board for the duration of [the terms for which they were
    13  elected and former legislative members shall serve a term of two
    14  years.] their legislative terms and shall continue to serve
    15  until 30 days after the convening of the next regular session of
    16  the General Assembly after the expiration of their respective
    17  legislative terms, or until a successor is appointed for the new
    18  term, whichever occurs first. Of the remaining four appointees,
    19  one shall be appointed for an initial term of two years, one for
    20  an initial term of three years, and two for an initial term of
    21  four years. A vacancy occurring during the term of an appointed
    22  member shall be filled for the unexpired term by the appointment
    23  and confirmation of a successor in the same manner as his
    24  predecessor.
    25     * * *
    26  § 5931.  Management of fund and accounts.
    27     * * *
    28     (h)  Venture capital[.--Venture capital investments shall be
    29  limited to not more than 2% of the book value of the total
    30  assets of the fund as determined for financial statement
    20010H0026B1749                 - 13 -

     1  purposes as of December 31 next preceding the date of
     2  investment. An investment shall be deemed a venture capital
     3  investment if it results in the acquisition of equity interests
     4  or a combination of debt and equity interests in a business
     5  which is expected to grow substantially in the future and in
     6  which the expected return on investment is to come predominantly
     7  from an increase in value of the equity interests and are not
     8  interests in or secured by real estate. A venture capital
     9  investment may be made only if, in the judgment of the board,
    10  the investment is reasonably likely to enhance the general
    11  welfare of this Commonwealth and its citizens and meets the
    12  standard of prudence set forth in subsection (a). In determining
    13  whether the investment meets the standard of prudence, the board
    14  may consider, together with the expected return on and the risk
    15  characteristics of the particular investment, the actual and
    16  expected future returns and the risk characteristics of the
    17  total venture capital investments held by the board at the time
    18  and the degree to which the proposed new investment would
    19  promote further diversification within the venture capital asset
    20  class.], private placement and alternative investments.--The
    21  board in its prudent discretion may make any venture capital
    22  investment, private placement investment or other alternative
    23  investment of any kind, structure or manner which meets the
    24  standard of prudence set forth in subsection (a).
    25     (i)  Vehicles for authorized investments.--The board in its
    26  prudent discretion may make any investments which meet the
    27  standard of prudence set forth in subsection (a) by [becoming a
    28  limited partner in partnerships that will hold such investments;
    29  or by acquiring shares or units of participation or otherwise
    30  participating beneficially in bank collective trusts or in the
    20010H0026B1749                 - 14 -

     1  separate accounts of any insurance company authorized to do
     2  business in this Commonwealth; or by acquiring stocks or shares
     3  or units of participation or otherwise participating
     4  beneficially in the fund of any corporation or trust organized
     5  or created and existing under the laws of the United States or
     6  of any state, district or territory thereof, which fund is
     7  maintained for and consists of assets of employees' benefit
     8  trusts, including governmental plans as defined in IRC § 414(d)
     9  or which meet the requirements for qualification under IRC §
    10  401] acquiring any type of interest in a business organization
    11  existing under the laws of any jurisdiction, provided that, in
    12  any such case, the liability of the State Employees' Retirement
    13  Fund shall be limited to the amount of its investment.
    14     (j)  Legislative declaration concerning certain authorized
    15  investments.--The General Assembly finds and declares that
    16  authorized investments of the fund made by or on behalf of the
    17  board under this section whereby the board becomes a joint owner
    18  or stockholder in any company, corporation [or], association or
    19  other lawful business organization are outside the scope of the
    20  original intent of and therefore do not violate the prohibition
    21  set forth in section 8 of Article VIII of the Constitution of
    22  Pennsylvania.
    23     Section 3.  Any and all investments of the Public School
    24  Employees' Retirement Board and of the State Employees'
    25  Retirement Board, respectively, which on the effective date of
    26  this section are owned or held through a vehicle as described in
    27  24 Pa.C.S. § 8521(i) or 71 Pa.C.S. § 5931(i), as applicable,
    28  shall be deemed to have been lawfully made through such vehicle
    29  at inception.
    30     Section 4.  All acts and parts of acts are repealed insofar
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     1  as they are inconsistent with this act.
     2     Section 5.  This act shall take effect immediately.



















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