PRINTER'S NO. 1778
No. 1432 Session of 2003
INTRODUCED BY NICKOL, HERMAN, BAKER, BALDWIN, BARD, BEBKO-JONES, BENNINGHOFF, BUNT, BUXTON, CALTAGIRONE, CAPPELLI, CAUSER, CLYMER, CRAHALLA, CURRY, DALLY, DeWEESE, FEESE, FREEMAN, GABIG, GEIST, GERGELY, GOODMAN, HARHAI, HUTCHINSON, JAMES, KIRKLAND, LAUGHLIN, LEACH, LEH, LEWIS, MANN, MARSICO, McILHATTAN, MICOZZIE, R. MILLER, S. MILLER, NAILOR, PAYNE, PETRI, PHILLIPS, PICKETT, ROBERTS, RUBLEY, SAINATO, SATHER, SHANER, B. SMITH, SOLOBAY, STEIL, STERN, STETLER, TANGRETTI, E. Z. TAYLOR, THOMAS, TRAVAGLIO, VANCE, WANSACZ, WILT, YOUNGBLOOD AND J. TAYLOR, MAY 12, 2003
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, MAY 12, 2003
AN ACT 1 Amending the act of December 18, 1984 (P.L.1005, No.205), 2 entitled "An act mandating actuarial funding standards for 3 all municipal pension systems; establishing a recovery 4 program for municipal pension systems determined to be 5 financially distressed; providing for the distribution of the 6 tax on the premiums of foreign fire insurance companies; and 7 making repeals," further providing for the certification of 8 municipal pension costs, for the administration of the 9 General Municipal Pension System State Aid Program and for 10 the continuation of the financially distressed municipal 11 pension system recovery program; adding provisions for the 12 establishment and administration of in-service retirement 13 option plans in local governments; and repealing the 14 financially distressed municipal pension plan determination 15 procedure. 16 The General Assembly of the Commonwealth of Pennsylvania 17 hereby enacts as follows: 18 Section 1. The title of the act of December 18, 1984 19 (P.L.1005, No.205), known as the Municipal Pension Plan Funding 20 Standard and Recovery Act, is amended to read:
1 AN ACT 2 Mandating actuarial funding standards for all municipal pension 3 systems; establishing a recovery program for municipal 4 pension systems determined to be financially distressed; 5 providing for the distribution of the tax on the premiums of 6 foreign fire insurance companies; providing for the 7 establishment and administration of in-service retirement 8 option plans in local governments; and making repeals. 9 Section 2. The definition of "municipal employee" in section 10 102 of the act is amended and the section is amended by adding 11 definitions to read: 12 Section 102. Definitions. 13 Except as provided in Chapter 7, the following words and 14 phrases when used in this act shall have the meanings given to 15 them in this section unless the context clearly indicates 16 otherwise: 17 * * * 18 "IROP." An in-service retirement option plan created and 19 operated by a local government or the Pennsylvania Municipal 20 Retirement System under Chapter 11 or any deferred retirement 21 option plan or similar program established by a local government 22 that provides for the commencement and accumulation of 23 retirement benefit payments for active employees with 24 disbursement of the accumulated payments and interest earnings 25 as a lump sum upon termination of employment. 26 "IROP participant." A retired member of a local government- 27 defined benefit pension plan who is eligible to participate in 28 an IROP under section 1112 and who has elected to participate in 29 an IROP under section 1113. 30 "IROP participant account." A pension trust fund ledger 20030H1432B1778 - 2 -
1 account established under section 1121(a). 2 "Local government." A municipality or any county. 3 * * * 4 "Municipal employee." Any person [other than an independent 5 contractor] who provides regular services for a municipality in 6 return for compensation from the municipality. The term does not 7 include an independent contractor or an IROP participant. 8 * * * 9 Section 3. Section 202(b) of the act, amended December 19, 10 1997 (P.L.611, No. 61), is amended to read: 11 Section 202. Contents of actuarial valuation report. 12 * * * 13 (b) Contents of actuarial exhibits; defined benefit plans 14 self-insured in whole or in part.--For any pension plan which is 15 a defined benefit plan and which is self-insured in whole or in 16 part, all applicable actuarial exhibits shall be prepared in 17 accordance with the entry age normal actuarial cost method with 18 entry age established as the actual entry age for all plan 19 members unless the municipality applies for and is granted 20 authorization by the commission to use an alternative actuarial 21 cost method. Authorization shall be granted if the municipality 22 demonstrates on an individual pension plan basis that there are 23 compelling reasons of an actuarial nature for the use of an 24 alternative actuarial cost method. The commission shall issue 25 rules and regulations specifying the criteria which the 26 commission will use to determine the question of the existence 27 of compelling reasons for the use of an alternative actuarial 28 cost method, the documentation which a municipality seeking the 29 authorization will be required to supply and the acceptable 30 alternative actuarial cost methods which the commission may 20030H1432B1778 - 3 -
1 authorize. The actuarial cost method shall be used to value all 2 aspects of the benefit plan or plans of the pension plan unless 3 the municipality applies for and is granted authorization by the 4 commission to use approximation techniques other than the 5 actuarial cost method for aspects of the benefit plan or plans 6 of the pension plan other than the retirement benefit. 7 Authorization shall be granted if the municipality demonstrates 8 on an individual pension plan basis that there are compelling 9 reasons of an actuarial nature for the use of these 10 approximation techniques. The commission shall issue rules and 11 regulations specifying the criteria which the commission will 12 use to determine the question of the existence of compelling 13 reasons for the use of approximation techniques, the 14 documentation which a municipality seeking the authorization 15 will be required to supply and the acceptable approximation 16 technique which the commission may authorize. The actuarial 17 exhibits shall use actuarial assumptions which are, in the 18 judgment of the actuary and the governing body of the plan, the 19 best available estimate of future occurrences in the case of 20 each assumption. With respect to economic actuarial assumptions, 21 the assumptions shall either be within the range specified in 22 rules and regulations issued by the commission or documentation 23 explaining and justifying the choice of assumptions outside the 24 range shall accompany the report. The actuarial exhibits shall 25 measure all aspects of the benefit plan or plans of the pension 26 plan in accordance with modifications in the benefit plan or 27 plans, if any, and salaries which as of the valuation date are 28 known or can reasonably be expected to be in force during the 29 ensuing plan year. In preparing the actuarial exhibits or any 30 actuarial valuation report, the municipality shall exclude the 20030H1432B1778 - 4 -
1 compensation of all IROP participants from the active member 2 payroll, all IROP participants from active member data and the 3 balance in the IROP participant account from the assets of the 4 pension trust fund. The actuarial valuation report shall contain 5 the following actuarial exhibits: 6 (1) An exhibit of the normal cost of the benefits 7 provided by the benefit plan as of the date of the actuarial 8 valuation, expressed as a percentage of the future covered 9 payroll of the active membership of the pension plan as of 10 the date of the actuarial valuation. 11 (2) An exhibit of the actuarial accrued liability of the 12 benefit plan as of the date of the actuarial valuation in 13 total which shall be the actuarial present value of all 14 projected benefits provided by the benefit plan reduced by 15 the actuarial present value of future normal costs, and in 16 particular, which shall include the following required 17 actuarial present values for pension plan benefits of related 18 items: 19 (i) Required actuarial present values on account of 20 active members: 21 (A) Retirement benefits. 22 (B) Disability benefits. 23 (C) Survivor benefits. 24 (D) Refund liability due to withdrawal from 25 active service or death. 26 (E) Other benefits, specifying the nature of 27 each type. 28 This item shall include a footnote indicating the amount 29 of accumulated member contributions without accrued 30 interest. 20030H1432B1778 - 5 -
1 (ii) Required actuarial present values on account of 2 former members with a deferred, vested or otherwise 3 nonforfeitable right to a retirement benefit. 4 (iii) Required actuarial present values on account 5 of former members who do not have a deferred, vested or 6 otherwise nonforfeitable right to the retirement benefit 7 and who have not withdrawn any accumulated member 8 contributions. 9 (iv) Required actuarial present values on account of 10 benefit recipients: 11 (A) Retirement benefits. 12 (B) Disability benefits. 13 (C) Surviving spouse benefits. 14 (D) Surviving child benefits. 15 (E) Other benefits, specifying the nature of 16 each type. 17 (v) Required actuarial present values for other 18 benefits provided by the benefit plan, specifying the 19 nature of each type. 20 (vi) Actuarial present value of future normal cost. 21 (3) An exhibit of the unfunded actuarial accrued 22 liability of the pension plan in total, which shall be the 23 actuarial accrued liability of the pension plan calculated 24 pursuant to paragraph (2) less the actuarial value of assets 25 of the pension plan calculated pursuant to subsection (e)(1), 26 and which, in particular, shall include the following: 27 (i) The remaining balance of the unfunded actuarial 28 accrued liability in existence as of the first actuarial 29 valuation report required by this section occurring next 30 following the date of enactment of this section. 20030H1432B1778 - 6 -
1 (ii) The remaining balance of each increment of 2 unfunded actuarial accrued liability attributable to 3 modifications in the benefit plan governing the pension 4 plan which were applicable to active members, separately 5 indicating each and designating each by the plan year in 6 which the benefit plan modification was made effective. 7 (iii) The remaining balance of each increment of 8 unfunded actuarial accrued liability attributable to 9 modifications in the benefit plan governing the pension 10 plan which were applicable to retired members and other 11 benefit recipients, separately indicating each and 12 designating each by the plan year in which the benefit 13 plan modification was made effective. 14 (iv) The remaining balance of each increment of net 15 unfunded actuarial accrued liability attributable to 16 modifications in the actuarial assumptions used to 17 calculate the actuarial accrued liability of the pension 18 plan separately indicating each and designating each by 19 the plan year in which the actuarial assumption 20 modification was made effective. 21 (v) The remaining balance of each increment or 22 decrement of net unfunded actuarial accrued liability 23 attributable to net actuarial experience losses or gains, 24 separately indicating each and designating each by the 25 plan year in which the actuarial experience loss or gain 26 was recognized. 27 The initial determination of the unfunded actuarial accrued 28 liability attributable to a modification in the benefit plan 29 governing the pension plan or to a modification in the 30 actuarial assumptions used to calculate the actuarial accrued 20030H1432B1778 - 7 -
1 liability of the pension plan shall be made by calculating 2 the unfunded actuarial accrued liability of the pension plan 3 in accordance with the benefit plan provisions and actuarial 4 assumptions which were in effect prior to the modification 5 and by calculating the unfunded actuarial accrued liability 6 of the pension plan in accordance with the modification in 7 the provisions of the benefit plan governing the pension plan 8 or the actuarial assumptions used to calculate the actuarial 9 accrued liability of the pension plan, whichever is 10 applicable, and the remaining benefit plan provisions and 11 actuarial assumptions. The initial determination of the 12 unfunded actuarial accrued liability attributable to an 13 actuarial loss shall be made in conjunction with the analysis 14 of increases or decreases in the unfunded actuarial accrued 15 liability of the pension plan required pursuant to paragraph 16 (6). 17 (4) An exhibit of any additional funding costs 18 associated with the amortization of any unfunded actuarial 19 accrued liability of the pension plan, indicating for each 20 increment of unfunded actuarial accrued liability specified 21 in paragraph (3), the level annual dollar contribution 22 required to pay an amount equal to the actuarial assumption 23 as to investment earnings applied to the principal amount of 24 the remaining balance of the increment of unfunded actuarial 25 accrued liability and to retire by the applicable 26 amortization target date specified in this paragraph the 27 principal amount of the remaining balance of the increment of 28 unfunded actuarial accrued liability. The amortization target 29 date applicable for each type of increment of unfunded 30 actuarial accrued liability shall be as follows: 20030H1432B1778 - 8 -
1 (i) (A) In the case of a pension plan established 2 on or prior to January 1, 1985 for the unfunded 3 actuarial accrued liability in existence as of the 4 beginning of the plan year occurring in calendar year 5 1985, at the end of the plan year occurring in 6 calendar year 2015; or 7 (B) In the case of a pension plan established 8 after January 1, 1985, for the unfunded actuarial 9 accrued liability then or subsequently determined to 10 be or to have been in existence as of the date of the 11 establishment of the plan, at the end of the plan 12 year occurring 30 years after the calendar year in 13 which the pension plan was established. 14 (ii) Increment or decrement of net unfunded 15 actuarial accrued liability attributable to a change in 16 actuarial assumptions, at the end of the plan year 17 occurring 20 years after the calendar year in which 18 actuarial assumption modification was effective. 19 (iii) Increment of net unfunded actuarial accrued 20 liability attributable to a modification in the benefit 21 plan applicable to active members, at the end of the plan 22 year occurring 20 years after the calendar year in which 23 the benefit plan modification was effective. 24 (iv) Increment of unfunded actuarial accrued 25 liability attributable to a modification in the benefit 26 plan applicable to retired members and other benefit 27 recipients, at the end of the plan year occurring 10 28 years after the calendar year in which the benefit plan 29 modification was effective. 30 (v) Increment or decrement of net unfunded actuarial 20030H1432B1778 - 9 -
1 accrued liability attributable to an actuarial experience 2 loss or gain, at the end of plan year occurring 15 years 3 after the calendar year in which the actuarial experience 4 loss or gain was recognized. 5 With respect to any applicable pension plan other than a plan 6 which comprises all or part of a moderately distressed or a 7 severely distressed municipal pension system, if the 8 remaining average period between the current average attained 9 age of active members as of the valuation date and the later 10 of their earliest average normal retirement age or their 11 average assumed retirement age is less than the applicable 12 period or periods ending with the amortization target date or 13 dates specified in subparagraph (i), (ii), (iii) or (v), the 14 appropriate amortization target date for the applicable 15 subparagraph determined with reference to the longest 16 applicable remaining average period rounded to the next 17 largest whole number shall be used. With respect to any plan 18 year beginning after December 31, 1997, if, as of the 19 beginning of the plan year, the ratio of the actuarial value 20 of assets to the actuarial accrued liability exceeds 0.70 and 21 the governing body of the municipality has passed a 22 resolution to irrevocably commit the municipality to apply 23 the limit on the additional funding costs, as provided 24 herein, in the preparation of the current and all future 25 exhibits under this paragraph, then the sum of the additional 26 funding costs for subparagraphs (i), (ii), (iii), (iv) and 27 (v) above shall not exceed the amount required to amortize 28 the remaining unfunded actuarial accrued liability as of the 29 beginning of the plan year over 10 years in level annual 30 dollar contributions. The exhibit shall indicate the total 20030H1432B1778 - 10 -
1 dollar amount of additional funding costs associated with the 2 amortization of any unfunded actuarial accrued liability of 3 the pension plan applicable for that plan year and any 4 subsequent plan year occurring prior to the preparation of 5 the next required actuarial valuation report, which shall be 6 the total of the additional funding costs associated with the 7 amortization of each increment of unfunded actuarial accrued 8 liability. The exhibit shall also indicate the plan year in 9 which any unfunded actuarial accrued liability of the pension 10 plan would be fully amortized if the total annual additional 11 funding cost calculated pursuant to this paragraph were met 12 continuously without increase or decrease in amount until the 13 total unfunded actuarial accrued liability currently existing 14 was fully amortized. In calculating the additional funding 15 costs associated with the amortization of any unfunded 16 actuarial accrued liability of the pension plan in any plan 17 year, any amortization contribution made in the interval 18 since the last actuarial valuation report shall be allocated 19 to each type of increment of unfunded actuarial accrued 20 liability in proportion to the remaining dollar amount of 21 each type. 22 (5) An exhibit of the total administrative cost of the 23 pension plan for the plan year occurring immediately prior to 24 the plan year for which the actuarial valuation report is 25 made. 26 (6) An exhibit containing an analysis of the increase or 27 decrease in the unfunded actuarial accrued liability of the 28 pension plan since the most recent prior actuarial valuation 29 report, including specifically an indication of increases or 30 decreases due to the following: 20030H1432B1778 - 11 -
1 (i) Modifications in the benefit plan or plans of 2 the pension plan. 3 (ii) Changes in actuarial assumptions. 4 (iii) Deviations in the actual experience of the 5 pension plan from the experience expected by virtue of 6 the actuarial assumptions. 7 (iv) Presence or absence of payments to amortize the 8 unfunded accrued liability of the pension plan. 9 (v) Other reasons. 10 The analysis shall be based on the best professional judgment 11 of the approved actuary reached after preparing the various 12 applicable actuarial exhibits of the actuarial valuation 13 report. If, in the opinion of the approved actuary, the 14 inclusion of any portion of this information is not 15 appropriate, that portion of the analysis may be omitted with 16 the provision of adequate explanation or justification of the 17 appropriateness of the omission. 18 (7) An exhibit summarizing the economic and demographic 19 actuarial assumptions used in the preparation of the 20 actuarial exhibits. 21 (8) A summary of the principal provisions of the benefit 22 plan of the pension plan upon which the actuarial exhibits 23 are based. 24 * * * 25 Section 4. The act is amended by adding a section to read: 26 Section 209. Certification of municipal pension costs. 27 The commission shall determine annually the actual financial 28 requirement for each municipal pension plan based on the data 29 contained in the most recent complete report required to be 30 filed by the municipality pursuant to this chapter and shall 20030H1432B1778 - 12 -
1 certify annually to the Auditor General the actual financial 2 requirements for each municipal pension plan based on the data 3 contained in the most recent actuarial valuation report required 4 to be filed by the municipality pursuant to this chapter. The 5 Auditor General shall use the data certified by the commission 6 to implement the provisions of section 402(f)(2). 7 Section 5. Section 302(b)(2) of the act, amended December 8 18, 1990 (P.L.753, No.189), is amended to read: 9 Section 302. Minimum funding standard; defined benefit plans 10 self-insured in whole or in part. 11 * * * 12 (b) Financial requirements of the pension plan.-- 13 * * * 14 (2) The normal cost and administrative expense 15 requirements for the following plan year shall be expressed 16 as a dollar amount and shall be determined by applying the 17 normal cost of the benefit plan and the administrative 18 expense payable from the assets attributable to the benefit 19 plan, as reported in the actuarial valuation report of the 20 pension plan and expressed as a percentage of payroll, to the 21 payroll of the active membership of the pension plan as of 22 the date the financial requirements of the pension plan are 23 determined. In expressing the normal cost and administrative 24 expense requirements as a dollar amount, the municipality 25 shall exclude the compensation of all IROP participants from 26 the payroll of the active membership of the pension plan. 27 * * * 28 Section 6. Section 402(e)(2) of the act is amended to read: 29 Section 402. Revision of financing from State revenue sources; 30 General Municipal Pension System State Aid 20030H1432B1778 - 13 -
1 Program. 2 * * * 3 (e) Allocation of general municipal pension system State 4 aid.-- 5 * * * 6 (2) The applicable number of units shall be attributable 7 to each active employee who was employed on a full-time basis 8 for a minimum of six consecutive months prior to December 31 9 preceding the date of certification and who was participating 10 in a pension plan maintained by that municipality, provided 11 that the municipality maintains a generally applicable 12 pension plan for that type of employee which was either 13 established on or prior to December 31, 1984, or, if 14 established after December 31, 1984, has been maintained by 15 that municipality for at least three plan years. For the 16 purpose of computing and reporting the applicable number of 17 units, an IROP participant shall not be reported to the 18 Auditor General as an active employee. The applicable number 19 of units per employee attributable to each eligible recipient 20 county of the second class shall be two units for each police 21 officer. The applicable number of units attributable to each 22 eligible recipient city, borough, incorporated town and 23 township shall be as follows: 24 (i) Police officer - two units. 25 (ii) Firefighter - two units. 26 (iii) Employee other than police officer or 27 firefighter - one unit. 28 * * * 29 Section 7. Chapter 5 of the act is repealed. 30 Section 8. Sections 602, 603, 604, 605 and 606 of the act 20030H1432B1778 - 14 -
1 are repealed. 2 Section 9. Section 607(a) of the act is amended to read: 3 Section 607. Remedies applicable to various recovery program 4 levels. 5 (a) Generally.--Notwithstanding any provision of law, 6 municipal charter, municipal ordinance, municipal resolution, or 7 pension plan agreement, document or instrument to the contrary, 8 the remedies specified in this section shall be available to the 9 applicable municipalities. After December 31, 2003, a 10 municipality may continue to utilize any of the remedies 11 specified in this section that it elected, implemented and used 12 on December 31, 2003. 13 * * * 14 Section 10. Section 608 of the act is repealed. 15 Section 11. The act is amended by adding a chapter to read: 16 CHAPTER 11 17 IN-SERVICE RETIREMENT OPTION PLANS LAW 18 SUBCHAPTER A 19 PRELIMINARY PROVISIONS 20 Section 1101. Short title. 21 This chapter shall be known and may be cited as the In- 22 Service Retirement Option Plans Law. 23 Section 1102. Declaration of purpose. 24 It is the purpose of this chapter to provide for an in- 25 service retirement option plan under which an eligible member of 26 the local government's retirement system may elect to 27 participate in an IROP, defer receipt of retirement system 28 benefits and continue employment with the local government. 29 Section 1103. Definitions. 30 The following words and phrases when used in this chapter 20030H1432B1778 - 15 -
1 shall have the meanings given to them in this section unless the 2 context clearly indicates otherwise: 3 "Normal retirement benefit." The retirement benefit payable 4 to a member of a defined benefit pension plan on or after the 5 date on which the member first satisfies the age and service 6 requirements for full, unreduced retirement benefits, including 7 supplemental amounts provided to the member after retirement as 8 cost-of-living increases. 9 "Subsidiary IROP participant account." The separate, 10 interest-bearing, subsidiary IROP participant account 11 established for an IROP participant under section 1121. 12 Section 1104. Employment status. 13 Participation in an IROP does not guarantee the IROP 14 participant's employment by the local government during the 15 specified period of the IROP. 16 SUBCHAPTER B 17 GENERAL PROVISIONS 18 Section 1111. Establishment of IROP. 19 (a) Local governments.--A local government that has 20 established or maintains a defined benefit pension plan for a 21 group of its employees which is self-insured in whole or in part 22 under section 202(b), except for a local government that has 23 joined the Pennsylvania Municipal Retirement System, may 24 establish by ordinance an IROP for those employees as part of 25 the pension plan. The ordinance establishing the IROP shall 26 specify a uniform participation period for the IROP that is not 27 more than five years in duration. 28 (b) PMRS participants.--A local government that has 29 established or maintains a defined benefit plan for a group of 30 its employees which is self-insured in whole or in part under 20030H1432B1778 - 16 -
1 section 202(b) and has joined the Pennsylvania Municipal 2 Retirement System may establish an IROP for those employees as a 3 part of the pension plan only through participation in the IROP 4 established and administered by the Pennsylvania Municipal 5 Retirement System. 6 (c) PMRS standards.--The Pennsylvania Municipal Retirement 7 Board shall establish an IROP for local government-defined 8 benefit pension plans that have joined the Pennsylvania 9 Municipal Retirement System. The IROP so established shall be 10 uniform, in compliance with the provisions of this chapter, open 11 to any local government and applicable to any of the defined 12 benefit pension plans administered by the Pennsylvania Municipal 13 Retirement System. 14 Section 1112. Eligibility of member to participate in IROP. 15 An active member of a local government retirement system that 16 has an IROP as a part of its defined benefit pension plan who is 17 eligible for a normal retirement benefit under the pension plan 18 or will be eligible for a normal retirement benefit under the 19 pension plan prior to participation in the IROP is eligible to 20 participate in the IROP by filing a written application with the 21 retirement system at least 30 days before the member's effective 22 date of retirement. 23 Section 1113. Participation in IROP. 24 (a) Election by an active member.--An eligible active member 25 may elect to participate in an IROP for the period specified in 26 the ordinance establishing the IROP. 27 (b) IROP participation election.--Upon deciding to 28 participate in an IROP, a member shall submit on forms provided 29 and required by the retirement system: 30 (1) A binding and irrevocable letter of resignation from 20030H1432B1778 - 17 -
1 regular employment with the local government that discloses 2 the member's intent to retire and specifies the member's 3 retirement date. 4 (2) An irrevocable written election to participate in 5 the IROP that: 6 (i) Details an IROP participant's rights and 7 obligations under the IROP. 8 (ii) Includes an agreement to forgo: 9 (A) Active membership in the retirement system. 10 (B) Any growth in the salary base used for 11 calculating the regular retirement benefit. 12 (C) Any additional benefit accrual for 13 retirement purposes. 14 (iii) Specifies the effective date of IROP 15 participation that shall be the day after the specified 16 retirement date. 17 (iv) Specifies the IROP termination date that 18 satisfies the limitation in subsection (a). 19 (3) Any other information required by the retirement 20 system. 21 (c) IROP termination.-- 22 (1) An IROP participant may change the IROP termination 23 date to an earlier date within the limitations of subsection 24 (a). No penalty shall be imposed for early termination of 25 IROP participation. 26 (2) Upon either early or regular termination of IROP 27 participation: 28 (i) The IROP participant shall be separated from 29 employment by the local government. 30 (ii) The retirement system shall pay the balance in 20030H1432B1778 - 18 -
1 the IROP participant's subsidiary IROP participant 2 account to the terminating IROP participant as provided 3 in section 1114(d). 4 (iii) The IROP participant shall be ineligible to 5 reenroll in the IROP thereafter even if the former IROP 6 participant is reemployed by the local government with 7 renewed active membership in the retirement system. 8 Section 1114. Benefits payable under IROP. 9 (a) Fixing retirement benefit, retirement date, retirement 10 benefits and IROP dates.-- Effective with the date of 11 retirement, which shall be the day before the effective date of 12 IROP participation, the member's monthly, normal retirement 13 benefit under the pension plan, the member's effective date of 14 retirement and the member's effective dates of beginning and 15 terminating employment as an IROP participant shall be fixed. 16 (b) Effective dates of IROP participation.-- 17 (1) A retired member's effective date of participation 18 in an IROP shall begin the day following the effective date 19 of the member's regular retirement. 20 (2) A retired member's participation in an IROP shall 21 end on the last day of the participation period specified in 22 the ordinance establishing the IROP that is in effect on the 23 effective date of the retired member's participation in the 24 IROP. 25 (c) Treatment of normal retirement benefit payments and 26 accruals.--All of the retired member's monthly, normal 27 retirement benefit and interest thereon at the assigned rate 28 shall be credited to the IROP participant's subsidiary IROP 29 participant account in the pension trust fund and a separate 30 accounting of the IROP participant's accrued benefit 20030H1432B1778 - 19 -
1 accumulation under the IROP shall be calculated annually and 2 provided to the IROP participant. 3 (d) Payment of IROP benefits.--On the effective date of an 4 IROP participant's termination of employment with the local 5 government as an IROP participant, participation in the IROP 6 shall cease and the retirement system shall calculate and pay to 7 the participant the participant's total accumulated IROP 8 benefits in the IROP participant's subsidiary IROP participant 9 account subject to the following provisions: 10 (1) Except as provided in paragraph (2), the terminating 11 IROP participant or, if deceased, the participant's named 12 beneficiary shall elect on a form provided by the retirement 13 system to receive payment of the IROP benefits in accordance 14 with one of the following options: 15 (i) The balance in the IROP participant's subsidiary 16 IROP participant account less withholding taxes, if any, 17 remitted to the Internal Revenue Service shall be paid 18 within 45 days by the retirement system from the account 19 to the IROP participant or surviving beneficiary. 20 (ii) The balance in the IROP participant's 21 subsidiary IROP participant account shall be paid within 22 45 days by the retirement system from the account 23 directly to the custodian of an eligible retirement plan 24 as defined in section 402(c)(8)(b) of the Internal 25 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et 26 seq.), or, in the case of an eligible rollover 27 distribution to the surviving spouse of a deceased IROP 28 participant, an eligible retirement plan that is an 29 individual retirement account or an individual retirement 30 annuity as described in section 402(c)(9) of the Internal 20030H1432B1778 - 20 -
1 Revenue Code. 2 (2) If the IROP participant or beneficiary fails to 3 elect a method of payment within 60 days after the 4 participant's termination date, the retirement system shall 5 pay the balance as a lump sum as provided in paragraph (1). 6 (3) The form of payment selected by the IROP participant 7 or surviving beneficiary shall comply with the minimum 8 distribution requirements of the Internal Revenue Code. 9 (e) Taxation, attachment and assignment of IROP 10 participant's account.-- 11 (1) Except as provided in paragraphs (2), (3) and (4), 12 the right of an IROP participant to any benefit or right 13 accrued or accruing under the provisions of this chapter and 14 the moneys in the IROP participant's subsidiary IROP 15 participant account are exempt from any State or municipal 16 tax, levy and sale, garnishment, attachment, spouse's 17 election or any other process whatsoever. 18 (2) Rights under this chapter shall be subject to 19 forfeiture as provided by the act of July 8, 1978 (P.L.752, 20 No.140), known as the Public Employee Pension Forfeiture Act. 21 Forfeitures under this subsection or under any other 22 provision of law may not be applied to increase the benefits 23 that any IROP participant otherwise would receive under this 24 chapter. 25 (3) Rights under this chapter shall be subject to 26 attachment in favor of an alternate payee as set forth in a 27 qualified domestic relations order. 28 (4) Under subsection (d)(1)(ii), a distributee may elect 29 to have an eligible rollover distribution paid directly to an 30 eligible retirement plan by way of a direct rollover. For 20030H1432B1778 - 21 -
1 purposes of this paragraph, a "distributee" includes an IROP 2 participant, an IROP participant's designated beneficiary and 3 an IROP participant's former spouse who is an alternate payee 4 under a qualified domestic relations order. For purposes of 5 this paragraph, "eligible rollover distribution" has the 6 meaning given the term by section 402(f)(2)(A) of the 7 Internal Revenue Code, except that a qualified trust shall be 8 considered an eligible retirement plan only if it accepts the 9 distributee's eligible rollover distribution and, in the case 10 of an eligible rollover distribution to a surviving spouse, 11 an eligible retirement plan is an "individual retirement 12 account" or an "individual retirement annuity" as those terms 13 are defined in section 408(a) and (b) of the Internal Revenue 14 Code. 15 (f) Effect of disability pension benefits.--If an IROP 16 participant becomes eligible for a disability pension benefit 17 and terminates employment, the monthly normal retirement benefit 18 of the IROP participant shall terminate. 19 (g) Eligibility for active member benefits.--Except for 20 those benefits specified under section 1113(b)(2)(ii) as forgone 21 by the member, an IROP participant shall be eligible for any 22 employee benefits provided to active employees before retirement 23 as set forth in the ordinance instituting the IROP. 24 (h) Eligibility for benefits otherwise provided by law.--An 25 IROP participant shall be eligible for all preretirement 26 benefits for employees otherwise provided by law, including, but 27 not limited to, benefits under the act of June 2, 1915 (P.L.736, 28 No.338), known as the Workers' Compensation Act; the act of June 29 28, 1935 (P.L.477, No.193), referred to as the Enforcement 30 Officer Disability Benefits Law; the act of December 5, 1936 20030H1432B1778 - 22 -
1 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment 2 Compensation Law; the act of June 24, 1976 (P.L.424, No.101), 3 referred to as the Emergency and Law Enforcement Personnel Death 4 Benefits Act; and the Public Safety Officers' Benefit Act of 5 1976 (Public Law 94-430, 42 U.S.C. § 90 stat. 1347). 6 Section 1115. Death benefits under IROP. 7 (a) IROP benefits for named beneficiary.--If an IROP 8 participant dies, the IROP participant's named beneficiary shall 9 be entitled to apply for and receive the benefits accrued in the 10 IROP participant's subsidiary IROP participant account as 11 provided in section 1114(d). 12 (b) Final credited monthly retirement benefit.--The monthly 13 retirement system benefit accrued in the IROP participant's 14 subsidiary IROP participant account during the month of an IROP 15 participant's death shall be the final monthly retirement system 16 benefit credited for IROP participation. 17 (c) IROP eligibility terminates upon participant's death.-- 18 An IROP participant's eligibility to participate in the IROP 19 terminates upon the death of the IROP participant. If an IROP 20 participant dies on or after the effective date of participation 21 in the IROP but before the monthly retirement system benefit of 22 the participant accruable for the month has accrued in the IROP 23 participant's subsidiary IROP participant account, the local 24 government shall pay the monthly retirement system benefits as 25 though the participant had not elected IROP participation and 26 had died after the member's effective date of retirement but 27 before receipt of the retired member's first regular retirement 28 benefit. 29 (d) Survivors ineligible for active member's death 30 benefit.--Except as provided in subsection (e), the survivors of 20030H1432B1778 - 23 -
1 an IROP participant who dies shall not be eligible to receive 2 retirement system death benefits payable in the event of the 3 death of an active member. 4 (e) IROP participant killed in service.--If otherwise 5 qualified as a family member under the act of May 29, 1956 (1955 6 P.L.1804, No.600), referred to as the Municipal Police Pension 7 Law, the named beneficiary of an IROP participant who is killed 8 in service shall be entitled to apply for and receive a 9 recalculation for payment of survivor benefits at 100% of the 10 IROP participant's salary as fixed at the participant's date of 11 retirement. 12 Section 1116. Subsequent employment and renewal of active 13 membership. 14 After both the termination of the IROP participant's 15 employment as an IROP participant by the local government and 16 the expiration of the IROP participation period, a former IROP 17 participant shall be subject to such reemployment limitations as 18 other retired members and shall be eligible for renewed 19 membership as an active member in the local government 20 employees' retirement system. 21 SUBCHAPTER C 22 ADMINISTRATIVE PROVISIONS 23 Section 1121. IROP participant account. 24 (a) General rule.--If a local government creates an IROP, it 25 shall establish an IROP participant account as an interest- 26 bearing ledger account in its pension trust fund. The account 27 balance shall be accounted for separately but need not be 28 physically segregated from other pension trust fund assets. 29 (b) Subsidiary IROP participant accounts.--A separate 30 interest-bearing subsidiary IROP participant account shall be 20030H1432B1778 - 24 -
1 established for each IROP participant. While a retired member is 2 employed as an IROP participant, the member's monthly, normal 3 retirement benefit and interest thereon shall be credited to the 4 IROP participant's subsidiary IROP participant account under 5 section 1114(c). The interest shall be compounded and credited 6 monthly at an annual rate specified in the ordinance 7 establishing the IROP that shall be not less than 1% nor more 8 than 4 1/2%. 9 (c) Termination of employment.--When an IROP participant 10 terminates employment with the local government as an IROP 11 participant, the IROP participant's total accumulated benefits 12 shall be calculated, charged to the IROP participant account and 13 paid out of the pension trust fund under section 1114(d). Under 14 section 202(b), the balance in the IROP participant account 15 shall be excluded from actuarial valuation reports of the 16 retirement system prepared and filed under this act. 17 (d) Account held in trust.--The IROP participant account 18 shall be held in trust for the exclusive benefit of IROP retired 19 members who are or were IROP participants and for the 20 beneficiaries of the members. 21 Section 1122. Audit of Pennsylvania Municipal Retirement 22 System. 23 The IROP established by the Pennsylvania Municipal Retirement 24 Board shall be subject to financial and compliance audits 25 conducted by the Auditor General with the initial audit 26 conducted within one year of its establishment. 27 Section 1123. Existing IROPs. 28 A local government with an IROP in existence on the effective 29 date of this chapter that does not conform to the provisions of 30 this chapter shall amend its plan within 180 days of the 20030H1432B1778 - 25 -
1 effective date of this chapter or when the current labor- 2 management contract creating the plan expires, whichever is 3 later, to conform with the provisions of this chapter with 4 respect to future IROP participants. 5 Section 1124. Noncompliance. 6 If a local government that established an IROP under section 7 1111(a) or the Pennsylvania Municipal Retirement Board that 8 established an IROP under section 1111(c) fails to comply within 9 90 days with a finding by the Auditor General of noncompliance 10 with this chapter or if the finding is appealed within 90 days 11 of conclusion of the appeal process, the failure to comply shall 12 be deemed sufficient refusal by the local government or the 13 Pennsylvania Municipal Retirement Board to comply with its duty 14 antecedent to the commencement of a mandamus action and the 15 Auditor General shall refer the finding to the Attorney General. 16 Upon receipt of the finding from the Auditor General, the 17 Attorney General, following an administrative proceeding in 18 accordance with 2 Pa.C.S. (relating to administrative law and 19 procedure), shall proceed in the name of the Commonwealth to 20 institute a legal proceeding for mandamus and no other remedy at 21 law shall be deemed to be sufficiently adequate and appropriate 22 to bar the commencement of this action. 23 Section 12. This act shall take effect as follows: 24 (1) The repeal of sections 602, 603, 604, 605, 606 and 25 608 of the act shall take effect January 1, 2004. 26 (2) The remainder of this act shall take effect in 60 27 days. E5L72MRD/20030H1432B1778 - 26 -