PRINTER'S NO. 1349
No. 994 Session of 2003
INTRODUCED BY D. WHITE, STOUT, KUKOVICH, COSTA, ERICKSON, MUSTO,
ORIE, C. WILLIAMS, RHOADES, LOGAN, WAGNER, BOSCOLA,
GREENLEAF, STACK, O'PAKE AND GORDNER, DECEMBER 24, 2003
REFERRED TO FINANCE, DECEMBER 24, 2003
AN ACT
1 Amending Title 24 (Education) of the Pennsylvania Consolidated
2 Statutes, defining "actual interest" and "time-weighted rate
3 of return"; further defining "valuation interest"; further
4 providing for actuarial cost method; and providing for
5 supplemental annuities commencing 2004.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. The definition of "valuation interest" in section
9 8102 of Title 24 of the Pennsylvania Consolidated Statutes is
10 amended and the section is amended by adding definitions to
11 read:
12 § 8102 Definitions.
13 The following words and phrases when used in this act shall
14 have the meanings given to them in this section unless the
15 context clearly indicates otherwise:
16 * * *
17 "Actual interest." Amounts credited annually to the annuity
18 reserve account calculated by multiplying the difference of the
19 fund's time-weighted rate of return for the preceding year minus
1 the Public School Employees' Retirement Board's actuarial
2 interest rate assumption for the preceding year, times the mean
3 amount of the annuity reserve account for the preceding year.
4 * * *
5 "Time-weighted rate of return." The fund's total investment
6 return, including both realized and unrealized gains and losses,
7 based on the actuarial value of assets used for determining
8 annual contribution rates.
9 "Valuation interest." Interest at 5 1/2% per annum,
10 compounded annually and applied to all accounts other than the
11 members' savings account and the annuity reserve account.
12 * * *
13 Section 2. Section 8328(b), (c), (d) and (e) are amended and
14 the section is amended by adding a subsection to read:
15 § 8328. Actuarial cost method.
16 * * *
17 (b) Normal contribution rate.--The normal contribution rate
18 shall be determined after each actuarial valuation. Until all
19 accrued liability contributions have been completed, the normal
20 contribution rate shall be determined, on the basis of an annual
21 interest rate and such mortality and other tables as shall be
22 adopted by the board in accordance with generally accepted
23 actuarial principles, as a level percentage of the compensation
24 of the average new active member, which percentage, if
25 contributed on the basis of his prospective compensation through
26 the entire period of active school service, would be sufficient
27 to fund the liability for any prospective benefit payable to
28 him, in excess of that portion funded by his prospective member
29 contributions, except for the supplemental benefits provided in
30 sections 8348 (relating to supplemental annuities), 8348.1
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1 (relating to additional supplemental annuities), 8348.2
2 (relating to further additional supplemental annuities), 8348.3
3 (relating to supplemental annuities commencing 1994), 8348.4
4 (relating to special supplemental postretirement adjustment),
5 8348.5 (relating to supplemental annuities commencing 1998),
6 8348.6 (relating to supplemental annuities commencing 2002)
7 [and], 8348.7 (relating to supplemental annuities commencing
8 2003) and 8348.8 (relating to supplemental annuities commencing
9 2004).
10 (c) Accrued liability contribution rate.--For the fiscal
11 year beginning July 1, 2002, the accrued liability contribution
12 rate shall be computed as the rate of total compensation of all
13 active members which shall be certified by the actuary as
14 sufficient to fund over a period of [ten] 20 years from July 1,
15 2002, the present value of the liabilities for all prospective
16 benefits of active members, except for the supplemental benefits
17 provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4,
18 8348.5, 8348.6 [and], 8348.7 and 8348.8, in excess of the total
19 assets in the fund (calculated by recognizing the actuarially
20 expected investment return immediately and recognizing the
21 difference between the actual investment return and the
22 actuarially expected investment return over a five-year period),
23 excluding the balance in the annuity reserve account, and of the
24 present value of normal contributions and of member
25 contributions payable with respect to all active members on July
26 1, 2002, during the remainder of their active service.
27 Thereafter, the amount of each annual accrued liability
28 contribution shall be equal to the amount of such contribution
29 for the fiscal year, beginning July 1, 2002, except that, if the
30 accrued liability is increased by legislation enacted subsequent
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1 to June 30, 2002, such additional liability shall be funded over
2 a period of [ten] 20 years from the first day of July,
3 coincident with or next following the effective date of the
4 increase. The amount of each annual accrued liability
5 contribution for such additional legislative liabilities shall
6 be equal to the amount of such contribution for the first annual
7 payment.
8 (d) Supplemental annuity contribution rate.--Contributions
9 from the Commonwealth and other employers required to provide
10 for the payment of the supplemental annuities provided for in
11 sections 8348, 8348.1, 8348.2, 8348.4 and 8348.5 shall be paid
12 over a period of [ten] 20 years from July 1, 2002. The funding
13 for the supplemental annuities commencing 2002 provided for in
14 section 8348.6 shall be as provided in section 8348.6(f). The
15 funding for the supplemental annuities commencing 2003 provided
16 for in section 8348.7 shall be as provided in section 8348.7(f).
17 The amount of each annual supplemental annuities contribution
18 shall be equal to the amount of such contribution for the fiscal
19 year beginning July 1, 2002. [In the event that supplemental
20 annuities are increased by legislation enacted subsequent to
21 June 30, 2002, the additional liability for the increased
22 benefits to be amortized shall be funded in equal dollar annual
23 installments over a period of ten years.] The additional
24 liabilities for supplemental annuities provided in section
25 8348.8 shall be calculated by the actuary as the supplemental
26 annuity contribution attributable to the additional liability
27 for the benefit increase, less the supplemental annuity
28 adjustment factor calculated in subsection (g), but in no case
29 shall it be less than zero. The sums calculated by the actuary
30 shall be funded in equal dollar annual installments over periods
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1 of 20 years.
2 (e) Experience adjustment factor.--For each year after the
3 establishment of the accrued liability contribution rate for the
4 fiscal year beginning July 1, 2002, any increase or decrease in
5 the unfunded accrued liability, excluding the gains or losses on
6 the assets of the health insurance account, due to actual
7 experience differing from assumed experience, changes in
8 actuarial assumptions, changes in the terms and conditions of
9 the benefits provided by the system by judicial, administrative
10 or other processes other than legislation, including, but not
11 limited to, reinterpretation of the provisions of this part,
12 shall be amortized in equal dollar annual installments over a
13 period of [ten] 20 years beginning with the July 1 second
14 succeeding the actuarial valuation.
15 * * *
16 (g) Supplemental annuity adjustment factor.--Beginning with
17 the fiscal year ending June 30, 2004, and continuing annually
18 thereafter, any increase or decrease in the accrued liability
19 for annuitant member benefits due to the crediting of actual
20 interest shall be amortized in equal dollar annual installments
21 over a period of 20 years beginning with July 1 next succeeding
22 the actuarial valuation.
23 Section 3. Title 24 is amended by adding a section to read:
24 § 8348.8. Supplemental annuities commencing 2004.
25 (a) Benefits.--Commencing with the first monthly annuity
26 payment after July 1, 2004, and annually thereafter, any
27 eligible benefit recipient shall be entitled to receive further
28 additional monthly supplemental annuities from the system. These
29 shall be in addition to the supplemental annuities provided for
30 in sections 8348 (relating to supplemental annuities), 8348.1
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1 (relating to additional supplemental annuities), 8348.2
2 (relating to further additional supplemental annuities), 8348.3
3 (relating to supplemental annuities commencing 1994), 8348.5
4 (relating to supplemental annuities commencing 1998), 8348.6
5 (relating to supplemental annuities commencing 2002) and 8348.7
6 (relating to supplemental annuities commencing 2003).
7 (b) Amounts of supplemental annuities.--Beginning July 1,
8 2004, and annually thereafter, the amounts of the supplemental
9 annuities payable pursuant to this section shall be calculated
10 by applying the lesser of 3% or the percentage change in the
11 Consumer Price Index for All Urban Consumers (CPI-U) for the
12 Pennsylvania, New Jersey, Delaware and Maryland area, for the
13 most recent 12-month period for which figures have been
14 officially reported by the United States Department of Labor,
15 Bureau of Labor Statistics, immediately prior to the date the
16 adjustment is due to take effect, to the then-current annuity
17 amount.
18 (c) Payment.--The additional monthly supplemental annuities
19 provided under this section shall be paid automatically unless
20 the intended recipient files a written notice with the system
21 requesting that the additional monthly supplemental annuities
22 not be paid.
23 (d) Conditions.--The additional supplemental annuities
24 provided under this section shall be payable under the same
25 terms and conditions as provided under the option plan in effect
26 July 1, 2004.
27 (e) Benefits paid to beneficiaries or survivors.--No
28 supplemental annuity effective after the death of the member
29 shall be payable to the beneficiary or survivor annuitant of the
30 deceased member.
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1 (f) Funding.--The additional liability for the increase in
2 benefits provided by this section shall be funded in equal
3 dollar annual installments over a period of 20 years beginning
4 July 1, 2005.
5 (g) Definition.--As used in this section, the term "eligible
6 benefit recipient" means a person who is receiving a
7 superannuation, withdrawal or disability annuity and who
8 commenced receipt of that annuity on or prior to July 1, 2004.
9 Section 4. This act shall take effect immediately.
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