PRINTER'S NO. 2203
No. 1669 Session of 2007
INTRODUCED BY GALLOWAY, WANSACZ, MANN, SCAVELLO, DePASQUALE,
BELFANTI, BRENNAN, CARROLL, CONKLIN, CURRY, HENNESSEY,
JOSEPHS AND YOUNGBLOOD, JULY 3, 2007
REFERRED TO COMMITTEE ON FINANCE, JULY 3, 2007
AN ACT
1 Establishing the Pennsylvania Voluntary Accounts Program, the
2 Pennsylvania Voluntary Accounts Program Advisory Board and
3 the Pennsylvania Voluntary Accounts Program Bureau; providing
4 for powers of the Treasury Department; and establishing the
5 Pennsylvania Voluntary Accounts Program Fund.
6 TABLE OF CONTENTS
7 Section 1. Short title.
8 Section 2. Declaration of policy.
9 Section 3. Definitions.
10 Section 4. Pennsylvania Voluntary Accounts Program Bureau.
11 Section 5. Pennsylvania Voluntary Accounts Program
12 Advisory Board.
13 Section 6. Powers of Treasury Department.
14 Section 7. Pennsylvania Voluntary Accounts Program Fund.
15 Section 8. Investment policies and guidelines.
16 Section 9. Investment program.
17 Section 10. Levy, execution and security for loans.
18 Section 11. Contributions.
19 Section 12. Eligible account owners.
1 Section 13. Safeguards and protections.
2 Section 14. Exemption from security laws.
3 Section 15. State tax exemption.
4 Section 16. Federal taxation.
5 Section 17. Effective date.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the Pennsylvania
10 Voluntary Accounts Program Act.
11 Section 2. Declaration of policy.
12 The General Assembly finds and declares as follows:
13 (1) Many workers do not have access to an employer-based
14 retirement plan.
15 (2) Workers who are unable to build up pensions and
16 savings risk living on low incomes in their old age and are
17 more likely to become dependent on State services.
18 (3) The Pennsylvania Voluntary Accounts Program will
19 provide a simple and inexpensive means for workers to save
20 for retirement.
21 Section 3. Definitions.
22 The following words and phrases when used in this act shall
23 have the meanings given to them in this section unless the
24 context clearly indicates otherwise:
25 "Account owner." A person, including a natural person,
26 corporation, association, partnership or other legal entity, who
27 enters into a Pennsylvania Voluntary Accounts Program contract.
28 "Board." The Pennsylvania Voluntary Accounts Program
29 Advisory Board.
30 "Bureau." The Pennsylvania Voluntary Accounts Program
20070H1669B2203 - 2 -
1 Bureau.
2 "Department." The Treasury Department of the Commonwealth.
3 "Fund." The Pennsylvania Voluntary Accounts Program Fund.
4 "Lawful investment." Any of the investments described in
5 either 24 Pa.C.S. § 8521 (relating to management of fund and
6 accounts) or 71 Pa.C.S. § 5931 (relating to management of fund
7 and accounts).
8 "Participating employer." A private employer, with a place
9 of business in this Commonwealth, with employees participating
10 in the Pennsylvania Voluntary Accounts Program.
11 "PAVAP" or "program." The Pennsylvania Voluntary Accounts
12 Program.
13 "PAVAP contract." A Pennsylvania Voluntary Accounts Program
14 contract entered into between an account owner and the Treasury
15 Department to provide for savings for retirement.
16 "Value of the account." An amount determined by subtracting
17 expenses, fees and taxes, if any, from the value of the
18 Pennsylvania Voluntary Accounts Program Fund and then prorating
19 the remaining net value by shares.
20 Section 4. Pennsylvania Voluntary Accounts Program Bureau.
21 The State Treasurer is directed to establish a bureau within
22 the department, which shall be known as the Pennsylvania
23 Voluntary Accounts Program Bureau, for the purpose of
24 establishing and administering the program.
25 Section 5. Pennsylvania Voluntary Accounts Program Advisory
26 Board.
27 (a) Establishment.--There is established a Pennsylvania
28 Voluntary Accounts Program Advisory Board. The board shall be
29 composed of the State Treasurer, the Secretary of Revenue and
30 the chairman of the State Employees' Retirement Board. There
20070H1669B2203 - 3 -
1 also shall be 14 other members of the board. Of these 14 other
2 members, four shall be appointed by the President pro tempore of
3 the Senate, four shall be appointed by the Speaker of the House
4 of Representatives and six shall be appointed by the Governor.
5 Of the four members appointed by the President pro tempore of
6 the Senate, two must be recommended by the Majority Leader of
7 the Senate and two must be recommended by the Minority Leader of
8 the Senate. Of the four members appointed by the Speaker of the
9 House of Representatives, two must be recommended by the
10 Majority Leader of the House of Representatives and two must be
11 recommended by the Minority Leader of the House of
12 Representatives. The members of the board appointed by the
13 President pro tempore of the Senate and the Speaker of the House
14 of Representatives must have knowledge, skill and expertise in
15 financial affairs.
16 (b) Terms.--Board members appointed by the President pro
17 tempore of the Senate, the Speaker of the House of
18 Representatives and the Governor shall be appointed for terms of
19 four years each. Vacancies shall be filled for the unexpired
20 terms of appointed members of the board in the same manner as
21 original appointments.
22 (c) Organizational meeting.--The State Treasurer shall call
23 the organizational meeting of the board, at which time a
24 chairperson shall be selected from among the members. If a
25 vacancy in the office of chairperson occurs, such vacancy shall
26 be filled by a selection from among the members. Meetings of the
27 board shall be held at least quarterly or at the call of the
28 chairperson.
29 (d) Duties.--The board shall consider, study and review the
30 work of the bureau, shall advise the department on request and
20070H1669B2203 - 4 -
1 shall make recommendations on its own initiative for the
2 improvement of the program. The board shall report annually to
3 the Governor and to the General Assembly, and may make such
4 interim reports as are deemed advisable.
5 (e) Employees.--The department shall have the power and its
6 duty shall be to provide the board with experts, stenographers
7 and assistants as necessary to carry out the work of the board.
8 In addition, the board may enlist voluntary assistance as
9 available from citizens, research organizations and other
10 agencies.
11 Section 6. Powers of Treasury Department.
12 In addition to the powers granted by other provisions of this
13 act, the department shall have the powers necessary or
14 convenient to carry out this act, including, but not limited to,
15 the power to:
16 (1) Administer the program and the fund.
17 (2) Enter into PAVAP contracts with account owners.
18 (3) Contract for goods and services, and engage and
19 employ personnel, including, but not limited to, the services
20 of private consultants, actuaries, managers, legal counsel
21 and auditors for rendering professional, managerial and
22 technical assistance and advice.
23 (4) Charge and collect administrative fees and charges
24 in connection with any transaction, including continued
25 participation in the program.
26 (5) Terminate the account and make refunds.
27 (6) Contract for insurance, letters of credit and
28 collateral agreements.
29 (7) Restrict the number of participants in the program.
30 (8) Adjust the terms of PAVAP contracts.
20070H1669B2203 - 5 -
1 (9) Solicit answers from the appropriate Federal
2 agencies regarding the application of security or other
3 Federal laws to the program.
4 (10) Limit the times and dates during which PAVAP
5 contracts may be entered into.
6 (11) Consider means whereby an account owner may have
7 contributions deducted from salary.
8 (12) Promulgate regulations.
9 Section 7. Pennsylvania Voluntary Accounts Program Fund.
10 (a) Establishment.--There is established in the State
11 Treasury a special fund to be known as the Pennsylvania
12 Voluntary Accounts Program Fund. The money in the fund shall be
13 invested in accordance with this act. All money in the fund is
14 hereby appropriated to the department on a continuing basis to
15 carry out the provisions of this act.
16 (b) Administration.--
17 (1) The assets of the fund shall be preserved, invested
18 and expended solely pursuant to and for the purposes set
19 forth in this act.
20 (2) The department, in conjunction with the board, shall
21 make an annual report to the Governor and the General
22 Assembly showing the condition of the fund. This report shall
23 contain the findings and recommendations of the department
24 and the board and the recommendations of any private
25 consultant under contract or volunteering services to the
26 department or board. Consistent with the goal of providing
27 for the maintenance of the fiscal sufficiency of the fund,
28 the report regarding the fund shall detail those actions
29 taken or needed to modify the program so that the fund and
30 account owner will receive favorable treatment for purposes
20070H1669B2203 - 6 -
1 of Federal taxation.
2 (c) Composition.--The fund shall consist of:
3 (1) All contributions made by account owners pursuant to
4 PAVAP contracts and all interest, earnings and additions
5 thereto.
6 (2) Any other money, public or private, appropriated or
7 made available to the department for the fund from any source
8 and all interest, earnings and additions thereto.
9 (d) Operating and administrative costs.--The department
10 shall, through the Governor, annually submit to the General
11 Assembly a budget covering the operating and administrative
12 expenses of the bureau and the board. Upon approval by the
13 General Assembly in an appropriation bill, expenses as incurred
14 by the bureau and the board shall be paid from the fees, charges
15 and investment earnings of the fund or from any other available
16 funds.
17 (e) Limitation.--Notwithstanding any other provision of law,
18 the department and the board shall not pledge the credit or
19 taxing powers of the Commonwealth. Any obligation or debt under
20 this act shall not be deemed an obligation or debt of the
21 Commonwealth, nor shall the Commonwealth be liable to pay
22 principal and interest on obligations or to offset any loss of
23 principal and interest earnings on investments made by the
24 department or recommended by the board pursuant to this act.
25 PAVAP contracts issued by the department with an account owner
26 shall contain a plain language statement explaining the
27 limitation contained in this subsection.
28 Section 8. Investment policies and guidelines.
29 (a) General rule.--The policies governing the investment of
30 the fund shall be directed to providing for an appropriate
20070H1669B2203 - 7 -
1 balance of risk, liquidity and return commensurate with the
2 management of a prudent investor. The department, its investment
3 managers, program managers and trustees shall have the authority
4 to invest and reinvest the fund in all lawful investments.
5 (b) Investment manager and trustee.--The department may
6 contract with one or more persons or other legal entities to
7 serve as investment managers, program managers and trustees to
8 the department on behalf of the program. If the department
9 contracts with investment managers, program managers or trustees
10 in order to fulfill the objectives of the program, the
11 investment managers, program managers and trustees shall work
12 with the department to create an investment program or programs,
13 to develop investment portfolios and to supervise investments
14 and the investment programs selected. The department, through
15 contract, may impose liability on investment managers, program
16 managers and trustees for losses incurred by the fund or the
17 account owners as a result of the investment managers', program
18 managers' and trustees' negligent, fraudulent or imprudent
19 selection or supervision of investments.
20 Section 9. Investment program.
21 The department shall establish an investment plan that
22 defines the program structure and sets forth investment policies
23 and guidelines to be utilized in administering the program and
24 may, in its discretion, obtain the services of investment
25 managers, program managers and trustees as described in section
26 8(b) to assist in establishing and administering the plan. The
27 department, pursuant to a PAVAP contract, shall specify the
28 minimum and maximum amounts of contributions, the terms and
29 conditions for making contributions, withdrawing contributions
30 or terminating the PAVAP contract and all other rights and
20070H1669B2203 - 8 -
1 obligations of the account owner and the department.
2 Section 10. Levy, execution and security for loans.
3 Levy, execution and security for loans. A PAVAP account or
4 any legal interest therein shall not be subject to attachment,
5 levy or execution by any creditor of an account owner or
6 beneficiary and shall not be used as security for a loan.
7 Section 11. Contributions.
8 (a) Excess contributions.--The department shall institute
9 adequate safeguards to prevent contributions to an account or
10 multiple accounts that are in excess of maximum contributions
11 permitted under the Internal Revenue Code of 1986 (Public Law
12 99-514, 26 U.S.C. § 1 et seq.).
13 (b) Cash contributions.--A contribution made pursuant to a
14 PAVAP contract may only be made in cash or, at the department's
15 discretion by check, money order, credit card or other similar
16 method.
17 Section 12. Eligible account owners.
18 Notwithstanding any other eligibility criteria established by
19 the board, in order to be eligible as an account owner, a person
20 must be one of the following:
21 (1) A resident of this Commonwealth at the time the
22 PAVAP contract is entered into.
23 (2) A nonresident employed at least 20 hours per week in
24 this Commonwealth.
25 (3) A nonresident employed by any legal entity with its
26 principal place of business located within this Commonwealth.
27 Section 13. Safeguards and protections.
28 (a) Disclosure.--PAVAP contracts shall disclose the
29 following information in writing to each account owner or
30 prospective owner of an account:
20070H1669B2203 - 9 -
1 (1) The terms and conditions for making contributions to
2 a PAVAP account.
3 (2) The terms and conditions under which money may be
4 withdrawn from an account, the reasonable charges that may
5 apply and the penalty for a nonqualified withdrawal.
6 (3) The probable tax consequences associated with
7 contributions to and withdrawals from an account.
8 (4) All other rights and obligations pertaining to
9 participation in the program.
10 (b) Construction.--Nothing in this act can be construed to
11 establish State residency for an individual solely because that
12 individual is an account owner or beneficiary.
13 Section 14. Exemption from security laws.
14 PAVAP contracts are exempt from any statute regulating
15 securities, including the act of December 5, 1972 (P.L.1280,
16 No.284), known as the Pennsylvania Securities Act of 1972.
17 Section 15. State tax exemption.
18 (a) Property of funds.--The property of the fund and its
19 income and operation shall be exempt from all taxation by the
20 Commonwealth and its political subdivisions.
21 (b) Contributions.--Contributions made pursuant to a PAVAP
22 contract and any increase in the value of those contributions
23 shall be exempt from all taxation by the Commonwealth and its
24 political subdivisions.
25 Section 16. Federal taxation.
26 The department may take appropriate action in order to obtain
27 a determination from the Internal Revenue Service or the Federal
28 courts as to whether contributions made pursuant to a PAVAP
29 contract and the increase in value of such contributions shall
30 be a transaction that will subject account owners or the income
20070H1669B2203 - 10 -
1 of the fund to Federal taxation and may respond to such
2 determination in any manner permitted under this act.
3 Section 17. Effective date.
4 This act shall take effect in 60 days.
C9L71BIL/20070H1669B2203 - 11 -