PRINTER'S NO.  872

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

783

Session of

2009

  

  

INTRODUCED BY CREIGHTON, CLYMER, GODSHALL, HORNAMAN, KORTZ, MENSCH, MURT, MUSTIO, ROAE, ROCK, STEVENSON, SWANGER AND VULAKOVICH, MARCH 6, 2009

  

  

REFERRED TO COMMITTEE ON FINANCE, MARCH 6, 2009  

  

  

  

AN ACT

  

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Amending Title 71 (State Government) of the Pennsylvania

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Consolidated Statutes, further providing for definitions and

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for mandatory and optional membership; and providing for the

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State Legislators' Retirement Program.

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The General Assembly of the Commonwealth of Pennsylvania

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hereby enacts as follows:

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Section 1.  Section 5102 of Title 71 of the Pennsylvania

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Consolidated Statutes is amended by adding a definition to read:

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§ 5102.  Definitions.

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The following words and phrases as used in this part, unless

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a different meaning is plainly required by the context, shall

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have the following meanings:

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* * *

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"State Legislators' Retirement Program."  The alternative

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defined contribution retirement program established under Ch. 59

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Subch. D (relating to State Legislators' Retirement Program).

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* * *

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Section 2.  Section 5301 of Title 71 is amended to read:

 


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§ 5301.  Mandatory and optional membership.

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(a)  Mandatory membership.--Membership in the system shall be

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mandatory as of the effective date of employment for all State

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employees except the following:

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(1)  Governor.

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(2)  Lieutenant Governor.

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(3)  [Members] Except as provided under paragraph (17),

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members of the General Assembly.

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(4)  Heads or deputy heads of administrative departments.

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(5)  Members of any independent administrative board or

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commission.

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(6)  Members of any departmental board or commission.

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(7)  Members of any advisory board or commission.

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(8)  Secretary to the Governor.

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(9)  Budget Secretary.

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(10)  Legislative employees.

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(11)  School employees who have elected membership in the

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Public School Employees' Retirement System.

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(12)  School employees who have elected membership in an

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independent retirement program approved by the employer,

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provided that in no case, except as hereinafter provided,

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shall the employer contribute on account of such elected

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membership at a rate greater than the employer normal

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contribution rate as determined in section 5508(b) (relating

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to actuarial cost method). For the fiscal year 1986-1987 an

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employer may contribute on account of such elected membership

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at a rate which is the greater of 7% or the employer normal

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contribution rate as determined in section 5508(b) and for

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the fiscal year 1992-1993 and all years after that at a rate

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of 9.29%.

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(13)  Persons who have elected to retain membership in

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the retirement system of the political subdivision by which

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they were employed prior to becoming eligible for membership

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in the State Employees' Retirement System.

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(14)  Persons who are not members of the system and are

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employed on a per diem or hourly basis for less than 100 days

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or 750 hours in a 12-month period.

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(15)  Employees of the Philadelphia Regional Port

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Authority who have elected to retain membership in the

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pension plan or retirement system in which they were enrolled

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as employees of the predecessor Philadelphia Port Corporation

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prior to the creation of the Philadelphia Regional Port

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Authority.

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(16)  Employees of the Juvenile Court Judges' Commission

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who, before the effective date of this paragraph, were

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transferred from the State System of Higher Education to the

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Juvenile Court Judges' Commission as a result of an

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interagency transfer of staff approved by the Office of

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Administration and who, while employees of the State System

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of Higher Education, had elected membership in an independent

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retirement program approved by the employer.

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(17)  Any person who becomes a member of the General

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Assembly on or after December 1, 2010, or a member of the

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General Assembly who elects to participate in the State

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Legislators' Retirement Program under Ch. 59 Subch. D

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(relating to State Legislators' Retirement Program).

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(b)  Optional membership.--The State employees listed in

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subsection (a)(1) through (11) shall have the right to elect

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membership in the system; once such election is exercised,

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membership shall continue until the termination of State

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service.

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(c)  Prohibited membership.--The State employees listed in

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subsection (a)(12), (13), (14) [and], (15) and (17) shall not

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have the right to elect membership in the system.

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(d)  Return to service.--An annuitant who returns to service

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as a State employee shall resume active membership in the system

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as of the effective date of employment, except as otherwise

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provided in section 5706(a) (relating to termination of

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annuities), regardless of the optional membership category of

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the position.

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(e)  Election prohibited.--Notwithstanding subsections (a)

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(13) and (c), county employees who are transferred to State

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employment and become State employees pursuant to 42 Pa.C.S. §

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1905 (relating to county-level court administrators) shall not

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have the election to remain a contributor in the retirement

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system or pension plan of the county by which they were employed

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prior to becoming eligible for membership in the State

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Employees' Retirement System. Such employees shall be mandatory

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members of the system provided they are otherwise eligible and

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unless they are eligible for optional membership pursuant to

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subsections (a)(1) through (11) and (b) or prohibited membership

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pursuant to subsections (a)(14) and (c).

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(f)  Additional optional membership.--The State employees

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listed in subsection (a)(16) shall be mandatory members of the

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system as of the effective date of employment with the Juvenile

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Court Judges' Commission unless they elect membership in an

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independent retirement program approved by the Juvenile Court

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Judges' Commission. Employees who elect membership in an

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independent retirement program approved by the Juvenile Court

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Judges' Commission shall be prohibited from being active members

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in the system while employed by the Juvenile Court Judges'

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Commission. If an employee described in this subsection becomes

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a State employee with an employer other than the Juvenile Court

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Judges' Commission, then membership for that employee shall be

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determined as otherwise provided for in this part. The election

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of membership in the independent retirement program approved by

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the Juvenile Court Judges' Commission must be made by the

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transferred employee filing written notice with the employer

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while a State employee no later than 90 days after the effective

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date of this subsection. Upon receipt of such an election, the

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Juvenile Court Judges' Commission shall certify the election to

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the board and the independent retirement program.

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Section 3.  Chapter 59 of Title 71 is amended by adding a

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subchapter to read:

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SUBCHAPTER D

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STATE LEGISLATORS' RETIREMENT PROGRAM

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Sec.

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5942.  Definitions.

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5942.1.  State Legislators' Retirement Program.

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5942.2.  Powers and duties of board.

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5942.3.  Taxation.

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5942.4.  Investments and expenses.

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5942.5.  Trust.

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5942.6.  Investments.

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5942.7.  Participant contributions.

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5942.8.  Employer contributions.

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5942.9.  Vesting.

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5942.10.  Optional election.

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§ 5942.  Definitions.

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The following words and phrases when used in this subchapter

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shall have the meanings given to them in this section unless the

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context clearly indicates otherwise:

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"Participant."  A qualified employee.

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"Program."  The State Legislators' Retirement Program.

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"Qualified employee."  Any individual who becomes a member of

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the General Assembly on or after December 1, 2010, or a person

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who is a member of the General Assembly prior to December 1,

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2008, and elects to participate in the State Legislators'

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Retirement Program.

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"Trust fund."  The trust created under section 5942.5

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(relating to trust) to hold the assets of the program in trust

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for the exclusive benefit of the program's participants and

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beneficiaries and for the payment of reasonable expenses of the

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program in accordance with section 5942.4 (relating to

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investments and expenses) and IRC § 401.

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§ 5942.1  State Legislators' Retirement Program.

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The board shall establish and administer a defined

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contribution retirement program to be known as the State

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Legislators' Retirement Program under which retirement benefits

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will be provided for qualified employees who participate in the

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program. The benefits to be provided for or on behalf of

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participants in the program shall be provided through

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participant-directed investments, in accordance with IRC §

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401(a). Participants and employers shall contribute to the

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program in accordance with sections 5942.7 (relating to

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participant contributions) and 5942.8 (relating to employer

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contributions).

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§ 5942.2.  Powers and duties of board.

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In order to establish and administer the program, the powers

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and duties of the board shall include all of the following:

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(1)  Entering into written agreements with financial or

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other organizations to administer the program for

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participants and to invest funds held pursuant to the

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program. The program and any written agreement shall comply

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with the IRC, including the plan qualification requirements

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imposed on governmental plans under IRC § 401(a).

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(2)  Establishing procedures whereby qualified employees

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may elect to participate in the program and participants may

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change their investment choices on a periodic basis, as

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determined by the board, which shall not be less frequently

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than quarterly.

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(3)  Arranging for a deduction, from the compensation of

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participants, of employee contributions to the program.

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(4)  Establishing standards or criteria for selection by

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the board of the financial institutions, insurance companies

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or other organizations that may be qualified as managers, on

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behalf of the board, of funds accumulated under the program

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on behalf of any participant.

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(5)  Establishing standards and criteria for the

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providing of options to qualified employees and participants

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concerning the method of investing amounts accumulated under

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the program if the options include a diversified mix of low-

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cost investment products that span the risk-return spectrum.

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(6)  Establishing standards and criteria for informing

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qualified employees and participants of specific options

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offered by qualified managers.

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(7)  Designing a comprehensive, balanced and impartial

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educational program to assist qualified employees and

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participants in their choice of investment options under the

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program, which shall include retirement planning education

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and financial planning guidance on matters such as investment

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diversification, investment risks, investment costs and asset

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allocation.

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(8)  Establishing standards and criteria for the

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disclosure to qualified employees and participants of the

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anticipated and actual income attributable to the amounts,

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property and rights and all fees, costs and charges to be

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made against the amounts accumulated to cover the costs of

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administering and managing the funds.

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(9)  Establishing processes for election to participate

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in the program. The election period shall begin on the date

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that an individual becomes a qualified employee and shall end

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90 days from that date.

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(10)  Performing an annual review of any qualified fund

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manager for the purpose of assuring it continues to meet all

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standards and criteria established.

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(11)  Establishing procedures whereby any participant may

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do one of the following:

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(i)  Withdraw accumulated amounts in cases of

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financial hardship or separation of a participant from

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State service or as otherwise permitted under the IRC.

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(ii)  Dispose of a participant's account pursuant to

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a domestic relations order unless in conflict with the

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IRC.

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(12)  Administering the program in compliance with the

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IRC.

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(13)  Promulgating regulations necessary to administer

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this subchapter.

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§ 5942.3.  Taxation.

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All amounts deferred under the program shall constitute

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taxable income for purposes of the act of March 4, 1971 (P.L.6,

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No.2), known as the Tax Reform Code of 1971, and shall

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constitute taxable income for State and local earned income

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taxes.

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§ 5942.4.  Investments and expenses.

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The board shall not be responsible for any investment loss

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incurred in the program or for failure of any investment to earn

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any specific or expected return or to earn as much as any other

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investment opportunity, whether or not the other investment

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opportunity was offered to participants in the program. The

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expenses arising from allowing qualified employees to elect to

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participate in the program and participants to choose a fund

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manager, deduct from compensation amounts contributed under the

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program and transfer to the fund manager amounts so deducted

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shall be borne by the board. All other expenses arising from the

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administration of the program shall be assessed against the

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accounts created on behalf of participants either by the fund

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managers or by the board.

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§ 5942.5.  Trust.

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(a)  Establishment.--All assets and income that have been or

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shall be withheld by the employer in accordance with this

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subchapter shall be held in trust in any funding vehicle

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permitted by applicable provisions of the IRC for the exclusive

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benefit of the program's participants and their beneficiaries

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until the time when the funds are distributed to the participant

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or the participant's beneficiary in accordance with the terms of

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the agreement between the participant and the board. All such

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assets and income withheld by the employer shall be held in

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trust as set forth in this subsection in a special fund created

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within the State Treasury of which the State Treasurer shall be

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custodian.

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(b)  Trustees.--The members of the board shall be the

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trustees of the trust established under subsection (a).

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(c)  Attachment.--Notwithstanding any other provision of law,

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any benefit or interest available under the program, any right

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to receive or direct payments under the program or any

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distribution of payment made under the program shall not, except

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as expressly specified by the program, be subject to assignment,

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alienation, garnishment, attachment, transfer, anticipation,

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sale, mortgage, pledge, hypothecation, commutation, execution or

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levy, whether by voluntary or involuntary act of any interested

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person.

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§ 5942.6.  Investments.

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Investment of contributions by any corporation, institution,

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insurance company or custodial bank that the board has approved

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shall not be unreasonably delayed, and in no case shall the

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investment of contributions be delayed more than 30 days from

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the date of payroll deduction to the date that funds are

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invested. Any interest earned on the funds pending investment

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shall be allocated to the Commonwealth and credited to the

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accounts of participants who are then participating in the

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program unless the interest is used to defray administrative

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costs and fees that would otherwise be required to be borne by

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participants who are then participating in the program.

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§ 5942.7.  Participant contributions.

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Regular participant contributions shall be made to the

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program on behalf of each active member for current service in

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an amount equal to 6% of the participant's compensation. The

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employer shall cause required participant contributions for

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current service to be made and deducted from each payroll.

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§ 5942.8.  Employer contributions.

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The Commonwealth or any other employer of a participant shall

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make payments to the fund on behalf of the participant in an

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amount equal to 6% of the participant's total compensation.

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§ 5942.9.  Vesting.

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A participant shall be vested after completing one year of

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State service during which he or she is a participant in the

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program with respect to employer contributions paid on behalf of

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the participant to the program plus interest and earnings on the

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employer contributions but minus investment fees and

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administrative charges.

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§ 5942.10.  Optional election.

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The board shall provide an option to a person who is a member

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of the General Assembly on November 30, 2010, to elect to

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participate in the program. The board shall determine an

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equitable and adequate manner to value the account of the active

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member for purposes of converting the account into the program.

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Section 4.  This act shall take effect immediately.

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