THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY WILLIAMS AND D. EVANS, JULY 3, 2009

REFERRED TO COMMITTEE ON APPROPRIATIONS, JULY 3, 2009  

AN ACT

Amending the act of December 18, 1984 (P.L.1005, No.205),

entitled "An act mandating actuarial funding standards for

all municipal pension systems; establishing a recovery

program for municipal pension systems determined to be

financially distressed; providing for the distribution of the

tax on the premiums of foreign fire insurance companies; and

making repeals," further providing for contents of actuarial

valuation report, for minimum funding standard and for

alternative funding mechanism. 

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 202(b)(4)(v) of the act of December 18,

1984 (P.L.1005, No.205), known as the Municipal Pension Plan

Funding Standard and Recovery Act, is amended by adding a clause

to read:

Section 202.  Contents of actuarial valuation report.

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(b)  Contents of actuarial exhibits; defined benefit plans

self-insured in whole or in part.--For any pension plan which is

a defined benefit plan and which is self-insured in whole or in

part, all applicable actuarial exhibits shall be prepared in

accordance with the entry age normal actuarial cost method with

entry age established as the actual entry age for all plan

members unless the municipality applies for and is granted

authorization by the commission to use an alternative actuarial

cost method. Authorization shall be granted if the municipality

demonstrates on an individual pension plan basis that there are

compelling reasons of an actuarial nature for the use of an

alternative actuarial cost method. The commission shall issue

rules and regulations specifying the criteria which the

commission will use to determine the question of the existence

of compelling reasons for the use of an alternative actuarial

cost method, the documentation which a municipality seeking the

authorization will be required to supply and the acceptable

alternative actuarial cost methods which the commission may

authorize. The actuarial cost method shall be used to value all

aspects of the benefit plan or plans of the pension plan unless

the municipality applies for and is granted authorization by the

commission to use approximation techniques other than the

actuarial cost method for aspects of the benefit plan or plans

of the pension plan other than the retirement benefit.

Authorization shall be granted if the municipality demonstrates

on an individual pension plan basis that there are compelling

reasons of an actuarial nature for the use of these

approximation techniques. The commission shall issue rules and

regulations specifying the criteria which the commission will

use to determine the question of the existence of compelling

reasons for the use of approximation techniques, the

documentation which a municipality seeking the authorization

will be required to supply and the acceptable approximation

technique which the commission may authorize. The actuarial

exhibits shall use actuarial assumptions which are, in the

judgment of the actuary and the governing body of the plan, the

best available estimate of future occurrences in the case of

each assumption. With respect to economic actuarial assumptions,

the assumptions shall either be within the range specified in

rules and regulations issued by the commission or documentation

explaining and justifying the choice of assumptions outside the

range shall accompany the report. The actuarial exhibits shall

measure all aspects of the benefit plan or plans of the pension

plan in accordance with modifications in the benefit plan or

plans, if any, and salaries which as of the valuation date are

known or can reasonably be expected to be in force during the

ensuing plan year. The actuarial valuation report shall contain

the following actuarial exhibits:

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(4)  An exhibit of any additional funding costs

associated with the amortization of any unfunded actuarial

accrued liability of the pension plan, indicating for each

increment of unfunded actuarial accrued liability specified

in paragraph (3), the level annual dollar contribution

required to pay an amount equal to the actuarial assumption

as to investment earnings applied to the principal amount of

the remaining balance of the increment of unfunded actuarial

accrued liability and to retire by the applicable

amortization target date specified in this paragraph the

principal amount of the remaining balance of the increment of

unfunded actuarial accrued liability. The amortization target

date applicable for each type of increment of unfunded

actuarial accrued liability shall be as follows:

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(v)  * * *

(C)  Notwithstanding any other provision of this

act or other law, a city of the first class, in its

sole discretion, may amortize its entire unfunded

actuarial accrued liability, as measured on a

valuation date selected by the city of the first

class and occurring in the plan year commencing after

January 1, 2009, and ending before December 31, 2010,

as a level dollar amount with the amortization target

date being the end of the plan year occurring 30

years after the plan year commencing after January 1,

2009, and ending before December 31, 2010, with

payments to commence in the next plan year. In order

for a city of the first class to extend the

applicable amortization period pursuant to this

clause, the city of the first class must file a

revised actuarial valuation report reflecting the

amortization period extension provided for under this

clause with the executive director of the commission

no later than March 31, 2010. Any such revised

actuarial valuation report may not be filed in lieu

of the actuarial valuation report prepared in

compliance with clause (A) and required to be filed

on or before March 31, 2009, and may be used only for

the purposes of recalculating the minimum municipal

obligation of the city of the first class for plan

years commencing after January 1, 2009, and

calculating the minimum municipal obligation of the

city of the first class for the plan year commencing

after January 1, 2009, to reflect the amortization

period extension. Any such revised actuarial

valuation report shall not affect distributions under

the General Municipal Pension System State Aid

Program under Chapter 4.

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Section 2.  Section 302 of the act is amended by adding a

subsection to read:

Section 302.  Minimum funding standard; defined benefit plans

self-insured in whole or in part.

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(f)  Cities of the first class.--Notwithstanding any other

provision of this act or other law, a city of the first class is

authorized to defer a portion of the minimum municipal

obligation provided for in this section:

(1)  for the plan year ending June 30, 2010, in an amount

not to exceed $155,000,000; and

(2)  for the plan year ending June 30, 2011, in an amount

not to exceed $80,000,000.

The amounts deferred shall bear interest at the actuarial

assumed rate of 8.25%, which shall be calculated from the

beginning of the plan year in which the deferral was made.

Accrued interest on any amounts deferred shall be paid yearly on

or before June 30, 2010, June 30, 2011, and June 30, 2012. On or

before June 30, 2013, the city of the first class shall repay at

least $90,000,000 of any amounts deferred, plus interest accrued

on all amounts deferred; or, if the total amount deferred is

less than $90,000,000, the total amount deferred, plus interest

accrued on that amount, shall be repaid. The balance of all

amounts deferred, including interest accrued and unpaid on

amounts deferred, shall be repaid by June 30, 2014. Any of the

amounts deferred, including interest accrued on deferred

amounts, which remain unpaid at the end of the plan year ending

June 30, 2014, shall be added to the minimum municipal

obligation of the city of the first class for the following plan

year, with interest calculated and due until the date that the

amounts due are paid. The calculation of the unfunded actuarial

accrued liability made by and certified by an approved actuary

under section 202 shall not include any amounts deferred

pursuant to this subsection, so long as the city of the first

class is paying interest accrued on such deferred amounts and

repaying such deferred amounts in accordance with the terms of

this subsection. The repayment of any amounts deferred,

including interest accrued on deferred amounts, as and when

required in this subsection, shall constitute a commitment and

obligation, binding and absolute, on the city of the first

class; and the city of the first class shall include all amounts

due to be paid under this subsection in the budget of the city,

and all amounts due to be paid shall be appropriated and paid in

order to make timely repayment of any amounts deferred,

including interest accrued on deferred amounts, with such

payment being unconditional and without setoff. Any person who

is beneficially interested in the city of the first class paying

its minimum municipal obligation under this subsection shall

have standing to institute a legal proceeding for mandamus to

enforce the obligation of the city of the first class to make

payments under this subsection in the same manner as payment

requirements of an alternative funding mechanism may be enforced

under section 1001. A person who is beneficially interested

under this subsection is any person who is a beneficially

interested person under section 1001(f).

Section 3.  Section 1001(b) of the act, added June 18, 1998

(P.L.626, No.82), is amended and the section is amended by

adding a subsection to read:

Section 1001.  Alternative funding mechanism.

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(b)  Period of payment requirements prior to July 1, 2009.--

The period of the city's payment requirements under an

alternative funding mechanism implemented prior to December 31,

2002, shall be the greater of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after

December 31, 2002, but before July 1, 2009, the period described

in paragraph (1) shall be the period of the city's payment

requirements.

(b.1)  Period of payment requirements beginning July 1,

2009.--The period of the city's payment requirements under an

alternative funding mechanism implemented or refinanced in whole

or in part on or after July 1, 2009, and prior to the beginning

of the plan year that commences in 2019, shall be the greater

of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after July 1,

2019, the period described in paragraph (1) shall be the period

of the city's payment requirements.

* * *

Section 4.  This act shall take effect immediately.