THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BOYD, OCTOBER 18, 2010

REFERRED TO COMMITTEE ON FINANCE, OCTOBER 18, 2010  

AN ACT

Amending Titles 24 (Education) and 71 (State Government) of the

Pennsylvania Consolidated Statutes, in Title 24, further

providing for definitions, for construction of part, for

mandatory and optional membership, for credited school

service, for eligibility points for retention and

reinstatement of service credits, for creditable nonschool

service, for classes of service, for eligibility for

annuities, for eligibility for vesting, for eligibility for

death benefits, for regular member contributions for current

service, for pickup contributions, for member contributions

for creditable school service, for payments by employers, for

actuarial cost method, for return of accumulated deductions,

for maximum single life annuity, for disability annuities,

for member's options, for termination of annuities, for death

benefits, for administrative duties of board; providing for

long-term disability group insurance program; further

providing for duties of board to report to State Employees'

Retirement Board, for duties of board regarding applications

and elections of members, for installment payments of

accumulated deductions, for duties of employers, for rights

and duties of school employees and members, for members'

savings account, for State accumulation account and for

annuity reserve account; and in Title 71, further providing

for definitions, for mandatory and optional membership, for

retention and reinstatement of service credits, for classes

of service, for eligibility for annuities, for eligibility

for vesting, for eligibility for death benefits, for regular

member contributions for current service, for pickup

contributions, for contributions by the Commonwealth and

other employers, for actuarial cost method, for return of

total accumulated deductions, for maximum single life

annuity, for disability annuities, for termination of

annuities, for death benefits, for administrative duties of

the board, for duties of the board to report to the Public

School Employees' Retirement Board, for duties of the board

regarding applications and elections of members, for

installment payments of accumulated deductions, for duties of

heads of departments, for rights and duties of State

employees and members, for members' savings account, for

State accumulation account and for annuity reserve account.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definitions of "accumulated deductions,"

"basic contribution rate," "beneficiary," "eligible annuitants,"

"employer," "full coverage member," "irrevocable beneficiary,"

"public school," "standard single life annuity," "statutory

interest," "superannuation or normal retirement age" and

"vestee" in section 8102 of Title 24 of the Pennsylvania

Consolidated Statutes are amended and the section is amended by

adding definitions to read:

§ 8102.  Definitions.

The following words and phrases when used in this part shall

have, unless the context clearly indicates otherwise, the

meanings given to them in this section:

"Accumulated deductions."  The total of pickup contributions

and the contributions paid into the fund by the member on

account of current school service, previous school service, or

creditable nonschool service, including after-tax contributions, 

and the statutory interest credited on all such contributions.

* * *

"After-tax contributions."  The optional contributions paid

into the fund by the member from the member's salary after all

applicable taxes have been deducted.

* * *

"Basic contribution rate."  For Class T-A, T-B and T-C

service, the rate of 6 1/4%. For Class T-D service, the rate of

7 1/2%. For all active members on the effective date of this

provision who are currently paying 5 1/4% and elect Class T-D

service, the rate of 6 1/2%. For Class T-E service, the rate of

6%.

"Beneficiary."  The person or persons last designated in

writing to the board by a member to receive his accumulated

deductions or a lump sum benefit upon the death of such member 

or for Class T-E members, the balance of the member's savings

account maintained in accordance with section 8523 (relating to

members' savings account).

* * *

"Eligible annuitants."  All current and prospective

annuitants with 24 1/2 or more eligibility points and all

current and prospective disability annuitants. Beginning January

1, 1995, "eligible annuitants" shall include members with 15 or

more eligibility points who terminated or who terminate school

service on or after attaining superannuation retirement age and

who are annuitants with an effective date of retirement after

superannuation age. An annuitant with Class T-E credited service

shall not qualify as an eligible annuitant.

* * *

"Employer."  Any governmental entity directly responsible for

the employment and payment of the school employee and charged

with the responsibility of providing public education within

this Commonwealth, including but not limited to: State-owned

colleges and universities, the Pennsylvania State University,

community colleges, area vocational-technical schools,

intermediate units, the State Board of Education, Scotland

School for Veterans' Children, Thaddeus Stevens [State School]

College of Technology, and the [Pennsylvania State Oral] Western 

School for the Deaf.

"Excess interest."  The investment earnings attributable to

Class T-E members in excess of that required for allocation to

statutory interest to Class T-E members and expenses

attributable to Class T-E members.

* * *

"Full coverage member."  Any member, other than a Class T-E

member, for whom regular member pickup contributions are being

picked up or who has paid or has agreed to pay to the fund the

actuarial equivalent of regular member contributions due on

account of service prior to January 1, 1983.

* * *

"Irrevocable beneficiary."  The person or persons permanently

designated by a member in writing to the board pursuant to an

approved domestic relations order to receive all or a portion of

the accumulated deductions or lump sum benefit payable upon the

death of such member or for Class T-E members, the balance of

the member's savings account maintained in accordance with

section 8523 (relating to members' savings account).

* * *

"Public school."  Any or all classes or schools within this

Commonwealth conducted under the order and superintendence of

the Department of Education including, but not limited to: all

educational classes of any employer charged with the

responsibility of public education within this Commonwealth as

well as those classes financed wholly or in part by the Federal

Government, State-owned colleges and universities, [the] The 

Pennsylvania State University, community colleges, area

vocational-technical schools, intermediate units, the State

Board of Education, Scotland School for Veterans' Children,

Thaddeus Stevens [State School] College of Technology, and the

[Pennsylvania State Oral] Western School for the Deaf.

* * *

"Standard single life annuity."  For Class T-A, T-B and T-C

credited service of a member, an annuity equal to 2% of the

final average salary, multiplied by the total number of years

and fractional part of a year of credited service of a member.

For Class T-D credited service of a member, an annuity equal to

2.5% of the final average salary, multiplied by the total number

of years and fractional part of a year of credited service. For

Class T-E credited service of a member, an annuity with a

present value equal to the balance of the member's saving

account maintained in accordance with section 8523 (relating to

members' savings account).

* * *

"Statutory interest."  [Interest] For Class T-A, T-B, T-C and

T-D credited service, interest at 4% per annum, compounded

annually. For Class T-E credited service, interest at 6% per

annum, compounded annually.

* * *

"Superannuation or normal retirement age."

* * *

"Vestee."  A Class T-A, T-B, T-C and T-D member with five or

more eligibility points who has terminated school service, has

left his accumulated deductions in the fund and is deferring

filing of an application for receipt of an annuity. A Class T-E

member who terminates school service, has left accumulated

deductions in the fund and is deferring the filing of an

application for receipt of an annuity.

Section 2.  Sections 8103 and 8301 of Title 24 are amended by

adding subsections to read:

§ 8103.  Construction of part.

* * *

(c)  Pension rights.--Notwithstanding any other provision of

law, pension rights of school employees shall be determined

solely under this part or any amendment to this part, and no

collective bargaining agreement nor any arbitration award

between the school employer and its employees or their

collective bargaining representatives shall be construed to

change any of the provisions in this part, to require the board

to administer pension or retirement benefits not set forth under

this part or to require action by any other government body

pertaining to pension or retirement benefits or rights of school

employees.

§ 8301.  Mandatory and optional membership.

* * *

(a.1)  Mandatory membership for certain employees.--

Notwithstanding any other provision of this part, membership in

the system shall be mandatory as of the effective date of

employment for any person who first becomes a school employee on

or after the effective date of this subsection regardless of the

number of hours or days worked.

* * *

(b.1)  Prohibited membership for certain employees.--Any

officer or employee of the Department of Education who is first

employed following the effective date of this subsection shall

not have the right to elect membership in the system.

* * *

(c.1)  Optional membership for certain employees.--

(1)  Notwithstanding any other provision of this part, a

school employee who first becomes an officer or employee of

any State-owned educational institution, community college,

area vocational-technical school, technical institute or The

Pennsylvania State University, on or after the effective date

of this subsection, may elect to become a member of the

system or another retirement program approved by the employer

regardless of the number of hours or days worked.

(2)  Once a school employee categorized under paragraph

(1) makes an election to become either a member of the system

or a member of another retirement program approved by the

employer, the election shall be irrevocable, regardless of

any break in service and subsequent reemployment.

(3)  The employer contribution rate on account of school

employees who have elected membership in another retirement

program approved by the employer rather than membership in

Class T-E shall be 6%.

Section 3.  Section 8302(b.1)(3) of Title 24 is amended by

adding a subparagraph to read:

§ 8302.  Credited school service.

* * *

(b.1)  Optional credit for leave of absence for activated

military service.--

* * *

(3)  Any member who has exercised option (ii) in

paragraph (1), but who, upon the expiration of his leave of

absence for activated military service, returns to his

employment and desires to receive the benefits of option (i),

shall have the right to receive such benefits if he shall

comply with the following requirements:

* * * 

(iii)  Notwithstanding any other provision of this

part, any Class T-E member who elects under this

subsection to receive the benefits under subparagraph

(i), shall not receive any excess interest that may have

been awarded during the period of leave of absence for

military service.

* * *

Section 4.  Section 8303 of Title 24 is amended by adding

subsections to read:

§ 8303.  Eligibility points for retention and reinstatement of

service credits.

* * *

(d)  Purchase prohibited.--Notwithstanding any other

provision of this part, a Class T-E member shall not be

permitted to purchase previous school service or creditable

nonschool service except for an approved leave of absence,

including military service in accordance with section 8304(b)(1)

and (2) (relating to creditable nonschool service).

(e)  Accumulated deductions.--A Class T-E member who elects

to receive his accumulated deductions in lieu of any benefit to

which he may be entitled in accordance with sections 8310

(relating to eligibility of refunds) and 8341 (relating to

return of accumulated deductions) shall be prohibited from

reinstating the withdrawal upon a subsequent return to service.

(f)  Previous election.--A current Class T-E member who

previously elected to become a member of another retirement

program approved by the employer in accordance with section

8301(c.1) (relating to mandatory and optional membership) shall

not be permitted to purchase the optional membership time

previously declined.

Section 5.  Section 8304(a) is amended to read:

§ 8304.  Creditable nonschool service.

(a)  Eligibility.--An active member or a multiple service

member who is an active member of the State Employees'

Retirement System shall be eligible to receive Class T-C service

credit for creditable nonschool service and Class T-D service

for intervening military service, provided the member becomes a

Class T-D member pursuant to section 8305.1 (relating to

election to become a Class T-D member) or 8305 (relating to

classes of service), Class T-E service for military service,

provided that the member is a Class T-E member under section

8305, as set forth in subsection (b) provided that he is not

entitled to receive, eligible to receive now or in the future,

or is receiving retirement benefits for such service under a

retirement system administered and wholly or partially paid for

by any other governmental agency or by any private employer, or

a retirement program approved by the employer in accordance with

section 8301(a)(1) (relating to mandatory and optional

membership), and further provided that such service is certified

by the previous employer and the manner of payment of the amount

due is agreed upon by the member, the employer, and the board.

* * *

Section 6.  Section 8305 is amended by adding a subsection to

read:

§ 8305.  Classes of service.

* * *

(d)  Class T-E membership.--Notwithstanding any other

provision of this part, a person who first becomes a school

employee and an active member on or after the effective date of

this subsection shall be classified as a Class T-E member upon

payment of regular member contributions.

Section 7.  Sections 8307(b) and (c), 8308, 8309, 8321,

8322.1(a) and 8323(a) and (c.1) are amended to read:

§ 8307.  Eligibility for annuities.

* * *

(b)  Withdrawal annuity.--A Class T-C or Class T-D vestee

with five or more eligibility points or an active or inactive

Class T-C or Class T-D member who terminates school service

having five or more eligibility points shall, upon filing a

proper application, be entitled to receive an early annuity.

(c)  Disability annuity.--An active or inactive Class T-C or

Class T-D member who has credit for at least five years of

service shall, upon filing of a proper application, be entitled

to a disability annuity if he becomes mentally or physically

incapable of continuing to perform the duties for which he is

employed and qualifies for an annuity in accordance with the

provisions of section 8505(c)(1) (relating to duties of board

regarding applications and elections of members).

§ 8308.  Eligibility for vesting.

(a)  Eligibility points.--Any Class T-C or Class T-D member

who terminates school service with five or more eligibility

points shall be entitled to vest his retirement benefits until

attainment of superannuation age.

(b)  Vesting.--Any Class T-E member who terminates school

service shall be immediately vested and shall be eligible to

receive a retirement benefit upon attainment of superannuation

age.

§ 8309.  Eligibility for death benefits.

(a)  Entitlement.--In the event of the death of a member who

is eligible for an annuity in accordance with section 8307(a) or

(b) (relating to eligibility for annuities) his beneficiary

shall be entitled to a death benefit as provided in section 8347

(relating to death benefits).

(b)  Accumulated deductions.--In the event of the death of a

Class T-C or Class T-D member not eligible for an annuity his

beneficiary shall receive the accumulated deductions standing to

the member's credit in the fund.

(c)  Balance.--In the event of the death of a Class T-E

member not eligible for an annuity in accordance with section

8307(a) (relating to eligibility for annuities), his beneficiary

shall receive the balance of the member's savings account

maintained in accordance with section 8523 (relating to members'

savings account) regardless of whether the member has attained

superannuation retirement age.

§ 8321.  Regular member contributions for current service.

(a)  Current service.--Regular member contributions shall be

made to the fund on behalf of each active member for current

service except for any period of current service in which the

making of such contributions has ceased solely by reason of any

provision of this part relating to the limitations under IRC §

401(a)(17) or 415(b).

(b)  After-tax contributions.--

(1)  After-tax contributions may be made by Class T-E

active members for current service up to but no more than the

applicable limits under the IRC.

(2)  After-tax contributions shall be made by payroll

deductions and transmitted to the system by the school

employer.

(3)  After-tax contributions shall be treated as taxed at

the time they are made to the system, shall be tracked

separately and shall not be treated as taxable when paid out

to the member.

(4)  After-tax contributions may be changed or stopped by

a Class T-E member upon notice to the school employer.

§ 8322.1.  Pickup contributions.

(a)  Treatment for purposes of IRC § 414(h).--All

contributions required to be made under sections 8321(a) 

(relating to regular member contributions for current service)

and 8322 (relating to joint coverage member contributions), with

respect to current school service rendered by an active member

on or after January 1, 1983, shall be picked up by the employer

and shall be treated as the employer's contribution for purposes

of IRC § 414(h).

* * *

§ 8323.  Member contributions for creditable school service.

(a)  Previous school service, sabbatical leave and full

coverage.--The contributions to be paid by an active member or

an eligible State employee for credit for reinstatement of all

previously credited school service, school service not

previously credited, sabbatical leave as if he had been in full-

time daily attendance, or full-coverage membership shall be

sufficient to provide an amount equal to the accumulated

deductions which would have been standing to the credit of the

member for such service had regular member contributions been

made with full coverage at the rate of contribution necessary to

be credited as Class T-C service [or], Class T-D service if the

member is a Class T-D member or Class T-E service if the member

is a Class T-E member and had such contributions been credited

with statutory interest during the period the contributions

would have been made and during all periods of subsequent school

and State service up to the date of purchase.

* * *

(c.1)  Activated military service leave.--The contributions

to be paid by an active member for credit for all activated

military service leave as if he had been in regular attendance

in the duties for which he is employed shall be sufficient to

provide an amount equal to the accumulated deductions which

would have been standing to the credit of the member for such

service had regular member contributions been made with full

coverage at the rate of contribution necessary to be credited as

Class T-C service [or], Class T-D service if the member is a

Class T-D member or Class T-E service if the member is a Class

T-E member and had such contributions been credited with

statutory interest during the period the contributions would

have been made and during all periods of subsequent State and

school service up to the date of purchase. In the case of

activated military service leave beginning after the date of

enactment of this subsection, contributions due from the member

shall be made as if he is in regular attendance in the duties

for which he is employed.

* * *

Section 8.  Section 8327(a) and (c) introductory paragraph of

Title 24 are amended and the section is amended by adding a

subsection to read: 

§ 8327.  Payments by employers.

(a)  General rule.--Each employer, including the Commonwealth

as employer of employees of the Department of Education, State-

owned colleges and universities, Thaddeus Stevens [State School]

College of Technology, [Pennsylvania State Oral] Western School

for the Deaf, Scotland School for Veterans' Children, and [the]

The Pennsylvania State University, shall make payments to the

fund each quarter in an amount equal to one-half the sum of the

percentages, as determined under section 8328 (relating to

actuarial cost method), applied to the total compensation during

the pay periods in the preceding quarter of all its employees

who were members of the system during such period, including

members on activated military service leave. In the event a

member on activated military service leave does not return to

service for the necessary time or receives an undesirable, bad

conduct or dishonorable discharge or does not elect to receive

credit for activated military service under section 8302(b.1)(3)

(relating to credited school service), the contributions made by

the employer on behalf of such member shall be returned with

valuation interest upon application by the employer.

* * *

(c)  Payments by employers after June 30, 1995.--After June

30, 1995, each employer, including the Commonwealth as employer

of employees of the Department of Education, State-owned

colleges and universities, Thaddeus Stevens [State School]

College of Technology, [Pennsylvania State Oral] Western School

for the Deaf, Scotland School for Veterans' Children and The

Pennsylvania State University, shall make payments to the fund

each quarter in an amount computed in the following manner:

* * *

(d)  Payments by employers for Class T-E members.--Each

employer, including the Commonwealth as employer of employees of

State-owned colleges and universities, Thaddeus Stevens College

of Technology, Western School for the Deaf, Scotland School for

Veterans' Children and The Pennsylvania State University, shall

make payments to the fund each quarter in an amount computed in

the following manner:

(1)  For any employer, whether or not a school entity, an

amount equal to 6% of the compensation of each active Class

T-E member, including members on activated military service

leave.

(2)  If a member on activated military service leave does

not return to service for the necessary time, receives an

undesirable, bad conduct or dishonorable discharge or does

not elect to receive credit for activated military service

under section 8302(b.1)(3), the contribution made by the

employer on behalf of the member shall be returned with

valuation interest upon application by the employer.

(3)  In computing the amount of payment due each quarter

for any employer, whether or not a school entity, any amount

of compensation of a noneligible member on the basis of which

member contributions have not been made by reason of the

limitation under IRC § 401(a)(17) shall be excluded from the

total compensation referred to under this subsection. Any

amount of contribution to the fund paid by the employer on

behalf of a noneligible member on the basis of compensation

which was subject to exclusion from total compensation in

accordance with this paragraph shall, upon the board's

determination or upon application by the employer, be

returned to the employer with valuation interest.

Section 9.  Sections 8328(a) and (b) and 8341 of Title 24 are

amended to read:

§ 8328.  Actuarial cost method.

(a)  Employer contribution rate on behalf of active

members.--The amount of the total employer contributions on

behalf of all active Class T-C and Class T-D members shall be

computed by the actuary as a percentage of the total

compensation of all active members, including active Class T-E

members, during the period for which the amount is determined

and shall be so certified by the board. The total contribution

rate on behalf of all active Class T-C and Class T-D members

shall consist of the normal contribution rate as defined in

subsection (b), the accrued liability contribution rate as

defined in subsection (c) and the supplemental annuity

contribution rate as defined in subsection (d). Beginning July

1, 2004, the total contribution rate shall be modified by the

experience adjustment factors as calculated in subsection (e)

but in no case shall it be less than 4% plus the premium

assistance contribution rate.

(b)  Normal contribution rate.--The normal contribution rate

shall be determined after each actuarial valuation. Until all

accrued liability contributions have been completed, the normal

contribution rate shall be determined, on the basis of an annual

interest rate and such mortality and other tables as shall be

adopted by the board in accordance with generally accepted

actuarial principles, as a level percentage of the compensation

of the average new active Class T-D member, which percentage, if

contributed on the basis of his prospective compensation through

the entire period of active school service, would be sufficient

to fund the liability for any prospective benefit payable to

him, in excess of that portion funded by his prospective member

contributions, except for the supplemental benefits provided in

sections 8348 (relating to supplemental annuities), 8348.1

(relating to additional supplemental annuities), 8348.2

(relating to further additional supplemental annuities), 8348.3

(relating to supplemental annuities commencing 1994), 8348.4

(relating to special supplemental postretirement adjustment),

8348.5 (relating to supplemental annuities commencing 1998),

8348.6 (relating to supplemental annuities commencing 2002) and

8348.7 (relating to supplemental annuities commencing 2003).

* * *

§ 8341.  Return of accumulated deductions.

(a)  Election.--Any member upon termination of service may,

in lieu of all benefits payable under this chapter to which he

may be entitled, elect to receive his accumulated deductions.

(b)  Class T-E.--Any Class T-E member who elects under this

section to receive his accumulated deductions in lieu of all

benefits to which he may be entitled shall forfeit the

contributions made on behalf of the school employer as well as

any excess interest.

Section 10.  Sections 8342(a) introductory paragraph and

8344(a) are amended and the sections are amended by adding

subsections to read:

§ 8342.  Maximum single life annuity.

(a)  General rule.--Upon termination of service, any full

coverage Class T-C or Class T-D member who is eligible to

receive an annuity pursuant to the provisions of section 8307(a)

or (b) (relating to eligibility for annuities) and has made an

application in accordance with the provisions of section 8507(f)

(relating to rights and duties of school employees and members)

shall be entitled to receive a maximum single life annuity

attributable to his credited service and equal to the sum of the

following single life annuities beginning at the effective date

of retirement and, in case the member on the effective date of

retirement is under superannuation age, multiplied by a

reduction factor calculated to provide benefits actuarially

equivalent to an annuity starting at superannuation age:

Provided however, That on or after July 1, 1976, in the case of

any Class T-C or Class T-D member who has attained age 55 and

has 25 or more eligibility points such sum of single life

annuities shall be reduced by a percentage determined by

multiplying the number of months, including a fraction of a

month as a full month, by which the effective date of retirement

precedes superannuation age by 1/4%:

* * *

(a.1)  Maximum single life annuity for Class T-E members.--

Upon termination of service, any Class T-E member who is

eligible to receive an annuity under section 8307(a) and has

made an application in accordance with section 8507(f) shall be

entitled to receive a maximum single life annuity with a present

value equal to the balance of the member's savings account

maintained in accordance with section 8523 (relating to members'

savings account) standing to his credit as of his effective date

of retirement.

* * *

§ 8344.  Disability annuities.

(a)  Amount of annuity.--A Class T-C or Class T-D member who

has made application for a disability annuity as provided in

section 8507(k) (relating to rights and duties of school

employees and members) and has been found to be eligible in

accordance with the provisions of sections 8307(c) (relating to

eligibility for annuities) and 8505(c)(1) (relating to duties of

board regarding applications and elections of members) shall

receive a disability annuity payable from the effective date of

disability and continued until a subsequent determination by the

board that the annuitant is no longer entitled to a disability

annuity. The disability annuity shall be equal to a standard

single life annuity if the total number of years of credited

service is greater than 16.667, otherwise the standard single

life annuity shall be multiplied by the lesser of the following

ratios:

Y*/Y or 16.667/Y

where Y = number of years of credited service and Y* = total

years of credited service if the member were to continue as a

school employee until attaining superannuation age, or if the

member has attained superannuation age then the number of years

of credited service. In no event shall the disability annuity

plus any cost-of-living increases be less than $100 for each

full year of credited service. The member shall be entitled to

the election of a joint and survivor annuity on that portion of

the disability annuity to which he is entitled under section

8342 (relating to maximum single life annuity).

* * *

(f)  Class T-E member.--Notwithstanding any other provision,

a Class T-E member shall not be eligible to receive a disability

annuity provided under this part, but shall be eligible to

participate in any long-term disability group insurance program

established by the board in accordance with section 8502.3

(relating to long-term disability group insurance program). In

all cases, a Class T-E member shall be eligible to receive an

annuity upon attainment of superannuation age in accordance with

section 8307(a) or may elect to receive a return of accumulated

deductions in accordance with section 8341 (relating to return

of accumulated deductions).

Section 11.  Sections 8345(a) introductory paragraph and

8346(c) and (d)(1) introductory paragraph of Title 24 are

amended to read:

§ 8345.  Member's options.

(a)  General rule.--Any vestee [with five or more eligibility

points] or any other eligible member upon termination of school

service who has not withdrawn his accumulated deductions as

provided in section 8341 (relating to return of accumulated

deductions) may apply for and elect to receive either a maximum

single life annuity, as calculated in accordance with the

provisions of section 8342 (relating to maximum single life

annuity), or a reduced annuity certified by the actuary to be

actuarially equivalent to the maximum single life annuity and in

accordance with one of the following options, except that no

member shall elect an annuity payable to one or more survivor

annuitants other than his spouse or alternate payee of such a

magnitude that the present value of the annuity payable to him

for life plus any lump sum payment he may have elected to

receive is less than 50% of the present value of his maximum

single life annuity.

* * *

§ 8346.  Termination of annuities.

* * *

(c)  Subsequent discontinuance of service.--Upon subsequent

discontinuance of service, such member other than a former

annuitant who had the effect of his frozen present value

eliminated in accordance with subsection (d) or a former

disability annuitant shall be entitled to an annuity which is

actuarially equivalent to the sum of the present value as

determined under subsection (a) [and]:

(1)  For Class T-C and Class T-D members the present

value of a maximum single life annuity based on years of

service credited subsequent to reentry in the system and his

final average salary computed by reference to his

compensation during his entire period of school and State

service.

(2)  For Class T-E members the present value of a maximum

single life annuity for all subsequent credited service.

(d)  Elimination of the effect of frozen present value.--

(1)  An annuitant who returns to school service and earns

three eligibility points as a Class T-C or Class T-D member

by performing credited school service following the most

recent period of receipt of an annuity under this part, or an

annuitant who enters State service and:

* * *

Section 12.  Sections 8347(a) and (b) and 8502(k) and (m) of

Title 24 are amended and the sections are amended by adding

subsections to read: 

§ 8347.  Death benefits.

(a)  Members eligible for annuities.--Any Class T-C or Class

T-D member, other than an annuitant, who dies and was eligible

for an annuity in accordance with section 8307(a) or (b)

(relating to eligibility for annuities) shall be considered as

having applied for an annuity to become effective the day before

his death; and, in the event he has not elected an option, it

shall be assumed that he elected Option 1 and assigned as

beneficiary that person last designated in writing to the board.

(b)  Members ineligible for annuities.--In the event of the

death of any Class T-C or Class T-D member, other than an

annuitant, who is not entitled to a death benefit as provided in

subsection (a), his designated beneficiary shall be paid the

full amount of his accumulated deductions.

* * *

(e)  Class T-E members.--In the event of the death of a Class

T-E member, other than a Class T-E annuitant, his beneficiary

shall receive the balance of the member's savings account

maintained in accordance with section 8523 (relating to members'

savings account) regardless of whether the member has attained

superannuation retirement age.

§ 8502.  Administrative duties of board.

* * *

(k)  Certification of employer contributions.--The board

shall, each year in addition to the itemized budget required

under section 8330 (relating to appropriations by the

Commonwealth), certify to the employers and the Commonwealth the

employer contribution rate expressed as a percentage of members'

payroll necessary for the funding of prospective annuities for

active members and the annuities of annuitants, and certify the

rates and amounts of the normal contributions as determined

pursuant to section 8328(b) (relating to actuarial cost method),

accrued liability contributions as determined pursuant to

section 8328(c), supplemental annuities contribution rate as

determined pursuant to section 8328(d) and the experience

adjustment factor as determined pursuant to section 8328(e) and

premium assistance contributions as determined pursuant to

section 8328(f), which shall be paid to the fund and credited to

the appropriate accounts. These certifications shall be regarded

as final and not subject to modification by the [Budget]

Secretary of the Budget.

* * *

(m)  Member contributions and interest.--[The board shall

cause each member's contributions, including payroll deductions,

pickup contributions and all other payments, including, but not

limited to, amounts collected by the State Employees' Retirement

System for the reinstatement of previous school service or

creditable nonschool service and amounts paid to return benefits

paid after the date of return to school service or entering

State service representing lump sum payments made pursuant to

section 8345(a)(4)(iii) (relating to member's options) and

member's annuity payments, but not including other benefits

returned pursuant to section 8346(a.1) (relating to termination

of annuities) to be credited to the account of such member and

shall pay all such amounts into the fund. Such contributions

shall be credited with statutory interest until date of

termination of service, except in the case of a vestee, who

shall have such interest credited until the effective date of

retirement or until the return of his accumulated deductions, if

he so elects; and in the case of a multiple service member who

shall have such interest credited until termination of service

in both the school and the State systems.]

(1)  The board shall cause all of the following of each

member to be credited to the account of each member and shall

pay all of the amounts into the fund:

(i)  Contributions, including payroll deductions,

pickup contributions and all other payments, including,

but not limited to, amounts collected by the State

Employees' Retirement System for the reinstatement of

previous school service or creditable nonschool service

and amounts paid to return benefits paid after the date

of return to school service or entering State service

representing lump sum payments made under section 8345(a)

(4)(iii) (relating to member's options).

(ii)  Member's annuity payments, not including other

benefits returned under section 8346(a.1) (relating to

termination of annuities).

(iii)  Amounts paid by school employers on behalf of

Class T-E members under section 8327(d).

(2)  (i)  Except as provided under subparagraph (ii),

contributions under paragraph (1), including amounts paid

by school employers on behalf of Class T-E members under

section 8327(d), shall be credited with statutory

interest until the date of termination of service.

(ii)  In the case of a vestee, interest shall be

credited until the effective date of retirement or until

the return of his accumulated deductions, if the vestee

so elects. In the case of a multiple service member,

interest shall be credited until termination of service

in both the school and the State systems.

* * *

(q)  Excess interest.--

(1)  The board may, after deducting money to pay for

expenses attributable to Class T-E members, annually allow

excess interest to be credited to the members' savings

account for active Class T-E members as provided under

section 8523(d) (relating to members' savings account), to

the State accumulation account as provided under section

8524(b) (relating to State accumulation account) and to the

annuity reserve account for Class T-E annuitants as provided

under section 8525(c) (relating to annuity reserve account).

(2)  The crediting of excess interest shall be made, with

the advice of the actuary, on a fully funded basis employing

actuarial assumptions which reflect the nature of the

liability.

(3)  Notwithstanding paragraphs (1) and (2), in no event

shall excess interest be allocated to the members' savings

account for active Class T-E members as provided under

section 8523(d) or to the annuity reserve account for Class

T-E annuitants as provided under section 8525(c) if the

system's funded status as a whole for all classes of

membership is less than 100% funded as determined by the

actuary in its most recent filing under subsection (j).

(4)  In the event that the system's funding status is

less than 100% funded as determined by the actuary in its

most recent filing under subsection (j), all excess interest

awarded by the board shall be allocated to the State

accumulation account.

Section 13.  Title 24 is amended by adding a section to read:

§ 8502.3.  Long-term disability group insurance program.

(a)  Authority.--The board may sponsor a participant-funded

long-term disability group insurance program to be funded by and

for Class T-E members. The board may administer the program

itself or through any legal entity authorized by law to do so.

The program may be administered in whole or in part on a fully

insured or self-funded basis at the board's sole discretion. The

board shall have the authority to establish accounts, adopt any

policy statement or promulgate regulations as may be required

for the proper administration of the long-term disability group

insurance program.

(b)  Hold harmless.--Neither the Commonwealth nor the board,

including their respective officers, directors and employees,

shall be liable for any claims, demands, actions or liability of

any nature, including, but not limited to, attorney fees and

court costs, based upon or arising out of the operation of the

program, whether incurred directly or indirectly. The eligible

participants who enroll and participate in the program shall be

deemed to agree, on behalf of themselves and their heirs,

successors and assigns, to hold harmless the Commonwealth and

the board, including their respective officers, directors and

employees, from any claims, demands, actions or liability of any

nature, whether directly or indirectly, including attorney fees

and court costs, based upon or arising out of the operation of

the program.

(c)  No recourse.--The assets of the Commonwealth or those

that comprise the Public School Employees' Retirement Fund as

set forth under section 8522 (relating to Public School

Employees' Retirement Fund) shall not be liable for or used to

pay any claims, demands, actions or liability of any nature,

whether directly or indirectly, including, but not limited to,

attorney fees and court costs, based upon or arising out of the

operation of the program.

(d)  Reservation of immunities.--Nothing contained in this

part shall be construed as a waiver of the Commonwealth's or

board's immunities, defenses or rights or actions arising out of

their sovereign status or from the Eleventh Amendment to the

Constitution of the United States.

(e)  Nature of rights.--Any termination or other modification

of the program, including, but not limited to, a change in

benefit options or structure or insurance providers, shall not

give rise to any contractual rights or claims by any eligible

persons or any other person claiming an interest, either

directly or indirectly, in the program. No provision of this

part nor any rule or regulation adopted under this part shall

create in any person a contractual right in that provision.

(f)  Additional requirements.--The assets of the fund shall

not be liable or utilized for payment of any expenses or claims

incurred by the long-term disability group insurance program.

The program shall not be subject to the provisions of section

8531 (relating to State guarantee).

Section 14.  Sections 8504(a) and (b) and 8505(c) of Title 24

are amended to read:

§ 8504.  Duties of board to report to State Employees'

Retirement Board.

(a)  Multiple service membership of school employees.--Upon

receipt of an application for membership in the system of a

school employee, other than a Class T-E member, who is a former

State employee and who has elected multiple service membership,

the board shall advise the State Employees' Retirement Board

accordingly.

(b)  Multiple service membership of State employees.--[Upon]

(1)  If a former school employee was previously credited

with Class T-C or Class T-D service, upon receipt of

notification from the State Employees' Retirement Board that

[a] the former school employee has become an active member in

the State Employees' Retirement System and has elected to

receive credit for multiple service, the board shall certify

to the State Employees' Retirement Board and concurrently to

the member:

[(1)]  (i)  The total credited service in the system and

the number of years and fractional part of a year of

service credited in each class of service.

[(2)]  (ii)  The annual compensation received each school

year by the member for credited school service.

[(3)]  (iii)  The amount of the deductions and the period

over which they are to be made if the member has elected

payroll deductions pursuant to section 8323 (relating to

member contributions for creditable school service) or

8324 (relating to contributions for purchase of credit

for creditable nonschool service).

(2)  In the event that the former school employee was

previously credited with Class T-E service, the board shall

certify the class of service to the State Employees'

Retirement Board and to the member.

* * *

§ 8505.  Duties of board regarding applications and elections of

members.

* * *

(c)  Disability annuities.--In every case where the board has

received an application duly executed by the member or by a

person legally authorized to act in his behalf for a disability

annuity provided for under section 8344 (relating to disability

annuities) based upon the member's physical or mental incapacity

for the performance of the job for which he is employed, the

board shall:

(1)  Through the medical examiner, have the application

and any supporting medical records and other documentation

submitted with the application reviewed and, on the basis of

said review and the subsequent recommendation by the medical

examiner regarding the applicant's medical qualification for

a disability annuity along with such other recommendations

which he may make with respect to the permanency of

disability or the need for subsequent reviews, make a finding

of disability or nondisability and, in the case of

disability, establish an effective date of disability and the

terms and conditions regarding subsequent reviews.

(2)  Upon the recommendation of the medical examiner on

the basis of a review of subsequent medical reports submitted

with an application for continuance of disability, make a

finding of disability or nondisability and, in the case of a

finding of nondisability, establish the date of termination

of disability and at that time discontinue any annuity

payments in excess of any annuity to which he may be

otherwise entitled under section 8342 (relating to maximum

single life annuity).

(3)  Upon receipt of a written statement from a

disability annuitant of his earned income of the previous

year, adjust the payments of the disability annuity for the

following year in accordance with the provisions for a

reduction of disability payments of section 8344 [(relating

to disability annuities)].

* * *

Section 15.  Section 8505.1 of Title 24 is amended by adding

a subsection to read:

§ 8505.1.  Installment payments of accumulated deductions.

* * *

(e)  Excess interest.--Any lump sum or installment payable to

a Class T-E member shall not include any excess interest that

may have been credited to the members' savings account for

active Class T-E members as provided for under section 8523(d)

(relating to members' savings account) after the member's

effective date of termination or the member's effective date of

retirement, whichever is later.

Section 16.  Section 8506(g) and (h) of Title 24 are amended

to read:

§ 8506.  Duties of employers.

* * *

(g)  Former State employee contributors.--

(1)  The employer shall, upon the employment of a former

member of the State Employees' Retirement System who is not

an annuitant of the State Employees' Retirement System,

advise such employee of his right to elect multiple service

membership within 365 days of entry into the system and, in

the case any such employee who so elects has withdrawn his

accumulated deductions, require him to restore his

accumulated deductions as they would have been at the time of

his separation had he been a full coverage member, together

with statutory interest for all periods of subsequent State

and school service to date of repayment. The employer shall

advise the board of such election.

(2)  Notwithstanding any other provision of this part,

notice under this subsection shall not be required for any

Class T-E member.

(h)  Former State employee annuitants.--

(1)  The employer shall, upon the employment of an

annuitant of the State Employees' Retirement System who

applies for membership in the system, advise such employee

that he may elect multiple service membership within 365 days

of entry into the system and that if he so elects his annuity

from the State Employees' Retirement System will be

discontinued effective upon the date of his return to school

service and, upon termination of school service and

application for an annuity, the annuity will be adjusted in

accordance with section 8346 (relating to termination of

annuities). The employer shall advise the board of such

election.

(2)  Notwithstanding any other provision of this part,

notice under this subsection shall not be required for any

Class T-E member.

* * *

Section 17.  Sections 8507(c) and (k) and 8523(a) of Title 24

are amended and the sections are amended by adding subsections

to read:

§ 8507.  Rights and duties of school employees and members.

* * *

(c)  Multiple service membership.--Any active member, other

than a Class T-E member, who was formerly an active member in

the State Employees' Retirement System may elect to become a

multiple service member. Such election shall occur no later than

365 days after becoming an active member in this system.

* * *

(d.1)  Eligible roll-in.--A member may make full or partial

payment for credited military service with an eligible rollover

distribution from a qualified plan. The system shall only accept

the amount of money needed to cover the cost of purchasing the

military service.

* * *

(k)  Disability annuities.--If service of a Class T-C or

Class T-D member is terminated due to his physical or mental

incapacity for the performance of duty, in lieu of an

application and election under subsection (f), an application

for a disability annuity may be executed by him or by a person

legally authorized to act on his behalf.

§ 8523.  Members' savings account.

(a)  Credits to account.--The members' savings account shall

be the ledger account to which shall be credited the amounts of

the pickup contributions made by the employer [and], 

contributions or lump sum payments made by active members in

accordance with the provisions of Chapter 83 (relating to

membership, contributions and benefits) and contributions made

by the employer under section 8327(d) (relating to payments by

employers) on behalf of Class T-E members.

* * *

(d)  Excess interest.--One-half of the excess interest

allocated under section 8502(q) (relating to administrative

duties of board) shall be proportionately divided based on the

individual assets credited to each account between the annuity

reserve account for Class T-E annuitants and the members'

savings account for Class T-E members.

Section 18.  Section 8524 of Title 24 is amended to read:

§ 8524.  State accumulation account.

(a)  General.--The State accumulation account shall be the

ledger account to which shall be credited all contributions of

the Commonwealth and other employers as well as the earnings of

the fund, except the premium assistance contributions and

earnings thereon in the health insurance account. Valuation

interest shall be allowed on the total amount of such account

less any earnings of the fund credited during the year. The

reserves necessary for the payment of annuities and death

benefits as approved by the board and as provided in Chapter 83

(relating to membership, contributions and benefits) shall be

transferred from the State accumulation account to the annuity

reserve account. At the end of each year the required interest

shall be transferred from the State accumulation account to the

credit of the members' savings account and the annuity reserve

account. The administrative expenses of the board shall be

charged to the State accumulation account.

(b)  Excess interest.--The amount of excess interest to be

credited to the State accumulation account shall be in an amount

equal to half of the excess interest allocated under section

8502(q) (relating to administrative duties of board) and shall

be credited against any unfunded liability of the system.

(c)  Underfunding.--In the event that the system's funding

status is less than 100% funded as determined by the actuary in

its most recent filing under section 8502(j) (relating to

administrative duties of board), all excess interest awarded by

the board shall be allocated to the State accumulation account

and shall be credited against any unfunded liability of the

system existing in the year in which excess interest is

credited.

(d)  Transfer prohibited.--Notwithstanding any other

provision of this part, all contributions made by the employer

under section 8327(d)(1) (relating to payments by employers) on

behalf of Class T-E members shall not be transferred to the

members' savings account and credited to the individual member

accounts for Class T-E members.

(e)  Refund.--In the event of a refund under section 8341(b)

(relating to return of accumulated deductions), the employer

contributions and excess interest forfeited by the Class T-E

member shall be transferred to the State accumulation account.

Section 19.  Section 8525 of Title 24 is amended by adding a

subsection to read:

§ 8525.  Annuity reserve account.

* * *

(c)  Excess Interest.--One-half of the excess interest

allocated under section 8502(q) (relating to administrative

duties of board) shall be proportionately divided based on the

individual assets credited to each account between the annuity

reserve account for Class T-E annuitants and the members'

savings account for Class T-E members.

Section 20.  The definitions of "beneficiary," "class of

service multiplier," "full coverage member," "irrevocable

beneficiary," "standard single life annuity," "statutory

interest," "superannuation age" and "vestee" in section 5102 of

Title 71 are amended and the section is amended by adding

definitions to read:

§ 5102.  Definitions.

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

a different meaning is plainly required by the context, shall

have the following meanings:

* * *

"After-tax contributions."  The optional contributions paid

into the fund by the member from the member's salary after all

applicable taxes have been deducted.

* * *

"Beneficiary."  The person or persons last designated in

writing to the board by a member to receive his accumulated

deductions or a lump sum benefit upon the death of such member 

or for Class QC members, the balance of the members savings

account maintained in accordance with section 5933 (relating to

members' savings account).

* * *

"Class of service multiplier."