THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY KRIEGER, VULAKOVICH, CUTLER, EVANKOVICH, MUSTIO, QUIGLEY, SCHRODER, METCALFE, AUMENT, ROAE, HAHN, TALLMAN, DUNBAR, HUTCHINSON, REESE, MARSHALL, MULLERY, GROVE, CHRISTIANA, MURT, HARHART, SIMMONS, BLOOM, BARRAR, EVERETT, SACCONE, GABLER, BENNINGHOFF AND PYLE, FEBRUARY 3, 2011

REFERRED TO COMMITTEE ON STATE GOVERNMENT, FEBRUARY 3, 2011  

AN ACT

Amending Title 71 (State Government) of the Pennsylvania

Consolidated Statutes, further providing for mandatory and

optional membership; and providing for State Legislators'

Defined Contribution Program.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 5102 of Title 71 of the Pennsylvania

Consolidated Statutes is amended by adding a definition 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:

* * *

"State Legislators' Defined Contribution Program."  The

defined contribution program established under Ch. 56 (relating

to State Legislators' Defined Contribution Program).

* * *

Section 2.  Section 5301(a)(3) and (c) of Title 71 are

amended and subsection (a) is amended by adding paragraphs to

read:

§ 5301.  Mandatory and optional membership.

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

mandatory as of the effective date of employment for all State

employees except the following:

* * *

(3)  Members of the General Assembly, other than members

of the General Assembly described under paragraphs (17) and

(18).

* * *

(17)  Any person who is not a member of the General

Assembly on November 30, 2012, and who becomes a member of

the General Assembly on or after December 1, 2012.

(18)  Any person who is a member of the General Assembly

on November 30, 2012, and who is reelected to serve as a

member of the General Assembly beginning on or after December

1, 2012.

* * *

(c)  Prohibited membership.--

(1)  The State employees listed in subsection (a)(12),

(13), (14) [and (15)], (15) and (17) shall not have the right

to elect membership in the system.

(2)  A member of the General Assembly described under

subsection (a)(18) shall have no right to be an active member

of the system and accrue credited service for State service

as a member of the General Assembly subsequent to November

30, 2012.

* * *

Section 3.  Title 71 is amended by adding a chapter to read:

CHAPTER 56

STATE LEGISLATORS' DEFINED CONTRIBUTION PROGRAM

Sec.

5601.  Definitions.

5602.  Establishment.

5603.  State Legislators' Defined Contribution Program.

5604.  Powers and duties of board.

5605.  Prohibited interests.

5606.  Investments and expenses.

5607.  Trust fund.

5608.  Election period.

5609.  Participant contributions.

5610.  Employer contributions.

5611.  Vesting.

5612.  Prohibition.

§ 5601.  Definitions.

The following words and phrases when used in this chapter

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

context clearly indicates otherwise:

"Participant."  A qualified employee who elects to

participate in the State Legislators' Defined Contribution

Program.

"Program."  The State Legislators' Defined Contribution

Program.

"Qualified employee."  Any of the following:

(1)  A person who is not a member of the General Assembly

on November 30, 2012, and who becomes a member of the General

Assembly on or after December 1, 2012.

(2)  A person who is a member of the General Assembly on

November 30, 2012, and who is reelected to serve as a member

of the General Assembly beginning on or after December 1,

2012.

"Trust fund."  The trust created under section 5607 (relating

to trust fund).

§ 5602.  Establishment.

The State Legislators' Defined Contribution Program is

established in accordance with this chapter.

§ 5603.  State Legislators' Defined Contribution Program.

The board shall administer the program, which shall be a

defined contribution retirement program for participants. The

board shall permit qualified employees to elect to participate

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

participants in the program shall be provided through

participant-directed investments, in accordance with IRC §

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

program in accordance with sections 5609 (relating to

participant contributions) and 5610 (relating to employer

contributions).

§ 5604.  Powers and duties of board.

In order to administer the program, the powers and duties of

the board shall include all of the following:

(1)  Entering into written agreements with financial or

other organizations to administer the program for

participants and to invest funds held under the program. The

program and any written agreement shall comply with the IRC,

including the plan qualification requirements imposed on

governmental plans under IRC § 401(a).

(2)  Establishing procedures whereby qualified employees

may elect to participate in the program and participants may

change their investment choices on a periodic basis, as

determined by the board, which shall not be less frequently

than quarterly.

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

participants, of participant contributions to the program.

(4)  Establishing standards and criteria for selection by

the board of the financial institutions, insurance companies

or other organizations that may be qualified as managers, on

behalf of the board, of funds accumulated under the program

on behalf of any participant.

(5)  Establishing standards and criteria for providing

options to qualified employees and participants concerning

the method of investing amounts accumulated under the

program. The investment options shall represent a broad cross

section of asset classes and risk profiles and shall include

lifestyle funds that are based upon age and projected

retirement date.

(6)  Establishing procedures for informing qualified

employees and participants of specific options offered by

qualified managers.

(7)  Designing a comprehensive, balanced and impartial

educational program to assist qualified employees and

participants in their choice of investment options under the

program, which shall include retirement planning education

and financial planning guidance on matters such as investment

diversification, investment risks, investment costs and asset

allocation.

(8)  Establishing standards and criteria for the

disclosure to qualified employees and participants of the

anticipated and actual income attributable to the amounts,

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

made against the amounts accumulated to cover the costs of

administering and managing the funds.

(9)  Establishing a process for election to participate

in the program.

(10)  Performing an annual review of any qualified fund

manager for the purpose of assuring it continues to meet all

standards and criteria established.

(11)  Allowing for rollovers into the program from plans

of other employers, regardless of the employer being a

private employer or a public employer.

(12)  Allowing a former participant to maintain his or

her account within the program.

(13)  Establishing procedures whereby any participant may

do one of the following:

(i)  Withdraw accumulated amounts in cases of

financial hardship or separation of a participant from

State service or as otherwise permitted under the IRC.

(ii)  Dispose of a participant's account under a

domestic relations order unless in conflict with the IRC.

(14)  Administering the program in compliance with the

IRC.

(15)  Promulgating regulations necessary to administer

this chapter.

(16)  Establishing procedures to provide for the lawful

payment of benefits.

§ 5605.  Prohibited interests.

No member or employee of the board shall have any direct or

indirect financial interest in any of the investment products

that are made available to participants under the program. 

§ 5606.  Investments and expenses.

(a)  Loss.--The board shall not be responsible for any

investment loss incurred in the program or for failure of any

investment to earn any specific or expected return or to earn as

much as any other investment opportunity, whether or not the

other investment opportunity was offered to participants in the

program. The expenses arising from allowing qualified employees

to elect to participate in the program and participants to

choose a fund manager, deduct from compensation amounts

contributed under the program and transfer to the fund manager

amounts so deducted shall be borne by the board. All other

expenses arising from the administration of the program shall be

assessed against the accounts created on behalf of participants

either by the fund managers or by the board.

(b)  Investment.--Investment of contributions by any

corporation, institution, insurance company or custodial bank

that the board has approved shall not be unreasonably delayed

and the investment of contributions shall not be delayed more

than 30 days from the date of payroll deduction to the date that

funds are invested. Any interest earned on the funds pending

investment shall be allocated to the Commonwealth and credited

to the accounts of participants who are then participating in

the program unless the interest is used to defray administrative

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

participants who are then participating in the program.

§ 5607.  Trust fund.

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

shall be withheld by the employer in accordance with this

chapter shall be held in trust in any funding vehicle permitted

by applicable provisions of the IRC for the exclusive benefit of

the program's participants and their beneficiaries until the

time when the funds are distributed to the participant or the

participant's beneficiary in accordance with the terms of the

agreement between the participant and the board. All such assets

and income withheld by the employer shall be held in trust as

set forth in this subsection in a special fund created within

the State Treasury of which the State Treasurer shall be

custodian. The assets of the program shall be held in trust for

the exclusive benefit of the program's participants and

beneficiaries and for the payment of reasonable expenses of the

program in accordance with section 5606 (relating to investments

and expenses) and IRC § 401.

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

trustees of the trust established under subsection (a).

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

any benefit or interest available under the program, any right

to receive or direct payments under the program or any

distribution of payment made under the program shall not, except

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

alienation, garnishment, attachment, transfer, anticipation,

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

levy, whether by voluntary or involuntary act of any interested

person.

§ 5608.  Election period.

A qualified employee may elect to participate in the program

by filing written notice with the board, in accordance with

procedures established by the board under section 5604(2)

(relating to powers and duties of board) within 90 days after

the date on which he or she become a qualified employee.

§ 5609.  Participant contributions.

Regular participant contributions shall be made to the

program on behalf of each participant for current service in an

amount equal to a percentage of the participant's pensionable

compensation. The employer shall cause participant contributions

for current service to be made and deducted from each payroll.

Participants may elect to contribute to the program on their

behalf to the extent permitted by law.

§ 5610.  Employer contributions.

The General Assembly shall make payments to the trust fund on

behalf of the participant. The amount of the payments shall

match the contribution made by the participant under section

5609 (relating to participant contributions) dollar for dollar,

but shall not exceed 4% of the participant's pensionable

earnings.

§ 5611.  Vesting.

A participant shall be vested after completing three years of

service as a member of the General Assembly during which he or

she is a participant in the program with respect to employer

contributions paid on behalf of the participant to the program

plus interest and earnings on the employer contributions but

minus investment fees and administrative charges.

§ 5612.  Prohibition.

No qualified employee may make an election to participate in

the program prior to December 1, 2012.

Section 4.  This act shall take effect in 60 days.