1Amending Title 71 (State Government) of the Pennsylvania
2Consolidated Statutes, in retirement for State employees and
3officers, further providing for definitions and for mandatory
4and optional membership; and providing for the State
5Employees' Optional Retirement Program.

6The General Assembly of the Commonwealth of Pennsylvania
7hereby enacts as follows:

8Section 1.  Section 5102 of Title 71 of the Pennsylvania
9Consolidated Statutes is amended by adding a definition to read:

10§ 5102.  Definitions.

11The following words and phrases as used in this part, unless
12a different meaning is plainly required by the context, shall
13have the following meanings:

14* * *

15"State Employees' Optional Retirement Program."  The
16alternative defined contribution retirement program established
17under Subchapter F of Chapter 59 (relating to State Employees'
18Optional Retirement Program).

19* * *

1Section 2.  Section 5301 of Title 71 is amended to read:

2§ 5301.  Mandatory and optional membership.

3(a)  Mandatory membership.--Membership in the system shall be
4mandatory as of the effective date of employment for all State
5employees except the following:

6(1)  Governor.

7(2)  Lieutenant Governor.

8(3)  Members of the General Assembly.

9(4)  Heads or deputy heads of administrative departments.

10(5)  Members of any independent administrative board or

12(6)  Members of any departmental board or commission.

13(7)  Members of any advisory board or commission.

14(8)  Secretary to the Governor.

15(9)  Budget Secretary.

16(10)  Legislative employees.

17(11)  School employees who have elected membership in the
18Public School Employees' Retirement System.

19(12)  School employees who have elected membership in an
20independent retirement program approved by the employer,
21provided that in no case, except as hereinafter provided,
22shall the employer contribute on account of such elected
23membership at a rate greater than the employer normal
24contribution rate as determined in section 5508(b) (relating
25to actuarial cost method). For the fiscal year 1986-1987 an
26employer may contribute on account of such elected membership
27at a rate which is the greater of 7% or the employer normal
28contribution rate as determined in section 5508(b) and for
29the fiscal year 1992-1993 and all years after that at a rate
30of 9.29%.

1(13)  Persons who have elected to retain membership in
2the retirement system of the political subdivision by which
3they were employed prior to becoming eligible for membership
4in the State Employees' Retirement System.

5(14)  Persons who are not members of the system and are
6employed on a per diem or hourly basis for less than 100 days
7or 750 hours in a 12-month period.

8(15)  Employees of the Philadelphia Regional Port
9Authority who have elected to retain membership in the
10pension plan or retirement system in which they were enrolled
11as employees of the predecessor Philadelphia Port Corporation
12prior to the creation of the Philadelphia Regional Port

14(16)  Employees of the Juvenile Court Judges' Commission
15who, before the effective date of this paragraph, were
16transferred from the State System of Higher Education to the
17Juvenile Court Judges' Commission as a result of an
18interagency transfer of staff approved by the Office of
19Administration and who, while employees of the State System
20of Higher Education, had elected membership in an independent
21retirement program approved by the employer.

22(17)  Any person who becomes a State employee on or after
23January 1, 2014, and who elects to participate in the State
24Employees' Optional Retirement Program under Subchapter F of
25Chapter 59 (relating to State Employees' Optional Retirement

27(b)  Optional membership.--The State employees listed in
28subsection (a)(1) through (11) shall have the right to elect
29membership in the system; once such election is exercised,
30membership shall continue until the termination of State


2(c)  Prohibited membership.--The State employees listed in
3subsection (a)(12), (13), (14) [and], (15) and (17) shall not
4have the right to elect membership in the system.

5(d)  Return to service.--An annuitant who returns to service
6as a State employee shall resume active membership in the system
7as of the effective date of employment, except as otherwise
8provided in section 5706(a) (relating to termination of
9annuities), regardless of the optional membership category of
10the position.

11(e)  Election prohibited.--Notwithstanding subsections (a)
12(13) and (c), county employees who are transferred to State
13employment and become State employees pursuant to 42 Pa.C.S. §
141905 (relating to county-level court administrators) shall not
15have the election to remain a contributor in the retirement
16system or pension plan of the county by which they were employed
17prior to becoming eligible for membership in the State
18Employees' Retirement System. Such employees shall be mandatory
19members of the system provided they are otherwise eligible and
20unless they are eligible for optional membership pursuant to
21subsections (a)(1) through (11) and (b) or prohibited membership
22pursuant to subsections (a)(14) and (c).

23(f)  Additional optional membership.--The State employees
24listed in subsection (a)(16) shall be mandatory members of the
25system as of the effective date of employment with the Juvenile
26Court Judges' Commission unless they elect membership in an
27independent retirement program approved by the Juvenile Court
28Judges' Commission. Employees who elect membership in an
29independent retirement program approved by the Juvenile Court
30Judges' Commission shall be prohibited from being active members

1in the system while employed by the Juvenile Court Judges'
2Commission. If an employee described in this subsection becomes
3a State employee with an employer other than the Juvenile Court
4Judges' Commission, then membership for that employee shall be
5determined as otherwise provided for in this part. The election
6of membership in the independent retirement program approved by
7the Juvenile Court Judges' Commission must be made by the
8transferred employee filing written notice with the employer
9while a State employee no later than 90 days after the effective
10date of this subsection. Upon receipt of such an election, the
11Juvenile Court Judges' Commission shall certify the election to
12the board and the independent retirement program.

13Section 3.  Chapter 59 of Title 71 is amended by adding a
14subchapter to read:




185971.  Definitions.

195972.  State Employees' Optional Retirement Program.

205973.  Powers and duties of board.

215974.  Taxation.

225975.  Investments and expenses.

235976.  Trust.

245977.  Investments.

255978.  Participant contributions.

265979.  Employer contributions.

275980.  Vesting.

28§ 5971.  Definitions.

29The following words and phrases when used in this subchapter
30shall have the meanings given to them in this section unless the

1context clearly indicates otherwise:

2"Participant."  A qualified employee who elects to
3participate in the State Employees' Optional Retirement Program,
4in lieu of becoming a member of the system.

5"Program."  The State Employees' Optional Retirement Program.

6"Qualified employee."  Any individual who becomes a State
7employee on or after January 1, 2014, and who is not a member of
8the system or a State employee categorized in section 5301(a)
9(12), (13), (14) or (15) (relating to mandatory and optional

11"Trust fund."  The trust created under section 5976 (relating
12to trust) to hold the assets of the program in trust for the
13exclusive benefit of the program's participants and
14beneficiaries and for the payment of reasonable expenses of the
15program in accordance with section 5975 (relating to investments
16and expenses) and IRC § 401.

17§ 5972.  State Employees' Optional Retirement Program.

18The board shall establish and administer an optional defined
19contribution retirement program to be known as the State
20Employees' Optional Retirement Program under which retirement
21benefits will be provided for qualified employees who elect to
22participate in the program in lieu of membership in the system.
23The benefits to be provided for or on behalf of participants in
24the program shall be provided through participant-directed
25investments, in accordance with IRC § 401(a). Participants and
26employers shall contribute to the program in accordance with
27sections 5978 (relating to participant contributions) and 5979
28(relating to employer contributions).

29§ 5973.  Powers and duties of board.

30In order to establish and administer the program, the powers

1and duties of the board shall include all of the following:

2(1)  Entering into written agreements with financial or
3other organizations to administer the program for
4participants and to invest funds held under the program. The
5program and any written agreement shall comply with the IRC,
6including the plan qualification requirements imposed on
7governmental plans under IRC § 401(a).

8(2)  Establishing procedures whereby qualified employees
9may elect to participate in the program and participants may
10change their investment choices on a periodic basis, as
11determined by the board, which shall not be less frequently
12than quarterly.

13(3)  Arranging for a deduction, from the compensation of
14participants, of employee contributions to the program.

15(4)  Establishing standards or criteria for selection by
16the board of the financial institutions, insurance companies
17or other organizations that may be qualified as managers, on
18behalf of the board, of funds accumulated under the program
19on behalf of any participant.

20(5)  Establishing standards and criteria for the
21providing of options to qualified employees and participants
22concerning the method of investing amounts accumulated under
23the program if the options include a diversified mix of low-
24cost investment products that span the risk-return spectrum.

25(6)  Establishing standards and criteria for informing
26qualified employees and participants of specific options
27offered by qualified managers.

28(7)  Designing a comprehensive, balanced and impartial
29educational program to assist qualified employees and
30participants in their choice of investment options under the

1program, which shall include retirement planning education
2and financial planning guidance on matters such as investment
3diversification, investment risks, investment costs and asset

5(8)  Establishing standards and criteria for the
6disclosure to qualified employees and participants of the
7anticipated and actual income attributable to the amounts,
8property and rights and all fees, costs and charges to be
9made against the amounts accumulated to cover the costs of
10administering and managing the funds.

11(9)  Establishing processes for election to participate
12in the program. The election period shall begin on the date
13that an individual becomes a qualified employee and shall end
1490 days from that date.

15(10)  Performing an annual review of any qualified fund
16manager for the purpose of assuring it continues to meet all
17standards and criteria established.

18(11)  Establishing procedures whereby any participant may
19do one of the following:

20(i)  Withdraw accumulated amounts in cases of
21financial hardship or separation of a participant from
22State service or as otherwise permitted under the IRC.

23(ii)  Dispose of a participant's account under a
24domestic relations order unless in conflict with the IRC.

25(12)  Administering the program in compliance with the

27(13)  Promulgating regulations necessary to administer
28this subchapter.

29§ 5974.  Taxation.

30All amounts deferred under the program shall constitute

1taxable income for purposes of the act of March 4, 1971 (P.L.6,
2No.2), known as the Tax Reform Code of 1971, and shall
3constitute taxable income for State and local earned income

5§ 5975.  Investments and expenses.

6The board shall not be responsible for any investment loss
7incurred in the program or for failure of any investment to earn
8any specific or expected return or to earn as much as any other
9investment opportunity, whether or not the other investment
10opportunity was offered to participants in the program. The
11expenses arising from allowing qualified employees to elect to
12participate in the program and participants to choose a fund
13manager, deduct from compensation amounts contributed under the
14program and transfer to the fund manager amounts so deducted
15shall be borne by the board. All other expenses arising from the
16administration of the program shall be assessed against the
17accounts created on behalf of participants either by the fund
18managers or by the board.

19§ 5976.  Trust.

20(a)  Establishment.--All assets and income that have been or
21shall be withheld by the employer in accordance with this
22subchapter shall be held in trust in any funding vehicle
23permitted by applicable provisions of the IRC for the exclusive
24benefit of the program's participants and their beneficiaries
25until the time when the funds are distributed to the participant
26or the participant's beneficiary in accordance with the terms of
27the agreement between the participant and the board. All such
28assets and income withheld by the employer shall be held in
29trust as set forth in this subsection in a special fund created
30within the State Treasury of which the State Treasurer shall be


2(b)  Trustees.--The members of the board shall be the
3trustees of the trust established under subsection (a).

4(c)  Attachment.--Notwithstanding any other provision of law,
5any benefit or interest available under the program, any right
6to receive or direct payments under the program or any
7distribution of payment made under the program shall not, except
8as expressly specified by the program, be subject to assignment,
9alienation, garnishment, attachment, transfer, anticipation,
10sale, mortgage, pledge, hypothecation, commutation, execution or
11levy, whether by voluntary or involuntary act of any interested

13§ 5977.  Investments.

14Investment of contributions by any corporation, institution,
15insurance company or custodial bank that the board has approved
16shall not be unreasonably delayed, and in no case shall the
17investment of contributions be delayed more than 30 days from
18the date of payroll deduction to the date that funds are
19invested. Any interest earned on the funds pending investment
20shall be allocated to the Commonwealth and credited to the
21accounts of participants who are then participating in the
22program unless the interest is used to defray administrative
23costs and fees that would otherwise be required to be borne by
24participants who are then participating in the program.

25§ 5978.  Participant contributions.

26Regular participant contributions shall be made to the
27program on behalf of each active member for current service in
28an amount equal to 6% of the participant's compensation. The
29employer shall cause required participant contributions for
30current service to be made and deducted from each payroll.

1§ 5979.  Employer contributions.

2The Commonwealth or any other employer of a participant shall
3make payments to the trust fund on behalf of the participant in
4an amount equal to 6% of the participant's total compensation.

5§ 5980.  Vesting.

6A participant shall be vested after completing one year of
7State service during which he or she is a participant in the
8program with respect to employer contributions paid on behalf of
9the participant to the program plus interest and earnings on the
10employer contributions but minus investment fees and
11administrative charges.

12Section 4.  This act shall take effect immediately.