Regular Session 2015-2016 House Bill 0727 P.N. 1555

PRIOR PRINTER'S NO. 861

PRINTER'S NO. 1555

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

727

Session of

2015

INTRODUCED BY KAMPF, ROSS, TURZAI, MAJOR, CUTLER, TOBASH,

BENNINGHOFF, REGAN, METCALFE, TRUITT, DIAMOND, BLOOM,

MILLARD, SACCONE, GREINER, DUNBAR, LAWRENCE, QUIGLEY,

KAUFFMAN, TOPPER, COX, EMRICK, TOEPEL, F. KELLER, SAYLOR,

GABLER, A. HARRIS, GINGRICH, HELM, TALLMAN, GROVE, SANKEY,

MALONEY, HICKERNELL, MENTZER, CHRISTIANA, EVANKOVICH,

KILLION, KNOWLES, SIMMONS, JAMES, MASSER, FEE, MURT,

HENNESSEY, TOOHIL, BARRAR, GILLESPIE, EVERETT, MOUL, ROAE,

RAPP, KRIEGER, PHILLIPS-HILL, SCHEMEL AND KLUNK,

MARCH 6, 2015

AS REPORTED FROM COMMITTEE ON STATE GOVERNMENT, HOUSE OF

REPRESENTATIVES, AS AMENDED, MAY 12, 2015

AN ACT

Amending Titles 24 (Education), 51 (Military Affairs) and 71

(State Government) of the Pennsylvania Consolidated Statutes,

in Title 24, in preliminary provisions, further providing for

definitions and construction and providing for references; in

retirement membership, contributions and benefits, further

providing for mandatory and optional membership, for credited

school service, for waiver of adjustments and for classes of

service, for elections, for eligibility points, for

eligibility for annuities, for eligibility for refunds, for

pickup contributions, for member contributions, for

contributions for purchase of credit, for annual compensation

limit, for contributions by Commonwealth, for payments by

employers, for actuarial cost method, for appropriations by

Commonwealth, for return of accumulated deductions, for

single life annuity, for disability annuities, for

termination of annuities and payment of benefits; providing

for school employees' defined contribution plan; in

administrative and miscellaneous provisions, further

providing for the Public School Employees' Retirement Board,

for administrative duties of board, for health insurance, for

advisory and reporting duties, for application and election

duties, for duties of employers, for rights and duties of

school employees and members, for management of fund and

accounts, for Public School Employees' Retirement Fund, for

State accumulation account, for annuity reserve account, for

State guarantee, for taxation, for attachment and assignment

of funds, for approval of domestic relations orders, for

irrevocable survivor annuitant and for amendment of approved

domestic relations orders; providing for irrevocable

successor payee; further providing for fraud and adjustment

of errors and for payments to school entities by

Commonwealth; providing for payments to school entities by

Commonwealth commencing with the 2015-2016 school year; in

health insurance for retired school employees, further

providing for definitions; in Title 51, in employment

preferences and pensions, further providing for military

leaves of absence; in Title 71, in retirement for State

employees and officers, further providing for definitions,

for preliminary provisions and for membership, credited

service, classes of service, and eligibility benefits,

providing for State Employees' Defined Contribution Plan,

further providing for contributions, for benefits and for

administration, funds and accounts; and making editorial

changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

ARTICLE I

AMENDMENTS TO TITLE 24

Section 101. The definitions of "alternate payee,"

"beneficiary," "compensation," "creditable nonschool service,"

"credited service," "date of termination of service,"

"distribution," "domestic relations order," "eligible

annuitants," "final average salary," "inactive member,"

"intervening military service," "irrevocable beneficiary,"

"leave for service with a collective bargaining organization,"

"previous school service," "reemployed from USERRA leave,"

"salary deductions," "USERRA leave" and "valuation interest" 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:

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* * *

"Accumulated employer defined contributions." The total of

the employer defined contributions paid into the trust on

account of a participant's school service together with any

investment earnings and losses and adjustment for fees, costs

and expenses credited or charged thereon.

"Accumulated mandatory participant contributions." The total

of the mandatory pickup participant contributions paid into the

trust on account of a participant's school service together with

any investment earnings and losses and adjustments for fees,

costs and expenses credited or charged thereon.

"Accumulated total defined contributions." The total of the

accumulated mandatory participant contributions, accumulated

employer defined contributions and accumulated voluntary

contributions, reduced by any distributions, standing to the

credit of a participant in an individual investment account in

the trust.

"Accumulated voluntary contributions." The total of any

amounts rolled over by a participant or transferred by a direct

trustee-to-trustee transfer into the trust together with any

investment earnings and losses and adjustment for fees, costs

and expenses credited or charged thereon.

* * *

"Active participant." A school employee for whom mandatory

pickup participant contributions are being made to the trust or

for whom such contributions otherwise required for current

school service are not being made solely by reason of any

provision of this part relating to the limitations under section

401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public

Law 99-514, 26 U.S.C. § 401(a)(17) or 415).

20150HB0727PN1555 - 3 -

* * *

"Alternate payee." Any spouse, former spouse, child or

dependent of a member or participant who is recognized by a

domestic relations order as having a right to receive all or a

portion of the moneys payable to that member or participant

under this part.

* * *

"Beneficiary." [The] In the case of the system, 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. In the case of the plan, the person or

persons last designated in writing to the board by a participant

to receive his VESTED accumulated total defined contributions or

a lump sum benefit upon the death of such participant.

* * *

"Compensation." Pickup contributions and mandatory pickup

participant contributions plus any remuneration received as a

school employee excluding reimbursements for expenses incidental

to employment and excluding any bonus, severance payments, any

other remuneration or other emolument received by a school

employee during his school service which is not based on the

standard salary schedule under which he is rendering service,

payments for unused sick leave or vacation leave, bonuses or

other compensation for attending school seminars and

conventions, payments under health and welfare plans based on

hours of employment or any other payment or emolument which may

be provided for in a collective bargaining agreement which may

be determined by the Public School Employees' Retirement Board

to be for the purpose of enhancing compensation as a factor in

the determination of final average salary, and excluding

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payments for military leave and any other payments made by an

employer while on USERRA leave, leave of absence granted under

51 Pa.C.S. § 4102 (relating to leaves of absence for certain

government employees), military leave of absence granted under

51 Pa.C.S. § 7302 (relating to granting military leaves of

absence), leave granted under section 1178 of the act of March

10, 1949 (P.L.30, No.14), known as the Public School Code of

1949, or other types of military leave, including other types of

leave payments, stipends, differential wage payments as defined

in IRC § 414(u)(12) and any other payments, provided, however,

that the limitation under section 401(a)(17) of the Internal

Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17))

taken into account for the purpose of member contributions,

including regular or joint coverage member contributions,

regardless of class of service, shall apply to each member who

first became a member of the Public School Employes' Retirement

System on or after July 1, 1996, and who by reason of such fact

is a noneligible member subject to the application of the

provisions of section 8325.1 (relating to annual compensation

limit under IRC § 401(a)(17)) and shall apply to each

participant.

* * *

"Creditable nonschool service." Service other than service

as a school employee for which an active member may obtain

credit in the system.

"Credited service." School or creditable nonschool service

for which the required contributions have been made to the fund,

or for which the contributions otherwise required for such

service were not made solely by reason of any provision of this

part relating to the limitations under section 401(a)(17) or

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415(b) of the Internal Revenue Code of 1986 (Public Law 99-514,

26 U.S.C. § 401(a)(17) or 415(b)), or for which salary

deductions to the system or lump sum payments have been agreed

upon in writing.

"Date of termination of service." The last date of service

for which:

(1) pickup contributions are made for an active member

[or,];

(2) in the case of an inactive member, the effective

date of his resignation or the date his employment is

formally discontinued by his employer or two years following

the last day of service for which contributions were made,

whichever is earliest[.];

(3) mandatory pickup participant contributions are made

for an active participant; or

(4) in the case of an inactive participant, the date of

his resignation or the date his employment is formally

discontinued by his employer.

* * *

"Distribution." Payment of all or any portion of a person's

interest in either the Public School Employees' Retirement Fund

or the School Employees' Defined Contribution Trust, or both,

which is payable under this part.

"Domestic relations order." Any judgment, decree or order,

including approval of a property settlement agreement, entered

on or after the effective date of this definition by a court of

competent jurisdiction pursuant to a domestic relations law

which relates to the marital property rights of the spouse or

former spouse of a member or participant, including the right to

receive all or a portion of the moneys payable to that member or

20150HB0727PN1555 - 6 -

participant under this part in furtherance of the equitable

distribution of marital assets. The term includes orders of

support as that term is defined by 23 Pa.C.S. § 4302 (relating

to definitions) and orders for the enforcement of arrearages as

provided in 23 Pa.C.S. § 3703 (relating to enforcement of

arrearages).

* * *

"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. The term eligible annuitants shall not

include participants.

* * *

"Employer defined contributions." Contributions equal to 4%

of an active participant's compensation that are made by an

employer for current service to the trust to be credited in the

participant's individual investment account.

"Final average salary." The highest average compensation

received as an active member during any three nonoverlapping

periods of 12 consecutive months with the compensation for part-

time service being annualized on the basis of the fractional

portion of the school year for which credit is received; except,

if the employee was not a member for three such periods, the

total compensation received as an active member annualized in

the case of part-time service divided by the number of such

periods of membership; in the case of a member with multiple

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service credit, the final average salary shall be determined by

reference to compensation received by him as a [school employee]

member of the system or a State employee other than as an

employee in the State Employees' Defined Contribution Plan or

both; and, in the case of a noneligible member, subject to the

application of the provisions of section 8325.1 (relating to

annual compensation limit under IRC § 401(a)(17)). Final average

salary shall be determined by including in compensation,

payments deemed to have been made to a member reemployed from

USERRA leave to the extent member contributions have been made

as provided in section 8302(d)(2) (relating to credited school

service) and payments made to a member on leave of absence under

51 Pa.C.S. § 4102 (relating to leaves of absence for certain

government employees) as provided in section 8302(d)(6).\

* * *

"Inactive member." A member for whom no pickup contributions

are being made to the fund, except in the case of an active

member for whom such contributions otherwise required for

current school service are not being made solely by reason of

any provision of this part relating to the limitations under

section 401(a)(17) or 415(b) of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)) or

because the member is on USERRA leave, who has accumulated

deductions standing to his credit in the fund and for whom

contributions have been made within the last two school years or

a multiple service member who is active in the State Employees'

Retirement System.

* * *

"Inactive member." A member for whom no pickup contributions

are being made to the fund, except in the case of an active

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member for whom such contributions otherwise required for

current school service are not being made solely by reason of

any provision of this part relating to the limitations under

section 401(a)(17) or 415(b) of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)), who

has accumulated deductions standing to his credit in the fund

and for whom contributions have been made within the last two

school years or a multiple service member who is active in the

State Employees' Retirement System.

"Inactive participant." A participant for whom no mandatory

pickup participant contributions are being made to the trust,

except in the case of an active participant for whom such

contributions otherwise required for current school service are

not being made solely by reason of any provision of this part

relating to limitations under section 401(a)(17) or 415 of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

401(a)(17) or 415), who has vested accumulated total defined

contributions standing to his credit in the trust and who has

not filed an application for an annuity A DISTRIBUTION .

"Individual investment account." The account in the trust to

which are credited the amounts of the contributions made by a

participant and the participant's employer in accordance with

the provisions of this part, together with all interest and

investment earnings after deduction for fees, costs and

expenses, investment losses and charges for distributions.

"Intervening military service." Active military service of a

member who was a school employee and an active member of the

system immediately preceding his induction into the armed

services or forces of the United States in order to meet a draft

obligation excluding any voluntary extension of such

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obligational service and who becomes a school employee and an

active member of the system within 90 days of the expiration of

such service.

* * *

"Irrevocable beneficiary." The person or persons permanently

designated by a member or a participant in writing to the board

pursuant to an approved domestic relations order to receive all

or a portion of the accumulated deductions, vested accumulated

total defined contributions or lump sum benefit payable upon the

death of such member or participant.

"Irrevocable successor payee." The person permanently

designated by a participant receiving vested distributions in

writing to the board pursuant to an approved domestic relations

order to receive one or more distributions from the plan upon

the death of such participant.

* * *

"Leave for service with a collective bargaining

organization." Paid leave granted to an active member or active

participant by an employer for purposes of working full time for

or serving full time as an officer of a Statewide employee

organization or a local collective bargaining representative

under the act of July 23, 1970 (P.L.563, No.195), known as the

Public Employe Relations Act: Provided, That greater than one-

half of the members of the employee organization are active

members of the system or active participants of the plan; that

the employer shall fully compensate the member or active

participant, including, but not limited to, salary, wages,

pension and retirement contributions and benefits, other

benefits and seniority, as if he were in full-time active

service; and that the employee organization shall fully

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reimburse the employer for such salary, wages, pension and

retirement contributions and benefits and other benefits and

seniority.

"Mandatory pickup participant contributions." Contributions

equal to 6.5% of compensation that are made by the employer for

active participants for current service that are picked up by

the employer.

* * *

"Participant." An active participant, inactive participant

or participant receiving distributions.

"Participant receiving distributions." A participant in the

plan who has commenced receiving distributions from his

individual investment account but who has not received a total

distribution of his vested interest in the individual investment

account.

* * *

"Plan." The School Employees' Defined Contribution Plan as

established by the provisions of this part and the board.

"Plan document." The documents created by the board under

section 8402 (relating to plan document) that contain the terms

and provisions of the plan and trust as established by the board

regarding the establishment, administration and investment of

the plan and trust.

"Previous school service." Service [rendered] as a school

employee including service in any summer school conducted by a

school district of the Commonwealth, but excluding service

rendered during which the school employee was or could have been

a participant in the plan, prior to the member's most recent

entrance in the system.

* * *

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"Reemployed from USERRA leave." Resumption of active

membership or active participation as a school employee after a

period of USERRA leave, if the resumption of active membership

or active participation was within the time period and under

conditions and circumstances such that the school employee was

entitled to reemployment rights under 38 U.S.C. Ch. 43 (relating

to employment and reemployment rights of members of the

uniformed services).

* * *

"Required beginning date." The latest date by which

distributions of a participant's interest in his individual

investment account must commence under IRC § 401(a)(9).

* * *

"Salary deductions." The amounts certified by the board,

deducted from the compensation of an active member or active

participant or the State service compensation of a multiple

service member who is an active member of the State Employees'

Retirement System and paid into the fund or trust.

* * *

"State Employees' Defined Contribution Plan." The defined

contribution plan for State employees established by 71 Pa.C.S.

Pt. XXV (relating to retirement for State employees and

officers).

* * *

"Successor payee." The person or persons last designated by

a participant receiving distributions in writing to the board to

receive one or more distributions upon the death of such

participant.

* * *

"Trust." The School Employees' Defined Contribution Trust

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established under Chapter 84 (relating to school employees'

defined contribution plan).

* * *

"USERRA leave." Any period of time for service in the

uniformed services as defined in 38 U.S.C. Ch. 43 (relating to

employment and reemployment rights of members of the uniformed

services) by a school employee or former school employee or a

participant or former participant who terminated school service

to perform the service in the uniformed services, if the current

or former school employee or current or former participant is

entitled to reemployment rights under 38 U.S.C. Ch. 43 with

respect to the uniformed service.

"Valuation interest." Interest at 5 1/2% per annum,

compounded annually and applied to all accounts of the fund

other than the members' savings account.

* * *

"Voluntary contributions." Contributions made by a

participant to the trust and credited to his individual

investment account in excess of his mandatory pickup participant

contributions by an eligible rollover or direct trustee-to-

trustee transfers.

Section 102. Section 8103 of Title 24 is amended by adding

subsections to read:

§ 8103. Construction of part.

* * *

severable and if any of its provisions shall be held to be

unconstitutional, the decision of the court shall not affect or

impair any of the remaining provisions. It is hereby declared to

be the legislative intent that this part would have been adopted

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had such unconstitutional provisions not been included.

(d) References to certain Federal statutes.--References in

this part to the IRC or the Uniformed Services Employment and

Reemployment Rights Act of 1994 (Public Law 103-353, 38 U.S.C. §

4301), including administrative regulations promulgated under

the IRC or the Uniformed Services Employment and Reemployment

Rights Act of 1994, are intended to include laws and regulations

in effect on the effective date of this section and amended,

supplemented or supplanted on and after the effective date of

this section.

(e) Construction.--

(1) This part may not be construed to mean that the

limitations on benefits or other requirements under IRC §

401(a) or other applicable provisions of the IRC that are

applicable to participants in the plan do not apply to the

participants or to the members of the system and the benefits

payable under this part.

(2) This part may not be construed to mean that an

interpretation or application of the provisions of this part

or benefits available to members of the Public School

Employees' Retirement System was not in accordance with the

provisions of this part or other applicable law, including

the IRC and the Uniformed Services Employment and

Reemployment Rights Act of 1994 before the effective date of

this subsection.

(3) This part may not be construed to mean that the

release or publicizing of a record, material or data that

would not constitute a public record under section 8502(e)(2)

(relating to administrative duties of board) is a violation

of the fiduciary duties of the board.

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(f) Applicability.--This part shall apply to a record,

material or data under section 8502(e)(2) notwithstanding

whether:

(1) The record, material or data was created, generated

or stored before the effective date of this section.

(2) The record, material or data was previously released

or made public.

(3) A request for the record, material or data was made

or is pending final response under the former act of June 21,

1957 (P.L.390, No.212), referred to as the Right-to-Know Law,

or the act of February 14, 2008 (P.L.6, No.3), known as the

Right-to-Know Law.

Section 103. Title 24 is amended by adding a section to

read:

§ 8103.1. Reference to Public School Employees' Retirement

System.

(a) Reference.--As of the effective date of this section,

unless the context clearly indicates otherwise, any reference to

the Public School Employees' Retirement System in a statutory

provision, other than this part, and 71 Pa.C.S. Pt. XXV

(relating to retirement for State employees and officers), shall

include a reference to the plan, and any reference to the Public

School Employees' Retirement Fund shall include a reference to

the trust.

(b) Agreement.--The agreement of an employer to make

contributions to the fund or to enroll its employees as members

in the system shall be deemed to be an agreement to make

contributions to the trust or to enroll its employees in the

plan.

Section 104. Sections 8301, 8302(a), (b), (c) and (d),

20150HB0727PN1555 - 15 -

8303.1 and 8304(a) of Title 24 are amended to read:

§ 8301. Mandatory and optional membership in the system and

participation in the plan.

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

mandatory as of the effective date of employment for all school

employees except the following:

(1) [Any] Subject to the provisions in subsection (a.1),

any officer or employee of the Department of Education,

State-owned educational institutions, community colleges,

area vocational-technical schools, technical institutes[,] or

[the] The Pennsylvania State University and who is a member

of the State Employees' Retirement System or a member of

another retirement program approved by the employer.

(2) (i) Any school employee [who is not a member of the

(2) [ANY] SUBJECT TO THE PROVISIONS IN SUBSECTION (A.2),

ANY SCHOOL EMPLOYEE WHO IS NOT A MEMBER OF THE system and]

who is employed on a per diem or hourly basis for less than

80 full-day sessions or 500 hours in any fiscal year or

annuitant who returns to school service under the provisions

of section 8346(b) (relating to termination of annuities).

(ii) Notwithstanding subparagraph (i), any school

employee who, on or after July 1, 2016, begins school

service and who is employed on a per diem or hourly basis

for less than 80 full-day sessions or 500 hours in any

fiscal year or annuitant who returns to school service

under the provisions of section 8346(b).

(3) Any officer or employee of a governmental entity who

subsequent to December 22, 1965, and prior to July 1, 1975,

administers, supervises[,] or teaches classes financed wholly

or in part by the Federal Government so long as he continues

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in such service.

(4) [Any] SUBJECT TO THE PROVISIONS IN SUBSECTION (A.2),

ANY part-time school employee who has an individual

retirement account pursuant to the Federal act of September

2, 1974 (Public Law 93-406, 88 Stat. 829), known as the

Employee Retirement Income Security Act of 1974.

(5) Any school employee who first begins school service

on or after July 1, 2016.

(a.1) Exceptions to mandating participation in plan.--

(1) Any officer or employee of the Department of

Education, a State-owned educational institution, a community

college or The Pennsylvania State University who is an active

member on December 31, 2015, and January 1, 2016, shall

remain an active member in the officer's or employee's class

of service until termination of school service. Any officer

or employee of the Department of Education, a State-owned

educational institution, a community college or The

Pennsylvania State University who becomes a school employee

on or after January 1, 2016, shall not be eligible for

membership in the system and shall not be eligible to become

a participant in the plan.

(2) Any officer or employee of an area vocational-

technical school or technical institute who is an active

member on June 30, 2016, and July 1, 2016, shall remain an

active member in the officer's or employee's class of service

until termination of school service. Any officer or employee

of an area vocational-technical school or technical institute

who becomes a school employee on or after July 1, 2016, shall

be a mandatory participant in the plan and shall not be

eligible to elect membership or participation in the system.

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(3) Any school employee other than those listed in

subsection (a)(1) who is an active member on June 30, 2016,

and July 1, 2016, shall remain an active member in the

employee's class of service until termination of school

service.

(A.2) PER DIEM AND HOURLY EMPLOYEES.--ON OR AFTER JULY 1,

2016, ANY SCHOOL EMPLOYEE WHO IS NOT A MEMBER OF THE SYSTEM AND

WHO IS EMPLOYED ON A PER DIEM OR HOURLY BASIS SHALL BE A

MANDATORY PARTICIPANT IN THE PLAN, UNLESS THE EMPLOYEE IS A

PART-TIME SCHOOL EMPLOYEE WHO HAS AN INDIVIDUAL RETIREMENT

ACCOUNT PURSUANT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT

OF 1974.

(b) Prohibited membership in system.--The school employees

categorized in subsection (a)(1) [and (2)], (2), (4) and (5)

shall not have the right to elect membership in the system.

categorized in subsection (a)(3) and, if otherwise eligible,

subsection (a)(4) shall have the right to elect membership in

the system before July 1, 2016. Once such election is exercised,

membership shall commence from the original date of eligibility

and shall continue until the termination of such service.

(d) Mandatory participation in plan.--Subject to the

exceptions in subsection (a.1), a school employee who first

begins school service on or after July 1, 2016, shall be a

mandatory participant in the plan as a result of such school

service.

§ 8302. Credited school service.

(a) Computation of credited service.--In computing credited

school service of a member for the determination of benefits, a

full-time salaried school employee shall receive one year of

20150HB0727PN1555 - 18 -

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credit for each school year or the corresponding fraction

thereof, in accordance with the proportion of the full school

year for which the required regular member contributions have

been made to the fund, or for which such contributions otherwise

required for such service were not made to the fund solely by

reason of any provision of this part relating to the limitations

under IRC § 401(a)(17) or 415(b). A per diem or hourly school

employee shall receive one year of credited service for each

nonoverlapping period of 12 consecutive months in which he is

employed and for which contributions are made to the fund, or

would have been made but for such limitations under the IRC, for

at least 180 full-day sessions or 1,100 hours of employment. If

such member was employed and contributions were made to the fund

for less than 180 full-day sessions or 1,100 hours, he shall be

credited with a fractional portion of a year determined by the

ratio of the number of full-day sessions or hours of service

actually rendered and for which contributions are made to the

fund to 180 full-day sessions or 1,100 hours, as the case may

be. A part-time salaried employee shall be credited with the

fractional portion of the year which corresponds to the service

actually rendered and for which contributions are made to the

fund in relation to the service required as a comparable full-

time salaried employee. In no case shall a member receive more

than one year of credited service for any 12 consecutive months

or a member who has elected multiple service receive an

aggregate in the two systems of more than one year of credited

service for any 12 consecutive months.

(b) Approved leaves of absence.--An active member or active

participant shall receive credit for an approved leave of

absence provided that:

20150HB0727PN1555 - 19 -

(1) the member returns for a period at least equal to

the length of the leave or one year as a member of the system

or the participant returns to school service as an active

participant in the plan, whichever is less, to the school

district which granted his leave, unless such condition is

waived by the employer; and

(2) the proper contributions are made by the member and

the employer or by the active participant and the employer.

* * *

in the system shall be cancelled if a member withdraws his

accumulated deductions.

(d) Credit for military service.--A school employee who has

performed USERRA leave may receive credit in the system or

participate in the plan as follows:

(1) For purposes of determining whether a member is

eligible to receive credited service in the system for a

period of active military service, other than active duty

service to meet periodic training requirements, rendered

after August 5, 1991, and that began before the effective

date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73

(relating to military leave of absence) shall apply to all

individuals who were active members of the system when the

period of military service began, notwithstanding if the

member is not defined as an employee under 51 Pa.C.S. § 7301

(relating to definitions). School employees may not receive

service credit or exercise the options under 51 Pa.C.S. §

7306(a), (b) and (c) (relating to retirement rights) for

military leaves that begin on or after the effective date of

this subsection, except otherwise provided under this

20150HB0727PN1555 - 20 -

subsection.

(2) A school employee who has performed USERRA leave may

receive credit in the system as provided by this paragraph.

(i) A school employee who is reemployed from USERRA

leave as an active member of the system shall be treated

as not having incurred a break in school service by

reason of the USERRA leave and shall be granted

eligibility points as if the school employee had not been

on the USERRA leave. If a school employee who is

reemployed from USERRA leave as an active member of the

system subsequently makes regular member contributions,

shared-risk member contributions and any other member

contributions in the amounts and in the time periods

required by 38 U.S.C. Ch. 43 (relating to employment and

reemployment rights of members of the uniformed services)

and IRC § 414(u) as if the school employee had continued

in his school office or employment and performed school

service and been compensated during the period of USERRA

leave, the school employee shall be granted school

service credit for the period of USERRA leave. The

employee shall have his benefits, rights and obligations

determined under this part as if he was an active member

who performed creditable school service during the USERRA

leave in the job position that he would have held had he

not been on USERRA leave and received the compensation on

which the member contributions to receive school service

credit for the USERRA leave were determined.

(ii) For purposes of determining whether a school

employee has made the required employee contributions for

school service credit for USERRA leave, if an employee

20150HB0727PN1555 - 21 -

who is reemployed from USERRA leave as an active member

of the system terminates school service or dies in school

service before the expiration of the allowed payment

period, school service credit for the USERRA leave shall

be granted as if the required member contributions were

paid the day before termination or death. The amount of

the required member contributions shall be treated as an

incomplete payment subject to the provisions of section

8325 (relating to incomplete payments). Upon a subsequent

return to school service or to State service as a

multiple service member, the required member

contributions treated as incomplete payments shall be

treated as member contributions that were either

withdrawn in a lump sum at termination or paid as a lump

sum under section 8345(a)(4) (relating to member's

options). For this purpose, the exclusion of Class T-E

and Class T-F members from electing a form of payment

under section 8345(a)(4)(iii) shall be ignored.

(iii) A school employee who is reemployed from

USERRA leave as an active member of the system and who

does not make the required member contributions or makes

only part of the required member contributions within the

allowed payment period shall not be:

(A) Granted credited service for the period of

USERRA leave for which the required member

contributions were not timely made.

(B) Eligible to subsequently make contributions.

nonschool service credit for the period of USERRA

leave for which the required member contributions

20150HB0727PN1555 - 22 -

were not timely made.

(2.1) The following shall apply:

(i) A participant who is reemployed from USERRA

leave shall be treated as not having incurred a break in

school service by reason of the USERRA leave AND SHALL BE

GRANTED VESTING CREDIT AS IF THE PARTICIPANT HAD NOT BEEN

ON USERRA LEAVE . If a participant who is reemployed from

USERRA leave subsequently makes mandatory pickup

participant contributions in the amounts and in the time

periods required by 38 U.S.C. Ch. 43 (relating to

employment and reemployment rights of members of the

uniformed services) and IRC § 414(u) as if the

participant had continued in school employment and

performed school service and been compensated during the

period of USERRA leave, then the participant's employer

shall make the corresponding employer defined

contributions. Such an employee shall have the employees

contributions, benefits, rights and obligations

determined under this part as if he were an active

participant who performed school service during the

USERRA leave in the job position that the employee would

have held had he not been on USERRA leave and received

the compensation on which the mandatory pickup

participant contributions to receive school service

credit for the USERRA leave were determined, including

the right to make voluntary contributions on such

compensation as permitted by law.

(ii) A participant who is reemployed from USERRA

leave who does not make the mandatory pickup participant

contributions or makes only part of the mandatory pickup

20150HB0727PN1555 - 23 -

<--

participant contributions within the allowed payment

period shall not be eligible to make mandatory pickup

participant contributions and voluntary contributions at

a later date for the period of USERRA leave for which the

mandatory pickup participant contributions were not

timely made.

(3) A school employee who is a member of the system and

performs USERRA leave from which the employee could have been

reemployed from USERRA leave had the school employee returned

to school service in the time frames required by 38 U.S.C.

Ch. 43 for reemployment rights, but did not do so, shall be

able to receive creditable nonschool service as

nonintervening military service for the period of USERRA

leave if the employee later returns to school service as an

active member of the system and is otherwise eligible to

purchase the service as nonintervening military service.

(3.1) A participant employee who performs USERRA leave

from which the employee could have been reemployed from

USERRA leave had the school employee returned to school

service in the time frames required by 38 U.S.C. Ch. 43 for

reemployment rights, but did not do so, shall not be eligible

to make mandatory pickup participant contributions or

voluntary contributions for the period of USERRA leave should

the employee later return to school service and be a

participant in the plan.

(4) [A school employee] An active member or inactive

member on leave without pay who, on or after the effective

date of this subsection, is granted a leave of absence under

section 1178 of the Public School Code, a leave of absence

under 51 Pa.C.S. § 4102 (relating to leaves of absence for

20150HB0727PN1555 - 24 -

certain government employees) or a military leave under 51

Pa.C.S. Ch. 73, that is not USERRA leave shall be able to

receive creditable nonschool service as nonintervening

military service should the employee return to school service

as an active member of the system and is otherwise eligible

to purchase the service as nonintervening military service.

(4.1) An active participant or inactive participant who,

on or after the effective date of this subsection, is granted

a leave of absence under 51 Pa.C.S. § 4102 (relating to

leaves of absence for certain government employees) or a

military leave under 51 Pa.C.S. Ch. 73 (relating to military

leave of absence), that is not USERRA leave shall not be able

to make mandatory pickup participant contributions or

voluntary contributions during or for the leave of absence or

military leave, and shall not have employer defined

contributions made during such leave, without regard to

whether or not the school employee received salary, wages,

stipends, differential wage payments or other payments from

his employer during the leave, notwithstanding any provision

to the contrary in 51 Pa.C.S. Ch. 73 or § 4102.

(5) If a member dies while performing USERRA leave, the

beneficiaries or survivor annuitants of the deceased member

shall be entitled to any additional benefits, including

eligibility points, other than benefit accruals relating to

the period of qualified military service, provided under this

part as if the member resumed and then terminated employment

on account of death.

(5.1) If a participant dies while performing USERRA

leave, then the beneficiaries or successor payees, as the

case may be, of the deceased participant are entitled to any

20150HB0727PN1555 - 25 -

additional benefits, other than benefit accruals relating to

the period of qualified military service, provided under this

part as if the participant had resumed and then terminated

employment on account of death.

(6) A school employee who is on a leave of absence from

his duties as a school employee and for which 51 Pa.C.S. §

4102 provides that he is not to suffer a loss of pay, time or

efficiency shall not be an active member, receive service

credit or make member contributions for the leave of absence

except as provided for in this part. Notwithstanding this

paragraph, any pay the member receives under section 1178 of

the Public School Code or 51 Pa.C.S. § 4102 shall be included

in the determination of final average salary and other

calculations in the system utilizing compensation as if the

payments were compensation under this part.

§ 8303.1. Waiver of adjustments.

(a) Allowance.--Upon appeal by an affected member,

participant, beneficiary or survivor annuitant, the board may

waive an adjustment or any portion of an adjustment made under

section 8534(b) (relating to fraud and adjustment of errors) if

in the opinion of the board or the board's designated

representative:

(1) the adjustment or portion of the adjustment will

cause undue hardship to the member, participant, beneficiary

or survivor annuitant;

(2) the adjustment was not the result of erroneous

information supplied by the member, participant, beneficiary

or survivor annuitant;

(3) the member or participant had no knowledge or notice

of the error before adjustment was made, and the member,

20150HB0727PN1555 - 26 -

participant, beneficiary or survivor annuitant took action

with respect to their benefits based on erroneous information

provided by the system or plan; and

(4) the member, participant, beneficiary or survivor

annuitant had no reasonable grounds to believe the erroneous

information was incorrect before the adjustment was made.

(b) Time period.--In order to obtain consideration of a

waiver under this section, the affected member, participant,

beneficiary or survivor annuitant must appeal to the board in

writing within 30 days after receipt of notice that benefits

have been adjusted or, if no notice was given, within 30 days

after the adjustment was known or should have been known to the

affected member, participant, beneficiary or survivor annuitant.

For any adjustments made prior to the effective date of this

subsection for which the member, participant, beneficiary or

survivor annuitant appealed to the board and was denied, an

appeal under this section must be filed within 90 days of the

effective date of this subsection.

§ 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, Class

T-E or Class T-F service credit for creditable nonschool service

and Class T-D, Class T-E or Class T-F 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 Class T-F member pursuant to section 8305.2

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

(relating to classes of service), as set forth in subsection (b)

provided that he is not entitled to receive, eligible to receive

20150HB0727PN1555 - 27 -

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 in the system and

participation in the plan), 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 105. Section 8305(b) of Title 24 is amended and the

section is amended by adding a subsection to read:

§ 8305. Classes of service.

* * *

(b) Other class membership.--A school employee who is a

member of a class of service other than Class T-C on the

effective date of this part may elect to become a member of

Class T-C or Class T-D or may retain his membership in such

other class until the service is discontinued or he elects to

become a full coverage member or elects to purchase credit for

previous school or creditable nonschool service. Any service

thereafter as a member of the system shall be credited as Class

T-C or T-D service as applicable.

* * *

(f) Ineligibility for active membership and classes of

service.--An individual who first becomes a school employee on

or after July 1, 2016, shall be ineligible for active membership

in the system. Instead, any such school employee shall be a

participant in the plan as a result of such school service,

20150HB0727PN1555 - 28 -

subject to the provisions in section 8301 (relating to mandatory

and optional membership in the system and participation in the

plan).

Section 106. Sections 8305.2(c) and (d) and 8306(b) of Title

24 are amended to read:

§ 8305.2. Election to become a Class T-F member.

* * *

member shall be irrevocable and shall commence from the original

date of eligibility and shall remain in effect for all future

school service creditable in the system. A member who elects

Class T-F membership shall receive Class T-F service credit on

any and all future service, regardless of whether the member

terminates service or has a break in service.

(d) Effect of failure to make election.--If a member fails

to timely file an election to become a Class T-F member, then

the member shall be enrolled as a member of Class T-E, unless

the school employee is required to be a participant in the plan,

and the member shall never be able to elect Class T-F service,

regardless of whether the member terminates service or has a

break in service.

§ 8306. Eligibility points.

* * *

(b) Transitional rule.--For the purposes of the transition:

(1) In determining whether a member, other than a

disability annuitant who returns to school service after June

30, 2001, upon termination of the disability annuity, who is

not a school employee or a State employee on June 30, 2001,

and July 1, 2001, and who has previous school service, has

the five eligibility points required by the definition of

20150HB0727PN1555 - 29 -

"vestee" in sections 8102 (relating to definitions), 8307

(relating to eligibility for annuities), 8308 (relating to

eligibility for vesting) and 8345 (relating to member's

options), only eligibility points earned by performing

credited school service as an active member of the system,

USERRA leave or credited State service as an active member of

the State Employees' Retirement System after June 30, 2001,

shall be counted until such member earns one eligibility

point by performing credited school service, USERRA leave or

credited State service after June 30, 2001, at which time all

eligibility points as determined under subsection (a) shall

be counted.

(2) A member subject to paragraph (1) shall be

considered to have satisfied any requirement for five

eligibility points contained in this part if the member has

at least ten eligibility points determined under subsection

(a).

Section 107. Sections 8307(c), 8310, 8321(b), 8322.1(a),

8323(a) and (d), 8324(b), (c) and (d), 8325.1(a), 8326(a), (c)

and (d), 8327, 8328(b), (c), (d), (e), (g) and (h), 8330, 8341,

8342(a), 8344(a) and (b), 8346 and 8349 heading, (a) and (b) of

Title 24 are amended to read:

§ 8307. Eligibility for annuities.

* * *

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)

20150HB0727PN1555 - 30 -

<--

(relating to duties of board regarding applications and

elections of members and participants).

§ 8310. Eligibility for refunds.

Upon termination of service any active member, regardless of

eligibility for benefits, may elect to receive his accumulated

deductions in lieu of any benefit from the system to which he is

entitled.

§ 8321. Regular member contributions for current service.

* * *

(b) Class T-E and Class T-F shared-risk contributions.--

Commencing with the annual actuarial valuation performed under

section 8502(j) (relating to administrative duties of board),

for the period ending June 30, 2014, and every three years

thereafter, the board shall compare the actual investment rate

of return, net of fees, to the annual interest rate adopted by

the board for the calculation of the normal contribution rate,

based on the market value of assets, for the prior ten-year

period. If the actual investment rate of return, net of fees, is

less than the annual interest rate adopted by the board by an

amount of 1% or more, the shared-risk contribution rate of Class

T-E and T-F members will increase by .5%. If the actual

investment rate of return, net of fees, is equal to or exceeds

the annual interest rate adopted by the board, the shared-risk

contributions rate of Class T-E and T-F members will decrease by

.5%. Class T-E and T-F members will contribute at the total

member contribution rate in effect when they are hired. The

total member contribution rate for Class T-E members shall not

be less than 7.5%, nor more than 9.5%. The total member

contribution rate for Class T-F members shall not be less than

10.3%, nor more than 12.3%. Notwithstanding this subsection, if

20150HB0727PN1555 - 31 -

the system's actuarial funded status is 100% or more as of the

date used for the comparison required under this subsection, as

determined in the current annual actuarial valuation, the

shared-risk contribution rate shall be zero. In the event that

the annual interest rate adopted by the board for the

calculation of the normal contribution rate is changed during

the period used to determine the shared-risk contribution rate,

the board, with the advice of the actuary, shall determine the

applicable rate during the entire period, expressed as an annual

rate. For periods commencing on or after July 1, 2016, the

determination of the shared-risk member contribution rate shall

be based on the annual interest rate adopted by the board for

the calculation of the accrued liability contribution rate under

section 8328(c) (relating to actuarial cost method).

(1) Until the system has a ten-year period of investment

rate of return experience following the effective date of

this subsection, the look-back period shall begin not earlier

than the effective date of this subsection.

(2) For any fiscal year in which the employer

contribution rate is lower than the final contribution rate

under section 8328(h) (relating to actuarial cost method),

the total member contribution rate for Class T-E and T-F

members shall be prospectively reset to the basic

contribution rate.

(3) There shall be no increase in the member

contribution rate if there has not been an equivalent

increase to the employer contribution rate over the previous

three-year period.

§ 8322.1. Pickup contributions.

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

20150HB0727PN1555 - 32 -

contributions to the fund required to be made under sections

8321 (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 in the system 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,

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

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

if the member is a Class T-F 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 service as an active member or inactive member

and State service as an active member or inactive member on

leave without pay up to the date of purchase.

* * *

(d) Certification and payment of contributions.--

20150HB0727PN1555 - 33 -

(1) In all cases other than for the purchase of credit

for sabbatical leave and activated military service leave

beginning before the effective date of paragraph (2), the

amount payable shall be certified by the board in accordance

with methods approved by the actuary and may be paid in a

lump sum within 90 days or in the case of an active member or

an eligible State employee who is an active member of the

State Employees' Retirement System it may be amortized with

statutory interest through salary deductions to the system in

amounts agreed upon by the member and the board. The salary

deduction amortization plans agreed to by members and the

board may include a deferral of payment amounts and statutory

interest until the termination of school service or State

service as the board in its sole discretion decides to allow.

The board may limit salary deduction amortization plans to

such terms as the board in its sole discretion determines. In

the case of an eligible State employee who is an active

member of the State Employees' Retirement System, the agreed

upon salary deductions shall be remitted to the State

Employees' Retirement Board, which shall certify and transfer

to the board the amounts paid.

(2) In the case of activated military service leave

beginning before the effective date of this paragraph, the

amount payable may be paid according to this subsection or

subsection (c.1), but all lump sum payments must be made

within one year of the termination of activated military

service leave.

§ 8324. Contributions for purchase of credit for creditable

nonschool service and noncreditable school service.

* * *

20150HB0727PN1555 - 34 -

(b) Nonintervening military service.--The amount due for the

purchase of credit for military service other than intervening

military service shall be determined by applying the member's

basic contribution rate plus the normal contribution rate as

provided in section 8328 (relating to actuarial cost method) at

the time of entry of the member into school service subsequent

to such military service to one-third of his total compensation

received during the first three years of such subsequent

credited school service and multiplying the product by the

number of years and fractional part of a year of creditable

nonintervening military service being purchased together with

statutory interest during all periods of subsequent school

service as an active or inactive member and State service as an

active member or inactive member on leave without pay to date of

purchase. Upon certification of the amount due, payment may be

made in a lump sum within 90 days or in the case of an active

member or an eligible State employee who is an active member of

the State Employees' Retirement System it may be amortized with

statutory interest through salary deductions to the system in

amounts agreed upon by the member and the board. The salary

deduction amortization plans agreed to by members and the board

may include a deferral of payment amounts and statutory interest

until the termination of school service or State service as the

board in its sole discretion decides to allow. The board may

limit salary deduction amortization plans to such terms as the

board in its sole discretion determines. In the case of an

eligible State employee who is an active member of the State

Employees' Retirement System, the agreed upon salary deductions

shall be remitted to the State Employees' Retirement Board,

which shall certify and transfer to the board the amounts paid.

20150HB0727PN1555 - 35 -

Application may be filed for all such military service credit

upon completion of three years of subsequent credited school

service and shall be credited as Class T-C service. In the event

that a Class T-E member makes a purchase of credit for such

military service, then such service shall be credited as Class

T-E service. In the event that a Class T-F member makes a

purchase of credit for such military service, then such service

shall be credited as Class T-F service.

of credit for intervening military service shall be determined

by the member's basic contribution rate and compensation at the

time of entry of the member into active military service,

together with statutory interest during all periods of

subsequent school service as an active or inactive member and

State service as an active member or inactive member on leave

without pay to date of purchase. Upon application for such

credit the amount due shall be certified in the case of each

member by the board, in accordance with methods approved by the

actuary, and contributions may be made by one of the following

methods:

(1) Regular monthly payments during active military

service.

(2) A lump sum payment within 90 days of certification

of the amount due.

(3) Salary deductions to the system in amounts agreed

upon by the member and the board. The salary deduction

amortization plans agreed to by the members and the board may

include a deferral of payment amounts and statutory interest

until the termination of school service or State service as

the board in its sole discretion decides to allow. The board

20150HB0727PN1555 - 36 -

may limit salary deduction amortization plans to such terms

as the board in its sole discretion determines. In the case

of an eligible State employee who is an active member of the

State Employees' Retirement System, the agreed upon salary

deductions shall be remitted to the State Employees'

Retirement Board, which shall certify and transfer to the

board the amounts paid.

(d) Other creditable nonschool service and noncreditable

school service.--

(1) Contributions on account of Class T-C credit for

creditable nonschool service other than military service

shall be determined by applying the member's basic

contribution rate plus the normal contribution rate as

provided in section 8328 at the time of the member's entry

into school service subsequent to such creditable nonschool

service to his total compensation received during the first

year of subsequent credited school service and multiplying

the product by the number of years and fractional part of a

year of creditable nonschool service being purchased together

with statutory interest during all periods of subsequent

school service as an active or inactive member or State

service as an active member or inactive member on leave

without pay to the date of purchase, except that in the case

of purchase of credit for creditable nonschool service as set

forth in section 8304(b)(5) (relating to creditable nonschool

service) the member shall pay only the employee's share

unless otherwise provided by law. Upon certification of the

amount due, payment may be made in a lump sum within 90 days

or in the case of an active member or an eligible State

employee who is an active member of the State Employees'

20150HB0727PN1555 - 37 -

Retirement System it may be amortized with statutory interest

through salary deductions to the system in amounts agreed

upon by the member and the board. The salary deduction

amortization plans agreed to by the members and the board may

include a deferral of payment amounts and statutory interest

until the termination of school service or State service as

the board in its sole discretion decides to allow. The board

may limit salary deduction amortization plans to such terms

as the board in its sole discretion determines. In the case

of an eligible State employee who is an active member of the

State Employees' Retirement System, the agreed upon salary

deductions shall be remitted to the State Employees'

Retirement Board, which shall certify and transfer to the

board the amounts paid.

(2) Contributions on account of Class T-E or Class T-F

credit for creditable nonschool service other than military

service shall be the present value of the full actuarial cost

of the increase in the projected superannuation annuity

caused by the additional service credited on account of the

purchase. Upon certification of the amount due, payment may

be made in a lump sum within 90 days or, in the case of an

active member or an eligible State employee who is an active

member of the State Employees' Retirement System, it may be

amortized with statutory interest through salary deductions

to the system in amounts agreed upon by the member and the

board. The salary deduction amortization plans agreed to by

the members and the board may include a deferral of payment

amounts and statutory interest until the termination of

school service or State service as the board in its sole

discretion decides to allow. The board may limit salary

20150HB0727PN1555 - 38 -

deduction amortization plans to the terms as the board in its

sole discretion determines. In the case of an eligible State

employee who is an active member of the State Employees'

Retirement System, the agreed upon salary deductions shall be

remitted to the State Employees' Retirement Board, which

shall certify and transfer to the board the amounts paid.

(3) Contributions on account of Class T-E or Class T-F

credit for noncreditable school service other than military

service shall be the present value of the full actuarial cost

of the increase in the projected superannuation annuity

caused by the additional service credited on account of the

purchase. Upon certification of the amount due, payment may

be made in a lump sum within 90 days or, in the case of an

active member or an eligible State employee who is an active

member of the State Employees' Retirement System, it may be

amortized with statutory interest through salary deductions

to the system in amounts agreed upon by the member and the

board. The salary deduction amortization plans agreed to by

the members and the board may include a deferral of payment

amounts and statutory interest until the termination of

school service or State service as the board in its sole

discretion decides to allow. The board may limit salary

deduction amortization plans to the terms as the board in its

sole discretion determines. In the case of an eligible State

employee who is an active member of the State Employees'

Retirement System, the agreed upon salary deductions shall be

remitted to the State Employees' Retirement Board, which

shall certify and transfer to the board the amounts paid.

* * *

§ 8325.1. Annual compensation limit under IRC § 401(a)(17).

20150HB0727PN1555 - 39 -

(a) General rule.--In addition to other applicable

limitations set forth in this part, and notwithstanding any

provision of this part to the contrary, the annual compensation

of each noneligible member and each participant taken into

account for benefit purposes under this subchapter shall not

exceed the limitation under IRC § 401(a)(17). On and after July

1, 1996, any reference in this part to the limitation under IRC

§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of

1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual

compensation limit set forth in this subsection. The OBRA '93

annual compensation limit is $150,000, as adjusted by the

commissioner for increases in the cost of living in accordance

with IRC § 401(a)(17)(B). The cost-of-living adjustment in

effect for a calendar year applies to any determination period

which is a period, not exceeding 12 months, over which

compensation is determined, beginning in such calendar year. If

a determination period consists of fewer than 12 months, the

OBRA '93 compensation limit will be multiplied by a fraction,

the numerator of which is the number of months in the

determination period and the denominator of which is 12.

* * *

§ 8326. Contributions by the Commonwealth.

(a) Contributions on behalf of active members and

participants.--The Commonwealth shall make contributions into

the fund on behalf of all active members and participants,

including members and participants on activated military service

leave, in an amount equal to one-half the amount certified by

the board as necessary to provide, together with the members'

contributions, annuity reserves on account of prospective

annuities as provided in this part in accordance with section

20150HB0727PN1555 - 40 -

8328 (relating to actuarial cost method). In case a school

employee has elected membership in a retirement program approved

by the employer, the Commonwealth shall contribute to such

program on account of his membership an amount no greater than

the amount it would have contributed had the employee been a

member of the Public School Employees' Retirement System.

* * *

(1) The Commonwealth shall make contributions into the

fund on behalf of all active members and participants,

including members and participants on activated military

service leave, for service performed after June 30, 1995, in

the following manner:

(i) For members and participants who are employees

of employers that are school entities, no Commonwealth

contributions shall be made.

(ii) For members and participants who are employees

of employers that are not school entities, the amount

computed under subsection (a).

(2) The Commonwealth shall make contributions into the

fund on behalf of annuitants for all amounts due to the fund

after June 30, 1995, including, but not limited to, amounts

due pursuant to section 8328(d) and (f), in the following

manner:

(i) For members and participants who are employees

of employers who are school entities, no Commonwealth

contributions shall be made.

(ii) For members and participants who are employees

of employers who are not school entities, the amount

computed under subsection (b).

20150HB0727PN1555 - 41 -

(d) Contributions resulting from members reemployed from

USERRA leave.--When a school employee reemployed from USERRA

leave makes the member contributions required to be granted

school service credit for the USERRA leave before July 1, 2016,

either by actual payment or by actuarial debt under section 8325

(relating to incomplete payments), the Commonwealth employer or

other employer by whom the school employee is employed at the

time the member contributions are made, or the last employer

before termination in the case of payment under sections 8327

(relating to payments by employers) and 8535 (relating to

payments to school entities by Commonwealth), shall make any

employer contributions that would have been made under this

section as if the employee making the member contributions after

being reemployed from USERRA leave continued to be employed in

his school office or position instead of performing USERRA

leave.

§ 8327. Payments by employers.

(a) General rule.--[Each]

(1) For payments on or prior to June 30, 2016, each

employer, including the Commonwealth as employer of employees

of the Department of Education, State-owned colleges and

universities, Thaddeus Stevens College of Technology, Western

Pennsylvania 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

20150HB0727PN1555 - 42 -

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.

(2) For payments after June 30, 2016, each employer,

including the Commonwealth as employer of employees of the

Department of Education, State-owned colleges and

universities, Thaddeus Stevens College of Technology, Western

Pennsylvania 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

equal to one-half the sum of the percentages, as determined

under section 8328, 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, plus the accrued

liability contribution rate applied to the total compensation

of all active participants in the plan. 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), the contributions made by the employer on

behalf of such member shall be returned with valuation

interest upon application by the employer.

20150HB0727PN1555 - 43 -

(b) Deduction from appropriations.--

(1) To facilitate the payment of amounts due from any

employer to the fund and the trust through the State

Treasurer and to permit the exchange of credits between the

State Treasurer and any employer, the Secretary of Education

and the State Treasurer shall cause to be deducted and paid

into the fund and the trust from the amount of any moneys due

to any employer on account of any appropriation for schools

or other purposes amounts equal to the employer and pickup

contributions which an employer is required to pay to the

fund, as certified by the board, and as remains unpaid on the

date such appropriations would otherwise be paid to the

employer. Such amount shall be credited to the appropriate

accounts in the fund and the trust.

(2) To facilitate the payments of amounts due from any

charter school, as defined in Article XVII-A of the act of

March 10, 1949 (P.L.30, No.14), known as the Public School

Code of 1949, to the fund and the trust through the State

Treasurer and to permit the exchange of credits between the

State Treasurer and any employer, the Secretary of Education

and the State Treasurer shall cause to be deducted and paid

into the fund and the trust from any funds appropriated to

the Department of Education for basic education of the

chartering school district of a charter school and public

school employees' retirement contributions amounts equal to

the employer and pickup contributions which a charter school

is required to pay to the fund and the trust, as certified by

the board, and as remains unpaid on the date such

appropriations would otherwise be paid to the chartering

school district or charter school. Such amounts shall be

20150HB0727PN1555 - 44 -

credited to the appropriate accounts in the fund and the

trust. Any reduction in payments to a chartering school

district made pursuant to this section shall be deducted from

the amount due to the charter school district pursuant to the

Public School Code[ of 1949].

30, 1995, and before July 1, 2016, each employer, including the

Commonwealth as employer of employees of the Department of

Education, State-owned colleges and universities, Thaddeus

Stevens College of Technology, Western Pennsylvania School for

the Deaf, Scotland School for Veterans' Children and The

Pennsylvania State University, shall make payments to the fund

and the trust each quarter in an amount computed in the

following manner:

(1) For an employer that is a school entity, the amount

shall be the sum of the percentages as determined under

section 8328 applied to the total compensation during the pay

periods in the preceding quarter of all employees who were

active members of the system or active participants of the

plan during such period, including members or active

participants 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), the contribution made by the

employer on behalf of such member shall be returned with

valuation interest upon application by the employer.

(2) For an employer that is not a school entity, the

amount computed under subsection (a).

20150HB0727PN1555 - 45 -

(3) For any employer, whether or not a school entity, in

computing the amount of payment due each quarter, there shall

be excluded from the total compensation referred to in this

subsection and subsection (a) any amount of compensation of a

noneligible member on the basis of which member or

participant contributions have not been made by reason of the

limitation under IRC § 401(a)(17). Any amount of contribution

to the fund or trust paid by the employer on behalf of a

noneligible member or participant on the basis of

compensation which was subject to exclusion from total

compensation in accordance with the provisions of this

paragraph shall, upon the board's determination or upon

application by the employer, be returned to the employer with

valuation interest.

(d) Payments by employers after June 30, 2016.--After June

30, 2016, each employer, including the Commonwealth as employer

of employees of the Department of Education, State-owned

colleges and universities, Thaddeus Stevens College of

Technology, Western Pennsylvania School for the Deaf, Scotland

School for Veterans' Children and The Pennsylvania State

University, shall make payments to the fund and trust each

quarter in an amount computed in the following manner:

(1) For an employer that is a school entity, the amount

shall be the sum of the percentages as determined under

section 8328 applied to the total compensation during the pay

periods in the preceding quarter of all employees who were

active members of the system during such period, including

members on activated military service leave, plus the accrued

liability contribution rate applied to the total compensation

of all active participants in the plan. In the event a member

20150HB0727PN1555 - 46 -

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), the contribution made by the employer on behalf

of such member shall be returned with valuation interest upon

application by the employer.

(2) For an employer that is not a school entity, the

amount computed under subsection (a).

(3) For any employer, whether or not a school entity, in

computing the amount of payment due each quarter, there shall

be excluded from the total compensation referred to in this

subsection and subsection (a) any amount of compensation of a

noneligible member on the basis of which member or

participant contributions have not been made by reason of the

limitation under IRC § 401(a)(17). Any amount of contribution

to the fund paid by the employer on behalf of a noneligible

member or participant on the basis of compensation which was

subject to exclusion from total compensation in accordance

with the provisions of this paragraph shall, upon the board's

determination or upon application by the employer, be

returned to the employer with valuation interest.

(e) Deemed agreed to.--The agreement of an employer listed

in the definition of school employee under section 8102

(relating to definitions) or any other law to make contributions

to the fund or to enroll its employees as members in the system

shall be deemed to be an agreement to make contributions to the

trust or enroll its employees in the plan.

(f) Contributions.--The employer employing a participant

shall pick up the required mandatory participant contributions

20150HB0727PN1555 - 47 -

by a reduction in the compensation of the participant.

(g) Contributions resulting from members reemployed from

USERRA leave.--When a school employee reemployed from USERRA

leave makes the member contributions required to be granted

school service credit for the USERRA leave after June 30, 2016,

either by actual payment or by actuarial debt under section 8325

(relating to incomplete payments), the employer that employed

the school employee when the member contributions are made or

the last employer before termination in the case of payments

under section 8325 shall make the employer contributions that

would have been made under this section if the employee making

the member contributions after he is reemployed from USERRA

leave continued to be employed in his school office or position

instead of performing USERRA leave.

§ 8328. Actuarial cost method.

* * *

(b) Normal contribution rate.--[The]

(1) For fiscal years ending on or before June 30, 2015,

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 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

20150HB0727PN1555 - 48 -

member contributions, excluding the shared-risk

contributions.

(2) For fiscal years beginning on or after July 1, 2015,

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 all

active members, which percentage, if contributed on the basis

of the member's prospective compensation through the entire

period of active school service, would be sufficient to fund

the liability for any prospective benefit payable to the

member, in excess of that portion funded by his prospective

member contributions, excluding the shared-risk

contributions.

(1) For the fiscal years beginning July 1, 2002, and

ending June 30, 2011, the accrued liability contribution rate

shall be computed as the rate of total compensation of all

active members which shall be certified by the actuary as

sufficient to fund over a period of ten years from July 1,

2002, the present value of the liabilities for all

prospective benefits of active members, 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

20150HB0727PN1555 - 49 -

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),

in excess of the total assets in the fund (calculated by

recognizing the actuarially expected investment return

immediately and recognizing the difference between the actual

investment return and the actuarially expected investment

return over a five-year period), excluding the balance in the

annuity reserve account, and of the present value of normal

contributions and of member contributions payable with

respect to all active members on July 1, 2002, during the

remainder of their active service.

(2) For the fiscal years beginning July 1, 2003, and

ending June 30, 2011, the amount of each annual accrued

liability contribution shall be equal to the amount of such

contribution for the fiscal year, beginning July 1, 2002,

except that, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2002, but before

July 1, 2003, such additional liability shall be funded over

a period of ten years from the first day of July, coincident

with or next following the effective date of the increase.

The amount of each annual accrued liability contribution for

such additional legislative liabilities shall be equal to the

amount of such contribution for the first annual payment.

(3) Notwithstanding any other provision of law,

beginning July 1, 2004, and ending June 30, 2011, the

outstanding balance of the increase in accrued liability due

to the change in benefits enacted in 2001 and the outstanding

balance of the net actuarial loss incurred in fiscal year

20150HB0727PN1555 - 50 -

2000-2001 shall be amortized in equal dollar annual

contributions over a period that ends 30 years after July 1,

2002, and the outstanding balance of the net actuarial loss

incurred in fiscal year 2001-2002 shall be amortized in equal

dollar annual contributions over a period that ends 30 years

after July 1, 2003. For fiscal years beginning on or after

July 1, 2004, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2003, such

additional liability shall be funded in equal dollar annual

contributions over a period of ten years from the first day

of July coincident with or next following the effective date

of the increase.

(4) For the fiscal year beginning July 1, 2011, the

accrued liability contribution rate shall be computed as the

rate of total compensation of all active members which shall

be certified by the actuary as sufficient to fund as a level

percentage of compensation over a period of 24 years from

July 1, 2011, the present value of the liabilities for all

prospective benefits calculated as of June 30, 2010,

including the supplemental benefits as provided in sections

8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and

8348.7, in excess of the actuarially calculated assets in the

fund (calculated recognizing all realized and unrealized

investment gains and losses each year in level annual

installments over a ten-year period, provided that the

resulting actuarially calculated assets are constrained

within a range of 70% to 130% of market value). In the event

that the accrued liability is [increased] changed by

legislation enacted subsequent to June 30, 2010, such

[additional] change in liability shall be funded as a level

20150HB0727PN1555 - 51 -

percentage of compensation over a period of ten years from

the July 1 second succeeding the date such legislation is

enacted.

(5) Notwithstanding any other provision of this

subsection, for fiscal years beginning on or after July 1,

2015, compensation shall be defined as the total compensation

of all active members and active participants.

(6) For purposes of determining the accrued liability

contribution rate in this subsection and the experience

adjustment factor in subsection (e) for The Pennsylvania

State University, the State System of Higher Education,

State-owned educational institutions and community colleges,

the term "compensation of all active members and active

participants" shall include an additional amount equal to the

difference between:

(i) the actual compensation of all active members

and active participants of The Pennsylvania State

University, the State System of Higher Education, State-

owned educational institutions and community colleges;

and

(ii) the compensation of all active members, active

participants, active members of the State Employees'

Retirement System, active participants of the State

Employees' Defined Contribution Plan and employees who

are members or participants of an independent retirement

program approved by the employer of The Pennsylvania

State University, the State System of Higher Education,

State-owned educational institutions and community

collective colleges multiplied by a fraction equal to the

amount determined under subparagraph (i) as part of the

20150HB0727PN1555 - 52 -

June 30, 2015, actuarial valuation divided by the amount

of compensation of all active members, active

participants, active members of the State Employees'

Retirement System, active participants of the State

Employees' Defined Contribution Plan and employees who

are members or participants of an independent retirement

program approved by the employer determined as part of

the June 30, 2015, actuarial valuation.

(7) For the fiscal year beginning July 1, 2016, and all

subsequent fiscal years, The Pennsylvania State University,

the State System of Higher Education, each State-owned

educational institution and each community college shall make

such additional actuarial accrued liability contributions as

shall be certified by the board. The additional actuarial

accrued liability contributions shall be the product of:

(i) the amount by which the final contribution rate

exceeds the employer normal contribution rate determined

under subsection (b)(1); multiplied by,

(ii) and the difference between:

(A) the actual compensation of all active

members and active participants of each such

educational institution; and

(B) the compensation of all active members,

active participants, active members of the State

Employees' Retirement System, active participants of

the State Employees' Defined Contribution Plan and

employees who are members or participants of an

independent retirement program approved by the

employer of each such educational institution

multiplied by a fraction equal to the amount

20150HB0727PN1555 - 53 -

determined under clause (A) as part of the June 30,

2015, actuarial valuation divided by the amount of

compensation of all active members, active

participants, active members of the State Employees'

Retirement System, active participants of the State

Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer of each

such educational institution determined as part of

the June 30, 2015, actuarial valuation.

(d) Supplemental annuity contribution rate.--

(1) For the period of July 1, 2002, to June 30, 2011,

contributions from the Commonwealth and other employers

required to provide for the payment of the supplemental

annuities provided for in sections 8348, 8348.1, 8348.2,

8348.4 and 8348.5 shall be paid over a period of ten years

from July 1, 2002. The funding for the supplemental annuities

commencing 2002 provided for in section 8348.6 shall be as

provided in section 8348.6(f). The funding for the

supplemental annuities commencing 2003 provided for in

section 8348.7 shall be as provided in section 8348.7(f). The

amount of each annual supplemental annuities contribution

shall be equal to the amount of such contribution for the

fiscal year beginning July 1, 2002.

(2) For fiscal years beginning July 1, 2011, and ending

on or before June 30, 2015, contributions from the

Commonwealth and other employers whose employees are members

of the system required to provide for the payment of

supplemental annuities as provided in sections 8348, 8348.1,

8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be

20150HB0727PN1555 - 54 -

<--

paid as part of the accrued liability contribution rate as

provided for in subsection (c)(4), and there shall not be a

separate supplemental annuity contribution rate attributable

to those supplemental annuities. In the event that

supplemental annuities are increased by legislation enacted

subsequent to June 30, 2010, [the] but before July 1, 2015,

such additional liability for the increase in benefits shall

be funded as a level percentage of compensation over a period

of ten years from the July 1 second succeeding the date such

legislation is enacted.

(3) For fiscal years beginning on or after July 1, 2015,

contributions from employers whose employees are members of

the system required to provide for the payment of

supplemental annuities as provided in sections 8348, 8348.1,

8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be

paid as part of the accrued liability contribution rate as

provided for in subsection (c)(4), and there shall not be a

separate supplemental annuity contribution rate attributable

to those supplemental annuities. In the event that

supplemental annuities are increased by legislation enacted

subsequent to June 30, 2014, the additional liability for the

increase in benefits shall be funded as a level in equal

dollar installments as a percentage of compensation of all

active members and active participants over a period of ten

years from the July 1 second succeeding the date such

legislation is enacted.

(e) Experience adjustment factor.--

(1) For each year after the establishment of the accrued

liability contribution rate for the fiscal [year] years

beginning July 1, 2011, and ending on or before June 30,

20150HB0727PN1555 - 55 -

2015, any increase or decrease in the unfunded accrued

liability, excluding the gains or losses on the assets of the

health insurance account, due to actual experience differing

from assumed experience, changes in actuarial assumptions,

changes in contributions caused by the final contribution

rate being different from the actuarially required

contribution rate, active members making shared-risk

contributions or changes in the terms and conditions of the

benefits provided by the system by judicial, administrative

or other processes other than legislation, including, but not

limited to, reinterpretation of the provisions of this part,

recognized by the actuarial valuations on June 30, 2011, and

June 30, 2012, shall be amortized as a level percentage of

compensation over a period of 24 years beginning with the

July 1 second succeeding the actuarial valuation determining

said increases or decreases.

(2) (Reserved).

(3) For fiscal years beginning on or after July 1, 2015,

any increase or decrease in the unfunded accrued liability,

excluding the gains or losses on the assets of the health

insurance account, due to actual experience differing from

assumed experience, changes in actuarial assumptions, changes

in contributions caused by the final contribution rate being

different from the actuarially required contribution rate,

active members making shared-risk contributions or changes in

the terms and conditions of the benefits provided by the

system by judicial, administrative or other processes other

than legislation, including, but not limited to,

reinterpretation of the provisions of this part, shall be

amortized as a level percentage of compensation of all active

20150HB0727PN1555 - 56 -

members and active participants over a period of 24 years

beginning with the July 1 second succeeding the actuarial

valuation determining such increases or decreases.

* * *

(g) Temporary application of collared contribution rate.--

(1) The collared contribution rate for each year shall

be determined by comparing the actuarially required

contribution rate, calculated without regard for the costs

added by legislation, to the prior year's final contribution

rate.

(2) If, for any of the fiscal years beginning July 1,

2011, July 1, 2012, [and] or on or after July 1, 2013, the

actuarially required contribution rate, calculated without

regard for the costs added by legislation, is more than 3%,

3.5% and 4.5%, respectively, of the total compensation of all

active members greater than the prior year's final

contribution rate, then the collared contribution rate shall

be applied and be equal to the prior year's final

contribution rate increased by 3%, 3.5% and 4.5%,

respectively, of total compensation of all active members.

Otherwise, and for all other fiscal years, the collared

contribution rate shall not be applicable. In no case shall

the collared contribution rate be less than 4% of the total

compensation of all active members.

(h) Final contribution rate.--

(1) For the fiscal year beginning July 1, 2010, the

final contribution rate is 5% of the total compensation of

all active members. For each subsequent fiscal year for which

the collared contribution rate is applicable, the final

contribution rate shall be the collared contribution rate as

20150HB0727PN1555 - 57 -

calculated in subsection (g), plus the costs added by

legislation.

(2) For all other fiscal years ending on or before June

30, 2016, the final contribution rate shall be the

actuarially required contribution rate, provided that the

final contribution rate shall not be less than the normal

contribution rate as provided in subsection (b).

* * *

§ 8330. Appropriations by the Commonwealth.

(a) Annual submission of budget.--The board shall prepare

and through the Governor submit annually to the General Assembly

an itemized budget consisting of the amounts necessary to be

appropriated by the Commonwealth out of the General Fund

required to meet the separate obligations to both the fund and

the trust accruing during the fiscal period beginning July 1 of

the following year.

(b) Appropriation and payment.--The General Assembly shall

make an appropriation sufficient to provide for the separate

obligations of the Commonwealth to both the fund and the trust.

Such amount shall be paid by the State Treasurer through the

Department of Revenue into the fund or the trust as the case may

be within 30 days of receipt of the requisition presented each

quarter by the board.

§ 8341. Return of accumulated deductions.

Any member upon termination of service may, in lieu of all

benefits payable from the system under this chapter to which he

may be entitled, elect to receive his accumulated deductions.

§ 8342. Maximum single life annuity.

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

coverage member who is eligible to receive an annuity pursuant

20150HB0727PN1555 - 58 -

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], members and

participants) 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 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%: Further provided, In no event shall a Class T-E or

Class T-F member receive an annual benefit, calculated as of the

effective date of retirement, greater than the member's final

average salary:

(1) A standard single life annuity multiplied by the

class of service multiplier and calculated on the basis of

the number of years of credited school service other than

concurrent service.

(2) A standard single life annuity multiplied by the

class of service multiplier and calculated on the basis of

the number of years of concurrent service and multiplied by

the ratio of total compensation received in the school system

during the period of concurrent service to the total

20150HB0727PN1555 - 59 -

compensation received during such period.

(3) A supplemental annuity such that the total annuity

prior to any optional modification or any reduction due to

retirement prior to superannuation age shall be at least $100

for each full year of credited service.

* * *

§ 8344. Disability annuities.

(a) Amount of annuity.--A 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], members and participants) 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 and participants) 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

20150HB0727PN1555 - 60 -

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).

(b) Reduction on account of earned income.--Payments on

account of disability shall be reduced by that amount by which

the earned income of the annuitant, as reported in accordance

with section 8508(b) (relating to rights and duties of

annuitants) for the preceding year together with the disability

annuity payments for the year, exceeds the greater of $5,000 or

the last year's salary of the annuitant as a [school employee]

member of the system, provided that the annuitant shall not

receive less than his member's annuity or the amount to which he

may be entitled under section 8342, whichever is greater.

* * *

§ 8346. Termination of annuities.

(a) General rule.--If an annuitant returns to school service

or enters or has entered State service and elects multiple

service membership, any annuity payable to him under this part

shall cease effective upon the date of his return to school

service or entering State service without regard to whether he

is a mandatory, optional or prohibited member of the system or

participant in the plan or, if a multiple service member,

whether he is a mandatory, optional or prohibited member or

participant of the State Employees' Retirement System or State

Employees' Defined Contribution Plan and in the case of an

annuity other than a disability annuity the present value of

such annuity, adjusted for full coverage in the case of a joint

coverage member who makes the appropriate back contributions for

full coverage, shall be frozen as of the date such annuity

ceases. An annuitant who is credited with an additional 10% of

20150HB0727PN1555 - 61 -

membership service as provided in section 8302(b.2) (relating to

credited school service) and who returns to school service,

except as provided in subsection (b), shall forfeit such

credited service and shall have his frozen present value

adjusted as if his 10% retirement incentive had not been applied

to his account. In the event that the cost-of-living increase

enacted December 18, 1979, occurred during the period of such

State or school employment, the frozen present value shall be

increased, on or after the member attains superannuation age, by

the percent applicable had he not returned to service.

(a.1) Return of benefits.--In the event an annuitant whose

annuity ceases pursuant to this section receives any annuity

payment, including a lump sum payment pursuant to section 8345

(relating to member's options) on or after the date of his

return to school service or entering State service, the

annuitant shall return to the board the amount so received plus

statutory interest. The amount payable shall be certified in

each case by the board in accordance with methods approved by

the actuary and shall be paid in a lump sum within 90 days or in

the case of an active member or a State employee who is an

active member of the State Employees' Retirement System may be

amortized with statutory interest through salary deductions to

the system in amounts agreed upon by the member and the board.

The salary deduction amortization plans agreed to by the member

and the board may include a deferral of payment amounts and

statutory interest until the termination of school service or

State service as the board in its sole discretion decides to

allow. The board may limit salary deduction amortization plans

to such terms as the board in its sole discretion determines. In

the case of a State employee who is an active member of the

20150HB0727PN1555 - 62 -

State Employees' Retirement System, the agreed upon salary

deductions shall be remitted to the State Employees' Retirement

Board, which shall certify and transfer to the board the amounts

paid.

(a.2) Return of benefits paid during USERRA leave.--If a

former school employee is reemployed from USERRA leave who had

received any payments or annuity from the system during the

USERRA leave, the employee shall return to the board the amount

received plus statutory interest. The amount payable shall be

certified by the board in accordance with methods approved by

the actuary and:

(1) shall be paid in a lump sum within 30 days; or

(2) in the case of an active member, may be amortized

with statutory interest through salary deductions in amounts

agreed upon by the member and the board for not longer than a

period that starts with the date of reemployment and

continuing for up to three times the length of the member's

immediate past period of USERRA leave. A repayment period

under this paragraph may not exceed five years or a longer

time as agreed to between the board and the member.

(b) Return to school service during emergency.--When, in the

judgment of the employer, an emergency creates an increase in

the work load such that there is serious impairment of service

to the public or in the event of a shortage of appropriate

subject certified teachers or other personnel, an annuitant or

participant receiving distributions may be returned to school

service for a period not to extend beyond the school year during

which the emergency or shortage occurs, without loss of his

annuity or distributions. The annuitant shall not be entitled to

earn any credited service, and no contributions may be made by

20150HB0727PN1555 - 63 -

the annuitant, the employer or the Commonwealth on account of

such employment. Such service shall not be subject to member

contributions or be eligible for qualification as creditable

school service or for participation in the plan, mandatory

pickup participant contributions or employer defined

contributions.

(b.1) Return to school service in an extracurricular

position.--

(1) An annuitant or participant receiving distributions

may be employed under separate contract by a public school or

charter school in an extracurricular position performed

primarily outside regular instructional hours and not part of

mandated curriculum without loss of annuity. Neither the

annuitant, the participant receiving distributions, nor the

employer shall make contributions to the member's savings

account, the individual investment account or State

accumulation account respectively for such service. Further,

such contract shall contain a waiver whereby the annuitant

waives any potential retirement benefits that could arise

from the contract and releases the employer and the board

from any liability for such benefits. Such service shall not

be subject to member or participant contributions nor be

eligible for qualification as creditable school service or

for participation in the plan, mandatory pickup participant

contributions or employer defined contributions.

(2) Nothing in this subsection shall be construed to

abridge or limit any rights provided under a collective

bargaining agreement or any rights provided under the act of

July 23, 1970 (P.L.563, No.195), known as the Public Employe

Relations Act.

20150HB0727PN1555 - 64 -

(3) For purposes of this subsection, the term

"extracurricular position" means a contract position filled

by an annuitant that is separate from the established

academic course structure, including the position of athletic

director.

discontinuance of service, such [member] terminating school

employee 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] to which

shall be added, if the service after reemployment was as a

member of the system, 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 as a member of the system or as a member of

the State Employees' Retirement System during his entire period

of school and State service.

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

(1) An annuitant who returns to school service as an

active member of the system and earns three eligibility

points by performing credited school service or reemployment

from USERRA leave following the most recent period of receipt

of an annuity under this part, or an annuitant who enters

State service other than a participant in the State

Employees' Defined Contribution Plan and:

(i) is a multiple service member; or

(ii) who elects multiple service membership, and

earns three eligibility points by performing credited

20150HB0727PN1555 - 65 -

State service, reemployment from USERRA leave or credited

school service following the most recent period of

receipt of an annuity under this part, and who had the

present value of his annuity frozen in accordance with

subsection (a), shall qualify to have the effect of the

frozen present value resulting from all previous periods

of retirement eliminated, provided that all payments

under Option 4 and annuity payments payable during

previous periods of retirement plus interest as set forth

in paragraph (3) shall be returned to the fund in the

form of an actuarial adjustment to his subsequent

benefits or in such form as the board may otherwise

direct.

(2) Upon subsequent discontinuance of service and the

filing of an application for an annuity, a former annuitant

who qualifies to have the effect of a frozen present value

eliminated under this subsection shall be entitled to receive

the higher of either:

(i) an annuity (prior to optional modification)

calculated as if the freezing of the former annuitant's

account pursuant to subsection (a) had not occurred,

adjusted by crediting Class T-C school service as Class

T-D service as provided for in section 8305(c) (relating

to classes of service) and further adjusted according to

paragraph (3), provided that a former annuitant of the

system or a former annuitant of the State Employees'

Retirement System who retired under a provision of law

granting additional service credit if termination of

school or State service or retirement occurred during a

specific period of time shall not be permitted to retain

20150HB0727PN1555 - 66 -

the additional service credit under the prior law when

the annuity is computed for his most recent retirement;

(ii) an annuity (prior to optional modification)

calculated as if the former annuitant did not qualify to

have the effect on the frozen present value eliminated,

unless the former annuitant notifies the board in writing by

the later of the date the application for annuity is filed or

the effective date of retirement that the former annuitant

wishes to receive the lower annuity.

(3) In addition to any other adjustment to the present

value of the maximum single life annuity that a member may be

entitled to receive that occurs as a result of any other

provision of law, the present value of the maximum single

life annuity shall be reduced by all amounts paid or payable

to him during all previous periods of retirement plus

interest on these amounts until the date of subsequent

retirement. The interest for each year shall be calculated

based upon the annual interest rate adopted for that school

year by the board for the calculation of the normal

contribution rate pursuant to section 8328(b) (relating to

actuarial cost method).

§ 8349. Payment of benefits from the system.

(a) Annuities.--Any annuity granted under the provisions of

this part and paid from the fund shall be paid in equal monthly

installments.

(b) Death benefits.--If the amount of a death benefit

payable from the fund to a beneficiary of a member under section

8347 (relating to death benefits) or under the provisions of

Option 1 of section 8345(a)(1) (relating to member's options) is

20150HB0727PN1555 - 67 -

$10,000 or more, such beneficiary may elect to receive payment

according to one of the following options:

(1) A lump sum payment.

(2) An annuity actuarially equivalent to the amount

payable.

(3) A lump sum payment and an annuity such that the

annuity is actuarially equivalent to the amount payable less

the lump sum payment specified by the beneficiary.

* * *

Section 108. Title 24 is amended by adding a chapter to

read:

CHAPTER 84

SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN

Sec.

8401. Establishment.

8402. Plan document.

8403. Individual investment accounts.

8404. Participant contributions.

8405. Mandatory participant pickup contributions.

8406. Employer defined contributions.

8407. Eligibility for benefits.

8408. Death benefits.

8409. Vesting.

8410. Termination of distributions.

8411. Agreements with financial institutions and other

organizations.

8411.1. RELATION OF ADMINISTRATORS OF SCHOOL EMPLOYEES' DEFINED

CONTRIBUTION PLAN TO PROVIDERS OF 403(B) PLANS.

8412. Annuitization.

8413. Powers and duties of board.

20150HB0727PN1555 - 68 -

<--

8414. Responsibility for investment loss.

8415. Investments based on participants' investment allocation

choices.

8416. Expenses.

8417. Required distributions.

§ 8401. Establishment.

(a) School Employees' Defined Contribution Plan.---The plan

is established in accordance with this part. The board shall

administer and manage the plan, which shall be a defined

contribution plan exclusively for the benefit of those school

employees who participate in the plan and their beneficiaries

within the meaning of and in conformity with IRC § 401(a). The

board shall determine the terms and provisions of the plan not

inconsistent with this part, the Internal Revenue Code of 1986

and other applicable law and shall provide for the plan's

administration.

(b) School Employees Defined Contribution Trust.--The trust

is established as part of the plan in accordance with this part.

The trust shall be comprised of the individual investment

accounts and all assets and moneys in those accounts. The

members of the board shall be the trustees of the trust, which

shall be administered exclusively for the benefit of those

school employees who participate in the plan and their

beneficiaries within the meaning of and conformity with IRC §

401(a). The board shall determine the terms and provisions of

the trust not inconsistent with this part, the Internal Revenue

Code of 1986 and other applicable law and shall provide for the

investment and administration of the trust.

that have been or shall be withheld or contributed by the

20150HB0727PN1555 - 69 -

participants, the Commonwealth and employers in accordance with

this part shall be held in trust in any funding vehicle

permitted by the applicable provisions of IRC for the exclusive

benefit of the plan's participants and their beneficiaries until

such time as the funds are distributed to the participants or

their beneficiaries in accordance with the terms of the plan

document. The assets of the plan held in trust for the exclusive

benefit of the participants and their beneficiaries may be used

for the payment of the fees, costs and expenses related to the

administration and investment of the plan and the trust.

(d) Name for transacting business.--By the name of "The

School Employees' Defined Contribution Plan," all of the

business of the plan shall be transacted, the trust invested,

all requisitions for money drawn and payments made, and all of

its cash and securities and other property shall be held, except

that, any other law to the contrary notwithstanding, the board

may establish a nominee registration procedure for the purpose

of registering securities in order to facilitate the purchase,

sale or other disposition of securities pursuant to the

provisions of this part.

§ 8402. Plan document.

The board shall set forth the terms and provisions of the

plan and trust in a document containing the terms and conditions

of the plan and in a trust declaration that shall be published

in the Pennsylvania Bulletin. The creation of the document

containing the terms and conditions of the plan and the trust

declaration and the establishment of the terms and provisions of

the plan and the trust need not be promulgated by regulation or

formal rulemaking and shall not be subject to the act of July

31, 1968 (P.L.769, No.240), referred to as the Commonwealth

20150HB0727PN1555 - 70 -

Documents Law. A reference in this part or other law to the plan

shall include the plan document unless the context clearly

indicates otherwise.

§ 8403. Individual investment accounts.

The board shall:

(1) Establish in the trust an individual investment

account for each participant in the plan. All contributions

by a participant or an employer for or on behalf of a

participant shall be credited to the participant's individual

investment account, together with all interest and investment

earnings and losses. Investment and administrative fees,

costs and expenses shall be charged to the participants'

individual investment accounts.

(2) Separately track participant contributions,

including investment gains and losses and employer

contributions, including investment gains and losses, but all

interest, investment gains and losses and investment and

administrative fees, costs and expenses shall be allocated

proportionately.

§ 8404. Participant contributions.

(a) Mandatory contributions.--Each participant shall make

mandatory pickup participant contributions through payroll

deductions to his individual investment account equal to 6.5% of

compensation for current school service. The employer shall

cause such contributions for current service to be made and

deducted from each payroll or on such schedule established by

the board.

(b) Voluntary contributions.--A participant may make

voluntary contributions through direct trustee-to-trustee

transfers or through transfers of money received in an eligible

20150HB0727PN1555 - 71 -

rollover into the trust to the extent allowed by IRC § 402. Such

rollovers shall be made in a form and manner as determined by

the board, shall be credited to the participant's individual

investment account and shall be separately accounted for by the

board.

allowed that would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

IRC § 415 or in other provisions of law. In the event that any

disallowed contributions are made, any participant contributions

in excess of the limitations and investment earnings thereon

shall be refunded to the participant by the board.

§ 8405. Mandatory pickup participant contributions.

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

contributions to the trust required to be made under section

8404(a) (relating to participant contributions) with respect to

current school service rendered by an active participant shall

be picked up by the employer and shall be treated as the

employer's contribution for purposes of IRC § 414(h). After the

effective date of this section, an employer employing a

participant in the plan shall pick up the required mandatory

participant contributions by a reduction in the compensation of

the participant.

(b) Treatment for other purposes.--For all other purposes

under this part and otherwise, such mandatory pickup participant

contributions shall be treated as contributions made by a

participant in the same manner and to the same extent as if the

contributions were made directly by the participant and not

picked up.

§ 8406. Employer defined contributions.

20150HB0727PN1555 - 72 -

(a) Contributions for current service.--The employer of a

participant shall make employer defined contributions for

current service of each active participant, which shall be

credited to the active participant's individual investment

account. Employer defined contributions must be recorded and

accounted for separately from participant contributions.

(b) Contributions resulting from participants reemployed

from USERRA leave.--When a school employee reemployed from

USERRA leave makes the mandatory pickup participant

contributions permitted to be made for the USERRA leave, the

employer by whom the school employee is employed at the time the

participant contributions are made shall make whatever employer

defined contributions would have been made under this section

had the employee making the participant contributions after

being reemployed from USERRA leave continued to be employed in

the employee's school position instead of performing USERRA

leave. Such employer defined contributions shall be placed in

the participant's individual investment account as otherwise

provided by this part.

allowed that would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

IRC § 415 or in other provisions of law. In the event that any

disallowed contributions are made, any employer defined

contributions in excess of the limitations and investment

earnings thereon shall be refunded to the employer by the board.

§ 8407. Eligibility for benefits.

(a) General.--A participant who terminates school service

shall be eligible to withdraw the vested accumulated total

defined contributions standing to his credit in his individual

20150HB0727PN1555 - 73 -

investment account or such lesser amount as the participant may

request. Payment shall be made in a lump sum unless the board

has established other forms of distribution in the plan

document. A participant who withdraws the vested accumulated

total defined contributions shall no longer be a participant in

the plan, notwithstanding that the participant may have

contracted to receive an annuity or other form of payment from a

provider retained by the board for such purposes.

(b) Required distributions.--All payments pursuant to this

section shall start and be made in compliance with the minimum

distribution requirements and incidental death benefit rules of

IRC § 401(a)(9). The board is authorized to take whatever

actions and make whatever distributions it may determine are

necessary to comply with such requirements.

married may receive a lump sum distribution or other

distribution directly from the board without the consent of the

spouse.

(d) Prohibition.--Loans or other distributions from the plan

to school employees who have not terminated school service are

not permitted.

(e) Small individual investment accounts.--A participant who

(E) SMALL INDIVIDUAL INVESTMENT ACCOUNTS.--

(1) A PARTICIPANT WHO terminates school service and

whose vested accumulated total defined contributions are

below the threshold established by law as of the date of

termination of service may be paid the vested accumulated

total defined contributions in a lump sum as provided in IRC

§ 401(a)(31).

(2) THE BOARD MAY ALSO PROVIDE IN THE PLAN DOCUMENT

20150HB0727PN1555 - 74 -

<--

THAT, NOTWITHSTANDING SUBSECTION (F), A PARTICIPANT WHOSE

VESTED ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS ARE BELOW

THE THRESHOLDS ESTABLISHED BY THE BOARD MAY RECEIVE THOSE

DISTRIBUTIONS WITHOUT THE OBLIGATION TO PURCHASE AN ANNUITY.

THE THRESHOLD MAY BE ESTABLISHED AS A DOLLAR AMOUNT, AN

ANNUITY AMOUNT, IN SOME OTHER FORM INDIVIDUALLY OR IN

COMBINATION AS THE BOARD DETERMINES.

(F) REQUIREMENT TO PURCHASE PARTIAL ANNUITY.--EXCEPT AS

PROHIBITED BY THE IRC OR AS OTHERWISE PROVIDED IN THIS PART, A

PARTICIPANT WHO IS ELIGIBLE AND ELECTS TO RECEIVE A DISTRIBUTION

OR VESTED ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS SHALL BE

REQUIRED TO PURCHASE AT LEAST A PARTIAL PAYOUT AS A LIFE ANNUITY

WITH THAT DISTRIBUTION FROM AN ANNUITY PROVIDER CONTRACTED BY

THE BOARD UNDER SECTION 8408(C) (RELATING TO DEATH BENEFITS) AND

UNDER SUCH CONDITIONS AS PROVIDED IN THE PLAN DOCUMENT. THE

CONDITIONS MAY INCLUDE THAT THE BOARD IS AUTHORIZED TO MAKE THE

DISTRIBUTION DIRECTLY TO THE ANNUITY PROVIDER.

§ 8408. Death benefits.

(a) General.--In the event of the death of an active

participant or inactive participant, the board shall pay to the

participant's beneficiary the vested balance in the

participant's individual investment account in a lump sum or in

such other manner as the board may establish in the plan

document.

(b) Lump sum distribution.--In the event of the death of a

participant receiving distributions, the board shall pay to the

participant's beneficiary the vested balance in the

participant's individual investment account in a lump sum or in

such other manner as the board may establish in the plan

document or, if the board has established alternative methods of

20150HB0727PN1555 - 75 -

distribution in the plan document under which the participant

was receiving distributions, to the participant's beneficiary or

successor payee as provided in the plan document.

institutions, insurance companies or other types of third-party

providers to allow participants who receive a lump sum

distribution to receive payments and death benefits in a form

and manner as provided by the contract.

§ 8409. Vesting.

(a) Participant and voluntary contributions.--Subject to the

forfeiture and attachment provisions of section 8533 (relating

to taxation, attachment and assignment of funds) or otherwise as

provided by law, a participant shall be vested with respect to

all mandatory pickup participant contributions and voluntary

contributions paid by or on behalf of the participant to the

trust plus interest and investment earnings on the participant

contributions but minus investment fees and administrative

charges.

(b) Employer contributions.--Subject to the forfeiture and

attachment provisions of section 8533 or otherwise as provided

by law, a participant shall be vested with respect to employer

defined contributions paid on behalf of the participant to the

trust and earnings on the employer contributions, but minus

losses and a proportionate share of investment fees and

administrative charges, according to the following schedule:

(1) During the first year of school service as a

participant in the plan, 0%.

(2) At and after the first year of school service as a

participant in the plan, 33%.

(3) At and after the second year of school service as a

20150HB0727PN1555 - 76 -

participant in the plan, 66%.

(4) At and after the third year of school service as a

participant in the plan, 100%.

document created by the board under section 8402 (relating to

plan document), the following:

(1) How the required time periods of school service in

the plan are determined and calculated.

(2) The effect of periods that school employees spend on

unpaid leave on the determination of a participant's vested

status in the plan.

(3) The effect of termination of school service or

distributions from the plan on a participant's vested status

in the plan.

(4) Other terms and conditions for the implementation

and administration of this section.

(d) Nonvested employer defined contributions.--Nonvested

employer defined contributions, including earnings and losses on

the employer contributions, that are forfeited by a participant

who has not fully vested shall be applied to the participant's

most recent employer's obligations assessed under this section

in future years.

(e) USERRA leave and vesting credit.--A participant in the

plan who is reemployed from USERRA leave or who dies while

performing USERRA leave shall receive vesting credit under this

section for the school service that would have been performed

had the member not performed USERRA leave.

§ 8410. Termination of distributions.

(a) Return to school service.--A participant receiving

distributions or an inactive participant who returns to school

20150HB0727PN1555 - 77 -

service shall cease receiving distributions and shall not be

eligible to receive distributions until the participant

subsequently terminates school service, without regard to

whether the participant is a mandatory, optional or prohibited

member of the system or participant in the plan. THIS SUBSECTION

SHALL NOT APPLY TO A DISTRIBUTION OF ACCUMULATED EMPLOYER

DEFINED CONTRIBUTIONS OR OTHER DISTRIBUTIONS THAT THE

PARTICIPANT HAS RECEIVED AND USED TO PURCHASE AN ANNUITY FROM A

PROVIDER CONTRACTED BY THE BOARD.

(b) Return of benefits paid during USERRA leave.--In the

event that a former school employee is reemployed from USERRA

leave who had received any payments or annuity from the plan

during the USERRA leave, the employee shall return to the board

the amount so received plus interest as provided in the plan

document. The amount payable shall be certified in each case by

the board in accordance with methods approved by the actuary and

shall be paid in a lump sum within 30 days or in the case of an

active participant may be amortized with interest as provided in

the plan document through salary deductions to the trust in

amounts agreed upon by the active participant and the board, but

not longer than a period that starts with the date of

reemployment and continuing for up to three times the length of

the participant's immediate past period of USERRA leave, with

the repayment period not to exceed five years.

§ 8411. Agreements with financial institutions and other

organizations.

(a) Authority to enter into agreements.--To establish and

administer the plan, the board may enter into written agreements

with one or more financial institutions or other organizations

relating to the plan's administration and investment of funds

20150HB0727PN1555 - 78 -

<--

held pursuant to the plan.

(b) Agreement terms and considerations.--Under the plan, the

board shall enter into an agreement to provide fully bundled

retirement plan investment, plan administration and services to

employees who participate in the plan. The agreement shall

provide for appropriate long-term retirement-oriented

investments and shall include either fixed or variable deferred

annuities, or a combination thereof. In determining the

financial institution or other organization with which the board

shall enter into an agreement, the board shall consider all of

the following:

(1) The financial stability of the financial institution

or other organization and the ability of the financial

institution or other organization to provide the contracted

rights and benefits to participants.

(2) The cost of the investments, plan administration and

services to the participants.

(3) The experience of the financial institution or other

organization in providing defined contribution retirement

plans in lieu of defined benefit plan participation to

employees or as part of employee hybrid retirement plans.

(4) The experience of the financial institution or other

organization in paying retirement income to employees.

(5) The experience of the financial institution or other

organization in providing plan education, counseling and

advice to participants in employee retirement plans that are

offered in lieu of defined benefit plan participation or as

part of employee hybrid retirement plans.

education, counseling and objective, participant-specific plan

20150HB0727PN1555 - 79 -

advice to participants.

§ 8411.1. RELATION OF ADMINISTRATORS OF SCHOOL EMPLOYEES'

DEFINED CONTRIBUTION PLAN TO PROVIDERS OF 403(B)

PLANS.

(A) GENERAL RULE.--A FINANCIAL INSTITUTION OR PENSION

MANAGEMENT ORGANIZATION ENTERING INTO A WRITTEN AGREEMENT

PURSUANT TO SECTION 8411 (RELATING TO AGREEMENTS WITH FINANCIAL

INSTITUTIONS AND OTHER ORGANIZATIONS) MAY OFFER OR PROVIDE

SERVICES TO ANY PLAN ESTABLISHED OR MAINTAINED BY A SCHOOL

DISTRICT UNDER IRC § 403(B) OR 457 IF THE WRITTEN AGREEMENT FOR

THE ADMINISTRATION OF THE SCHOOL EMPLOYEES' DEFINED CONTRIBUTION

PLAN IS NOT COMBINED WITH ANY OTHER WRITTEN AGREEMENT FOR THE

ADMINISTRATION OF A SCHOOL DISTRICT'S 403(B) PLAN OR 457 PLAN.

EACH SCHOOL DISTRICT THAT PROVIDES A 403(B) PLAN SHALL MAKE

AVAILABLE, IN THE MANNER PROVIDED BY SUBSECTION (C), TO

PARTICIPANTS, MULTIPLE FINANCIAL INSTITUTIONS OR PENSION

MANAGEMENT ORGANIZATIONS THAT HAVE NOT ENTERED INTO A WRITTEN

AGREEMENT PURSUANT TO SECTION 8411 AND WHICH PROVIDE SERVICES TO

THE SCHOOL DISTRICT'S 403(B) PLAN OR 457 PLAN.

(B) PLAN TRANSPARENCY AND ADMINISTRATION.--A FINANCIAL

INSTITUTION OR PENSION MANAGEMENT ORGANIZATION PROVIDING

SERVICES FOR ANY PLAN ESTABLISHED OR MAINTAINED BY A SCHOOL

DISTRICT UNDER IRC § 403(B) OR 457 SHALL:

(1) ENTER INTO AN AGREEMENT WITH THE SCHOOL DISTRICT OR

THE SCHOOL DISTRICT'S INDEPENDENT COMPLIANCE ADMINISTRATOR

THAT SHALL REQUIRE THE FINANCIAL INSTITUTION OR PENSION

MANAGEMENT ORGANIZATION TO PROVIDE IN AN ELECTRONIC FORMAT

ALL DATA NECESSARY FOR THE ADMINISTRATION OF THE 403(B) PLAN

OR 457 PLAN AS DETERMINED BY THE SCHOOL DISTRICT OR THE

SCHOOL DISTRICT'S COMPLIANCE ADMINISTRATOR; AND

20150HB0727PN1555 - 80 -

<--

(2) PROVIDE ALL DATA REQUIRED BY THE SCHOOL DISTRICT OR

THE SCHOOL DISTRICT'S COMPLIANCE ADMINISTRATOR TO FACILITATE

DISCLOSURE OF ALL FEES, CHARGES, EXPENSES, COMMISSIONS,

COMPENSATION AND PAYMENTS TO THIRD PARTIES RELATED TO

INVESTMENTS OFFERED UNDER THE 403(B) PLAN OR 457 PLAN.

OR MAINTAINS A PLAN UNDER IRC § 403(B) OR 457 SHALL SELECT A

MINIMUM OF TWO FINANCIAL INSTITUTIONS OR PENSION MANAGEMENT

ORGANIZATIONS, IN ADDITION TO THE FINANCIAL INSTITUTION OR

PENSION MANAGEMENT ORGANIZATION THAT ENTERED INTO AN AGREEMENT

PURSUANT TO SECTION 8411, TO PROVIDE SERVICES TO THE 403(B) PLAN

OR 457 PLAN. IF FEWER THAN TWO SUCH ADDITIONAL FINANCIAL

INSTITUTIONS OR PENSION MANAGEMENT ORGANIZATIONS ARE DETERMINED

TO BE AVAILABLE OR ABLE TO MEET THE REQUIREMENTS ESTABLISHED IN

THIS SECTION, THEN THE SCHOOL DISTRICT SHALL SELECT THE NUMBER

OF AVAILABLE PROVIDERS ABLE TO MEET THE SCHOOL DISTRICT'S

REQUIREMENTS. A FINANCIAL INSTITUTION OR PENSION MANAGEMENT

ORGANIZATION SHALL BE DESIGNATED A 403(B) PLAN OR 457 PLAN

PROVIDER IF THE FINANCIAL INSTITUTION OR PENSION MANAGEMENT

ORGANIZATION ENTERS INTO AN AGREEMENT IN ACCORDANCE WITH

SUBSECTION (B).

§ 8412. Annuitization.

The plan shall include the requirement that any disbursement

of the accumulated assets in an individual investment account

made after the participant reaches 55 years of age must include

at least partial payout as a life annuity. The board shall

determine the minimum annuity amount. The plan shall offer

participants a menu of lifetime annuity options, either fixed or

variable, or a combination of both.

§ 8413. Powers and duties of board.

20150HB0727PN1555 - 81 -

The board shall have the following powers and duties to

establish the plan and trust and to administer the provisions of

this part:

(1) The board may commingle or pool assets with the

assets of other persons or entities.

(2) The board shall pay all administrative fees, costs

and expenses of managing, investing, and administering the

plan, the trust and the individual investment accounts from

the balance of such individual investment accounts except as

may be provided otherwise by law.

(3) The board may establish investment guidelines and

limits on the types of investments that participants can

make, consistent with the board's fiduciary obligations.

(3.1) The board shall include default investment options

and strategies to include predetermined investment portfolio

options that shall be constructed to reflect different risk

profiles and shall be constructed to automatically reallocate

and rebalance contributions as a participant ages. The plan

may permit participants to construct their own investment

portfolios using some or all of the investment options

comprising the default solutions.

(4) The board shall at all times have the power to

change the terms of the plan as may be necessary to maintain

the tax-qualified status of the plan.

(5) The board may establish a process for election to

participate in the plan by those school employees for whom

participation is not mandatory.

(6) The board may perform an annual review of any

qualified fund manager for the purpose of assuring it

continues to meet all standards and criteria established.

20150HB0727PN1555 - 82 -

(7) The board may allow for eligible rollovers and

direct trustee-to-trustee transfers into the trust from

qualified plans of other employers, regardless of whether the

employers are private employers or public employers.

(8) The board may allow a former participant to maintain

the participant's individual investment account within the

plan.

(9) The board shall administer the plan in compliance

with the qualification and other rules of IRC.

(10) The board may establish procedures to provide for

the lawful payment of benefits.

(11) The board shall determine what constitutes a

termination of school service.

(12) The board may establish procedures for

distributions of small accounts as required or permitted by

IRC.

(13) The board shall have the power to establish

procedures in the plan document or to promulgate rules and

regulations as it deems necessary for the administration and

management of the plan, including, but not limited to,

establishing:

(i) Procedures whereby eligible participants may

change their investment choices on a periodic basis or

make other elections regarding their participation in the

plan.

(ii) Procedures for deducting mandatory pick up

participant contributions from a participant's

compensation.

(iii) Procedures for rollovers and trustee-to-

trustee transfers allowed under IRC and permitted by the

20150HB0727PN1555 - 83 -

board as part of the plan.

(iv) Standards and criteria for disclosing and

providing options to eligible individuals regarding

investments of amounts deferred under the plan, provided

that one of the available options must serve as the

default option for participants who do not make a timely

election.

(v) Standards and criteria for disclosing to the

participants the anticipated and actual income

attributable to amounts invested, property rights and all

fees, costs and expenses to be made against amounts

deferred to cover the costs and expenses of administering

and managing the plan or trust.

(vi) Procedures, standards and criteria for the

making of distributions from the plan upon termination

from employment or death or in other circumstances

consistent with the purpose of the plan.

(14) The board may waive any reporting or information

requirement contained in this part if the board determines

that the information is not needed for the administration of

the plan.

(15) The board may contract any services and duties in

lieu of staff except final adjudications and as prohibited by

law. Any duties or responsibilities of the board not required

by law to be performed by the board can be delegated to a

third-party provider subject to appeal to the board.

(16) The board may provide that any duties of the

employer or information provided by the participant to the

employer can be performed or received directly by the board.

(17) The provisions and restrictions of the act of July

20150HB0727PN1555 - 84 -

2, 2010 (P.L.266, No.44), known as Protecting Pennsylvania's

Investments Act, shall not apply to the plan or trust or the

investments thereof, but the board is authorized to offer to

the plan participants investment vehicles that would be

allowed under the Protecting Pennsylvania's Investments Act.

The board shall also to the extent commercially available

provide that one option for participants will have an annuity

investment feature.

§ 8414. Responsibility for investment loss.

Neither the Commonwealth, the board, an employer nor any

school entity or other political subdivision shall be

responsible for any investment loss incurred under the plan or

for the failure of any investment to earn any specific or

expected return, or to earn as much as any other investment

opportunity, whether or not such other opportunity was offered

to participants in the plan.

§ 8415. Investments based on participants' investment

allocation choices.

(a) Vesting.--All contributions, interest and investment

earnings shall be invested based on the participant's investment

allocation choices. Each participant shall be credited

individually with the amount of contributions, interest and

investment earnings. All investment allocation choices shall be

credited proportionately between participant contributions and

employer defined contributions.

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

corporation, institution, insurance company or custodial bank or

other entity that the board has approved shall not be

unreasonably delayed, and in no case shall the investment of

contributions be delayed more than 30 days from the date of

20150HB0727PN1555 - 85 -

payroll deductions or the date voluntary contributions are made

to the date that funds are invested. Any interest earned on the

funds pending investment shall be allocated to the employers and

credited to the individual investment accounts of participants

who are then participating in the plan 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.

§ 8416. Expenses.

All expenses, fees and cost of administering the plan and

investing the assets of the trust shall be borne by the

participants and paid from assessments against the balances of

the individual investment accounts as established by the board

except as may be provided otherwise by law.

§ 8417. Required distributions.

(a) Compliance.--All payments pursuant to this chapter shall

start and be made in compliance with the minimum distribution

requirements and incidental death benefit rules of IRC § 401(a).

(b) Applicability.--The following shall apply:

(1) (i) Except as provided under subparagraph (ii) and

notwithstanding any provision of this part, a

contribution or benefit related to the plan may not

exceed a limitation under IRC § 415 with respect to

governmental plans that are in effect on the date the

contribution or benefit payment takes effect.

(ii) An increase in a limitation under IRC § 415

shall apply to the participants on or after the effective

date of this section.

(iii) For the purposes of this paragraph, the term

"government plans" shall have the same meaning as in IRC

20150HB0727PN1555 - 86 -

§ 414(d).

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

amendment of this part on or after the effective date of

the addition of subsection (b) to this section that

increases contributions or benefits for active

participants, inactive participants or participants

receiving distributions may not be deemed to provide for

a contribution or benefit in excess of a limitation,

adjusted on or after the effective date of the addition

of subsection (b) to this section, under IRC §415 unless

specifically provided for by legislation.

(ii) Notwithstanding subparagraph (i), an increase

in benefits on or after the effective date of the

addition of subsection (b) to this section for a

participant in the plan shall be authorized and apply to

the fullest extent allowed by law.

Section 109. Section 8501(a), (c) and (d) of Title 24 are

amended to read:

§ 8501. Public School Employees' Retirement Board.

(a) Status and membership.--The board shall be an

independent administrative board and shall consist of 15

members: the Secretary of Education, ex officio; the State

Treasurer, ex officio; two Senators; two members of the House of

Representatives; the executive secretary of the Pennsylvania

School Boards Association, ex officio; two to be appointed by

the Governor, at least one of whom shall not be a school

employee or an officer or employee of the State; three to be

elected by the active professional members of the system and

active professional participants of the plan from among their

number; one to be elected by annuitants or a participant of the

20150HB0727PN1555 - 87 -

plan who has terminated school service and is receiving or is

eligible to receive distributions from among their number; one

to be elected by the active nonprofessional members of the

system or active nonprofessional participants of the plan from

among their number; and one to be elected by members of

Pennsylvania public school boards from among their number. The

appointments made by the Governor shall be confirmed by the

Senate and each election shall be conducted in a manner approved

by the board. The terms of the appointed and nonlegislative

elected members shall be three years. The members from the

Senate shall be appointed by the President pro tempore of the

Senate and shall consist of one member from the majority and one

member from the minority. The members from the House of

Representatives shall be appointed by the Speaker of the House

of Representatives and shall consist of one member from the

majority and one member from the minority. The legislative

members shall serve on the board for the duration of their

legislative terms and shall continue to serve until 30 days

after the convening of the next regular session of the General

Assembly after the expiration of their respective legislative

terms or until a successor is appointed for the new term,

whichever occurs first. The chairman of the board shall be

elected by the board members. Each ex officio member of the

board and each legislative member of the board may appoint a

duly authorized designee to act in his stead. In the event that

a board member, who is designated as an active participant or as

the participant in the plan who is receiving or is eligible to

receive distributions, receives a total distribution of the

board member's interest in the plan, that board member may

continue to serve on the board for the remainder of the term.

20150HB0727PN1555 - 88 -

* * *

oath of office that he will, so far as it devolves upon him,

diligently and honestly administer the affairs of said board,

the system and the plan and that he will not knowingly violate

or willfully permit to be violated any of the provisions of law

applicable to this part. Such oath shall be subscribed by the

member making it and certified by the officer before whom it is

taken and shall be immediately filed in the office of the

Secretary of the Commonwealth.

(d) Compensation and expenses.--The members of the board who

are members of the system or participants in the plan shall

serve without compensation. Members of the board who are members

of the system or participants in the plan and who are employed

by a governmental entity shall not suffer loss of salary or

wages through serving on the board. The board, on request of the

employer of any member of the board who is an active

professional or nonprofessional member of the system or active

professional or nonprofessional participant in the plan, may

reimburse such employer for the salary or wages of the member,

or for the cost of employing a substitute for such member or

participant, while the member or participant is necessarily

absent from employment to execute the duties of the board. The

members of the board who are not members of either the school

system or the State Employees' Retirement System may be paid

$100 per day when attending meetings and all board members shall

be reimbursed for any necessary expenses. However, when the

duties of the board as mandated are not executed, no

compensation or reimbursement for expenses of board members

shall be paid or payable during the period in which such duties

20150HB0727PN1555 - 89 -

are not executed.

* * *

Section 110. Section 8502(b), (c), (e), (h), (i), (j), (k),

(n) and (o) of Title 24 are amended and the section is amended

by adding a subsection to read:

§ 8502. Administrative duties of board.

* * *

(b) Professional personnel.--The board shall contract for

the services of a chief medical examiner, an actuary, investment

advisors, counselors, an investment coordinator, and such other

professional personnel as it deems advisable. The board may

utilize the same individuals and firms contracted under this

subsection for both the system and the plan but shall allocate

the fees, costs and expenses incurred under this subsection

between the system and the plan as appropriate.

to the General Assembly annually a budget covering the

administrative expenses of [this part] the system and a separate

budget covering the administrative expenses of the plan. Such

expenses of the system as approved by the General Assembly in an

appropriation bill shall be paid from investment earnings of the

fund. Such expenses of the plan as approved by the General

Assembly shall be paid from interest, pursuant to section

8415(b) (relating to investments based on participants'

investment allocation choices) or assessments on the balances of

the participants' individual investment accounts except as may

be provided otherwise by law. Concurrently with its

administrative budget, the board shall also submit to the

General Assembly annually a list of proposed expenditures which

the board intends to pay through the use of directed

20150HB0727PN1555 - 90 -

commissions, together with a list of the actual expenditures

from the past year actually paid by the board through the use of

directed commissions. All such directed commission expenditures

shall be made by the board for the exclusive benefit of the

system and its members and for the exclusive benefit of the plan

and its participants, respectively.

* * *

(e) Records.--

(1) The board shall keep a record of all its proceedings

which shall be [open to inspection by] accessible to the

public, except as otherwise provided in this part or by other

law.

(2) Any record, material or data received, prepared,

used or retained by the board or its employees, investment

professionals or agents relating to an investment shall not

constitute a public record subject to public inspection under

the act of [June 21, 1957 (P.L.390, No.212), referred to]

February 14, 2008 (P.L.6, No.3), known as the Right-to-Know

Law, if, in the reasonable judgment of the board, the

[inspection] access would:

(i) in the case of an alternative investment or

alternative investment vehicle involve the release of

sensitive investment or financial information relating to

the alternative investment or alternative investment

vehicle which the fund or trust was able to obtain only

upon agreeing to maintain its confidentiality;

(ii) cause substantial competitive harm to the

person from whom sensitive investment or financial

information relating to the investment was received; or

(iii) have a substantial detrimental impact on the

20150HB0727PN1555 - 91 -

value of an investment to be acquired, held or disposed

of by the fund or trust, or would cause a breach of the

standard of care or fiduciary duty set forth in this

part.

(3) (i) The sensitive investment or financial

information excluded from [inspection] access under

paragraph (2)(i), to the extent not otherwise excluded

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once the board is no longer required by

its agreement to maintain confidentiality.

(ii) The sensitive investment or financial

information excluded from inspection under paragraph (2)

(ii), to the extent not otherwise excluded from

[inspection] access, shall constitute a public record

subject to public [inspection] access under the Right-to-

Know Law once:

(A) the [inspection] access no longer causes

substantial competitive harm to the person from whom

the information was received; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

(iii) The sensitive investment or financial

information excluded from [inspection] access under

paragraph (2)(iii), to the extent not otherwise excluded

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once:

(A) the [inspection] access no longer has a

20150HB0727PN1555 - 92 -

substantial detrimental impact on the value of an

investment of the fund or trust and would not cause a

breach of the standard of care or fiduciary duty set

forth in this part; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

(4) Except for the provisions of paragraph (3), nothing

in this subsection shall be construed to designate any

record, material or data received, prepared, used or retained

by the board or its employees, investment professionals or

agents relating to an investment as a public record subject

to public [inspection] access under the Right-to-Know Law.

(5) Notwithstanding the provisions of this subsection,

the following information regarding an alternative investment

vehicle shall be subject to public [inspection] access under

the Right-to-Know Law:

(i) The name, address and vintage year of the

alternative investment vehicle.

(ii) The identity of the manager of the alternative

investment vehicle.

(iii) The dollar amount of the commitment made by

the system or plan to the alternative investment vehicle.

(iv) The dollar amount of cash contributions made by

the system or plan to the alternative investment vehicle

since inception.

(v) The dollar amount of cash distributions received

by the system or plan from the alternative investment

vehicle since inception.

(vi) The net internal rate of return of the

20150HB0727PN1555 - 93 -

alternative investment vehicle since inception, provided

that the system or plan shall not be required to disclose

the net internal rate of return under circumstances in

which, because of the limited number of portfolio assets

remaining in the alternative investment vehicle, the

disclosure could reveal the values of specifically

identifiable remaining portfolio assets to the detriment

of the alternative investment.

(vii) The aggregate value of the remaining portfolio

assets attributable to the system's or plan's investment

in the alternative investment vehicle, provided that the

system or plan shall not be required to disclose the

value under circumstances in which, because of the

limited number of portfolio assets remaining in the

alternative investment vehicle, the disclosure could

reveal the values of specifically identifiable remaining

portfolio assets to the detriment of the alternative

investment.

(viii) The dollar amount of total management fees

and costs paid to the alternative investment vehicle by

the system or plan on an annual fiscal year-end basis.

(6) Any record, material or data received, prepared,

used or retained by the board or its employees or agents

relating to a participant shall not constitute a public

record subject to public access under the Right-to-Know Law,

if, in the reasonable judgment of the board, the access would

disclose any of the following:

(i) The existence, date, amount and any other

information pertaining to the rollover contributions and

trustee-to-trustee transfers, of any participant.

20150HB0727PN1555 - 94 -

(ii) The investment option selections of any

participant.

(iii) The balance of a participant's individual

investment account, including the amount distributed to

the participant, and any investment gains or losses, or

rates of return.

(iv) The identity of a participant's designated

beneficiary, successor payee or alternate payee.

(v) The benefit payment option of a participant.

(7) Nothing in this subsection shall be construed to

designate any record, material or data received, prepared,

used or retained by the board or its employees or agents

relating to the contributions, investments, account value or

benefits payable to or on account of a participant as a

public record subject to public access under the Right-to-

Know Law.

* * *

(h) Regulations and procedures.--The board shall, with the

advice of the Attorney General and the actuary, adopt and

promulgate rules and regulations for the uniform administration

of the system. The actuary shall approve in writing all

computational procedures used in the calculation of

contributions and benefits pertaining to the system, and the

board shall by resolution adopt such computational procedures,

prior to their application by the board. Such rules, regulations

and computational procedures as so adopted from time to time and

as in force and effect at any time, together with such tables as

are adopted and published pursuant to subsection (j) as

necessary for the calculation of annuities and other benefits,

shall be as effective as if fully set forth in this part. Any

20150HB0727PN1555 - 95 -

actuarial assumption specified in or underlying any such rule,

regulation or computational procedure and utilized as a basis

for determining any benefit shall be applied in a uniform

manner.

(i) Data.--The board shall keep in convenient form such data

as are stipulated by the actuary in order that an annual

actuarial valuation of the various accounts of the fund can be

completed within six months of the close of each fiscal year.

The board shall have final authority over the means by which

data is collected, maintained and stored and in so doing shall

protect the rights of its membership as to privacy and

confidentiality.

(j) Actuarial investigation and valuation.--The board shall

have the actuary make an annual valuation of the various

accounts of the fund within six months of the close of each

fiscal year. In the fiscal year 1975 and in every fifth year

thereafter, the board shall have the actuary conduct an

actuarial investigation and evaluation of the system based on

data including the mortality, service, and compensation

experience provided by the board annually during the preceding

five years concerning the members and beneficiaries of the

system. The board shall by resolution adopt such tables as are

necessary for the actuarial valuation of the fund and the trust

and calculation of contributions, annuities, and other benefits

based on the reports and recommendations of the actuary. Within

30 days of their adoption, the secretary of the board shall

cause those tables which relate to the calculation of annuities

and other benefits to be published in the Pennsylvania Bulletin

in accordance with the provisions of 45 Pa.C.S. § 725(a)

(relating to additional contents of Pennsylvania Bulletin) and,

20150HB0727PN1555 - 96 -

unless the board specifies therein a later effective date, such

tables shall become effective on such publication. The board

shall include a report on the significant facts, recommendations

and data developed in each five-year actuarial investigation and

evaluation of the system in the annual financial statement

published pursuant to the requirements of subsection (n) for the

fiscal year in which such investigation and evaluation were

concluded.

(k) Certification of employer contributions to fund.--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), the experience

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

premium assistance contributions as determined pursuant to

section 8328(f), the costs added by legislation as determined

pursuant to section 8328(i), the actuarial required contribution

rate as determined pursuant to section 8328(i), the collared

contribution rate as determined pursuant to section 8328(g), the

final contribution rate as determined pursuant to section

8328(h) and the shared-risk contribution rate as determined

under section 8321(b) (relating to regular member contributions

for current service), which shall be paid to the fund and

20150HB0727PN1555 - 97 -

credited to the appropriate accounts. These certifications shall

be regarded as final and not subject to modification by the

Secretary of the Budget.

* * *

(n) Annual financial statement.--The board shall prepare and

have published, on or before January 1 of each year, [a

financial statement] financial statements as of the fiscal year

ending June 30 of the previous year showing the condition of the

fund, the trust and the various accounts, including, but not

limited to, the board's accrual and expenditure of directed

commissions, and setting forth such other facts, recommendations

and data as may be of use in the advancement of knowledge

concerning annuities and other benefits provided by this part.

The board shall submit said financial [statement] statements to

the Governor and shall make copies available to the employers

for the use of the school employees and the public.

(o) Independent [audit] audits.--The board shall provide for

[an annual audit] annual audits of the system and the plan by an

independent certified public accounting firm, which [audit]

audits shall include the board's accrual and expenditure of

directed commissions. The board may use the same independent

certified public accountant for the audits of both the system

and the plan.

* * *

(q) Participant and employer contributions to trust.--The

board shall, each year in addition to any fees and itemized

budget required under section 8330, certify, as a percentage of

each participant's compensation, the employer defined

contributions, which shall be paid to the trust and credited to

each participant's individual investment account. These

20150HB0727PN1555 - 98 -

certifications shall be regarded as final and not subject to

modification by the Secretary of the Budget. The board shall

cause all mandatory pickup participant contributions made on

behalf of a participant and all voluntary contributions made by

a participant to be credited to the participant's individual

investment account.

Section 111. Section 8502.2(a) and (d) of Title 24 are

amended to read:

§ 8502.2. Health insurance.

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

group health insurance program for annuitants, participants

receiving distributions, spouses of annuitants and participants

receiving distributions, survivor annuitants and their

dependents. The board may promulgate regulations regarding the

prudent and efficient operation of the program, including, but

not limited to:

(1) Establishment of an annual budget and disbursements

in accordance with the budget.

(2) Determination of the benefits structure.

(3) Determination of enrollment procedures.

(4) Establishment of premium rates sufficient to fully

fund the program, including administrative expenses.

(5) Contracting for goods, equipment, services,

consultants and other professional personnel as needed to

operate the program.

* * *

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

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

incurred by the health insurance program. The program shall be

an approved health insurance program for purposes of section

20150HB0727PN1555 - 99 -

8505(i) (relating to duties of board regarding applications and

elections of members and participants) and an approved insurance

carrier for purposes of section 8509 (relating to health

insurance premium assistance program). The program shall not be

subject to the provisions of section 8531 (relating to State

guarantee regarding the system).

Section 112. Section 8503 heading and (a) of Title 24 are

amended and the section is amended by adding a subsection to

read:

§ 8503. Duties of board to advise and report to employers [and

members], members and participants.

(a) Manual of regulations.--The board shall, with the advice

of the Attorney General and the actuary, prepare, within 90 days

of the effective date of this part, a manual incorporating rules

and regulations consistent with the provisions of this part for

the employers who shall make information contained therein

available to the general membership. The board shall thereafter

advise the employers within 90 days of any changes in such rules

and regulations due to changes in the law or due to changes in

administrative policies. As soon as practicable after the

commissioner's publication with respect thereto, the board shall

also advise the employers as to any cost-of-living adjustment

for the succeeding calendar year in the amount of the limitation

under IRC § 401(a)(17) and the dollar amounts of the limitations

under IRC § 415[(b)].

* * *

(b.1) Participant status statements.--The board shall have

furnished annually to each participant on or before December 31,

and more frequently as the board may agree or as required by

law, a statement showing the accumulated total defined

20150HB0727PN1555 - 100 -

contributions credited to the participant's individual

investment account, the nature and type of investments and the

investment allocation of future contributions as of June 30 of

the current year and requesting the participant to make any

necessary corrections or revision regarding his designated

beneficiary.

* * *

Section 113. Section 8504(c) of Title 24 is amended to read:

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

Retirement Board.

* * *

receipt of notification and the required data from the State

Employees' Retirement Board that a former school employee who

elected multiple service has applied for a State employee's

retirement benefit or, in the event of his death, his legally

constituted representative has applied for such benefit, the

board shall:

(1) Certify to the State Employees' Retirement Board:

(i) The salary history as a member of the Public

School Employees' Retirement System and the final average

salary as calculated on the basis of the compensation

received as a State and school employee.

(ii) The annuity or benefit which the member or his

beneficiary is entitled to receive under this part and

modified according to the option selected.

(2) Transfer to the State Employees' Retirement Fund the

accumulated deductions standing to such member's credit and

the actuarial reserve required on account of the member's

years of credited service in the school system and his final

20150HB0727PN1555 - 101 -

average salary determined on the basis of his compensation as

a member in both systems.

Section 114. Sections 8505 heading, (b), (h) and (i),

8506(a), (d), (e) and (k) and 8507 heading, (a), (d.1), (e), (f)

and (h) of Title 24 are amended and the sections are amended by

adding subsections to read:

§ 8505. Duties of board regarding applications and elections of

members and participants.

* * *

(b) State employees electing multiple service status.--Upon

receipt of notification from the State Employees' Retirement

Board that a former school employee has become an active member

in the State Employees' Retirement System and has elected to

become a member with multiple service status, the board shall:

(1) In case of a member who is receiving an annuity from

the system:

(i) Discontinue payments, transfer the present value

of the member's annuity at the time of entering State

service, plus the amount withdrawn in a lump sum payment,

on or after the date of entering State service, pursuant

to section 8345 (relating to member's options), with

statutory interest to date of transfer, minus the amount

to be returned to the board on account of return to

service that the board has determined is to be credited

in the members' savings account, from the annuity reserve

account to the members' savings account and resume

crediting of statutory interest on the amount restored to

his credit.

(ii) Transfer the balance of the present value of

the total annuity, minus the amount to be returned to the

20150HB0727PN1555 - 102 -

board on account of return to service that the board has

determined is to be credited in the State accumulation

account, from the annuity reserve account to the State

accumulation account.

(iii) Certify to the member the amount of lump sum

and annuity payments with statutory interest the member

is to return to the board and, of those amounts, which

amount shall be credited to the members' savings account

and credited with statutory interest as such payments are

returned and which amount shall be credited to the State

accumulation account.

(2) In case of a member who is not receiving an annuity

from the system and who has not withdrawn his accumulated

deductions, continue or resume the crediting of statutory

interest on his accumulated deductions.

(3) In case of a member who is not receiving an annuity

from the system and his accumulated deductions were

withdrawn, certify to the member the 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 service eligible for

membership in the State Employees' Retirement System and

school service eligible for active membership in the system

to the date of repayment. Such amount shall be restored by

him and shall be credited with statutory interest as such

payments are restored.

* * *

(e.1) Certification to participants terminating service.--

The board shall certify to a participant, within one year of

termination of service of such participant, in writing, of the

20150HB0727PN1555 - 103 -

vested accumulated total defined contributions credited to the

participant's individual investment account as of the date

stated in the writing, any notices regarding rollover or other

matters required by IRC or other law, the obligation of the

participant to commence distributions from the plan by the

participant's required beginning date, and the ability to

receive all or part of the vested balance in the participant's

individual investment account in a lump sum or in such other

form as the board may authorize or as is required by law.

* * *

(f.1) Notification to inactive participants approaching

required beginning date.--The board shall notify each inactive

participant who has terminated school service and had not

commenced distribution by 90 days before the participant's

required beginning date, in writing, that the inactive

participant has an obligation to commence distributions by his

required beginning date in a form and manner required by IRC §

401(a)(9) and other applicable provisions of IRC.

* * *

(g.1) Initial payment to a participant.--The board shall

make the initial payment to a participant who has applied for a

distribution within 60 days of the filing of his application.

(h) Death benefits.--Upon receipt of notification of the

death of a member [or], a former member on USERRA leave, an

active participant, an inactive participant or a former

participant performing USERRA leave, the board shall notify the

designated beneficiary or survivor annuitant of the benefits to

which he is entitled and shall make the first payment to the

beneficiary under the plan elected by the beneficiary within 60

days of receipt of certification of death and other necessary

20150HB0727PN1555 - 104 -

data. If no beneficiary designation is in effect at the date of

the member's or participant's death or no notice has been filed

with the board to pay the amount of such benefits to the

member's or participant's estate, the board is authorized to pay

such benefits to the executor, administrator, surviving spouse

or next-of-kin of the deceased member or participant, and

payment pursuant hereto shall fully discharge the fund or plan

from any further liability to make payment of such benefits to

any other person. If the surviving spouse or next-of-kin of the

deceased member or participant cannot be found for the purpose

of paying such benefits for a period of seven years from the

date of death of the member or participant, then such benefits

shall be escheated to the Commonwealth for the benefit of the

fund or plan.

(i) Medical insurance coverage.--Upon receipt of

notification from an insurance carrier offering a health

insurance program approved by the board that an annuitant or

terminated participant who has attained age 65 has elected

medical, major medical, and hospitalization insurance coverage

or notification that annuitants of the system with less than 24

1/2 eligibility points (other than disability annuitants of the

system), spouses of annuitants and survivor annuitants eligible

to elect to enroll in the approved health insurance program have

elected participation in such health insurance program, the

board may deduct from the annuity payments the appropriate

annual charges in equal monthly installments. Such deductions

shall be transmitted to the insurance carrier.

* * *

§ 8506. Duties of employers.

(a) Status of members and participants.--The employer shall,

20150HB0727PN1555 - 105 -

each month, notify the board in a manner prescribed by the board

of the salary changes effective during the past month, the date

of all removals from the payroll, and the type of leave of any

member or participant who has been removed from the payroll for

any time during that month, and:

(1) if the removal is due to leave without pay, the

employer shall furnish the board with the date of beginning

leave, the date of return to service, and the reason for

leave;

(2) if the removal is due to a transfer to another

employer, the former employer shall furnish such employer and

the board with a complete school service record, including

credited or creditable nonschool service; or

(3) if the removal is due to termination of school

service, the employer shall furnish the board with a complete

school service record including credited or creditable

nonschool service and in the case of death of the member the

employer shall so notify the board.

* * *

(c.1) Participant and employer defined contributions.--The

employer shall cause the mandatory pickup participant

contributions on behalf of a participant to be made. The

employer shall also cause the employer defined contributions on

behalf of a participant to be made. The employer shall notify

the board at times and in a manner prescribed by the board of

the compensation of any participant to whom the limitation under

IRC § 401(a)(17) either applies or is expected to apply and

shall cause such participant's contributions to be deducted from

payroll to cease at the limitation under IRC § 401(a)(17) on the

payroll date if and when such limit shall be reached. The

20150HB0727PN1555 - 106 -

employer shall certify to the board the amounts picked up and

deducted and the employer defined contributions being made and

shall send the total amount picked up, deducted and contributed

together with a duplicate of such voucher to the secretary of

the board every pay period or on such schedule as established by

the board.

(d) New employees subject to mandatory membership or

participation.--Upon the assumption of duties of each new school

employee whose membership in the system or plan is mandatory,

the employer shall no later than 30 days thereafter cause an

application for membership or participation, which application

shall include the employee's home address, birthdate certified

by the employer, previous school or State service and any other

information requested by the board, and a nomination of

beneficiary to be made by such employee and filed with the board

and shall make pickup contributions or mandatory pickup

participant contributions from the effective date of school

employment.

(e) New employees subject to optional membership or

participation.--The employer shall inform any eligible school

employee whose membership in the system or participation in the

plan is not mandatory of his opportunity to become a member of

the system or participant in the plan provided that he elects to

purchase credit for all such continuous creditable service. If

such employee so elects, the employer shall no later than 30

days thereafter cause an application for membership which

application shall include the employee's home address, birthdate

certified by the employer, previous school or State service and

any other information requested by the board, and a nomination

of beneficiary to be made by him and filed with the board and

20150HB0727PN1555 - 107 -

shall cause proper contributions to be made from the date of

election of membership or participation.

* * *

(k) School employees performing USERRA or military-related

leave of absence.--The employer shall report to the board all of

the following:

(1) Any school employee who:

(i) ceases to be an active member or active

participant to perform USERRA service; or

(ii) is granted a leave of absence under 51 Pa.C.S.

§ 4102 (relating to leaves of absence for certain

government employees) or a military leave of absence

under 51 Pa.C.S. § 7302 (relating to granting military

leaves of absence).

(2) The date on which the USERRA service, leave of

absence or military leave of absence began.

(3) The date on which the school employee is reemployed

from USERRA leave or returns after the leave of absence or

military leave of absence, if applicable.

(4) Any other information the board may require.

(l) Differential wage payments and military leave of absence

payments.-—Notwithstanding the exclusion of differential wage

payments as defined in IRC § 414(u)(12) from compensation under

this part, the employer of any school employee on USERRA leave

shall report differential wage payments made to such employee to

the board, and the employer of any school employee on leave of

absence under 51 Pa.C.S. § 4102 shall report any payment made to

such employee, in the form and manner established by the board.

(m) Obligation of educational institutions to report

participation and compensation of employees in independent

20150HB0727PN1555 - 108 -

retirement programs.--The Pennsylvania State University, the

State System of Higher Education, State-owned educational

institutions and community colleges shall report to the board

the compensation and other information as the board may request

for employees who are members in the State Employees' Retirement

System or independent retirement programs approved by the

employer.

§ 8507. Rights and duties of school employees [and members],

members and participants.

(a) Information on new employees.--Upon his assumption of

duties, each new school employee shall furnish his employer with

a complete record of his previous school or State service, or

creditable nonschool service, proof of his date of birth, his

home address, his current status in the system and the plan and

in the State Employees' Retirement System and the State

Employees' Defined Contribution Plan and such other information

as the board may require. Willful failure to provide the

information required by this subsection to the extent available

or the provision of erroneous information upon entrance into the

system shall result in the forfeiture of the right of the member

to subsequently assert any right to benefits based on erroneous

information or on any of the required information which he

failed to provide. In any case in which the board finds that a

member is receiving an annuity based on false information, the

additional amounts received predicated on such false information

together with statutory interest doubled and compounded shall be

deducted from the present value of any remaining benefits to

which the member is legally entitled and such remaining benefits

shall be correspondingly decreased.

* * *

20150HB0727PN1555 - 109 -

(b.1) Application for participation.--On or after July 1,

2016, in the case of a new employee who is not currently a

participant in the plan and whose participation is mandatory, or

in the case of a new employee whose participation is not

mandatory but is permitted and who desires to become a

participant in the plan, the new employee shall execute an

application for participation and a nomination of a beneficiary.

* * *

(d.1) [School service] Contributions for USERRA leave.--Any

active member [or], inactive member, active participant,

inactive participant or former participant who was reemployed

from USERRA leave and who desires to receive school service

credit or make mandatory pickup participant contributions for

his USERRA leave shall notify the board within the time period

required under 38 U.S.C. Ch. 43 (relating to employment and

reemployment rights of members of the uniformed services) and

IRC § 414(u) of his desire to make the [required member]

contributions. Upon making the required member contributions

within the allowed time period, the member shall receive credit

for the service as of the date the contributions are made. Upon

making the permitted mandatory pickup participant contributions

within the allowed time period, the employer shall make the

corresponding employer defined contributions at the same time.

(d.2) Voluntary contributions by a participant.--Any active

participant who desires to make voluntary contributions to be

credited to his individual investment account shall notify the

board and, upon compliance with the requirements, procedures and

limitations established by the board in the plan document, may

do so subject to the limitations under IRC §§ 401(a) and 415 and

other applicable law.

20150HB0727PN1555 - 110 -

(e) Beneficiary for death benefits from system.--Every

member shall nominate a beneficiary by written designation filed

with the board to receive the death benefit or the benefit

payable under the provisions of Option 1. Such nomination may be

changed at any time by the member by written designation filed

with the board. A member may also nominate a contingent

beneficiary or beneficiaries to receive the death benefit or the

benefit payable under the provisions of Option 1.

(e.1) Beneficiary for death benefits from plan.--Every

participant shall nominate a beneficiary by written designation

filed with the board as provided in section 8506 (relating to

duties of employers) to receive the death benefit payable under

section 8347 8408 (relating to death benefits). A participant

may also nominate a contingent beneficiary or beneficiaries to

receive the death benefit provided under this section 8408 . Such

nomination may be changed at any time by the participant by

written designation filed with the board.

(f) Termination of service by members.--Each member who

terminates school service and who is not then a disability

annuitant shall execute on or before the date of termination of

service a written application, duly attested by the member or

his legally constituted representative, electing to do one of

the following:

(1) Withdraw his accumulated deductions.

(2) Vest his retirement rights and if he is a joint

coverage member, and so desires, elect to become a full

coverage member and agree to pay within 30 days of the date

of termination of service the lump sum required.

(3) Receive an immediate annuity, if eligible, and may,

if he is a joint coverage member, elect to become a full

20150HB0727PN1555 - 111 -

<--

coverage member and agree to pay within 30 days of date of

termination of service the lump sum required.

* * *

(g.1) Deferral of retirement rights.--If a participant

terminates school service and does not commence receiving a

distribution, he shall nominate a beneficiary by written

designation filed with the board, and he may anytime thereafter,

but no later than his required beginning date, withdraw the

vested accumulated total defined contributions standing to his

credit or apply for another form of distribution required by law

or authorized by the board.

(h) Vestees attaining superannuation age.--Upon attainment

of superannuation age a vestee shall execute and file within 90

days an application for an annuity. Any application filed after

such 90 day period shall be effective as of the date it is filed

with the board, subject to the provisions of section 8505(g)

(relating to duties of board regarding applications and

elections of members and participants). If a vestee does not

file an application within seven years after attaining

superannuation age, he shall be deemed to have elected to

receive his accumulated deductions upon attainment of

superannuation age.

* * *

Section 115. Sections 8521(b), 8522, 8524, 8525, 8531, 8533,

8533.1, 8533.3 and 8533.4(a) of Title 24 are amended to read:

§ 8521. Management of fund and accounts.

* * *

(b) Crediting of interest.--The board annually shall allow

statutory interest, excluding the individual investment

accounts, to the credit of the members' savings account on the

20150HB0727PN1555 - 112 -

mean amount of the accumulated deductions of all members for

whom interest is payable for the preceding year and valuation

interest on the mean amount of the annuity reserve account for

the preceding year to the credit of that account. The board

annually shall allow valuation interest calculated on the mean

amount for the preceding year of the balance in the State

accumulation account excluding any earnings of the fund credited

to the account during that year. In the event the total earnings

for the year do not exceed 5 1/2% of the mean amount for the

preceding year of the total assets of the fund less earnings

credited to the fund during that year plus the administrative

expenses of the board, the difference required to be

appropriated from the General Fund shall be credited to the

State accumulation account.

* * *

§ 8522. Public School Employees' Retirement Fund.

The fund shall consist of all moneys in the several separate

funds in the State Treasury set apart to be used under the

direction of the board for the benefit of members of the system;

and the Treasury Department shall credit to the fund all moneys

received from the Department of Revenue arising from the

contributions relating to or on behalf of the members of the

system required under the provisions of Chapter 83 (relating to

membership, contributions and benefits) and all earnings from

investments or moneys of said fund. There shall be established

and maintained by the board the several ledger accounts

specified in sections 8523 (relating to members' savings

account), 8524 (relating to State accumulation account), 8525

(relating to annuity reserve account) and 8526 (relating to

health insurance account). The individual investment accounts

20150HB0727PN1555 - 113 -

that are part of the trust are not part of the fund. Mandatory

pickup participant contributions, voluntary contributions and

employer defined contributions made under this part and any

income earned by the investment of such contributions shall not

be paid or credited to the fund but instead shall be paid to the

trust and credited to the individual investment accounts.

§ 8524. State accumulation account.

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 resulting from membership in the

system 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.

§ 8525. Annuity reserve account.

(a) Credits and charges to account.--The annuity reserve

account shall be the ledger account to which shall be credited

the reserves held for the payment of annuities and death

benefits resulting from membership in the system on account of

all annuitants and the contributions from the Commonwealth and

other employers as determined in accordance with section 8328

20150HB0727PN1555 - 114 -

(relating to actuarial cost method) for the payment of the

supplemental annuities 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). The annuity reserve

account shall be credited with valuation interest. After the

transfers provided in sections 8523 (relating to members'

savings account) and 8524 (relating to State accumulation

account), all annuity and death benefit payments shall be

charged to the annuity reserve account and paid from the fund.

(b) Transfers from account.--Should an annuitant be

subsequently restored to active service either as a member of

the system or as a participant in the plan, the present value of

his member's annuity at the time of reentry into school service

shall be transferred from the annuity reserve account and placed

to his individual credit in the members' savings account. In

addition, the actuarial reserve for his annuity less the amount

transferred to the members' savings account shall be transferred

from the annuity reserve account to the State accumulation

account.

§ 8531. State guarantee regarding the system.

Statutory interest charges payable, the maintenance of

reserves in the fund, and the payment of all annuities and other

benefits granted by the board from the system under the

provisions of this part relating to the establishment and

20150HB0727PN1555 - 115 -

administration of the system are hereby made obligations of the

Commonwealth. All income, interest, and dividends derived from

deposits and investments of the system authorized by this part

shall be used for the payment of the said obligations of the

Commonwealth and shall not be used for any obligations of the

plan or trust.

§ 8533. Taxation, attachment and assignment of funds.

(a) General rule.--Except as provided in subsections (b),

State annuity, or retirement allowance, to the return of

contributions, any benefit or right accrued or accruing to any

person under the provisions of this part, and the moneys in the

fund and the trust are hereby exempt from any State or municipal

tax, and exempt from levy and sale, garnishment, attachment, the

provisions of Article XIII.1 of the the act of April 9, 1929

(P.L.343, No.176), known as The Fiscal Code, or any other

process whatsoever, and shall be unassignable. No participant or

beneficiary, successor payee, spouse or alternate payee of a

participant shall have the ability to commute, sell, assign,

alienate, anticipate, mortgage, pledge, hypothecate, commutate

or otherwise transfer or convey any benefit or interest in an

individual investment account or rights to receive or direct

distributions under this part or under agreements entered into

under this part except as otherwise provided in this part and in

the case of either a member or a participant.

(b) Forfeiture.--Rights under this part shall be subject to

forfeiture as provided by the act of July 8, 1978 (P.L.752,

No.140), known as the Public Employee Pension Forfeiture Act.

Forfeitures under this subsection or under any other provision

of law may not be applied to increase the benefits that any

20150HB0727PN1555 - 116 -

member would otherwise receive under this part. Notwithstanding

this paragraph, the act of July 8, 1978 (P.L.752, No.140), known

as the Public Employee Pension Forfeiture Act, section 16(b) of

Article V of the Constitution of Pennsylvania or 42 Pa.C.S. §

3352 (relating to pension rights), the accumulated mandatory

participant contributions and accumulated voluntary

contributions standing to the credit of a participant shall not

be forfeited but shall be available for payment of fines and

restitution as provided by law. Furthermore, amounts in the

trust that have been ordered to be distributed to an alternate

payee as the result of an equitable distribution of marital

property as part of an approved domestic relations order entered

before the date of the order or action in a court or other

tribunal resulting in a forfeiture of a participant's interest

in the trust shall not be subject to the Public Employee Pension

Forfeiture Act, section 16(b) of the Article V of the

Constitution of Pennsylvania or 42 Pa.C.S. § 3352. Any

accumulated employer defined contributions forfeited as a result

of this subsection or other law shall be retained by the board

and used for the payment of expenses of the plan.

be subject to attachment in favor of an alternate payee as set

forth in an approved domestic relations order.

(d) Direct rollover.--Effective with distributions made on

or after January 1, 1993, and notwithstanding any other

provision of this part to the contrary, a distributee may elect,

at the time and in the manner prescribed by the board, to have

any portion of an eligible rollover distribution paid directly

to an eligible retirement plan by way of a direct rollover. For

purposes of this subsection, a "distributee" includes a member,

20150HB0727PN1555 - 117 -

a participant, [and] a member's surviving spouse [and], a

participant's surviving spouse, a member's former spouse who is

an alternate payee under an approved domestic relations order

and a participant's former spouse who is an alternate payee

under an approved domestic relations order and anyone else

authorized under the IRC and the plan terms approved by the

board to have an eligible rollover distribution paid directly to

an eligible retirement plan by way of a direct rollover. For

purposes of this subsection, the term "eligible rollover

distribution" has the meaning given such term by IRC § 402(f)(2)

(A) and "eligible retirement plan" has the meaning given such

term by IRC § 402(c)(8)(B), except that a qualified trust shall

be considered an eligible retirement plan only if it accepts the

distributee's eligible rollover distribution; however, in the

case of an eligible rollover distribution to a surviving spouse,

an eligible retirement plan is an "individual retirement

account" or an "individual retirement annuity" as those terms

are defined in IRC § 408(a) and (b).

§ 8533.1. Approval of domestic relations orders.

(a) Certification regarding members.--A domestic relations

order pertaining to a member of the system shall be certified as

an approved domestic relations order by the secretary of the

board, or his designated representative, only if such order

meets all of the following:

(1) Requires the system to provide any type or form of

benefit or any option applicable to members already provided

under this part.

(2) Requires the system to provide no more than the

total amount of benefits than the member would otherwise

receive (determined on the basis of actuarial value) unless

20150HB0727PN1555 - 118 -

increased benefits are paid to the member or alternate payee

based upon cost-of-living increases or increases based on

other than actuarial value.

(3) Specifies the amount or percentage of the member's

benefits to be paid by the system to each such alternate

payee or the manner in which the amount or percentage is to

be determined.

(4) Specifies the retirement option to be selected by

the member upon retirement or states that the member may

select any retirement option offered by this part upon

retirement.

(5) Specifies the name and last known mailing address,

if any, of the member and the name and last known mailing

address of each alternate payee covered by the order and

states that it is the responsibility of each alternate payee

to keep a current mailing address on file with the system.

(6) Does not grant an alternate payee any of the rights,

options or privileges of a member under this part.

(7) Requires the member to execute an authorization

allowing each alternate payee to monitor the member's

compliance with the terms of the domestic relations order

through access to information concerning the member

maintained by the system.

(a.1) Certification regarding participants.--A domestic

relations order pertaining to a participant shall be certified

as an approved domestic relations order by the secretary of the

board, or his designated representative, only if that order

meets all of the following:

(1) Does not require the plan to provide any type or

form of benefit or any option applicable to members of the

20150HB0727PN1555 - 119 -

system or participants in the plan.

(2) Does not require the segregation of the alternate

payee's share of the participant's individual investment

account into a subaccount or newly established individual

account titled in the name of the alternate payee.

(3) Does not require the plan to recover or distribute

any funds which were distributed to the participant or at the

participant's direction prior to the approval of the domestic

relations order by the secretary of the board or his

designated representative.

(4) Requires the plan to pay to the alternate payee no

more than the lesser of the vested amount of the

participant's individual investment account specified by the

domestic relations order or the VESTED amount of the

participant's individual investment account as of the date of

the transfer of the alternate payee's share to the alternate

payee.

(5) States that the plan shall not be required to recoup

or make good for losses in value to the participant's

individual investment account incurred between the date of

the valuation of the account used for equitable distribution

purposes and the date of distribution to the alternate payee.

(6) Specifies the amount or percentage of the

participant's individual investment account to be paid to the

alternate payee and the date upon which such valuation is

based.

(7) Specifies the name and last known mailing address,

if any, of the participant and the name and last known

mailing address of each alternate payee covered by the order

and states that it is the responsibility of each alternate

20150HB0727PN1555 - 120 -

<--

payee to keep a current mailing address on file with the

system.

(8) Does not grant an alternate payee the rights,

privileges or options available to a participant.

(9) Requires the participant to execute an authorization

allowing each alternate payee to monitor the participant's

compliance with the terms of the domestic relations order

through access to information concerning the participant

maintained by the plan. Any authorization granted under this

section shall be construed only as an authorization for the

alternate payee to receive information concerning the

participant which relates to the administration, calculation,

and payment of the alternate payee's share of the

participant's account and not as an authorization to exercise

the rights afforded to participants or obtain information

that is not related to the administration, calculation and

payment of the alternate payee's share of the participant's

account.

(10) In the case of participants who have not yet begun

to receive distributions as of the date the domestic

relations order is approved by the secretary of the board or

his designated representative, requires the immediate

distribution of the alternate payee's share of the

participant's individual investment account, which may be

made by direct payment, eligible rollover or trustee-to-

trustee transfer to another eligible plan or qualified

account owned by the alternate payee . , NOTWITHSTANDING ANY

OTHER PROVISION OF THIS PART OR THE PLAN THAT WOULD REQUIRE A

DISTRIBUTION OF ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS IN

THE FORM OF AN ANNUITY OR TO REQUIRE THE PURCHASE OF AN

20150HB0727PN1555 - 121 -

<--

ANNUITY.

(11) In the case of participants who are currently

receiving distributions from the trust as of the date the

domestic relations order is approved by the secretary of the

board or his designated representative, the domestic

relations order may not order the board to pay the alternate

payee more than the balance available in the participant's

individual investment account as of the date the order is

approved or require that distributions continue to the

alternate payee after the death of the participant and final

settlement of the participant's individual investment

account.

(b) Determination by secretary.--Within a reasonable period

of time after receipt of a domestic relations order, the

secretary of the board, or his designated representative, shall

determine whether this order is an approved domestic relations

order and notify the member or participant and each alternate

payee of this determination. Notwithstanding any other provision

of law, the exclusive remedy of any member, participant or

alternate payee aggrieved by a decision of the secretary of the

board, or his designated representative, shall be the right to

an adjudication by the board under 2 Pa.C.S. Ch. 5 (relating to

practice and procedure) with appeal therefrom to the

Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to judicial

review) and 42 Pa.C.S. § 763(a)(1) (relating to direct appeals

from government agencies).

in [subsection (a)] subsections (a) and (a.1) shall not apply to

any domestic relations order which is an order for support as

that term is defined in 23 Pa.C.S. § 4302 (relating to

20150HB0727PN1555 - 122 -

definitions) or an order for the enforcement of arrearages as

provided in 23 Pa.C.S. § 3703 (relating to enforcement of

arrearages). These orders shall be approved to the extent that

they do not attach moneys in excess of the limits on attachments

as established by the laws of this Commonwealth and the United

States, require distributions of benefits in a manner that would

violate the laws of the United States, any state or this

Commonwealth or require the distribution of funds for support or

enforcement of arrearages against any participant who is not

receiving distributions from the plan at the time such order is

entered.

(d) Obligation discharged.--Only the requirements of this

part and any regulations promulgated hereunder shall be used to

govern the approval or disapproval of a domestic relations

order. Therefore, if the secretary of the board, or his

designated representative, acts in accordance with the

provisions of this part and any promulgated regulations in

approving or disapproving a domestic relations order, then the

obligations of the system or plan with respect to such approval

or disapproval shall be discharged.

§ 8533.3. Irrevocable survivor annuitant.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a member may provide for an

irrevocable survivor annuitant. A domestic relations order

requiring the designation of an irrevocable survivor annuitant

shall be deemed to be one that requires a member to designate an

alternate payee as a survivor annuitant and that prohibits the

removal or change of that survivor annuitant without approval of

a court of competent jurisdiction, except by operation of law.

Such a domestic relations order may be certified as an approved

20150HB0727PN1555 - 123 -

domestic relations order by the secretary of the board, or his

designated representative, in which case the irrevocable

survivor annuitant so ordered by the court cannot be changed by

the member without approval by the court. A person ineligible to

be designated as a survivor annuitant may not be designated an

irrevocable survivor annuitant.

§ 8533.4. Amendment of approved domestic relations orders.

(a) Deceased alternate payee.--In the event that the

alternate payee predeceases the member or participant and there

are benefits payable to the alternate payee, the divorce court

may amend the approved domestic relations order to substitute a

person for the deceased alternate payee to receive any benefits

payable to the deceased alternate payee.

* * *

Section 116. Title 24 is amended by adding a section to

read:

§ 8533.5. Irrevocable successor payee.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a participant may provide for an

irrevocable successor payee, only if the participant is

receiving a payment pursuant to a payment option provided by the

board that allows for a successor payee. A domestic relations

order requiring the designation of an irrevocable successor

payee shall be deemed to be one that requires a participant who

is receiving payments from an annuity or other distribution

option to designate an alternate payee as a successor payee and

that prohibits the removal or change of that successor payee

without approval of a court of competent jurisdiction, except by

operation of law. Such a domestic relations order may be

certified as an approved domestic relations order by the

20150HB0727PN1555 - 124 -

secretary of the board, or his designated representative, in

which case the irrevocable successor payee so ordered by the

court cannot be changed by the participant except by approval by

the court. A person ineligible to be designated as a successor

payee may not be designated as an irrevocable successor payee. A

court may not name an irrevocable successor payee if the

alternate payee is eligible to receive a lump sum distribution

of the alternate payee's portion of the marital portion of the

pension benefit.

Section 117. Sections 8534 and 8535 of Title 24 are amended

to read:

§ 8534. Fraud and adjustment of errors.

(a) Penalty for fraud.--Any person who shall knowingly make

any false statement or shall falsify or permit to be falsified

any record or records of this system or plan in any attempt to

defraud the system or plan as a result of such act shall be

guilty of a misdemeanor of the second degree.

(b) Adjustment of errors.--Should any change or mistake in

records result in any member, participant, beneficiary, [or],

survivor annuitant or successor payee receiving from the system

or plan more or less than he would have been entitled to receive

had the records been correct, then regardless of the intentional

or unintentional nature of the error and upon the discovery of

such error, the board shall correct the error and if the error

affects contributions to or payments from the system, then so

far as practicable shall adjust the payments which may be made

for and to such person in such a manner that the actuarial

equivalent of the benefit to which he was correctly entitled

shall be paid. If the error affects contributions to or payments

from the plan, the board shall take such action as shall be

20150HB0727PN1555 - 125 -

provided for in the plan document.

§ 8535. Payments to school entities by Commonwealth.

For each school year beginning with the 1995-1996 school year

and ending with the 2015-2016 school year, each school entity

shall be paid by the Commonwealth for contributions based upon

school service of active members of the system after June 30,

1995, as follows:

(1) The Commonwealth shall pay each school entity for

contributions made to the Public School Employees' Retirement

Fund based upon school service of all active members,

including members on activated military service leave, whose

effective dates of employment with their school entities are

after June 30, 1994, and who also had not previously been

employed by any school entity within this Commonwealth an

amount equal to the amount certified by the Public School

Employees' Retirement Board as necessary to provide, together

with the members' contributions, reserves on account of

prospective annuities, supplemental annuities and the premium

assistance program as provided in this part in accordance

with section 8328 (relating to actuarial cost method),

multiplied by the market value/income aid ratio of the school

entity. For no school year shall any school entity receive

less than the amount that would result if the market

value/income aid ratio as defined in section 2501(14.1) of

the Public School Code [of 1949] was 0.50.

(2) The Commonwealth shall pay each school entity for

contributions made to the Public School Employees' Retirement

Fund based upon school service of all active members,

including members on activated military service leave, who

are not described in paragraph (1), one-half of the amount

20150HB0727PN1555 - 126 -

certified by the Public School Employees' Retirement Board as

necessary to provide, together with the members'

contributions, reserves on account of prospective annuities,

supplemental annuities and the premium assistance program as

provided in this part in accordance with section 8328.

(3) School entities shall have up to five days after

receipt of the Commonwealth's portion of the employer's

liability to make payment to the Public School Employees'

Retirement Fund. School entities are expected to make the

full payment to the Public School Employees' Retirement Fund

in accordance with section 8327 (relating to payments by

employers) in the event the receipt of the Commonwealth's

portion of the employer's liability is delayed because of

delinquent salary reporting or other conduct by the school

entities.

Section 118. Title 24 is amended by adding a section to

read:

§ 8535.1. Payments to school entities by Commonwealth

commencing with the 2016-2017 school year.

For each school year, beginning with the 2016-2017 school

year, each school entity shall be paid by the Commonwealth for

contributions based upon school service of active members of the

system and active participants of the plan after June 30, 2016,

as follows:

(1) The Commonwealth shall pay each school entity for

contributions made to the fund based upon school service of

all active members, including members on activated military

service leave, and active participants of the plan whose

effective dates of employment with their school entities are

after June 30, 1994, and who also had not previously been

20150HB0727PN1555 - 127 -

employed by any school entity within this Commonwealth an

amount equal to the amount certified by the board as

necessary to provide, together with the members' and

participants' contributions, reserves on account of

prospective annuities, supplemental annuities and the premium

assistance program as provided in this part in accordance

with section 8328 (relating to actuarial cost method),

multiplied by the market value/income aid ratio of the school

entity. For no school year shall any school entity receive

less than the amount that would result if the market

value/income aid ratio as defined in section 2501(14.1) of

the Public School Code was 0.50.

(2) The Commonwealth shall pay each school entity for

contributions made to the fund based upon school service of

all active members, including members on activated military

service leave, and active participants of the plan who are

not described in paragraph (1), one-half of the amount

certified by the board as necessary to provide, together with

the members' and participants' contributions, reserves on

account of prospective annuities, supplemental annuities and

the premium assistance program as provided in this part in

accordance with section 8328.

(3) School entities shall have up to five days after

receipt of the Commonwealth's portion of the employer's

liability to make payment to the fund. School entities are

expected to make the full payment to the fund in accordance

with section 8327 (relating to payments by employers) in the

event the receipt of the Commonwealth's portion of the

employer's liability is delayed because of delinquent salary

reporting or other conduct by the school entities.

20150HB0727PN1555 - 128 -

Section 119. The definition of "eligible person" in section

8702(a) of Title 24 is amended to read:

§ 8702. Definitions.

(a) General rule.--Subject to additional definitions

contained in subsequent provisions of this part which are

applicable to specific provisions of this part, the following

words and phrases when used in this part shall have the meanings

given to them in this section unless the context clearly

indicates otherwise:

"Eligible person." An individual who is an annuitant or

survivor annuitant or the spouse or dependent of an annuitant or

survivor annuitant, or an individual who is a participant

receiving distributions or a successor payee, or the spouse or

dependent of a participant receiving distributions or successor

payee.

* * *

Section 120. Section 9109(a) and (b) of Title 24 are amended

to read:

§ 9101. Status of program relative to Public School Employees'

Retirement Code.

(a) General rule.--The program shall be an approved health

insurance program for purposes of section 8505(i) (relating to

duties of board regarding applications and elections of members

and participants) and shall be an approved insurance carrier for

purposes of section 8509 (relating to health insurance premium

assistance program).

(b) State guarantee.--The program shall not be subject to

the provisions of section 8531 (relating to State guarantee

regarding the system).

* * *

20150HB0727PN1555 - 129 -

ARTICLE II

AMENDMENTS TO TITLE 51

Section 201. Section 7306(a) of Title 51 is amended and the

section is amended by adding subsections to read:

§ 7306. Retirement rights.

(a) Options available to employees.--Any employee who is a

member of a retirement system other than an active member or

inactive member on leave without pay of the State Employees'

Retirement System or [an active or inactive member of] the

Public School Employees' Retirement System or an active or

inactive participant on leave without pay of the State

Employees' Defined Contribution Plan or the School Employees'

Defined Contribution Plan at the time he is granted a military

leave of absence shall be entitled to exercise any one of the

following options in regard thereto:

(1) He may continue to make regular payments into the

fund during the period of his military leave of absence. The

amount of such payments shall be the same as they would have

been, had he not been granted a military leave of absence,

but had instead remained actively in his employment. The time

of making such payments shall be mutually agreed upon by the

employee and the retirement association of which he is a

member, but in no event shall be less frequent than

semiannually. The employer shall make its contributions on

the same basis as is used to compute the employee's

contributions. In this case, his retirement rights shall be

determined on the basis that he was in the active, continuous

and uninterrupted employ of his employer for the period

during which he was on military leave of absence.

(2) He may discontinue making payments into the fund

20150HB0727PN1555 - 130 -

during the period of his military leave of absence. In such

event, the employer shall also discontinue making its

contributions during this period. In this case, his

retirement rights shall be determined by completely

disregarding the period of his military leave of absence for

all purposes.

* * *

(f) Participants of the State Employees' Defined

Contribution Plan.--An employee who is an active participant or

inactive participant on leave without pay of the State

Employees' Defined Contribution Plan at the time he is granted a

military leave of absence shall be entitled to make

contributions to the State Employees' Defined Contribution Trust

for such leave as provided in 71 Pa.C.S. Pt. XXV (relating to

retirement for State employees and officers).

(g) Participants of the School Employees' Defined

Contribution Plan.--An employee who is an active or inactive

participant of the School Employees' Defined Contribution Plan

at the time he is granted a military leave of absence shall be

entitled to make contributions to the Public School Employees'

Defined Contribution Trust for such leave as provided in the

Public School Employees' Retirement Code.

ARTICLE III

AMENDMENTS TO TITLE 71

Section 301. The definitions of "alternate payee," "average

noncovered salary," "beneficiary," "compensation," "creditable

nonstate service," "credited service," "date of termination of

service," "distribution," "domestic relations order," "final

average salary," "inactive member," "intervening military

service," "irrevocable beneficiary," "previous State service,"

20150HB0727PN1555 - 131 -

"reemployed from USERRA leave," "retirement counselor," "salary

deductions," "special vestee," "State employee," "superannuation

age" and "valuation interest" 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:

* * *

"Accumulated employer defined contributions." The total of

the employer defined contributions paid into the trust on

account of a participant's State service together with any

investment earnings and losses and adjustment for fees, costs

and expenses credited or charged thereon.

"Accumulated mandatory participant contributions." The total

of the mandatory pickup participant contributions paid into the

trust on account of a participant's State service together with

any investment earnings and losses and adjustments for fees,

costs and expenses credited or charged thereon.

"Accumulated total defined contributions." The total of the

accumulated mandatory participant contributions, accumulated

employer defined contributions and accumulated voluntary

contributions, reduced by any distributions, standing to the

credit of a participant in an individual investment account in

the trust.

"Accumulated voluntary contributions." The total of any

amounts rolled over by a participant or transferred by a direct

trustee-to-trustee transfer into the trust together with any

investment earnings and losses and adjustment for fees, costs

20150HB0727PN1555 - 132 -

and expenses credited or charged thereon.

* * *

"Active participant." A State employee for whom mandatory

pickup participant contributions are being made to the trust or

for whom such contributions otherwise required for current State

service are not being made solely by reason of any provision of

this part relating to the limitations under section 401(a)(17)

or 415 of the Internal Revenue Code of 1986 (Public Law 99-514,

26 U.S.C. § 401(a)(17) or 415) .

* * *

"Alternate payee." Any spouse, former spouse, child or

dependent of a member or participant who is recognized by a

domestic relations order as having a right to receive all or a

portion of the moneys payable to that member or participant

under this part.

* * *

"Average noncovered salary." The average of the amounts of

compensation received by an active member each calendar year

since January 1, 1956, exclusive of the amount which was or

could have been covered by the Federal Social Security Act[,]

(42 U.S.C. § 301 et seq.), during that portion of the member's

service since January 1, 1956, for which he has received social

security integration credit.

* * *

"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] the

member[.] or by a participant to receive the participant's

VESTED accumulated total defined contributions or a lump sum

benefit upon the death of the participant.

20150HB0727PN1555 - 133 -

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* * *

"COMBINED SERVICE EMPLOYEE." A CURRENT OR FORMER STATE

EMPLOYEE WHO IS BOTH A MEMBER OF THE SYSTEM AND A PARTICIPANT IN

THE PLAN.

"Compensation." Pickup contributions and mandatory pickup

contributions plus remuneration actually received as a State

employee excluding refunds for expenses, contingency and

accountable expense allowances; excluding any severance payments

or payments for unused vacation or sick leave; and excluding

payments for military leave and any other payments made by an

employer while on USERRA leave, leave of absence granted under

51 Pa.C.S. § 4102 (relating to leaves of absence for certain

government employees), military leave of absence granted under

51 Pa.C.S. § 7302 (relating to granting military leaves of

absence) or other types of military leave, including other types

of leave payments, stipends, differential wage payments as

defined in IRC § 414(u)(12) and any other payments: Provided,

however, That compensation received prior to January 1, 1973,

shall be subject to the limitations for retirement purposes in

effect December 31, 1972, if any: Provided further, That the

limitation under section 401(a)(17) of the Internal Revenue Code

of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17)) taken into

account for the purpose of member contributions, including any

additional member contributions in addition to regular or joint

coverage member contributions and Social Security integration

contributions, regardless of class of service, shall apply to

each member who first became a member of the State Employees'

Retirement System on or after January 1, 1996, and who by reason

of such fact is a noneligible member subject to the application

of the provisions of section 5506.1(a) (relating to annual

20150HB0727PN1555 - 134 -

<--

compensation limit under IRC § 401(a)(17)) and shall apply to

each participant.

* * *

"Creditable nonstate service." Service other than:

(1) service as a State employee;

(2) service converted to State service pursuant to

section 5303.1 (relating to election to convert county

service to State service); or

(3) school service converted to State service pursuant

to section 5303.2 (relating to election to convert school

service to State service)

for which an active member may obtain credit in the system.

"Credited service." State or creditable nonstate service for

which the required contributions have been made to the fund or

for which the contributions otherwise required for such service

were not made solely by reason of section 5502.1 (relating to

waiver of regular member contributions and Social Security

integration member contributions) or any provision of this part

relating to the limitations under section 401(a)(17) or 415(b)

of the Internal Revenue Code of 1986 (Public Law 99-514, 26

U.S.C. § 401(a)(17) or 415(b)), or for which salary deductions

to the system or lump sum payments have been agreed upon in

writing.

"Date of termination of service." The last day of service

for which:

(1) pickup contributions are made for an active member

[or] ;

(2) in the case of an inactive member on leave without

pay, the date of his resignation or the date his employment

is formally discontinued by his employer[.];

20150HB0727PN1555 - 135 -

(3) mandatory pickup participant contributions are made

for an active participant; or

(4) in the case of an inactive participant on leave

without pay, the date of his resignation or the date his

employment is formally discontinued by his employer . ; OR

(5) IN THE CASE OF A COMBINED SERVICE EMPLOYEE, THE

LATEST OF THE DATES IN PARAGRAPHS (1), (2), (3) AND (4).

* * *

"Distribution." Payment of all or any portion of a person's

interest in either the State Employees' Retirement Fund or the

State Employees' Defined Contribution Trust or both which is

payable under this part.

"Domestic relations order." Any judgment, decree or order,

including approval of a property settlement agreement, entered

on or after the effective date of this definition by a court of

competent jurisdiction pursuant to a domestic relations law

which relates to the marital property rights of the spouse or

former spouse of a member or participant, including the right to

receive all or a portion of the moneys payable to that member or

participant under this part in furtherance of the equitable

distribution of marital assets. The term includes orders of

support as that term is defined by 23 Pa.C.S. § 4302 (relating

to definitions) and orders for the enforcement of arrearages as

provided in 23 Pa.C.S. § 3703 (relating to enforcement of

arrearages).

* * *

"Employer defined contributions."

(1) Unless paragraph (2) applies, contributions equal to

4% of an active participant's compensation which are made by

the Commonwealth or other employer for current service to the

20150HB0727PN1555 - 136 -

<--

trust to be credited in the participant's individual

investment account.

(2) For an enforcement officer, correction officer,

psychiatric security aide, Delaware River Port Authority

policeman, park ranger or Capitol police officer,

contributions equal to 5.5% of an active participant's

compensation which are made by the Commonwealth or other

employer for current service to the trust to be credited in

the participant's individual investment account.

* * *

"Final average salary." The highest average compensation

received as a member during any three nonoverlapping periods of

four consecutive calendar quarters during which the member was a

State employee, with the compensation for part-time service

being annualized on the basis of the fractional portion of the

year for which credit is received; except if the employee was

not a member for three nonoverlapping periods of four

consecutive calendar quarters, the total compensation received

as a member, annualized in the case of part-time service,

divided by the number of nonoverlapping periods of four

consecutive calendar quarters of membership; in the case of a

member with multiple service, the final average salary shall be

determined on the basis of the compensation received by him as a

[State employee] member of the system or as a school employee

other than as a participant in the School Employees' Defined

Contribution Plan, or both; in the case of a member with Class

A-3 or Class A-4 service and service in one or more other

classes of service, the final average salary shall be determined

on the basis of the compensation received by him in all classes

of State service credited in the system; and, in the case of a

20150HB0727PN1555 - 137 -

member who first became a member on or after January 1, 1996,

the final average salary shall be determined as hereinabove

provided but subject to the application of the provisions of

section 5506.1(a) (relating to annual compensation limit under

IRC § 401(a)(17)). Final average salary shall be determined by

including in compensation payments deemed to have been made to a

member reemployed from USERRA leave to the extent member

contributions have been made as provided in section 5302(f)(2)

(relating to credited State service) and payments made to a

member on leave of absence under 51 Pa.C.S. § 4102 (relating to

leaves of absence for certain government employees) as provided

in section 5302(f)(6).

* * *

"Inactive member." A member for whom no pickup contributions

are being made to the fund, except in the case of an active

member for whom such contributions otherwise required for

current State service are not being made solely by reason of

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions) or any provision of this part relating to the

limitations under section 401(a)(17) or 415(b) of the Internal

Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17)

or 415(b)), but who has accumulated deductions standing to his

credit in the fund and who is not eligible to become or has not

elected to become a vestee or has not filed an application for

an annuity.

"Inactive participant." A participant for whom no mandatory

pickup participant contributions are being made to the trust,

except in the case of an active participant for whom such

contributions otherwise required for current State service are

20150HB0727PN1555 - 138 -

not being made solely by reason of any provision of this part

relating to limitations under section 401(a)(17) or 415 of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

401(a)(17) or 415), but who has VESTED accumulated total defined

contributions standing to his credit in the trust and who has

not filed an application for an annuity.

"Individual investment account." The account in the trust to

which are credited the amounts of the contributions made by a

participant and the participant's employer in accordance with

the provisions of this part, together with all interest and

investment earnings after deduction for fees, costs, expenses

and investment losses and charges for distributions.

"Intervening military service." Active military service of a

member who was a State employee and active member of the system

immediately preceding his induction into the armed services or

forces of the United States in order to meet a military

obligation excluding any voluntary extension of such service and

who becomes a State employee within 90 days of the expiration of

such service.

* * *

"Irrevocable beneficiary." The person or persons permanently

designated by a member or a participant in writing to the State

Employees' Retirement Board pursuant to an approved domestic

relations order to receive all or a portion of the accumulated

deductions, VESTED accumulated total defined contributions or

lump sum benefit payable upon the death of such member or

participant.

"Irrevocable successor payee." The person permanently

designated by a participant receiving distributions in writing

to the board pursuant to an approved domestic relations order to

20150HB0727PN1555 - 139 -

<--

receive one or more distributions from the plan upon the death

of such participant.

* * *

"Mandatory pickup participant contributions." Contributions

equal to 6.5% of compensation that are made by the Commonwealth

or other employer for active participants for current service

which are picked up by the employer.

* * *

"Participant." An active participant, inactive participant

or participant receiving distributions.

"Participant receiving distributions." A participant in the

plan who has commenced receiving distributions from his

individual investment account but who has not received a total

distribution of his VESTED interest in the account.

* * *

"Plan." The State Employees' Defined Contribution Plan as

established by the provisions of this part and the board.

"Plan document." The documents created by the board under

section 5402 (relating to plan document) that contain the terms

and provisions of the plan and trust as established by the board

regarding the establishment, administration and investment of

the plan and trust.

"Previous State service." Service rendered as a State

employee prior to his most recent entrance in the system[.],

provided that the State employee was not a participant in the

plan, was not eligible to be an optional participant in the plan

under section 5301(b.1) (relating to mandatory and optional

membership in system and participation in plan) or was not

prohibited from being a participant under section 5301(c.1)

during such service .

20150HB0727PN1555 - 140 -

<--

* * *

"Reemployed from USERRA leave." Resumption of active

membership or active participation as a State employee after a

period of USERRA leave, provided, however, that the resumption

of active membership or active participation was within the time

period and under conditions and circumstances such that the

State employee was entitled to reemployment rights under 38

U.S.C. Ch. 43 (relating to employment and reemployment rights of

members of the uniformed services).

* * *

"Required beginning date." The latest date by which

distributions of a participant's interest in his individual

investment account must commence under section 401(a)(9) of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

401(a)(9)).

"Retirement counselor." The State Employees' Retirement

System or State Employees' Defined Contribution Plan employee

whose duty it shall be to advise each employee of his rights and

duties as a member of the system or as a participant of the

plan.

"Salary deductions." The amounts certified by the board,

deducted from the compensation of an active member or active

participant, or the school service compensation of a multiple

service member who is an active member of the Public School

Employees' Retirement System, and paid into the fund or trust.

"School Employees' Defined Contribution Plan." The defined

contribution plan for school employees established under 24

Pa.C.S. Pt. IV (relating to retirement for school employees).

* * *

"Special vestee." An employee of The Pennsylvania State

20150HB0727PN1555 - 141 -

University who is a member of the State Employees' Retirement

System with five or more but less than ten eligibility points

and who has a date of termination of service from The

Pennsylvania State University of June 30, 1997, because of the

transfer of his job position or duties to a controlled

organization of the Penn State Geisinger Health System or

because of the elimination of his job position or duties due to

the transfer of other job positions or duties to a controlled

organization of the Penn State Geisinger Health System, provided

that:

(1) subsequent to termination of State service as an

employee of The Pennsylvania State University, the member has

not returned to State service in any other capacity or

position as a State employee;

(2) The Pennsylvania State University certifies to the

board that the member is eligible to be a special vestee;

(3) the member files an application to vest the member's

retirement rights pursuant to section 5907(f) (relating to

rights and duties of State employees [and], members and

participants) on or before September 30, 1997; and

(4) the member elects to leave the member's total

accumulated deductions in the fund and to defer receipt of an

annuity until attainment of superannuation age.

* * *

"State employee." Any person holding a State office or

position under the Commonwealth, employed by the State

Government of the Commonwealth, in any capacity whatsoever,

except an independent contractor or any person compensated on a

fee basis or any person paid directly by an entity other than a

State Employees' Retirement System employer, and shall include

20150HB0727PN1555 - 142 -

members of the General Assembly, and any officer or employee of

the following:

(1) (i) The Department of Education.

(ii) State-owned educational institutions.

(iii) Community colleges.

(iv) The Pennsylvania State University, except an

employee in the College of Agriculture who is paid wholly

from Federal funds or an employee who is participating in

the Federal Civil Service Retirement System. The

university shall be totally responsible for all employer

contributions under [section] sections 5507 (relating to

contributions to system by the Commonwealth and other

[employers).] employers before July 1, 2016) and 5507.1

(relating to contributions to system by the Commonwealth

and other employers starting July 1, 2016).

(2) The Pennsylvania Turnpike Commission, the Delaware

River Port Authority, the Port Authority Transit Corporation,

the Philadelphia Regional Port Authority, the Delaware River

Joint Toll Bridge Commission, the State Public School

Building Authority, The General State Authority, the State

Highway and Bridge Authority, the Delaware Valley Regional

Planning Commission, the Interstate Commission of the

Delaware River Basin, and the Susquehanna River Basin

Commission any time subsequent to its creation, provided the

commission or authority agrees to contribute and does

contribute to the fund or to the trust, from time to time,

the moneys required to build up the reserves necessary for

the payment of the annuities or other benefits of such

officers and employees without any liability on the part of

the Commonwealth to make appropriations for such purposes,

20150HB0727PN1555 - 143 -

and provided in the case of employees of the Interstate

Commission of the Delaware River Basin, that the employee

shall have been a member of the system for at least ten years

prior to January 1, 1963.

(3) Any separate independent public corporation created

by statute, not including any municipal or quasi-municipal

corporation, so long as he remains an officer or employee of

such public corporation, and provided that such officer or

employee of such public corporation was an employee of the

Commonwealth immediately prior to his employment by such

corporation, and further provided such public corporation

shall agree to contribute and contributes to the fund or to

the trust, from time to time, the moneys required to build up

the reserves necessary for the payment of the annuities or

other benefits of such officers and employees without any

liability on the part of the Commonwealth to make

appropriations for such purposes.

* * *

"Successor payee." The person or persons last designated by

a participant receiving distributions in writing to the board to

receive one or more distributions upon the death of such

participant.

"Superannuation age." For classes of service in the system

other than Class A-3 and Class A-4, any age upon accrual of 35

eligibility points or age 60, except for a member of the General

Assembly, an enforcement officer, a correction officer, a

psychiatric security aide, a Delaware River Port Authority

policeman or an officer of the Pennsylvania State Police, age

50, and, except for a member with Class G, Class H, Class I,

Class J, Class K, Class L, Class M or Class N service, age 55

20150HB0727PN1555 - 144 -

upon accrual of 20 eligibility points. For Class A-3 and Class

A-4 service, any age upon attainment of a superannuation score

of 92, provided the member has accrued 35 eligibility points, or

age 65, or for park rangers or capitol police officers, age 55

with 20 years of service as a park ranger or capitol police

officer, except for a member of the General Assembly, an

enforcement officer, a correction officer, a psychiatric

security aide, a Delaware River Port Authority policeman or an

officer of the Pennsylvania State Police, age 55. A vestee with

Class A-3 or Class A-4 service credit attains superannuation age

on the birthday the vestee attains the age resulting in a

superannuation score of 92, provided that the vestee has at

least 35 eligibility points, or attains another applicable

superannuation age, whichever occurs first.

* * *

"Sworn police officer." A State employee who is employed and

serving as an officer of the Pennsylvania State Police.

* * *

"Trust." The State Employees' Defined Contribution Trust

established under Chapter 54 (relating to State Employees'

Defined Contribution Plan).

* * *

"Valuation interest." Interest at 5 1/2% per annum

compounded annually and applied to all accounts of the fund

other than the members' savings account.

* * *

"Voluntary contributions." Contributions made by a

participant to the trust and credited to his individual

investment account in excess of his mandatory pickup participant

contributions by an eligible rollover or direct trustee-to-

20150HB0727PN1555 - 145 -

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trustee transfer AND CREDITED TO HIS INDIVIDUAL INVESTMENT

ACCOUNT .

Section 302. Section 5103 of Title 71 is amended to read:

§ 5103. Notice to members and participants.

Notice by publication, including, without being limited to,

newsletters, newspapers, forms, first class mail, letters,

manuals and, to the extent authorized by a policy adopted by the

board, electronically, including, without being limited to, e-

mail or [World Wide Web] Internet sites, distributed or made

available to members and participants in a manner reasonably

calculated to give actual notice of those sections of the State

Employees' Retirement Code that require notice to members or

participants shall be deemed sufficient notice for all purposes.

Section 303. Title 71 is amended by adding a section to

read:

§ 5104. Reference to State Employees' Retirement System.

(a) Construction.--As of the effective date of this section,

unless the context clearly indicates otherwise, any reference to

the State Employees' Retirement System in a statutory provision

other than this part and 24 Pa.C.S. Pt. IV (relating to

retirement for school employees) shall include a reference to

the State Employees' Defined Contribution Plan and any reference

to the State Employees' Retirement Fund shall include a

reference to the State Employees' Defined Contribution Trust.

(b) Agreement.--The agreement of an employer listed in the

definition of "State employee" under section 5102 (relating to

definitions) or any other law to make contributions to the State

Employees' Retirement Fund or to enroll its employees as members

in the State Employees' Retirement System shall be deemed to be

an agreement to make contributions to the State Employees'

20150HB0727PN1555 - 146 -

<--

Defined Contribution Trust or to enroll its employees in the

State Employees' Defined Contribution Plan.

Section 304. Section 5301 heading, (a), (b), (c) and (d) of

Title 71 are amended and the section is amended by adding

subsections to read:

§ 5301. Mandatory and optional membership in system and

participation in plan.

(a) Mandatory membership IN THE SYSTEM.--Membership in the

system shall be mandatory as of the effective date of employment

for all State employees except the following:

(1) Governor.

(2) Lieutenant Governor.

(3) Members of the General Assembly.

(4) Heads or deputy heads of administrative departments.

(5) Members of any independent administrative board or

commission.

(6) Members of any departmental board or commission.

(7) Members of any advisory board or commission.

(8) Secretary to the Governor.

(9) Budget Secretary.

(10) Legislative employees.

(11) School employees who have elected membership in the

Public School Employees' Retirement System.

(12) School employees who have elected membership in an

independent retirement program approved by the employer,

provided that in no case, except as hereinafter provided,

shall the employer contribute on account of such elected

membership at a rate greater than the employer normal

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

to actuarial cost method for fiscal years ending before July

20150HB0727PN1555 - 147 -

<--

1, 2016). For the fiscal year 1986-1987 an employer may

contribute on account of such elected membership at a rate

which is the greater of 7% or the employer normal

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

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

of 9.29%.

(13) Persons who have elected to retain membership in

the retirement system of the political subdivision by which

they were employed prior to becoming eligible for membership

in the State Employees' Retirement System.

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

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

or 750 hours in a 12-month period.

(15) Employees of the Philadelphia Regional Port

Authority who have elected to retain membership in the

pension plan or retirement system in which they were enrolled

as employees of the predecessor Philadelphia Port Corporation

prior to the creation of the Philadelphia Regional Port

Authority.

(16) Employees of the Juvenile Court Judges' Commission

who, before the effective date of this paragraph, were

transferred from the State System of Higher Education to the

Juvenile Court Judges' Commission as a result of an

interagency transfer of staff approved by the Office of

Administration and who, while employees of the State System

of Higher Education, had elected membership in an independent

retirement program approved by the employer.

(17) State employees, except for OTHER THAN ANY sworn

police officers OFFICER PERFORMING SERVICE AS A SWORN POLICE

OFFICER , whose first period of State service starts on or

20150HB0727PN1555 - 148 -

<--

after January 1, 2016.

(a.1) Mandatory participation in the plan.--State employees

listed in subsection (a)(17) who are not listed in subsection

(a)(1) through (13) shall be mandatory participants as of the

first date of State service.

(b) Optional membership in the system.--The State employees

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

elect membership in the system on or before December 31, 2015;

once such election is exercised, membership shall continue until

the termination of State service.

(b.1) (1) Optional participation in the plan.--The State

employees listed in subsection (a)(17) who also are listed in

subsection (a)(1) through (10) shall have the right to elect

participation in the plan; once such election is exercised,

participation will be effective as of the date of election

and shall continue until the termination of State service.

THE STATE EMPLOYEES DESCRIBED IN THIS PARAGRAPH SHALL NOT

HAVE THE RIGHT TO ELECT MEMBERSHIP IN THE SYSTEM.

(2) The State employees not listed in subsection (a)

(17), who are listed in subsection (a)(1) through (10) and

who are not members of the system because membership is

optional, shall have the right to elect participation in the

plan. Once such election is exercised, participation shall be

effective as of the date of election and shall continue until

termination of State service. THE STATE EMPLOYEES DESCRIBED

IN THIS PARAGRAPH SHALL NOT HAVE THE RIGHT TO ELECT

MEMBERSHIP IN THE SYSTEM.

employees listed in subsection (a)(12), (13), (14) [and], (15)

and (17) shall not have the right to elect membership in the

20150HB0727PN1555 - 149 -

<--

system.

(c.1) Prohibited participation in the plan.--The State

employees listed in subsection (a)(17) who also are listed in

subsection (a)(13) and (15) or who are employees of The

Pennsylvania State University, the State System of Higher

Education, State-owned educational institutions or community

colleges shall not be eligible to participate in the plan.

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

as a State employee shall resume active membership in the system

as of the effective date of employment, except as otherwise

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

annuities), regardless of the optional membership category of

the position. An inactive participant or a participant receiving

distributions who returns to service as a State employee shall

be an active participant of the plan as of the effective date of

employment unless the position is eligible for optional

participation or is not eligible for participation in the plan,

or except as otherwise provided in section 5706(a).

* * *

Section 305. Section 5302(a), (b), (e) and (f) of Title 71

are amended to read:

§ 5302. Credited State service.

(a) Computation of credited service.--In computing credited

State service of a member for the determination of benefits, a

full-time salaried State employee, including any member of the

General Assembly, shall receive credit for service in each

period for which contributions as required are made to the fund,

or for which contributions otherwise required for such service

were not made to the fund solely by reason of section 5502.1

(relating to waiver of regular member contributions and Social

20150HB0727PN1555 - 150 -

Security integration member contributions) or any provision of

this part relating to the limitations under IRC § 401(a)(17) or

415(b), but in no case shall he receive more than one year's

credit for any 12 consecutive months or 26 consecutive biweekly

pay periods. A per diem or hourly State employee shall receive

one year of credited service for each nonoverlapping period of

12 consecutive months or 26 consecutive biweekly pay periods in

which he is employed and for which contributions are made to the

fund or would have been made to the fund but for such waiver

under section 5502.1 or limitations under the IRC for at least

220 days or 1,650 hours of employment. If the member was

employed and contributions were made to the fund for less than

220 days or 1,650 hours, he shall be credited with a fractional

portion of a year determined by the ratio of the number of days

or hours of service actually rendered to 220 days or 1,650

hours, as the case may be. A part-time salaried employee shall

be credited with the fractional portion of the year which

corresponds to the number of hours or days of service actually

rendered and for which contributions are made to the fund in

relation to 1,650 hours or 220 days, as the case may be. In no

case shall a member who has elected multiple service receive an

aggregate in the two systems of more than one year of credited

service for any 12 consecutive months.

(b) Creditable leaves of absence.--

(1) A member on leave without pay who is studying under

a Federal grant approved by the head of his department or who

is engaged up to a maximum of two years of temporary service

with the United States Government, another state or a local

government under the Intergovernmental Personnel Act of 1970

(5 U.S.C. §§ 1304, 3371-3376; 42 U.S.C. §§ 4701-4772) shall

20150HB0727PN1555 - 151 -

be eligible for credit for such service: Provided, That

contributions are made in accordance with sections 5501

(relating to regular member contributions for current

service), 5501.1 (relating to shared-risk member

contributions for Class A-3 and Class A-4 service), 5505.1

(relating to additional member contributions) [and], 5507

(relating to contributions to system by the Commonwealth and

other employers before July 1, 2016) and 5507.1 (relating to

c ontributions to system by the Commonwealth and other

employers starting July 1, 2016), the member returns from

leave without pay to active State service as a member of the

system for a period of at least one year, and he is not

entitled to retirement benefits for such service under a

retirement system administered by any other governmental

agency.

(2) An active member or active participant on paid leave

granted by an employer for purposes of serving as an elected

full-time officer for a Statewide employee organization which

is a collective bargaining representative under the act of

June 24, 1968 (P.L.237, No.111), referred to as the Policemen

and Firemen Collective Bargaining Act, or the act of July 23,

1970 (P.L.563, No.195), known as the Public Employe Relations

Act, and up to 14 full-time business agents appointed by an

employee organization that represents correction officers

employed at State correctional institutions: Provided, That

for elected full-time officers such leave shall not be for

more than three consecutive terms of the same office and for

up to 14 full-time business agents appointed by an employee

organization that represents correction officers employed at

State correctional institutions no more than three

20150HB0727PN1555 - 152 -

consecutive terms of the same office; that the employer shall

fully compensate the member or the participant, including,

but not limited to, salary, wages, pension and retirement

contributions and benefits, other benefits and seniority, as

if he were in full-time active service; and that the

Statewide employee organization shall fully reimburse the

employer for all expenses and costs of such paid leave,

including, but not limited to, contributions and payment in

accordance with [sections] section 5404 (relating to

participant contributions), 5405 (relating to mandatory

pickup participant contributions), 5406 (relating to employer

defined contributions), 5501, 5501.1, 5505.1 [and], 5507 or

5507.1, if the employee organization either directly pays, or

reimburses the Commonwealth or other employer for,

contributions made in accordance with [section] sections

5404, 5405, 5406, 5507 and 5507.1.

* * *

(e) Cancellation of credited service.--All credited service

in the system shall be cancelled if a member withdraws his total

accumulated deductions, except that a member with Class A-3 or

Class A-4 service credit and one or more other classes of

service credit shall not have his service credit as a member of

any classes of service other than as a member of Class A-3 or

Class A-4 cancelled when the member receives a lump sum payment

of accumulated deductions resulting from Class A-3 or Class A-4

service pursuant to section 5705.1 (relating to payment of

accumulated deductions resulting from Class A-3 and Class A-4

service). A PARTIAL OR TOTAL DISTRIBUTION OF ACCUMULATED TOTAL

DEFINED CONTRIBUTIONS TO A COMBINED SERVICE EMPLOYEE SHALL NOT

CANCEL SERVICE CREDITED IN THE SYSTEM.

20150HB0727PN1555 - 153 -

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(f) Credit for military service.--A State employee who has

performed USERRA leave may receive credit in the system or

participate in the plan as follows:

(1) For purposes of determining whether a member is

eligible to receive credited service in the system for a

period of active military service, other than active duty

service to meet periodic training requirements, rendered

after August 5, 1991, and that began before the effective

date of this paragraph, the provisions of 51 Pa.C.S. Ch. 73

(relating to military leave of absence) shall apply to all

individuals who were active members of the system when the

period of military service began, even if not defined as an

employee pursuant to 51 Pa.C.S. § 7301 (relating to

definitions).

(1.1) State employees may not receive service credit in

the system or exercise the options under 51 Pa.C.S. § 7306

(relating to retirement rights) for military leaves that

begin on or after the effective date of this subsection,

except as otherwise provided by this subsection.

(1.2) State employees may not participate in the plan or

exercise the options under 51 Pa.C.S. § 7306 (relating to

retirement rights) for military leaves that begin on or after

the effective date of this paragraph, except as otherwise

provided by this subsection.

(2) A State employee who has performed USERRA leave may

receive credit in the system as provided by this paragraph.

The following shall apply:

(i) A State employee who is reemployed from USERRA

leave as an active member of the system shall be treated

as not having incurred a break in State service by reason

20150HB0727PN1555 - 154 -

of the USERRA leave and shall be granted eligibility

points as if the State employee had not been on the

USERRA leave. If a State employee who is reemployed from

USERRA leave as an active member of the system

subsequently makes regular member contributions,

additional member contributions, Social Security

integration member contributions, shared-risk member

contributions and any other member contributions in the

amounts and in the time periods required by 38 U.S.C. Ch.

43 (relating to employment and reemployment rights of

members of the uniformed services) and IRC § 414(u) as if

the State employee had continued in State office or

employment and performed State service and was

compensated during the period of USERRA leave, then the

State employee shall be granted State service credit for

the period of USERRA leave. The State employee shall have

the State employee's benefits, rights and obligations

determined under this part as if the State employee was

an active member who performed creditable State service

during the USERRA leave in the job position that the

State employee would have held had the State employee not

been on USERRA leave and received the compensation on

which the member contributions to receive State service

credit for the USERRA leave were determined.

(ii) For purposes of determining whether a State

employee has made the required employee contributions for

State service credit for USERRA leave, if an employee who

is reemployed from USERRA leave as an active member of

the system terminates State service or dies in State

service before the expiration of the allowed payment

20150HB0727PN1555 - 155 -

period, then State service credit for the USERRA leave

will be granted as if the required member contributions

were paid the day before termination or death. The amount

of the required member contributions will be treated as

an incomplete payment subject to the provisions of

section 5506 (relating to incomplete payments). Upon a

subsequent return to State service or to school service

as a multiple service member, the required member

contributions treated as incomplete payments shall be

treated as member contributions that were either

withdrawn in a lump sum at termination or paid as a lump

sum pursuant to section 5705(a)(4) (relating to member's

options), as the case may be.

(iii) A State employee who is reemployed from USERRA

leave as an active member of the system who does not make

the required member contributions or makes only part of

the required member contributions within the allowed

payment period shall not be granted credited service for

the period of USERRA leave for which the required member

contributions were not timely made, shall not be eligible

to subsequently make contributions and shall not be

granted either State service credit or nonstate service

credit for the period of USERRA leave for which the

required member contributions were not timely made.

(2.1) The following shall apply:

(i) A participant who is reemployed from USERRA

leave shall be treated as not having incurred a break in

State service by reason of the USERRA leave . AND SHALL BE

GRANTED VESTING CREDIT AS IF THE PARTICIPANT HAD NOT BEEN

ON USERRA LEAVE. If a participant who is reemployed from

20150HB0727PN1555 - 156 -

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USERRA leave subsequently makes mandatory pickup

participant contributions in the amounts and in the time

periods required by 38 U.S.C. Ch. 43 and IRC § 414(u) as

if the participant had continued in his State office or

employment and performed State service and been

compensated during the period of USERRA leave, the

participant's employer shall make the corresponding

employer defined contributions. Such an employee shall

have his contributions, benefits, rights and obligations

determined under this part as if he were an active

participant who performed State service during the USERRA

leave in the job position that he would have held had he

not been on USERRA leave and received the compensation on

which the mandatory pickup participant contributions to

receive State service credit for the USERRA leave were

determined, including the right to make voluntary

contributions on such compensation as permitted by law.

(ii) A participant who is reemployed from USERRA

leave who does not make the mandatory pickup participant

contributions or makes only part of the mandatory pickup

participant contributions within the allowed payment

period shall not be eligible to make mandatory pickup

participant contributions or voluntary contributions at a

later date for the period of USERRA leave for which the

mandatory pickup participant contributions were not

timely made.

(3) A State employee who is a member of the system and

performs USERRA leave from which the employee could have been

reemployed from USERRA leave had the State employee returned

to State service in the time frames required by 38 U.S.C. Ch.

20150HB0727PN1555 - 157 -

43 for reemployment rights, but did not do so, shall be able

to receive creditable nonstate service as nonintervening

military service for the period of USERRA leave should the

employee later return to State service as an active member of

the system and is otherwise eligible to purchase the service

as nonintervening military service.

(3.1) A State employee who is a participant in the plan

and performs USERRA leave from which the employee could have

been reemployed from USERRA leave had the employee returned

to State service in the time frames required by 38 U.S.C. Ch.

43 for reemployment rights, but was not reemployed, shall not

be eligible to make mandatory pickup participant

contributions or voluntary contributions for the period of

USERRA leave should the employee later return to State

service and be a participant in the plan.

(4) [A State employee] An active member or inactive

member on leave without pay who on or after the effective

date of this subsection is granted a leave of absence under

51 Pa.C.S. § 4102 (relating to leaves of absence for certain

government employees) or a military leave under 51 Pa.C.S.

Ch. 73, that is not USERRA leave shall be able to receive

creditable nonstate service as nonintervening military

service should the employee return to State service as an

active member of the system and is otherwise eligible to

purchase the service as nonintervening military service.

(4.1) An active participant or inactive participant on

leave without pay who, on or after the effective date of this

paragraph, is granted a leave of absence under 51 Pa.C.S. §

4102 or a military leave under 51 Pa.C.S. Ch.73 that is not

USERRA leave shall not be able to make mandatory pickup

20150HB0727PN1555 - 158 -

participant contributions or voluntary contributions during

or for the leave of absence or military leave and shall not

have employer defined contributions made during such leave,

without regard to whether or not the State employee received

salary, wages, stipends, differential wage payments or other

payments from his employer during the leave, notwithstanding

any provision to the contrary in 51 Pa.C.S. § 4102 or 51

Pa.C.S. Ch. 73.

(5) If a member dies while performing USERRA leave, then

the beneficiaries or survivor annuitants, as the case may be,

of the deceased member are entitled to any additional

benefits, including eligibility points, other than benefit

accruals relating to the period of qualified military

service, provided under this part had the member resumed and

then terminated employment on account of death.

(5.1) If a participant dies while performing USERRA

leave, the beneficiaries or successor payees of the deceased

participant are entitled to any additional benefits, other

than benefit accruals relating to the period of qualified

military service, provided under this part had the

participant resumed and terminated employment on account of

death.

(6) A State employee who is on a leave of absence from

his duties as a State employee for which 51 Pa.C.S. § 4102

provides that he is not to suffer a loss of pay, time or

efficiency rating shall not be an active member, receive

service credit or make member contributions for the leave of

absence, except as provided for in this part. Notwithstanding

this paragraph, any pay the member receives pursuant to 51

Pa.C.S. § 4102 shall be included in the determination of

20150HB0727PN1555 - 159 -

final average salary and other calculations in the system

utilizing compensation as if the payments were compensation

under this part.

Section 306. Sections 5303(b)(2), (d)(1), (e)(1) and (4),

5303.2(a) and (e), 5304(a) and (b), 5305(b) introductory

paragraph and (3) and 5305.1 of Title 71 are amended to read:

§ 5303. Retention and reinstatement of service credits.

* * *

(b) Eligibility points for prospective credited service.--

* * *

(2) A special vestee or person otherwise eligible to be

a special vestee who returns to State service, other than as

a participant in the plan, or withdraws his accumulated

deductions pursuant to section 5311 (relating to eligibility

for refunds) or 5701 (relating to return of total accumulated

deductions) shall receive or retain eligibility points in

accordance with paragraph (1) but upon subsequent termination

of State service shall only be eligible to be an annuitant,

vestee or inactive member without regard to previous status

as a special vestee and without regard to the provisions of

this part providing for special vestees.

* * *

(d) Transfer of certain pension service credit.--

(1) Any person who was an employee of any county in this

Commonwealth on the personal staff of an appellate court

judge prior to September 9, 1985, and who had that employment

transferred to the Commonwealth pursuant to 42 Pa.C.S. § 3703

(relating to local chamber facilities) shall be a member of

the system for all service rendered as an employee of the

Commonwealth on the personal staff of an appellate court

20150HB0727PN1555 - 160 -

judge subsequent to the date of the transfer unless

specifically prohibited pursuant to section 5301(c) (relating

to mandatory and optional membership in system and

participation in plan). The employee shall be entitled to

have any prior service credit in that county or other

municipal pension plan or retirement system transferred to

the system and deemed to be State service for all purposes

under this part. However, for those employees who were in

continuous county employment which commenced prior to July

22, 1983, section 5505.1 shall not apply. The transfer of

prior service credit to the system shall occur upon the

transfer, by the member, county or other municipal pension

plan or retirement system, to the system of the amount of

accumulated member contributions, pick-up contributions and

credited interest standing in the employee's county or

municipal pension plan or retirement system account as of the

date that these funds are transferred to the system. In the

event that these funds have been refunded to the member, the

transfer of service credit shall occur when the member

transfers an amount equal to either the refund which the

member received from the county or municipal pension plan or

retirement system or the amount due under section 5504, if

less. In the case of a transfer by the member, the transfer

shall occur by December 31, 1987, in order for the member to

receive credit for the prior service. In the case of a

transfer by the county or other municipal pension plan or

retirement system, the transfer shall also occur by December

31, 1987. If the amount transferred to the system by the

member of a county or municipal pension plan or retirement

system is greater than the amount that would have accumulated

20150HB0727PN1555 - 161 -

in the member's account if the employee had been a member of

the system, all excess funds shall be returned to the

employee within 90 days of the date on which such funds are

credited to the member's account in the system. Within 60

days of receipt of written notice that an employee has

elected to transfer credits under the provisions of this

subsection, the county or other municipal pension plans or

retirement systems shall be required to transfer to the

system an amount, excluding contributions due under section

5504(a), equal to the liability of the prior service in

accordance with county or other municipal pension plan or

retirement system benefit provisions, multiplied by the ratio

of system actuarial value of assets for active members to the

system actuarial accrued liability for active members. The

Public Employee Retirement Study Commission shall determine

the appropriate amount of employer contributions to be

transferred to the system by the county or other municipal

pension plans or retirement systems.

* * *

(e) Transfer and purchase of certain pension service credit;

Philadelphia Regional Port Authority.--

(1) Any employee of the Philadelphia Regional Port

Authority who becomes a State employee, as defined in section

5102 (relating to definitions), and an active member of the

system shall be eligible to obtain retirement credit for

prior uncredited service with the Philadelphia Port

Corporation, a Pennsylvania not-for-profit corporation

("predecessor corporation"), provided that the Commonwealth

does not incur any liability for the funding of the annuities

attributable to the prior, uncredited "predecessor

20150HB0727PN1555 - 162 -

corporation" service, the cost of which shall be determined

according to paragraph (2).

* * *

(4) Any person who became employed by the Philadelphia

Regional Port Authority between July 10, 1989, and passage of

this act and who becomes a State employee, as defined in

section 5102, and an active member of the system shall be

eligible to obtain retirement credit for service from the

date of employment with the Philadelphia Regional Port

Authority, provided that the contributions are made in

accordance with sections 5501, 5504, 5505.1 and 5506.

* * *

§ 5303.2. Election to convert school service to State service.

(a) Eligibility.--An active member or inactive member on

leave without pay who was an employee transferred from the

Department of Education to the Department of Corrections

pursuant to section 908-B of the act of April 9, 1929 (P.L.177,

No.175), known as The Administrative Code of 1929, and who on

the effective date of that transfer did not participate in an

independent retirement program approved by the Department of

Education under 24 Pa.C.S. § 8301(a)(1) (relating to mandatory

and optional membership) or section 5301(a)(12) (relating to

mandatory and optional membership in system and participation in

plan), notwithstanding any other provision of law or any

collective bargaining agreement, arbitration award, contract or

term or conditions of any retirement system or pension plan, may

make a one-time election to convert all service credited in the

Public School Employees' Retirement System as of June 30, 1999,

and transfer to the system all accumulated member contributions

and statutory interest credited in the members' savings account

20150HB0727PN1555 - 163 -

in the Public School Employees' Retirement System as of June 30,

1999, plus statutory interest on that amount credited by the

Public School Employees' Retirement System from July 1, 1999, to

the date of transfer to the system.

* * *

(e) Transfer.--Within 180 days after the effective date of

this subsection, the Public School Employees' Retirement System

shall transfer to the board for each member electing to convert

under this section the accumulated member contributions and

statutory interest credited in the Public School Employees'

Retirement System, plus an amount equal to the value of all

annual employer contributions made to the Public School

Employees' Retirement System with interest at the annual rate

adopted by the board for the calculation of the normal

contribution rate under section 5508(b) (relating to actuarial

cost method for fiscal years ending before July 1, 2016), from

the date of each contribution to the date of the transfer of the

funds to the board. Any debt owed by a member to the Public

School Employees' Retirement System for whatever reason shall be

transferred to the system and shall be paid in a manner and in

accordance with conditions prescribed by the board.

* * *

§ 5304. Creditable nonstate service.

(a) Eligibility.--

(1) An active member who first becomes an active member

before January 1, 2011, or before December 1, 2010, as a

member of the General Assembly, or a multiple service member

who first becomes an active member before January 1, 2011, or

before December 1, 2010, as a member of the General Assembly,

and who is a school employee and an active member of the

20150HB0727PN1555 - 164 -

Public School Employees' Retirement System shall be eligible

for Class A service credit for creditable nonstate service as

set forth in subsections (b) and (c) except that intervening

military service shall be credited in the class of service

for which the member was eligible at the time of entering

into military service and for which he makes the required

contributions to the fund and except that a multiple service

member who is a school employee and an active member of the

Public School Employees' Retirement System shall not be

eligible to purchase service credit for creditable nonstate

service set forth in subsection (c)(5).

(2) An active member who first becomes an active member

on or after January 1, 2011, or on or after December 1, 2010,

as a member of the General Assembly, or a multiple service

member who first becomes an active member on or after January

1, 2011, or on or after December 1, 2010, as a member of the

General Assembly, and who is a school employee and an active

member of the Public School Employees' Retirement System

shall be eligible for Class A-3 service credit for creditable

nonstate service as set forth in subsections (b) and (c)

except that intervening military service shall be credited in

the class of service for which the member was eligible at the

time of entering into military service and for which he makes

the required contributions to the fund and except that a

multiple service member who is a school employee and an

active member of the Public School Employees' Retirement

System shall not be eligible to purchase service credit for

creditable nonstate service set forth in subsection (c)(5).

* * *

(b) Limitations on eligibility.--An active member or a

20150HB0727PN1555 - 165 -

multiple service member who is a school employee and an active

member of the Public School Employees' Retirement System shall

be eligible to receive credit for nonstate service provided that

he does not have credit for such service in the system or in the

school system and is not entitled to receive, eligible to

receive now or in the future, or is receiving retirement

benefits for such service in the system or 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 5301(a)(12) (relating to mandatory and optional

membership in system and participation in plan), and further

provided, that such service is certified by the previous

employer and contributions are agreed upon and made in

accordance with section 5505 (relating to contributions for the

purchase of credit for creditable nonstate service).

* * *

§ 5305. Social security integration credits.

* * *

(b) Accrual of subsequent credits.--Any active member who

has social security integration accumulated deductions to his

credit or is receiving a benefit on account of social security

integration credits may accrue one social security integration

credit for each year of service as a State employee on or

subsequent to March 1, 1974 and a fractional credit for a

corresponding fractional year of service provided that

contributions are made to the fund, or would have been made to

the fund but for section 5502.1 (relating to waiver of regular

member contributions and Social Security integration member

contributions) or the limitations under IRC § 401(a)(17) or

20150HB0727PN1555 - 166 -

415(b), in accordance with section 5502 (relating to Social

Security integration member contributions), and he:

* * *

(3) terminates his status as a vestee or an annuitant

and returns to State service as an active member of the

system.

* * *

§ 5305.1. Eligibility for actuarial increase factor.

A person who is:

(1) an active member;

(2) an inactive member on leave without pay; [or]

(3) a multiple service member who is a school employee

and an active member of the Public School Employees'

Retirement System; OR

(4) A COMBINED SERVICE EMPLOYEE WHO IS AN ACTIVE

PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE WITHOUT PAY;

who terminates State service or school service, as the case may

be, after attaining age 70 and who applies for a superannuation

annuity with an effective date of retirement the day after the

date of termination of State service or school service shall

have that person's maximum single life annuity calculated

pursuant to section 5702(a.1) (relating to maximum single life

annuity).

Section 307. Section 5306(a), (a.1)(2) and (6), (a.2)(1) and

(2) and (b) of Title 71 are amended and the section is amended

by adding a subsection to read:

§ 5306. Classes of service.

(a) Class A and Class A-3 membership.--

(1) A State employee who is a member of Class A on the

effective date of this part or who first becomes a member of

20150HB0727PN1555 - 167 -

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the system subsequent to the effective date of this part and

before January 1, 2011, or before December 1, 2010, as a

member of the General Assembly, shall be classified as a

Class A member and receive credit for Class A service upon

payment of regular and additional member contributions for

Class A service, provided that the State employee does not

become a member of Class AA pursuant to subsection (a.1)

[or], a member of Class D-4 pursuant to subsection (a.2) or a

participant in the plan.

(2) A State employee who first becomes a member of the

system on or after January 1, 2011, or on or after December

1, 2010, as a member of the General Assembly, shall be

classified as a Class A-3 member and receive credit for Class

A-3 service upon payment of regular member contributions and

shared-risk member contributions for Class A-3 service

provided that the State employee does not become a member of

Class A-4 pursuant to subsection (a.3), except that a member

of the judiciary shall be classified as a member of such

other class of service for which the member of the judiciary

is eligible, shall elect and make regular member

contributions[.], and further provided that the State

employee does not become a participant in the plan or is not

eligible to be an optional participant of the plan under

section 5301 (relating to mandatory and optional membership

in system and participation in plan).

(3) A person who first becomes a sworn police officer on

or after January 1, 2016, shall receive credit for service as

a sworn police officer as a member of Class A-3 upon payment

of the required member contributions and shall not be

eligible to be a participant in the plan for such service.

20150HB0727PN1555 - 168 -

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All other State service shall be credited in the plan as

otherwise provided under this part, except that any State

service performed concurrently with service as an active or

inactive member on leave without pay as a sworn police

officer shall be credited as Class A-3 service and shall not

be eligible for active participation in the plan. Class A-3

service provided for under this subparagraph shall be subject

to an election to be credited as Class A-4 service.

(a.1) Class AA membership.--

* * *

(2) A person who is a State employee on June 30, 2001,

and July 1, 2001, but is not an active member of the system

because membership in the system is optional or prohibited

pursuant to section 5301 [(relating to mandatory and optional

membership)] and who first becomes an active member after

June 30, 2001, and before January 1, 2011, or before December

1, 2010, as a member of the General Assembly, and who is not

a State police officer and not employed in a position for

which a class of service other than Class A is credited or

could be elected shall be classified as a Class AA member and

receive credit for Class AA State service upon payment of

regular member contributions for Class AA service and,

subject to the limitations contained in paragraph (7), if

previously a member of Class A or previously employed in a

position for which Class A service could have been earned,

shall have all Class A State service (other than State

service performed as a State [Police] police officer or for

which a class of service other than Class A was earned or

could have been elected) classified as Class AA service.

* * *

20150HB0727PN1555 - 169 -

(6) A State employee who after June 30, 2001, becomes a

State police officer or who is employed in a position in

which the member could elect membership in the system in a

class of service other than Class AA or Class D-4 shall

retain any Class AA service credited prior to becoming a

State police officer or being so employed but shall be

ineligible to receive Class AA credit thereafter and instead

shall receive Class A credit for service as a member of the

judiciary if such judicial service begins before January 1,

2016, or if he first became a member before January 1, 2011,

or December 1, 2010, as a member of the General Assembly, or

Class A-3 credit for service other than as a member of the

judiciary if such nonjudicial service begins before January

1, 2016, and he first became a member on or after January 1,

2011, or December 1, 2010, as a member of the General

Assembly, unless a class of membership other than Class A is

elected.

* * *

(a.2) Class of membership for members of the General

Assembly.--

(1) A person who:

(i) becomes a member of the General Assembly and an

active member of the system after June 30, 2001, and

before December 1, 2010; or

(ii) is a member of the General Assembly on July 1,

2001, but is not an active member of the system because

membership in the system is optional pursuant to section

5301 and who becomes an active member after June 30,

2001, and before December 1, 2010;

and who was not a State police officer on or after July 1,

20150HB0727PN1555 - 170 -

1989, shall be classified as a Class D-4 member and receive

credit as a Class D-4 member for all State service as a

member of the system performed as a member of the General

Assembly upon payment of regular member contributions for

Class D-4 service and, subject to the limitations contained

in subsection (a.1)(7), if previously a member of Class A or

employed in a position for which Class A service could have

been earned, shall receive Class AA service credit for all

Class A State service, other than State service performed as

a State police officer or for which a class of service other

than Class A or Class D-4 was or could have been elected or

credited.

(2) Provided an election to become a Class D-4 member is

made pursuant to section 5306.2 (relating to elections by

members of the General Assembly), a State employee who was

not a State police officer on or after July 1, 1989, who on

July 1, 2001, is a member of the General Assembly and an

active member of the system and not a member of Class D-3

shall be classified as a Class D-4 member and receive credit

as a Class D-4 member for all State service as a member of

the system performed as a member of the General Assembly not

credited as another class other than Class A upon payment of

regular member contributions for Class D-4 service and,

subject to the limitations contained in paragraph (a.1)(7),

shall receive Class AA service credit for all Class A State

service, other than State service performed as a State police

officer or as a State employee in a position in which the

member could have elected a class of service other than Class

A, performed before July 1, 2001.

* * *

20150HB0727PN1555 - 171 -

(b) Other class membership.--

(1) A State employee who is a member of a class of

service other than Class A on the effective date of this part

shall retain his membership in that class until such service

is discontinued; any service as a member of the system

thereafter shall be credited as Class A service, Class AA

service or Class D-4 service as provided for in this section.

(2) Notwithstanding any other provision of this section,

a State employee who is appointed bail commissioner of the

Philadelphia Municipal Court under 42 Pa.C.S. § 1123(a)(5)

(relating to jurisdiction and venue) and is eligible to be a

member of the system as a bail commissioner may, within 30

days of the effective date of this sentence or within 30 days

of his initial appointment as a bail commissioner, whichever

is later, elect Class E-2 service credit for service

performed as a bail commissioner. This class of service

multiplier for E-2 service as a bail commissioner shall be

1.5.

* * *

(e) Ineligibility for active membership and classes of

service.--An individual who is a State employee on January 1,

2016, but is not a member of the system or who first becomes a

State employee, other than a State police officer, on or after

January 1, 2016, shall be ineligible for active membership in

the system or the several classes of State service as otherwise

provided for under this section. Any such State employee, if

eligible, may be a participant in the plan as a result of such

State service.

Section 308. Sections 5306.3(c) and (d), 5307(b)(1),

5308(c), 5307, 5308, 5308.1(1) and 5311(a) of Title 71 are

20150HB0727PN1555 - 172 -

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amended to read:

§ 5306.3. Election to become a Class A-4 member.

* * *

member shall be irrevocable and shall become effective on the

effective date of membership in the system and shall remain in

effect for all future [creditable] State service creditable in

the system, other than service performed as a member of the

judiciary. Payment of regular member contributions for Class A-4

State service performed prior to the election of Class A-4

membership shall be made in a form, manner and time determined

by the board. Upon termination and a subsequent reemployment, a

member who elected Class A-4 membership shall be credited as a

Class A-4 member for creditable State service performed after

reemployment, except as a member of the judiciary, regardless of

termination of employment, termination of membership by

withdrawal of accumulated deductions or status as an annuitant,

vestee or inactive member after the termination of service.

(d) Effect of failure to make election.--Failure to elect to

become a Class A-4 member within the election period set forth

in subsection (b) shall result in all of the member's State

service, other than service performed as a member of the

judiciary, being credited as Class A-3 service and not subject

to further election or crediting as Class A-4 service. Upon

termination and subsequent employment, a member who failed to

elect to become a Class A-4 member shall not be eligible to make

another election to become a Class A-4 member for either past or

future State service.

* * *

§ 5307. Eligibility points.

20150HB0727PN1555 - 173 -

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* * *

(A) GENERAL RULE.--AN ACTIVE MEMBER OF THE SYSTEM SHALL

ACCRUE ONE ELIGIBILITY POINT FOR EACH YEAR OF CREDITED SERVICE

AS A MEMBER OF THE STATE OR THE PUBLIC SCHOOL EMPLOYEES'

RETIREMENT SYSTEM. A MEMBER SHALL ACCRUE AN ADDITIONAL TWO-

THIRDS OF AN ELIGIBILITY POINT FOR EACH YEAR OF CLASS D-3

CREDITED SERVICE. IN THE CASE OF A FRACTIONAL PART OF A YEAR OF

CREDITED SERVICE, A MEMBER SHALL ACCRUE THE CORRESPONDING

FRACTIONAL PORTION OF ELIGIBILITY POINTS TO WHICH THE CLASS OF

SERVICE ENTITLES HIM.

(A.1) USERRA LEAVE.--A MEMBER OF THE SYSTEM WHO IS

REEMPLOYED FROM USERRA LEAVE OR WHO DIES WHILE PERFORMING USERRA

LEAVE SHALL BE GRANTED THE ELIGIBILITY POINTS THAT HE WOULD HAVE

ACCRUED HAD HE CONTINUED IN HIS STATE OFFICE OR EMPLOYMENT

INSTEAD OF PERFORMING USERRA LEAVE. IN THE EVENT THAT A STATE

EMPLOYEE WHO IS REEMPLOYED FROM USERRA LEAVE MAKES THE MEMBER

CONTRIBUTIONS TO BE GRANTED STATE SERVICE CREDIT FOR THE USERRA

LEAVE, NO ADDITIONAL ELIGIBILITY POINTS WILL BE GRANTED.

(b) Transitional rule.--

(1) In determining whether a member who is not a State

employee or school employee on June 30, 2001, and July 1,

2001, and who has previous State service (except a disability

annuitant who returns to State service after June 30, 2001,

upon termination of the disability annuity) has the five

eligibility points required by sections 5102 (relating to

definitions), 5308(b) (relating to eligibility for

annuities), 5309 (relating to eligibility for vesting),

5704(b) (relating to disability annuities) and 5705(a)

(relating to member's options), only eligibility points

earned by performing credited State service as an active

20150HB0727PN1555 - 174 -

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member of the system, USERRA leave or credited school service

as an active member of the Public School Employees'

Retirement System after June 30, 2001, shall be counted until

such member earns one eligibility point by performing

credited State service or credited school service after June

30, 2001, at which time all eligibility points as determined

pursuant to subsection (a) shall be counted.

* * *

(2) ANY MEMBER TO WHOM PARAGRAPH (1) APPLIES SHALL BE

CONSIDERED TO HAVE SATISFIED ANY REQUIREMENT FOR FIVE

ELIGIBILITY POINTS CONTAINED IN THIS PART IF THE MEMBER:

(I) HAS TEN OR MORE ELIGIBILITY POINTS AS DETERMINED

PURSUANT TO SUBSECTION (A); OR

(II) HAS CLASS G, CLASS H, CLASS I, CLASS J, CLASS

L, CLASS M OR CLASS N SERVICE AND HAS EIGHT OR MORE

ELIGIBILITY POINTS AS DETERMINED PURSUANT TO SUBSECTION

(A).

DETERMINING WHETHER A COMBINED SERVICE EMPLOYEE HAS THE FIVE

ELIGIBILITY POINTS REQUIRED BY SECTIONS 5102, 5308(B)(1),

5309(1) AND 5705(A) OR THE TEN ELIGIBILITY POINTS REQUIRED BY

SECTIONS 5102, 5308(B)(2), 5309(2) AND 5705(A), ANY SUCH

COMBINED SERVICE EMPLOYEE SHALL BE CONSIDERED TO HAVE SATISFIED

ANY REQUIREMENT FOR FIVE OR TEN ELIGIBILITY POINTS, AS THE CASE

MAY BE, IF THE COMBINED SERVICE EMPLOYEE DOES NOT TERMINATE

STATE SERVICE FOR THREE OR MORE YEARS AFTER THE EFFECTIVE DATE

OF PARTICIPATION IN THE PLAN.

§ 5308. Eligibility for annuities.

* * *

(A) SUPERANNUATION ANNUITY.--ATTAINMENT OF SUPERANNUATION

20150HB0727PN1555 - 175 -

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AGE BY AN ACTIVE MEMBER [OR], AN INACTIVE MEMBER ON LEAVE

WITHOUT PAY OR A COMBINED SERVICE EMPLOYEE WHO IS AN ACTIVE

PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE WITHOUT PAY WITH

THREE OR MORE ELIGIBILITY POINTS OTHER THAN ELIGIBILITY POINTS

RESULTING FROM NONSTATE SERVICE OR NONSCHOOL SERVICE SHALL

ENTITLE HIM TO RECEIVE A SUPERANNUATION ANNUITY UPON TERMINATION

OF STATE SERVICE AND COMPLIANCE WITH SECTION 5907(F) (RELATING

TO RIGHTS AND DUTIES OF STATE EMPLOYEES [AND], MEMBERS AND

PARTICIPANTS).

(B) WITHDRAWAL ANNUITY.--

(1) ANY VESTEE OR ANY ACTIVE MEMBER [OR], INACTIVE

MEMBER ON LEAVE WITHOUT PAY OR A COMBINED SERVICE EMPLOYEE

WHO IS AN ACTIVE PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE

WITHOUT PAY WHO TERMINATES STATE SERVICE HAVING FIVE OR MORE

ELIGIBILITY POINTS AND WHO DOES NOT HAVE CLASS A-3 OR CLASS

A-4 SERVICE CREDIT OR CLASS T-E OR CLASS T-F SERVICE CREDIT

IN THE PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM, OR WHO HAS

CLASS G, CLASS H, CLASS I, CLASS J, CLASS K, CLASS L, CLASS M

OR CLASS N SERVICE AND TERMINATES STATE SERVICE HAVING FIVE

OR MORE ELIGIBILITY POINTS, UPON COMPLIANCE WITH SECTION

5907(F), (G) OR (H) SHALL BE ENTITLED TO RECEIVE AN ANNUITY.

(2) ANY VESTEE, ACTIVE MEMBER [OR], INACTIVE MEMBER ON

LEAVE WITHOUT PAY OR A COMBINED SERVICE EMPLOYEE WHO IS AN

ACTIVE PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE WITHOUT

PAY WHO HAS CLASS A-3 OR CLASS A-4 SERVICE CREDIT OR CLASS T-

E OR CLASS T-F SERVICE CREDIT IN THE PUBLIC SCHOOL EMPLOYEES'

RETIREMENT SYSTEM WHO TERMINATES STATE SERVICE HAVING TEN OR

MORE ELIGIBILITY POINTS, UPON COMPLIANCE WITH SECTION

5907(F), (G) OR (H), SHALL BE ENTITLED TO RECEIVE AN ANNUITY.

(3) ANY VESTEE, ACTIVE MEMBER [OR], INACTIVE MEMBER ON

20150HB0727PN1555 - 176 -

LEAVE WITHOUT PAY OR A COMBINED SERVICE EMPLOYEE WHO IS AN

ACTIVE PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE WITHOUT

PAY WHO HAS EITHER CLASS A-3 OR CLASS A-4 SERVICE CREDIT OR

CLASS T-E OR CLASS T-F SERVICE CREDIT IN THE PUBLIC SCHOOL

EMPLOYEES' RETIREMENT SYSTEM AND ALSO HAS SERVICE CREDITED IN

THE SYSTEM IN ONE OR MORE OTHER CLASSES OF SERVICE WHO HAS

FIVE OR MORE, BUT FEWER THAN TEN, ELIGIBILITY POINTS, UPON

COMPLIANCE WITH SECTION 5907(F), (G) OR (H), SHALL BE

ELIGIBLE TO RECEIVE AN ANNUITY CALCULATED ON HIS SERVICE

CREDITED IN CLASSES OF SERVICE OTHER THAN CLASS A-3 OR CLASS

A-4, PROVIDED THAT THE MEMBER HAS FIVE OR MORE ELIGIBILITY

POINTS RESULTING FROM SERVICE IN CLASSES OTHER THAN CLASS A-3

OR CLASS A-4 OR CLASS T-E OR CLASS T-F SERVICE IN THE PUBLIC

SCHOOL EMPLOYEES' RETIREMENT SYSTEM.

on leave without pay who has five or more eligibility points

other than eligibility points resulting from membership in the

Public School Employees' Retirement System or any active member

or inactive member on leave without pay who is an officer of the

Pennsylvania State Police or an enforcement officer shall, upon

compliance with section 5907(k), 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 in accordance with the provisions of section 5905(c)

(1) (relating to duties of the board regarding applications and

elections of members and participants).

(D) ELIGIBILITY OF COMBINED SERVICE EMPLOYEES FOR

SUPERANNUATION ANNUITY.--A COMBINED SERVICE EMPLOYEE IS DEEMED

TO HAVE SATISFIED THE REQUIREMENT OF THREE OR MORE YEARS OF

CREDITED STATE OR SCHOOL SERVICE UNDER SUBSECTION (A) IF THE

20150HB0727PN1555 - 177 -

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COMBINED SERVICE EMPLOYEE DOES NOT TERMINATE STATE SERVICE

BEFORE THREE YEARS AFTER THE EFFECTIVE DATE OF PARTICIPATION IN

THE PLAN. NOTHING IN THIS SUBSECTION AMENDS OR WAIVES ANY OTHER

REQUIREMENT TO BE ELIGIBLE FOR A SUPERANNUATION ANNUITY.

§ 5308.1. Eligibility for special early retirement.

Notwithstanding any provisions of this title to the contrary,

the following special early retirement provisions shall be

applicable to specified eligible members as follows:

(1) During the period of July 1, 1985, to September 30,

1991, an active member who has attained the age of at least

53 years and has accrued at least 30 eligibility points shall

be entitled, upon termination of State service and compliance

with section 5907(f) (relating to rights and duties of State

employees [and], members and participants), to receive a

maximum single life annuity calculated under section 5702

(relating to maximum single life annuity) without a reduction

by virtue of an effective date of retirement which is under

the superannuation age.

* * *

§ 5311. Eligibility for refunds.

(a) Total accumulated deductions.--Any active member,

regardless of eligibility for benefits, may elect to receive his

total accumulated deductions upon termination of service in lieu

of any benefit from the system to which he is entitled.

* * *

Section 309. Title 71 is amended by adding a chapter to

read:

CHAPTER 54

STATE EMPLOYEES' DEFINED CONTRIBUTION PLAN

Sec.

20150HB0727PN1555 - 178 -

5401. Establishment.

5402. Plan document.

5403. Individual investment accounts.

5404. Participant contributions.

5405. Mandatory pickup participant contributions.

5406. Employer defined contributions.

5407. Eligibility for benefits.

5408. Death benefits.

5409. Vesting.

5410. Termination of distributions.

5411. Agreements with financial institutions and other

organizations.

5411.1 Annuitization.

5412. Powers and duties of board.

5413. Responsibility for investment loss.

5414. Investments based on participants' investment allocation

choices.

5415. Expenses.

5416. (Reserved).

5417. Required distributions.

§ 5401. Establishment.

(a) State Employees' Defined Contribution Plan.--The State

Employees' Defined Contribution Plan is established. The board

shall administer and manage the plan which shall be a defined

contribution plan exclusively for the benefit of those State

employees who participate in the plan and their beneficiaries

within the meaning of and in conformity with IRC § 401(a). The

board shall determine the terms and provisions of the plan not

inconsistent with this part, IRC or other applicable law and

shall provide for the plan's administration.

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(b) State Employees' Defined Contribution Trust.--The State

Employees' Defined Contribution Trust is established as part of

the State Employees' Defined Contribution Plan. The trust shall

be comprised of the individual investment accounts and all

assets and moneys in those accounts. The members of the board

shall be the trustees of the trust established under this

section which shall be administered exclusively for the benefit

of those State employees who participate in the plan and their

beneficiaries within the meaning of and conformity with IRC §

401(a). The board shall determine the terms and provisions of

the trust not inconsistent with this part, IRC or other

applicable law and shall provide for the investment and

administration of the trust.

that have been or shall be withheld or contributed by the

participants, the Commonwealth and other employers in accordance

with this part shall be held in trust in any funding vehicle

permitted by the applicable provisions of IRC for the exclusive

benefit of the plan's participants and their beneficiaries until

such time as the funds are distributed to the participants or

their beneficiaries in accordance with the terms of the plan

document. The assets of the plan held in trust for the exclusive

benefit of the plan's participants and their beneficiaries may

be used for the payment of the fees, costs and expenses related

to the administration and investment of the plan and the trust.

(d) Name for transacting business.--All of the business of

the plan shall be transacted, the trust invested, all

requisitions for money drawn and payments made and all of its

cash and securities and other property shall be held by the name

of the "State Employees' Defined Contribution Plan," except

20150HB0727PN1555 - 180 -

that, any other law to the contrary notwithstanding, the board

may establish a nominee registration procedure for the purpose

of registering securities in order to facilitate the purchase,

sale or other disposition of securities pursuant to the

provisions of this part.

§ 5402. Plan document.

The board shall set forth the terms and provisions of the

plan and trust in a document containing the terms and conditions

of the plan and in a trust declaration that shall be published

in the Pennsylvania Bulletin. The creation of the document

containing the terms and conditions of the plan and the trust

declaration and the establishment of the terms and provisions of

the plan and the trust need not be promulgated by regulation or

formal rulemaking and shall not be subject to the act of July

31, 1968 (P.L.769, No.240), referred to as the Commonwealth

Documents Law. A reference in this part or other law to the plan

shall include the plan document unless the context clearly

indicates otherwise.

§ 5403. Individual investment accounts.

The board shall establish in the trust an individual

investment account for each participant in the plan. All

contributions by a participant or an employer for or on behalf

of a participant shall be credited to the participant's

individual investment account, together with all interest and

investment earnings and losses. Investment and administrative

fees, costs and expenses shall be charged to the participants'

individual investment accounts. Employer defined contributions

shall be recorded and accounted for separately from participant

contributions, but all interest, investment earnings and losses,

and investment and administrative fees, costs and expenses shall

20150HB0727PN1555 - 181 -

be allocated proportionately.

§ 5404. Participant contributions.

(a) Mandatory contributions.--Each participant shall make

mandatory pickup participant contributions through payroll

deductions to the participant's individual investment account

equal to 6.5% of compensation for current State service. The

employer shall cause such contributions for current service to

be made and deducted from each payroll or on such schedule as

established by the board.

(b) Voluntary contributions.--A participant may make

voluntary contributions through direct trustee-to-trustee

transfers or through transfers of money received in an eligible

rollover into the trust to the extent allowed by IRC § 402. Such

rollovers shall be made in a form and manner as determined by

the board, shall be credited to the participant's individual

investment account and shall be separately accounted for by the

board.

allowed which would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

IRC § 415 or in other provisions of law. In the event that any

disallowed contributions are made, any participant contributions

in excess of the limitations and investment earnings thereon

shall be refunded to the participant by the board.

§ 5405. Mandatory pickup participant contributions.

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

contributions to the trust required to be made under section

5404(a) (relating to participant contributions) with respect to

current State service rendered by an active participant shall be

picked up by the Commonwealth or other employer and shall be

20150HB0727PN1555 - 182 -

treated as the employer's contribution for purposes of IRC §

414(h). After the effective date of this section, an employer

employing a participant in the plan shall pick up the required

mandatory participant contributions by a reduction in the

compensation of the participant.

(b) Treatment for other purposes.--For all purposes other

than the IRC, such mandatory pickup participant contributions

shall be treated as contributions made by a participant in the

same manner and to the same extent as if the contributions were

made directly by the participant and not picked up.

§ 5406. Employer defined contributions.

(a) Contributions for current service.--The Commonwealth or

other employer of a participant shall make employer defined

contributions for current service of each active participant

which shall be credited to each respective participant's

individual investment account.

(b) Contributions resulting from participants reemployed

from USERRA leave.--When a State employee reemployed from USERRA

leave makes the mandatory pickup participant contributions

permitted to be made for the USERRA leave, the Commonwealth or

other employer by whom the State employee is employed at the

time the participant contributions are made shall make whatever

employer defined contributions would have been made under this

section had the employee making the participant contributions

continued to be employed in the employee's State office or

position instead of performing USERRA leave. Such employer

defined contributions shall be placed in the participant's

individual investment account as otherwise provided by this

part.

20150HB0727PN1555 - 183 -

allowed which would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

IRC § 415 or in other provisions of law. In the event that any

disallowed contributions are made, any employer defined

contributions in excess of the limitations and investment

earnings thereon shall be refunded to the employer by the board.

§ 5407. Eligibility for benefits.

(a) Termination of service.--A participant who terminates

State service shall be eligible to withdraw the VESTED

accumulated total defined contributions standing to his credit

in the participant's individual investment account or such

lesser amount as the participant may request. Payment shall be

made in a lump sum unless the board has established other forms

of distribution in the plan document. A participant who

withdraws his VESTED accumulated total defined contributions

shall no longer be a participant in the plan, notwithstanding

that the participant may have contracted to receive an annuity

or other form of payment from a provider retained by the board

for such purposes.

(b) Required distributions.--All payments pursuant to this

section shall start and be made in compliance with the minimum

distribution requirements and incidental death benefit rules of

IRC § 401(a)(9). The board shall take any action and make any

distributions it may determine are necessary to comply with such

requirements.

COMBINED SERVICE EMPLOYEE MUST BE TERMINATED FROM ALL POSITIONS

THAT RESULT IN EITHER MEMBERSHIP IN THE SYSTEM OR PARTICIPATION

IN THE PLAN TO BE ELIGIBLE TO RECEIVE A DISTRIBUTION.

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to State employees who have not terminated State service are not

permitted, except as required by law.

(d) Small individual investment accounts.--A participant who

(E) SMALL INDIVIDUAL INVESTMENT ACCOUNTS.--

(1) A PARTICIPANT WHO terminates State service and whose

VESTED accumulated total defined contributions are below the

threshold established by law as of the date of termination of

service may be paid the VESTED accumulated total defined

contributions in a lump sum as provided in IRC § 401(a)(31).

(2) THE BOARD MAY ALSO PROVIDE IN THE PLAN DOCUMENT

THAT, NOTWITHSTANDING SUBSECTION (F), A PARTICIPANT WHOSE

VESTED ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS ARE BELOW

THE THRESHOLDS ESTABLISHED BY THE BOARD MAY RECEIVE THOSE

DISTRIBUTIONS WITHOUT THE OBLIGATION TO PURCHASE AN ANNUITY.

THE THRESHOLD MAY BE ESTABLISHED AS A DOLLAR AMOUNT, AN

ANNUITY AMOUNT, IN SOME OTHER FORM INDIVIDUALLY OR IN

COMBINATION AS THE BOARD DETERMINES.

(F) REQUIREMENT TO PURCHASE PARTIAL ANNUITY.--EXCEPT AS

PROHIBITED BY THE IRC OR AS OTHERWISE PROVIDED IN THIS PART, A

PARTICIPANT WHO IS ELIGIBLE AND ELECTS TO RECEIVE A DISTRIBUTION

OR VESTED ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS SHALL BE

REQUIRED TO PURCHASE AT LEAST A PARTIAL PAYOUT AS A LIFE ANNUITY

WITH THAT DISTRIBUTION FROM AN ANNUITY PROVIDER CONTRACTED BY

THE BOARD UNDER SECTION 5408(C) (RELATING TO DEATH BENEFITS) AND

UNDER SUCH CONDITIONS AS PROVIDED IN THE PLAN DOCUMENT. THE

CONDITIONS MAY INCLUDE THAT THE BOARD IS AUTHORIZED TO MAKE THE

DISTRIBUTION DIRECTLY TO THE ANNUITY PROVIDER.

(G) SPOUSAL CONSENT NOT REQUIRED.--A PARTICIPANT WHO IS

MARRIED MAY RECEIVE A LUMP SUM DISTRIBUTION OR OTHER

DISTRIBUTION DIRECTLY FROM THE BOARD WITHOUT THE CONSENT OF THE

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SPOUSE.

§ 5408. Death benefits.

(a) General rule.--In the event of the death of an active

participant or inactive participant, the board shall pay to the

participant's beneficiary the VESTED balance in the

participant's individual investment account in a lump sum or in

such other manner as the board may establish in the plan

document.

(b) Death of participant receiving distributions.--In the

event of the death of a participant receiving distributions, the

board shall pay to the participant's beneficiary the VESTED

balance in the participant's individual investment account in a

lump sum or in such other manner as the board may establish in

the plan document or, if the board has established alternative

methods of distribution in the plan document under which the

participant was receiving distributions, to the participant's

beneficiary or successor payee, as the case may be, as provided

in the plan document.

institutions, insurance companies or other types of third-party

providers to allow participants who receive a lump sum

distribution to receive payments and death benefits in a form

and manner as provided by the contract.

§ 5409. Vesting.

(a) Participant and voluntary contributions.--Subject to the

forfeiture and attachment provisions of section 5953 (relating

to taxation, attachment and assignment of funds) or otherwise as

provided by law, a participant shall be vested with respect to

all mandatory pickup participant contributions and voluntary

contributions paid by or on behalf of the participant to the

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trust in addition to interest and investment gains or losses on

the participant contributions, but not including investment fees

and administrative charges.

(b) Employer contributions.--Subject to the forfeiture and

attachment provisions of section 5953 or otherwise as provided

by law, a participant shall be vested with respect to employer-

defined contributions paid to the participant's individual

investment account in the trust and earnings on the employer

contributions, but minus losses and a proportionate share of

investment fees and administrative charges, according to the

following schedule:

(1) During the first year of State service as a

participant in the plan, 0%.

(2) At the first year until the second year of State

service as a participant in the plan, 33%.

(3) At the second year until the third year of State

service as a participant in the plan, 66%.

(4) At the third year until the fourth year of State

service as a participant in the plan, 100%.

document created by the board under section 5402 (relating to

plan document), the following:

(1) How the required time periods of State service in

the plan are determined and calculated.

(2) The effect of periods that State employees spend on

unpaid leave on the determination of a participant's vested

status in the plan.

(3) The effect of termination of State service or

distributions from the plan on a participant's vested status

in the plan.

20150HB0727PN1555 - 187 -

(4) Other terms and conditions for the implementation

and administration of this section.

(d) Nonvested employer-defined contributions.--Nonvested

employer-defined contributions, including earnings and losses on

the employer contributions, that are not distributable to a

participant who has not fully vested are credited to the

participant's most recent employer's future obligations assessed

under section 5509 (relating to appropriations and assessments

by the Commonwealth).

(e) USERRA leave and vesting credit.--A participant in the

plan who is reemployed from USERRA leave or who dies while

performing USERRA leave shall receive vesting credit under this

section for the State service that would have been performed had

the member not performed USERRA leave.

§ 5410. Termination of distributions.

(a) Return to State service.--A participant receiving

distributions or an inactive participant who returns to State

service shall cease receiving distributions and shall not be

eligible to receive distributions until the participant

subsequently terminates State service, without regard to whether

the participant is a mandatory, optional or prohibited member of

the system or participant in the plan. THIS SUBSECTION SHALL NOT

APPLY TO A DISTRIBUTION OF ACCUMULATED EMPLOYER DEFINED

CONTRIBUTIONS OR OTHER DISTRIBUTIONS THAT THE PARTICIPANT HAS

RECEIVED AND USED TO PURCHASE AN ANNUITY FROM A PROVIDER

CONTRACTED BY THE BOARD.

(b) Return of benefits paid during USERRA leave.--If a

former State employee is reemployed from USERRA leave and has

previously received any payments or annuity from the plan during

the USERRA leave, the employee shall return to the board the

20150HB0727PN1555 - 188 -

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amount so received plus interest as provided in the plan

document. The amount payable shall be certified in each case by

the board in accordance with methods approved by the actuary and

shall be paid in a lump sum within 30 days, or in the case of an

active participant, may be amortized with interest as provided

in the plan document through salary deductions to the trust in

amounts agreed upon by the participant and the board, but for

not longer than a period that starts with the date of

reemployment and continues for up to three times the length of

the participant's immediate past period of USERRA leave. The

repayment period shall not exceed five years.

§ 5411. Agreements with financial institutions and other

organizations.

(a) Authority to enter into agreements.--To establish and

administer the State Employees' Defined Contribution Plan, the

board shall have the power to enter into written agreements with

one or more financial institutions or other organizations

relating to the plan's administration and investment of funds

held pursuant to the plan.

(b) Agreement terms and considerations.--Under the plan, the

board shall enter into an agreement to provide fully bundled

retirement plan investment, plan administration and services to

employees who participate in the plan. The agreement shall

provide for appropriate long-term retirement-oriented

investments and shall include either fixed or variable deferred

annuities, or a combination thereof. In determining the

financial institution or other organization with which the board

shall enter into an agreement, the board shall consider all of

the following:

(1) The financial stability of the financial institution

20150HB0727PN1555 - 189 -

or other organization and the ability of the financial

institution or other organization to provide the contracted

rights and benefits to participants.

(2) The cost of the investments, plan administration and

services to the participants.

(3) The experience of the financial institution or other

organization in providing defined contribution retirement

plans in lieu of defined benefit plan participation to

employees or as part of employee hybrid retirement plans.

(4) The experience of the financial institution or other

organization in paying retirement income to employees.

(5) The experience of the financial institution or other

organization in providing plan education, counseling and

advice to participants in employee retirement plans that are

offered in lieu of defined benefit plan participation or as

part of employee hybrid retirement plans.

education, counseling, and objective participant-specific plan

advice to participants.

§ 5411.1. Annuitization.

The plan shall include the requirement that any disbursement

of the accumulated assets in an individual investment account

made after the participant reaches 55 years of age must include

at least partial payout as a life annuity. The board shall

determine the minimum annuity amount. The plan shall offer

participants a menu of lifetime annuity options, either fixed or

variable, or a combination of both.

§ 5412. Powers and duties of board.

The board shall have the following powers and duties to

establish the plan and trust and administer the provisions of

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this chapter and part:

(1) The board may commingle or pool assets with the

assets of other persons or entities.

(2) The board shall pay all administrative fees, costs

and expenses of managing, investing and administering the

plan, the trust and the individual investment accounts from

the balance of such individual investment accounts except as

may be provided otherwise by law.

(3) The board may establish investment guidelines and

limits on the types of investments that participants may

make, consistent with the board's fiduciary obligations.

(3.1) The board shall include default investment options

and strategies to include predetermined investment portfolio

options that shall be constructed to reflect different risk

profiles and shall be constructed to automatically reallocate

and rebalance contributions as a participant ages. The plan

may permit participants to construct their own investment

portfolios using some or all of the investment options

comprising the default solutions.

(4) The board shall at all times have the power to

change the terms of the plan as may be necessary to maintain

the tax-qualified status of the plan.

(5) The board may establish a process for election to

participate in the plan by those State employees for whom

participation is not mandatory.

(6) The board may perform an annual review of any

qualified fund manager for the purpose of assuring that the

fund manager continues to meet all standards and criteria

established.

(7) The board may allow for eligible rollovers and

20150HB0727PN1555 - 191 -

direct trustee-to-trustee transfers into the trust from

qualified plans of other employers, regardless of whether the

employers are private employers or public employers.

(8) The board may allow a former participant to maintain

his individual investment account within the plan.

(9) The board shall administer the program in compliance

with the qualifications and other rules of the IRC.

(10) The board may establish procedures to provide for

the lawful payment of benefits.

(11) The board shall determine what constitutes a

termination of State service.

(12) The board may establish procedures for

distributions of small accounts as required or permitted by

the IRC.

(13) The board shall have the power to establish

procedures in the plan document or to promulgate rules and

regulations as it deems necessary for the administration and

management of the plan, including, but not limited to,

establishing:

(i) Procedures whereby eligible participants may

change their investment choices on a periodic basis or

make other elections regarding their participation in the

plan.

(ii) Procedures for deducting mandatory pickup

participant contributions from a participant's

compensation.

(iii) Procedures for rollovers and trustee-to-

trustee transfers allowed under the IRC and permitted as

part of the plan.

(iv) Standards and criteria for disclosing and

20150HB0727PN1555 - 192 -

providing options to eligible individuals regarding

investments of amounts deferred under the plan, provided

that one of the available options must serve as the

default option for participants who do not make a timely

election and that, to the extent commercially available,

one option must have an annuity investment feature.

(v) Standards and criteria for disclosing to the

participants the anticipated and actual income

attributable to amounts invested, property rights and all

fees, costs and charges to be made against amounts

deferred to cover the fees, costs and expenses of

administering and managing the plan or trust.

(vi) Procedures, standards and criteria for the

making of distributions from the plan upon termination

from employment or death or in other circumstances

consistent with the purpose of the plan.

(14) The board may waive any reporting or information

requirement contained in this part if the board determines

that the information is not needed for the administration of

the plan.

(15) The board may contract any services and duties in

lieu of staff, except final adjudications or if prohibited by

law. Any duties or responsibilities of the board not required

by law to be performed by the board can be delegated to a

third-party provider subject to appeal to the board.

(16) The board may provide that any duties of the

employer or information provided by the participant to the

employer can be performed or received directly by the board.

(17) The provisions and restrictions of the act of July

2, 2010 (P.L.266, No.44), known as the Protecting

20150HB0727PN1555 - 193 -

Pennsylvania's Investments Act, shall not apply to the plan

or trust or the investments thereof, but the board is

authorized to offer to the plan participants investment

vehicles that would be permitted under the Protecting

Pennsylvania's Investments Act.

§ 5413. Responsibility for investment loss.

The board, the Commonwealth, an employer or other political

subdivision shall not be responsible for any investment loss

incurred under the plan, or for the failure of any investment to

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

other investment opportunity, whether or not such other

opportunity was offered to participants in the plan.

§ 5414. Investments based on participants' investment

allocation choices.

(a) General rule.--All contributions, interest and

investment earnings shall be 100% vested and shall be invested

based on the participant's investment allocation choices. All

investment allocation choices shall be credited proportionally

between participant contributions and employer defined

contributions. Each participant shall be credited individually

with the amount of contributions, interest and investment

earnings.

(b) Investment of contributions made by entities other than

the Commonwealth.--Investment of contributions by any

corporation, institution, insurance company or custodial bank

that the board has approved shall not be unreasonably delayed,

and in no case shall the investment of contributions be delayed

more than 30 days from the date of payroll deduction or the date

voluntary contributions are made to the date that funds are

invested. Any interest earned on the funds pending investment

20150HB0727PN1555 - 194 -

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shall be allocated to the Commonwealth and credited to the

individual investment accounts of participants who are then

participating in the plan 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

plan.

§ 5415. Expenses.

All fees, costs and expenses of administering the plan and

the trust and investing the assets of the trust shall be borne

by the participants and paid from assessments against the

balances of the individual investment accounts as established by

the board, except as may be provided otherwise by law.

§ 5416. (Reserved).

§ 5417. Required distributions.

All payments under this chapter shall start and be made in

compliance with the minimum distribution requirements and

incidental death benefit rules of IRC § 401(a).

Section 310. Section 5501.1(b)(7) and (8) of Title 71 are

amended and the subsection is amended by adding a paragraph to

read:

§ 5501.1. Shared-risk member contributions for Class A-3 and

Class A-4 service.

* * *

(b) Determination of shared-risk contribution rate.--

* * *

(7) For any fiscal year in which the actual

contributions by the Commonwealth or an employer are lower

than those required to be made under section 5507(d)

[(relating to contributions by the Commonwealth and other

employers)] (relating to contributions to system by the

20150HB0727PN1555 - 195 -

Commonwealth and other employers before July 1, 2016) or

5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2016), the

prospective shared-risk contribution rate for those employees

whose employers are not making the contributions required by

section 5507(d) shall be zero and shall not subsequently be

increased, except as otherwise provided in this section.

(8) If the actuary certifies that the accrued liability

contributions calculated in accordance with the actuarial

cost method provided in [section 5508(b)] section 5508

(relating to actuarial cost method for fiscal years ending

before July 1, 2016) or 5508.1 (relating to actuarial cost

method for fiscal years beginning July 1, 2016, or later), as

adjusted by the experience adjustment factor, are zero or

less, then the shared-risk contribution rate for the next

fiscal year shall be zero and shall not subsequently be

increased, except as otherwise provided in this section.

(9) For periods commencing on or after July 1, 2016, the

determination of shared-risk member contribution rate shall

be based on the annual interest rate adopted by the board for

the calculation of the accrued liability contribution rate

under section 5508.1(c).

Section 311. The definition of "actuarially required

contribution rate" in section 5501.2 of Title 71 is amended to

read:

§ 5501.2. 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:

"Actuarially required contribution rate." The employer

20150HB0727PN1555 - 196 -

contribution rate as calculated pursuant to section 5508(a),

(b), (c), (e) and (f) (relating to actuarial cost method for

fiscal years ending before July 1, 2016) or 5508.1(a), (b), (c),

(e) and (f) (relating to actuarial cost method for fiscal years

beginning July 1, 2016, or later).

* * *

Section 312. Sections 5502, 5503.1(a), 5504(a)(1), (a.1) and

(b), 5505(b)(1), (c), (d) and (i)(4), 5505.1, 5506, 5506.1(a)

and 5507 heading, (a), (b), (d), (e) and (f) of Title 71 are

amended to read:

§ 5502. Social Security integration member contributions.

Except for any period of current service in which the making

of regular member contributions has ceased solely by reason of

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions) or any provision of this part relating to

limitations under IRC § 401(a)(17) or 415(b), contributions

shall be made on behalf of [a] an active member of any class who

prior to March 1, 1974, has elected Social Security integration

coverage. The amount of such contributions shall be 6 1/4% of

that portion of his compensation as an active member in excess

of the maximum wages taxable under the provisions of the Social

Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.), in

addition to the regular member contributions which, after such

election, shall be determined on the basis of the basic

contribution rate of 5% and the additional member contribution

of 1 1/4%: Provided, That a member may elect to discontinue

Social Security integration coverage and shall thereafter be

ineligible to accrue any further Social Security integration

credits or any additional benefits on account of Social Security

20150HB0727PN1555 - 197 -

integration membership.

§ 5503.1. Pickup contributions.

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

contributions to the fund required to be made under sections

5501 (relating to regular member contributions for current

service), 5501.1 (relating to shared-risk member contributions

for Class A-3 and Class A-4 service), 5502 (relating to Social

Security integration member contributions), 5503 (relating to

joint coverage member contributions) and [section] 5505.1

(relating to additional member contributions), with respect to

current State service rendered by an active member on or after

January 1, 1982, shall be picked up by the Commonwealth or other

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

purposes of IRC § 414(h).

* * *

§ 5504. Member contributions for the purchase of credit for

previous State service or to become a full coverage

member.

(a) Amount of contributions for service in other than Class

G through N.--

(1) The contributions to be paid by an active member or

eligible school employee for credit in the system for total

previous State service other than service in Class G, Class

H, Class I, Class J, Class K, Class L, Class M and Class N or

to become a full coverage member shall be sufficient to

provide an amount equal to the regular and additional

accumulated deductions which would have been standing to the

credit of the member for such service had regular and

additional member contributions been made with full coverage

in the class of service and at the rate of contribution

20150HB0727PN1555 - 198 -

applicable during such period of previous service and had his

regular and additional accumulated deductions been credited

with statutory interest during all periods of subsequent

State service as an active member or inactive member on leave

without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System up to the date of purchase.

* * *

(a.1) Converted county service.--No contributions shall be

required to restore credit for previously credited State service

in Class G, Class H, Class I, Class J, Class K, Class L, Class M

and Class N. Such service shall be restored upon the

commencement of payment of the contributions required to restore

credit in the system for all other previous State service.

(b) Certification and method of payment.--The amount payable

shall be certified in each case by the board in accordance with

methods approved by the actuary and shall be paid in a lump sum

within 30 days or in the case of an active member or eligible

school employee who is an active member of the Public School

Employees' Retirement System may be amortized with statutory

interest through salary deductions to the system in amounts

agreed upon by the member and the board. The salary deduction

amortization plans agreed to by members and the board may

include a deferral of payment amounts and statutory interest

until the termination of school service or State service or

beginning service as a participant as the board in its sole

discretion decides to allow. The board may limit the salary

deduction amortization plans to such terms as the board in its

sole discretion determines. In the case of an eligible school

employee who is an active member of the Public School Employees'

20150HB0727PN1555 - 199 -

Retirement System, the agreed upon salary deductions shall be

remitted to the Public School Employees' Retirement Board, which

shall certify and transfer to the board the amounts paid.

§ 5505. Contributions for the purchase of credit for creditable

nonstate service.

* * *

(b) Nonintervening military service.--

(1) The amount due for the purchase of credit for

military service other than intervening military service

shall be determined by applying the member's basic

contribution rate, the additional contribution rate plus the

Commonwealth normal contribution rate for active members at

the time of entry, subsequent to such military service, of

the member into State service to his average annual rate of

compensation over the first three years of such subsequent

State service and multiplying the result by the number of

years and fractional part of a year of creditable

nonintervening military service being purchased together with

statutory interest during all periods of subsequent State

service as an active member or inactive member on leave

without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System to date of purchase. Upon

application for credit for such service, payment shall be

made in a lump sum within 30 days or in the case of an active

member or eligible school employee who is an active member of

the Public School Employees' Retirement System it may be

amortized with statutory interest through salary deductions

to the system in amounts agreed upon by the member and the

board. The salary deduction amortization plans agreed to by

20150HB0727PN1555 - 200 -

members and the board may include a deferral of payment

amounts and statutory interest until the termination of

school service or State service or beginning service as a

participant as the board in its sole discretion decides to

allow. The board may limit salary deduction amortization

plans to such terms as the board in its sole discretion

determines. In the case of an eligible school employee who is

an active member of the Public School Employees' Retirement

System, the agreed upon salary deductions shall be remitted

to the Public School Employees' Retirement Board, which shall

certify and transfer to the board the amounts paid.

Application may be filed for all such military service credit

upon completion of three years of subsequent State service

and shall be credited as Class A service.

* * *

of credit for intervening military service shall be determined

by the member's regular contribution rate, shared-risk

contribution rate, Social Security integration contribution

rate, the additional contribution rate which shall be applied

only to those members who began service on or after the

effective date of this amendatory act and compensation at the

time of entry of the member into active military service,

together with statutory interest during all periods of

subsequent State service as an active member or inactive member

on leave without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System to date of purchase. Upon

application for such credit the amount due shall be certified in

the case of each member by the board in accordance with methods

20150HB0727PN1555 - 201 -

approved by the actuary, and contributions may be made by:

(1) regular monthly payments during active military

service; or

(2) a lump sum payment within 30 days of certification;

(3) salary deductions to the system in amounts agreed

upon by the member or eligible school employee who is an

active member of the Public School Employees' Retirement

System and the board.

The salary deduction amortization plans agreed to by members and

the board may include a deferral of payment amounts and

statutory interest until the termination of school service or

State service or beginning service as a participant as the board

in its sole discretion decides to allow. The board may limit

salary deduction amortization plans to such terms as the board

in its sole discretion determines. In the case of an eligible

school employee who is an active member of the Public School

Employees' Retirement System, the agreed upon salary deductions

shall be remitted to the Public School Employees' Retirement

Board, which shall certify and transfer to the board the amounts

paid.

(d) Nonmilitary and nonmagisterial service.--Contributions

on account of credit for creditable nonstate service other than

military and magisterial service by State employees who first

become members of the system before January 1, 2011, or before

December 1, 2010, as a member of the General Assembly shall be

determined by applying the member's basic contribution rate, the

additional contribution rate plus the Commonwealth normal

contribution rate for active members at the time of entry

subsequent to such creditable nonstate service of the member

20150HB0727PN1555 - 202 -

into State service to his compensation at the time of entry into

State service as a member of the system and multiplying the

result by the number of years and fractional part of a year of

creditable nonstate service being purchased together with

statutory interest during all periods of subsequent State

service as an active member or inactive member on leave without

pay and school service as an active member or inactive member on

leave without pay of the Public School Employees' Retirement

System to the date of purchase. Upon application for credit for

such service payment shall be made in a lump sum within 30 days

or in the case of an active member or eligible school employee

who is an active member of the Public School Employees'

Retirement System it may be amortized with statutory interest

through salary deductions to the system in amounts agreed upon

by the member and the board. The salary deduction amortization

plans agreed to by members and the board may include a deferral

of payment amounts and statutory interest until the termination

of school service or State service or beginning service as a

participant as the board in its sole discretion decides to

allow. The board may limit salary deduction amortization plans

to such terms as the board in its sole discretion determines. In

the case of an eligible school employee who is an active member

of the Public School Employees' Retirement System, the agreed

upon salary deduction shall be remitted to the Public School

Employees' Retirement Board, which shall certify and transfer to

the board the amounts paid.

* * *

(i) Purchases of nonstate service credit by State employees

who first became members of the system on or after December 1,

2010.--

20150HB0727PN1555 - 203 -

* * *

(4) The payment for credit purchased under this

subsection shall be certified in each case by the board in

accordance with methods approved by the actuary and shall be

paid in a lump sum within 30 days or in the case of an active

member or eligible school employee who is an active member of

the Public School Employees' Retirement System may be

amortized with statutory interest through salary deductions

to the system in amounts agreed upon by the member and the

board. The salary deduction amortization plans agreed to by

members and the board may include a deferral of payment

amounts and interest until the termination of school service

or State service or beginning service as a participant as the

board in its sole discretion decides to allow. The board may

limit the salary deduction amortization plans to such terms

as the board in its sole discretion determines. In the case

of an eligible school employee who is an active member of the

Public School Employees' Retirement System, the agreed upon

salary deductions shall be remitted to the Public School

Employees' Retirement Board, which shall certify and transfer

to the board the amounts paid.

§ 5505.1. Additional member contributions.

In addition to regular or joint coverage member contributions

and social security integration contributions, contributions

shall be made on behalf of each active member, regardless of

class of service, at the rate of 1 1/4% of compensation until

such time as the actuary certifies that all accrued liability

contributions have been completed in accordance with the

actuarial cost method provided in section 5508(b) (relating to

actuarial cost method for fiscal years ending before July 1,

20150HB0727PN1555 - 204 -

2016).

§ 5506. Incomplete payments.

In the event that a member terminates State service or

becomes a participant or a multiple service member who is an

active member of the Public School Employees' Retirement System

terminates school service before the agreed upon payments for

credit for previous State service, USERRA leave, creditable

nonstate service, social security integration, full coverage

membership or return of benefits on account of returning to

State service or entering school service and electing multiple

service have been completed, the member or multiple service

member who is an active member of the Public School Employees'

Retirement System shall have the right to pay within 30 days of

termination of State service or school service or becoming a

participant the balance due, including interest, in a lump sum

and the annuity shall be calculated including full credit for

the previous State service, creditable nonstate service, social

security integration, or full coverage membership. In the event

a member does not pay the balance due within 30 days of

termination of State service or becoming a participant or in the

event a member dies in State service or within 30 days of

termination of State service or becoming a participant or in the

case of a multiple service member who is an active member of the

Public School Employees' Retirement System does not pay the

balance due within 30 days of termination of school service or

dies in school service or within 30 days of termination of

school service and before the agreed upon payments have been

completed, the present value of the benefit otherwise payable

shall be reduced by the balance due, including interest, and the

benefit payable shall be calculated as the actuarial equivalent

20150HB0727PN1555 - 205 -

of such reduced present value.

§ 5506.1. Annual compensation limit under IRC § 401(a)(17).

(a) General rule.--In addition to other applicable

limitations set forth in this part, and notwithstanding any

provision of this part to the contrary, the annual compensation

of each noneligible member and each participant taken into

account for benefit purposes under this part shall not exceed

the limitation under IRC § 401(a)(17). On and after January 1,

1996, any reference in this part to the limitation under IRC §

401(a)(17) shall mean the Omnibus Budget Reconciliation Act of

1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual

compensation limit set forth in this subsection. The OBRA '93

annual compensation limit is $150,000, as adjusted by the

commissioner for increases in the cost of living in accordance

with IRC § 401(a)(17)(B). The cost-of-living adjustment in

effect for a calendar year applies to any determination period

which is a period, not exceeding 12 months, over which

compensation is determined, beginning in such calendar year. If

a determination period consists of fewer than 12 months, the

OBRA '93 compensation limit will be multiplied by a fraction,

the numerator of which is the number of months in the

determination period and the denominator of which is 12.

* * *

§ 5507. Contributions to system by the Commonwealth and other

employers before July 1, 2016.

(a) Contributions on behalf of active members.--[The] Until

June 30, 2016, the Commonwealth and other employers whose

employees are members of the system, and from January 1, 2016,

to June 30, 2016, the Commonwealth and other employers whose

employees are participants in the plan, shall make contributions

20150HB0727PN1555 - 206 -

to the fund on behalf of all active members in such amounts as

shall be certified by the board as necessary to provide,

together with the members' total accumulated deductions, annuity

reserves on account of prospective annuities other than those

provided in sections 5708 (relating to supplemental annuities),

5708.1 (relating to additional supplemental annuities), 5708.2

(relating to further additional supplemental annuities), 5708.3

(relating to supplemental annuities commencing 1994), 5708.4

(relating to special supplemental postretirement adjustment),

5708.5 (relating to supplemental annuities commencing 1998),

5708.6 (relating to supplemental annuities commencing 2002),

5708.7 (relating to supplemental annuities commencing 2003) and

5708.8 (relating to special supplemental postretirement

adjustment of 2002), in accordance with the actuarial cost

method provided in section 5508(a), (b), (c), (d) and (f)

(relating to actuarial cost method for fiscal years ending

before July 1, 2016).

(b) Contributions on behalf of annuitants.--[The] Until June

30, 2016, the Commonwealth and other employers whose employees

are members of the system shall make contributions on behalf of

annuitants in such amounts as shall be certified by the board as

necessary to fund the liabilities for supplemental annuities in

accordance with the actuarial cost method provided in section

5508(e) [(relating to actuarial cost method)].

* * *

(d) Payment of final contribution rate.--Notwithstanding the

calculation of the actuarially required contribution rate and

the provisions of subsections (a) and (b), until June 30, 2016,

the Commonwealth and other employers whose employees are members

of the system shall make contributions to the fund on behalf of

20150HB0727PN1555 - 207 -

all active members and annuitants in such amounts as shall be

certified by the board in accordance with section 5508(i).

(e) Benefits completion plan contributions.--In addition to

all other contributions required under this section and section

5508, until June 30, 2016, the Commonwealth and other employers

whose employees are members of the system shall make

contributions as certified by the board pursuant to section 5941

(relating to benefits completion plan).

(f) Contributions resulting from members reemployed from

USERRA leave.--When a State employee reemployed from USERRA

leave makes the member contributions required to be granted

State service credit for the USERRA leave before July 1, 2016,

either by actual payment or by actuarial debt under section 5506

(relating to incomplete payments), then the Commonwealth

employer or other employer by whom the State employee is

employed at the time the member contributions are made, or the

last employer before termination in the case of payment under

section 5506, shall make whatever employer contributions would

have been made under this section had the employee making the

member contributions after being reemployed from USERRA leave

continued to be employed in his State office or position instead

of performing USERRA leave.

Section 313. Title 71 is amended by adding a section to

read:

§ 5507.1. Contributions to system by the Commonwealth and other

employers starting July 1, 2016.

(a) Contributions on behalf of members.--For fiscal years

beginning on or after July 1, 2016, the Commonwealth and other

employers whose employees are or were members of the system

shall make contributions to the fund on behalf of all members in

20150HB0727PN1555 - 208 -

such amounts as shall be certified by the board as necessary to

provide, together with the members' total accumulated

deductions, annuity reserves on account of annuities including

those provided in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

annuities), 5708.2 (relating to further additional supplemental

annuities), 5708.3 (relating to supplemental annuities

commencing 1994), 5708.4 (relating to special supplemental

postretirement adjustment), 5708.5 (relating to supplemental

annuities commencing 1998), 5708.6 (relating to supplemental

annuities commencing 2002), 5708.7 (relating to supplemental

annuities commencing 2003) and 5708.8 (relating to special

supplemental postretirement adjustment of 2002), in accordance

with the actuarial cost method provided in section 5508.1

(relating to actuarial cost method for fiscal years beginning

July 1, 2016, or later).

(b) Payment of employer contributions to the system.--

(1) Payment of employer normal contributions shall be as

a percentage of compensation of active members.

(2) Payment of accrued liability contributions as

modified by the experience adjustment factor shall be as a

percentage of compensation of active members and active

participants.

(3) Payment of the additional accrued liability

contributions determined under section 5508.1(d) shall be in

equal monthly payments during the fiscal year on the first

day of each month, or in such other time and manner as the

board may establish.

calculation of the actuarially required contribution rate and

20150HB0727PN1555 - 209 -

the provisions of subsections (a) and (b)(1) and (2), after June

30, 2016, the Commonwealth and other employers whose employees

are members of the system shall make contributions to the fund

on behalf of all active members and annuitants in such amounts

as shall be certified by the board in accordance with section

5508.1(h).

(d) Benefits completion plan contributions.--In addition to

all other contributions required under this section and section

5508.1, after June 30, 2016, the Commonwealth and other

employers whose employees are active members of the system shall

make contributions as certified by the board pursuant to section

5941 (relating to benefits completion plan).

(e) Contributions resulting from members reemployed from

USERRA leave.--When a State employee reemployed from USERRA

leave makes the member contributions required to be granted

State service credit for the USERRA leave after June 30, 2016,

either by actual payment or by actuarial debt under section 5506

(relating to incomplete payments), the Commonwealth employer or

other employer that employed the State employee when the member

contributions are made or the last employer before termination

in the case of payment under section 5506 shall make the

employer contributions that would have been made under this

section if the employee making the member contributions after

the employee is reemployed from USERRA leave continued to be

employed in the employee's State office or position instead of

performing USERRA leave.

Section 314. Section 5508 heading, (a), (b), (c)(1) and (3),

(e)(2), (f)(1), (h) and (i) of Title 71 are amended and

subsection (c) is amended by adding a paragraph to read:

§ 5508. Actuarial cost method for fiscal years ending before

20150HB0727PN1555 - 210 -

July 1, 2016.

(a) Employer contribution rate on behalf of active

members.--[The] For the fiscal years ending before July 1, 2016,

the amount of the Commonwealth and other employer contributions

on behalf of all active members shall be computed by the actuary

as a percentage of the total compensation of all active members

during the period for which the amount is determined and shall

be so certified by the board. The actuarially required

contribution rate on behalf of all active members shall consist

of the employer normal contribution rate, as defined in

subsection (b), and the accrued liability contribution rate as

defined in subsection (c). The actuarially required contribution

rate on behalf of all active members shall be modified by the

experience adjustment factor as calculated in subsection (f).

(b) Employer normal contribution rate.--[The] For the fiscal

years ending before July 1, 2016, the employer normal

contribution rate shall be determined after each actuarial

valuation 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. The

employer normal contribution rate shall be determined as a level

percentage of the compensation of the average new active member,

which percentage, if contributed on the basis of his prospective

compensation through his entire period of active State 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, excluding shared-risk member

contributions.

(1) For the fiscal years beginning July 1, 2002, and

20150HB0727PN1555 - 211 -

July 1, 2003, the accrued liability contribution rate shall

be computed as the rate of total compensation of all active

members which shall be certified by the actuary as sufficient

to fund over a period of ten years from July 1, 2002, the

present value of the liabilities for all prospective

benefits, except for the supplemental benefits as provided in

sections 5708 (relating to supplemental annuities), 5708.1

(relating to additional supplemental annuities), 5708.2

(relating to further additional supplemental annuities),

5708.3 (relating to supplemental annuities commencing 1994),

5708.4 (relating to special supplemental postretirement

adjustment), 5708.5 (relating to supplemental annuities

commencing 1998), 5708.6 (relating to supplemental annuities

commencing 2002), 5708.7 (relating to supplemental annuities

commencing 2003) and 5708.8 (relating to special supplemental

postretirement adjustment of 2002), in excess of the total

assets in the fund (calculated recognizing all investment

gains and losses over a five-year period), excluding the

balance in the supplemental annuity account, and the present

value of employer normal contributions and of member

contributions payable with respect to all active members on

December 31, 2001, and excluding contributions to be

transferred by county retirement systems or pension plans

pursuant to section 5507(c) (relating to contributions to

system by the Commonwealth and other employers before July 1,

2016). The amount of each annual accrued liability

contribution shall be equal to the amount of such

contribution for the fiscal year beginning July 1, 2002,

except that, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2002, but before

20150HB0727PN1555 - 212 -

July 1, 2003, such additional liability shall be funded over

a period of ten years from the first day of July, coincident

with or next following the effective date of the increase.

The amount of each annual accrued liability contribution for

such additional legislative liabilities shall be equal to the

amount of such contribution for the first annual payment.

* * *

(3) For the fiscal year beginning July 1, 2010, the

accrued liability contribution rate shall be computed as the

rate of total compensation of all active members which shall

be certified by the actuary as sufficient to fund in equal

dollar installments over a period of 30 years from July 1,

2010, the present value of the liabilities for all

prospective benefits calculated as of the immediately prior

valuation date, including the supplemental benefits as

provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4,

5708.5, 5708.6, 5708.7 and 5708.8, but excluding the benefits

payable from the retirement benefit plan established pursuant

to section 5941 (relating to benefits completion plan), in

excess of the actuarially calculated assets in the fund

(calculated recognizing all realized and unrealized

investment gains and losses each year in level annual

installments over five years), including the balance in the

supplemental annuity account, and the present value of

employer normal contributions and of member contributions

payable with respect to all active members, inactive members

on leave without pay, vestees and special vestees on December

31, 2009. If the accrued liability is changed by legislation

enacted subsequent to December 31, 2009, and before January

1, 2015, such change in liability shall be funded in equal

20150HB0727PN1555 - 213 -

dollar installments over a period of ten years from the first

day of July following the valuation date coincident with or

next following the date such legislation is enacted.

(4) For the fiscal year beginning July 1, 2015, the

accrued liability contribution rate shall be computed as

provided for under this section, except that the rate shall

be computed as a rate of total compensation of all active

members and active participants for the fiscal year. In

addition to any employer defined contributions made to the

trust, the Commonwealth and other employers of participants

shall make the accrued liability contributions to the fund

certified by the board.

* * *

(e) Supplemental annuity contribution rate.--

* * *

(2) For fiscal years beginning on or after July 1, 2010,

and ending on or before June 30, 2016, contributions from the

Commonwealth and other employers whose employees are members

of the system required to provide for the payment of

supplemental annuities as provided in sections 5708, 5708.1,

5708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7 and 5708.8

shall be paid as part of the accrued liability contribution

rate as provided for in subsection (c)(3), and there shall

not be a separate supplemental annuity contribution rate

attributable to those supplemental annuities. In the event

that supplemental annuities are increased by legislation

enacted subsequent to December 31, 2009, and before January

1, 2015, the additional liability for the increase in

benefits shall be funded in equal dollar installments over a

period of ten years from the first day of July following the

20150HB0727PN1555 - 214 -

valuation date coincident with or next following the date

such legislation is enacted.

(f) Experience adjustment factor.--

(1) For each [year] fiscal year ending before July 1,

2016, after the establishment of the accrued liability

contribution rate and the supplemental annuity contribution

rate for the fiscal year beginning July 1, 2010, any increase

or decrease in the unfunded accrued liability and any

increase or decrease in the liabilities and funding for

supplemental annuities, due to actual experience differing

from assumed experience (recognizing all realized and

unrealized investment gains and losses over a five-year

period), changes in contributions caused by the final

contribution rate being different from the actuarially

required contribution rate, State employees making shared-

risk member contributions, changes in actuarial assumptions

or changes in the terms and conditions of the benefits

provided by the system by judicial, administrative or other

processes other than legislation, including, but not limited

to, reinterpretation of the provisions of this part

recognized by the actuarial valuations on December 31, 2010,

and through December 31, 2013 2014 , shall be amortized in

equal dollar annual contributions over a period of 30 years

beginning with the July 1 succeeding the actuarial valuation

determining said increases or decreases.

* * *

(h) Temporary application of collared contribution rate.--

The collared contribution rate for each [year] fiscal year

ending on or before June 30, 2016, shall be determined by

comparing the actuarially required contribution rate calculated

20150HB0727PN1555 - 215 -

<--

without regard for costs added by legislation to the prior

year's final contribution rate. If, for any of the fiscal years

beginning July 1, 2011, July 1, 2012, [and on or after] July 1,

2013, July 1, 2014, and July 1, 2015, the actuarially required

contribution rate calculated without regard for costs added by

legislation is more than 3%, 3.5%, 4.5% , 4.5% and 4.5%,

respectively, of the total compensation of all active members

greater than the prior year's final contribution rate, then the

collared contribution rate shall be applied and be equal to the

prior year's final contribution rate increased by the respective

percentage above of total compensation of all active members.

Otherwise, and for all subsequent fiscal years, the collared

contribution rate shall not be applicable. In no case shall the

collared contribution rate be less than 4% of total compensation

of all active members.

(i) Final contribution rate.--For the fiscal year beginning

July 1, 2010, the final contribution rate shall be 5% of total

compensation of all active members. For each subsequent fiscal

year for which the collared contribution rate is applicable, the

final contribution rate shall be the collared contribution rate

plus the costs added by legislation. For all other fiscal years

ending before July 1, 2016, the final contribution rate shall be

the actuarially required contribution rate, provided that the

final contribution rate shall not be less than the employer

normal contribution rate, as defined in subsection (b).

Section 315. Title 71 is amended by adding a section to

read:

§ 5508.1. Actuarial cost method for fiscal years beginning July

1, 2016, or later.

(a) Employer contributions on behalf of members.--For fiscal

20150HB0727PN1555 - 216 -

<--

years beginning on or after July 1, 2016, the amount of the

Commonwealth and other employer contributions on behalf of all

members shall be computed by the actuary and certified by the

board as an employer normal contribution rate as defined in

subsection (b) and the accrued liability contribution amount as

defined in subsection (c). The accrued liability contribution

amount shall be modified by the experience adjustment factor as

calculated in subsection (f).

(b) Employer normal contribution rate.--For fiscal years

beginning on or after July 1, 2016, the employer normal

contribution rate for all active members of the system shall be

the employer normal contribution rate that would have been

applicable if the employer normal contribution rate was

determined as part of the December 31, 2015, actuarial valuation

under section 5508(b) (relating to actuarial cost method for

fiscal years ending before July 1, 2016) without regard to the

provisions of this section and the inapplicability of that rate

to periods on or after July 1, 2016.

(1) For fiscal years beginning July 1, 2016, the accrued

liability contribution rate shall be computed as the rate of

total compensation of all active members and active

participants which shall be determined by the actuary as

sufficient to fund in THE equal dollar installments over a

period of 30 years from July 1, 2016, the present value of

all the liabilities for all prospective benefits of members

of the system calculated as of the immediately prior

valuation date, including the supplemental benefits as

provided in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

20150HB0727PN1555 - 217 -

<--

annuities), 5708.2 (relating to further additional

supplemental annuities), 5708.3 (relating to supplemental

annuities commencing 1994), 5708.4 (relating to special

supplemental postretirement adjustment), 5708.5 (relating to

supplemental annuities commencing 1998), 5708.6 (relating to

supplemental annuities commencing 2002), 5708.7 (relating to

supplemental annuities commencing 2003) and 5708.8 (relating

to special supplemental postretirement adjustment of 2002),

but excluding the benefits payable from the retirement

benefit plan established pursuant to section 5941 (relating

to benefits completion plan), in excess of the actuarially

calculated assets in the fund, calculated recognizing all

realized and unrealized investment gains and losses each year

in level annual installments over five years, including the

balance in the supplemental annuity account, and the present

value of employer normal contributions and of member

contributions payable with respect to all active members,

inactive members on leave without pay, vestees and special

vestees on December 31, 2015. DETERMINED UNDER SECTION

5508(C). If the accrued liability is changed by legislation

enacted subsequent to December 31, 2015, such change in

liability shall be funded in equal dollar installments as a

percentage of compensation of all active members and active

participants over a period of 10 years from the first day of

July following the valuation date coincident with or next

following the date such legislation is enacted. The accrued

liability contribution rate shall be determined after each

actuarial valuation 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

20150HB0727PN1555 - 218 -

<--

principles.

(2) For purposes of determining the accrued liability

contribution rate in paragraph (1) and subsection (e) and the

experience adjustment factor in subsection (f), the term

"compensation of all active members and active participants"

shall include an additional amount equal to the difference

between:

(i) The actual compensation of all active members

and active participants of The Pennsylvania State

University, the State System of Higher Education, State-

owned educational institutions and community colleges.

(ii) The compensation of all employees of The

Pennsylvania State University, the State System of Higher

Education, State-owned educational institutions and

community colleges who are active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer multiplied by

a fraction equal to the amount determined under

subparagraph (i) as part of the December 31, 2015,

actuarial valuation divided by the amount determined

under this subparagraph as of December 31, 2015.

(d) Allocation of accrued liability contribution amount.--

For the fiscal year beginning July 1, 2016, and all subsequent

fiscal years, The Pennsylvania State University, the State

System of Higher Education, each State-owned educational

institution and each community college shall make such

additional actuarial accrued liability contributions as shall be

20150HB0727PN1555 - 219 -

certified by the board. The additional actuarial accrued

liability contributions shall be the product of:

(1) the amount by which the final contribution rate

exceeds the employer normal contribution rate determined

under subsection (b)(1); multiplied by

(2) the difference between:

(i) the actual compensation of all active members

and active participants of each such educational

institution; and

(ii) the compensation of all active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer of each such

educational institution multiplied by a fraction equal to

the amount determined under subparagraph (i) as part of

the December 31, 2015, actuarial valuation divided by the

amount of compensation of all active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer of each such

educational institution determined as of December 31,

2015.

(e) Supplemental annuity contribution amounts.--For fiscal

years beginning on or after July 1, 2016, contributions from the

Commonwealth and other employers whose employees are members of

the system required to provide for the payment of supplemental

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annuities as provided in sections 5708, 5708.1, 5708.2, 5708.3,

5708.4, 5708.5, 5708.6, 5708.7 and 5708.8 5708 (RELATING TO

SUPPLEMENTAL ANNUITIES), 5708.1 (RELATING TO ADDITIONAL

SUPPLEMENTAL ANNUITIES), 5708.2 (RELATING TO FURTHER ADDITIONAL

SUPPLEMENTAL ANNUITIES), 5708.3 (RELATING TO SUPPLEMENTAL

ANNUITIES COMMENCING 1994), 5708.4 (RELATING TO SPECIAL

SUPPLEMENTAL POSTRETIREMENT ADJUSTMENT), 5708.5 (RELATING TO

SUPPLEMENTAL ANNUITIES COMMENCING 1998), 5708.6 (RELATING TO

SUPPLEMENTAL ANNUITIES COMMENCING 2002), 5708.7 (RELATING TO

SUPPLEMENTAL ANNUITIES COMMENCING 2003) AND 5708.8 (RELATING TO

SPECIAL SUPPLEMENTAL POSTRETIREMENT ADJUSTMENT OF 2002) shall be

paid as part of the accrued liability contribution rate as

provided for in subsection (c) and there shall not be a separate

supplemental annuity contribution amount attributable to those

supplemental annuities. In the event that supplemental annuities

are increased by legislation enacted subsequent to December 31,

2015, the additional liability for the increase in benefits

shall be funded in equal dollar installments as a percentage of

compensation of all active members and active participants over

a period of ten years from the first day of July following the

valuation date coincident with or next following the date such

legislation is enacted as part of the accrued liability amount

and not as a separate supplemental annuity contribution amount.

(f) Experience adjustment factor.--

(1) For each year after the establishment of the accrued

liability contribution amount for the fiscal year beginning

July 1, 2016, any increase or decrease in the unfunded

(1) FOR EACH YEAR BEGINNING ON OR AFTER JULY 1, 2016:

(I) THE ACCRUED LIABILITY CONTRIBUTION RATE COMPUTED

UNDER SUBSECTION (C) SHALL BE MODIFIED EACH YEAR BY ANY

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AMOUNTS CALCULATED FOR EACH YEAR UNDER SECTION 5508(F)

FOR EACH OF THE RESPECTIVE AMORTIZATION PERIODS REMAINING

AS OF JULY 1, 2016; AND

(II) ANY INCREASE OR DECREASE IN THE UNFUNDED

accrued liability and any increase or decrease in the

liabilities and funding for supplemental annuities, due

to actual experience differing from assumed experience,

recognizing all realized and unrealized investment gains

and losses over a five-year period, changes in

contributions caused by the final contribution rate being

different from the actuarially required contribution

rate, State employees making shared-risk member

contributions, changes in actuarial assumptions or

changes in the terms and conditions of the benefits

provided by the system by judicial, administrative or

other processes other than legislation, including, but

not limited to, reinterpretation of the provisions of

this part, shall be amortized in equal dollar

installments expressed as a level percentage of

compensation of all active members and active

participants over a period of 30 years beginning with the

July 1 succeeding the actuarial valuation determining

said increases or decreases.

(2) The actuarially required contribution rate shall be

the sum of the normal contribution rate determined under

subsection (b)(2), the accrued liability contribution rate

and the supplemental annuity contribution rate modified by

the experience adjustment factor as calculated in paragraph

(1).

(g) Temporary application of collared contribution rate.--

20150HB0727PN1555 - 222 -

The collared contribution rate for each fiscal year beginning on

or after July 1, 2016, shall be determined by comparing the

actuarially required contribution rate calculated without regard

for costs added by legislation to the prior year's final

contribution rate. If the actuarially required contribution rate

calculated without regard for costs added by legislation is more

than 4.5% of the total compensation of all active members

greater than the prior year's final contribution rate, then the

collared contribution rate shall be applied and be equal to the

prior year's final contribution rate increased by 4.5% of total

compensation of all active members. Otherwise, and for all

subsequent fiscal years, the collared contribution rate shall

not be applicable. In no case shall the collared contribution

rate be less than 4% of total compensation of all active

members.

(h) Final contribution rate.--For the fiscal year beginning

July 1, 2016, if the collared contribution rate is applicable,

the final contribution rate shall be the collared contribution

rate plus the costs added by legislation. For each subsequent

fiscal year for which the collared contribution rate is

applicable, the final contribution rate shall be the collared

contribution rate plus the costs added by legislation. For all

other fiscal years beginning on or after July 1, 2016, the final

contribution rate shall be the actuarially required contribution

rate, provided that the final contribution rate shall not be

less than the employer normal contribution rate, as provided

under subsection (b).

Section 316. Sections 5509, 5701, 5701.1, 5702(a)(1),

5704(a) and (c), 5706(a), (a.1), (a.2), (b) and (c)(1) and (3),

5707(f), 5708.1(f), 5708.2(f), 5708.3(f), 5708.5(f), 5708.6(f),

20150HB0727PN1555 - 223 -

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5708.7(f), 5708.8(g), 5709 heading, (a) and (b) and 5901(a), (c)

and (d) AND 5701.1 of Title 71 are amended to read:

§ 5509. Appropriations and assessments by the Commonwealth.

(a) Annual submission of budget.--The board shall prepare

and submit annually an itemized budget consisting of the amounts

necessary to be appropriated by the Commonwealth out of the

General Fund and special operating funds and the amounts to be

assessed the other employers required to meet the separate

obligations to both the fund and the trust accruing during the

fiscal period beginning the first day of July of the following

year.

(b) Appropriation and payment.--The General Assembly shall

make an appropriation sufficient to provide for the separate

obligations of the Commonwealth to both the fund and the trust.

Such amount shall be paid by the State Treasurer through the

Department of Revenue into the fund or the trust, as the case

may be, in accordance with requisitions presented by the board.

The contributions to the system by the Commonwealth on behalf of

active members who are officers of the Pennsylvania State Police

shall be charged to the General Fund and to the Motor License

Fund in the same ratios as used to apportion the appropriations

for salaries of members of the Pennsylvania State Police. The

contributions to the system by the Commonwealth on behalf of

active members who are enforcement officers and investigators of

the Pennsylvania Liquor Control Board shall be charged to the

General Fund and to the State Stores Fund.

amounts assessed other employers who are required to make the

necessary separate contributions to both the fund and the trust

out of funds other than the General Fund shall be paid by such

20150HB0727PN1555 - 224 -

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employers into the fund or the trust, as the case may be, in

accordance with requisitions presented by the board. The General

Fund of the Commonwealth shall not be held liable to appropriate

the moneys required to build up the reserves in the fund

necessary for the payment of benefits from the system to

employees or to make the employer defined contributions for

employees of such other employers. In case any such other

employer shall fail to provide to the fund the moneys necessary

for such purpose, then the service of such members of the system

for such period for which money is not so provided shall be

credited and pickup contributions with respect to such members

shall continue to be credited to the members' savings account.

The annuity to which such member is entitled shall be determined

as actuarially equivalent to the present value of the maximum

single life annuity of each such member reduced by the amount of

employer contributions to the system payable on account and

attributable to his compensation during such service, except

that no reduction shall be made as a result of the failure of an

employer to make contributions required for a period of USERRA

leave.

§ 5701. Return of total accumulated deductions.

Any member upon termination of service may, in lieu of all

benefits payable from the system under this chapter to which he

may be entitled, elect to receive his total accumulated

deductions.

§ 5701.1. Transfer of accumulated deductions.

When an employee of the Juvenile Court Judges' Commission

elects membership in an independent retirement program pursuant

to section 5301(f) (relating to mandatory and optional

membership in system and participation in plan), the board shall

20150HB0727PN1555 - 225 -

transfer directly to the trustee or administrator of the

independent retirement program all accumulated deductions

resulting from service credited while an employee of the

Juvenile Court Judges' Commission.

SECTION 316.1. SECTIONS 5702(A)(1) AND 5704(A) AND (C) OF

TITLE 71 ARE AMENDED AND THE SECTIONS ARE AMENDED BY ADDING

SUBSECTIONS TO READ:

§ 5702. Maximum single life annuity.

(a) General rule.--Any full coverage member who is eligible

to receive an annuity pursuant to the provisions of section

5308(a) or (b) (relating to eligibility for annuities) who

terminates State service, or if a multiple service member who is

a school employee who is an active member of the Public School

Employees' Retirement System who terminates school service,

before attaining age 70 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:

(1) A standard single life annuity multiplied by the sum

of the products, determined separately for each class of

service, obtained by multiplying the appropriate class of

service multiplier by the ratio of years of service credited

in that class to the total credited service. In case the

member on the effective date of retirement is under

superannuation age for any service, a reduction factor

calculated to provide benefits actuarially equivalent to an

annuity starting at superannuation age shall be applied to

the product determined for that service. The class of service

multiplier for any period of concurrent service shall be

multiplied by the proportion of total State and school

20150HB0727PN1555 - 226 -

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compensation during such period attributable to State service

as a member of the system. In the event a member has two

multipliers for one class of service the class of service

multiplier to be used for calculating benefits for that class

shall be the average of the two multipliers weighted by the

proportion of compensation attributable to each multiplier

during the three years of highest annual compensation in that

class of service: Provided, That in the case of a member of

Class E-1, a portion but not all of whose three years of

highest annual judicial compensation is prior to January 1,

1973, two class of service multipliers shall be calculated on

the basis of his entire judicial service, the one applying

the judicial class of service multipliers effective prior to

January 1, 1973 and the second applying the class of service

multipliers effective subsequent to January 1, 1973. The

average class of service multiplier to be used for

calculating benefits for his judicial service shall be the

average of the two calculated multipliers weighted by the

proportion of compensation attributable to each of the

calculated multipliers during the three years of highest

annual compensation in that class of service.

* * *

(E) COORDINATION OF BENEFITS.--THE DETERMINATION AND PAYMENT

OF THE MAXIMUM SINGLE LIFE ANNUITY UNDER THIS SECTION SHALL BE

IN ADDITION TO ANY PAYMENTS A COMBINED SERVICE EMPLOYEE MAY BE

ENTITLED TO RECEIVE, HAS RECEIVED OR IS RECEIVING AS A RESULT OF

BEING A PARTICIPANT IN THE PLAN.

§ 5704. Disability annuities.

(a) Amount of annuity.--A member who has made application

for a disability annuity and has been found to be eligible in

20150HB0727PN1555 - 227 -

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accordance with the provisions of section 5905(c)(1) (relating

to duties of the board regarding applications and elections of

members and participants) shall receive a disability annuity

payable from the effective date of disability as determined by

the board 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 multiplied by the class of service

multiplier applicable to the class of service at the time of

disability if the product of such class of service multiplier

and 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:

MY*/Y or 16.667/Y

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

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

employee until attaining superannuation age as applicable at the

time of disability, or if the member has attained superannuation

age, as applicable at the time of disability, then the number of

years of credited service and M = the class of service

multiplier as applicable at the effective date of disability. A

member of Class C shall receive, in addition, any annuity to

which he may be eligible under section 5702(a)(3) (relating to

maximum single life annuity). 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

5702.

* * *

January 1, 1972, payments on account of disability shall be

20150HB0727PN1555 - 228 -

reduced by that amount by which the earned income of the

annuitant, as reported in accordance with section 5908(b)

(relating to rights and duties of annuitants), for the preceding

calendar year together with the disability annuity payments

provided in this section other than subsection (b), for the

year, exceeds the product of:

[(i)] (1) the last year's salary of the annuitant as

a [State employee] member of the system; and

[(ii)] (2) the ratio of the current monthly payment

to the monthly payment at the effective date of

disability;

Provided, That the annuitant shall not receive less than his

member's annuity or the amount to which he may be entitled under

section 5702 whichever is greater.

* * *

(H) COORDINATION OF BENEFITS.--THE DETERMINATION AND PAYMENT

OF THE DISABILITY ANNUITY UNDER THIS SECTION SHALL BE IN

ADDITION TO ANY PAYMENTS A COMBINED SERVICE EMPLOYEE MAY BE

ENTITLED TO RECEIVE, HAS RECEIVED OR IS RECEIVING AS A RESULT OF

BEING A PARTICIPANT IN THE PLAN.

SECTION 316.2. SECTIONS 5706(A), (A.1), (A.2), (B) AND (C)

(1) AND (3), 5707(A), (B) AND (F), 5708.1(F), 5708.2(F),

5708.3(F), 5708.5(F), 5708.6(F), 5708.7(F), 5708.8(G), 5709

HEADING, (A) AND (B) AND 5901(A), (C) AND (D) OF TITLE 71 ARE

AMENDED TO READ:

§ 5706. Termination of annuities.

(a) General rule.--If the annuitant returns to State service

or enters or has entered school service and elects multiple

service membership, any annuity payable to him under this part

shall cease effective upon the date of his return to State

20150HB0727PN1555 - 229 -

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service or entering school service without regard to whether he

is a mandatory, optional or prohibited member of the system or

participant in the plan, or if a multiple service member,

whether he is a mandatory, optional or prohibited member or

participant of the Public School Employees' Retirement System or

School Employees' Defined Contribution Plan and in the case of

an annuity other than a disability annuity the present value of

such annuity, adjusted for full coverage in the case of a joint

coverage member who makes the appropriate back contributions for

full coverage, shall be frozen as of the date such annuity

ceases. An annuitant who is credited with an additional 10% of

Class A and Class C service as provided in section 5302(c)

(relating to credited State service) and who returns to State

service shall forfeit such credited service and shall have his

frozen present value adjusted as if his 10% retirement incentive

had not been applied to his account. In the event that the cost-

of-living increase enacted December 18, 1979 occurred during the

period of such State or school employment, the frozen present

value shall be increased, on or after the member attains

superannuation age, by the percent applicable had he not

returned to service. This subsection shall not apply in the case

of any annuitant who may render services to the Commonwealth in

the capacity of an independent contractor or as a member of an

independent board or commission or as a member of a departmental

administrative or advisory board or commission when such members

of independent or departmental boards or commissions are

compensated on a per diem basis for not more than 150 days per

calendar year or as a member of an independent board or

commission requiring appointment by the Governor, with advice

and consent of the Senate, where the annual salary payable to

20150HB0727PN1555 - 230 -

the member does not exceed $35,000 and where the member has been

an annuitant for at least six months immediately preceding the

appointment. Such service shall not be subject to member

contributions or be eligible for qualification as creditable

State service or for participation in the plan, mandatory pickup

participant contributions or employer defined contributions.

(a.1) Return to State service during emergency.--When, in

the judgment of the employer, an emergency creates an increase

in the work load such that there is serious impairment of

service to the public, an annuitant may be returned to State

service for a period not to exceed 95 days in any calendar year

without loss of his annuity. In computing the number of days an

annuitant has returned to State service, any amount of time less

than one-half of a day shall be counted as one-half of a day.

For agencies, boards and commissions under the Governor's

jurisdiction, the approval of the Governor that an emergency

exists shall be required before an annuitant may be returned to

State service. Such service shall not be subject to member

contributions or be eligible for qualification as creditable

State service or for participation in the plan, mandatory pickup

participant contributions or employer defined contributions.

(a.2) Return of benefits.--In the event an annuitant whose

annuity ceases pursuant to this section receives any annuity

payment, including a lump sum payment pursuant to section 5705

(relating to member's options) on or after the date of his

return to State service or entering school service, the

annuitant shall return to the board the amount so received plus

statutory interest. The amount payable shall be certified in

each case by the board in accordance with methods approved by

the actuary and shall be paid in a lump sum within 30 days or in

20150HB0727PN1555 - 231 -

the case of an active member or school employee who is an active

member of the Public School Employees' Retirement System may be

amortized with statutory interest through salary deductions to

the system in amounts agreed upon by the member and the board.

The salary deduction amortization plans agreed to by the member

and the board may include a deferral of payment amounts and

statutory interest until the termination of school service or

State service or beginning service as a participant as the board

in its sole discretion decides to allow. The board may limit

salary deduction amortization plans to such terms as the board

in its sole discretion determines. In the case of a school

employee who is an active member of the Public School Employees'

Retirement System, the agreed upon salary deductions shall be

remitted to the Public School Employees' Retirement Board, which

shall certify and transfer to the board the amounts paid.

* * *

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

discontinuance of service, such [member] terminating State

employee other than a former annuitant who had the effect of his

frozen present value eliminated in accordance with subsection

annuity which is actuarially equivalent to [the sum of] the

present value as determined under subsection (a) [and] to which

shall be added, if the service after reemployment was as a

member of the system, 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 as a member of the system or as a member of

the Public School Employees' Retirement System during his entire

period of State and school service.

20150HB0727PN1555 - 232 -

(1) An annuitant who returns to State service as an

active member of the system and earns three eligibility

points by performing credited State service following the

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

or an annuitant who enters school service other than as a

participant in the School Employees' Defined Contribution

Plan and:

(i) is a multiple service member; or

(ii) who elects multiple service membership, and

earns three eligibility points by performing credited State

service or credited school service following the most recent

period of receipt of an annuity under this part, and who had

the present value of his annuity frozen in accordance with

subsection (a), shall qualify to have the effect of the

frozen present value resulting from all previous periods of

retirement eliminated, provided that all payments under

Option 4 and annuity payments payable during previous periods

of retirement plus interest as set forth in paragraph (3)

shall be returned to the fund in the form of an actuarial

adjustment to his subsequent benefits or in such form as the

board may otherwise direct.

* * *

(3) In addition to any other adjustment to the present

value of the maximum single life annuity that a member may be

entitled to receive that occurs as a result of any other

provision of law, the present value of the maximum single

life annuity shall be reduced by all amounts paid or payable

to him during all previous periods of retirement plus

interest on these amounts until the date of subsequent

20150HB0727PN1555 - 233 -

retirement. The interest for each year shall be calculated

based upon the annual interest rate adopted for that fiscal

year by the board for the calculation of the normal

contribution rate pursuant to section 5508(b) (relating to

actuarial cost method[).] for fiscal years ending before July

1, 2016) or for the calculation of the accrued liability

contribution rate under section 5508.1(c) (relating to

actuarial cost method for fiscal years beginning July 1,

2016, or later) for fiscal years starting on or after July 1,

2016.

§ 5707. Death benefits.

(A) MEMBERS ELIGIBLE FOR ANNUITIES.--ANY ACTIVE MEMBER,

INACTIVE MEMBER ON LEAVE WITHOUT PAY, COMBINED SERVICE EMPLOYEE

WHO IS AN ACTIVE PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE

WITHOUT PAY, VESTEE OR CURRENT OR FORMER STATE EMPLOYEE

PERFORMING USERRA LEAVE WHO DIES AND WAS ELIGIBLE FOR AN ANNUITY

IN ACCORDANCE WITH SECTION 5308(A) OR (B) (RELATING TO

ELIGIBILITY FOR ANNUITIES) OR SPECIAL VESTEE WHO HAS ATTAINED

SUPERANNUATION AGE AND DIES BEFORE APPLYING FOR A SUPERANNUATION

ANNUITY 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 OR SUCH ELECTION HAS NOT BEEN APPROVED

PRIOR TO HIS DEATH, IT SHALL BE ASSUMED THAT HE ELECTED OPTION

(B) MEMBERS INELIGIBLE FOR ANNUITIES.--IN THE EVENT OF THE

DEATH OF A SPECIAL VESTEE, AN ACTIVE MEMBER, AN INACTIVE MEMBER

ON LEAVE WITHOUT PAY, A COMBINED SERVICE EMPLOYEE WHO IS AN

ACTIVE PARTICIPANT OR INACTIVE PARTICIPANT ON LEAVE WITHOUT PAY,

OR A CURRENT OR FORMER STATE EMPLOYEE PERFORMING USERRA LEAVE

WHO IS NOT ENTITLED TO A DEATH BENEFIT AS PROVIDED IN SUBSECTION

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(A), HIS DESIGNATED BENEFICIARY SHALL BE PAID THE FULL AMOUNT OF

HIS TOTAL ACCUMULATED DEDUCTIONS.

* * *

(f) Members subject to limitations under section 5702(c).--

Subject to the limitations contained in section 401(a)(9) of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

401(a)(9)), the present value of any annuity in excess of that

payable under section 5702 (relating to maximum single life

annuity) that is not subject to the limitations under section

415(b) of the Internal Revenue Code of 1986 shall be paid in a

lump sum to the beneficiary designated by the member after the

death of the member. A beneficiary receiving a benefit under

this subsection shall not be able to elect a payment method

otherwise allowed under section 5709(b)(2) and (3) (relating to

payment of benefits from the system).

§ 5708.1. Additional supplemental annuities.

* * *

(f) Funding.--The actuary shall annually certify the amount

of appropriations for the next fiscal year needed to fund, over

a period of ten years from July 1, 2002, the additional monthly

supplemental annuity provided for in this section, which amounts

shall be paid during the period beginning July 1, 2002, and

ending June 30, 2010. For fiscal years beginning on or after

July 1, 2010, the additional liability provided in this section

shall be funded as part of the actuarial accrued liability as

provided in [section 5508 (relating to actuarial cost method).]

sections 5508 (relating to actuarial cost method for fiscal

years ending before July 1, 2016) and 5508.1 (relating to

actuarial cost method for fiscal years beginning July 1, 2016,

or later).

20150HB0727PN1555 - 235 -

* * *

§ 5708.2. Further additional supplemental annuities.

* * *

(f) Funding.--The actuary shall annually estimate the amount

of Commonwealth appropriations for the next fiscal year needed

to fund, over a period of ten years from July 1, 2002, the

additional monthly supplemental annuity provided for in this

section, which amounts shall be paid during the period beginning

July 1, 2002, and ending June 30, 2010. For fiscal years

beginning on or after July 1, 2010, the additional liability

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2016, or later).

* * *

§ 5708.3. Supplemental annuities commencing 1994.

* * *

(f) Funding.--For the period beginning July 1, 2002, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2002. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

20150HB0727PN1555 - 236 -

years beginning July 1, 2016, or later).

* * *

§ 5708.5. Supplemental annuities commencing 1998.

* * *

(f) Funding.--For the period beginning July 1, 2002, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2002. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2016, or later) .

* * *

§ 5708.6. Supplemental annuities commencing 2002.

* * *

(f) Funding.--For the period beginning July 1, 2003, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2003. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

20150HB0727PN1555 - 237 -

years beginning July 1, 2016, or later) .

* * *

§ 5708.7. Supplemental annuities commencing 2003.

* * *

(f) Funding.--For the period beginning July 1, 2004, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2004. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2016, or later) .

* * *

§ 5708.8. Special supplemental postretirement adjustment of

2002.

* * *

(g) Funding.--For the period beginning July 1, 2003, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2003. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

20150HB0727PN1555 - 238 -

2016) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2016, or later) .

* * *

§ 5709. Payment of benefits from the system.

(a) Annuities.--Any annuity granted under the provisions of

this part and paid from the fund shall be paid in equal monthly

installments.

(b) Death benefits.--If the amount of a death benefit

payable from the fund to a beneficiary of a member under section

5707 (relating to death benefits) or under the provisions of

Option 1 of section 5705(a)(1) (relating to member's options) is

$10,000 or more, such beneficiary may elect to receive payment

according to one of the following options:

(1) a lump sum payment;

(2) an annuity actuarially equivalent to the amount

payable; or

(3) a lump sum payment and an annuity such that the

annuity is actuarially equivalent to the amount payable less

the lump sum payment specified by the beneficiary.

* * *

§ 5901. The State Employees' Retirement Board.

(a) Status and membership.--The board shall be an

independent administrative board and consist of 11 members: the

State Treasurer, ex officio, two Senators, two members of the

House of Representatives and six members appointed by the

Governor, one of whom shall be an annuitant of the system or a

participant of the plan who has terminated State service and is

receiving or is eligible to receive distributions, for terms of

four years, subject to confirmation by the Senate. At least five

board members shall be active members of the system or active

20150HB0727PN1555 - 239 -

participants of the plan, and at least two shall have ten or

more years of credited State service or shall have been active

participants of the plan for ten calendar years. The chairman of

the board shall be designated by the Governor from among the

members of the board. Each member of the board who is a member

of the General Assembly may appoint a duly authorized designee

to act in his stead. In the event that a board member, who is

designated as an active participant or as the participant in the

plan who is receiving or is eligible to receive distributions,

receives a total distribution of the member's interest in the

plan, that board member may continue to serve on the board for

the remainder of the member's term.

* * *

oath of office that he will, so far as it devolves upon him,

diligently and honestly, administer the affairs of said board,

the system and the plan and that he will not knowingly violate

or willfully permit to be violated any of the provisions of law

applicable to this part. Such oath shall be subscribed by the

member taking it and certified by the officer before whom it is

taken and shall be immediately filed in the Office of the

Secretary of the Commonwealth.

(d) Compensation and expenses.--The members of the board who

are members of the system or participants in the plan shall

serve without compensation but shall not suffer loss of salary

or wages through serving on the board. The members of the board

who are not members of the system or participants in the plan

shall receive $100 per day when attending meetings and all board

members shall be reimbursed for any necessary expenses. However,

when the duties of the board as mandated are not executed, no

20150HB0727PN1555 - 240 -

compensation or reimbursement for expenses of board members

shall be paid or payable during the period in which such duties

are not executed.

* * *

Section 317. Sections 5902(a.1) introductory paragraph, (3),

(5) and (6), (b), (c), (e), (h), (i), (j), (k), (m) and (n) and

5903 heading and (a) of Title 71 are amended and the sections

are amended by adding subsections to read:

§ 5902. Administrative duties of the board.

* * *

(a.1) Secretary.--The secretary shall act as chief

administrative officer for the board with respect to both the

system and the plan. In addition to other powers and duties

conferred upon and delegated to the secretary by the board, the

secretary shall:

* * *

(3) Review and analyze proposed legislation and

legislative developments affecting the system or the plan and

present findings to the board, legislative committees, and

other interested groups or individuals.

* * *

(5) Receive inquiries and requests for information

concerning the system or the plan from the press,

Commonwealth officials, State employees, the general public,

research organizations, and officials and organizations from

other states, and provide information as authorized by the

board.

(6) Supervise a staff of administrative, technical, and

clerical employees engaged in record-keeping and clerical

processing activities for both the system and the plan in

20150HB0727PN1555 - 241 -

maintaining files of members and participants, accounting for

contributions, processing payments to annuitants and

terminated participants, preparing required reports, and

retirement counseling. The board may utilize the staff of

employees provided for under this subsection for both the

system and the plan but shall allocate the fees, costs and

expenses incurred under this subsection between the system

and the plan as appropriate.

(b) Professional personnel.--The board shall contract for

the services of a chief medical examiner, an actuary, investment

advisors and counselors, and such other professional personnel

as it deems advisable. The board may, with the approval of the

Attorney General, contract for legal services. The board may

utilize the same individuals and firms contracted under this

subsection for both the system and the plan but shall allocate

the fees, costs and expenses incurred under this subsection

between the system and the plan as appropriate.

to the General Assembly annually a budget covering the

administrative expenses of [this part] the system and a separate

budget covering the administrative expenses of the plan. Such

expenses of the system as approved by the General Assembly in an

appropriation bill shall be paid from investment earnings of the

fund. Such expenses of the plan as approved by the General

Assembly shall be paid from interest, pursuant to section

5414(b) (relating to investments based on members' investment

allocation choices), or assessments on the balances of the

participants' individual investment accounts except as may be

provided otherwise by law. Concurrently with its administrative

budget, the board shall also submit to the General Assembly

20150HB0727PN1555 - 242 -

annually a list of proposed expenditures which the board intends

to pay through the use of directed commissions, together with a

list of the actual expenditures from the past year actually paid

by the board through the use of directed commissions. All such

directed commission expenditures shall be made by the board for

the exclusive benefit of the system and its members.

* * *

(e) Records.--

(1) The board shall keep a record of all its proceedings

which shall be open to [inspection] access by the public,

except as otherwise provided in this part or by other law.

(2) Any record, material or data received, prepared,

used or retained by the board or its employees, investment

professionals or agents relating to an investment shall not

constitute a public record subject to public [inspection]

access under the act of [June 21, 1957 (P.L.390, No.212),

referred to as the Right-to-Know Law,] February 14, 2008

(P.L.6, No.3), known as the Right-to-Know Law, if, in the

reasonable judgment of the board, the [inspection] access

would:

(i) in the case of an alternative investment or

alternative investment vehicle, involve the release of

sensitive investment or financial information relating to

the alternative investment or alternative investment

vehicle which the fund or trust was able to obtain only

upon agreeing to maintain its confidentiality;

(ii) cause substantial competitive harm to the

person from whom sensitive investment or financial

information relating to the investment was received; or

(iii) have a substantial detrimental impact on the

20150HB0727PN1555 - 243 -

value of an investment to be acquired, held or disposed

of by the fund or trust or would cause a breach of the

standard of care or fiduciary duty set forth in this

part.

(3) (i) The sensitive investment or financial

information excluded from [inspection] access under

paragraph (2)(i), to the extent not otherwise excluded

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once the board is no longer required by

its agreement to maintain confidentiality.

(ii) The sensitive investment or financial

information excluded from [inspection] access under

paragraph (2)(ii), to the extent not otherwise excluded

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once:

(A) the [inspection] access no longer causes

substantial competitive harm to the person from whom

the information was received; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

(iii) The sensitive investment or financial

information excluded from [inspection] access under

paragraph (2)(iii), to the extent not otherwise excluded

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once:

(A) the [inspection] access no longer has a

20150HB0727PN1555 - 244 -

substantial detrimental impact on the value of an

investment of the fund or trust and would not cause a

breach of the standard of care or fiduciary duty set

forth in this part; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

(4) Except for the provisions of paragraph (3), nothing

in this subsection shall be construed to designate any

record, material or data received, prepared, used or retained

by the board or its employees, investment professionals or

agents relating to an investment as a public record subject

to public [inspection] access under the Right-to-Know Law.

(5) Any record, material or data received, prepared,

used or retained by the board or its employees, or agents

relating to the contributions, account value or benefits

payable to or on account of a participant shall not

constitute a public record subject to public access under the

Right-to-Know Law, if, in the reasonable judgment of the

board, the access would disclose any of the following:

(i) The existence, date, amount and any other

information pertaining to the rollover contributions or

trustee-to-trustee transfers, of any participant.

(ii) The investment options selections of any

participant.

(iii) The balance of a participant's account,

including the amount distributed to the participant

investment gains or losses or rates of return.

(iv) The identity of a participant's designated

beneficiary, successor payee or alternate payee.

20150HB0727PN1555 - 245 -

(v) The benefit payment option of a participant.

(6) Nothing in this subsection shall be construed to

designate any record, material or data received, prepared,

used or retained by the board or its employees, or agents

relating to the contributions, account value or benefits

payable to or on account of a participant as a public record

subject to public access under the Right-to-Know Law.

* * *

(h) Regulations and procedures.--The board shall, with the

advice of the Attorney General and the actuary, adopt and

promulgate rules and regulations for the uniform administration

of the system. The actuary shall approve in writing all

computational procedures used in the calculation of

contributions and benefits pertaining to the system, and the

board shall by resolution adopt such computational procedures,

prior to their application by the board. Such rules, regulations

and computational procedures as so adopted from time to time and

as in force and effect at any time, together with such tables as

are adopted pursuant to subsection (j) as necessary for the

calculation of annuities and other benefits, shall be as

effective as if fully set forth in this part. Any actuarial

assumption specified in or underlying any such rule, regulation

or computational procedure and utilized as a basis for

determining any benefit shall be applied in a uniform manner.

(i) Data.--The board shall keep in convenient form such data

as are stipulated by the actuary in order that an annual

actuarial valuation of the various accounts of the fund can be

completed within six months of the close of each calendar year.

(j) Actuarial investigation and valuation.--The board shall

have the actuary make an annual valuation of the various

20150HB0727PN1555 - 246 -

accounts of the fund within six months of the close of each

calendar year. In the year 1975 and in every fifth year

thereafter the board shall have the actuary conduct an actuarial

investigation and evaluation of the system based on data

including the mortality, service, and compensation experience

provided by the board annually during the preceding five years

concerning the members and beneficiaries of the system. The

board shall by resolution adopt such tables as are necessary for

the actuarial valuation of the fund and calculation of

contributions, annuities and other benefits based on the reports

and recommendations of the actuary. Within 30 days of their

adoption, the secretary of the board shall cause those tables

which relate to the calculation of annuities and other benefits

to be published in the Pennsylvania Bulletin in accordance with

the provisions of 45 Pa.C.S. § 725(a) (relating to additional

contents of Pennsylvania Bulletin) and, unless the board

specifies therein a later effective date, such tables shall

become effective on such publication. The board shall include a

report on the significant facts, recommendations and data

developed in each five-year actuarial investigation and

evaluation of the system in the annual financial statement

published pursuant to the requirements of subsection (m) for the

fiscal year in which such investigation and evaluation were

concluded.

(k) Certification of employer contributions to the fund.--

The board shall, each year in addition to the itemized budget

required under section 5509 (relating to appropriations and

assessments by the Commonwealth), certify, as a percentage of

the members' payroll, the shared-risk contribution rate, the

employers' contributions as determined pursuant to [section 5508

20150HB0727PN1555 - 247 -

(relating to actuarial cost method)] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2016) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2016, or later) necessary for the

funding of prospective annuities for active members and the

annuities of annuitants and certify the rates and amounts of the

employers' normal contributions as determined pursuant to

[section] sections 5508(b) and 5508.1(b), accrued liability

contributions as determined pursuant to [section] sections

5508(c) and 5508.1(c) and (d), supplemental annuities

contribution rate as determined pursuant to section 5508(e), the

experience adjustment factor as determined pursuant to [section]

sections 5508(f) and 5508.1(f), the collared contribution rate

pursuant to section 5508(h) and the final contribution rate

pursuant to section 5508(i), which shall be paid to the fund and

credited to the appropriate accounts. The board may allocate the

final contribution rate and certify various employer

contribution rates and amounts based upon the different benefit

eligibility, class of service multiplier, superannuation age and

other benefit differences resulting from State service credited

for individual members even though such allocated employer

contribution rate on behalf of any given member may be more or

less than 5% of the member's compensation for the period from

July 1, 2010, to June 30, 2011, or may differ from the prior

year's contribution for that member by more or less than the

percentages used to calculate the collared contribution rate for

that year and may be below any minimum contribution rate

established for the collared contribution rate or final

contribution rate. These certifications shall be regarded as

final and not subject to modification by the Secretary of the

20150HB0727PN1555 - 248 -

Budget.

* * *

(m) Annual financial statement.--The board shall prepare and

have published, on or before July 1 of each year, [a financial

statement] financial statements as of the calendar year ending

December 31 of the previous year showing the condition of the

fund and the trust and the various accounts, including, but not

limited to, the board's accrual and expenditure of directed

commissions, and setting forth such other facts,

recommendations, and data as may be of use in the advancement of

knowledge concerning annuities and other benefits provided by

this part. The board shall submit said financial [statement]

statements to the Governor and shall file copies with the head

of each department for the use of the State employees and the

public.

(n) Independent [audit] audits.--The board shall provide for

[an annual audit] annual audits of the system and the plan by

[an] independent certified public [accountant] accountants,

which [audit] audits shall include the board's accrual and

expenditure of directed commissions. The board may use the same

independent certified public accountant for the audits of both

the system and the plan.

* * *

(p) Participant and employer contributions to the trust.--

The board shall, each year in addition to any fees and itemized

budget required under section 5509 (relating to appropriations

and assessments by the Commonwealth), certify, as a percentage

of each participant's compensation, the employer defined

contributions, which shall be paid to the trust and credited to

each participant's individual investment account. These

20150HB0727PN1555 - 249 -

certifications shall be regarded as final and not subject to

modification by the Secretary of the Budget. The board shall

cause all mandatory pickup participant contributions made on

behalf of a participant and all voluntary contributions made by

a participant to be credited to the participant's individual

investment account.

§ 5903. Duties of the board to advise and report to heads of

departments [and], members and participants.

(a) Manual of regulations.--The board shall, with the advice

of the Attorney General and the actuary, prepare and provide,

within 90 days of the effective date of this part, a manual

incorporating rules and regulations consistent with the

provisions of this part to the heads of departments who shall

make the information contained therein available to the general

membership. The board shall thereafter advise the heads of

departments within 90 days of any changes in such rules and

regulations due to changes in the law or due to changes in

administrative policies. As soon as practicable after the

commissioner's announcement with respect thereto, the board

shall also advise the heads of departments as to any cost-of-

living adjustment for the succeeding calendar year in the amount

of the limitation under IRC § 401(a)(17) and the dollar amounts

of the limitations under IRC § 415[(b)]. As soon as practicable

after January 1 of each year, the board shall also advise the

heads of departments of the employees for whom, pursuant to

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions), pickup contributions are not to be made.

* * *

(b.1) Participant status statements.--The board shall have

20150HB0727PN1555 - 250 -

furnished annually to each participant, on or before April 1 and

more frequently as the board may agree or as required by law, a

statement for each participant in the plan showing the

accumulated total defined contributions credited to the

participant's individual investment account, the nature and type

of investments and the investment allocation of future

contributions as of December 31 of the previous year and

requesting the participant to make any necessary correction or

revision regarding his designated beneficiary.

* * *

Section 318. Section 5904(c)(2) of Title 71 is amended to

read:

§ 5904. Duties of the board to report to the Public School

Employees' Retirement Board.

* * *

receipt of notification and the required data from the Public

School Employees' Retirement Board that a former State employee

who elected multiple service has applied for a public school

employees' retirement benefit or, in the event of his death, his

legally constituted representative has applied for such benefit,

the board shall:

* * *

(2) transfer to the Public School Employees' Retirement

Fund the total accumulated deductions standing to such

member's credit and the actuarial reserve required on account

of years of credited service in the State system, final

average salary determined on the basis of his compensation as

a member in both systems and the average noncovered salary to

be charged to the State accumulation account, the State

20150HB0727PN1555 - 251 -

Police benefit account or the enforcement officers' benefit

account, as each case may require.

* * *

Section 319. Sections 5905 heading, (b)(3), (c.1) and (g),

5906(a) introductory paragraph and (3), (b), (d), (e), (g), (h),

(i) and (l) and 5907 heading, (a), (e), (f) and (h) of Title 71

are amended and the sections are amended by adding subsections

to read:

§ 5905. Duties of the board regarding applications and

elections of members and participants.

* * *

(b) School employees electing multiple service status.--Upon

receipt of notification from the Public School Employees'

Retirement Board that a former State employee has become an

active member in the Public School Employees' Retirement System

and has elected to become a member with multiple service status

the board shall:

* * *

(3) in case of a former State employee who is not

receiving an annuity from the system and his total

accumulated deductions were withdrawn, certify to the former

State employee the 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 service eligible for membership

in the system and school service as a member of the Public

School Employees' Retirement System to the date of repayment.

Such amount shall be restored by him and shall be credited

with statutory interest as such payments are restored.

* * *

20150HB0727PN1555 - 252 -

(c.1) Termination of service by a member.--In the case of

any member terminating State service who is entitled to an

annuity and who is not then a disability annuitant, the board

shall advise such member in writing of any benefits from the

system to which he may be entitled under the provisions of this

part and shall have the member prepare, on or before the date of

termination of State service, one of the following three forms,

a copy of which shall be given to the member and the original of

which shall be filed with the board:

(1) an application for the return of total accumulated

deductions;

(2) an election to vest his retirement rights and, if he

is a joint coverage member and so desires, elect to become a

full coverage member and agree to pay within 30 days of the

date of termination of service the lump sum required; or

(3) an application for an immediate annuity and, if he

desires:

(i) an election to convert his medical, major

medical and hospitalization insurance coverage to the

plan for State annuitants; and

(ii) if he is a joint coverage member, an election

to become a full coverage member and an agreement to pay

within 30 days of date of termination of service the lump

sum required.

(c.2) Termination of service by a participant.--In the case

of any participant terminating State service, the board shall

advise the participant in writing of the VESTED accumulated

total defined contributions credited to the participant's

individual investment account as of the date stated in the

writing, any notices regarding rollover or other matters

20150HB0727PN1555 - 253 -

<--

required by THE IRC or other law, the obligation of the

participant to commence distributions from the plan by the

participant's required beginning date and the ability to receive

all or part of the VESTED balance in the participant's

individual investment account in a lump sum or in such other

form as the board may authorize or is required by law.

* * *

(e.2) Notification to inactive participants approaching

required beginning date.--The board shall notify each inactive

participant who has terminated State service and had not

commenced distribution by 90 days before the participant's

required beginning date in writing that the participant has an

obligation to commence distributions by his required beginning

date in a form and manner required by IRC § 401(a)(9) and other

applicable provisions of the IRC.

* * *

(f.1) Initial payment to a participant.--The board shall

make the initial payment to a participant who has applied for a

distribution within 60 days of the filing of his application.

(g) Death benefits.--Upon receipt of notification from the

head of a department of the death of an active member, a member

performing USERRA leave [or], a member on leave without pay, an

active participant, an inactive participant on leave without pay

or a former participant performing USERRA leave, the board shall

advise the designated beneficiary of the benefits to which he is

entitled, and shall make the first payment to the beneficiary

within 60 days of receipt of certification of death and other

necessary data. If no beneficiary designation is in effect at

the date of the member's death or no notice has been filed with

the board to pay the amount of the benefits to the member's

20150HB0727PN1555 - 254 -

<--

estate, the board is authorized to pay the benefits to the

executor, administrator, surviving spouse or next of kin of the

deceased member, and payment pursuant hereto shall fully

discharge the fund from any further liability to make payment of

such benefits to any other person. If the surviving spouse or

next of kin of the deceased member cannot be found for the

purpose of paying the benefits for a period of seven years from

the date of death of the member, then the benefits shall be

escheated to the Commonwealth for the benefit of the fund. If no

beneficiary designation is in effect at the date of a

participant's death or no notice has been filed with the board

to pay the amount of the benefits to the participant's estate,

the board is authorized to pay the benefits to the surviving

spouse, executor, administrator or next of kin of the deceased

participant and payment pursuant hereto shall fully discharge

the fund from any further liability to make payment of such

benefits to any other person.

* * *

§ 5906. Duties of heads of departments.

(a) Status of members and participants.--The head of

department shall, at the end of each pay period, notify the

board in a manner prescribed by the board of salary changes

effective during that period for any members and participants of

the department, the date of all removals from the payroll, and

the type of leave of any members and participants of the

department who have been removed from the payroll for any time

during that period, and:

* * *

(3) if the removal is due to termination of State

service, he shall furnish the board with a complete State

20150HB0727PN1555 - 255 -

service record, including service in other departments or

agencies, or creditable nonstate service and;

(i) in the case of death of the member or

participant the head of the department shall so notify

the board;

(ii) in the case of a service connected disability

of a member the head of department shall, to the best of

his ability, investigate the circumstances surrounding

the disablement of the member and submit in writing to

the board information which shall include but not

necessarily be limited to the following: date, place and

time of disablement to the extent ascertainable; nature

of duties being performed at such time; and whether or

not the duties being performed were authorized and

included among the member's regular duties. In addition,

the head of department shall furnish in writing to the

board all such other information as may be related to the

member's disablement;

(iii) in the case of a member terminating from The

Pennsylvania State University who is a member of the

system with five or more but less than ten eligibility

points and who has terminated State service on June 30,

1997, because of the transfer of his job position or

duties to a controlled organization of the Penn State

Geisinger Health System or because of the elimination of

his job position or duties due to the transfer of other

job positions or duties to a controlled organization of

the Penn State Geisinger Health System, the head of the

department shall so certify to the board.

(b) Records and information.--At any time at the request of

20150HB0727PN1555 - 256 -

the board and at termination of service of a member or a

participant, the head of department shall furnish service and

compensation records and such other information as the board may

require and shall maintain and preserve such records as the

board may direct for the expeditious discharge of its duties.

* * *

(c.1) Participant and employer defined contributions.--The

head of the department shall:

(1) Cause the mandatory pickup participant contributions

on behalf of a participant to be made.

(2) Cause the employer defined contributions on behalf

of a participant to be made.

(3) Notify the board at times and in a manner prescribed

by the board of the compensation of any participant to whom

the limitation under IRC § 401(a)(17) either applies or is

expected to apply and cause such participant's contributions

to be deducted from payroll to cease at the limitation under

IRC § 401(a)(17) on the payroll date if and when such limit

shall be reached.

(4) Certify to the State Treasurer the amounts picked up

and deducted and the employer defined contributions being

made and send the total amount picked up, deducted and

contributed together with a duplicate of such voucher to the

secretary of the board every pay period or on such schedule

as established by the board.

(d) New employees subject to mandatory membership or

participation.--Upon the assumption of duties of each new State

employee whose membership in the system or plan is mandatory,

the head of department shall cause an application for membership

or participation and a nomination of beneficiary to be made by

20150HB0727PN1555 - 257 -

such employee and filed with the board and shall make pickup

contributions or mandatory pickup participant contributions from

the effective date of State employment.

(e) New employees subject to optional membership or

participation.--The head of department shall, upon the

employment or entering into office of any State employee whose

membership in the system or participation in the plan is not

mandatory, inform such employee of his opportunity to become a

member of the system or participant in the plan. If such

employee so elects, the head of department shall cause an

application for membership and a nomination of beneficiary to be

made by him and filed with the board and shall cause proper

contributions to be made from the effective date of membership

or participation.

* * *

(g) Former school employee contributors.--The head of

department shall, upon the employment of a former contributor to

the Public School Employees' Retirement System who is not an

annuitant of the Public School Employees' Retirement System,

advise such employee of his right to elect within 365 days of

entry into the system to become a multiple service member, and

in the case of any such employee who so elects and has withdrawn

his accumulated deductions, require him to reinstate his credit

in the Public School Employees' Retirement System. The head of

the department shall advise the board of such election. This

subsection shall not apply to a State employee who is employed

in a position where he is or may be a participant in the plan.

(h) Former school employee annuitants.--The head of

department shall, upon the employment of an annuitant of the

Public School Employees' Retirement System who applies for

20150HB0727PN1555 - 258 -

membership in the system, advise such employee that he may elect

multiple service membership within 365 days of entry into the

system and if he so elects his public school employee's annuity

will be discontinued effective upon the date of his return to

State service and, upon termination of State service and

application for an annuity, the annuity will be adjusted in

accordance with section 5706 (relating to termination of

annuities). The head of department shall advise the board of

such election. This subsection shall not apply to a State

employee who is employed in a position where he is or may be a

participant in the plan.

(i) Annual statement to members.--Annually, upon receipt

from the board, the head of department shall furnish to each

member the statement specified in section 5903(b) (relating to

duties of the board to advise and report to heads of departments

[and], members and participants).

* * *

(l) State employees performing USERRA or military-related

leave of absence.--The head of department shall report to the

board any State employee who ceases to be an active member or

active participant to perform USERRA service, or who is granted

a leave of absence under 51 Pa.C.S. § 4102 (relating to leaves

of absence for certain government employees) or a military leave

of absence under 51 Pa.C.S. § 7302 (relating to granting

military leaves of absence), the date on which the USERRA

service, leave of absence or military leave of absence began,

the date on which the State employee is reemployed from USERRA

leave or returns after the leave of absence or military leave of

absence, if the event occurs, and any other information the

board may require or direct.

20150HB0727PN1555 - 259 -

* * *

(n) Obligation of educational institutions to report

participation and compensation of employees in independent

retirement programs.--The Pennsylvania State University, the

State System of Higher Education, State-owned educational

institutions and community colleges shall report to the board

the compensation and other information as the board may request

for the application and administration of sections 5507.1

(relating to contributions to system by the Commonwealth and

other employers starting July 1, 2016) and 5508.1(c) and (d)

(relating to actuarial cost method for fiscal years beginning

July 1, 2016, or later) of employees who are participants or

members in the Public School Employees' Retirement System,

School Employees' Defined Contribution Plan or independent

retirement programs approved by the employer.

§ 5907. Rights and duties of State employees [and], members and

participants.

(a) Information on new employees.--Upon his assumption of

duties each new State employee shall furnish the head of

department with a complete record of his previous State service,

his school service or creditable nonstate service, and proof of

his date of birth and current status in the system and the plan

and in the Public School Employees' Retirement System and the

School Employees' Defined Contribution Plan. Willful failure to

provide the information required by this subsection to the

extent available upon entrance into the system shall result in

the forfeiture of the right of the member to subsequently assert

any right to benefits based on any of the required information

which he failed to provide. In any case in which the board finds

that a member is receiving an annuity based on false

20150HB0727PN1555 - 260 -

information, the total amount received predicated on such false

information together with statutory interest doubled and

compounded shall be deducted from the present value of any

remaining benefits to which the member is legally entitled.

* * *

(b.1) Application for participation.--On or after January 1,

2016, in the case of a new employee who is not currently a

participant in the plan and whose participation is mandatory or

in the case of a new employee whose participation is not

mandatory but is permitted and who desires to become a

participant in the plan, the new employee shall execute an

application for participation and a nomination of a beneficiary.

* * *

(d.2) Contributions for USERRA leave.--Any active

participant or inactive participant on leave without pay or

former participant who was reemployed from USERRA leave who

desires to make mandatory pickup participant contributions for

his USERRA leave shall so notify the board within the time

period required under 38 U.S.C. Ch. 43 (relating to employment

and reemployment rights of members of the uniformed services)

and IRC § 414(u) of his desire to make such contributions. Upon

making the permitted mandatory pickup participant contributions

within the allowed time period, the head of the department shall

make the corresponding employer defined contributions at the

same time.

(d.3) Voluntary contributions by participant.--Any active

participant who desires to make voluntary contributions to be

credited to his individual investment account shall notify the

board and, upon compliance with the requirements, procedures and

limitations established by the board in the plan document, may

20150HB0727PN1555 - 261 -

do so subject to the limitation under IRC §§ 401(a) and 415 and

other applicable law.

(e) Beneficiary for death benefits from the system.--Every

member shall nominate a beneficiary by written designation filed

with the board as provided in section 5906(d) or (e) (relating

to duties of heads of departments) to receive the death benefit

payable under section 5707 (relating to death benefits) or the

benefit payable under the provisions of Option 1 of section

5705(a)(1) (relating to member's options). Such nomination may

be changed at any time by the member by written designation

filed with the board. A member may also nominate a contingent

beneficiary or beneficiaries to receive the death benefit

provided under section 5707 or the benefit payable under the

provisions of Option 1 of section 5705(a)(1).

(e.1) Beneficiary for death benefits from the plan.--Every

participant shall nominate a beneficiary by written designation

filed with the board as provided in section 5906(d) or (e) to

receive the death benefit payable under section 5408 (relating

to death benefits). A participant may also nominate a contingent

beneficiary or beneficiaries to receive the death benefit

provided under section 5408. Such nomination may be changed at

any time by the participant by written designation filed with

the board.

(E.2) BENEFICIARY FOR COMBINED SERVICE EMPLOYEE.--A COMBINED

SERVICE EMPLOYEE MAY DESIGNATE OR NOMINATE DIFFERENT PERSONS TO

BE BENEFICIARIES, SURVIVOR ANNUITANTS AND SUCCESSOR PAYEES FOR

THE EMPLOYEE'S BENEFITS FROM THE SYSTEM AND THE PLAN.

(f) Termination of service by members.--Each member who

terminates State service and who is not then a disability

annuitant shall execute on or before the date of termination of

20150HB0727PN1555 - 262 -

<--

service the appropriate application, duly attested by the member

or his legally constituted representative, electing to:

(1) withdraw his total accumulated deductions; or

(2) vest his retirement rights; and if he is a joint

coverage member, and so desires, elect to become a full

coverage member and agree to pay within 30 days of the date

of termination of service the lump sum required; or

(3) receive an immediate annuity and may,

(i) if eligible, elect to convert his medical, major

medical, and hospitalization coverage to the plan for

State annuitants; and

(ii) if he is a joint coverage member, elect to

become a full coverage member and agree to pay within 30

days of date of termination of service the lump sum

required.

* * *

(g.1) Deferral of retirement rights.--If a participant

terminates State service and does not commence receiving a

distribution, he shall nominate a beneficiary, and he may

anytime thereafter, but no later than his required beginning

date, withdraw the VESTED accumulated total defined

contributions standing to his credit or apply for another form

of distribution required by law or authorized by the board.

(h) Vestees and special vestees attaining superannuation

age.--Upon attainment of superannuation age a vestee or special

vestee shall execute and file an application for an annuity. Any

such application filed within 90 days after attaining

superannuation age shall be effective as of the date of

attainment of superannuation age. Any application filed after

such period shall be effective as of the date it is filed with

20150HB0727PN1555 - 263 -

<--

the board, subject to the provisions of section 5905(f)

(relating to duties of the board regarding applications and

elections of members and participants). If a vestee or special

vestee does not file an application within seven years after

attaining superannuation age, he shall be deemed to have elected

to receive his total accumulated deductions upon attainment of

superannuation age.

* * *

Section 320. Sections 5931(b), 5932, 5934, 5935, 5936, 5937,

5938, 5939, 5951 and 5953 of Title 71 are amended to read:

§ 5931. Management of fund and accounts.

* * *

(b) Crediting of interest.--The board, annually, shall allow

the required interest on the mean amount for the preceding year

to the credit of each of the accounts other than the individual

investment accounts. The amount so allowed shall be credited

thereto by the board and transferred from the interest reserve

account.

* * *

§ 5932. State Employees' Retirement Fund.

The fund shall consist of all balances in the several

separate accounts set apart to be used under the direction of

the board for the benefit of members of the system; and the

Treasury Department shall credit to the fund all moneys received

from the Department of Revenue arising from the contributions

relating to or on behalf of members of the system required under

the provisions of Chapter 55 (relating to contributions), and

any income earned by the investments or moneys of said fund.

There shall be established and maintained by the board the

several ledger accounts specified in sections 5933 (relating to

20150HB0727PN1555 - 264 -

members' savings account), 5934 (relating to State accumulation

account), 5935 (relating to annuity reserve account), 5936

(relating to State Police benefit account), 5937 (relating to

enforcement officers' benefit account), 5938 (relating to

supplemental annuity account) and 5939 (relating to interest

reserve account). The individual investment accounts that are

part of the trust shall not be part of the fund. Mandatory

pickup participant contributions, voluntary contributions and

employer defined contributions made under this part and any

income earned by the investment of such contributions shall not

be paid or credited to the fund but shall be paid to the trust

and credited to the individual investment accounts.

§ 5934. State accumulation account.

The State accumulation account shall be the ledger account to

which shall be credited all contributions of the Commonwealth or

other employers whose employees are members of the system and

made in accordance with the provisions of [section 5507(a) or

(d) (relating to contributions by the Commonwealth and other

employers)] sections 5507(a) or (d) (relating to contributions

to system by the Commonwealth an AND other employers before July

1, 2016) and 5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2016) except

that the amounts received under the provisions of the act of May

12, 1943 (P.L.259, No.120), and the amounts received under the

provisions of the Liquor Code, act of April 12, 1951 (P.L.90,

No.21), shall be credited to the State Police benefit account or

the enforcement officers' benefit account as the case may be.

All amounts transferred to the fund by county retirement systems

or pension plans in accordance with the provisions of section

5507(c) also shall be credited to the State accumulation

20150HB0727PN1555 - 265 -

<--

account. All amounts transferred to the fund by the Public

School Employees' Retirement System in accordance with section

5303.2(e) (relating to election to convert school service to

State service), except amounts credited to the members' savings

account, and all amounts paid by the Department of Corrections

in accordance with section 5303.2(f) also shall be credited to

the State accumulation account. The State accumulation account

shall be credited with valuation interest. The reserves

necessary for the payment of annuities and death benefits

resulting from membership in the system as approved by the board

and as provided in Chapter 57 (relating to benefits) shall be

transferred from the State accumulation account to the annuity

reserve account provided for in section 5935 (relating to

annuity reserve account), except that the reserves necessary on

account of a member who is an officer of the Pennsylvania State

Police or an enforcement officer shall be transferred from the

State accumulation account to the State Police benefit account

provided for in section 5936 (relating to State Police benefit

account) or to the enforcement officers' benefit account as

provided for in section 5937 (relating to enforcement officers'

benefit account) as the case may be. The reserves necessary for

the payment of supplemental annuities in excess of those

reserves credited to the supplemental annuity account on June

30, 2010, shall be transferred from the State accumulation

account to the supplemental annuity account. In the event that

supplemental annuities are increased by legislation enacted

after December 31, 2009, the necessary reserves shall be

transferred from the State accumulation account to the

supplemental annuity account.

§ 5935. Annuity reserve account.

20150HB0727PN1555 - 266 -

(a) Credits and charges to account.--The annuity reserve

account shall be the ledger account to which shall be credited

the reserves held for payment of annuities and death benefits on

account of all annuitants except in the case of members who are

officers of the Pennsylvania State Police or enforcement

officers. The annuity reserve account shall be credited with

valuation interest. After the transfers provided in sections

5933 (relating to members' savings account), 5934 (relating to

State accumulation account) and 5938 (relating to supplemental

annuity account), all annuity and death benefit payments

resulting from membership in the system except those payable to

any member who retires as an officer of the Pennsylvania State

Police or an enforcement officer shall be charged to the annuity

reserve account and paid from the fund.

(b) Transfers from account.--Should an annuitant other than

a member who was retired as an officer of the Pennsylvania State

Police or an enforcement officer be subsequently restored to

active service as a member of the system or as a participant in

the plan, the present value of his member's annuity at the time

of reentry into State service shall be transferred from the

annuity reserve account and placed to his individual credit in

the members' savings account. In addition, the actuarial reserve

for his annuity less the amount transferred to the members'

savings account shall be transferred from the annuity reserve

account to the State accumulation account.

§ 5936. State Police benefit account.

(a) Credits and charges to account.--The State Police

benefit account shall be the ledger account to which shall be

credited all contributions received under the provisions of the

act of May 12, 1943 (P.L.259, No.120), and any additional

20150HB0727PN1555 - 267 -

Commonwealth or other employer contributions provided for in

[section 5507 (relating to contributions by the Commonwealth and

other employers)] sections 5507 (relating to contributions to

system by the Commonwealth and other employers before July 1,

2016) and 5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2016) which

are creditable to the State Police benefit account. The State

Police benefit account shall be credited with the required

interest. In addition, upon the filing of an application for an

annuity by a member who is an officer of the Pennsylvania State

Police, the total accumulated deductions standing to the credit

of the member in the members' savings account and the necessary

reserves from the State accumulation account shall be

transferred to the State Police benefit account. Thereafter, the

total annuity of such annuitant shall be charged to the State

Police benefit account and paid from the fund.

(b) Transfers from account.--Should the said annuitant be

subsequently restored to active service as a member of the

system or as a participant in the plan, the present value of the

member's annuity at the time of reentry into State service shall

be transferred from the State Police benefit account and placed

to his individual credit in the members' savings account. In

addition, the actuarial reserve for his annuity calculated as if

he had been a member of Class A if he has Class A or Class C

service credited; as if he had been a member of Class A-3 if the

annuitant has Class A-3 State service credited; or as if he had

been a member of Class A-4 if the annuitant has Class A-4

service credited, less the amount transferred to the members'

savings account shall be transferred from the State Police

benefit account to the State accumulation account. Upon

20150HB0727PN1555 - 268 -

subsequent retirement other than as an officer of the

Pennsylvania State Police the actuarial reserve remaining in the

State Police benefit account shall be transferred to the

appropriate reserve account.

§ 5937. Enforcement officers' benefit account.

(a) Credits and charges to account.--The enforcement

officers' benefit account shall be the ledger account to which

shall be credited moneys transferred from the enforcement

officers' retirement account in the State Stores Fund according

to the provisions of the act of April 12, 1951 (P.L.90, No.21),

known as the Liquor Code, and any additional Commonwealth or

other employer contributions provided for in [section 5507

(relating to contributions by the Commonwealth and other

employers)] sections 5507 (relating to contributions to system

by the Commonwealth and other employers before July 1, 2016) and

5507.1 (relating to contributions to system by the Commonwealth

and other employers starting July 1, 2016) which are creditable

to the enforcement officers' benefit account. The enforcement

officers' benefit account shall be credited with the required

interest. In addition, upon the filing of an application for an

annuity by a member who is an enforcement officer of the

Pennsylvania Liquor Control Board, the total accumulated

deductions standing to the credit of the member in the members'

savings account and the necessary reserves from the State

accumulation account shall be transferred to the enforcement

officers' benefit account. Thereafter, the total annuity of such

annuitant shall be charged to the enforcement officers' benefit

account and paid from the fund.

(b) Transfers from account.--Should the said annuitant be

subsequently restored to active service as a member of the

20150HB0727PN1555 - 269 -

system or as a participant in the plan, the present value of the

member's annuity at the time of reentry into State service shall

be transferred from the enforcement officers' benefit account

and placed to his individual credit in the members' savings

account. In addition, the actuarial reserve for his annuity

calculated as if he had been a member of Class A if the

annuitant does not have any Class AA, Class A-3 or Class A-4

service credited; as if he had been a member of Class AA if the

annuitant does have Class AA service credited; as if he had been

a member of Class A-3 if the annuitant has Class A-3 State

service credited; or as if he had been a member of Class A-4 if

the annuitant has Class A-4 service credited, less the amount

transferred to the members' savings account shall be transferred

from the enforcement officers' benefit account to the State

accumulation account. Upon subsequent retirement other than as

an enforcement officer the actuarial reserve remaining in the

enforcement officers' benefit account shall be transferred to

the appropriate reserve account.

§ 5938. Supplemental annuity account.

The supplemental annuity account shall be the ledger account

to which shall be credited all contributions from the

Commonwealth and other employers in accordance with section

5507(b) [(relating to contributions by the Commonwealth and

other employers)] (relating to contributions to system by the

Commonwealth and other employers before July 1, 2016) for the

payment of the supplemental annuities provided in sections 5708

(relating to supplemental annuities), 5708.1 (relating to

additional supplemental annuities), 5708.2 (relating to further

additional supplemental annuities), 5708.3 (relating to

supplemental annuities commencing 1994), 5708.4 (relating to

20150HB0727PN1555 - 270 -

special supplemental postretirement adjustment), 5708.5

(relating to supplemental annuities commencing 1998), 5708.6

(relating to supplemental annuities commencing 2002), 5708.7

(relating to supplemental annuities commencing 2003) and 5708.8

(relating to special supplemental postretirement adjustment of

2002) made before July 1, 2010, the amount transferred from the

State accumulation account to provide all additional reserves

necessary as of June 30, 2010, to pay such supplemental

annuities and adjustments, and the amounts transferred from the

State accumulation account to provide all additional reserves

necessary as a result of supplemental annuities enacted after

December 31, 2009. The supplemental annuity account shall be

credited with valuation interest. The reserves necessary for the

payment of such supplemental annuities shall be transferred from

the supplemental annuity account to the annuity reserve account

as provided in section 5935 (relating to annuity reserve

account).

§ 5939. Interest reserve account.

The interest reserve account shall be the ledger account to

which shall be credited all income earned by the fund and to

which shall be charged all administrative and investment

expenses incurred by the fund. At the end of each year the

required interest shall be transferred from the interest reserve

account to the credit of each of the accounts of the fund in

accordance with the provisions of this subchapter. In addition,

at the end of each accounting period, the interest reserve

account shall be credited or charged with all recognized changes

in the market valuation of the investments of the fund. The

administrative and investment expenses of the board relating to

the administration of the system and investments of the fund

20150HB0727PN1555 - 271 -

shall be paid from the fund out of earnings. Any surplus or

deficit in the interest reserve account at the end of each year

shall be transferred to the State accumulation account.

§ 5951. State guarantee regarding the State Employees'

Retirement System.

The required interest charges payable, the maintenance of

reserves in the fund, and the payment of all annuities and other

benefits granted by the board from the system under the

provisions of this part relating to the establishment and

administration of the system are hereby made obligations of the

Commonwealth. All income, interest, and dividends derived from

deposits and investments of the system authorized by this part

shall be used for the payment of the said obligations of the

Commonwealth and shall not be used for any obligations of the

plan or trust.

§ 5953. Taxation, attachment and assignment of funds.

(a) General rule.--

(1) Except as provided in paragraphs (2), (3) [and], (4)

and (5), the right of a person to any benefit or right

accrued or accruing under the provisions of this part and the

moneys in the fund and the trust are hereby exempt from any

State or municipal tax, levy and sale, garnishment,

attachment, spouse's election, the provisions of Article

XIII.1 of the act of April 9, 1929 (P.L.343, No.176), known

as The Fiscal Code, or any other process whatsoever, and no

participant or beneficiary, successor payee or alternate

payee of a participant shall have the ability to commute,

sell, assign, alienate, anticipate, mortgage, pledge,

hypothecate, commutate or otherwise transfer or convey any

benefit or interest in an individual investment account or

20150HB0727PN1555 - 272 -

rights to receive or direct distributions under this part or

under agreements entered into under this part except as

otherwise provided in this part and in the case of either a

member or a participant except for a set-off by the

Commonwealth in the case provided in subparagraph (i), and

shall be unassignable except:

(i) To the Commonwealth in the case of a member or

participant who is terminating State service and has been

determined to be obligated to the Commonwealth for the

repayment of money owed on account of his employment or

to the fund on account of a loan from a credit union to a

member which has been satisfied by the board from the

fund.

(ii) To a credit union as security for a loan to a

member not to exceed $750 and interest not to exceed 6%

per annum discounted and/or fines thereon if the credit

union is now or hereafter organized and incorporated

under the laws of this Commonwealth and the membership of

such credit union is limited solely to officials and

employees of the Commonwealth and if such credit union

has paid to the fund $3 for each such assignment.

(2) Rights under this part shall be subject to

forfeiture as provided by the act of July 8, 1978 (P.L.752,

No.140), known as the Public Employee Pension Forfeiture Act,

and by or pursuant to section 16(b) of Article V of the

Constitution of Pennsylvania. Forfeitures under this

subsection or under any other provision of law may not be

applied to increase the benefits that any member would

otherwise receive under this part. Notwithstanding this

paragraph, 42 Pa.C.S. § 3352 (relating to pension rights),

20150HB0727PN1555 - 273 -

the Public Employee Pension Forfeiture Act or section 16(b)

of Article V of the Constitution of Pennsylvania, the

accumulated mandatory participant contributions and

accumulated voluntary contributions standing to the credit of

a participant shall not be forfeited but shall be available

for payment of fines and restitution as provided by law.

Furthermore, amounts in the trust that have been ordered to

be distributed to an alternate payee as the result of an

equitable distribution of marital property as part of an

approved domestic relations order entered before the date of

the order or action in a court or other tribunal resulting in

a forfeiture of a participant's interest in the trust shall

not be subject to 42 Pa.C.S. § 3352, the Public Employee

Pension Forfeiture Act or section 16(b) of Article V of the

Constitution of Pennsylvania. Any accumulated employer

defined contributions forfeited as a result of this paragraph

or other law shall be retained by the board and used for the

payment of expenses of the plan.

(3) Rights under this part shall be subject to

attachment in favor of an alternate payee as set forth in an

approved domestic relations order.

(4) Effective with distributions made on or after

January 1, 1993, and notwithstanding any other provision of

this part to the contrary, a distributee may elect, at the

time and in the manner prescribed by the board, to have any

portion of an eligible rollover distribution paid directly to

an eligible retirement plan by way of a direct rollover. For

purposes of this paragraph, a "distributee" includes a member

[and], a participant, a member's surviving spouse [and], a

participant's surviving spouse, a member's former spouse who

20150HB0727PN1555 - 274 -

is an alternate payee under an approved domestic relations

order, a participant's former spouse who is an alternate

payee under an approved domestic relations order and anyone

else authorized under the IRC and the plan terms approved by

the board to have an eligible rollover distribution paid

directly to an eligible retirement plan by way of a direct

rollover. For purposes of this paragraph, the term "eligible

rollover distribution" has the meaning given such term by IRC

§ 402(f)(2)(A), and "eligible retirement plan" has the

meaning given such term by IRC § 402(c)(8)(B), except that a

qualified trust shall be considered an eligible retirement

plan only if it accepts the distributee's eligible rollover

distribution; however, in the case of an eligible rollover

distribution to a surviving spouse, an eligible retirement

plan is an "individual retirement account" or an "individual

retirement annuity" as those terms are defined in IRC §

408(a) and (b).

(b) Authorized payments from fund.--The board shall be

authorized to pay from the fund:

(1) In the case of a member or participant who is

terminating service, the amount determined after

certification by the head of the department that the member

or participant is so obligated, and after review and approval

by the department or agency's legal representative or upon

receipt of an assignment from the member or participant in

the amount so certified[.], except that no payment shall be

made from the individual investment account of a participant

until the participant otherwise applies for and receives a

distribution and shall not exceed the amount of the

distribution.

20150HB0727PN1555 - 275 -

(2) In the case of a loan to a member the amount of the

loan and any fine or interest due thereon to the credit union

except 5% of the total amount due which is to be retained in

the fund as a collection fee:

(i) if the member obtaining the loan shall have been

in default in required payments for a period of not less

than two years; or

(ii) at such time as the Department of Banking shall

require the credit union to charge the amount of the loan

against the reserve fund of such credit union.

Any member who shall have pledged such rights as security

for a loan from a credit union and, on whose behalf the board

shall have made any payment by reason of that member's

default, may not thereafter pledge or assign such rights to a

credit union.

(3) In the case of a participant whose former spouse is

an alternate payee of an equitable distribution of marital

assets under an approved domestic relations order, a lump sum

of the alternate payee's interest in the participant's

accumulated total defined contributions. This paragraph

applies without regard to whether the participant has not

terminated, is terminating or has terminated State service.

Section 321. Section 5953.1(a) introductory paragraph and

(1), (b), (c) and (d) of Title 71 are amended and the section is

amended by adding a subsection to read:

§ 5953.1. Approval of domestic relations orders.

(a) Certification regarding members.--A domestic relations

order pertaining to a member of the system shall be certified as

an approved domestic relations order by the secretary of the

board, or his designated representative, only if that order

20150HB0727PN1555 - 276 -

meets all of the following:

(1) Requires the system to provide any type or form of

benefit or any option applicable to members already provided

under this part.

* * *

(a.1) Certification regarding participants.--A domestic

relations order pertaining to a participant shall be certified

as an approved domestic relations order by the secretary of the

board or his designated representative only if that order meets

all of the following:

(1) Does not require the plan to provide any type or

form of benefit or any option applicable to members of the

system or participants in the plan.

(2) Does not require the segregation of the alternate

payee's share of the participant's individual investment

account into a subaccount or newly established individual

account titled in the name of the alternate payee.

(3) Does not require the plan to recover or distribute

any funds which were distributed to the participant or at the

participant's direction prior to the approval of the domestic

relations order by the secretary of the board or his

designated representative.

(4) Requires the plan to pay to the alternate payee no

more than the lesser of the VESTED amount of the

participant's individual investment account specified by the

domestic relations order or the VESTED amount of the

participant's individual investment account as of the date of

the transfer of the alternate payee's share to the alternate

payee.

(5) States that the plan shall not be required to recoup

20150HB0727PN1555 - 277 -

<--

or make good for losses in value to the participant's

individual investment account incurred between the date of

the valuation of the account used for equitable distribution

purposes and the date of distribution to the alternate payee.

(6) Specifies the amount or percentage of the

participant's individual investment account to be paid to the

alternate payee and the date upon which such valuation is

based.

(7) Specifies the name and last known mailing address,

if any, of the participant and the name and last known

mailing address of each alternate payee covered by the order

and states that it is the responsibility of each alternate

payee to keep a current mailing address on file with the

plan.

(8) Does not grant an alternate payee the rights,

privileges or options available to a participant.

(9) Requires the participant to execute an authorization

allowing each alternate payee to monitor the participant's

compliance with the terms of the domestic relations order

through access to information concerning the participant

maintained by the plan. Any authorization granted pursuant to

this section shall be construed only as an authorization for

the alternate payee to receive information concerning the

participant which relates to the administration, calculation

and payment of the alternate payee's share of the

participant's account and not as an authorization to exercise

the rights afforded to participants or obtain information

which is not related to the administration, calculation and

payment of alternate payee's share of the participant's

individual investment account.

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(10) In the case of a participant who has not yet begun

to receive distributions as of the date the domestic

relations order is approved by the secretary of the board or

his designated representative, requires the immediate

distribution of the alternate payee's share of the

participant's individual investment account, which may be by

direct payment, eligible rollover or trustee-to-trustee

transfer to another eligible plan or qualified account owned

by the alternate payee . , NOTWITHSTANDING ANY OTHER PROVISION

OF THIS PART OR THE PLAN THAT WOULD REQUIRE A DISTRIBUTION OF

ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS IN THE FORM OF AN

ANNUITY OR TO REQUIRE THE PURCHASE OF AN ANNUITY.

(11) In the case of a participant who is currently

receiving distributions from the trust as of the date the

domestic relations order is approved by the secretary of the

board or his designated representative, the domestic

relations order may not order the board to pay the alternate

payee more than the balance available in the participant's

individual investment account as of the date the order is

approved or require that distributions continue to the

alternate payee after the death of the participant and final

settlement of the participant's individual investment

account.

(b) Determination by secretary.--Within a reasonable period

after receipt of a domestic relations order, the secretary of

the board, or his designated representative, shall determine

whether this order is an approved domestic relations order and

notify the member or participant and each alternate payee of

this determination. Notwithstanding any other provision of law,

the exclusive remedy of any member, participant or alternate

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payee aggrieved by a decision of the secretary of the board, or

his designated representative, shall be the right to an

adjudication by the board under 2 Pa.C.S. Ch. 5 Subch. A

(relating to practice and procedure) with appeal therefrom to

the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to

judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct

appeals from government agencies).

in [subsection (a)] subsections (a) and (a.1) shall not apply to

any domestic relations order which is an order [for] of support

as the term is defined at 23 Pa.C.S. § 4302 (relating to

definitions) or an order for the enforcement of arrearages as

provided in 23 Pa.C.S. § 3703 (relating to enforcement of

arrearages). These orders shall be approved to the extent that

they do not attach moneys in excess of the limits on attachments

as established by the laws of the United States and this

Commonwealth[.], require distributions of benefits in a manner

which would violate the laws of the United States, any other

state or this Commonwealth or require the distribution of funds

for support or enforcement of arrearages against any participant

who is not receiving distributions from the plan at the time

such order is entered.

(d) Obligation discharged.--Only the requirements of this

part and any regulations promulgated hereunder shall be used to

govern the approval or disapproval of a domestic relations

order. Therefore, if the secretary of the board, or his

designated representative, acts in accordance with the

provisions of this part and any promulgated regulations in

approving or disapproving a domestic relations order, then the

obligations of the system or the plan with respect to such

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approval or disapproval shall be discharged.

Section 322. Sections 5953.2, 5953.3 and 5953.4(a) of Title

71 are amended to read:

§ 5953.2. Irrevocable beneficiary.

Notwithstanding any other provision of this part, a domestic

relations order may provide for an irrevocable beneficiary. A

domestic relations order requiring the nomination of an

irrevocable beneficiary shall be deemed to be one that requires

a member or participant to nominate an alternate payee as a

beneficiary and that prohibits the removal or change of that

beneficiary without approval of a court of competent

jurisdiction, except by operation of law. Such a domestic

relations order may be certified as an approved domestic

relations order by the secretary of the board, or his designated

representative, after the member or participant makes such

nomination, in which case the irrevocable beneficiary so ordered

by the court cannot be changed by the member or participant

without approval by the court.

§ 5953.3. Irrevocable survivor annuitant.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a member may provide for an

irrevocable survivor annuitant. A domestic relations order

requiring the designation of an irrevocable survivor annuitant

shall be deemed to be one that requires a member to designate an

alternate payee as a survivor annuitant and that prohibits the

removal or change of that survivor annuitant without approval of

a court of competent jurisdiction, except by operation of law.

Such a domestic relations order may be certified as an approved

domestic relations order by the secretary of the board, or his

designated representative, in which case the irrevocable

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survivor annuitant so ordered by the court cannot be changed by

the member without approval by the court. A person ineligible to

be designated as a survivor annuitant may not be designated as

an irrevocable survivor annuitant.

§ 5953.4. Amendment of approved domestic relations orders.

(a) Deceased alternate payee.--In the event that the

alternate payee predeceases the member or the participant and

there are benefits payable to the alternate payee, the divorce

court may amend the approved domestic relations order to

substitute a person for the deceased alternate payee to receive

any benefits payable to the deceased alternate payee.

* * *

Section 323. Title 71 is amended by adding a section to

read:

§ 5953.6. Irrevocable successor payee.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a participant may provide for an

irrevocable successor payee only if the participant is receiving

a payment pursuant to a payment option provided by the board

that allows for a successor payee. A domestic relations order

requiring the designation of an irrevocable successor payee

shall be deemed to be one that requires a participant who is

receiving payments from an annuity or other distribution option

to designate an alternate payee as a successor payee and that

prohibits the removal or change of that successor payee without

approval of a court of competent jurisdiction, except by

operation of law. Such a domestic relations order may be

certified as an approved domestic relations order by the

secretary of the board or his designated representative, in

which case the irrevocable successor payee so ordered by the

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court shall not be changed by the participant without approval

by the court. A person ineligible to be designated as a

successor payee shall not be designated as an irrevocable

successor payee. A court shall not name an irrevocable successor

payee if the alternate payee is eligible to receive a lump sum

distribution of the alternate payee's portion of the marital

portion of the pension benefit.

Section 324. Sections 5954 and 5955 of Title 71 are amended

to read:

§ 5954. Fraud and adjustment of errors.

(a) Penalty for fraud.--Any person who shall knowingly make

any false statement or shall falsify or permit to be falsified

any record or records of this system or plan in any attempt to

defraud the system or plan as a result of such act shall be

guilty of a misdemeanor of the second degree.

(b) Adjustment of errors.--Should any change or mistake in

records result in any member, participant, beneficiary [or],

survivor annuitant or successor payee receiving from the system

or plan more or less than he would have been entitled to receive

had the records been correct, then regardless of the intentional

or unintentional nature of the error and upon the discovery of

such error, the board shall correct the error and if the error

affected contributions to or payments from the system, then so

far as practicable shall adjust the payments which may be made

for and to such person in such a manner that the actuarial

equivalent of the benefit to which he was correctly entitled

shall be paid. If the error affected contributions to or

payments from the plan, then the board shall take such action as

shall be provided for in the plan document.

§ 5955. Construction of part.

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(a) Exclusive source of rights and benefits.--Regardless of

any other provision of law, pension and benefit rights of State

employees shall be determined solely by this part or any

amendment thereto, and no collective bargaining agreement nor

any arbitration award between the Commonwealth and [its] other

employers and their employees or their collective bargaining

representatives shall be construed to change any of the

provisions herein, to require the board to administer pension or

retirement benefits not set forth in this part or not

established by the board in the plan document, to require the

board to modify, amend or change any of the terms and provisions

of the plan document, or otherwise require action by any other

government body pertaining to pension or retirement benefits or

rights of State employees. Notwithstanding the foregoing, any

pension or retirement benefits or rights previously so

established by or as a result of an arbitration award shall

remain in effect after the expiration of the current collective

bargaining agreement between the State employees so affected and

the Commonwealth until the expiration of each of the collective

bargaining agreements in effect on January 1, 2011, at which

time the classes of membership and resulting member contribution

rates and contributions for creditable nonstate service,

eligibility for vesting, withdrawal and superannuation

annuities, optional modification of annuities and other terms

and conditions related to class of membership shall be as

determined by this part for employees covered by those and

successor collective bargaining agreements. For purposes of

administering this part, for those State employees who are

members of each such collective bargaining unit, the date

January 1, 2011, contained in this part, except in this section,

20150HB0727PN1555 - 284 -

shall be replaced with the date of the day immediately following

the expiration of each such collective bargaining agreement. The

provisions of this part insofar as they are the same as those of

existing law are intended as a continuation of such laws and not

as new enactments. The provisions of this part shall not affect

any act done, liability incurred, right accrued or vested, or

any suit or prosecution pending or to be instituted to enforce

any right or penalty or to punish any offense under the

authority of any repealed laws.

(b) Officer or member of Pennsylvania State Police.--

(1) Notwithstanding a provision of subsection (a) or

section 12.1 of the act of November 23, 2010 (P.L. 1269, No.

120), regarding the continued effectiveness of pension or

retirement benefits or rights previously established by or as

a result of a binding arbitration award issued before July 1,

1989, pursuant to the act of June 24, 1968 (P.L.237, No.111),

referred to as the Policemen and Firemen Collective

Bargaining Act, and implemented by the board, the pension or

retirement benefits or rights of a State employee who is a

current or former sworn police officer or who becomes a sworn

police officer after the effective date of this subsection

shall be as provided in this part as if the binding

arbitration award was not issued, except as provided under

this subsection.

(2) A State employee who is a current or former sworn

police officer or who becomes a sworn police officer after

the effective date of this subsection who:

(i) terminates State service before January 1, 2016;

(ii) terminates State service on or after January 1,

20150HB0727PN1555 - 285 -

2016, and does not have service credited in Class A-5

shall be eligible to receive the maximum single life annuity,

before optional modification under section 5705 (relating to

member's options), that the State employee would have been

eligible to receive if this subsection had not been enacted.

(3) A State employee who is a current or former sworn

police officer, or who becomes a sworn police officer after

the effective date of this subsection, who has service as a

plan participant and who terminates State service on or after

January 1, 2016, shall be eligible to receive a maximum

single life annuity before optional modification under

section 5705 equal to the maximum single life annuity that

the State employee would have been eligible to receive

without regard to any eligibility points, service credit,

compensation or contributions attributable to service as a

plan participant.

(4) Any benefit resulting from participation in the plan

shall be in addition to any benefit a sworn police officer may

be eligible to receive as a plan participant.

THIS PART:

(1) THE TERM "INACTIVE MEMBER ON LEAVE WITHOUT PAY" DOES

NOT INCLUDE A COMBINED SERVICE EMPLOYEE WHO IS AN INACTIVE

PARTICIPANT ON LEAVE WITHOUT PAY.

(2) THE TERM "INACTIVE PARTICIPANT ON LEAVE WITHOUT PAY"

DOES NOT INCLUDE A COMBINED SERVICE EMPLOYEE WHO IS AN ACTIVE

MEMBER ON LEAVE WITHOUT PAY.

ARTICLE IV

TRANSITIONAL PROVISIONS

Section 401. The following apply:

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(1) The following provisions shall not create in any

member of the School Employees' Retirement System or

participant in the School Employees' Defined Contribution

Plan or in any other person claiming an interest in the

account of the member or participant a contractual right,

either express or implied, in the provisions or in any

construction of 24 Pa.C.S. Pt. IV or 51 Pa.C.S., as so

amended or supplemented, or any rules or regulations adopted

under 24 Pa.C.S. Pt. IV or 51 Pa.C.S.:

(i) Anything in this act which amends or supplements

provisions of 51 Pa.C.S. or 24 Pa.C.S. Pt. IV in relation

to requirements for:

(A) qualification of the School Employees'

Defined Contribution Plan as a qualified pension plan

under the Internal Revenue Code of 1986 (Public Law

99-514, 26 U.S.C. §§ 401(a) and 415(b)) or compliance

with the Uniformed Services Employment and

Reemployment Rights Act of 1994 (Public Law 103-353,

108 Stat. 3149);

(B) contributions to, participation in or

benefits from the School Employees' Defined

Contribution Plan or School Employees' Defined

Contribution Trust; and

alternate payees of participants in the Public School

Employees' Defined Contribution Plan.

(ii) Any construction of 24 Pa.C.S. Pt. IV or 51

Pa.C.S., as so amended or supplemented, or any rules or

regulations adopted under 24 Pa.C.S. Pt. IV or 51

Pa.C.S., or any term or provision of the School

20150HB0727PN1555 - 287 -

Employees' Defined Contribution Plan or School Employees'

Defined Contribution Trust, whether established by

statute or in the plan document or trust declaration.

(2) The provisions of 24 Pa.C.S. Pt. IV shall remain

subject to the Internal Revenue Code of 1986 and the

Uniformed Services Employment and Reemployment Rights Act of

1994 (Public Law 103-353, 108 Stat. 3149), and regulations

under those statutes, and the General Assembly reserves to

itself such further exercise of its legislative power to

amend or supplement such provisions as may from time to time

be required in order to maintain the qualification of the

system as a qualified pension plan under section 401(a) and

other applicable provisions of the Internal Revenue Code of

1986 and the Uniformed Services Employment and Reemployment

Rights Act of 1994 (Public Law 103-353, 108 Stat. 3149).

(3) Nothing in this act which amends or supplements

provisions of 51 Pa.C.S. § 7306 or 71 Pa.C.S. Pt. XXV in

relation to requirements:

(i) for qualification of the State Employees'

Defined Contribution Plan as a qualified pension plan

under the Internal Revenue Code of 1986 (Public Law 99-

514, 26 U.S.C. § 1 et seq.) or compliance with 38 U.S.C.

Ch. 43 (relating to employment and reemployment rights of

members of the uniformed services);

(ii) for contributions to, participation in or

benefits from the State Employees' Defined Contribution

Plan or State Employees' Defined Contribution Trust; or

(iii) for domestic relations orders regarding

alternate payees of participants in the State Employees'

Defined Contribution Plan;

20150HB0727PN1555 - 288 -

nor any construction of 51 Pa.C.S. or 71 Pa.C.S. Pt. XXV, as

so amended or supplemented, or any rules or regulations

adopted under 51 Pa.C.S. or 71 Pa.C.S. Pt. XXV, or any term

or provision of the State Employees' Defined Contribution

Plan or State Employees' Defined Contribution Trust, whether

established by statute or in the plan document or trust

declaration, shall create in any member of the State

Employees' Retirement System or participant in the State

Employees' Defined Contribution Plan or in any other person

claiming an interest in the account of any such member or

participant a contractual right, either express or implied,

in such provisions nor in any construction of 51 Pa.C.S. §

7306 or 71 Pa.C.S. Pt. XXV, as so amended or supplemented, or

any rules or regulations adopted under 51 Pa.C.S. or 71

Pa.C.S. Pt. XXV.

(4) The provisions of 71 Pa.C.S. Pt. XXV shall remain

subject to the Internal Revenue Code of 1986 and 38 U.S.C.

Ch. 43 and regulations thereunder, and the General Assembly

reserves to itself such further exercise of its legislative

power to amend or supplement such provisions as may from time

to time be required in order to maintain the qualification of

such system as a qualified pension plan under section 401(a)

and other applicable provisions of the Internal Revenue Code

of 1986 and 38 U.S.C. Ch. 43.

Section 402. References in this act to the Internal Revenue

Code of 1986 or 38 U.S.C. Ch. 43, or administrative regulations

promulgated thereunder, are intended to include such laws and

regulations in effect on the effective date of this act and as

they may hereafter be amended or supplemented or supplanted by

successor provisions.

20150HB0727PN1555 - 289 -

Section 403. Nothing in this act shall be construed or

deemed to imply that, but for the expressed applications of the

limitations on benefits or other requirements under section

401(a) or applicable provisions of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 401 et seq.) to

participants in the School Employees' Defined Contribution Plan,

those limitations would not otherwise apply to such participants

or to members of the Public School Employees' Retirement System

and the benefits payable pursuant to 24 Pa.C.S. Pt. IV.

Section 404. Nothing in this act shall be construed or

deemed to imply that, but for the expressed applications of the

limitations on benefits or other requirements under section

401(a) or other applicable provisions of the Internal Revenue

Code of 1986 (Public Law 99-514, 26 U.S.C. § 401 et seq.), those

limitations would not otherwise apply to such participants or to

members of the State Employees' Retirement System and the

benefits payable under 71 Pa.C.S. Pt. XXV.

Section 405. (a) Notwithstanding any provisions of this act

to the contrary, no contributions or benefit related to the

State Employees' Defined Contribution Plan or the School

Employee's Defined Contribution Plan shall be made or payable to

the extent that such contributions or benefits exceed any

limitation under section 415 of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) as in effect

with respect to governmental plans as such term is defined in

section 414(d) of the Internal Revenue Code of 1986 on the date

the contributions or benefit payment becomes effective. Any

increase in any limitation under section 415 of the Internal

Revenue Code of 1986 shall be applicable to all current and

future participants.

20150HB0727PN1555 - 290 -

(b) No future amendment of this act that increases

contributions or benefits for active participants, inactive

participants or participants receiving distributions shall be

deemed by the rules of statutory construction or otherwise to

provide for contributions or benefits in excess of any

limitation, as adjusted or subsequently increased, provided for

under section 415 of the Internal Revenue Code of 1986 unless

specifically so provided by legislation. Notwithstanding this

section, any future increase in benefits for any participants in

the State Employee's Defined Contribution Plan or the School

Employee's Defined Contribution Plan are intended to be

applicable to the fullest extent allowed by law and this section

authorizes any such increases in limitations or allowable

benefits.

Section 406. Nothing in this act shall be construed or

deemed to imply that any calculation or actuarial method used by

the Public School Employees' Retirement Board, its actuaries or

the Public School Employees' Retirement System was not in

accordance with the provisions of the 24 Pa.C.S. Pt. IV or other

applicable law prior to the effective date of this section.

Section 407. Nothing in this act shall be construed or

deemed to imply that any calculation or actuarial method used by

the State Employees' Retirement Board, its actuaries or the

State Employees' Retirement System was not in accordance with

the provisions of the State Employees' Retirement Code or other

applicable law prior to the effective date of this section.

Section 408. Nothing in this act shall be construed or

deemed to imply that any interpretation or application of the

provisions of 24 Pa.C.S. Pt. IV or benefits available to members

of the Public School Employees' Retirement System was not in

20150HB0727PN1555 - 291 -

accordance with the provisions of 24 Pa.C.S. Pt. IV or other

applicable law, including the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.) and the Uniformed

Services Employment and Reemployment Rights Act of 1994 (Public

Law 103-353, 108 Stat. 3149) prior to the effective date of this

section.

Section 409. Nothing in this act shall be construed or

deemed to imply that any interpretation or application of the

provisions of 71 Pa.C.S. Pt. XXV or benefits available to

members of the State Employees' Retirement System was not in

accordance with the provisions of 71 Pa.C.S. Pt. XXV or other

applicable law, including the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.) and 38 U.S.C. Ch. 43

(relating to employment and reemployment rights of members of

the uniformed services), prior to the effective date of this

section.

Section 410. This act shall be construed and administered in

such a manner that the Public School Employees' Retirement

System and the School Employees' Defined Contribution Plan will

satisfy the requirements necessary to qualify as a qualified

pension plan under section 401(a) and other applicable

provisions of the Internal Revenue Code of 1986 (Public Law 99-

514, 26 U.S.C. § 1 et seq.) and the Uniformed Services

Employment and Reemployment Rights Act of 1994 (Public Law 103-

353, 108 Stat. 3149). The rules, regulations and procedures

adopted and promulgated by the Public School Employees'

Retirement Board, and the terms and conditions of the plan

document and trust declaration adopted by the Public School

Employees' Retirement Board, may include those necessary to

accomplish the purpose of this section.

20150HB0727PN1555 - 292 -

Section 411. This act shall be construed and administered in

such a manner that the State Employees' Retirement System and

the State Employees' Defined Contribution Plan will satisfy the

requirements necessary to qualify as a qualified pension plan

under section 401(a) and other applicable provisions of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1

et seq.) and 38 U.S.C. Ch. 43 (relating to employment and

reemployment rights of members of the uniformed services). The

rules, regulations and procedures adopted and promulgated by the

State Employees' Retirement Board and the terms and conditions

of the plan document and trust declaration adopted by the State

Employees' Retirement Board may include those necessary to

accomplish the purpose of this section.

Section 412. The following apply:

(1) If the application of any provision of this act to

any person is held invalid, the invalidity shall not affect

the application of this act to any other person, but the

entire act shall be invalid as to the person to whom part of

it was invalid.

(2) In the event that a school employee's participation

in the School Employees' Defined Contribution Plan is

declared invalid, the affected school employee shall return

to the School Employees' Defined Contribution Trust any

distributions and shall be granted status and service credit

in the Public School Employees' Retirement System and shall

be required to make all contributions to the Public School

Employees' Retirement Fund as if this act had not been

enacted. The affected school employee's accumulated mandatory

participant contributions and accumulated voluntary

contributions shall be transferred to the affected employee's

20150HB0727PN1555 - 293 -

member savings account to the extent necessary to fund that

account with the member contributions and interest that would

have been standing to the member's account had this act not

been passed. Any remaining balance shall be refunded to the

school employee who shall be responsible for paying to the

fund in a manner and time determined by the Public School

Employees' Retirement Board any additional funds required if

the accumulated mandatory participant contributions and

accumulated voluntary contributions were not sufficient. The

accumulated employer defined contributions shall be

transferred to the State accumulation account, and no further

amount shall be due from the employer or refund paid on

account of the service performed as a participant.

(3) In the event that a State employee's participation

in the State Employees' Defined Contribution Plan is declared

invalid, the affected State employee shall return to the

State Employees' Defined Contribution Trust any distributions

and shall be granted the status and service credit in the

State Employees' Retirement System and shall be required to

make all contributions to the State Employees' Retirement

Fund as if this act had not been enacted. The affected State

employee's accumulated mandatory participant contributions

and accumulated voluntary contributions shall be transferred

to the affected employee's member savings account to the

extent necessary to fund that account with the member

contributions and interest that would have been standing to

the member's account had this act not been enacted. Any

remaining balance shall be refunded to the State employee,

who shall be responsible for paying to the fund in a manner

and time determined by the State Employees' Retirement Board

20150HB0727PN1555 - 294 -

any additional funds required if the accumulated mandatory

participant contributions and accumulated voluntary

contributions were not sufficient. The accumulated employer

defined contributions shall be transferred to the State

accumulation account and no further amount shall be due from

the employer or refund paid.

Section 413. Nothing in this act shall be construed or

deemed to imply that the release or making public of any record,

material or data described in 71 Pa.C.S. § 5902(e)(2) as not

being a public record is a violation of the State Employees'

Retirement Board's fiduciary duties.

Section 414. (a) Notwithstanding any other provision of

law, any change in accrued liability of the State Employees'

Retirement System created by this act as a result of changes in

benefits shall be funded in equal dollar installments over a

period of 20 years beginning July 1, 2015. Any change in accrued

liability as a result of the amendment of 71 Pa.C.S. §§ 5507 and

5508 or the addition of 71 Pa.C.S. §§ 5507.1 and 5508.1 shall be

funded in equal dollar installments over a period of 30 years

beginning July 1, 2015. Payments required to fund any changes in

accrued liability resulting from the provisions of 71 Pa.C.S.

Pt. XXV shall be subject to any limits imposed by this act on

employer contributions to the State Employees' Retirement

System, and shall not be subject to re-amortization for 30 years

under 71 Pa.C.S. § 5508.1(c). For purposes of 71 Pa.C.S. §§

5501.2, 5507 and 5508, any such changes shall not be considered

to be costs added by legislation.

(b) For purposes of this section, the provisions of 71

Pa.C.S. §§ 5507.1(b)(3) and 5508.1(c)(2) and (d) shall apply.

Section 415. This act shall take effect immediately.

20150HB0727PN1555 - 295 -

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