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SENATE AMENDED
PRIOR PRINTER'S NO. 1814
PRINTER'S NO. 2684
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1332
Session of
2015
INTRODUCED BY GODSHALL, FRANKEL, BLOOM, MARKOSEK, QUIGLEY,
BROWNLEE, MURT, IRVIN, MILLARD, DRISCOLL, McNEILL, GREINER,
McGINNIS, O'BRIEN, JAMES, GROVE, CUTLER, EVERETT, KINSEY,
KOTIK, READSHAW, SAYLOR, HARPER, W. KELLER, RADER,
YOUNGBLOOD, QUINN, D. COSTA, KORTZ, TAYLOR, MILNE, PASHINSKI,
A. HARRIS, HARHAI, COHEN, MENTZER, GILLEN, COX, DUSH AND
BRADFORD, JUNE 16, 2015
AS AMENDED ON THIRD CONSIDERATION, IN SENATE, DECEMBER 18, 2015
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes, in retirement for school
employees, further providing for definitions and for
construction of part; providing for notice to members;
further providing for credited school service, for creditable
nonschool service, for eligibility for annuities, for
eligibility for vesting, for eligibility for refunds, for
regular member contributions for current service, for pickup
contributions, for return of accumulated contributions, for
maximum single life annuity, for disability annuities, for
member's options, for termination of annuities, for death
benefits, for payment of benefits, for duties of board
regarding applications and elections of members, for duties
of employers, and for rights and duties of school employees
and members; in retirement for State employees and officers,
further providing for definitions, for credited State
service, for creditable nonstate service, for Social Security
integration credits, for eligibility for annuities, for
eligibility for vesting, for eligibility for special vesting,
for eligibility for refunds, for regular member contributions
for current service, for Social Security integration member
contributions, for waiver of regular member contributions and
Social Security integration member contributions, for member
contributions for the purchase of credit for previous State
service or to become a full coverage member, for
contributions for the purchase of credit for creditable
nonstate service, for incomplete payments, for return of
total accumulated deductions, for maximum single life
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annuity, for disability annuities, for member's options, for
termination of annuities, for death benefits, for payment of
benefits, for duties of board to advise and report to heads
of departments and members, for duties of the board regarding
application and elections of members, for duties of heads of
departments, for rights and duties of State employees and
members, and for taxation, attachment and assignment of
funds; and providing for construction of part with respect to
the Internal Revenue Code.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "active member," "credited
service" and "inactive member" 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:
* * *
"Active member." A school employee for whom pickup
contributions are being made to the fund 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(b)]
415 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17) or [415(b))] 415).
* * *
"Credited service." School or creditable nonschool service
for which the required contributions have been made, 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 [415(b)] 415 of
the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
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§ 401(a)(17) or [415(b))] 415), or for which salary deductions
or lump sum payments have been agreed upon in writing.
* * *
"Inactive member." A member for whom no pickup contributions
are being made, 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)] 415 of the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. § 401(a)(17) or [415(b))] 415) 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.
* * *
"Normal retirement age." The age set forth in section 401(a)
(36) of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(36)) and in 26 C.F.R. § 1.401(a)-1(b)(2)
(relating to post-ERISA qualified plans and qualified trusts; in
general).
* * *
"Required beginning date." The beginning LATEST date by
which distributions of a member's interest 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)).
* * *
Section 2. Section 8103 of Title 24 is amended by adding
subsections to read:
§ 8103. Construction of part.
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* * *
(c) Vesting in the event of plan termination.--In the event
of termination of the Public School Employees' Retirement System
or upon complete discontinuance of contributions under this
part, the rights of all members of the system to benefits
accrued under this part to the date of such termination or
discontinuance, to the extent then funded, are vested and
nonforfeitable, except as forfeiture is required 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 member would otherwise receive under this
part.
(d) Construction of part with respect to the IRC.
(1) (i) Notwithstanding any provisions of this part to
the contrary, no benefit shall be payable to the extent that
such benefit exceeds any limitation under IRC § 415 as in
effect with respect to governmental plans as such term is
defined in IRC § 414(d) on the date the benefit payment
becomes effective, provided, however, that any increase in
any limitation under IRC § 415 shall be applicable to all
current and future annuitants. No act of the General Assembly
enacted after the effective date of this subsection that
increases benefits either for active members, inactive
members, vestees or annuitants shall be deemed by the rules
of statutory construction or otherwise to provide for
benefits in excess of any limitation provided for under IRC §
415, as adjusted or subsequently increased, unless
specifically so provided by legislation.
(ii) Notwithstanding subparagraph (i), any future
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increase in benefits for any member is intended to be
applicable to the fullest extent allowed by law and this
section is authorization for all such situations where
authorization is required to apply any such increase in
limitations or allowable benefits.
(2) In the event that annuities payable to a member from
both the system and the State Employees' Retirement System
are combined for purposes of determining whether annuities
from the system and the State Employees' Retirement System
are in excess of the limitations under IRC § 415(b), then:
(i) to the extent that the combined benefits exceed
such limitations, but neither of the annuities from
either retirement system would individually exceed such
limitations or the annuities payable under this part
individually exceed such limitations and the annuity
payable from the State Employees' Retirement System does
not, then the limitations shall be applied to the
annuities payable under the State Employees' Retirement
System to the extent required for such combined benefits
to be within the limitations; or
(ii) to the extent that the combined benefits exceed
such limitations and the annuity payable under this part
individually exceeds such limitations and the annuity
from the State Employees' Retirement System does not
individually exceed such limitations or the annuities
payable from each retirement system both individually
exceed the limitations, then the limitations shall be
applied first to the annuity payable under this part so
that the annuity under this part is not in excess of such
limitations and any remaining limitation shall be applied
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to the benefits payable under the State Employees'
Retirement System.
(3) No payments for service shall be allowed for which
the required contributions would cause a violation of the
limitations related to contributions applicable to
governmental plans contained in IRC § 415. In the event that
any service credit based on such disallowed contributions is
granted after the effective date of this subsection, then
such service credit shall be canceled and benefits calculated
without regard to such service or contributions and any
member contributions in excess of the limitations and
statutory interest credited on those contributions shall be
refunded to the member by the board.
(e) Permissive service credit.--
(1) Nothing in this part shall be construed or deemed to
imply that any member of the system shall be required to make
contributions to the system for the purchase of school or
nonschool permissive service credit in excess of the limits
established by IRC § 415(n)(3)(A)(iii).
(2) Any contributions made by a member of the system for
the purchase of school or nonschool service credit that are
determined to be in excess of those limits shall be refunded
to the member in a lump sum subject to withholding for all
applicable taxes and penalties as soon as administratively
possible after such determination is made.
(3) Any refund of excess contributions made under this
section shall not affect the benefit payable to the member
and shall not be treated as, or deemed to be, a withdrawal of
the member's accumulated deductions.
Section 3. Title 24 is amended by adding a section to read:
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§ 8103.1. Notice to members.
Notice by publication, including, but not limited to,
newsletters, newspapers, forms, first class mail, letters,
manuals and electronic notice, including, but not limited to, e-
mail or publicly accessible Internet websites, distributed or
made available to members in a manner reasonably calculated to
give actual notice of the provisions of this part that require
notice to members shall be deemed sufficient notice for all
purposes.
Section 4. Sections 8302(a), 8304(c), 8307(a), 8308, 8310,
8321(a), 8322.1(a), 8341, 8342(c), 8344(e) and 8345(a) of Title
24 are amended to read:
§ 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
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, or for which such contributions otherwise required
for such service were not made solely by reason of any provision
of this part relating to the limitations under IRC § 401(a)(17)
or [415(b)] 415. 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, 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 for less than 180 full-day
sessions or 1,100 hours, he shall be credited with a fractional
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portion of a year determined by the ratio of the number of full-
day sessions or hours of service actually rendered 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
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.
* * *
§ 8304. Creditable nonschool service.
* * *
(c) Limitations on years of credit.--Service listed in
subsection (b)(3) and (4) must have been for a period of at
least one school year and credit for such service shall be
limited to the lesser of 12 years or the number of years of
school service credited in the system. In no case shall the
total credit for nonschool service other than that listed in
subsection (b)(5) exceed the number of years of school service
credited in the system, plus, in the case of a multiple service
member, any additional years of State service credited in the
State Employees' Retirement System. In no case shall a member be
permitted to purchase any service in violation of the
limitations of IRC § 415(n).
§ 8307. Eligibility for annuities.
(a) Superannuation annuity.--An active or an inactive member
who attains superannuation age shall be entitled to receive a
superannuation annuity upon termination of service and filing of
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a proper application. All members must begin receiving a
superannuation annuity by the member's required beginning date.
* * *
§ 8308. Eligibility for vesting.
Any Class T-C or Class T-D member who terminates school
service with five or more eligibility points shall be entitled
to vest his retirement benefits until [attainment of
superannuation age] the member's required beginning date. Any
Class T-E or Class T-F member who terminates school service with
ten or more eligibility points shall be entitled to vest his
retirement benefits until [attainment of superannuation age] his
required beginning date.
§ 8310. Eligibility for refunds.
Upon termination of service any active member, regardless of
eligibility for benefits, may elect to receive his accumulated
deductions by his required beginning date in lieu of any benefit
to which he is entitled.
§ 8321. Regular member contributions for current service.
(a) General.--Regular member contributions shall be made to
the fund on behalf of each active member for current service
except for any period of current service in which the making of
such contributions has ceased solely by reason of any provision
of this part relating to the limitations under IRC § 401(a)(17)
or [415(b)] 415.
* * *
§ 8322.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions required to be made under sections 8321 (relating
to regular member contributions for current service) [and], 8322
(relating to joint coverage member contributions), and 8305
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(relating to member class 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).
* * *
§ 8341. Return of accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable under this chapter to which he may be entitled,
elect to receive his accumulated deductions by his required
beginning date.
§ 8342. Maximum single life annuity.
* * *
(c) Limitation regarding annual benefit under IRC §
415(b).--Notwithstanding any provision of this part to the
contrary, no benefit shall be payable to the extent that such
benefit exceeds any limitation under IRC § 415(b) in effect with
respect to governmental plans, as such term is defined in IRC §
414(d), on the date the benefit payment becomes effective,
provided that any increase in any limitation under IRC § 415
shall be applicable to all current and future annuitants and
survivor annuitants.
§ 8344. Disability annuities.
* * *
(e) Limitation regarding annual benefit under IRC §
415(b).--Notwithstanding any provision of this part to the
contrary, no benefit shall be payable to the extent that such
benefit exceeds any limitation under IRC § 415(b) in effect with
respect to governmental plans, as such term is defined in IRC §
414(d), on the date the benefit payment becomes effective,
provided that any increase in any limitation under IRC § 415
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shall be applicable to all current and future annuitants and
survivor annuitants.
§ 8345. Member's options.
(a) General rule.--Any Class T-C or Class T-D member who is
a vestee with five or more eligibility points, any Class T-E or
Class T-F member who is a vestee with ten or more eligibility
points, or any other eligible member upon termination of school
service who has not withdrawn his accumulated deductions as
provided in section 8341 (relating to return of accumulated
deductions) may apply for and elect to receive either a maximum
single life annuity, as calculated in accordance with the
provisions of section 8342 (relating to maximum single life
annuity), or a reduced annuity certified by the actuary to be
actuarially equivalent to the maximum single life annuity and in
accordance with one of the following options, except that no
member shall elect an annuity payable to one or more survivor
annuitants other than his spouse or alternate payee of such a
magnitude that the present value of the annuity payable to him
for life plus any lump sum payment he may have elected to
receive is less than 50% of the present value of his maximum
single life annuity and no member may elect a payment option
that would provide benefits that do not satisfy the minimum
distribution requirements or would violate the incidental death
benefit rules of IRC § 401(a)(9) . 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) Option 1.--A life annuity to the member with a
guaranteed total payment equal to the present value of the
maximum single life annuity on the effective date of
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retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
(2) Option 2.--A joint and survivor annuity payable
during the lifetime of the member with the full amount of
such annuity payable thereafter to his survivor annuitant, if
living at his death.
(3) Option 3.--A joint and fifty percent (50%) survivor
annuity payable during the lifetime of the member with one-
half of such annuity payable thereafter to his survivor
annuitant, if living at his death.
(4) Option 4.--Some other benefit which shall be
certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
(i) Any annuity shall be payable without reduction
during the lifetime of the member.
(ii) The sum of all annuities payable to the
designated survivor annuitants shall not be greater than
[one and one-half times] the annuity payable to the
member.
(iii) A portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the accumulated deductions
standing to the credit of the member. The balance of the
present value of the maximum single life annuity adjusted
in accordance with section 8342(b) shall be paid in the
form of an annuity with a guaranteed total payment, a
single life annuity, or a joint and survivor annuity or
any combination thereof but subject to the restrictions
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of subparagraphs (i) and (ii) of this paragraph. This
subparagraph shall not apply to a Class T-E or Class T-F
member.
* * *
Section 5. Section 8346(b) and (b.1)(1) of Title 24 are
amended and the section is amended by adding a subsection to
read:
§ 8346. Termination of annuities.
* * *
(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 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, provided that the annuitant meets
the conditions set forth in subsection (b.2). The annuitant
shall not be entitled to earn any credited service, and no
contributions may be made by the annuitant, the employer or the
Commonwealth on account of such employment.
(b.1) Return to school service in an extracurricular
position.--
(1) An annuitant 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, provided that the annuitant meets the conditions set
for in subsection (b.2). Neither the annuitant nor the
employer shall make contributions to the member's savings
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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.
* * *
(b.2) Limitation on return to school service by an annuitant
during emergency or in an extracurricular position.--
(1) An annuitant may return to school service under
subsection (b) or (b.1), provided the annuitant otherwise
meets the requirements of subsection (b) or (b.1) and has
attained the age set forth in § 401(a)(36) or the applicable
"normal retirement age" in 26 C.F.R. § 1.401(a)-1(b)(2)
(relating to post-ERISA qualified plans and qualified trusts;
in general).
(2) An annuitant who has not reached the age as set
forth in IRC § 401(a)(36), or the applicable "normal
retirement age" under 26 C.F.R. § 1.401(a)-1(b)(2), may
return to service under subsection (b) or (b.1) provided the
annuitant otherwise meets the requirements of subsection (b)
or (b.1) and has had a break in service, as set forth in
paragraph (3).
(3) For purposes of this subsection, a break in service
occurs when a member has a bona fide termination of service.
The following factors will be considered in determining
whether there had been a bona fide termination of service:
(i) whether the change in the employment
relationship is more than a formal or technical change,
requiring the severing of the employment connection with
the employer;
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(ii) whether there has been a reasonable
anticipation or prearranged agreement between the member
and the employer that a return to school service under
this section shall take place;
(iii) the amount of time that has elapsed from the
date the member becomes an annuitant and the return to
school service;
(iv) whether the services are a continuation of the
annuitant's previous service with the same employer; and
(v) such other factors as the board may deem
appropriate.
* * *
Section 6. Section 8347 of Title 24 is amended by adding a
subsection to read:
§ 8347. Death benefits.
* * *
(e) Required distributions.--All payments pursuant to this
section shall start and be made in compliance with the minimum
distribution requirements and the incidental death benefit rules
of IRC § 401(a)(9).
Section 7. Section 8349(a) of Title 24 is amended and the
section is amended by adding a subsection to read:
§ 8349. Payment of benefits.
(a) Annuities.--Any annuity granted under the provisions of
this part shall be paid in equal monthly installments commencing
by the required beginning date.
* * *
(d) Required distributions.--All payments pursuant to this
section shall start and be made in compliance with the required
beginning date, minimum distribution requirements and incidental
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death benefit rules of IRC § 401(a)(9).
Section 8. Sections 8503(a) and (b), 8505(e), (f), (g) and
(h), 8506(c) and 8507(d), (g), (h) and (i) of Title 24 are
amended to read:
§ 8503. Duties of board to advise and report to employers and
members.
(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)] 415.
(b) Member status statements.--The board shall furnish
annually on or before December 31, a statement to each member
showing the accumulated deductions standing to the credit of the
member and the number of years and fractional part of a year of
service credited in each class of service as of June 30 of that
year. Each member's statement shall [be mailed to his home
address and shall] include a request that the member make any
necessary corrections or revisions regarding his designated
beneficiary, whose name at the request of the member shall
remain confidential and not appear on this statement.
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* * *
§ 8505. Duties of board regarding applications and elections of
members.
* * *
(e) Certification to vestees terminating service.--The board
shall certify to a vestee within one year of termination of
service of such member:
(1) The accumulated deductions standing to his credit at
the date of termination of service.
(2) The number of years and fractional part of a year of
credit in each class of service.
(3) The maximum single life annuity to which the vestee
shall become entitled upon the attainment of superannuation
age and the filing of an application for such annuity.
(4) The obligation of the member to commence
distributions by the member's required beginning date.
(f) Notification to vestees approaching superannuation
age.--The board shall notify each vestee in writing 90 days
prior to his attainment of superannuation age that he shall
apply for his annuity within 90 days of attainment of
superannuation age; that, if he does so apply, his effective
date of retirement will be the date of attainment of
superannuation age; that, if he does not so apply but defers his
application to a later date, his effective date of retirement
will be the date of filing the application or the date specified
on the application, whichever is later; [and that, if he 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] provided that in no event shall a member
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begin receiving benefits on a date later than the required
beginning date.
(g) Initial annuity payment and certification.--The board
shall make the first monthly payment to a member who is eligible
for an annuity within 60 days of the filing of his application
for an annuity or, in the case of a vestee who has deferred the
filing of his application to a date later than 90 days following
attainment of superannuation age, within 60 days of his
effective date of retirement, and receipt of the required data
from the employer of the member, provided that in no event shall
a member begin receiving benefits on a date later than the
required beginning date. Concurrently the board shall certify to
such member:
(1) The accumulated deductions standing to his credit
showing separately the amount contributed by the member, the
pickup contribution and the interest credited to the date of
termination of service.
(2) The number of years and fractional part of a year
credited in each class of service.
(3) The final average salary on which his annuity is
based as well as any applicable reduction factors due to age
or election of an option or both.
(4) The total annuity payable under the option elected
and the amount and effective date of any future reduction on
account of social security old-age insurance benefits.
(h) Death benefits.--Upon receipt of notification of the
death of a member or former member on 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
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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 such benefits to the
member's estate, the board is authorized to pay such 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 such benefits for a period of seven years from
the date of death of the member, then such benefits shall be
escheated to the Commonwealth for the benefit of the fund.]
* * *
§ 8506. Duties of employers.
* * *
(c) Member and employer contributions.--The employer shall
certify to its treasurer the required member contributions
picked up and any other contributions, including, but not
limited to, amounts collected for the State Employees'
Retirement Board for the reinstatement of previous State service
or creditable nonstate service and amounts paid to return
benefits paid after the date of return to State service or
entering school service, deducted from each payroll. On July 1,
1996, and upon any later effective date of employment of any
noneligible member to whom limitations under IRC § 401(a)(17) or
[415(b)] 415 applies or is expected to apply, the employer shall
identify to its treasurer or other payroll administrator the
member or members to whom such limit applies or may apply and
shall cause any such member's contributions deducted from
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payroll and the employer's contribution on his behalf to cease
at the limitations under IRC § 401(a)(17) or [415(b)] 415 on the
payroll date if and when such limit shall be reached. The
treasurer shall remit to the secretary of the board each month
the total of the member contributions and the amount due from
the employer determined in accordance with section 8327
(relating to payments by employers). If, upon crediting the
remittance of a noneligible member's contributions to the
member's savings account, the board shall determine that such
account shall have been credited with pickup contributions
attributable to compensation which is in excess of the annual
compensation limit under IRC § 401(a)(17) or [415(b)] 415, or
with total member contributions for such member which would
cause such member's contributions or benefits to exceed any
applicable limitation on contributions or benefits under IRC §
401(a)(17) or [415(b)] 415, the board shall as soon as
practicable refund to the member from his individual member
account such amount, together with the statutory interest
thereon, as will cause the member's total member contributions
not to exceed the applicable limit. The payment of any such
refund to the member shall be charged to the member's savings
account.
* * *
§ 8507. Rights and duties of school employees and members.
* * *
(d) Credit for previous service or change in membership
status.--Any active member or multiple service member who is a
State employee who desires to receive credit for his previous
school service or creditable nonschool service to which he is
entitled, or a member of Class T-A or Class T-B who desires to
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become a member of Class T-C, or a joint coverage member who
desires to become a full coverage member shall so notify the
board. Upon written agreement by the member and the board as to
the manner of payment of the amount due, the member shall
receive credit for such service as of the date of such agreement
subject to the provisions of section 8325 (relating to
incomplete payments) and subject to the provisions in this part
relating to limitations under IRC § 415.
* * *
(g) Vesting of retirement rights.--If a member elects to
vest his retirement rights, he shall nominate a beneficiary by
written designation filed with the board and he may anytime
thereafter withdraw the accumulated deductions standing to his
credit or apply for an annuity if eligible as provided in
section 8307(a) or (b) (relating to eligibility for annuitants),
provided that in no event shall a member begin receiving
benefits on a date later than the required beginning date.
(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), provided that in no event shall a member
begin receiving benefits on a date later than the required
beginning date. 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.
(i) Failure to apply for annuity.--If a member is eligible
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to receive an annuity and does not file a proper application
within 90 days of termination of service, he shall be deemed to
have elected to vest, and his annuity will become effective as
of the date an application is filed with the board or the date
designated on the application whichever is later, provided that
in no event shall a member begin receiving benefits on a date
later than the required beginning date.
* * *
Section 9. The definitions of "active member," "credited
service," "inactive member" and "special vestee" in section 5102
of Title 71 are amended and the section is amended by adding
definitions to read:
§ 5102. Definitions.
The following words and phrases as used in this part, unless
a different meaning is plainly required by the context, shall
have the following meanings:
* * *
"Active member." A State employee, or a member on leave
without pay, for whom pickup contributions are being made to the
fund or 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 section [415(b)] 415 of
the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
§ 401(a)(17) or [415(b)] 415).
* * *
"Credited service." State or creditable nonstate service for
which the required contributions have been made or for which the
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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)] 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(17) or [415(b))] 415) except as otherwise provided in
this part, or for which salary deductions or lump sum payments
have been agreed upon in writing.
* * *
"Inactive member." A member for whom no pickup contributions
are being made, 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)]
415 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. § 401(a)(17) or [415(b)] 415), 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.
* * *
"Normal retirement age." The normal retirement age of a
member is the age set forth in section 401(a)(36) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
401(a)(36)) and in 26 C.F.R. § 1.401(a)-1(b)(2) (relating to
post-ERISA qualified plans and qualified trusts; in general).
* * *
"Required beginning date." The latest date by which
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distributions of a member's interest 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)).
* * *
"Special vestee." An employee of The Pennsylvania State
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 under section 5907(f) (relating to rights
and duties of State employees and members) 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 or the
member's required beginning date.
* * *
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Section 10. Section 5302(a) of Title 71 is 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, or for
which 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 IRC § 401(a)(17) or [415(b)] 415, except
as otherwise provided in this part, 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 or would have been made 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 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 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
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receive an aggregate in the two systems of more than one year of
credited service for any 12 consecutive months.
* * *
Section 11. Section 5304 of Title 71 is amended by adding a
subsection to read:
§ 5304. Creditable nonstate service.
* * *
(c.2) Additional limitation on nonstate service.--No credit
for nonstate service shall be granted for the portion of such
service for which the required contributions would cause a
violation of the limitations applicable to governmental plans
contained in IRC § 415. In the event that such nonstate service
credit is granted after the effective date of this subsection,
then such service credit shall be canceled and benefits
calculated without regard to such service or contributions and
any member contributions in excess of the limitations and
statutory interest credited on those contributions shall be
refunded to the member by the board.
* * *
Section 12. Section 5305(b) of Title 71 is amended to read:
§ 5305. Social security integration credits.
* * *
(b) Accrual of subsequent credits.--Any 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, or would have been made but for section
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5502.1 (relating to waiver of regular member contributions and
Social Security integration member contributions) or the
limitations under IRC § 401(a)(17) or [415(b)] 415, except as
otherwise provided in this part, in accordance with section 5502
(relating to Social Security integration member contributions),
and he:
(1) continues subsequent to March 1, 1974 as an active
member in either the State or school system;
(2) terminates such continuous service in the State or
school system and returns to active membership in the State
system within six months; or
(3) terminates his status as a vestee or an annuitant
and returns to State service.
* * *
Section 13. Section 5308 of Title 71 is amended by adding a
subsection to read:
§ 5308. Eligibility for annuities.
* * *
(d) Required beginning date.--Members eligible for an
annuity must commence receiving the annuity by the member's
required beginning date.
Section 14. Sections 5309, 5309.1, 5311, 5501 and 5502 of
Title 71 are amended to read:
§ 5309. Eligibility for vesting.
Any member who:
(1) 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 and terminates State service
with five or more eligibility points, or any member with
Class G, Class H, Class I, Class J, Class K, Class L, Class M
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or Class N service with five or more eligibility points,
shall be eligible until [attainment of superannuation age]
his required beginning date to vest his retirement benefits.
(2) 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 and terminates State service
with ten or more eligibility points shall be eligible until
[attainment of superannuation age] his required beginning
date to vest his retirement benefits.
(3) 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, also has service credited in
the system in one or more other classes of service and has
five or more, but fewer than ten, eligibility points shall be
eligible until [the attainment of superannuation age] his
required beginning date to vest his retirement benefits
calculated on his service credited in classes of service
other than Class A-3 or Class A-4 and to be credited with
statutory interest on total accumulated deductions,
regardless of whether or not any part of his accumulated
deductions are a result of Class A-3 or Class A-4 service
credit.
§ 5309.1. Eligibility for special vesting.
Any employee of The Pennsylvania State University who is a
member of the 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
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the transfer of other job positions or duties to a controlled
organization of the Penn State Geisinger Health System shall be
eligible until the attainment of superannuation age or his
required beginning date to vest his retirement benefits
according to the terms and conditions of this part.
§ 5311. Eligibility for refunds.
(a) Total accumulated deductions.--Any active member,
regardless of eligibility for benefits, may elect to receive his
total accumulated deductions by his required beginning date upon
termination of service in lieu of any benefit to which he is
entitled.
(b) Social security integration accumulated deductions.--Any
active member at any time after the attainment of normal
retirement age may elect to receive his social security
integration accumulated deductions and thereby to have all his
social security integration credits and benefits therefor
cancelled, and shall not be entitled to accrue any further
social security integration credits or benefits; except that a
disability annuitant who returns to State service shall have the
right to reinstate his social security integration accumulated
deductions and credits therefor.
§ 5501. Regular member contributions for current service.
Regular member contributions shall be made to the fund on
behalf of each active member for current service except for any
period of current service in which the making of such
contributions has ceased solely by reason of 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 IRC § 401(a)(17) or
[415(b)] 415.
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§ 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)] 415,
contributions shall be made on behalf of a 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 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
integration membership.
Section 15. Section 5502.1 of Title 71 is amended by adding
a subsection to read:
§ 5502.1. Waiver of regular member contributions and Social
Security integration member contributions.
* * *
(c) Expiration.--This section shall expire December 31 of
the year coincident with or next following the effective date of
this subsection.
Section 16. Section 5504(b) of Title 71 is amended to read:
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§ 5504. Member contributions for the purchase of credit for
previous State service or to become a full coverage
member.
* * *
(b) Certification and method of payment.--
(1) 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 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 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.
(2) No payments for service or coverage shall be allowed
for which the required contributions would cause a violation
of the limitation related to contributions applicable to
governmental plans contained in IRC § 415. In the event that
any service credit or coverage based on such disallowed
contributions is granted after the effective date of this
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paragraph, then such service credit shall be canceled and
benefits calculated without regard to such service or
contributions and any member contributions in excess of the
limitations and statutory interest credited on those
contributions shall be refunded to the member by the board.
Section 17. Section 5505 of Title 71 is amended by adding a
subsection to read:
§ 5505. Contributions for the purchase of credit for creditable
nonstate service.
* * *
(j) Disallowed contributions.--No payments for service shall
be allowed for which the required contributions would cause a
violation of the limitation related to contributions applicable
to governmental plans contained in IRC § 415. In the event that
any service credit based on such disallowed contributions is
granted after the effective date of this subsection, then such
service credit shall be canceled and benefits calculated without
regard to such service or contributions and any member
contributions in excess of the limitations and statutory
interest credited on those contributions shall be refunded to
the member by the board.
Section 18. Sections 5506, 5701, 5702(d), 5704(g) and
5705(a) of Title 71 are amended to read:
§ 5506. Incomplete payments.
(a) General rule.--In the event that a member terminates
State service 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
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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 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 in
the event a member dies in State service or within 30 days of
termination of State service 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 of such reduced
present value.
(b) Disallowed contributions.--No payments for service or
coverage shall be allowed for which the required contributions
would cause a violation of the limitation related to
contributions applicable to governmental plans contained in IRC
§ 415. In the event that any service credit or coverage based on
such disallowed contributions is granted after the effective
date of this subsection, then such service credit or coverage
shall be canceled and benefits calculated without regard to such
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service, coverage or contributions and any member contributions
in excess of the limitations and statutory interest credited on
those contributions shall be refunded to the member by the
board.
§ 5701. Return of total accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable under this chapter to which he may be entitled,
elect to receive his total accumulated deductions by his
required beginning date.
§ 5702. Maximum single life annuity.
* * *
(d) Limitation regarding annual benefit under IRC § 415.--
Notwithstanding any provision of this part to the contrary,
including, but not limited to, subsection (c), no benefit shall
be payable to the extent that such benefit exceeds any
limitations under IRC § [415(b)] 415 in effect with respect to
governmental plans as such term is defined in IRC § 414(d) on
the date the benefit payment becomes effective[.], provided
however, that any increase in any limitation under IRC § 415
shall be applicable to all current and future annuitants and
survivor annuitants.
§ 5704. Disability annuities.
* * *
(g) Limitation regarding annual benefit under IRC § 415.--
Notwithstanding any provisions of this part to the contrary, no
benefit shall be payable to the extent that such benefit exceeds
any limitation under IRC § [415(b)] 415 as in effect with
respect to governmental plans as such term is defined in IRC §
414(d) on the date the benefit payment becomes effective[.],
provided however, that any increase in any limitation under IRC
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§ 415 shall be applicable to all current and future annuitants
and survivor annuitants.
§ 5705. Member's options.
(a) General rule.--Any special vestee who has attained
superannuation age, any vestee who does not have Class A-3 or
Class A-4 service credit having five or more eligibility points
for service other than Class T-E or Class T-F service in the
Public School Employees' Retirement System, or vestee who has
Class A-3 or Class A-4 service credit having ten or more
eligibility points, any member with Class G, Class H, Class I,
Class J, Class K, Class L, Class M or Class N service having
five or more eligibility points or any other eligible member
upon termination of State service who has not withdrawn his
total accumulated deductions as provided in section 5701
(relating to return of total accumulated deductions) may apply
for and elect to receive either a maximum single life annuity,
as calculated in accordance with the provisions of section 5702
(relating to maximum single life annuity), or a reduced annuity
certified by the actuary to be actuarially equivalent to the
maximum single life annuity and in accordance with one of the
following options; except that no member shall elect an annuity
payable to one or more survivor annuitants other than his spouse
or alternate payee of such a magnitude that the present value of
the annuity payable to him for life plus any lump sum payment he
may have elected to receive is less than 50% of the present
value of his maximum single life annuity[:] and no member may
elect a payment option that would provide benefits that do not
satisfy the minimum distribution requirements or would violate
the incidental death benefit rules of IRC § 401(a)(9):
(1) Option 1.--A life annuity to the member with a
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guaranteed total payment equal to the present value of the
maximum single life annuity on the effective date of
retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
(2) Option 2.--A joint and survivor annuity payable
during the lifetime of the member with the full amount of
such annuity payable thereafter to his survivor annuitant, if
living at his death.
(3) Option 3.--A joint and fifty percent (50%) survivor
annuity payable during the lifetime of the member with one-
half of such annuity payable thereafter to his survivor
annuitant, if living at his death.
(4) Option 4.--Some other benefit which shall be
certified by the actuary to be actuarially equivalent to the
maximum single life annuity, subject to the following
restrictions:
(i) any annuity shall be payable without reduction
during the lifetime of the member;
(ii) the sum of all annuities payable to the
designated survivor annuitants shall not be greater than
one and one-half times the annuity payable to the member;
and
(iii) a portion of the benefit may be payable as a
lump sum, except that such lump sum payment shall not
exceed an amount equal to the total accumulated
deductions standing to the credit of the member that are
not the result of contributions and statutory interest
made or credited as a result of Class A-3 or Class A-4
service. The balance of the present value of the maximum
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single life annuity adjusted in accordance with section
5702(b) shall be paid in the form of an annuity with a
guaranteed total payment, a single life annuity, or a
joint and survivor annuity or any combination thereof but
subject to the restrictions of subparagraphs (i) and (ii)
under this option.
* * *
Section 19. Section 5706(a) and (a.1) of Title 71 are
amended and the section is amended by adding subsections to
read:
§ 5706. Termination of annuities.
(a) General rule.--
(1) 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 service
or entering school service 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
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increased, on or after the member attains superannuation age,
by the percent applicable had he not returned to service.
(2) This subsection shall not apply in the case of any
annuitant who:
(i) may render services to the Commonwealth in the
capacity of an independent contractor; or
(ii) is over normal retirement age or who has been
an annuitant for more than one year and who may render
service to the Commonwealth:
(A) 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
(B) 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 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.]
(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 who is over normal
retirement age or who has been an annuitant for more than one
year may be returned to State service for a period not to exceed
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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.
* * *
(a.4) Return to service as a senior judge or senior
magisterial district judge.--Notwithstanding the provisions of
the act of September 30, 1983 (P.L.160, No.39), known as the
Public Official Compensation Law, 42 Pa.C.S. (relating to
judiciary and judicial procedure) or any other provision of law
or rule of court providing for or allowing a member of the
judiciary to return to service as a senior judge, senior
justice, senior magisterial district judge or in any
administrative, fact finding, adjudicative, appellate or other
capacity with any court or tribunal or in any other capacity for
which compensation is received and to receive such compensation,
whether paid on a per diem, hourly, salaried or other basis, in
addition to any annuity payable under this part, any such member
of the judiciary who returns to State service shall be subject
to the provision of this section and section 5301 (relating to
mandatory and optional membership) unless that member of the
judiciary is over normal retirement age or has been an annuitant
for more than one year.
(a.5) No contributions or credited service.--The service of
an annuitant whose annuity does not cease upon his return to
State or school service shall not be subject to member
contributions or eligible for qualification as creditable State
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service.
* * *
Section 20. Sections 5707 and 5709 of Title 71 are amended
by adding subsections to read:
§ 5707. Death benefits.
* * *
(g) 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).
§ 5709. Payment of benefits.
* * *
(d) Required distributions.--All payments pursuant to this
section shall start and be made in compliance with the required
beginning date, minimum distribution requirements and incidental
death benefit rules of IRC § 401(a)(9).
Section 21. Sections 5903(a), 5905(e), (e.1) and (g),
5906(c), 5907(d), (g), (h) and (i) and 5953 of Title 71 are
amended to read:
§ 5903. Duties of the board to advise and report to heads of
departments and members.
(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
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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.] 415.
* * *
§ 5905. Duties of the board regarding applications and
elections of members.
* * *
(e) Certification to vestees and special vestees terminating
service.--The board shall certify to a vestee or to a special
vestee within one year of termination of State service of such
member:
(1) the total accumulated deductions standing to his
credit at the date of termination of service;
(2) the number of years and fractional part of a year of
credit in each class of service; [and]
(3) the maximum single life annuity to which the vestee
or special vestee shall become entitled upon the attainment
of superannuation age and the filing of an application for
such annuity[.]; and
(4) the obligation of the member to commence
distributions by the member's required beginning date.
(e.1) Notification to vestees and special vestees
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approaching superannuation age.--The board shall notify each
vestee and special vestee in writing 90 days prior to his
attainment of superannuation age that he shall apply for his
annuity within 90 days of attainment of superannuation age;
that, if he does so apply, his effective date of retirement will
be the date of attainment of superannuation age; that, if he
does not so apply but defers his application to a later date,
then he has an obligation to apply by his required beginning
date and that his effective date of retirement will be the later
of the date of filing such application or the date specified on
the application, [whichever is later; and that, if he 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] which shall not be later than his required
beginning date.
* * *
(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, 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 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
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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.]
* * *
§ 5906. Duties of heads of departments.
* * *
(c) Member contributions.--The head of department shall
cause the required pickup contributions for current service to
be made and shall cause to be deducted any other required member
contributions, including, but not limited to, contributions owed
by an active member with multiple service membership for school
service and creditable nonschool service in the Public School
Employees' Retirement System and amounts certified by the Public
School Employees' Retirement Board as due and owing on account
of termination of annuities, from each payroll. The head of
department shall notify the board at times and in a manner
prescribed by the board of the compensation of any noneligible
member to whom the limitation under IRC § 401(a)(17) either
applies or is expected to apply and shall cause such member's
contributions 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 head of department shall certify to
the State Treasurer the amounts picked up and deducted and shall
send the total amount picked up and deducted together with a
duplicate of such voucher to the secretary of the board every
pay period. The head of department shall pay pickup
contributions from the same source of funds which is used to pay
other compensation to the employee. On or before January 31,
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1997, and on or before January 31 of each year thereafter, the
head of department shall, at the time when the income and
withholding information required by law is furnished to each
member, also furnish the amount of pickup contributions made on
his behalf and notify the board, if it has not been previously
notified, of any noneligible member whose compensation in the
preceding year exceeded the annual compensation limit under IRC
§ 401(a)(17). If the board shall determine that the member's
savings account shall have been credited with pickup
contributions for a noneligible member in the preceding year
which are attributable to compensation in excess of the
limitation under IRC § 401(a)(17), or with total member
contributions for such member which would cause such member's
contributions or benefits to exceed any applicable limitation
under IRC § 401(a)(17) or [415(b)] 415, the board shall as soon
as practicable refund to the member from his individual member
account such amount, together with the statutory interest
thereon, as will cause the member's total member contributions
in the preceding year not to exceed the applicable limit. The
payment of any such refund to the member shall be charged to the
member's savings account.
* * *
§ 5907. Rights and duties of State employees and members.
* * *
(d) Credit for previous service or change in membership
status.--Any active member or eligible school employee who
desires to receive credit for his total previous State service
or creditable nonstate service to which he is entitled, or a
joint coverage member who desires to become a full coverage
member, shall so notify the board and upon written agreement by
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the member and the board as to the manner of payment of the
amount due, the member shall receive credit for such service as
of the date of such agreement subject to the provisions in this
part relating to the limitations under IRC § 415.
* * *
(g) Vesting of retirement rights.--If a member elects to
vest his retirement rights 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 total accumulated deductions standing to his credit
or apply for an annuity.
(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 filed by the member's required beginning
date and shall be effective as of the date it is filed with the
board, subject to the provisions of section 5905(f) (relating to
duties of the board regarding applications and elections of
members). [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.]
(i) Failure to apply for annuity.--If a member is eligible
to receive an annuity and does not file a proper application
within 90 days of termination of service, his annuity will
become effective as of the later of the date the application is
filed with the board or the date designated on the application
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[whichever is later] which shall not be later than his required
beginning date.
* * *
§ 5953. Taxation, attachment and assignment of funds.
(a) General rule.--
(1) Except as provided in paragraphs (2), (3) and (4),
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 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 except for a set-off by the Commonwealth
in the case provided in [subparagraph (i)] this paragraph,
and shall be unassignable except[:
(i) To] to the Commonwealth in the case of a member
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 which has been
satisfied by the board from the fund.
(ii) To a credit union as security for a loan 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
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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.
(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 member's surviving spouse and a member's former spouse
who is an alternate payee under an approved domestic
relations order. 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).
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(b) Authorized payments from fund.--The board shall be
authorized to pay from the fund[:
(1) In] in the case of a member who is terminating
service, the amount determined after certification by the
head of the department that the member 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 in the amount so certified.
[(2) In the case of a loan 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.]
Section 22. Title 71 is amended by adding a section to read:
§ 5955.2. Construction of part with respect to the Internal
Revenue Code.
(a) Limitation regarding annual benefit under IRC § 415.--
(1) (i) Notwithstanding any provisions of this part to
the contrary, no benefit shall be payable to the extent that
such benefit exceeds any limitation under IRC § 415 in effect
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with respect to governmental plans as the term is defined in
IRC § 414(d) on the date the benefit payment becomes
effective, provided, however, that any increase in any
limitation under IRC § 415 shall be applicable to all current
and future annuitants. No act of the General Assembly enacted
after the effective date of this section that increases
benefits under this part either for active members, inactive
members, vestees or annuitants shall be deemed by the rules
of statutory construction or otherwise to provide for
benefits in excess of any limitation, as adjusted or
subsequently increased, provided for under IRC § 415 unless
specifically so provided by act of the General Assembly.
(ii) Notwithstanding subparagraph (i), any increase
in benefits for any members of the system after the
effective date of this section are intended to be
applicable to the fullest extent allowed by law and this
section authorizes any such increases in limitations or
allowable benefits.
(2) In the event that annuities payable to a member from
both the system and the Public School Employees' Retirement
System are combined for purposes of determining whether
annuities from the system and the Public School Employees'
Retirement System are in excess of the limitations under IRC
§ 415(b), then:
(i) to the extent that the combined benefits exceed
such limitations, but neither of the annuities from
either the system or the Public School Employees'
Retirement System would individually exceed such
limitations, or the annuities payable under this part
individually exceed such limitations and the annuity
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payable from the Public School Employees' Retirement
System does not, then the limitations shall be applied to
the annuities payable under this part to the extent
required for such combined benefits to be within the
limitations; or
(ii) to the extent that the annuity payable from the
Public School Employees' Retirement System exceeds such
limitation and the annuity from this part does not, or
the annuities payable from the system and the Public
School Employees' Retirement System individually exceed
the limitations, then the limitation shall be applied
first to the annuity payable from the Public School
Employees' Retirement System so that the annuity from the
Public School Employees' Retirement System is not in
excess of such limitations and any remaining limitation
will be applied to the benefits payable under this part.
(b) Vesting in event of plan termination.--
(1) In the event of termination of the system or upon
complete discontinuance of contributions under this part, the
rights of all members of the system to benefits accrued under
this part to the date of such termination or discontinuance,
to the extent then funded, and the amounts credited to the
members' savings account are vested and nonforfeitable,
except as allowed under 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 or any provision of this part
and any such member shall be eligible to be a vestee under
section 5309 (relating to eligibility for vesting) or receive
an annuity under section 5308(a) or (b) (relating to
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eligibility for annuities) without regard to any requirement
that the member needs a specified number of eligibility
points or years of credited service to be eligible to be a
vestee or receive an annuity.
(2) This subsection shall not apply to benefits or
contributions which, pursuant to the regulations prescribed
by the Secretary of the Treasury or his delegate to preclude
the discrimination prohibited by IRC § 401(a)(4) as in effect
on September 1, 1974, may not be used for such designated
employees in the event of early termination of the system.
(c) Permissive service credit.--Nothing in this part shall
be construed or deemed to imply that any member of the system
shall be required to make contributions to the system for the
purchase of State or nonstate permissive service credit in
excess of the limits established by IRC § 415(n)(3)(A)(iii). Any
contributions made by a member of the system for the purchase of
State or nonstate service credit which are determined to be in
excess of those limits shall be refunded to the member in a lump
sum subject to withholding for all applicable taxes and
penalties as soon as administratively possible after the
determination is made. Any refund of excess contributions made
under this section shall not affect the benefit payable to the
member and shall not be treated as or deemed to be a withdrawal
of the member's accumulated deductions.
(d) References to Internal Revenue Code of 1986.--References
in this part to provisions of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.), including for this
purpose administrative regulations promulgated under that act,
are intended to include such laws and regulations as are in
effect on the effective date of this section and as they may be
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amended or supplemented or supplanted by successor provisions
after the effective date of this section.
(e) Construction and administration of part.--This part
shall be construed and administered in such a manner that the
system shall satisfy the requirements necessary to qualify as a
qualified pension plan under IRC § 401(a) and other applicable
provisions of the IRC. The rules, regulations and procedures
adopted and promulgated by the board under section 5902(h)
(relating to administrative duties of the board) may include
those necessary to accomplish the purpose of this section.
Section 23. Repeals are as follows:
(1) The General Assembly finds that the repeal under
paragraph (2) is necessary to effectuate this act.
(2) Section 23 of the act of May 17, 2001 (P.L.26,
No.9), entitled "An act amending Titles 24 (Education) and 71
(State Government) of the Pennsylvania Consolidated Statutes,
further providing for public school employees' retirement and
State employees' retirement; defining terms; providing for
additional optional classifications for existing members, for
new classifications for prospective members and for health
insurance for retired school employees; and further providing
for creditable school and State service, for creditable
nonschool and nonstate service, for eligibility, for vesting,
for regular member contributions, for return to service, for
payments by employers and the Commonwealth, for termination
of annuities, for actuarial cost methods, for member options,
for funding of supplemental annuities, for administration,
for reports to agencies and members, for applications and
elections, for the composition of the Public School
Employees' Retirement Board and of the State Employees'
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Retirement Board, for investment powers of the boards, for
management of funds and accounts and for enforcement
officers' benefit and supplemental annuity accounts," is
repealed.
Section 24. References in this act to provisions of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1
et seq.), including for this purpose administrative regulations
promulgated thereunder, are intended to include such laws and
regulations as are in effect on the effective date of this
section and as they may be amended or supplemented or supplanted
by successor provisions after the effective date of this
section.
Section 25. Nothing in this act that amends or supplements
provisions of 24 Pa.C.S. Pt. IV in relation to requirements for
qualification of the Public School Employees' Retirement System
as a qualified pension plan under sections 401(a) and 415(b) of
the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
§§ 401(a) and 415(b)) nor any construction of 24 Pa.C.S. Pt. IV,
as so amended or supplemented, or any rules or regulations
adopted under 24 Pa.C.S. Pt. IV shall create in any member of
the system or in any other person claiming an interest in the
account of any such member a contractual right, either express
or implied nor in any construction of 24 Pa.C.S. Pt. IV, as so
amended or supplemented, or any rules or regulations adopted
under 24 Pa.C.S. Pt. IV. The provisions of 24 Pa.C.S. Pt. IV
shall remain subject to the Internal Revenue Code of 1986, as
amended, and regulations thereunder as the same may hereafter be
amended, 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
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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.
Section 26. Nothing in this act shall be construed or deemed
to imply that:
(1) 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), those
limitations would not otherwise apply to members of the
Public School Employees' Retirement System and the benefits
payable pursuant to 24 Pa.C.S. Pt. IV.
(2) 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
accordance with the provisions of 24 Pa.C.S. Pt. IV or other
applicable law prior to the effective date of this section.
Section 27. In addition to any other member of the Public
School Employees' Retirement System to which this act shall
apply, it is the expressed intention of the General Assembly
that this act shall apply to all members of the Public School
Employees' Retirement System who are active members and inactive
members of the Public School Employees' Retirement System, and
to any former school employee who is a multiple service member,
is a State employee and is a member of the State Employees'
Retirement System, without regard to class of service, State
office or employment position or effective date of commencing
State service or membership in the State Employees' Retirement
System. Notwithstanding this section, the amendments to 24
Pa.C.S. § 8346(b.1) shall not apply to annuitants whose most
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recent return to school service occurred before the effective
date of this section.
Section 28. Nothing in this act which amends or supplements
provisions of 71 Pa.C.S. Pt. XXV in relation to requirements for
qualification of State Employees' Retirement System as a
qualified pension plan under sections 401(a) and 415(b) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§
401(a) and 415(b)) nor any construction of 71 Pa.C.S. Pt. XXV,
as so amended or supplemented, or any rules or regulations
adopted under 71 Pa.C.S. Pt. XXV shall create in any member of
the State Employees' Retirement System or in any other person
claiming an interest in the account of any such member a
contractual right, either express or implied nor in any
construction of 71 Pa.C.S. Pt. XXV, as so amended or
supplemented, or any rules or regulations adopted under 71
Pa.C.S. Pt. XXV. The provisions of 71 Pa.C.S. Pt. XXV shall
remain subject to the Internal Revenue Code of 1986, and
regulations thereunder as the same may be amended after the
effective date of this section, 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 qualifications of the
State Employees' Retirement System as a qualified pension plan
under section 401(a) and other applicable provisions of the
Internal Revenue Code of 1986.
Section 29. Nothing in this act shall be construed or deemed
to imply that:
(1) 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
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of 1986 (Public Law 99-514, 26 U.S.C. § 401), those
limitations would not otherwise apply to members of the State
Employees' Retirement System and the benefits payable under
71 Pa.C.S. Pt. XXV.
(2) 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
prior to the effective date of this section.
Section 30. In addition to any other member of the State
Employees' Retirement System to which this act applies, the
General Assembly intends that this act apply to all members of
the State Employees' Retirement System who are active members
and inactive members on leave without pay of the State
Employees' Retirement System, and to any former State employee
who is a multiple service member, is a school employee and is a
member of the Public School Employees' Retirement System,
without regard to class of service, State office or employment
position or effective date of commencing State service or
membership in the Public School Employees' Retirement System.
Notwithstanding this section, the addition or amendment of 71
Pa.C.S. § 5706(a), (a.1) and (a.4) shall not apply to annuitants
whose most recent return to State service or most recent
appointment or commission to any position otherwise covered by
71 Pa.C.S. § 5706(a.4) occurred before the effective date of
this section.
Section 31. This act shall take effect immediately.
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