Regular Session 2015-2016 House Bill 2316 P.N. 3814

PRINTER'S NO. 3814

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2316

Session of

2015

INTRODUCED BY ORTITAY, COX, CUTLER, GODSHALL, GROVE, KAUFFMAN,

McGINNIS, SACCONE, SAYLOR AND WARD, SEPTEMBER 7, 2016

REFERRED TO COMMITTEE ON STATE GOVERNMENT, SEPTEMBER 7, 2016

AN ACT

Amending Title 71 (State Government) of the Pennsylvania

Consolidated Statutes, in retirement for State employees and

officers, further providing for preliminary provisions and

for membership, credited service, classes of service and

eligibility for benefits; providing for State Employees'

Defined Contribution Plan; further providing for

contributions, for benefits and for administration, funds and

accounts; and making editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

ARTICLE I

(RESERVED)

ARTICLE II

(RESERVED)

ARTICLE III

Section 301. The definitions of "alternate payee," "average

noncovered salary," "beneficiary," "compensation," "creditable

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

service," "distribution," "domestic relations order," "final

average salary," "inactive member," "intervening military

service," "irrevocable beneficiary," "previous State service,"

"reemployed from USERRA leave," "retirement counselor," "salary

deductions," "special vestee," "State employee," "superannuation

age" and "valuation interest" in section 5102 of Title 71 of the

Pennsylvania Consolidated Statutes, amended December 28, 2015

(P.L.529, No.93), are amended and the section is amended by

adding definitions to read:

§ 5102. Definitions.

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

a different meaning is plainly required by the context, shall

have the following meanings:

* * *

"Accumulated employer defined contributions." The total of

the employer defined contributions paid into the trust on

account of a participant's State service together with any

investment earnings and losses and adjustment for fees, costs

and expenses credited or charged thereon.

"Accumulated mandatory participant contributions." The total

of the mandatory pickup participant contributions paid into the

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

any investment earnings and losses and adjustments for fees,

costs and expenses credited or charged thereon.

"Accumulated total defined contributions." The total of the

accumulated mandatory participant contributions, accumulated

employer defined contributions and accumulated voluntary

contributions, reduced by any distributions, standing to the

credit of a participant in an individual investment account in

the trust.

"Accumulated voluntary contributions." The total of any

amounts rolled over by a participant or transferred by a direct

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

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investment earnings and losses and adjustment for fees, costs

and expenses credited or charged thereon.

* * *

"Active participant." A State employee for whom mandatory

pickup participant contributions are being made to the trust or

for whom such contributions otherwise required for current State

service are not being made solely by reason of any provision of

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

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

26 U.S.C. § 401(a)(17) or 415) .

* * *

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

dependent of a member or participant who is recognized by a

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

portion of the moneys payable to that member or participant

under this part.

* * *

"Average noncovered salary." The average of the amounts of

compensation received by an active member each calendar year

since January 1, 1956, exclusive of the amount which was or

could have been covered by the Federal Social Security Act[,]

(42 U.S.C. § 301 et seq.), during that portion of the member's

service since January 1, 1956, for which he has received social

security integration credit.

* * *

"Beneficiary." The person or persons last designated in

writing to the board by a member to receive his accumulated

deductions or a lump sum benefit upon the death of [such] the

member[.] or by a participant to receive the participant's

vested accumulated total defined contributions or a lump sum

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benefit upon the death of the participant.

* * *

"Combined service employee." A current or former State

employee who is both a member of the system and a participant in

the plan.

* * *

"Compensation." Pickup contributions and mandatory pickup

contributions plus remuneration actually received as a State

employee excluding refunds for expenses, contingency and

accountable expense allowances; excluding any severance payments

or payments for unused vacation or sick leave; and excluding

payments for military leave and any other payments made by an

employer while on USERRA leave, leave of absence granted under

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

government employees), military leave of absence granted under

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

absence) or other types of military leave, including other types

of leave payments, stipends, differential wage payments as

defined in IRC § 414(u)(12) and any other payments: Provided,

however, That compensation received prior to January 1, 1973,

shall be subject to the limitations for retirement purposes in

effect December 31, 1972, if any: Provided further, That the

limitation under section 401(a)(17) of the Internal Revenue Code

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

account for the purpose of member contributions, including any

additional member contributions in addition to regular or joint

coverage member contributions and Social Security integration

contributions, regardless of class of service, shall apply to

each member who first became a member of the State Employees'

Retirement System on or after January 1, 1996, and who by reason

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of such fact is a noneligible member subject to the application

of the provisions of section 5506.1(a) (relating to annual

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

each participant.

* * *

"Creditable nonstate service." Service other than:

(1) service as a State employee;

(2) service converted to State service pursuant to

section 5303.1 (relating to election to convert county

service to State service); or

(3) school service converted to State service pursuant

to section 5303.2 (relating to election to convert school

service to State service)

for which an active member may obtain credit in the system.

"Credited service." State or creditable nonstate service for

which the required contributions have been made to the fund or

for which the contributions otherwise required for such service

were not made solely by reason of section 5502.1 (relating to

waiver of regular member contributions and Social Security

integration member contributions) or any provision of this part

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

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

§ 401(a)(17) or 415), except as otherwise provided in this part,

or for which salary deductions to the system or lump sum

payments have been agreed upon in writing.

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

for which:

(1) pickup contributions are made for an active member

[or];

(2) in the case of an inactive member on leave without

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pay, the date of his resignation or the date his employment

is formally discontinued by his employer[.];

(3) mandatory pickup participant contributions are made

for an active participant;

(4) in the case of an inactive participant on leave

without pay, the date of his resignation or the date his

employment is formally discontinued by his employer ; or

(5) in the case of a combined service employee, the

latest of the dates in paragraphs (1), (2), (3) and (4).

* * *

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

interest in either the State Employees' Retirement Fund or the

State Employees' Defined Contribution Trust, or both, which is

payable under this part.

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

including approval of a property settlement agreement, entered

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

competent jurisdiction pursuant to a domestic relations law

which relates to the marital property rights of the spouse or

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

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

participant under this part in furtherance of the equitable

distribution of marital assets. The term includes orders of

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

to definitions) and orders for the enforcement of arrearages as

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

arrearages).

* * *

"Employer defined contributions."

(1) Unless paragraph (2) applies, contributions equal to

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4% of an active participant's compensation which are made by

the Commonwealth or other employer for current service to the

trust to be credited in the participant's individual

investment account.

(2) For an enforcement officer, correction officer,

psychiatric security aide, Delaware River Port Authority

policeman, park ranger or Capitol police officer,

contributions equal to 5.5% of an active participant's

compensation which are made by the Commonwealth or other

employer for current service to the trust to be credited in

the participant's individual investment account.

* * *

"Final average salary." The highest average compensation

received as a member during any three nonoverlapping periods of

four consecutive calendar quarters during which the member was a

State employee, with the compensation for part-time service

being annualized on the basis of the fractional portion of the

year for which credit is received; except if the employee was

not a member for three nonoverlapping periods of four

consecutive calendar quarters, the total compensation received

as a member, annualized in the case of part-time service,

divided by the number of nonoverlapping periods of four

consecutive calendar quarters of membership; in the case of a

member with multiple service, the final average salary shall be

determined on the basis of the compensation received by him as a

[State employee] member of the system or as a school employee

other than as a participant in the School Employees' Defined

Contribution Plan, or both; in the case of a member with Class

A-3 or Class A-4 service and service in one or more other

classes of service, the final average salary shall be determined

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on the basis of the compensation received by him in all classes

of State service credited in the system; and, in the case of a

member who first became a member on or after January 1, 1996,

the final average salary shall be determined as hereinabove

provided but subject to the application of the provisions of

section 5506.1(a) (relating to annual compensation limit under

IRC § 401(a)(17)). Final average salary shall be determined by

including in compensation payments deemed to have been made to a

member reemployed from USERRA leave to the extent member

contributions have been made as provided in section 5302(f)(2)

(relating to credited State service) and payments made to a

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

leaves of absence for certain government employees) as provided

in section 5302(f)(6).

* * *

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

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

member for whom such contributions otherwise required for

current State service are not being made solely by reason of

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions) or any provision of this part relating to the

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

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

or 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.

"Inactive participant." A participant for whom no mandatory

pickup participant contributions are being made to the trust,

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except in the case of an active participant for whom such

contributions otherwise required for current State service are

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

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

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

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

contributions standing to his credit in the trust and who has

not filed an application for an annuity.

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

which are credited the amounts of the contributions made by a

participant and the participant's employer in accordance with

the provisions of this part, together with all interest and

investment earnings after deduction for fees, costs, expenses

and investment losses and charges for distributions.

"Intervening military service." Active military service of a

member who was a State employee and active member of the system

immediately preceding his induction into the armed services or

forces of the United States in order to meet a military

obligation excluding any voluntary extension of such service and

who becomes a State employee within 90 days of the expiration of

such service.

* * *

"Irrevocable beneficiary." The person or persons permanently

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

Employees' Retirement Board pursuant to an approved domestic

relations order to receive all or a portion of the accumulated

deductions, vested accumulated total defined contributions or

lump sum benefit payable upon the death of such member or

participant.

"Irrevocable successor payee." The person permanently

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designated by a participant receiving distributions in writing

to the board pursuant to an approved domestic relations order to

receive one or more distributions from the plan upon the death

of such participant.

* * *

"Mandatory pickup participant contributions." Contributions

equal to 7% of compensation that are made by the Commonwealth or

other employer for active participants for current service which

are picked up by the employer.

* * *

"Participant." An active participant, inactive participant

or participant receiving distributions.

"Participant receiving distributions." A participant in the

plan who has commenced receiving distributions from his

individual investment account but who has not received a total

distribution of his vested interest in the account.

* * *

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

established by the provisions of this part and the board.

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

section 5402 (relating to plan document) that contain the terms

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

regarding the establishment, administration and investment of

the plan and trust.

"Previous State service." Service rendered as a State

employee prior to his most recent entrance in the system[.],

provided that the State employee was not a participant in the

plan, was not eligible to be an optional participant in the plan

under section 5301(b.1) (relating to mandatory and optional

membership in system and participation in plan) or was not

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prohibited from being a participant under section 5301(c.1)

during such service.

* * *

"Reemployed from USERRA leave." Resumption of active

membership or active participation as a State employee after a

period of USERRA leave, provided, however, that the resumption

of active membership or active participation was within the time

period and under conditions and circumstances such that the

State employee was entitled to reemployment rights under 38

U.S.C. Ch. 43 (relating to employment and reemployment rights of

members of the uniformed services).

* * *

"Retirement counselor." The State Employees' Retirement

System or State Employees' Defined Contribution Plan employee

whose duty it shall be to advise each employee of his rights and

duties as a member of the system or as a participant of the

plan.

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

deducted from the compensation of an active member or active

participant, or the school service compensation of a multiple

service member who is an active member of the Public School

Employees' Retirement System, and paid into the fund or trust.

* * *

"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

20160HB2316PN3814 - 11 -

because of the elimination of his job position or duties due to

the transfer of other job positions or duties to a controlled

organization of the Penn State Geisinger Health System, provided

that:

(1) subsequent to termination of State service as an

employee of The Pennsylvania State University, the member has

not returned to State service in any other capacity or

position as a State employee;

(2) The Pennsylvania State University certifies to the

board that the member is eligible to be a special vestee;

(3) the member files an application to vest the member's

retirement rights pursuant to section 5907(f) (relating to

rights and duties of State employees [and], members and

participants) on or before September 30, 1997; and

(4) the member elects to leave the member's total

accumulated deductions in the fund and to defer receipt of an

annuity until attainment of superannuation age or the

member's required beginning date.

* * *

"State employee." Any person holding a State office or

position under the Commonwealth, employed by the State

Government of the Commonwealth, in any capacity whatsoever,

except an independent contractor or any person compensated on a

fee basis or any person paid directly by an entity other than a

State Employees' Retirement System employer, and shall include

members of the General Assembly, and any officer or employee of

the following:

(1) (i) The Department of Education.

(ii) State-owned educational institutions.

(iii) Community colleges.

20160HB2316PN3814 - 12 -

(iv) The Pennsylvania State University, except an

employee in the College of Agriculture who is paid wholly

from Federal funds or an employee who is participating in

the Federal Civil Service Retirement System. The

university shall be totally responsible for all employer

contributions under [section] sections 5507 (relating to

contributions to system by the Commonwealth and other

[employers).] employers before July 1, 2018) and 5507.1

(relating to contributions to system by the Commonwealth

and other employers starting July 1, 2018).

(2) The Pennsylvania Turnpike Commission, the Delaware

River Port Authority, the Port Authority Transit Corporation,

the Philadelphia Regional Port Authority, the Delaware River

Joint Toll Bridge Commission, the State Public School

Building Authority, The General State Authority, the State

Highway and Bridge Authority, the Delaware Valley Regional

Planning Commission, the Interstate Commission of the

Delaware River Basin, and the Susquehanna River Basin

Commission any time subsequent to its creation, provided the

commission or authority agrees to contribute and does

contribute to the fund or to the trust, from time to time,

the moneys required to build up the reserves necessary for

the payment of the annuities or other benefits of such

officers and employees without any liability on the part of

the Commonwealth to make appropriations for such purposes,

and provided in the case of employees of the Interstate

Commission of the Delaware River Basin, that the employee

shall have been a member of the system for at least ten years

prior to January 1, 1963.

(3) Any separate independent public corporation created

20160HB2316PN3814 - 13 -

by statute, not including any municipal or quasi-municipal

corporation, so long as he remains an officer or employee of

such public corporation, and provided that such officer or

employee of such public corporation was an employee of the

Commonwealth immediately prior to his employment by such

corporation, and further provided such public corporation

shall agree to contribute and contributes to the fund or to

the trust, from time to time, the moneys required to build up

the reserves necessary for the payment of the annuities or

other benefits of such officers and employees without any

liability on the part of the Commonwealth to make

appropriations for such purposes.

* * *

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

a participant receiving distributions in writing to the board to

receive one or more distributions upon the death of such

participant.

"Superannuation age." For classes of service in the system

other than Class A-3 and Class A-4, any age upon accrual of 35

eligibility points or age 60, except for a member of the General

Assembly, an enforcement officer, a correction officer, a

psychiatric security aide, a Delaware River Port Authority

policeman or an officer of the Pennsylvania State Police, age

50, and, except for a member with Class G, Class H, Class I,

Class J, Class K, Class L, Class M or Class N service, age 55

upon accrual of 20 eligibility points. For Class A-3 and Class

A-4 service, any age upon attainment of a superannuation score

of 92, provided the member has accrued 35 eligibility points, or

age 65, or for park rangers or capitol police officers, age 55

with 20 years of service as a park ranger or capitol police

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officer, except for a member of the General Assembly, an

enforcement officer, a correction officer, a psychiatric

security aide, a Delaware River Port Authority policeman or an

officer of the Pennsylvania State Police, age 55. A vestee with

Class A-3 or Class A-4 service credit attains superannuation age

on the birthday the vestee attains the age resulting in a

superannuation score of 92, provided that the vestee has at

least 35 eligibility points, or attains another applicable

superannuation age, whichever occurs first.

* * *

"Sworn police officer." A State police officer who is

employed and serving as an officer of the Pennsylvania State

Police.

* * *

"Trust." The State Employees' Defined Contribution Trust

established under Chapter 54 (relating to State Employees'

Defined Contribution Plan).

* * *

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

compounded annually and applied to all accounts of the fund

other than the members' savings account.

* * *

"Voluntary contributions." Contributions made by a

participant to the trust in excess of his mandatory pickup

participant contributions either by salary deduction paid

through the employer or by an eligible rollover or direct

trustee-to-trustee transfer and credited to his individual

investment account.

Section 302. Section 5103 of Title 71 is amended to read:

§ 5103. Notice to members and participants.

20160HB2316PN3814 - 15 -

Notice by publication, including, without being limited to,

newsletters, newspapers, forms, first class mail, letters,

manuals and, to the extent authorized by a policy adopted by the

board, electronically, including, without being limited to, e-

mail or [World Wide Web sites] Internet websites, distributed or

made available to members and participants in a manner

reasonably calculated to give actual notice of those sections of

the State Employees' Retirement Code that require notice to

members or participants shall be deemed sufficient notice for

all purposes.

Section 303. Title 71 is amended by adding a section to

read:

§ 5104. Reference to State Employees' Retirement System.

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

unless the context clearly indicates otherwise, any reference to

the State Employees' Retirement System in a statutory provision

other than this part and 24 Pa.C.S. Pt. IV (relating to

retirement for school employees) shall include a reference to

the State Employees' Defined Contribution Plan and any reference

to the State Employees' Retirement Fund shall include a

reference to the State Employees' Defined Contribution Trust.

(b) Agreement.--The agreement of an employer listed in the

definition of "State employee" under section 5102 (relating to

definitions) or any other law to make contributions to the State

Employees' Retirement Fund or to enroll its employees as members

in the State Employees' Retirement System shall be deemed to be

an agreement to make contributions to the State Employees'

Defined Contribution Trust or to enroll its employees in the

State Employees' Defined Contribution Plan.

Section 304. Section 5301 heading, (a), (b), (c) and (d) of

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Title 71 are amended and the section is amended by adding

subsections to read:

§ 5301. Mandatory and optional membership in system and

participation in plan.

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

system shall be mandatory as of the effective date of employment

for all State employees except the following:

(1) Governor.

(2) Lieutenant Governor.

(3) Members of the General Assembly.

(4) Heads or deputy heads of administrative departments.

(5) Members of any independent administrative board or

commission.

(6) Members of any departmental board or commission.

(7) Members of any advisory board or commission.

(8) Secretary to the Governor.

(9) Budget Secretary.

(10) Legislative employees.

(11) School employees who have elected membership in the

Public School Employees' Retirement System.

(12) School employees who have elected membership in an

independent retirement program approved by the employer,

provided that in no case, except as hereinafter provided,

shall the employer contribute on account of such elected

membership at a rate greater than the employer normal

contribution rate as determined in section 5508(b) (relating

to actuarial cost method for fiscal years ending before July

1, 2018). For the fiscal year 1986-1987 an employer may

contribute on account of such elected membership at a rate

which is the greater of 7% or the employer normal

20160HB2316PN3814 - 17 -

contribution rate as determined in section 5508(b) and for

the fiscal year 1992-1993 and all years after that at a rate

of 9.29%.

(13) Persons who have elected to retain membership in

the retirement system of the political subdivision by which

they were employed prior to becoming eligible for membership

in the State Employees' Retirement System.

(14) Persons who are not members of the system and are

employed on a per diem or hourly basis for less than 100 days

or 750 hours in a 12-month period.

(15) Employees of the Philadelphia Regional Port

Authority who have elected to retain membership in the

pension plan or retirement system in which they were enrolled

as employees of the predecessor Philadelphia Port Corporation

prior to the creation of the Philadelphia Regional Port

Authority.

(16) Employees of the Juvenile Court Judges' Commission

who, before the effective date of this paragraph, were

transferred from the State System of Higher Education to the

Juvenile Court Judges' Commission as a result of an

interagency transfer of staff approved by the Office of

Administration and who, while employees of the State System

of Higher Education, had elected membership in an independent

retirement program approved by the employer.

(17) State employees, other than sworn police officers

performing service as a sworn police officer, whose first

period of State service starts on or after January 1, 2018.

(a.1) Mandatory participation in the plan.--State employees

listed in subsection (a)(17) who are not listed in subsection

(a)(1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11) and

20160HB2316PN3814 - 18 -

(13) shall be mandatory participants as of the first date of

State service.

(b) Optional membership in the system.--The State employees

listed in subsection (a)(1) through (11) shall have the right to

elect membership in the system on or before December 31, 2017;

once such election is exercised, membership shall continue until

the termination of State service.

(b.1) (1) Optional participation in the plan.--The State

employees listed in subsection (a)(17) who also are listed in

subsection (a)(1) through (10) shall have the right to elect

participation in the plan. Once such election is exercised,

participation will be effective as of the date of election

and shall continue until the termination of State service.

The State employees described in this paragraph shall not

have the right to elect membership in the system.

(2) The State employees not listed in subsection (a)

(17), who are listed in subsection (a)(1) through (10) and

who are not members of the system because membership is

optional, shall have the right to elect participation in the

plan. Once such election is exercised, participation shall be

effective as of the date of election and shall continue until

termination of State service. The State employees described

in this paragraph shall not have the right to elect

membership in the system.

employees listed in subsection (a)(12), (13), (14) [and], (15)

and (17) shall not have the right to elect membership in the

system.

(c.1) Prohibited participation in the plan.--The State

employees listed in subsection (a)(17) who also are listed in

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subsection (a)(13) and (15) shall not be eligible to participate

in the plan.

(d) Return to service.--An annuitant who returns to service

as a State employee shall resume active membership in the system

as of the effective date of employment, except as otherwise

provided in section 5706(a) (relating to termination of

annuities), regardless of the optional membership category of

the position. An inactive participant or a participant receiving

distributions who returns to service as a State employee shall

be an active participant of the plan as of the effective date of

employment unless the position is eligible for optional

participation or is not eligible for participation in the plan,

or except as otherwise provided in section 5706(a).

* * *

Section 305. Section 5302(a), (b), (e) and (f) of Title 71,

amended December 28, 2015 (P.L.529, No.93), are amended to read:

§ 5302. Credited State service.

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

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

full-time salaried State employee, including any member of the

General Assembly, shall receive credit for service in each

period for which contributions as required are made to the fund,

or for which contributions otherwise required for such service

were not made to the fund solely by reason of section 5502.1

(relating to waiver of regular member contributions and Social

Security integration member contributions) or any provision of

this part relating to the limitations under IRC § 401(a)(17) or

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

20160HB2316PN3814 - 20 -

diem or hourly State employee shall receive one year of credited

service for each nonoverlapping period of 12 consecutive months

or 26 consecutive biweekly pay periods in which he is employed

and for which contributions are made to the fund or would have

been made to the fund but for such waiver under section 5502.1

or limitations under the IRC for at least 220 days or 1,650

hours of employment. If the member was employed and

contributions were made to the fund for less than 220 days or

1,650 hours, he shall be credited with a fractional portion of a

year determined by the ratio of the number of days or hours of

service actually rendered to 220 days or 1,650 hours, as the

case may be. A part-time salaried employee shall be credited

with the fractional portion of the year which corresponds to the

number of hours or days of service actually rendered and for

which contributions are made to the fund in relation to 1,650

hours or 220 days, as the case may be. In no case shall a member

who has elected multiple service receive an aggregate in the two

systems of more than one year of credited service for any 12

consecutive months.

(b) Creditable leaves of absence.--

(1) A member on leave without pay who is studying under

a Federal grant approved by the head of his department or who

is engaged up to a maximum of two years of temporary service

with the United States Government, another state or a local

government under the Intergovernmental Personnel Act of 1970

(5 U.S.C. §§ 1304, 3371-3376; 42 U.S.C. §§ 4701-4772) shall

be eligible for credit for such service: Provided, That

contributions are made in accordance with sections 5501

(relating to regular member contributions for current

service), 5501.1 (relating to shared-risk member

20160HB2316PN3814 - 21 -

contributions for Class A-3 and Class A-4 service), 5505.1

(relating to additional member contributions) [and], 5507

(relating to contributions to system by the Commonwealth and

other [employers)] employers before July 1, 2018) and 5507.1

(relating to contributions to system by the Commonwealth and

other employers starting July 1, 2018), the member returns

from leave without pay to active State service as a member of

the system for a period of at least one year, and he is not

entitled to retirement benefits for such service under a

retirement system administered by any other governmental

agency.

(2) An active member or active participant on paid leave

granted by an employer for purposes of serving as an elected

full-time officer for a Statewide employee organization which

is a collective bargaining representative under the act of

June 24, 1968 (P.L.237, No.111), referred to as the Policemen

and Firemen Collective Bargaining Act, or the act of July 23,

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

Act, and up to 14 full-time business agents appointed by an

employee organization that represents correction officers

employed at State correctional institutions: Provided, That

for elected full-time officers such leave shall not be for

more than three consecutive terms of the same office and for

up to 14 full-time business agents appointed by an employee

organization that represents correction officers employed at

State correctional institutions no more than three

consecutive terms of the same office; that the employer shall

fully compensate the member or the participant, including,

but not limited to, salary, wages, pension and retirement

contributions and benefits, other benefits and seniority, as

20160HB2316PN3814 - 22 -

if he were in full-time active service; and that the

Statewide employee organization shall fully reimburse the

employer for all expenses and costs of such paid leave,

including, but not limited to, contributions and payment in

accordance with [sections] section 5404 (relating to

participant contributions), 5405 (relating to mandatory

pickup participant contributions), 5406 (relating to employer

defined contributions), 5501, 5501.1, 5505.1 [and], 5507 or

5507.1, if the employee organization either directly pays, or

reimburses the Commonwealth or other employer for,

contributions made in accordance with [section] sections

5404, 5405, 5406, 5507 and 5507.1.

* * *

(e) Cancellation of credited service.--All credited service

in the system shall be cancelled if a member withdraws his total

accumulated deductions, except that a member with Class A-3 or

Class A-4 service credit and one or more other classes of

service credit shall not have his service credit as a member of

any classes of service other than as a member of Class A-3 or

Class A-4 cancelled when the member receives a lump sum payment

of accumulated deductions resulting from Class A-3 or Class A-4

service pursuant to section 5705.1 (relating to payment of

accumulated deductions resulting from Class A-3 and Class A-4

service). A partial or total distribution of accumulated total

defined contributions to a combined service employee shall not

cancel service credited in the system.

(f) Credit for military service.--A State employee who has

performed USERRA leave may receive credit in the system or

participate in the plan as follows:

(1) For purposes of determining whether a member is

20160HB2316PN3814 - 23 -

eligible to receive credited service in the system for a

period of active military service, other than active duty

service to meet periodic training requirements, rendered

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

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

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

individuals who were active members of the system when the

period of military service began, even if not defined as an

employee pursuant to 51 Pa.C.S. § 7301 (relating to

definitions).

(1.1) State employees may not receive service credit in

the system or exercise the options under 51 Pa.C.S. § 7306

(relating to retirement rights) for military leaves that

begin on or after the effective date of this subsection,

except as otherwise provided by this subsection.

(1.2) State employees may not participate in the plan or

exercise the options under 51 Pa.C.S. § 7306 for military

leaves that begin on or after the effective date of this

paragraph, except as otherwise provided by this subsection.

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

receive credit in the system as provided by this paragraph.

The following shall apply:

(i) A State employee who is reemployed from USERRA

leave as an active member of the system shall be treated

as not having incurred a break in State service by reason

of the USERRA leave and shall be granted eligibility

points as if the State employee had not been on the

USERRA leave. If a State employee who is reemployed from

USERRA leave as an active member of the system

subsequently makes regular member contributions,

20160HB2316PN3814 - 24 -

additional member contributions, Social Security

integration member contributions, shared-risk member

contributions and any other member contributions in the

amounts and in the time periods required by 38 U.S.C. Ch.

43 (relating to employment and reemployment rights of

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

the State employee had continued in State office or

employment and performed State service and was

compensated during the period of USERRA leave, then the

State employee shall be granted State service credit for

the period of USERRA leave. The State employee shall have

the State employee's benefits, rights and obligations

determined under this part as if the State employee was

an active member who performed creditable State service

during the USERRA leave in the job position that the

State employee would have held had the State employee not

been on USERRA leave and received the compensation on

which the member contributions to receive State service

credit for the USERRA leave were determined.

(ii) For purposes of determining whether a State

employee has made the required employee contributions for

State service credit for USERRA leave, if an employee who

is reemployed from USERRA leave as an active member of

the system terminates State service or dies in State

service before the expiration of the allowed payment

period, then State service credit for the USERRA leave

will be granted as if the required member contributions

were paid the day before termination or death. The amount

of the required member contributions will be treated as

an incomplete payment subject to the provisions of

20160HB2316PN3814 - 25 -

section 5506 (relating to incomplete payments). Upon a

subsequent return to State service or to school service

as a multiple service member, the required member

contributions treated as incomplete payments shall be

treated as member contributions that were either

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

sum pursuant to section 5705(a)(4) (relating to member's

options), as the case may be.

(iii) A State employee who is reemployed from USERRA

leave as an active member of the system who does not make

the required member contributions or makes only part of

the required member contributions within the allowed

payment period shall not be granted credited service for

the period of USERRA leave for which the required member

contributions were not timely made, shall not be eligible

to subsequently make contributions and shall not be

granted either State service credit or nonstate service

credit for the period of USERRA leave for which the

required member contributions were not timely made.

(2.1) The following shall apply:

(i) A participant who is reemployed from USERRA

leave shall be treated as not having incurred a break in

State service by reason of the USERRA leave and shall be

granted vesting credit as if the participant had not been

on USERRA leave. If a participant who is reemployed from

USERRA leave subsequently makes mandatory pickup

participant contributions in the amounts and in the time

periods required by 38 U.S.C. Ch. 43 and IRC § 414(u) as

if the participant had continued in his State office or

employment and performed State service and been

20160HB2316PN3814 - 26 -

compensated during the period of USERRA leave, the

participant's employer shall make the corresponding

employer defined contributions. Such an employee shall

have his contributions, benefits, rights and obligations

determined under this part as if he were an active

participant who performed State service during the USERRA

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

not been on USERRA leave and received the compensation on

which the mandatory pickup participant contributions to

receive State service credit for the USERRA leave were

determined, including the right to make voluntary

contributions on such compensation as permitted by law.

(ii) A participant who is reemployed from USERRA

leave who does not make the mandatory pickup participant

contributions or makes only part of the mandatory pickup

participant contributions within the allowed payment

period shall not be eligible to make mandatory pickup

participant contributions or voluntary contributions at a

later date for the period of USERRA leave for which the

mandatory pickup participant contributions were not

timely made.

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

performs USERRA leave from which the employee could have been

reemployed from USERRA leave had the State employee returned

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

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

to receive creditable nonstate service as nonintervening

military service for the period of USERRA leave should the

employee later return to State service as an active member of

the system and is otherwise eligible to purchase the service

20160HB2316PN3814 - 27 -

as nonintervening military service.

(3.1) A State employee who is a participant in the plan

and performs USERRA leave from which the employee could have

been reemployed from USERRA leave had the employee returned

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

43 for reemployment rights, but was not reemployed, shall not

be eligible to make mandatory pickup participant

contributions or voluntary contributions for the period of

USERRA leave should the employee later return to State

service and be a participant in the plan.

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

member on leave without pay who on or after the effective

date of this subsection is granted a leave of absence under

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

government employees) or a military leave under 51 Pa.C.S.

Ch. 73, that is not USERRA leave shall be able to receive

creditable nonstate service as nonintervening military

service should the employee return to State service as an

active member of the system and is otherwise eligible to

purchase the service as nonintervening military service.

(4.1) An active participant or inactive participant on

leave without pay who, on or after the effective date of this

paragraph, is granted a leave of absence under 51 Pa.C.S. §

4102 or a military leave under 51 Pa.C.S. Ch. 73 that is not

USERRA leave shall not be able to make mandatory pickup

participant contributions or voluntary contributions during

or for the leave of absence or military leave and shall not

have employer defined contributions made during such leave,

without regard to whether or not the State employee received

salary, wages, stipends, differential wage payments or other

20160HB2316PN3814 - 28 -

payments from his employer during the leave, notwithstanding

any provision to the contrary in 51 Pa.C.S. § 4102 or 51

Pa.C.S. Ch. 73.

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

the beneficiaries or survivor annuitants, as the case may be,

of the deceased member are entitled to any additional

benefits, including eligibility points, other than benefit

accruals relating to the period of qualified military

service, provided under this part had the member resumed and

then terminated employment on account of death.

(5.1) If a participant dies while performing USERRA

leave, the beneficiaries or successor payees of the deceased

participant are entitled to any additional benefits, other

than benefit accruals relating to the period of qualified

military service, provided under this part had the

participant resumed and terminated employment on account of

death.

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

his duties as a State employee for which 51 Pa.C.S. § 4102

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

efficiency rating shall not be an active member, receive

service credit or make member contributions for the leave of

absence, except as provided for in this part. Notwithstanding

this paragraph, any pay the member receives pursuant to 51

Pa.C.S. § 4102 shall be included in the determination of

final average salary and other calculations in the system

utilizing compensation as if the payments were compensation

under this part.

Section 306. Sections 5303(b)(2), (d)(1), (e)(1) and (4),

5303.2(a) and (e) and 5304(a) and (b) of Title 71 are amended to

20160HB2316PN3814 - 29 -

read:

§ 5303. Retention and reinstatement of service credits.

* * *

(b) Eligibility points for prospective credited service.--

* * *

(2) A special vestee or person otherwise eligible to be

a special vestee who returns to State service, other than as

a participant in the plan, or withdraws his accumulated

deductions pursuant to section 5311 (relating to eligibility

for refunds) or 5701 (relating to return of total accumulated

deductions) shall receive or retain eligibility points in

accordance with paragraph (1) but upon subsequent termination

of State service shall only be eligible to be an annuitant,

vestee or inactive member without regard to previous status

as a special vestee and without regard to the provisions of

this part providing for special vestees.

* * *

(d) Transfer of certain pension service credit.--

(1) Any person who was an employee of any county in this

Commonwealth on the personal staff of an appellate court

judge prior to September 9, 1985, and who had that employment

transferred to the Commonwealth pursuant to 42 Pa.C.S. § 3703

(relating to local chamber facilities) shall be a member of

the system for all service rendered as an employee of the

Commonwealth on the personal staff of an appellate court

judge subsequent to the date of the transfer unless

specifically prohibited pursuant to section 5301(c) (relating

to mandatory and optional membership in system and

participation in plan). The employee shall be entitled to

have any prior service credit in that county or other

20160HB2316PN3814 - 30 -

municipal pension plan or retirement system transferred to

the system and deemed to be State service for all purposes

under this part. However, for those employees who were in

continuous county employment which commenced prior to July

22, 1983, section 5505.1 shall not apply. The transfer of

prior service credit to the system shall occur upon the

transfer, by the member, county or other municipal pension

plan or retirement system, to the system of the amount of

accumulated member contributions, pick-up contributions and

credited interest standing in the employee's county or

municipal pension plan or retirement system account as of the

date that these funds are transferred to the system. In the

event that these funds have been refunded to the member, the

transfer of service credit shall occur when the member

transfers an amount equal to either the refund which the

member received from the county or municipal pension plan or

retirement system or the amount due under section 5504, if

less. In the case of a transfer by the member, the transfer

shall occur by December 31, 1987, in order for the member to

receive credit for the prior service. In the case of a

transfer by the county or other municipal pension plan or

retirement system, the transfer shall also occur by December

31, 1987. If the amount transferred to the system by the

member of a county or municipal pension plan or retirement

system is greater than the amount that would have accumulated

in the member's account if the employee had been a member of

the system, all excess funds shall be returned to the

employee within 90 days of the date on which such funds are

credited to the member's account in the system. Within 60

days of receipt of written notice that an employee has

20160HB2316PN3814 - 31 -

elected to transfer credits under the provisions of this

subsection, the county or other municipal pension plans or

retirement systems shall be required to transfer to the

system an amount, excluding contributions due under section

5504(a), equal to the liability of the prior service in

accordance with county or other municipal pension plan or

retirement system benefit provisions, multiplied by the ratio

of system actuarial value of assets for active members to the

system actuarial accrued liability for active members. The

Public Employee Retirement Study Commission shall determine

the appropriate amount of employer contributions to be

transferred to the system by the county or other municipal

pension plans or retirement systems.

* * *

(e) Transfer and purchase of certain pension service credit;

Philadelphia Regional Port Authority.--

(1) Any employee of the Philadelphia Regional Port

Authority who becomes a State employee, as defined in section

5102 (relating to definitions), and an active member of the

system shall be eligible to obtain retirement credit for

prior uncredited service with the Philadelphia Port

Corporation, a Pennsylvania not-for-profit corporation

("predecessor corporation"), provided that the Commonwealth

does not incur any liability for the funding of the annuities

attributable to the prior, uncredited "predecessor

corporation" service, the cost of which shall be determined

according to paragraph (2).

* * *

(4) Any person who became employed by the Philadelphia

Regional Port Authority between July 10, 1989, and passage of

20160HB2316PN3814 - 32 -

this act and who becomes a State employee, as defined in

section 5102, and an active member of the system shall be

eligible to obtain retirement credit for service from the

date of employment with the Philadelphia Regional Port

Authority, provided that the contributions are made in

accordance with sections 5501, 5504, 5505.1 and 5506.

* * *

§ 5303.2. Election to convert school service to State service.

(a) Eligibility.--An active member or inactive member on

leave without pay who was an employee transferred from the

Department of Education to the Department of Corrections

pursuant to section 908-B of the act of April 9, 1929 (P.L.177,

No.175), known as The Administrative Code of 1929, and who on

the effective date of that transfer did not participate in an

independent retirement program approved by the Department of

Education under 24 Pa.C.S. § 8301(a)(1) (relating to mandatory

and optional membership) or section 5301(a)(12) (relating to

mandatory and optional membership in system and participation in

plan), notwithstanding any other provision of law or any

collective bargaining agreement, arbitration award, contract or

term or conditions of any retirement system or pension plan, may

make a one-time election to convert all service credited in the

Public School Employees' Retirement System as of June 30, 1999,

and transfer to the system all accumulated member contributions

and statutory interest credited in the members' savings account

in the Public School Employees' Retirement System as of June 30,

1999, plus statutory interest on that amount credited by the

Public School Employees' Retirement System from July 1, 1999, to

the date of transfer to the system.

* * *

20160HB2316PN3814 - 33 -

(e) Transfer.--Within 180 days after the effective date of

this subsection, the Public School Employees' Retirement System

shall transfer to the board for each member electing to convert

under this section the accumulated member contributions and

statutory interest credited in the Public School Employees'

Retirement System, plus an amount equal to the value of all

annual employer contributions made to the Public School

Employees' Retirement System with interest at the annual rate

adopted by the board for the calculation of the normal

contribution rate under section 5508(b) (relating to actuarial

cost method for fiscal years ending before July 1, 2018), from

the date of each contribution to the date of the transfer of the

funds to the board. Any debt owed by a member to the Public

School Employees' Retirement System for whatever reason shall be

transferred to the system and shall be paid in a manner and in

accordance with conditions prescribed by the board.

* * *

§ 5304. Creditable nonstate service.

(a) Eligibility.--

(1) An active member who first becomes an active member

before January 1, 2011, or before December 1, 2010, as a

member of the General Assembly, or a multiple service member

who first becomes an active member before January 1, 2011, or

before December 1, 2010, as a member of the General Assembly,

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

Public School Employees' Retirement System shall be eligible

for Class A service credit for creditable nonstate service as

set forth in subsections (b) and (c) except that intervening

military service shall be credited in the class of service

for which the member was eligible at the time of entering

20160HB2316PN3814 - 34 -

into military service and for which he makes the required

contributions to the fund and except that a multiple service

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

Public School Employees' Retirement System shall not be

eligible to purchase service credit for creditable nonstate

service set forth in subsection (c)(5).

(2) An active member who first becomes an active member

on or after January 1, 2011, or on or after December 1, 2010,

as a member of the General Assembly, or a multiple service

member who first becomes an active member on or after January

1, 2011, or on or after December 1, 2010, as a member of the

General Assembly, and who is a school employee and an active

member of the Public School Employees' Retirement System

shall be eligible for Class A-3 service credit for creditable

nonstate service as set forth in subsections (b) and (c)

except that intervening military service shall be credited in

the class of service for which the member was eligible at the

time of entering into military service and for which he makes

the required contributions to the fund and except that a

multiple service member who is a school employee and an

active member of the Public School Employees' Retirement

System shall not be eligible to purchase service credit for

creditable nonstate service set forth in subsection (c)(5).

* * *

(b) Limitations on eligibility.--An active member or a

multiple service member who is a school employee and an active

member of the Public School Employees' Retirement System shall

be eligible to receive credit for nonstate service provided that

he does not have credit for such service in the system or in the

school system and is not entitled to receive, eligible to

20160HB2316PN3814 - 35 -

receive now or in the future, or is receiving retirement

benefits for such service in the system or under a retirement

system administered and wholly or partially paid for by any

other governmental agency or by any private employer, or a

retirement program approved by the employer in accordance with

section 5301(a)(12) (relating to mandatory and optional

membership in system and participation in plan), and further

provided, that such service is certified by the previous

employer and contributions are agreed upon and made in

accordance with section 5505 (relating to contributions for the

purchase of credit for creditable nonstate service).

* * *

Section 307. Section 5305(b) introductory paragraph and (3)

of Title 71, amended December 28, 2015 (P.L.529, No.93), are

amended to read:

§ 5305. Social security integration credits.

* * *

(b) Accrual of subsequent credits.--Any active member who

has social security integration accumulated deductions to his

credit or is receiving a benefit on account of social security

integration credits may accrue one social security integration

credit for each year of service as a State employee on or

subsequent to March 1, 1974 and a fractional credit for a

corresponding fractional year of service provided that

contributions are made to the fund, or would have been made to

the fund but for section 5502.1 (relating to waiver of regular

member contributions and Social Security integration member

contributions) or the limitations under IRC § 401(a)(17) or 415,

except as otherwise provided in this part, in accordance with

section 5502 (relating to Social Security integration member

20160HB2316PN3814 - 36 -

contributions), and he:

* * *

(3) terminates his status as a vestee or an annuitant

and returns to State service as an active member of the

system.

* * *

Section 308. Section 5305.1 of Title 71 is amended to read:

§ 5305.1. Eligibility for actuarial increase factor.

A person who is:

(1) an active member;

(2) an inactive member on leave without pay; [or]

(3) a multiple service member who is a school employee

and an active member of the Public School Employees'

Retirement System; or

(4) a combined service employee who is an active

participant or inactive participant on leave without pay;

who terminates State service or school service, as the case may

be, after attaining age 70 and who applies for a superannuation

annuity with an effective date of retirement the day after the

date of termination of State service or school service shall

have that person's maximum single life annuity calculated

pursuant to section 5702(a.1) (relating to maximum single life

annuity).

Section 309. Section 5306(a), (a.1)(2) and (6), (a.2)(1) and

(2) and (b) of Title 71 are amended and the section is amended

by adding a subsection to read:

§ 5306. Classes of service.

(a) Class A and Class A-3 membership.--

(1) A State employee who is a member of Class A on the

effective date of this part or who first becomes a member of

20160HB2316PN3814 - 37 -

the system subsequent to the effective date of this part and

before January 1, 2011, or before December 1, 2010, as a

member of the General Assembly, shall be classified as a

Class A member and receive credit for Class A service upon

payment of regular and additional member contributions for

Class A service, provided that the State employee does not

become a member of Class AA pursuant to subsection (a.1)

[or], a member of Class D-4 pursuant to subsection (a.2) or a

participant in the plan.

(2) A State employee who first becomes a member of the

system on or after January 1, 2011, or on or after December

1, 2010, as a member of the General Assembly, shall be

classified as a Class A-3 member and receive credit for Class

A-3 service upon payment of regular member contributions and

shared-risk member contributions for Class A-3 service

provided that the State employee does not become a member of

Class A-4 pursuant to subsection (a.3), except that a member

of the judiciary shall be classified as a member of such

other class of service for which the member of the judiciary

is eligible, shall elect and make regular member

contributions[.], and further provided that the State

employee does not become a participant in the plan or is not

eligible to be an optional participant of the plan under

section 5301 (relating to mandatory and optional membership

in system and participation in plan).

(3) A person who first becomes a sworn police officer on

or after January 1, 2018, shall receive credit for service as

a sworn police officer as a member of Class A-3 upon payment

of the required member contributions and shall not be

eligible to be a participant in the plan for such service.

20160HB2316PN3814 - 38 -

All other State service shall be credited in the plan as

otherwise provided under this part, except that any State

service performed concurrently with service as an active or

inactive member on leave without pay as a sworn police

officer shall be credited as Class A-3 service and shall not

be eligible for active participation in the plan. Class A-3

service provided for under this paragraph shall be subject to

an election to be credited as Class A-4 service.

(a.1) Class AA membership.--

* * *

(2) A person who is a State employee on June 30, 2001,

and July 1, 2001, but is not an active member of the system

because membership in the system is optional or prohibited

pursuant to section 5301 [(relating to mandatory and optional

membership)] and who first becomes an active member after

June 30, 2001, and before January 1, 2011, or before December

1, 2010, as a member of the General Assembly, and who is not

a State police officer and not employed in a position for

which a class of service other than Class A is credited or

could be elected shall be classified as a Class AA member and

receive credit for Class AA State service upon payment of

regular member contributions for Class AA service and,

subject to the limitations contained in paragraph (7), if

previously a member of Class A or previously employed in a

position for which Class A service could have been earned,

shall have all Class A State service (other than State

service performed as a State [Police] police officer or for

which a class of service other than Class A was earned or

could have been elected) classified as Class AA service.

* * *

20160HB2316PN3814 - 39 -

(6) A State employee who after June 30, 2001, becomes a

State police officer or who is employed in a position in

which the member could elect membership in the system in a

class of service other than Class AA or Class D-4 shall

retain any Class AA service credited prior to becoming a

State police officer or being so employed but shall be

ineligible to receive Class AA credit thereafter and instead

shall receive Class A credit for service as a member of the

judiciary if such judicial service begins before January 1,

2018, or if he first became a member before January 1, 2011,

or December 1, 2010, as a member of the General Assembly, or

Class A-3 credit for service other than as a member of the

judiciary if such nonjudicial service begins before January

1, 2017, and he first became a member on or after January 1,

2011, or December 1, 2010, as a member of the General

Assembly, unless a class of membership other than Class A is

elected.

* * *

(a.2) Class of membership for members of the General

Assembly.--

(1) A person who:

(i) becomes a member of the General Assembly and an

active member of the system after June 30, 2001, and

before December 1, 2010; or

(ii) is a member of the General Assembly on July 1,

2001, but is not an active member of the system because

membership in the system is optional pursuant to section

5301 and who becomes an active member after June 30,

2001, and before December 1, 2010;

and who was not a State police officer on or after July 1,

20160HB2316PN3814 - 40 -

1989, shall be classified as a Class D-4 member and receive

credit as a Class D-4 member for all State service as a

member of the system performed as a member of the General

Assembly upon payment of regular member contributions for

Class D-4 service and, subject to the limitations contained

in subsection (a.1)(7), if previously a member of Class A or

employed in a position for which Class A service could have

been earned, shall receive Class AA service credit for all

Class A State service, other than State service performed as

a State police officer or for which a class of service other

than Class A or Class D-4 was or could have been elected or

credited.

(2) Provided an election to become a Class D-4 member is

made pursuant to section 5306.2 (relating to elections by

members of the General Assembly), a State employee who was

not a State police officer on or after July 1, 1989, who on

July 1, 2001, is a member of the General Assembly and an

active member of the system and not a member of Class D-3

shall be classified as a Class D-4 member and receive credit

as a Class D-4 member for all State service as a member of

the system performed as a member of the General Assembly not

credited as another class other than Class A upon payment of

regular member contributions for Class D-4 service and,

subject to the limitations contained in paragraph (a.1)(7),

shall receive Class AA service credit for all Class A State

service, other than State service performed as a State police

officer or as a State employee in a position in which the

member could have elected a class of service other than Class

A, performed before July 1, 2001.

* * *

20160HB2316PN3814 - 41 -

(b) Other class membership.--

(1) A State employee who is a member of a class of

service other than Class A on the effective date of this part

shall retain his membership in that class until such service

is discontinued; any service as a member of the system

thereafter shall be credited as Class A service, Class AA

service or Class D-4 service as provided for in this section.

(2) Notwithstanding any other provision of this section,

a State employee who is appointed bail commissioner of the

Philadelphia Municipal Court under 42 Pa.C.S. § 1123(a)(5)

(relating to jurisdiction and venue) and is eligible to be a

member of the system as a bail commissioner may, within 30

days of the effective date of this sentence or within 30 days

of his initial appointment as a bail commissioner, whichever

is later, elect Class E-2 service credit for service

performed as a bail commissioner. This class of service

multiplier for E-2 service as a bail commissioner shall be

1.5.

* * *

(e) Ineligibility for active membership and classes of

service.--An individual who is a State employee on January 1,

2018, but is not a member of the system or who first becomes a

State employee on or after January 1, 2018, shall be ineligible

for active membership in the system or the several classes of

State service as otherwise provided for under this section. Any

such State employee, if eligible, may be a participant in the

plan as a result of such State service.

Section 310. Sections 5306.3(c) and 5307 of Title 71 are

amended to read:

§ 5306.3. Election to become a Class A-4 member.

20160HB2316PN3814 - 42 -

* * *

member shall be irrevocable and shall become effective on the

effective date of membership in the system and shall remain in

effect for all future [creditable] State service creditable in

the system, other than service performed as a member of the

judiciary. Payment of regular member contributions for Class A-4

State service performed prior to the election of Class A-4

membership shall be made in a form, manner and time determined

by the board. Upon termination and a subsequent reemployment, a

member who elected Class A-4 membership shall be credited as a

Class A-4 member for creditable State service performed after

reemployment, except as a member of the judiciary, regardless of

termination of employment, termination of membership by

withdrawal of accumulated deductions or status as an annuitant,

vestee or inactive member after the termination of service.

* * *

§ 5307. Eligibility points.

(a) General rule.--An active member of the system shall

accrue one eligibility point for each year of credited service

as a member of the State or the Public School Employees'

Retirement System. A member shall accrue an additional two-

thirds of an eligibility point for each year of Class D-3

credited service. In the case of a fractional part of a year of

credited service, a member shall accrue the corresponding

fractional portion of eligibility points to which the class of

service entitles him.

(a.1) USERRA leave.--A member of the system who is

reemployed from USERRA leave or who dies while performing USERRA

leave shall be granted the eligibility points that he would have

20160HB2316PN3814 - 43 -

accrued had he continued in his State office or employment

instead of performing USERRA leave. In the event that a State

employee who is reemployed from USERRA leave makes the member

contributions to be granted State service credit for the USERRA

leave, no additional eligibility points will be granted.

(b) Transitional rule.--

(1) In determining whether a member who is not a State

employee or school employee on June 30, 2001, and July 1,

2001, and who has previous State service (except a disability

annuitant who returns to State service after June 30, 2001,

upon termination of the disability annuity) has the five

eligibility points required by sections 5102 (relating to

definitions), 5308(b) (relating to eligibility for

annuities), 5309 (relating to eligibility for vesting),

5704(b) (relating to disability annuities) and 5705(a)

(relating to member's options), only eligibility points

earned by performing credited State service as an active

member of the system, USERRA leave or credited school service

as an active member of the Public School Employees'

Retirement System after June 30, 2001, shall be counted until

such member earns one eligibility point by performing

credited State service or credited school service after June

30, 2001, at which time all eligibility points as determined

pursuant to subsection (a) shall be counted.

(2) Any member to whom paragraph (1) applies shall be

considered to have satisfied any requirement for five

eligibility points contained in this part if the member:

(i) has ten or more eligibility points as determined

pursuant to subsection (a); or

(ii) has Class G, Class H, Class I, Class J, Class

20160HB2316PN3814 - 44 -

L, Class M or Class N service and has eight or more

eligibility points as determined pursuant to subsection

(a).

determining whether a combined service employee has the five

eligibility points required by sections 5102, 5308(b)(1),

5309(1) and 5705(a) or the ten eligibility points required by

sections 5102, 5308(b)(2), 5309(2) and 5705(a), any such

combined service employee shall be considered to have satisfied

any requirement for five or ten eligibility points, as the case

may be, if the combined service employee does not terminate

State service for three or more years after the effective date

of participation in the plan.

Section 311. Section 5308 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5308. Eligibility for annuities.

(a) Superannuation annuity.--Attainment of superannuation

age by an active member [or], an inactive member on leave

without pay or a combined service employee who is an active

participant or inactive participant on leave without pay with

three or more eligibility points other than eligibility points

resulting from nonstate service or nonschool service shall

entitle him to receive a superannuation annuity upon termination

of State service and compliance with section 5907(f) (relating

to rights and duties of State employees [and], members and

participants).

(b) Withdrawal annuity.--

(1) Any vestee or any active member [or], inactive

member on leave without pay or a combined service employee

who is an active participant or inactive participant on leave

20160HB2316PN3814 - 45 -

without pay who terminates State service having five or more

eligibility points and who does not have Class A-3 or Class

A-4 service credit or Class T-E or Class T-F service credit

in the Public School Employees' Retirement System, or who has

Class G, Class H, Class I, Class J, Class K, Class L, Class M

or Class N service and terminates State service having five

or more eligibility points, upon compliance with section

5907(f), (g) or (h) shall be entitled to receive an annuity.

(2) Any vestee, active member [or], inactive member on

leave without pay or a combined service employee who is an

active participant or inactive participant on leave without

pay who has Class A-3 or Class A-4 service credit or Class T-

E or Class T-F service credit in the Public School Employees'

Retirement System who terminates State service having ten or

more eligibility points, upon compliance with section

5907(f), (g) or (h), shall be entitled to receive an annuity.

(3) Any vestee, active member [or], inactive member on

leave without pay or a combined service employee who is an

active participant or inactive participant on leave without

pay who has either Class A-3 or Class A-4 service credit or

Class T-E or Class T-F service credit in the Public School

Employees' Retirement System and also has service credited in

the system in one or more other classes of service who has

five or more, but fewer than ten, eligibility points, upon

compliance with section 5907(f), (g) or (h), shall be

eligible to receive an annuity calculated on his service

credited in classes of service other than Class A-3 or Class

A-4, provided that the member has five or more eligibility

points resulting from service in classes other than Class A-3

or Class A-4 or Class T-E or Class T-F service in the Public

20160HB2316PN3814 - 46 -

School Employees' Retirement System.

on leave without pay who has five or more eligibility points

other than eligibility points resulting from membership in the

Public School Employees' Retirement System or any active member

or inactive member on leave without pay who is an officer of the

Pennsylvania State Police or an enforcement officer shall, upon

compliance with section 5907(k), be entitled to a disability

annuity if he becomes mentally or physically incapable of

continuing to perform the duties for which he is employed and

qualifies in accordance with the provisions of section 5905(c)

(1) (relating to duties of the board regarding applications and

elections of members and participants).

(d) Required beginning date.--Members eligible for an

annuity must commence receiving the annuity by the member's

required beginning date.

(e) Eligibility of combined service employees for

superannuation annuity.--A combined service employee is deemed

to have satisfied the requirement of three or more years of

credited State or school service under subsection (a) if the

combined service employee does not terminate State service

before three years after the effective date of participation in

the plan. Nothing in this subsection amends or waives any other

requirement to be eligible for a superannuation annuity.

Section 312. Section 5308.1(1) of Title 71 is amended to

read:

§ 5308.1. Eligibility for special early retirement.

Notwithstanding any provisions of this title to the contrary,

the following special early retirement provisions shall be

applicable to specified eligible members as follows:

20160HB2316PN3814 - 47 -

(1) During the period of July 1, 1985, to September 30,

1991, an active member who has attained the age of at least

53 years and has accrued at least 30 eligibility points shall

be entitled, upon termination of State service and compliance

with section 5907(f) (relating to rights and duties of State

employees [and], members and participants), to receive a

maximum single life annuity calculated under section 5702

(relating to maximum single life annuity) without a reduction

by virtue of an effective date of retirement which is under

the superannuation age.

* * *

Section 313. Section 5311(a) of Title 71, amended December

28, 2015 (P.L.529, No.93), is amended to read:

§ 5311. Eligibility for refunds.

(a) Total accumulated deductions.--Any active member,

regardless of eligibility for benefits, may elect to receive his

total accumulated deductions upon termination of service in lieu

of any benefit from the system to which he is entitled.

* * *

Section 313.1. Title 71 is amended by adding a section to

read:

§ 5312. Election to terminate active membership in the system.

(a) General rule.--A member may make a one-time election to

terminate active membership in the system.

(b) Time for making election.--The election to terminate

active membership in the system must be made by the member

filing written notice with the board in a form and manner

determined by the board during the period beginning January 1,

2018, and ending April 20, 2018.

20160HB2316PN3814 - 48 -

membership in the system shall be irrevocable and shall become

effective on the date of the election. Notwithstanding any other

provision of this part, a member who makes an election to

terminate active membership in the system shall not be eligible

for active membership in the system for any State service

performed after the date of the election.

(d) Effect of failure to make election.--Failure to elect to

terminate active membership within the election period set forth

in subsection (b) shall result in the continuation of the

member's active membership in the system, as provided under this

part, until the termination of State service.

Section 314. Title 71 is amended by adding a chapter to

read:

CHAPTER 54

STATE EMPLOYEES' DEFINED CONTRIBUTION PLAN

Sec.

5401. Establishment.

5402. Plan document.

5403. Individual investment accounts.

5404. Participant contributions.

5405. Mandatory pickup participant contributions.

5406. Employer defined contributions.

5407. Eligibility for benefits.

5408. Death benefits.

5409. Vesting.

5410. Termination of distributions.

5411. Agreements with financial institutions and other

organizations.

5411.1 Annuitization.

5412. Powers and duties of board.

20160HB2316PN3814 - 49 -

5413. Responsibility for investment loss.

5414. Investments based on participants' investment allocation

choices.

5415. Expenses.

5416. (Reserved).

5417. Required distributions.

§ 5401. Establishment.

(a) State Employees' Defined Contribution Plan.--The State

Employees' Defined Contribution Plan is established. The board

shall administer and manage the plan which shall be a defined

contribution plan exclusively for the benefit of those State

employees who participate in the plan and their beneficiaries

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

board shall determine the terms and provisions of the plan not

inconsistent with this part, IRC or other applicable law and

shall provide for the plan's administration.

(b) State Employees' Defined Contribution Trust.--The State

Employees' Defined Contribution Trust is established as part of

the State Employees' Defined Contribution Plan. The trust shall

be comprised of the individual investment accounts and all

assets and moneys in those accounts. The members of the board

shall be the trustees of the trust established under this

section which shall be administered exclusively for the benefit

of those State employees who participate in the plan and their

beneficiaries within the meaning of and conformity with IRC §

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

the trust not inconsistent with this part, IRC or other

applicable law and shall provide for the investment and

administration of the trust.

20160HB2316PN3814 - 50 -

that have been or shall be withheld or contributed by the

participants, the Commonwealth and other employers in accordance

with this part shall be held in trust in any funding vehicle

permitted by the applicable provisions of IRC for the exclusive

benefit of the plan's participants and their beneficiaries until

such time as the funds are distributed to the participants or

their beneficiaries in accordance with the terms of the plan

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

benefit of the plan's participants and their beneficiaries may

be used for the payment of the fees, costs and expenses related

to the administration and investment of the plan and the trust.

(d) Name for transacting business.--All of the business of

the plan shall be transacted, the trust invested, all

requisitions for money drawn and payments made and all of its

cash and securities and other property shall be held by the name

of the "State Employees' Defined Contribution Plan," except

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

may establish a nominee registration procedure for the purpose

of registering securities in order to facilitate the purchase,

sale or other disposition of securities pursuant to the

provisions of this part.

§ 5402. Plan document.

The board shall set forth the terms and provisions of the

plan and trust in a document containing the terms and conditions

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

in the Pennsylvania Bulletin. The creation of the document

containing the terms and conditions of the plan and the trust

declaration and the establishment of the terms and provisions of

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

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

20160HB2316PN3814 - 51 -

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

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

shall include the plan document unless the context clearly

indicates otherwise.

§ 5403. Individual investment accounts.

The board shall establish in the trust an individual

investment account for each participant in the plan. All

contributions by a participant or an employer for or on behalf

of a participant shall be credited to the participant's

individual investment account, together with all interest and

investment earnings and losses. Investment and administrative

fees, costs and expenses shall be charged to the participants'

individual investment accounts. Employer defined contributions

shall be recorded and accounted for separately from participant

contributions, but all interest, investment earnings and losses

and investment and administrative fees, costs and expenses shall

be allocated proportionately.

§ 5404. Participant contributions.

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

mandatory pickup participant contributions through payroll

deductions to the participant's individual investment account

equal to 7% of compensation for current State service. The

employer shall cause such contributions for current service to

be made and deducted from each payroll or on such schedule as

established by the board.

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

voluntary contributions through direct trustee-to-trustee

transfers or through transfers of money received in an eligible

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

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

20160HB2316PN3814 - 52 -

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

investment account and shall be separately accounted for by the

board.

allowed which would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

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

disallowed contributions are made, any participant contributions

in excess of the limitations and investment earnings thereon

shall be refunded to the participant by the board.

§ 5405. Mandatory pickup participant contributions.

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

contributions to the trust required to be made under section

5404(a) (relating to participant contributions) with respect to

current State service rendered by an active participant shall be

picked up by the Commonwealth or other employer and shall be

treated as the employer's contribution for purposes of IRC §

414(h). After the effective date of this section, an employer

employing a participant in the plan shall pick up the required

mandatory participant contributions by a reduction in the

compensation of the participant.

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

than the IRC, such mandatory pickup participant contributions

shall be treated as contributions made by a participant in the

same manner and to the same extent as if the contributions were

made directly by the participant and not picked up.

§ 5406. Employer defined contributions.

(a) Contributions for current service.--The Commonwealth or

other employer of a participant shall make employer defined

contributions for current service of each active participant

20160HB2316PN3814 - 53 -

which shall be credited to each respective participant's

individual investment account.

(b) Contributions resulting from participants reemployed

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

leave makes the mandatory pickup participant contributions

permitted to be made for the USERRA leave, the Commonwealth or

other employer by whom the State employee is employed at the

time the participant contributions are made shall make whatever

employer defined contributions would have been made under this

section had the employee making the participant contributions

continued to be employed in the employee's State office or

position instead of performing USERRA leave. Such employer

defined contributions shall be placed in the participant's

individual investment account as otherwise provided by this

part.

allowed which would cause a violation of the limitations related

to contributions applicable to governmental plans contained in

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

disallowed contributions are made, any employer defined

contributions in excess of the limitations and investment

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

§ 5407. Eligibility for benefits.

(a) Termination of service.--A participant who terminates

State service shall be eligible to withdraw the vested

accumulated total defined contributions standing to his credit

in the participant's individual investment account or such

lesser amount as the participant may request. Payment shall be

made in a lump sum unless the board has established other forms

of distribution in the plan document. A participant who

20160HB2316PN3814 - 54 -

withdraws his vested accumulated total defined contributions

shall no longer be a participant in the plan, notwithstanding

that the participant may have contracted to receive an annuity

or other form of payment from a provider retained by the board

for such purposes.

(b) Required distributions.--All payments under this section

shall start and be made in compliance with the minimum

distribution requirements and incidental death benefit rules of

IRC § 401(a)(9). The board shall take any action and make any

distributions it may determine are necessary to comply with such

requirements.

combined service employee must be terminated from all positions

that result in either membership in the system or participation

in the plan to be eligible to receive a distribution.

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

State employees who have not terminated State service are not

permitted, except as required by law.

(e) Small individual investment accounts.--

(1) A participant who terminates State service and whose

vested accumulated total defined contributions are below the

threshold established by law as of the date of termination of

service may be paid the vested accumulated total defined

contributions in a lump sum as provided in IRC § 401(a)(31).

(2) The board may also provide in the plan document

that, notwithstanding subsection (f), a participant whose

vested accumulated employer defined contributions are below

the thresholds established by the board may receive those

distributions without the obligation to purchase an annuity.

The threshold may be established as a dollar amount, an

20160HB2316PN3814 - 55 -

annuity amount, in some other form individually or in

combination as the board determines.

(f) Requirement to purchase partial annuity.--Except as

prohibited by the IRC or as otherwise provided in this part, a

participant who is eligible and elects to receive a distribution

or vested accumulated employer defined contributions shall be

required to purchase at least a partial payout as a life annuity

with that distribution from an annuity provider contracted by

the board under section 5408(c) (relating to death benefits) and

under such conditions as provided in the plan document. The

conditions may include that the board is authorized to make the

distribution directly to the annuity provider.

(g) Spousal consent not required.--A participant who is

married may receive a lump sum distribution or other

distribution directly from the board without the consent of the

spouse.

§ 5408. Death benefits.

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

participant or inactive participant, the board shall pay to the

participant's beneficiary the vested balance in the

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

such other manner as the board may establish in the plan

document.

(b) Death of participant receiving distributions.--In the

event of the death of a participant receiving distributions, the

board shall pay to the participant's beneficiary the vested

balance in the participant's individual investment account in a

lump sum or in such other manner as the board may establish in

the plan document or, if the board has established alternative

methods of distribution in the plan document under which the

20160HB2316PN3814 - 56 -

participant was receiving distributions, to the participant's

beneficiary or successor payee, as the case may be, as provided

in the plan document.

institutions, insurance companies or other types of third-party

providers to allow participants who receive a lump sum

distribution to receive payments and death benefits in a form

and manner as provided by the contract.

§ 5409. Vesting.

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

forfeiture and attachment provisions of section 5953 (relating

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

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

all mandatory pickup participant contributions and voluntary

contributions paid by or on behalf of the participant to the

trust in addition to interest and investment gains or losses on

the participant contributions, but not including investment fees

and administrative charges.

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

attachment provisions of section 5953 or otherwise as provided

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

defined contributions paid to the participant's individual

investment account in the trust and earnings on the employer

contributions, but minus losses and a proportionate share of

investment fees and administrative charges, according to the

following schedule:

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

participant in the plan, 0%.

(2) At the first year until the second year of State

service as a participant in the plan, 25%.

20160HB2316PN3814 - 57 -

(3) At the second year until the third year of State

service as a participant in the plan, 50%.

(4) At the third year until the fourth year of State

service as a participant in the plan, 75%.

(5) At and after the fourth year of State service as a

participant in the plan, 100%.

document created by the board under section 5402 (relating to

plan document), the following:

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

the plan are determined and calculated.

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

unpaid leave on the determination of a participant's vested

status in the plan.

(3) The effect of termination of State service or

distributions from the plan on a participant's vested status

in the plan.

(4) Other terms and conditions for the implementation

and administration of this section.

(d) Nonvested employer-defined contributions.--Nonvested

employer-defined contributions, including earnings and losses on

the employer contributions, that are not distributable to a

participant who has not fully vested are credited to the

participant's most recent employer's future obligations assessed

under section 5509 (relating to appropriations and assessments

by the Commonwealth).

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

plan who is reemployed from USERRA leave or who dies while

performing USERRA leave shall receive vesting credit under this

section for the State service that would have been performed had

20160HB2316PN3814 - 58 -

the member not performed USERRA leave.

§ 5410. Termination of distributions.

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

distributions or an inactive participant who returns to State

service shall cease receiving distributions and shall not be

eligible to receive distributions until the participant

subsequently terminates State service, without regard to whether

the participant is a mandatory, optional or prohibited member of

the system or participant in the plan. This subsection shall not

apply to a distribution of accumulated employer defined

contributions or other distributions that the participant has

received and used to purchase an annuity from a provider

contracted by the board.

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

former State employee is reemployed from USERRA leave and has

previously received any payments or annuity from the plan during

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

amount so received plus interest as provided in the plan

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

the board in accordance with methods approved by the actuary and

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

active participant, may be amortized with interest as provided

in the plan document through salary deductions to the trust in

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

not longer than a period that starts with the date of

reemployment and continues for up to three times the length of

the participant's immediate past period of USERRA leave. The

repayment period shall not exceed five years.

§ 5411. Agreements with financial institutions and other

organizations.

20160HB2316PN3814 - 59 -

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

administer the State Employees' Defined Contribution Plan, the

board shall have the power to enter into written agreements with

one or more financial institutions or other organizations

relating to the plan's administration and investment of funds

held pursuant to the plan.

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

board shall enter into an agreement to provide fully bundled

retirement plan investment, plan administration and services to

employees who participate in the plan. The agreement shall

provide for appropriate long-term retirement-oriented

investments and shall include either fixed or variable deferred

annuities, or a combination thereof. In determining the

financial institution or other organization with which the board

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

the following:

(1) The financial stability of the financial institution

or other organization and the ability of the financial

institution or other organization to provide the contracted

rights and benefits to participants.

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

services to the participants.

(3) The experience of the financial institution or other

organization in providing defined contribution retirement

plans in lieu of defined benefit plan participation to

employees or as part of employee hybrid retirement plans.

(4) The experience of the financial institution or other

organization in paying retirement income to employees.

(5) The experience of the financial institution or other

organization in providing plan education, counseling and

20160HB2316PN3814 - 60 -

advice to participants in employee retirement plans that are

offered in lieu of defined benefit plan participation or as

part of employee hybrid retirement plans.

education, counseling and objective participant-specific plan

advice to participants.

§ 5411.1. Annuitization.

The plan shall include the requirement that any disbursement

of the accumulated assets in an individual investment account

made after the participant reaches 55 years of age must include

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

determine the minimum annuity amount. The plan shall offer

participants a menu of lifetime annuity options, either fixed or

variable, or a combination of both.

§ 5412. Powers and duties of board.

The board shall have the following powers and duties to

establish the plan and trust and administer the provisions of

this chapter and part:

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

assets of other persons or entities.

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

and expenses of managing, investing and administering the

plan, the trust and the individual investment accounts from

the balance of such individual investment accounts except as

may be provided otherwise by law.

(3) The board may establish investment guidelines and

limits on the types of investments that participants may

make, consistent with the board's fiduciary obligations.

(3.1) The board shall include default investment options

and strategies to include predetermined investment portfolio

20160HB2316PN3814 - 61 -

options that shall be constructed to reflect different risk

profiles and shall be constructed to automatically reallocate

and rebalance contributions as a participant ages. The plan

may permit participants to construct their own investment

portfolios using some or all of the investment options

comprising the default solutions.

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

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

the tax-qualified status of the plan.

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

participate in the plan by those State employees for whom

participation is not mandatory.

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

qualified fund manager for the purpose of assuring that the

fund manager continues to meet all standards and criteria

established.

(7) The board may allow for eligible rollovers and

direct trustee-to-trustee transfers into the trust from

qualified plans of other employers, regardless of whether the

employers are private employers or public employers.

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

his individual investment account within the plan.

(9) The board shall administer the program in compliance

with the qualifications and other rules of the IRC.

(10) The board may establish procedures to provide for

the lawful payment of benefits.

(11) The board shall determine what constitutes a

termination of State service.

(12) The board may establish procedures for

distributions of small accounts as required or permitted by

20160HB2316PN3814 - 62 -

the IRC.

(13) The board shall have the power to establish

procedures in the plan document or to promulgate rules and

regulations as it deems necessary for the administration and

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

establishing:

(i) Procedures whereby eligible participants may

change their investment choices on a periodic basis or

make other elections regarding their participation in the

plan.

(ii) Procedures for deducting mandatory pickup

participant contributions from a participant's

compensation.

(iii) Procedures for rollovers and trustee-to-

trustee transfers allowed under the IRC and permitted as

part of the plan.

(iv) Standards and criteria for disclosing and

providing options to eligible individuals regarding

investments of amounts deferred under the plan, provided

that one of the available options must serve as the

default option for participants who do not make a timely

election and that, to the extent commercially available,

one option must have an annuity investment feature.

(v) Standards and criteria for disclosing to the

participants the anticipated and actual income

attributable to amounts invested, property rights and all

fees, costs and charges to be made against amounts

deferred to cover the fees, costs and expenses of

administering and managing the plan or trust.

(vi) Procedures, standards and criteria for the

20160HB2316PN3814 - 63 -

making of distributions from the plan upon termination

from employment or death or in other circumstances

consistent with the purpose of the plan.

(14) The board may waive any reporting or information

requirement contained in this part if the board determines

that the information is not needed for the administration of

the plan.

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

lieu of staff, except final adjudications or if prohibited by

law. Any duties or responsibilities of the board not required

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

third-party provider subject to appeal to the board.

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

employer or information provided by the participant to the

employer can be performed or received directly by the board.

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

2, 2010 (P.L.266, No.44), known as the Protecting

Pennsylvania's Investments Act, shall not apply to the plan

or trust or the investments thereof, but the board is

authorized to offer to the plan participants investment

vehicles that would be permitted under the Protecting

Pennsylvania's Investments Act.

§ 5413. Responsibility for investment loss.

The board, the Commonwealth, an employer or other political

subdivision shall not be responsible for any investment loss

incurred under the plan, or for the failure of any investment to

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

other investment opportunity, whether or not such other

opportunity was offered to participants in the plan.

§ 5414. Investments based on participants' investment

20160HB2316PN3814 - 64 -

allocation choices.

(a) General rule.--All contributions, interest and

investment earnings shall be invested based on the participant's

investment allocation choices. All investment allocation choices

shall be credited proportionally between participant

contributions and employer defined contributions. Each

participant shall be credited individually with the amount of

contributions, interest and investment earnings.

(b) Investment of contributions made by entities other than

the Commonwealth.--Investment of contributions by any

corporation, institution, insurance company or custodial bank

that the board has approved shall not be unreasonably delayed,

and in no case shall the investment of contributions be delayed

more than 30 days from the date of payroll deduction or the date

voluntary contributions are made to the date that funds are

invested. Any interest earned on the funds pending investment

shall be allocated to the Commonwealth and credited to the

individual investment accounts of participants who are then

participating in the plan unless the interest is used to defray

administrative costs and fees that would otherwise be required

to be borne by participants who are then participating in the

plan.

§ 5415. Expenses.

All fees, costs and expenses of administering the plan and

the trust and investing the assets of the trust shall be borne

by the participants and paid from assessments against the

balances of the individual investment accounts as established by

the board, except as may be provided otherwise by law.

§ 5416. (Reserved).

§ 5417. Required distributions.

20160HB2316PN3814 - 65 -

All payments under this chapter shall start and be made in

compliance with the minimum distribution requirements and

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

Section 315. Section 5501.1(b)(7) and (8) of Title 71 are

amended and the subsection is amended by adding a paragraph to

read:

§ 5501.1. Shared-risk member contributions for Class A-3 and

Class A-4 service.

* * *

(b) Determination of shared-risk contribution rate.--

* * *

(7) For any fiscal year in which the actual

contributions by the Commonwealth or an employer are lower

than those required to be made under section 5507(d)

[(relating to contributions by the Commonwealth and other

employers)] (relating to contributions to system by the

Commonwealth and other employers before July 1, 2018) or

5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2018), the

prospective shared-risk contribution rate for those employees

whose employers are not making the contributions required by

section 5507(d) shall be zero and shall not subsequently be

increased, except as otherwise provided in this section.

(8) If the actuary certifies that the accrued liability

contributions calculated in accordance with the actuarial

cost method provided in [section 5508(b)] section 5508

(relating to actuarial cost method for fiscal years ending

before July 1, 2018) or 5508.1 (relating to actuarial cost

method for fiscal years beginning July 1, 2018, or later), as

adjusted by the experience adjustment factor, are zero or

20160HB2316PN3814 - 66 -

less, then the shared-risk contribution rate for the next

fiscal year shall be zero and shall not subsequently be

increased, except as otherwise provided in this section.

(9) For periods commencing on or after July 1, 2018, the

determination of shared-risk member contribution rate shall

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

the calculation of the accrued liability contribution rate

under section 5508.1(c).

Section 316. The definition of "actuarially required

contribution rate" in section 5501.2 of Title 71 is amended to

read:

§ 5501.2. Definitions.

The following words and phrases when used in this chapter

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

context clearly indicates otherwise:

"Actuarially required contribution rate." The employer

contribution rate as calculated pursuant to section 5508(a),

(b), (c), (e) and (f) (relating to actuarial cost method for

fiscal years ending before July 1, 2017) or 5508.1(a), (b), (c),

(e) and (f) (relating to actuarial cost method for fiscal years

beginning July 1, 2018, or later).

* * *

Section 317. Section 5502 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5502. Social Security integration member contributions.

Except for any period of current service in which the making

of regular member contributions has ceased solely by reason of

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions) or any provision of this part relating to

20160HB2316PN3814 - 67 -

limitations under IRC § 401(a)(17) or 415(b), contributions

shall be made on behalf of [a] an active member of any class who

prior to March 1, 1974, has elected Social Security integration

coverage. The amount of such contributions shall be 6 1/4% of

that portion of his compensation as an active member in excess

of the maximum wages taxable under the provisions of the Social

Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.), in

addition to the regular member contributions which, after such

election, shall be determined on the basis of the basic

contribution rate of 5% and the additional member contribution

of 1 1/4%: Provided, That a member may elect to discontinue

Social Security integration coverage and shall thereafter be

ineligible to accrue any further Social Security integration

credits or any additional benefits on account of Social Security

integration membership.

Section 318. Section 5503.1(a) of Title 71 is amended to

read:

§ 5503.1. Pickup contributions.

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

contributions to the fund required to be made under sections

5501 (relating to regular member contributions for current

service), 5501.1 (relating to shared-risk member contributions

for Class A-3 and Class A-4 service), 5502 (relating to Social

Security integration member contributions), 5503 (relating to

joint coverage member contributions) and [section] 5505.1

(relating to additional member contributions), with respect to

current State service rendered by an active member on or after

January 1, 1982, shall be picked up by the Commonwealth or other

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

purposes of IRC § 414(h).

20160HB2316PN3814 - 68 -

* * *

Section 319. Section 5504 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5504. Member contributions for the purchase of credit for

previous State service or to become a full coverage

member.

(a) Amount of contributions for service in other than Class

G through N.--

(1) The contributions to be paid by an active member or

eligible school employee for credit in the system for total

previous State service other than service in Class G, Class

H, Class I, Class J, Class K, Class L, Class M and Class N or

to become a full coverage member shall be sufficient to

provide an amount equal to the regular and additional

accumulated deductions which would have been standing to the

credit of the member for such service had regular and

additional member contributions been made with full coverage

in the class of service and at the rate of contribution

applicable during such period of previous service and had his

regular and additional accumulated deductions been credited

with statutory interest during all periods of subsequent

State service as an active member or inactive member on leave

without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System up to the date of purchase.

(2) Notwithstanding paragraph (1), members with Class A-

3 State service shall make contributions and receive credit

as if the previous State service was Class A-3 service, and

members with Class A-4 State service shall make contributions

and receive credit as if the previous State service was Class

20160HB2316PN3814 - 69 -

A-4 service, even if it would have been credited as a

different class of service had the State employee been a

member of the system at the time the service was performed

unless it was mandatory that the State employee be an active

member of the system and the previous State service is being

credited as the result of a mandatory active membership

requirement.

(a.1) Converted county service.--No contributions shall be

required to restore credit for previously credited State service

in Class G, Class H, Class I, Class J, Class K, Class L, Class M

and Class N. Such service shall be restored upon the

commencement of payment of the contributions required to restore

credit in the system for all other previous State service.

(b) Certification and method of payment.--

(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 to the system in amounts agreed

upon by the member and the board. The salary deduction

amortization plans agreed to by members and the board may

include a deferral of payment amounts and statutory interest

until the termination of school service or State service or

beginning service as a participant as the board in its sole

discretion decides to allow. The board may limit the salary

deduction amortization plans to such terms as the board in

its sole discretion determines. In the case of an eligible

school employee who is an active member of the Public School

20160HB2316PN3814 - 70 -

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

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 320. Sections 5505(b)(1), (c), (d) and (i)(4) and

5505.1 of Title 71 are amended to read:

§ 5505. Contributions for the purchase of credit for creditable

nonstate service.

* * *

(b) Nonintervening military service.--

(1) The amount due for the purchase of credit for

military service other than intervening military service

shall be determined by applying the member's basic

contribution rate, the additional contribution rate plus the

Commonwealth normal contribution rate for active members at

the time of entry, subsequent to such military service, of

the member into State service to his average annual rate of

compensation over the first three years of such subsequent

State service and multiplying the result by the number of

20160HB2316PN3814 - 71 -

years and fractional part of a year of creditable

nonintervening military service being purchased together with

statutory interest during all periods of subsequent State

service as an active member or inactive member on leave

without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System to date of purchase. Upon

application for credit for such service, payment shall be

made in a lump sum within 30 days or in the case of an active

member or eligible school employee who is an active member of

the Public School Employees' Retirement System it may be

amortized with statutory interest through salary deductions

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

board. The salary deduction amortization plans agreed to by

members and the board may include a deferral of payment

amounts and statutory interest until the termination of

school service or State service or beginning service as a

participant as the board in its sole discretion decides to

allow. The board may limit salary deduction amortization

plans to such terms as the board in its sole discretion

determines. In the case of an eligible school employee who is

an active member of the Public School Employees' Retirement

System, the agreed upon salary deductions shall be remitted

to the Public School Employees' Retirement Board, which shall

certify and transfer to the board the amounts paid.

Application may be filed for all such military service credit

upon completion of three years of subsequent State service

and shall be credited as Class A service.

* * *

20160HB2316PN3814 - 72 -

of credit for intervening military service shall be determined

by the member's regular contribution rate, shared-risk

contribution rate, Social Security integration contribution

rate, the additional contribution rate which shall be applied

only to those members who began service on or after the

effective date of this amendatory act and compensation at the

time of entry of the member into active military service,

together with statutory interest during all periods of

subsequent State service as an active member or inactive member

on leave without pay and school service as an active member or

inactive member on leave without pay of the Public School

Employees' Retirement System to date of purchase. Upon

application for such credit the amount due shall be certified in

the case of each member by the board in accordance with methods

approved by the actuary, and contributions may be made by:

(1) regular monthly payments during active military

service; or

(2) a lump sum payment within 30 days of certification;

(3) salary deductions to the system in amounts agreed

upon by the member or eligible school employee who is an

active member of the Public School Employees' Retirement

System and the board.

The salary deduction amortization plans agreed to by members and

the board may include a deferral of payment amounts and

statutory interest until the termination of school service or

State service or beginning service as a participant as the board

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

salary deduction amortization plans to such terms as the board

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

20160HB2316PN3814 - 73 -

school employee who is an active member of the Public School

Employees' Retirement System, the agreed upon salary deductions

shall be remitted to the Public School Employees' Retirement

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

paid.

(d) Nonmilitary and nonmagisterial service.--Contributions

on account of credit for creditable nonstate service other than

military and magisterial service by State employees who first

become members of the system before January 1, 2011, or before

December 1, 2010, as a member of the General Assembly shall be

determined by applying the member's basic contribution rate, the

additional contribution rate plus the Commonwealth normal

contribution rate for active members at the time of entry

subsequent to such creditable nonstate service of the member

into State service to his compensation at the time of entry into

State service as a member of the system and multiplying the

result by the number of years and fractional part of a year of

creditable nonstate service being purchased together with

statutory interest during all periods of subsequent State

service as an active member or inactive member on leave without

pay and school service as an active member or inactive member on

leave without pay of the Public School Employees' Retirement

System to the date of purchase. Upon application for credit for

such service payment shall be made in a lump sum within 30 days

or in the case of an active member or eligible school employee

who is an active member of the Public School Employees'

Retirement System it may be amortized with statutory interest

through salary deductions to the system in amounts agreed upon

by the member and the board. The salary deduction amortization

plans agreed to by members and the board may include a deferral

20160HB2316PN3814 - 74 -

of payment amounts and statutory interest until the termination

of school service or State service or beginning service as a

participant as the board in its sole discretion decides to

allow. The board may limit salary deduction amortization plans

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

the case of an eligible school employee who is an active member

of the Public School Employees' Retirement System, the agreed

upon salary deduction shall be remitted to the Public School

Employees' Retirement Board, which shall certify and transfer to

the board the amounts paid.

* * *

(i) Purchases of nonstate service credit by State employees

who first became members of the system on or after December 1,

2010.--

* * *

(4) The payment for credit purchased under this

subsection shall be certified in each case by the board in

accordance with methods approved by the actuary and shall be

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

member or eligible school employee who is an active member of

the Public School Employees' Retirement System may be

amortized with statutory interest through salary deductions

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

board. The salary deduction amortization plans agreed to by

members and the board may include a deferral of payment

amounts and interest until the termination of school service

or State service or beginning service as a participant as the

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

limit the salary deduction amortization plans to such terms

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

20160HB2316PN3814 - 75 -

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

Public School Employees' Retirement System, the agreed upon

salary deductions shall be remitted to the Public School

Employees' Retirement Board, which shall certify and transfer

to the board the amounts paid.

* * *

§ 5505.1. Additional member contributions.

In addition to regular or joint coverage member contributions

and social security integration contributions, contributions

shall be made on behalf of each active member, regardless of

class of service, at the rate of 1 1/4% of compensation until

such time as the actuary certifies that all accrued liability

contributions have been completed in accordance with the

actuarial cost method provided in section 5508(b) (relating to

actuarial cost method for fiscal years ending before July 1,

2018).

Section 321. Section 5506 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5506. Incomplete payments.

In the event that a member terminates State service or

becomes a participant or a multiple service member who is an

active member of the Public School Employees' Retirement System

terminates school service before the agreed upon payments for

credit for previous State service, USERRA leave, creditable

nonstate service, social security integration, full coverage

membership or return of benefits on account of returning to

State service or entering school service and electing multiple

service have been completed, the member or multiple service

member who is an active member of the Public School Employees'

Retirement System shall have the right to pay within 30 days of

20160HB2316PN3814 - 76 -

termination of State service or school service or becoming a

participant the balance due, including interest, in a lump sum

and the annuity shall be calculated including full credit for

the previous State service, creditable nonstate service, social

security integration, or full coverage membership. In the event

a member does not pay the balance due within 30 days of

termination of State service or becoming a participant or in the

event a member dies in State service or within 30 days of

termination of State service or becoming a participant or in the

case of a multiple service member who is an active member of the

Public School Employees' Retirement System does not pay the

balance due within 30 days of termination of school service or

dies in school service or within 30 days of termination of

school service and before the agreed upon payments have been

completed, the present value of the benefit otherwise payable

shall be reduced by the balance due, including interest, and the

benefit payable shall be calculated as the actuarial equivalent

of such reduced present value.

Section 322. Sections 5506.1(a) and 5507 heading, (a), (b),

(d), (e) and (f) of Title 71 are amended to read:

§ 5506.1. Annual compensation limit under IRC § 401(a)(17).

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

limitations set forth in this part, and notwithstanding any

provision of this part to the contrary, the annual compensation

of each noneligible member and each participant taken into

account for benefit purposes under this part shall not exceed

the limitation under IRC § 401(a)(17). On and after January 1,

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

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

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

20160HB2316PN3814 - 77 -

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

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

commissioner for increases in the cost of living in accordance

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

effect for a calendar year applies to any determination period

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

compensation is determined, beginning in such calendar year. If

a determination period consists of fewer than 12 months, the

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

the numerator of which is the number of months in the

determination period and the denominator of which is 12.

* * *

§ 5507. Contributions to system by the Commonwealth and other

employers before July 1, 2018.

(a) Contributions on behalf of active members.--[The] Until

June 30, 2018, the Commonwealth and other employers whose

employees are members of the system, and from January 1, 2018,

to June 30, 2018, the Commonwealth and other employers whose

employees are participants in the plan, shall make contributions

to the fund on behalf of all active members in such amounts as

shall be certified by the board as necessary to provide,

together with the members' total accumulated deductions, annuity

reserves on account of prospective annuities other than those

provided in sections 5708 (relating to supplemental annuities),

5708.1 (relating to additional supplemental annuities), 5708.2

(relating to further additional supplemental annuities), 5708.3

(relating to supplemental annuities commencing 1994), 5708.4

(relating to special supplemental postretirement adjustment),

5708.5 (relating to supplemental annuities commencing 1998),

5708.6 (relating to supplemental annuities commencing 2002),

20160HB2316PN3814 - 78 -

5708.7 (relating to supplemental annuities commencing 2003) and

5708.8 (relating to special supplemental postretirement

adjustment of 2002), in accordance with the actuarial cost

method provided in section 5508(a), (b), (c), (d) and (f)

(relating to actuarial cost method for fiscal years ending

before July 1, 2018).

(b) Contributions on behalf of annuitants.--[The] Until June

30, 2018, the Commonwealth and other employers whose employees

are members of the system shall make contributions on behalf of

annuitants in such amounts as shall be certified by the board as

necessary to fund the liabilities for supplemental annuities in

accordance with the actuarial cost method provided in section

5508(e) (relating to actuarial cost method).

* * *

(d) Payment of final contribution rate.--Notwithstanding the

calculation of the actuarially required contribution rate and

the provisions of subsections (a) and (b), until June 30, 2018,

the Commonwealth and other employers whose employees are members

of the system shall make contributions to the fund on behalf of

all active members and annuitants in such amounts as shall be

certified by the board in accordance with section 5508(i).

(e) Benefits completion plan contributions.--In addition to

all other contributions required under this section and section

5508, until June 30, 2018, the Commonwealth and other employers

whose employees are members of the system shall make

contributions as certified by the board pursuant to section 5941

(relating to benefits completion plan).

(f) Contributions resulting from members reemployed from

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

leave makes the member contributions required to be granted

20160HB2316PN3814 - 79 -

State service credit for the USERRA leave before July 1, 2018,

either by actual payment or by actuarial debt under section 5506

(relating to incomplete payments), then the Commonwealth

employer or other employer by whom the State employee is

employed at the time the member contributions are made, or the

last employer before termination in the case of payment under

section 5506, shall make whatever employer contributions would

have been made under this section had the employee making the

member contributions after being reemployed from USERRA leave

continued to be employed in his State office or position instead

of performing USERRA leave.

Section 323. Title 71 is amended by adding a section to

read:

§ 5507.1. Contributions to system by the Commonwealth and other

employers starting July 1, 2018.

(a) Contributions on behalf of members.--For fiscal years

beginning on or after July 1, 2018, the Commonwealth and other

employers whose employees are or were members of the system

shall make contributions to the fund on behalf of all members in

such amounts as shall be certified by the board as necessary to

provide, together with the members' total accumulated

deductions, annuity reserves on account of annuities including

those provided in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

annuities), 5708.2 (relating to further additional supplemental

annuities), 5708.3 (relating to supplemental annuities

commencing 1994), 5708.4 (relating to special supplemental

postretirement adjustment), 5708.5 (relating to supplemental

annuities commencing 1998), 5708.6 (relating to supplemental

annuities commencing 2002), 5708.7 (relating to supplemental

20160HB2316PN3814 - 80 -

annuities commencing 2003) and 5708.8 (relating to special

supplemental postretirement adjustment of 2002), in accordance

with the actuarial cost method provided in section 5508.1

(relating to actuarial cost method for fiscal years beginning

July 1, 2018, or later).

(b) Payment of employer contributions to the system.--

(1) Payment of employer normal contributions shall be as

a percentage of compensation of active members.

(2) Payment of accrued liability contributions as

modified by the experience adjustment factor shall be as a

percentage of compensation of active members and active

participants.

(3) Payment of the additional accrued liability

contributions determined under section 5508.1(d) shall be in

equal monthly payments during the fiscal year on the first

day of each month, or in such other time and manner as the

board may establish.

calculation of the actuarially required contribution rate and

the provisions of subsections (a) and (b)(1) and (2), after June

30, 2018, the Commonwealth and other employers whose employees

are members of the system shall make contributions to the fund

on behalf of all active members and annuitants in such amounts

as shall be certified by the board in accordance with section

5508.1(h).

(d) Benefits completion plan contributions.--In addition to

all other contributions required under this section and section

5508.1, after June 30, 2018, the Commonwealth and other

employers whose employees are active members of the system shall

make contributions as certified by the board pursuant to section

20160HB2316PN3814 - 81 -

5941 (relating to benefits completion plan).

(e) Contributions resulting from members reemployed from

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

leave makes the member contributions required to be granted

State service credit for the USERRA leave after June 30, 2018,

either by actual payment or by actuarial debt under section 5506

(relating to incomplete payments), the Commonwealth employer or

other employer that employed the State employee when the member

contributions are made or the last employer before termination

in the case of payment under section 5506 shall make the

employer contributions that would have been made under this

section if the employee making the member contributions after

the employee is reemployed from USERRA leave continued to be

employed in the employee's State office or position instead of

performing USERRA leave.

Section 324. Section 5508 heading, (a), (b), (c)(1) and (3),

(e)(2) and (f)(1) of Title 71 are amended and subsection (c) is

amended by adding a paragraph to read:

§ 5508. Actuarial cost method for fiscal years ending before

July 1, 2018.

(a) Employer contribution rate on behalf of active

members.--[The] For the fiscal years ending before July 1, 2018,

the amount of the Commonwealth and other employer contributions

on behalf of all active members shall be computed by the actuary

as a percentage of the total compensation of all active members

during the period for which the amount is determined and shall

be so certified by the board. The actuarially required

contribution rate on behalf of all active members shall consist

of the employer normal contribution rate, as defined in

subsection (b), and the accrued liability contribution rate as

20160HB2316PN3814 - 82 -

defined in subsection (c). The actuarially required contribution

rate on behalf of all active members shall be modified by the

experience adjustment factor as calculated in subsection (f).

(b) Employer normal contribution rate.--[The] For the fiscal

years ending before July 1, 2018, the employer normal

contribution rate shall be determined after each actuarial

valuation on the basis of an annual interest rate and such

mortality and other tables as shall be adopted by the board in

accordance with generally accepted actuarial principles. The

employer normal contribution rate shall be determined as a level

percentage of the compensation of the average new active member,

which percentage, if contributed on the basis of his prospective

compensation through his entire period of active State service,

would be sufficient to fund the liability for any prospective

benefit payable to him in excess of that portion funded by his

prospective member contributions, excluding shared-risk member

contributions.

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

July 1, 2003, the accrued liability contribution rate shall

be computed as the rate of total compensation of all active

members which shall be certified by the actuary as sufficient

to fund over a period of ten years from July 1, 2002, the

present value of the liabilities for all prospective

benefits, except for the supplemental benefits as provided in

sections 5708 (relating to supplemental annuities), 5708.1

(relating to additional supplemental annuities), 5708.2

(relating to further additional supplemental annuities),

5708.3 (relating to supplemental annuities commencing 1994),

5708.4 (relating to special supplemental postretirement

20160HB2316PN3814 - 83 -

adjustment), 5708.5 (relating to supplemental annuities

commencing 1998), 5708.6 (relating to supplemental annuities

commencing 2002), 5708.7 (relating to supplemental annuities

commencing 2003) and 5708.8 (relating to special supplemental

postretirement adjustment of 2002), in excess of the total

assets in the fund (calculated recognizing all investment

gains and losses over a five-year period), excluding the

balance in the supplemental annuity account, and the present

value of employer normal contributions and of member

contributions payable with respect to all active members on

December 31, 2001, and excluding contributions to be

transferred by county retirement systems or pension plans

pursuant to section 5507(c) (relating to contributions to

system by the Commonwealth and other employers before July 1,

2018). The amount of each annual accrued liability

contribution shall be equal to the amount of such

contribution for the fiscal year beginning July 1, 2002,

except that, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2002, but before

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

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

with or next following the effective date of the increase.

The amount of each annual accrued liability contribution for

such additional legislative liabilities shall be equal to the

amount of such contribution for the first annual payment.

* * *

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

accrued liability contribution rate shall be computed as the

rate of total compensation of all active members which shall

be certified by the actuary as sufficient to fund in equal

20160HB2316PN3814 - 84 -

dollar installments over a period of 30 years from July 1,

2010, the present value of the liabilities for all

prospective benefits calculated as of the immediately prior

valuation date, including the supplemental benefits as

provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4,

5708.5, 5708.6, 5708.7 and 5708.8, but excluding the benefits

payable from the retirement benefit plan established pursuant

to section 5941 (relating to benefits completion plan), in

excess of the actuarially calculated assets in the fund

(calculated recognizing all realized and unrealized

investment gains and losses each year in level annual

installments over five years), including the balance in the

supplemental annuity account, and the present value of

employer normal contributions and of member contributions

payable with respect to all active members, inactive members

on leave without pay, vestees and special vestees on December

31, 2009. If the accrued liability is changed by legislation

enacted subsequent to December 31, 2009, and before January

1, 2017, such change in liability shall be funded in equal

dollar installments over a period of ten years from the first

day of July following the valuation date coincident with or

next following the date such legislation is enacted.

(4) For the fiscal year beginning July 1, 2018, the

accrued liability contribution rate shall be computed as

provided for under this section, except that the rate shall

be computed as a rate of total compensation of all active

members and active participants for the fiscal year. In

addition to any employer defined contributions made to the

trust, the Commonwealth and other employers of participants

shall make the accrued liability contributions to the fund

20160HB2316PN3814 - 85 -

certified by the board.

* * *

(e) Supplemental annuity contribution rate.--

* * *

(2) For fiscal years beginning on or after July 1, 2010,

and ending on or before June 30, 2018, contributions from the

Commonwealth and other employers whose employees are members

of the system required to provide for the payment of

supplemental annuities as provided in sections 5708, 5708.1,

5708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7 and 5708.8

shall be paid as part of the accrued liability contribution

rate as provided for in subsection (c)(3), and there shall

not be a separate supplemental annuity contribution rate

attributable to those supplemental annuities. In the event

that supplemental annuities are increased by legislation

enacted subsequent to December 31, 2009, and before January

1, 2017, the additional liability for the increase in

benefits shall be funded in equal dollar installments over a

period of ten years from the first day of July following the

valuation date coincident with or next following the date

such legislation is enacted.

(f) Experience adjustment factor.--

(1) For each [year] fiscal year ending before July 1,

2018, after the establishment of the accrued liability

contribution rate and the supplemental annuity contribution

rate for the fiscal year beginning July 1, 2010, any increase

or decrease in the unfunded accrued liability and any

increase or decrease in the liabilities and funding for

supplemental annuities, due to actual experience differing

from assumed experience (recognizing all realized and

20160HB2316PN3814 - 86 -

unrealized investment gains and losses over a five-year

period), changes in contributions caused by the final

contribution rate being different from the actuarially

required contribution rate, State employees making shared-

risk member contributions, changes in actuarial assumptions

or changes in the terms and conditions of the benefits

provided by the system by judicial, administrative or other

processes other than legislation, including, but not limited

to, reinterpretation of the provisions of this part

recognized by the actuarial valuations on December 31, 2010,

and through December 31, 2016 , shall be amortized in equal

dollar annual contributions over a period of 30 years

beginning with the July 1 succeeding the actuarial valuation

determining said increases or decreases.

* * *

Section 325. Title 71 is amended by adding a section to

read:

§ 5508.1. Actuarial cost method for fiscal years beginning July

1, 2018, or later.

(a) Employer contributions on behalf of members.--For fiscal

years beginning on or after July 1, 2018, the amount of the

Commonwealth and other employer contributions on behalf of all

members shall be computed by the actuary and certified by the

board as an employer normal contribution rate as defined in

subsection (b) and the accrued liability contribution amount as

defined in subsection (c). The accrued liability contribution

amount shall be modified by the experience adjustment factor as

calculated in subsection (f).

(b) Employer normal contribution rate.--For fiscal years

beginning on or after July 1, 2018, the employer normal

20160HB2316PN3814 - 87 -

contribution rate for all active members of the system shall be

the employer normal contribution rate that would have been

applicable if the employer normal contribution rate was

determined as part of the December 31, 2017, actuarial valuation

under section 5508(b) (relating to actuarial cost method for

fiscal years ending before July 1, 2018) without regard to the

provisions of this section and the inapplicability of that rate

to periods on or after July 1, 2018.

(1) For fiscal years beginning July 1, 2018, the accrued

liability contribution rate shall be computed as the rate of

total compensation of all active members and active

participants which shall be determined by the actuary as

sufficient to fund the equal dollar installments determined

under section 5508(c). If the accrued liability is changed by

legislation enacted subsequent to December 31, 2016, such

change in liability shall be funded in equal dollar

installments as a percentage of compensation of all active

members and active participants over a period of 10 years

from the first day of July following the valuation date

coincident with or next following the date such legislation

is enacted. The accrued liability contribution rate shall be

determined after each actuarial valuation on the basis of an

annual interest rate and such mortality and other tables as

shall be adopted by the board in accordance with generally

accepted actuarial principles.

(2) For purposes of determining the accrued liability

contribution rate in paragraph (1) and subsection (e) and the

experience adjustment factor in subsection (f), the term

"compensation of all active members and active participants"

20160HB2316PN3814 - 88 -

shall include an additional amount equal to the difference

between:

(i) The actual compensation of all active members

and active participants of The Pennsylvania State

University, the State System of Higher Education, State-

owned educational institutions and community colleges.

(ii) The compensation of all employees of The

Pennsylvania State University, the State System of Higher

Education, State-owned educational institutions and

community colleges who are active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer multiplied by

a fraction equal to the amount determined under

subparagraph (i) as part of the December 31, 2017,

actuarial valuation divided by the amount determined

under this subparagraph as of December 31, 2017.

(d) Allocation of accrued liability contribution amount.--

For the fiscal year beginning July 1, 2018, and all subsequent

fiscal years, The Pennsylvania State University, the State

System of Higher Education, each State-owned educational

institution and each community college shall make such

additional actuarial accrued liability contributions as shall be

certified by the board. The additional actuarial accrued

liability contributions shall be the product of:

(1) the amount by which the final contribution rate

exceeds the employer normal contribution rate determined

under subsection (b)(1); multiplied by

20160HB2316PN3814 - 89 -

(2) the difference between:

(i) the actual compensation of all active members

and active participants of each such educational

institution; and

(ii) the compensation of all active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer of each such

educational institution multiplied by a fraction equal to

the amount determined under subparagraph (i) as part of

the December 31, 2017, actuarial valuation divided by the

amount of compensation of all active members, active

participants, active members of the Public School

Employees' Retirement System, active participants of the

School Employees' Defined Contribution Plan and employees

who are members or participants of an independent

retirement program approved by the employer of each such

educational institution determined as of December 31,

2017.

(e) Supplemental annuity contribution amounts.--For fiscal

years beginning on or after July 1, 2018, contributions from the

Commonwealth and other employers whose employees are members of

the system required to provide for the payment of supplemental

annuities as provided in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

annuities), 5708.2 (relating to further additional supplemental

annuities), 5708.3 (relating to supplemental annuities

commencing 1994), 5708.4 (relating to special supplemental

20160HB2316PN3814 - 90 -

postretirement adjustment), 5708.5 (relating to supplemental

annuities commencing 1998), 5708.6 (relating to supplemental

annuities commencing 2002), 5708.7 (relating to supplemental

annuities commencing 2003) and 5708.8 (relating to special

supplemental postretirement adjustment of 2002) shall be paid as

part of the accrued liability contribution rate as provided for

in subsection (c) and there shall not be a separate supplemental

annuity contribution amount attributable to those supplemental

annuities. In the event that supplemental annuities are

increased by legislation enacted subsequent to December 31,

2015, the additional liability for the increase in benefits

shall be funded in equal dollar installments as a percentage of

compensation of all active members and active participants over

a period of 10 years from the first day of July following the

valuation date coincident with or next following the date such

legislation is enacted as part of the accrued liability amount

and not as a separate supplemental annuity contribution amount.

(f) Experience adjustment factor.--

(1) For each year beginning on or after July 1, 2018:

(i) the accrued liability contribution rate computed

under subsection (c) shall be modified each year by any

amounts calculated for each year under section 5508(f)

for each of the respective amortization periods remaining

as of July 1, 2018; and

(ii) any increase or decrease in the unfunded

accrued liability and any increase or decrease in the

liabilities and funding for supplemental annuities, due

to actual experience differing from assumed experience,

recognizing all realized and unrealized investment gains

and losses over a five-year period, changes in

20160HB2316PN3814 - 91 -

contributions caused by the final contribution rate being

different from the actuarially required contribution

rate, State employees making shared-risk member

contributions, changes in actuarial assumptions or

changes in the terms and conditions of the benefits

provided by the system by judicial, administrative or

other processes other than legislation, including, but

not limited to, reinterpretation of the provisions of

this part, shall be amortized in equal dollar

installments expressed as a level percentage of

compensation of all active members and active

participants over a period of 30 years beginning with the

July 1 succeeding the actuarial valuation determining

said increases or decreases.

(2) The actuarially required contribution rate shall be

the sum of the normal contribution rate determined under

subsection (b)(2), the accrued liability contribution rate

and the supplemental annuity contribution rate modified by

the experience adjustment factor as calculated in paragraph

(1).

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

The collared contribution rate for each fiscal year beginning on

or after July 1, 2018, shall be determined by comparing the

actuarially required contribution rate calculated without regard

for costs added by legislation to the prior year's final

contribution rate. If the actuarially required contribution rate

calculated without regard for costs added by legislation is more

than 4.5% of the total compensation of all active members

greater than the prior year's final contribution rate, then the

collared contribution rate shall be applied and be equal to the

20160HB2316PN3814 - 92 -

prior year's final contribution rate increased by 4.5% of total

compensation of all active members. Otherwise, and for all

subsequent fiscal years, the collared contribution rate shall

not be applicable. In no case shall the collared contribution

rate be less than 4% of total compensation of all active

members.

(h) Final contribution rate.--For the fiscal year beginning

July 1, 2018, if the collared contribution rate is applicable,

the final contribution rate shall be the collared contribution

rate plus the costs added by legislation. For each subsequent

fiscal year for which the collared contribution rate is

applicable, the final contribution rate shall be the collared

contribution rate plus the costs added by legislation. For all

other fiscal years beginning on or after July 1, 2017, the final

contribution rate shall be the actuarially required contribution

rate, provided that the final contribution rate shall not be

less than the employer normal contribution rate, as provided

under subsection (b).

Section 326. Section 5509 of Title 71 is amended to read:

§ 5509. Appropriations and assessments by the Commonwealth.

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

and submit annually an itemized budget consisting of the amounts

necessary to be appropriated by the Commonwealth out of the

General Fund and special operating funds and the amounts to be

assessed the other employers required to meet the separate

obligations to both the fund and the trust accruing during the

fiscal period beginning the first day of July of the following

year.

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

make an appropriation sufficient to provide for the separate

20160HB2316PN3814 - 93 -

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

Such amount shall be paid by the State Treasurer through the

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

may be, in accordance with requisitions presented by the board.

The contributions to the system by the Commonwealth on behalf of

active members who are officers of the Pennsylvania State Police

shall be charged to the General Fund and to the Motor License

Fund in the same ratios as used to apportion the appropriations

for salaries of members of the Pennsylvania State Police. The

contributions to the system by the Commonwealth on behalf of

active members who are enforcement officers and investigators of

the Pennsylvania Liquor Control Board shall be charged to the

General Fund and to the State Stores Fund.

amounts assessed other employers who are required to make the

necessary separate contributions to both the fund and the trust

out of funds other than the General Fund shall be paid by such

employers into the fund or the trust, as the case may be, in

accordance with requisitions presented by the board. The General

Fund of the Commonwealth shall not be held liable to appropriate

the moneys required to build up the reserves in the fund

necessary for the payment of benefits from the system to

employees or to make the employer defined contributions for

employees of such other employers. In case any such other

employer shall fail to provide to the fund the moneys necessary

for such purpose, then the service of such members of the system

for such period for which money is not so provided shall be

credited and pickup contributions with respect to such members

shall continue to be credited to the members' savings account.

The annuity to which such member is entitled shall be determined

20160HB2316PN3814 - 94 -

as actuarially equivalent to the present value of the maximum

single life annuity of each such member reduced by the amount of

employer contributions to the system payable on account and

attributable to his compensation during such service, except

that no reduction shall be made as a result of the failure of an

employer to make contributions required for a period of USERRA

leave.

Section 327. Section 5701 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5701. Return of total accumulated deductions.

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

benefits payable from the system under this chapter to which he

may be entitled, elect to receive his total accumulated

deductions by his required beginning date.

Section 328. Section 5701.1 of Title 71 is amended to read:

§ 5701.1. Transfer of accumulated deductions.

When an employee of the Juvenile Court Judges' Commission

elects membership in an independent retirement program pursuant

to section 5301(f) (relating to mandatory and optional

membership in system and participation in plan), the board shall

transfer directly to the trustee or administrator of the

independent retirement program all accumulated deductions

resulting from service credited while an employee of the

Juvenile Court Judges' Commission.

Section 329. Sections 5702(a)(1) and 5704(a) and (c) of

Title 71 are amended and the sections are amended by adding

subsections to read:

§ 5702. Maximum single life annuity.

(a) General rule.--Any full coverage member who is eligible

to receive an annuity pursuant to the provisions of section

20160HB2316PN3814 - 95 -

5308(a) or (b) (relating to eligibility for annuities) who

terminates State service, or if a multiple service member who is

a school employee who is an active member of the Public School

Employees' Retirement System who terminates school service,

before attaining age 70 shall be entitled to receive a maximum

single life annuity attributable to his credited service and

equal to the sum of the following single life annuities

beginning at the effective date of retirement:

(1) A standard single life annuity multiplied by the sum

of the products, determined separately for each class of

service, obtained by multiplying the appropriate class of

service multiplier by the ratio of years of service credited

in that class to the total credited service. In case the

member on the effective date of retirement is under

superannuation age for any service, a reduction factor

calculated to provide benefits actuarially equivalent to an

annuity starting at superannuation age shall be applied to

the product determined for that service. The class of service

multiplier for any period of concurrent service shall be

multiplied by the proportion of total State and school

compensation during such period attributable to State service

as a member of the system. In the event a member has two

multipliers for one class of service the class of service

multiplier to be used for calculating benefits for that class

shall be the average of the two multipliers weighted by the

proportion of compensation attributable to each multiplier

during the three years of highest annual compensation in that

class of service: Provided, That in the case of a member of

Class E-1, a portion but not all of whose three years of

highest annual judicial compensation is prior to January 1,

20160HB2316PN3814 - 96 -

1973, two class of service multipliers shall be calculated on

the basis of his entire judicial service, the one applying

the judicial class of service multipliers effective prior to

January 1, 1973 and the second applying the class of service

multipliers effective subsequent to January 1, 1973. The

average class of service multiplier to be used for

calculating benefits for his judicial service shall be the

average of the two calculated multipliers weighted by the

proportion of compensation attributable to each of the

calculated multipliers during the three years of highest

annual compensation in that class of service.

* * *

(e) Coordination of benefits.--The determination and payment

of the maximum single life annuity under this section shall be

in addition to any payments a combined service employee may be

entitled to receive, has received or is receiving as a result of

being a participant in the plan.

§ 5704. Disability annuities.

(a) Amount of annuity.--A member who has made application

for a disability annuity and has been found to be eligible in

accordance with the provisions of section 5905(c)(1) (relating

to duties of the board regarding applications and elections of

members and participants) shall receive a disability annuity

payable from the effective date of disability as determined by

the board and continued until a subsequent determination by the

board that the annuitant is no longer entitled to a disability

annuity. The disability annuity shall be equal to a standard

single life annuity multiplied by the class of service

multiplier applicable to the class of service at the time of

disability if the product of such class of service multiplier

20160HB2316PN3814 - 97 -

and the total number of years of credited service is greater

than 16.667, otherwise the standard single life annuity shall be

multiplied by the lesser of the following ratios:

MY*/Y or 16.667/Y

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

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

employee until attaining superannuation age as applicable at the

time of disability, or if the member has attained superannuation

age, as applicable at the time of disability, then the number of

years of credited service and M = the class of service

multiplier as applicable at the effective date of disability. A

member of Class C shall receive, in addition, any annuity to

which he may be eligible under section 5702(a)(3) (relating to

maximum single life annuity). The member shall be entitled to

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

the disability annuity to which he is entitled under section

5702.

* * *

January 1, 1972, payments on account of disability shall be

reduced by that amount by which the earned income of the

annuitant, as reported in accordance with section 5908(b)

(relating to rights and duties of annuitants), for the preceding

calendar year together with the disability annuity payments

provided in this section other than subsection (b), for the

year, exceeds the product of:

[(i)] (1) the last year's salary of the annuitant as

a [State employee] member of the system; and

[(ii)] (2) the ratio of the current monthly payment

to the monthly payment at the effective date of

20160HB2316PN3814 - 98 -

disability;

Provided, That the annuitant shall not receive less than his

member's annuity or the amount to which he may be entitled under

section 5702 whichever is greater.

* * *

(h) Coordination of benefits.--The determination and payment

of the disability annuity under this section shall be in

addition to any payments a combined service employee may be

entitled to receive, has received or is receiving as a result of

being a participant in the plan.

Section 330. Sections 5706(a), (a.1), (a.2), (b) and (c)(1)

and (3) of Title 71, amended December 28, 2015 (P.L.529, No.93),

are amended 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 without regard to whether he is a

mandatory, optional or prohibited member of the system or

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

whether he is a mandatory, optional or prohibited member or

participant of the Public School Employees' Retirement System

or School Employees' Defined Contribution Plan and in the

case of an annuity other than a disability annuity the

present value of such annuity, adjusted for full coverage in

the case of a joint coverage member who makes the appropriate

back contributions for full coverage, shall be frozen as of

the date such annuity ceases. An annuitant who is credited

20160HB2316PN3814 - 99 -

with an additional 10% of Class A and Class C service as

provided in section 5302(c) (relating to credited State

service) and who returns to State service shall forfeit such

credited service and shall have his frozen present value

adjusted as if his 10% retirement incentive had not been

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

increase enacted December 18, 1979 occurred during the period

of such State or school employment, the frozen present value

shall be increased, on or after the member attains

superannuation age, by the percent applicable had he not

returned to service.

(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

20160HB2316PN3814 - 100 -

appointment.

(a.1) Return to State service during emergency.--When, in

the judgment of the employer, an emergency creates an increase

in the work load such that there is serious impairment of

service to the public, an annuitant may be returned to State

service for a period not to exceed 95 days in any calendar year

without loss of his annuity. In computing the number of days an

annuitant has returned to State service, any amount of time less

than one-half of a day shall be counted as one-half of a day.

For agencies, boards and commissions under the Governor's

jurisdiction, the approval of the Governor that an emergency

exists shall be required before an annuitant may be returned to

State service. Such service shall not be subject to member

contributions or be eligible for qualification as creditable

State service or for participation in the plan, mandatory pickup

participant contributions or employer defined contributions.

(a.2) Return of benefits.--In the event an annuitant whose

annuity ceases pursuant to this section receives any annuity

payment, including a lump sum payment pursuant to section 5705

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

return to State service or entering school service, the

annuitant shall return to the board the amount so received plus

statutory interest. The amount payable shall be certified in

each case by the board in accordance with methods approved by

the actuary and shall be paid in a lump sum within 30 days or in

the case of an active member or school employee who is an active

member of the Public School Employees' Retirement System may be

amortized with statutory interest through salary deductions to

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

The salary deduction amortization plans agreed to by the member

20160HB2316PN3814 - 101 -

and the board may include a deferral of payment amounts and

statutory interest until the termination of school service or

State service or beginning service as a participant as the board

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

salary deduction amortization plans to such terms as the board

in its sole discretion determines. In the case of a school

employee who is an active member of the Public School Employees'

Retirement System, the agreed upon salary deductions shall be

remitted to the Public School Employees' Retirement Board, which

shall certify and transfer to the board the amounts paid.

(a.3) Return of benefits paid during USERRA leave.--In the

event that a former State employee is reemployed from USERRA

leave who had received any payments or annuity from the system

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

the amount so received plus statutory interest. The amount

payable shall be certified in each case by the board in

accordance with methods approved by the actuary and shall be

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

member may be amortized with statutory interest through salary

deductions in amounts agreed upon by the member and the board,

but not longer than a period that starts with the date of

reemployment and continuing for up to three times the length of

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

repayment period not to exceed five years or such longer time as

may be agreed to between the board and the member.

(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

20160HB2316PN3814 - 102 -

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

service.

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

discontinuance of service, such [member] terminating State

employee other than a former annuitant who had the effect of his

frozen present value eliminated in accordance with subsection

annuity which is actuarially equivalent to [the sum of] the

present value as determined under subsection (a) [and] to which

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

member of the system, the present value of a maximum single life

annuity based on years of service credited subsequent to reentry

in the system and his final average salary computed by reference

to his compensation as a member of the system or as a member of

20160HB2316PN3814 - 103 -

the Public School Employees' Retirement System during his entire

period of State and school service.

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

active member of the system and earns three eligibility

points by performing credited State service following the

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

or an annuitant who enters school service other than as a

participant in the School Employees' Defined Contribution

Plan and:

(i) is a multiple service member; or

(ii) who elects multiple service membership, and

earns three eligibility points by performing credited State

service or credited school service following the most recent

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

the present value of his annuity frozen in accordance with

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

frozen present value resulting from all previous periods of

retirement eliminated, provided that all payments under

Option 4 and annuity payments payable during previous periods

of retirement plus interest as set forth in paragraph (3)

shall be returned to the fund in the form of an actuarial

adjustment to his subsequent benefits or in such form as the

board may otherwise direct.

(2) Upon subsequent discontinuance of service and the

filing of an application for an annuity, a former annuitant

who qualifies to have the effect of a frozen present value

eliminated under this subsection shall be entitled to receive

the higher of either:

(i) an annuity (prior to optional modification)

20160HB2316PN3814 - 104 -

calculated as if the freezing of the former annuitant's

account pursuant to subsection (a) had not occurred,

adjusted by crediting Class A State service as Class AA

service as provided for in section 5306(a.1) (relating to

classes of service) and further adjusted according to

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

system or a former annuitant of the Public School

Employees' Retirement System who retired under a

provision of law granting additional service credit if

termination of State or school service or retirement

occurred during a specific period of time shall not be

permitted to retain the additional service credit under

the prior law when the annuity is computed for his most

recent retirement; or

(ii) an annuity (prior to optional modification)

calculated as if the former annuitant did not qualify to

have the effect of the frozen present value eliminated,

unless the former annuitant notifies the board in writing by

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

the effective date of retirement that the former annuitant

wishes to receive the lower annuity.

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

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

entitled to receive that occurs as a result of any other

provision of law, the present value of the maximum single

life annuity shall be reduced by all amounts paid or payable

to him during all previous periods of retirement plus

interest on these amounts until the date of subsequent

retirement. The interest for each year shall be calculated

based upon the annual interest rate adopted for that fiscal

20160HB2316PN3814 - 105 -

year by the board for the calculation of the normal

contribution rate pursuant to section 5508(b) (relating to

actuarial cost method[).] for fiscal years ending before July

1, 2018) or for the calculation of the accrued liability

contribution rate under section 5508.1(c) (relating to

actuarial cost method for fiscal years beginning July 1,

2018, or later) for fiscal years starting on or after July 1,

2018.

Section 331. Sections 5707(a), (b) and (f), 5708.1(f),

5708.2(f), 5708.3(f), 5708.5(f), 5708.6(f), 5708.7(f),

5708.8(g), 5709 heading, (a) and (b) and 5901(a), (c) and (d) of

Title 71 are amended to read:

§ 5707. Death benefits.

(a) Members eligible for annuities.--Any active member,

inactive member on leave without pay, combined service employee

who is an active participant or inactive participant on leave

without pay, vestee or current or former State employee

performing USERRA leave who dies and was eligible for an annuity

in accordance with section 5308(a) or (b) (relating to

eligibility for annuities) or special vestee who has attained

superannuation age and dies before applying for a superannuation

annuity shall be considered as having applied for an annuity to

become effective the day before his death and in the event he

has not elected an option or such election has not been approved

prior to his death, it shall be assumed that he elected Option

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

death of a special vestee, an active member, an inactive member

on leave without pay, a combined service employee who is an

active participant or inactive participant on leave without pay,

20160HB2316PN3814 - 106 -

or a current or former State employee performing USERRA leave

who is not entitled to a death benefit as provided in subsection

(a), his designated beneficiary shall be paid the full amount of

his total accumulated deductions.

* * *

(f) Members subject to limitations under section 5702(c).--

Subject to the limitations contained in section 401(a)(9) of the

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

401(a)(9)), the present value of any annuity in excess of that

payable under section 5702 (relating to maximum single life

annuity) that is not subject to the limitations under section

415(b) of the Internal Revenue Code of 1986 shall be paid in a

lump sum to the beneficiary designated by the member after the

death of the member. A beneficiary receiving a benefit under

this subsection shall not be able to elect a payment method

otherwise allowed under section 5709(b)(2) and (3) (relating to

payment of benefits from the system).

§ 5708.1. Additional supplemental annuities.

* * *

(f) Funding.--The actuary shall annually certify the amount

of appropriations for the next fiscal year needed to fund, over

a period of ten years from July 1, 2002, the additional monthly

supplemental annuity provided for in this section, which amounts

shall be paid during the period beginning July 1, 2002, and

ending June 30, 2010. For fiscal years beginning on or after

July 1, 2010, the additional liability provided in this section

shall be funded as part of the actuarial accrued liability as

provided in [section 5508 (relating to actuarial cost method).]

sections 5508 (relating to actuarial cost method for fiscal

years ending before July 1, 2018) and 5508.1 (relating to

20160HB2316PN3814 - 107 -

actuarial cost method for fiscal years beginning July 1, 2018,

or later).

* * *

§ 5708.2. Further additional supplemental annuities.

* * *

(f) Funding.--The actuary shall annually estimate the amount

of Commonwealth appropriations for the next fiscal year needed

to fund, over a period of ten years from July 1, 2002, the

additional monthly supplemental annuity provided for in this

section, which amounts shall be paid during the period beginning

July 1, 2002, and ending June 30, 2010. For fiscal years

beginning on or after July 1, 2010, the additional liability

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5708.3. Supplemental annuities commencing 1994.

* * *

(f) Funding.--For the period beginning July 1, 2002, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2002. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

20160HB2316PN3814 - 108 -

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5708.5. Supplemental annuities commencing 1998.

* * *

(f) Funding.--For the period beginning July 1, 2002, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2002. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5708.6. Supplemental annuities commencing 2002.

* * *

(f) Funding.--For the period beginning July 1, 2003, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

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

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

20160HB2316PN3814 - 109 -

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5708.7. Supplemental annuities commencing 2003.

* * *

(f) Funding.--For the period beginning July 1, 2004, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

July 1, 2004. For fiscal years beginning on or after July 1,

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5708.8. Special supplemental postretirement adjustment of

2002.

* * *

(g) Funding.--For the period beginning July 1, 2003, and

ending June 30, 2010, the additional liability for the increase

in benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years beginning

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

2010, the additional liability for the increase in benefits

provided in this section shall be funded as part of the

actuarial accrued liability as provided in [section 5508

20160HB2316PN3814 - 110 -

(relating to actuarial cost method).] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later).

* * *

§ 5709. Payment of benefits from the system.

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

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

installments.

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

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

5707 (relating to death benefits) or under the provisions of

Option 1 of section 5705(a)(1) (relating to member's options) is

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

according to one of the following options:

(1) a lump sum payment;

(2) an annuity actuarially equivalent to the amount

payable; or

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

annuity is actuarially equivalent to the amount payable less

the lump sum payment specified by the beneficiary.

* * *

§ 5901. The State Employees' Retirement Board.

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

independent administrative board and consist of 11 members: the

State Treasurer, ex officio, two Senators, two members of the

House of Representatives and six members appointed by the

Governor, one of whom shall be an annuitant of the system or a

participant of the plan who has terminated State service and is

receiving or is eligible to receive distributions, for terms of

20160HB2316PN3814 - 111 -

four years, subject to confirmation by the Senate. At least five

board members shall be active members of the system or active

participants of the plan, and at least two shall have ten or

more years of credited State service or shall have been active

participants of the plan for ten calendar years. The chairman of

the board shall be designated by the Governor from among the

members of the board. Each member of the board who is a member

of the General Assembly may appoint a duly authorized designee

to act in his stead. In the event that a board member, who is

designated as an active participant or as the participant in the

plan who is receiving or is eligible to receive distributions,

receives a total distribution of the member's interest in the

plan, that board member may continue to serve on the board for

the remainder of the member's term.

* * *

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

diligently and honestly, administer the affairs of said board,

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

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

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

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

taken and shall be immediately filed in the Office of the

Secretary of the Commonwealth.

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

are members of the system or participants in the plan shall

serve without compensation but shall not suffer loss of salary

or wages through serving on the board. The members of the board

who are not members of the system or participants in the plan

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

20160HB2316PN3814 - 112 -

members shall be reimbursed for any necessary expenses. However,

when the duties of the board as mandated are not executed, no

compensation or reimbursement for expenses of board members

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

are not executed.

* * *

Section 332. Section 5902(a.1) introductory paragraph, (3),

(5) and (6), (b), (c), (e), (h), (i), (j), (k), (m) and (n) of

Title 71 are amended and the section is amended by adding a

subsection to read:

§ 5902. Administrative duties of the board.

* * *

(a.1) Secretary.--The secretary shall act as chief

administrative officer for the board with respect to both the

system and the plan. In addition to other powers and duties

conferred upon and delegated to the secretary by the board, the

secretary shall:

* * *

(3) Review and analyze proposed legislation and

legislative developments affecting the system or the plan and

present findings to the board, legislative committees, and

other interested groups or individuals.

* * *

(5) Receive inquiries and requests for information

concerning the system or the plan from the press,

Commonwealth officials, State employees, the general public,

research organizations, and officials and organizations from

other states, and provide information as authorized by the

board.

(6) Supervise a staff of administrative, technical, and

20160HB2316PN3814 - 113 -

clerical employees engaged in record-keeping and clerical

processing activities for both the system and the plan in

maintaining files of members and participants, accounting for

contributions, processing payments to annuitants and

terminated participants, preparing required reports, and

retirement counseling. The board may utilize the staff of

employees provided for under this subsection for both the

system and the plan but shall allocate the fees, costs and

expenses incurred under this subsection between the system

and the plan as appropriate.

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

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

advisors and counselors, and such other professional personnel

as it deems advisable. The board may, with the approval of the

Attorney General, contract for legal services. The board may

utilize the same individuals and firms contracted under this

subsection for both the system and the plan but shall allocate

the fees, costs and expenses incurred under this subsection

between the system and the plan as appropriate.

to the General Assembly annually a budget covering the

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

budget covering the administrative expenses of the plan. Such

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

appropriation bill shall be paid from investment earnings of the

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

Assembly shall be paid from interest, pursuant to section

5414(b) (relating to investments based on members' investment

allocation choices), or assessments on the balances of the

participants' individual investment accounts except as may be

20160HB2316PN3814 - 114 -

provided otherwise by law. Concurrently with its administrative

budget, the board shall also submit to the General Assembly

annually a list of proposed expenditures which the board intends

to pay through the use of directed commissions, together with a

list of the actual expenditures from the past year actually paid

by the board through the use of directed commissions. All such

directed commission expenditures shall be made by the board for

the exclusive benefit of the system and its members.

* * *

(e) Records.--

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

which shall be open to [inspection] access by the public,

except as otherwise provided in this part or by other law.

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

used or retained by the board or its employees, investment

professionals or agents relating to an investment shall not

constitute a public record subject to public [inspection]

access under the act of [June 21, 1957 (P.L.390, No.212),

referred to as the Right-to-Know Law,] February 14, 2008

(P.L.6, No.3), known as the Right-to-Know Law, if, in the

reasonable judgment of the board, the [inspection] access

would:

(i) in the case of an alternative investment or

alternative investment vehicle, involve the release of

sensitive investment or financial information relating to

the alternative investment or alternative investment

vehicle which the fund or trust was able to obtain only

upon agreeing to maintain its confidentiality;

(ii) cause substantial competitive harm to the

person from whom sensitive investment or financial

20160HB2316PN3814 - 115 -

information relating to the investment was received; or

(iii) have a substantial detrimental impact on the

value of an investment to be acquired, held or disposed

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

standard of care or fiduciary duty set forth in this

part.

(3) (i) The sensitive investment or financial

information excluded from [inspection] access under

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

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

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

its agreement to maintain confidentiality.

(ii) The sensitive investment or financial

information excluded from [inspection] access under

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

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

Right-to-Know Law once:

(A) the [inspection] access no longer causes

substantial competitive harm to the person from whom

the information was received; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

(iii) The sensitive investment or financial

information excluded from [inspection] access under

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

from [inspection] access, shall constitute a public

record subject to public [inspection] access under the

20160HB2316PN3814 - 116 -

Right-to-Know Law once:

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

substantial detrimental impact on the value of an

investment of the fund or trust and would not cause a

breach of the standard of care or fiduciary duty set

forth in this part; or

(B) the entity in which the investment was made

is liquidated;

whichever is later.

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

in this subsection shall be construed to designate any

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

by the board or its employees, investment professionals or

agents relating to an investment as a public record subject

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

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

used or retained by the board or its employees, or agents

relating to the contributions, account value or benefits

payable to or on account of a participant shall not

constitute a public record subject to public access under the

Right-to-Know Law, if, in the reasonable judgment of the

board, the access would disclose any of the following:

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

information pertaining to the rollover contributions or

trustee-to-trustee transfers of any participant.

(ii) The investment options selections of any

participant.

(iii) The balance of a participant's account,

including the amount distributed to the participant

investment gains or losses or rates of return.

20160HB2316PN3814 - 117 -

(iv) The identity of a participant's designated

beneficiary, successor payee or alternate payee.

(v) The benefit payment option of a participant.

(6) Nothing in this subsection shall be construed to

designate any record, material or data received, prepared,

used or retained by the board or its employees, or agents

relating to the contributions, account value or benefits

payable to or on account of a participant as a public record

subject to public access under the Right-to-Know Law.

* * *

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

advice of the Attorney General and the actuary, adopt and

promulgate rules and regulations for the uniform administration

of the system. The actuary shall approve in writing all

computational procedures used in the calculation of

contributions and benefits pertaining to the system, and the

board shall by resolution adopt such computational procedures,

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

and computational procedures as so adopted from time to time and

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

are adopted pursuant to subsection (j) as necessary for the

calculation of annuities and other benefits, shall be as

effective as if fully set forth in this part. Any actuarial

assumption specified in or underlying any such rule, regulation

or computational procedure and utilized as a basis for

determining any benefit shall be applied in a uniform manner.

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

as are stipulated by the actuary in order that an annual

actuarial valuation of the various accounts of the fund can be

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

20160HB2316PN3814 - 118 -

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

have the actuary make an annual valuation of the various

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

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

thereafter the board shall have the actuary conduct an actuarial

investigation and evaluation of the system based on data

including the mortality, service, and compensation experience

provided by the board annually during the preceding five years

concerning the members and beneficiaries of the system. The

board shall by resolution adopt such tables as are necessary for

the actuarial valuation of the fund and calculation of

contributions, annuities and other benefits based on the reports

and recommendations of the actuary. Within 30 days of their

adoption, the secretary of the board shall cause those tables

which relate to the calculation of annuities and other benefits

to be published in the Pennsylvania Bulletin in accordance with

the provisions of 45 Pa.C.S. § 725(a) (relating to additional

contents of Pennsylvania Bulletin) and, unless the board

specifies therein a later effective date, such tables shall

become effective on such publication. The board shall include a

report on the significant facts, recommendations and data

developed in each five-year actuarial investigation and

evaluation of the system in the annual financial statement

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

fiscal year in which such investigation and evaluation were

concluded.

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

The board shall, each year in addition to the itemized budget

required under section 5509 (relating to appropriations and

assessments by the Commonwealth), certify, as a percentage of

20160HB2316PN3814 - 119 -

the members' payroll, the shared-risk contribution rate, the

employers' contributions as determined pursuant to [section 5508

(relating to actuarial cost method)] sections 5508 (relating to

actuarial cost method for fiscal years ending before July 1,

2018) and 5508.1 (relating to actuarial cost method for fiscal

years beginning July 1, 2018, or later) necessary for the

funding of prospective annuities for active members and the

annuities of annuitants and certify the rates and amounts of the

employers' normal contributions as determined pursuant to

[section] sections 5508(b) and 5508.1(b), accrued liability

contributions as determined pursuant to [section] sections

5508(c) and 5508.1(c) and (d), supplemental annuities

contribution rate as determined pursuant to section 5508(e), the

experience adjustment factor as determined pursuant to [section]

sections 5508(f) and 5508.1(f), the collared contribution rate

pursuant to section 5508(h) and the final contribution rate

pursuant to section 5508(i), which shall be paid to the fund and

credited to the appropriate accounts. The board may allocate the

final contribution rate and certify various employer

contribution rates and amounts based upon the different benefit

eligibility, class of service multiplier, superannuation age and

other benefit differences resulting from State service credited

for individual members even though such allocated employer

contribution rate on behalf of any given member may be more or

less than 5% of the member's compensation for the period from

July 1, 2010, to June 30, 2011, or may differ from the prior

year's contribution for that member by more or less than the

percentages used to calculate the collared contribution rate for

that year and may be below any minimum contribution rate

established for the collared contribution rate or final

20160HB2316PN3814 - 120 -

contribution rate. These certifications shall be regarded as

final and not subject to modification by the Secretary of the

Budget.

* * *

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

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

statement] financial statements as of the calendar year ending

December 31 of the previous year showing the condition of the

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

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

commissions, and setting forth such other facts,

recommendations, and data as may be of use in the advancement of

knowledge concerning annuities and other benefits provided by

this part. The board shall submit said financial [statement]

statements to the Governor and shall file copies with the head

of each department for the use of the State employees and the

public.

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

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

[an] independent certified public [accountant] accountants,

which [audit] audits shall include the board's accrual and

expenditure of directed commissions. The board may use the same

independent certified public accountant for the audits of both

the system and the plan.

* * *

(p) Participant and employer contributions to the trust.--

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

budget required under section 5509 (relating to appropriations

and assessments by the Commonwealth), certify, as a percentage

of each participant's compensation, the employer defined

20160HB2316PN3814 - 121 -

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

each participant's individual investment account. These

certifications shall be regarded as final and not subject to

modification by the Secretary of the Budget. The board shall

cause all mandatory pickup participant contributions made on

behalf of a participant and all voluntary contributions made by

a participant to be credited to the participant's individual

investment account.

Section 333. Section 5903 heading and (a) of Title 71,

amended December 28, 2015 (P.L.529, No.93), are amended and the

section is amended by adding a subsection to read:

§ 5903. Duties of the board to advise and report to heads of

departments [and], members and participants.

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

of the Attorney General and the actuary, prepare and provide,

within 90 days of the effective date of this part, a manual

incorporating rules and regulations consistent with the

provisions of this part to the heads of departments who shall

make the information contained therein available to the general

membership. The board shall thereafter advise the heads of

departments within 90 days of any changes in such rules and

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

administrative policies. As soon as practicable after the

commissioner's announcement with respect thereto, the board

shall also advise the heads of departments as to any cost-of-

living adjustment for the succeeding calendar year in the amount

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

of the limitations under IRC § 415[(b)]. As soon as practicable

after January 1 of each year, the board shall also advise the

heads of departments of the employees for whom, pursuant to

20160HB2316PN3814 - 122 -

section 5502.1 (relating to waiver of regular member

contributions and Social Security integration member

contributions), pickup contributions are not to be made.

* * *

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

furnished annually to each participant, on or before April 1 and

more frequently as the board may agree or as required by law, a

statement for each participant in the plan showing the

accumulated total defined contributions credited to the

participant's individual investment account, the nature and type

of investments and the investment allocation of future

contributions as of December 31 of the previous year and

requesting the participant to make any necessary correction or

revision regarding his designated beneficiary.

* * *

Section 334. Section 5904(c)(2) of Title 71 is amended to

read:

§ 5904. Duties of the board to report to the Public School

Employees' Retirement Board.

* * *

receipt of notification and the required data from the Public

School Employees' Retirement Board that a former State employee

who elected multiple service has applied for a public school

employees' retirement benefit or, in the event of his death, his

legally constituted representative has applied for such benefit,

the board shall:

* * *

(2) transfer to the Public School Employees' Retirement

Fund the total accumulated deductions standing to such

20160HB2316PN3814 - 123 -

member's credit and the actuarial reserve required on account

of years of credited service in the State system, final

average salary determined on the basis of his compensation as

a member in both systems and the average noncovered salary to

be charged to the State accumulation account, the State

Police benefit account or the enforcement officers' benefit

account, as each case may require.

* * *

Section 335. Section 5905 heading, (b)(3), (c.1) and (g) of

Title 71, amended December 28, 2015 (P.L.529, No.93), are

amended and the section is amended by adding subsections to

read:

§ 5905. Duties of the board regarding applications and

elections of members and participants.

* * *

(b) School employees electing multiple service status.--Upon

receipt of notification from the Public School Employees'

Retirement Board that a former State employee has become an

active member in the Public School Employees' Retirement System

and has elected to become a member with multiple service status

the board shall:

* * *

(3) in case of a former State employee who is not

receiving an annuity from the system and his total

accumulated deductions were withdrawn, certify to the former

State employee the accumulated deductions as they would have

been at the time of his separation had he been a full

coverage member together with statutory interest for all

periods of subsequent State service eligible for membership

in the system and school service as a member of the Public

20160HB2316PN3814 - 124 -

School Employees' Retirement System to the date of repayment.

Such amount shall be restored by him and shall be credited

with statutory interest as such payments are restored.

* * *

(c.1) Termination of service by a member.--In the case of

any member terminating State service who is entitled to an

annuity and who is not then a disability annuitant, the board

shall advise such member in writing of any benefits from the

system to which he may be entitled under the provisions of this

part and shall have the member prepare, on or before the date of

termination of State service, one of the following three forms,

a copy of which shall be given to the member and the original of

which shall be filed with the board:

(1) an application for the return of total accumulated

deductions;

(2) an election to vest his retirement rights and, if he

is a joint coverage member and so desires, elect to become a

full coverage member and agree to pay within 30 days of the

date of termination of service the lump sum required; or

(3) an application for an immediate annuity and, if he

desires:

(i) an election to convert his medical, major

medical and hospitalization insurance coverage to the

plan for State annuitants; and

(ii) if he is a joint coverage member, an election

to become a full coverage member and an agreement to pay

within 30 days of date of termination of service the lump

sum required.

(c.2) Termination of service by a participant.--In the case

of any participant terminating State service, the board shall

20160HB2316PN3814 - 125 -

advise the participant in writing of the vested accumulated

total defined contributions credited to the participant's

individual investment account as of the date stated in the

writing, any notices regarding rollover or other matters

required by the IRC or other law, the obligation of the

participant to commence distributions from the plan by the

participant's required beginning date and the ability to receive

all or part of the vested balance in the participant's

individual investment account in a lump sum or in such other

form as the board may authorize or is required by law.

* * *

(e.2) Notification to inactive participants approaching

required beginning date.--The board shall notify each inactive

participant who has terminated State service and had not

commenced distribution by 90 days before the participant's

required beginning date in writing that the participant has an

obligation to commence distributions by his required beginning

date in a form and manner required by IRC § 401(a)(9) and other

applicable provisions of the IRC.

* * *

(f.1) Initial payment to a participant.--The board shall

make the initial payment to a participant who has applied for a

distribution within 60 days of the filing of his application.

(g) Death benefits.--

(1) Upon receipt of notification from the head of a

department of the death of an active member, a member

performing USERRA leave [or], a member on leave without pay,

an active participant, an inactive participant on leave

without pay or a former participant performing USERRA leave,

the board shall advise the designated beneficiary of the

20160HB2316PN3814 - 126 -

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.

(2) 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 such benefits to any other person.

(3) If no beneficiary designation is in effect at the

date of a participant's death or no notice has been filed

with the board to pay the amount of the benefits to the

participant's estate, the board is authorized to pay the

benefits to the surviving spouse, executor, administrator or

next of kin of the deceased participant and payment pursuant

hereto shall fully discharge the fund from any further

liability to make payment of such benefits to any other

person.

* * *

Section 336. Sections 5906(a) introductory paragraph and

(3), (b), (d), (e), (g), (h), (i) and (l) of Title 71 are

amended and the section is amended by adding subsections to

read:

§ 5906. Duties of heads of departments.

(a) Status of members and participants.--The head of

department shall, at the end of each pay period, notify the

board in a manner prescribed by the board of salary changes

effective during that period for any members and participants of

20160HB2316PN3814 - 127 -

the department, the date of all removals from the payroll, and

the type of leave of any members and participants of the

department who have been removed from the payroll for any time

during that period, and:

* * *

(3) if the removal is due to termination of State

service, he shall furnish the board with a complete State

service record, including service in other departments or

agencies, or creditable nonstate service and;

(i) in the case of death of the member or

participant the head of the department shall so notify

the board;

(ii) in the case of a service connected disability

of a member the head of department shall, to the best of

his ability, investigate the circumstances surrounding

the disablement of the member and submit in writing to

the board information which shall include but not

necessarily be limited to the following: date, place and

time of disablement to the extent ascertainable; nature

of duties being performed at such time; and whether or

not the duties being performed were authorized and

included among the member's regular duties. In addition,

the head of department shall furnish in writing to the

board all such other information as may be related to the

member's disablement;

(iii) in the case of a member terminating from The

Pennsylvania State University who is a member of the

system with five or more but less than ten eligibility

points and who has terminated State service on June 30,

1997, because of the transfer of his job position or

20160HB2316PN3814 - 128 -

duties to a controlled organization of the Penn State

Geisinger Health System or because of the elimination of

his job position or duties due to the transfer of other

job positions or duties to a controlled organization of

the Penn State Geisinger Health System, the head of the

department shall so certify to the board.

(b) Records and information.--At any time at the request of

the board and at termination of service of a member or a

participant, the head of department shall furnish service and

compensation records and such other information as the board may

require and shall maintain and preserve such records as the

board may direct for the expeditious discharge of its duties.

* * *

(c.1) Participant and employer defined contributions.--The

head of the department shall:

(1) Cause the mandatory pickup participant contributions

on behalf of a participant to be made.

(2) Cause the employer defined contributions on behalf

of a participant to be made.

(3) Notify the board at times and in a manner prescribed

by the board of the compensation of any participant to whom

the limitation under IRC § 401(a)(17) either applies or is

expected to apply and cause such participant's contributions

to be deducted from payroll to cease at the limitation under

IRC § 401(a)(17) on the payroll date if and when such limit

shall be reached.

(4) Certify to the State Treasurer the amounts picked up

and deducted and the employer defined contributions being

made and send the total amount picked up, deducted and

contributed together with a duplicate of such voucher to the

20160HB2316PN3814 - 129 -

secretary of the board every pay period or on such schedule

as established by the board.

(d) New employees subject to mandatory membership or

participation.--Upon the assumption of duties of each new State

employee whose membership in the system or plan is mandatory,

the head of department shall cause an application for membership

or participation and a nomination of beneficiary to be made by

such employee and filed with the board and shall make pickup

contributions or mandatory pickup participant contributions from

the effective date of State employment.

(e) New employees subject to optional membership or

participation.--The head of department shall, upon the

employment or entering into office of any State employee whose

membership in the system or participation in the plan is not

mandatory, inform such employee of his opportunity to become a

member of the system or participant in the plan. If such

employee so elects, the head of department shall cause an

application for membership and a nomination of beneficiary to be

made by him and filed with the board and shall cause proper

contributions to be made from the effective date of membership

or participation.

* * *

(g) Former school employee contributors.--The head of

department shall, upon the employment of a former contributor to

the Public School Employees' Retirement System who is not an

annuitant of the Public School Employees' Retirement System,

advise such employee of his right to elect within 365 days of

entry into the system to become a multiple service member, and

in the case of any such employee who so elects and has withdrawn

his accumulated deductions, require him to reinstate his credit

20160HB2316PN3814 - 130 -

in the Public School Employees' Retirement System. The head of

the department shall advise the board of such election. This

subsection shall not apply to a State employee who is employed

in a position where he is or may be a participant in the plan.

(h) Former school employee annuitants.--The head of

department shall, upon the employment of an annuitant of the

Public School Employees' Retirement System who applies for

membership in the system, advise such employee that he may elect

multiple service membership within 365 days of entry into the

system and if he so elects his public school employee's annuity

will be discontinued effective upon the date of his return to

State service and, upon termination of State service and

application for an annuity, the annuity will be adjusted in

accordance with section 5706 (relating to termination of

annuities). The head of department shall advise the board of

such election. This subsection shall not apply to a State

employee who is employed in a position where he is or may be a

participant in the plan.

(i) Annual statement to members.--Annually, upon receipt

from the board, the head of department shall furnish to each

member the statement specified in section 5903(b) (relating to

duties of the board to advise and report to heads of departments

[and], members and participants).

* * *

(l) State employees performing USERRA or military-related

leave of absence.--The head of department shall report to the

board any State employee who ceases to be an active member or

active participant to perform USERRA service, or who is granted

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

of absence for certain government employees) or a military leave

20160HB2316PN3814 - 131 -

of absence under 51 Pa.C.S. § 7302 (relating to granting

military leaves of absence), the date on which the USERRA

service, leave of absence or military leave of absence began,

the date on which the State employee is reemployed from USERRA

leave or returns after the leave of absence or military leave of

absence, if the event occurs, and any other information the

board may require or direct.

* * *

(n) Obligation of educational institutions to report

participation and compensation of employees in independent

retirement programs.--The Pennsylvania State University, the

State System of Higher Education, State-owned educational

institutions and community colleges shall report to the board

the compensation and other information as the board may request

for the application and administration of sections 5507.1

(relating to contributions to system by the Commonwealth and

other employers starting July 1, 2018) and 5508.1(c) and (d)

(relating to actuarial cost method for fiscal years beginning

July 1, 2018, or later) of employees who are participants or

members in the Public School Employees' Retirement System or

independent retirement programs approved by the employer.

Section 337. Section 5907 heading, (a), (e), (f) and (h) of

Title 71, amended December 28, 2015 (P.L.529, No.93), are

amended and the section is amended by adding subsections to

read:

§ 5907. Rights and duties of State employees [and], members and

participants.

(a) Information on new employees.--Upon his assumption of

duties each new State employee shall furnish the head of

department with a complete record of his previous State service,

20160HB2316PN3814 - 132 -

his school service or creditable nonstate service, and proof of

his date of birth and current status in the system and the plan

and in the Public School Employees' Retirement System. Willful

failure to provide the information required by this subsection

to the extent available upon entrance into the system shall

result in the forfeiture of the right of the member to

subsequently assert any right to benefits based on any of the

required information which he failed to provide. In any case in

which the board finds that a member is receiving an annuity

based on false information, the total amount received predicated

on such false information together with statutory interest

doubled and compounded shall be deducted from the present value

of any remaining benefits to which the member is legally

entitled.

* * *

(b.1) Application for participation.--On or after January 1,

2018, in the case of a new employee who is not currently a

participant in the plan and whose participation is mandatory or

in the case of a new employee whose participation is not

mandatory but is permitted and who desires to become a

participant in the plan, the new employee shall execute an

application for participation and a nomination of a beneficiary.

* * *

(d.2) Contributions for USERRA leave.--Any active

participant or inactive participant on leave without pay or

former participant who was reemployed from USERRA leave who

desires to make mandatory pickup participant contributions for

his USERRA leave shall so notify the board within the time

period required under 38 U.S.C. Ch. 43 (relating to employment

and reemployment rights of members of the uniformed services)

20160HB2316PN3814 - 133 -

and IRC § 414(u) of his desire to make such contributions. Upon

making the permitted mandatory pickup participant contributions

within the allowed time period, the head of the department shall

make the corresponding employer defined contributions at the

same time.

(d.3) Voluntary contributions by participant.--Any active

participant who desires to make voluntary contributions to be

credited to his individual investment account shall notify the

board and, upon compliance with the requirements, procedures and

limitations established by the board in the plan document, may

do so subject to the limitation under IRC §§ 401(a) and 415 and

other applicable law.

(e) Beneficiary for death benefits from the system.--Every

member shall nominate a beneficiary by written designation filed

with the board as provided in section 5906(d) or (e) (relating

to duties of heads of departments) to receive the death benefit

payable under section 5707 (relating to death benefits) or the

benefit payable under the provisions of Option 1 of section

5705(a)(1) (relating to member's options). Such nomination may

be changed at any time by the member by written designation

filed with the board. A member may also nominate a contingent

beneficiary or beneficiaries to receive the death benefit

provided under section 5707 or the benefit payable under the

provisions of Option 1 of section 5705(a)(1).

(e.1) Beneficiary for death benefits from the plan.--Every

participant shall nominate a beneficiary by written designation

filed with the board as provided in section 5906(d) or (e) to

receive the death benefit payable under section 5408 (relating

to death benefits). A participant may also nominate a contingent

beneficiary or beneficiaries to receive the death benefit

20160HB2316PN3814 - 134 -

provided under section 5408. Such nomination may be changed at

any time by the participant by written designation filed with

the board.

(e.2) Beneficiary for combined service employee.--A combined

service employee may designate or nominate different persons to

be beneficiaries, survivor annuitants and successor payees for

the employee's benefits from the system and the plan.

(f) Termination of service by members.--Each member who

terminates State service and who is not then a disability

annuitant shall execute on or before the date of termination of

service the appropriate application, duly attested by the member

or his legally constituted representative, electing to:

(1) withdraw his total accumulated deductions; or

(2) vest his retirement rights; and if he is a joint

coverage member, and so desires, elect to become a full

coverage member and agree to pay within 30 days of the date

of termination of service the lump sum required; or

(3) receive an immediate annuity and may,

(i) if eligible, elect to convert his medical, major

medical, and hospitalization coverage to the plan for

State annuitants; and

(ii) if he is a joint coverage member, elect to

become a full coverage member and agree to pay within 30

days of date of termination of service the lump sum

required.

* * *

(g.1) Deferral of retirement rights.--If a participant

terminates State service and does not commence receiving a

distribution, he shall nominate a beneficiary, and he may

anytime thereafter, but no later than his required beginning

20160HB2316PN3814 - 135 -

date, withdraw the vested accumulated total defined

contributions standing to his credit or apply for another form

of distribution required by law or authorized by the board.

(h) Vestees and special vestees attaining superannuation

age.--

(1) Upon attainment of superannuation age a vestee or

special vestee shall execute and file an application for an

annuity. Any such application filed within 90 days after

attaining superannuation age shall be effective as of the

date of attainment of superannuation age. Any application

filed after such period shall be effective as of the date it

is filed with the board, subject to the provisions of section

5905(f) (relating to duties of the board regarding

applications and elections of members and participants).

(2) If a vestee or special vestee does not file an

application within seven years after attaining superannuation

age, he shall be deemed to have elected to receive his total

accumulated deductions upon attainment of superannuation age.

* * *

Section 338. Sections 5931(b), 5932, 5934, 5935, 5936, 5937,

5938, 5939 and 5951 of Title 71 are amended to read:

§ 5931. Management of fund and accounts.

* * *

(b) Crediting of interest.--The board, annually, shall allow

the required interest on the mean amount for the preceding year

to the credit of each of the accounts other than the individual

investment accounts. The amount so allowed shall be credited

thereto by the board and transferred from the interest reserve

account.

* * *

20160HB2316PN3814 - 136 -

§ 5932. State Employees' Retirement Fund.

The fund shall consist of all balances in the several

separate accounts set apart to be used under the direction of

the board for the benefit of members of the system; and the

Treasury Department shall credit to the fund all moneys received

from the Department of Revenue arising from the contributions

relating to or on behalf of members of the system required under

the provisions of Chapter 55 (relating to contributions), and

any income earned by the investments or moneys of said fund.

There shall be established and maintained by the board the

several ledger accounts specified in sections 5933 (relating to

members' savings account), 5934 (relating to State accumulation

account), 5935 (relating to annuity reserve account), 5936

(relating to State Police benefit account), 5937 (relating to

enforcement officers' benefit account), 5938 (relating to

supplemental annuity account) and 5939 (relating to interest

reserve account). The individual investment accounts that are

part of the trust shall not be part of the fund. Mandatory

pickup participant contributions, voluntary contributions and

employer defined contributions made under this part and any

income earned by the investment of such contributions shall not

be paid or credited to the fund but shall be paid to the trust

and credited to the individual investment accounts.

§ 5934. State accumulation account.

The State accumulation account shall be the ledger account to

which shall be credited all contributions of the Commonwealth or

other employers whose employees are members of the system and

made in accordance with the provisions of [section 5507(a) or

(d) (relating to contributions by the Commonwealth and other

employers)] sections 5507(a) or (d) (relating to contributions

20160HB2316PN3814 - 137 -

to system by the Commonwealth and other employers before July 1,

2018) and 5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2018) except

that the amounts received under the provisions of the act of May

12, 1943 (P.L.259, No.120), and the amounts received under the

provisions of the Liquor Code, act of April 12, 1951 (P.L.90,

No.21), shall be credited to the State Police benefit account or

the enforcement officers' benefit account as the case may be.

All amounts transferred to the fund by county retirement systems

or pension plans in accordance with the provisions of section

5507(c) also shall be credited to the State accumulation

account. All amounts transferred to the fund by the Public

School Employees' Retirement System in accordance with section

5303.2(e) (relating to election to convert school service to

State service), except amounts credited to the members' savings

account, and all amounts paid by the Department of Corrections

in accordance with section 5303.2(f) also shall be credited to

the State accumulation account. The State accumulation account

shall be credited with valuation interest. The reserves

necessary for the payment of annuities and death benefits

resulting from membership in the system as approved by the board

and as provided in Chapter 57 (relating to benefits) shall be

transferred from the State accumulation account to the annuity

reserve account provided for in section 5935 (relating to

annuity reserve account), except that the reserves necessary on

account of a member who is an officer of the Pennsylvania State

Police or an enforcement officer shall be transferred from the

State accumulation account to the State Police benefit account

provided for in section 5936 (relating to State Police benefit

account) or to the enforcement officers' benefit account as

20160HB2316PN3814 - 138 -

provided for in section 5937 (relating to enforcement officers'

benefit account) as the case may be. The reserves necessary for

the payment of supplemental annuities in excess of those

reserves credited to the supplemental annuity account on June

30, 2010, shall be transferred from the State accumulation

account to the supplemental annuity account. In the event that

supplemental annuities are increased by legislation enacted

after December 31, 2009, the necessary reserves shall be

transferred from the State accumulation account to the

supplemental annuity account.

§ 5935. Annuity reserve account.

(a) Credits and charges to account.--The annuity reserve

account shall be the ledger account to which shall be credited

the reserves held for payment of annuities and death benefits on

account of all annuitants except in the case of members who are

officers of the Pennsylvania State Police or enforcement

officers. The annuity reserve account shall be credited with

valuation interest. After the transfers provided in sections

5933 (relating to members' savings account), 5934 (relating to

State accumulation account) and 5938 (relating to supplemental

annuity account), all annuity and death benefit payments

resulting from membership in the system except those payable to

any member who retires as an officer of the Pennsylvania State

Police or an enforcement officer shall be charged to the annuity

reserve account and paid from the fund.

(b) Transfers from account.--Should an annuitant other than

a member who was retired as an officer of the Pennsylvania State

Police or an enforcement officer be subsequently restored to

active service as a member of the system or as a participant in

the plan, the present value of his member's annuity at the time

20160HB2316PN3814 - 139 -

of reentry into State service shall be transferred from the

annuity reserve account and placed to his individual credit in

the members' savings account. In addition, the actuarial reserve

for his annuity less the amount transferred to the members'

savings account shall be transferred from the annuity reserve

account to the State accumulation account.

§ 5936. State Police benefit account.

(a) Credits and charges to account.--The State Police

benefit account shall be the ledger account to which shall be

credited all contributions received under the provisions of the

act of May 12, 1943 (P.L.259, No.120), and any additional

Commonwealth or other employer contributions provided for in

[section 5507 (relating to contributions by the Commonwealth and

other employers)] sections 5507 (relating to contributions to

system by the Commonwealth and other employers before July 1,

2018) and 5507.1 (relating to contributions to system by the

Commonwealth and other employers starting July 1, 2018) which

are creditable to the State Police benefit account. The State

Police benefit account shall be credited with the required

interest. In addition, upon the filing of an application for an

annuity by a member who is an officer of the Pennsylvania State

Police, the total accumulated deductions standing to the credit

of the member in the members' savings account and the necessary

reserves from the State accumulation account shall be

transferred to the State Police benefit account. Thereafter, the

total annuity of such annuitant shall be charged to the State

Police benefit account and paid from the fund.

(b) Transfers from account.--Should the said annuitant be

subsequently restored to active service as a member of the

system or as a participant in the plan, the present value of the

20160HB2316PN3814 - 140 -

member's annuity at the time of reentry into State service shall

be transferred from the State Police benefit account and placed

to his individual credit in the members' savings account. In

addition, the actuarial reserve for his annuity calculated as if

he had been a member of Class A if he has Class A or Class C

service credited; as if he had been a member of Class A-3 if the

annuitant has Class A-3 State service credited; or as if he had

been a member of Class A-4 if the annuitant has Class A-4

service credited, less the amount transferred to the members'

savings account shall be transferred from the State Police

benefit account to the State accumulation account. Upon

subsequent retirement other than as an officer of the

Pennsylvania State Police the actuarial reserve remaining in the

State Police benefit account shall be transferred to the

appropriate reserve account.

§ 5937. Enforcement officers' benefit account.

(a) Credits and charges to account.--The enforcement

officers' benefit account shall be the ledger account to which

shall be credited moneys transferred from the enforcement

officers' retirement account in the State Stores Fund according

to the provisions of the act of April 12, 1951 (P.L.90, No.21),

known as the Liquor Code, and any additional Commonwealth or

other employer contributions provided for in [section 5507

(relating to contributions by the Commonwealth and other

employers)] sections 5507 (relating to contributions to system

by the Commonwealth and other employers before July 1, 2018) and

5507.1 (relating to contributions to system by the Commonwealth

and other employers starting July 1, 2018) which are creditable

to the enforcement officers' benefit account. The enforcement

officers' benefit account shall be credited with the required

20160HB2316PN3814 - 141 -

interest. In addition, upon the filing of an application for an

annuity by a member who is an enforcement officer of the

Pennsylvania Liquor Control Board, the total accumulated

deductions standing to the credit of the member in the members'

savings account and the necessary reserves from the State

accumulation account shall be transferred to the enforcement

officers' benefit account. Thereafter, the total annuity of such

annuitant shall be charged to the enforcement officers' benefit

account and paid from the fund.

(b) Transfers from account.--Should the said annuitant be

subsequently restored to active service as a member of the

system or as a participant in the plan, the present value of the

member's annuity at the time of reentry into State service shall

be transferred from the enforcement officers' benefit account

and placed to his individual credit in the members' savings

account. In addition, the actuarial reserve for his annuity

calculated as if he had been a member of Class A if the

annuitant does not have any Class AA, Class A-3 or Class A-4

service credited; as if he had been a member of Class AA if the

annuitant does have Class AA service credited; as if he had been

a member of Class A-3 if the annuitant has Class A-3 State

service credited; or as if he had been a member of Class A-4 if

the annuitant has Class A-4 service credited, less the amount

transferred to the members' savings account shall be transferred

from the enforcement officers' benefit account to the State

accumulation account. Upon subsequent retirement other than as

an enforcement officer the actuarial reserve remaining in the

enforcement officers' benefit account shall be transferred to

the appropriate reserve account.

§ 5938. Supplemental annuity account.

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The supplemental annuity account shall be the ledger account

to which shall be credited all contributions from the

Commonwealth and other employers in accordance with section

5507(b) [(relating to contributions by the Commonwealth and

other employers)] (relating to contributions to system by the

Commonwealth and other employers before July 1, 2018) for the

payment of the supplemental annuities provided in sections 5708

(relating to supplemental annuities), 5708.1 (relating to

additional supplemental annuities), 5708.2 (relating to further

additional supplemental annuities), 5708.3 (relating to

supplemental annuities commencing 1994), 5708.4 (relating to

special supplemental postretirement adjustment), 5708.5

(relating to supplemental annuities commencing 1998), 5708.6

(relating to supplemental annuities commencing 2002), 5708.7

(relating to supplemental annuities commencing 2003) and 5708.8

(relating to special supplemental postretirement adjustment of

2002) made before July 1, 2010, the amount transferred from the

State accumulation account to provide all additional reserves

necessary as of June 30, 2010, to pay such supplemental

annuities and adjustments, and the amounts transferred from the

State accumulation account to provide all additional reserves

necessary as a result of supplemental annuities enacted after

December 31, 2009. The supplemental annuity account shall be

credited with valuation interest. The reserves necessary for the

payment of such supplemental annuities shall be transferred from

the supplemental annuity account to the annuity reserve account

as provided in section 5935 (relating to annuity reserve

account).

§ 5939. Interest reserve account.

The interest reserve account shall be the ledger account to

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which shall be credited all income earned by the fund and to

which shall be charged all administrative and investment

expenses incurred by the fund. At the end of each year the

required interest shall be transferred from the interest reserve

account to the credit of each of the accounts of the fund in

accordance with the provisions of this subchapter. In addition,

at the end of each accounting period, the interest reserve

account shall be credited or charged with all recognized changes

in the market valuation of the investments of the fund. The

administrative and investment expenses of the board relating to

the administration of the system and investments of the fund

shall be paid from the fund out of earnings. Any surplus or

deficit in the interest reserve account at the end of each year

shall be transferred to the State accumulation account.

§ 5951. State guarantee regarding the State Employees'

Retirement System.

The required interest charges payable, the maintenance of

reserves in the fund, and the payment of all annuities and other

benefits granted by the board from the system under the

provisions of this part relating to the establishment and

administration of the system are hereby made obligations of the

Commonwealth. All income, interest, and dividends derived from

deposits and investments of the system authorized by this part

shall be used for the payment of the said obligations of the

Commonwealth and shall not be used for any obligations of the

plan or trust.

Section 339. Section 5953 of Title 71, amended December 28,

2015 (P.L.529, No.93), is amended to read:

§ 5953. Taxation, attachment and assignment of funds.

(a) General rule.--

20160HB2316PN3814 - 144 -

(1) Except as provided in paragraphs (2), (3) [and], (4)

and (5), the right of a person to any benefit or right

accrued or accruing under the provisions of this part and the

moneys in the fund and the trust are hereby exempt from any

State or municipal tax, levy and sale, garnishment,

attachment, spouse's election, the provisions of Article

XIII.1 of the act of April 9, 1929 (P.L.343, No.176), known

as The Fiscal Code, or any other process whatsoever, and no

participant or beneficiary, successor payee or alternate

payee of a participant shall have the ability to commute,

sell, assign, alienate, anticipate, mortgage, pledge,

hypothecate, commutate or otherwise transfer or convey any

benefit or interest in an individual investment account or

rights to receive or direct distributions under this part or

under agreements entered into under this part except as

otherwise provided in this part and in the case of either a

member or a participant except for a set-off by the

Commonwealth in the case provided in this paragraph, and

shall be unassignable except to the Commonwealth in the case

of a member or participant who is terminating State service

and has been determined to be obligated to the Commonwealth

for the repayment of money owed on account of his employment.

(2) Rights under this part shall be subject to

forfeiture as provided by the act of July 8, 1978 (P.L.752,

No.140), known as the Public Employee Pension Forfeiture Act,

and by or pursuant to section 16(b) of Article V of the

Constitution of Pennsylvania. Forfeitures under this

subsection or under any other provision of law may not be

applied to increase the benefits that any member would

otherwise receive under this part. Notwithstanding this

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paragraph, 42 Pa.C.S. § 3352 (relating to pension rights),

the Public Employee Pension Forfeiture Act or section 16(b)

of Article V of the Constitution of Pennsylvania, the

accumulated mandatory participant contributions and

accumulated voluntary contributions standing to the credit of

a participant shall not be forfeited but shall be available

for payment of fines and restitution as provided by law.

Furthermore, amounts in the trust that have been ordered to

be distributed to an alternate payee as the result of an

equitable distribution of marital property as part of an

approved domestic relations order entered before the date of

the order or action in a court or other tribunal resulting in

a forfeiture of a participant's interest in the trust shall

not be subject to 42 Pa.C.S. § 3352, the Public Employee

Pension Forfeiture Act or section 16(b) of Article V of the

Constitution of Pennsylvania. Any accumulated employer

defined contributions forfeited as a result of this paragraph

or other law shall be retained by the board and used for the

payment of expenses of the plan.

(3) Rights under this part shall be subject to

attachment in favor of an alternate payee as set forth in an

approved domestic relations order.

(4) Effective with distributions made on or after

January 1, 1993, and notwithstanding any other provision of

this part to the contrary, a distributee may elect, at the

time and in the manner prescribed by the board, to have any

portion of an eligible rollover distribution paid directly to

an eligible retirement plan by way of a direct rollover. For

purposes of this paragraph, a "distributee" includes a member

[and], a participant, a member's surviving spouse [and], a

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participant's surviving spouse, a member's former spouse who

is an alternate payee under an approved domestic relations

order, a participant's former spouse who is an alternate

payee under an approved domestic relations order and anyone

else authorized under the IRC and the plan terms approved by

the board to have an eligible rollover distribution paid

directly to an eligible retirement plan by way of a direct

rollover. For purposes of this paragraph, the term "eligible

rollover distribution" has the meaning given such term by IRC

§ 402(f)(2)(A), and "eligible retirement plan" has the

meaning given such term by IRC § 402(c)(8)(B), except that a

qualified trust shall be considered an eligible retirement

plan only if it accepts the distributee's eligible rollover

distribution; however, in the case of an eligible rollover

distribution to a surviving spouse, an eligible retirement

plan is an "individual retirement account" or an "individual

retirement annuity" as those terms are defined in IRC §

408(a) and (b).

(b) Authorized payments from fund.--The board shall be

authorized to pay from the fund [in]:

(1) In the case of a member or participant who is

terminating service, the amount determined after

certification by the head of the department that the member

or participant is so obligated, and after review and approval

by the department or agency's legal representative or upon

receipt of an assignment from the member or participant in

the amount so certified[.], except that no payment shall be

made from the individual investment account of a participant

until the participant otherwise applies for and receives a

distribution and shall not exceed the amount of the

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distribution.

(2) (Reserved).

(3) In the case of a participant whose former spouse is

an alternate payee of an equitable distribution of marital

assets under an approved domestic relations order, a lump sum

of the alternate payee's interest in the participant's

accumulated total defined contributions. This paragraph

applies without regard to whether the participant has not

terminated, is terminating or has terminated State service.

Section 340. Section 5953.1(a) introductory paragraph and

(1), (b), (c) and (d) of Title 71 are amended and the section is

amended by adding a subsection to read:

§ 5953.1. Approval of domestic relations orders.

(a) Certification regarding members.--A domestic relations

order pertaining to a member of the system shall be certified as

an approved domestic relations order by the secretary of the

board, or his designated representative, only if that order

meets all of the following:

(1) Requires the system to provide any type or form of

benefit or any option applicable to members already provided

under this part.

* * *

(a.1) Certification regarding participants.--A domestic

relations order pertaining to a participant shall be certified

as an approved domestic relations order by the secretary of the

board or his designated representative only if that order meets

all of the following:

(1) Does not require the plan to provide any type or

form of benefit or any option applicable to members of the

system or participants in the plan.

20160HB2316PN3814 - 148 -

(2) Does not require the segregation of the alternate

payee's share of the participant's individual investment

account into a subaccount or newly established individual

account titled in the name of the alternate payee.

(3) Does not require the plan to recover or distribute

any funds which were distributed to the participant or at the

participant's direction prior to the approval of the domestic

relations order by the secretary of the board or his

designated representative.

(4) Requires the plan to pay to the alternate payee no

more than the lesser of the vested amount of the

participant's individual investment account specified by the

domestic relations order or the vested amount of the

participant's individual investment account as of the date of

the transfer of the alternate payee's share to the alternate

payee.

(5) States that the plan shall not be required to recoup

or make good for losses in value to the participant's

individual investment account incurred between the date of

the valuation of the account used for equitable distribution

purposes and the date of distribution to the alternate payee.

(6) Specifies the amount or percentage of the

participant's individual investment account to be paid to the

alternate payee and the date upon which such valuation is

based.

(7) Specifies the name and last known mailing address,

if any, of the participant and the name and last known

mailing address of each alternate payee covered by the order

and states that it is the responsibility of each alternate

payee to keep a current mailing address on file with the

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plan.

(8) Does not grant an alternate payee the rights,

privileges or options available to a participant.

(9) Requires the participant to execute an authorization

allowing each alternate payee to monitor the participant's

compliance with the terms of the domestic relations order

through access to information concerning the participant

maintained by the plan. Any authorization granted pursuant to

this section shall be construed only as an authorization for

the alternate payee to receive information concerning the

participant which relates to the administration, calculation

and payment of the alternate payee's share of the

participant's account and not as an authorization to exercise

the rights afforded to participants or obtain information

which is not related to the administration, calculation and

payment of alternate payee's share of the participant's

individual investment account.

(10) In the case of a participant who has not yet begun

to receive distributions as of the date the domestic

relations order is approved by the secretary of the board or

his designated representative, requires the immediate

distribution of the alternate payee's share of the

participant's individual investment account, which may be by

direct payment, eligible rollover or trustee-to-trustee

transfer to another eligible plan or qualified account owned

by the alternate payee , notwithstanding any other provision

of this part or the plan that would require a distribution of

accumulated employer defined contributions in the form of an

annuity or to require the purchase of an annuity.

(11) In the case of a participant who is currently

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receiving distributions from the trust as of the date the

domestic relations order is approved by the secretary of the

board or his designated representative, the domestic

relations order may not order the board to pay the alternate

payee more than the balance available in the participant's

individual investment account as of the date the order is

approved or require that distributions continue to the

alternate payee after the death of the participant and final

settlement of the participant's individual investment

account.

(b) Determination by secretary.--Within a reasonable period

after receipt of a domestic relations order, the secretary of

the board, or his designated representative, shall determine

whether this order is an approved domestic relations order and

notify the member or participant and each alternate payee of

this determination. Notwithstanding any other provision of law,

the exclusive remedy of any member, participant or alternate

payee aggrieved by a decision of the secretary of the board, or

his designated representative, shall be the right to an

adjudication by the board under 2 Pa.C.S. Ch. 5 Subch. A

(relating to practice and procedure) with appeal therefrom to

the Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to

judicial review) and 42 Pa.C.S. § 763(a)(1) (relating to direct

appeals from government agencies).

in [subsection (a)] subsections (a) and (a.1) shall not apply to

any domestic relations order which is an order [for] of support

as the term is defined at 23 Pa.C.S. § 4302 (relating to

definitions) or an order for the enforcement of arrearages as

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

20160HB2316PN3814 - 151 -

arrearages). These orders shall be approved to the extent that

they do not attach moneys in excess of the limits on attachments

as established by the laws of the United States and this

Commonwealth[.], require distributions of benefits in a manner

which would violate the laws of the United States, any other

state or this Commonwealth or require the distribution of funds

for support or enforcement of arrearages against any participant

who is not receiving distributions from the plan at the time

such order is entered.

(d) Obligation discharged.--Only the requirements of this

part and any regulations promulgated hereunder shall be used to

govern the approval or disapproval of a domestic relations

order. Therefore, if the secretary of the board, or his

designated representative, acts in accordance with the

provisions of this part and any promulgated regulations in

approving or disapproving a domestic relations order, then the

obligations of the system or the plan with respect to such

approval or disapproval shall be discharged.

Section 341. Sections 5953.2, 5953.3 and 5953.4(a) of Title

71 are amended to read:

§ 5953.2. Irrevocable beneficiary.

Notwithstanding any other provision of this part, a domestic

relations order may provide for an irrevocable beneficiary. A

domestic relations order requiring the nomination of an

irrevocable beneficiary shall be deemed to be one that requires

a member or participant to nominate an alternate payee as a

beneficiary and that prohibits the removal or change of that

beneficiary without approval of a court of competent

jurisdiction, except by operation of law. Such a domestic

relations order may be certified as an approved domestic

20160HB2316PN3814 - 152 -

relations order by the secretary of the board, or his designated

representative, after the member or participant makes such

nomination, in which case the irrevocable beneficiary so ordered

by the court cannot be changed by the member or participant

without approval by the court.

§ 5953.3. Irrevocable survivor annuitant.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a member may provide for an

irrevocable survivor annuitant. A domestic relations order

requiring the designation of an irrevocable survivor annuitant

shall be deemed to be one that requires a member to designate an

alternate payee as a survivor annuitant and that prohibits the

removal or change of that survivor annuitant without approval of

a court of competent jurisdiction, except by operation of law.

Such a domestic relations order may be certified as an approved

domestic relations order by the secretary of the board, or his

designated representative, in which case the irrevocable

survivor annuitant so ordered by the court cannot be changed by

the member without approval by the court. A person ineligible to

be designated as a survivor annuitant may not be designated as

an irrevocable survivor annuitant.

§ 5953.4. Amendment of approved domestic relations orders.

(a) Deceased alternate payee.--In the event that the

alternate payee predeceases the member or the participant and

there are benefits payable to the alternate payee, the divorce

court may amend the approved domestic relations order to

substitute a person for the deceased alternate payee to receive

any benefits payable to the deceased alternate payee.

* * *

Section 342. Title 71 is amended by adding a section to

20160HB2316PN3814 - 153 -

read:

§ 5953.6. Irrevocable successor payee.

Notwithstanding any other provisions of this part, a domestic

relations order pertaining to a participant may provide for an

irrevocable successor payee only if the participant is receiving

a payment pursuant to a payment option provided by the board

that allows for a successor payee. A domestic relations order

requiring the designation of an irrevocable successor payee

shall be deemed to be one that requires a participant who is

receiving payments from an annuity or other distribution option

to designate an alternate payee as a successor payee and that

prohibits the removal or change of that successor payee without

approval of a court of competent jurisdiction, except by

operation of law. Such a domestic relations order may be

certified as an approved domestic relations order by the

secretary of the board or his designated representative, in

which case the irrevocable successor payee so ordered by the

court shall not be changed by the participant without approval

by the court. A person ineligible to be designated as a

successor payee shall not be designated as an irrevocable

successor payee. A court shall not name an irrevocable successor

payee if the alternate payee is eligible to receive a lump sum

distribution of the alternate payee's portion of the marital

portion of the pension benefit.

Section 343. Sections 5954 and 5955 of Title 71 are amended

to read:

§ 5954. Fraud and adjustment of errors.

(a) Penalty for fraud.--Any person who shall knowingly make

any false statement or shall falsify or permit to be falsified

any record or records of this system or plan in any attempt to

20160HB2316PN3814 - 154 -

defraud the system or plan as a result of such act shall be

guilty of a misdemeanor of the second degree.

(b) Adjustment of errors.--Should any change or mistake in

records result in any member, participant, beneficiary [or],

survivor annuitant or successor payee receiving from the system

or plan more or less than he would have been entitled to receive

had the records been correct, then regardless of the intentional

or unintentional nature of the error and upon the discovery of

such error, the board shall correct the error and if the error

affected contributions to or payments from the system, then so

far as practicable shall adjust the payments which may be made

for and to such person in such a manner that the actuarial

equivalent of the benefit to which he was correctly entitled

shall be paid. If the error affected contributions to or

payments from the plan, then the board shall take such action as

shall be provided for in the plan document.

§ 5955. Construction of part.

(a) Exclusive source of rights and benefits.--Regardless of

any other provision of law, pension and benefit rights of State

employees shall be determined solely by this part or any

amendment thereto, and no collective bargaining agreement nor

any arbitration award between the Commonwealth and [its] other

employers and their employees or their collective bargaining

representatives shall be construed to change any of the

provisions herein, to require the board to administer pension or

retirement benefits not set forth in this part or not

established by the board in the plan document, to require the

board to modify, amend or change any of the terms and provisions

of the plan document, or otherwise require action by any other

government body pertaining to pension or retirement benefits or

20160HB2316PN3814 - 155 -

rights of State employees. Notwithstanding the foregoing, any

pension or retirement benefits or rights previously so

established by or as a result of an arbitration award shall

remain in effect after the expiration of the current collective

bargaining agreement between the State employees so affected and

the Commonwealth until the expiration of each of the collective

bargaining agreements in effect on January 1, 2011, at which

time the classes of membership and resulting member contribution

rates and contributions for creditable nonstate service,

eligibility for vesting, withdrawal and superannuation

annuities, optional modification of annuities and other terms

and conditions related to class of membership shall be as

determined by this part for employees covered by those and

successor collective bargaining agreements. For purposes of

administering this part, for those State employees who are

members of each such collective bargaining unit, the date

January 1, 2011, contained in this part, except in this section,

shall be replaced with the date of the day immediately following

the expiration of each such collective bargaining agreement. The

provisions of this part insofar as they are the same as those of

existing law are intended as a continuation of such laws and not

as new enactments. The provisions of this part shall not affect

any act done, liability incurred, right accrued or vested, or

any suit or prosecution pending or to be instituted to enforce

any right or penalty or to punish any offense under the

authority of any repealed laws.

(b) Officer or member of the Pennsylvania State Police.--

(1) Notwithstanding a provision of subsection (a) or

section 12.1 of the act of November 23, 2010 (P.L.1269,

No.120) regarding the continued effectiveness of pension or

20160HB2316PN3814 - 156 -

retirement benefits or rights previously established by or as

a result of a binding arbitration award issued before July 1,

1989, pursuant to the act of June 24, 1968 (P.L.237, No.111),

referred to as the Policemen and Firemen Collective

Bargaining Act, and implemented by the board, the pension or

retirement benefits or rights of a State employee who on

January 1, 2018, is a current or former sworn police officer,

shall be as provided in this part as if the binding

arbitration award was not issued, except as provided under

this subsection.

(2) A State employee who:

(i) is a current or former sworn police officer or

becomes a sworn police officer after the effective date

of this subsection; and

(ii) terminates State service:

(A) before January 1, 2018; or

(B) on or after January 1, 2018, and does not

have service credited in Class A-5 shall be eligible

to receive the maximum single life annuity, before

optional modification under section 5705 (relating to

member's options) that the State employee would have

been eligible to receive if this subsection had not

been enacted.

(3) A State employee who:

(i) is a current or former sworn police officer or

becomes a sworn police officer after the effective date

of this subsection;

(ii) has service as a plan participant; and

(iii) terminates State service on or after January

1, 2018, shall be eligible to receive a maximum single

20160HB2316PN3814 - 157 -

life annuity before optional modification under section

5705 equal to the maximum single life annuity that the

State employee would have been eligible to receive

without regard to any eligibility points, service credit,

compensation or contributions attributable to service as

a plan participant.

(4) Any benefit resulting from participation in the plan

shall be in addition to any benefit a sworn police officer

may be eligible to receive as a plan participant.

ARTICLE IV

TRANSITIONAL PROVISIONS

Section 401. The following apply:

(1) Nothing in this act which amends or supplements

provisions of 51 Pa.C.S. § 7306 or 71 Pa.C.S. Pt. XXV in

relation to requirements:

(i) for qualification of the State Employees'

Defined Contribution Plan as a qualified pension plan

under the Internal Revenue Code of 1986 (Public Law 99-

514, 26 U.S.C. § 1 et seq.) or compliance with 38 U.S.C.

Ch. 43 (relating to employment and reemployment rights of

members of the uniformed services);

(ii) for contributions to, participation in or

benefits from the State Employees' Defined Contribution

Plan or State Employees' Defined Contribution Trust; or

(iii) for domestic relations orders regarding

alternate payees of participants in the State Employees'

Defined Contribution Plan;

nor any construction of 51 Pa.C.S. or 71 Pa.C.S. Pt. XXV, as

so amended or supplemented, or any rules or regulations

adopted under 51 Pa.C.S. or 71 Pa.C.S. Pt. XXV, or any term

20160HB2316PN3814 - 158 -

or provision of the State Employees' Defined Contribution

Plan or State Employees' Defined Contribution Trust, whether

established by statute or in the plan document or trust

declaration, shall create in any member of the State

Employees' Retirement System or participant in the State

Employees' Defined Contribution Plan or in any other person

claiming an interest in the account of any such member or

participant a contractual right, either express or implied,

in such provisions nor in any construction of 51 Pa.C.S. §

7306 or 71 Pa.C.S. Pt. XXV, as so amended or supplemented, or

any rules or regulations adopted under 51 Pa.C.S. or 71

Pa.C.S. Pt. XXV.

(2) The provisions of 71 Pa.C.S. Pt. XXV shall remain

subject to the Internal Revenue Code of 1986 and 38 U.S.C.

Ch. 43 and regulations thereunder, and the General Assembly

reserves to itself such further exercise of its legislative

power to amend or supplement such provisions as may from time

to time be required in order to maintain the qualification of

such system as a qualified pension plan under section 401(a)

and other applicable provisions of the Internal Revenue Code

of 1986 and 38 U.S.C. Ch. 43.

Section 402. References in this act to the Internal Revenue

Code of 1986 or 38 U.S.C. Ch. 43, or administrative regulations

promulgated thereunder, are intended to include such laws and

regulations in effect on the effective date of this act and as

they may hereafter be amended or supplemented or supplanted by

successor provisions.

Section 403. Nothing in this act shall be construed or

deemed to imply that, but for the expressed applications of the

limitations on benefits or other requirements under section

20160HB2316PN3814 - 159 -

401(a) or other applicable provisions of the Internal Revenue

Code of 1986 (Public Law 99-514, 26 U.S.C. § 401 et seq.), those

limitations would not otherwise apply to such participants or to

members of the State Employees' Retirement System and the

benefits payable under 71 Pa.C.S. Pt. XXV.

Section 404. (a) Notwithstanding any provisions of this act

to the contrary, no contributions or benefit related to the

State Employees' Defined Contribution Plan shall be made or

payable to the extent that such contributions or benefits exceed

any limitation under section 415 of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) as in effect

with respect to governmental plans as such term is defined in

section 414(d) of the Internal Revenue Code of 1986 on the date

the contributions or benefit payment becomes effective. Any

increase in any limitation under section 415 of the Internal

Revenue Code of 1986 shall be applicable to all current and

future participants.

(b) No future amendment of this act that increases

contributions or benefits for active participants, inactive

participants or participants receiving distributions shall be

deemed by the rules of statutory construction or otherwise to

provide for contributions or benefits in excess of any

limitation, as adjusted or subsequently increased, provided for

under section 415 of the Internal Revenue Code of 1986 unless

specifically so provided by legislation. Notwithstanding this

section, any future increase in benefits for any participants in

the State Employee's Defined Contribution Plan are intended to

be applicable to the fullest extent allowed by law and this

section authorizes any such increases in limitations or

allowable benefits.

20160HB2316PN3814 - 160 -

Section 405. Nothing in this act shall be construed or

deemed to imply that any calculation or actuarial method used by

the State Employees' Retirement Board, its actuaries or the

State Employees' Retirement System was not in accordance with

the provisions of the State Employees' Retirement Code or other

applicable law prior to the effective date of this section.

Section 406. Nothing in this act shall be construed or

deemed to imply that any interpretation or application of the

provisions of 71 Pa.C.S. Pt. XXV or benefits available to

members of the State Employees' Retirement System was not in

accordance with the provisions of 71 Pa.C.S. Pt. XXV or other

applicable law, including the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.) and 38 U.S.C. Ch. 43

(relating to employment and reemployment rights of members of

the uniformed services), prior to the effective date of this

section.

Section 407. This act shall be construed and administered in

such a manner that the State Employees' Retirement System and

the State Employees' Defined Contribution Plan will satisfy the

requirements necessary to qualify as a qualified pension plan

under section 401(a) and other applicable provisions of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1

et seq.) and 38 U.S.C. Ch. 43 (relating to employment and

reemployment rights of members of the uniformed services). The

rules, regulations and procedures adopted and promulgated by the

State Employees' Retirement Board and the terms and conditions

of the plan document and trust declaration adopted by the State

Employees' Retirement Board may include those necessary to

accomplish the purpose of this section.

Section 408. The following apply:

20160HB2316PN3814 - 161 -

(1) If the application of any provision of this act to

any person is held invalid, the invalidity shall not affect

the application of this act to any other person, but the

entire act shall be invalid as to the person to whom part of

it was invalid.

(2) In the event that a State employee's participation

in the State Employees' Defined Contribution Plan is declared

invalid, the affected State employee shall return to the

State Employees' Defined Contribution Trust any distributions

and shall be granted the status and service credit in the

State Employees' Retirement System and shall be required to

make all contributions to the State Employees' Retirement

Fund as if this act had not been enacted. The affected State

employee's accumulated mandatory participant contributions

and accumulated voluntary contributions shall be transferred

to the affected employee's member savings account to the

extent necessary to fund that account with the member

contributions and interest that would have been standing to

the member's account had this act not been enacted. Any

remaining balance shall be refunded to the State employee,

who shall be responsible for paying to the fund in a manner

and time determined by the State Employees' Retirement Board

any additional funds required if the accumulated mandatory

participant contributions and accumulated voluntary

contributions were not sufficient. The accumulated employer

defined contributions shall be transferred to the State

accumulation account and no further amount shall be due from

the employer or refund paid.

Section 409. Nothing in this act shall be construed or

deemed to imply that the release or making public of any record,

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material or data described in 71 Pa.C.S. § 5902(e)(2) as not

being a public record is a violation of the State Employees'

Retirement Board's fiduciary duties.

Section 410. (a) Notwithstanding any other provision of

law, any change in accrued liability of the State Employees'

Retirement System created by this act as a result of changes in

benefits shall be funded in equal dollar installments over a

period of 20 years beginning July 1, 2017. Any change in accrued

liability as a result of the amendment of 71 Pa.C.S. §§ 5507 and

5508 or the addition of 71 Pa.C.S. §§ 5507.1 and 5508.1 shall be

funded in equal dollar installments over a period of 30 years

beginning July 1, 2017. Payments required to fund any changes in

accrued liability resulting from the provisions of 71 Pa.C.S.

Pt. XXV shall be subject to any limits imposed by this act on

employer contributions to the State Employees' Retirement

System. For purposes of 71 Pa.C.S. §§ 5501.2, 5507 and 5508, any

such changes shall not be considered to be costs added by

legislation.

(b) For purposes of this section, the provisions of 71

Pa.C.S. §§ 5507.1(b)(3) and 5508.1(c)(2) and (d) shall apply.

Section 411. This act shall take effect immediately.

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