Regular Session 2015-2016 Senate Bill 0755 P.N. 1017

PRINTER'S NO. 1017

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

755

Session of

2015

INTRODUCED BY EICHELBERGER, SCAVELLO, FOLMER, VANCE, MENSCH,

WAGNER, AUMENT, ALLOWAY, STEFANO, SMUCKER, BROWNE AND YAW,

JUNE 4, 2015

REFERRED TO FINANCE, JUNE 4, 2015

AN ACT

Amending Title 53 (Municipalities Generally) of the Pennsylvania

Consolidated Statutes, providing for a municipal alternative

retirement plan.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Title 53 of the Pennsylvania Consolidated

Statutes is amended by adding a chapter to read:

CHAPTER 93

MUNICIPAL ALTERNATIVE RETIREMENT PLAN

Subchapter

A. Preliminary Provisions

B. Municipal Alternative Retirement Plan

C. Membership

D. Contributions

E. Vesting

F. Member Accounts

G. Distributions

H. Military Service

I. In-Service Withdrawals

SUBCHAPTER A

PRELIMINARY PROVISIONS

Sec.

9301. Definitions.

§ 9301. 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:

"Account." The entries maintained in the records of the

trustee which represent the member's interest in the trust.

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

dependent of a member who is recognized by a qualified domestic

relations order as having a right to receive all or a portion of

the member's vested account balance.

"Annual additions." For any limitation year, the sum of the

following:

(1) the aggregate after-tax employee contributions that

the member contributes during the year to all qualified

retirement plans maintained by the municipality;

(2) the amount of municipality contributions allocated

to the member's municipality contribution account under this

plan as of any date within the year; and

(3) the amount of municipality contributions and

forfeitures allocated to the member under any qualified

defined contribution plan that may be maintained by the

municipality, other than this plan, as of any date within the

year.

"Benefit commencement date." For any member or designated

beneficiary, the date the first benefit payment, including a

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single sum from the member's account, is due, other than

pursuant to a withdrawal under section 9382 (relating to

retirement age).

"Break in service." Shall be as follows:

(1) Except as provided in paragraph (2) or (3), any plan

year in which an employee is not credited with more than 500

hours of service.

(2) For the purpose of calculating a break in service,

an employee shall receive credit for an hour of service for

each hour of service that the employee would have earned had

the employee continued to be actively employed during the

period of absence if the employee is absent for one or more

of the following reasons:

(i) layoff for a period of not more than one year;

(ii) leave of absence that is protected under the

Family and Medical Leave Act of 1993 (Public Law 103-3,

29 U.S.C. § 2601 et seq.); or

(iii) leave of absence for any other reason with the

approval of the plan administrator for a period of not

more than one year.

(3) If an employee is absent from work by reason of

pregnancy, childbirth or placement in connection with an

adoption, the employee shall be credited with the hours of

service that the employee would have received but for the

absence. If the hours of service cannot be determined, the

employee shall receive eight hours of service per normal

workday. The total number of hours to be treated as hours of

service under this provision shall not exceed 501. The hours

of service described in this provision shall be credited to

the plan year in which the hours of service would have

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otherwise occurred.

"Compensation." Shall be as follows:

(1) For any plan year, subject to the limitations set

forth below, the total wages as reported on an employee's

Form W-2 from the municipality for the plan year, including:

(i) basic contributions and elective contributions

that are not included in gross income pursuant to section

125, 132(f), 402(e)(3), 402(h)(1)(B) or 402(k) of the IRS

Code (26 U.S.C. § 125, 132(f), 402(e)(3), 402(h)(1)(B) or

402(k)); and

(ii) compensation deferred under an eligible

deferred compensation plan within the meaning of section

457(b) of the IRS Code (26 U.S.C. § 457(b)).

(2) If an employee is severed from employment,

compensation must be paid or made available to an employee

within the limitation year and must be paid or treated as

paid to the employee prior to his or her severance from

employment. For purposes of Subchapter D (relating to

contributions), compensation shall also include compensation

paid by the later of two and one-half months after the

employee's severance from employment or the end of the

limitation year in which the employee has a severance from

employment if payment is regular compensation for services

during the employee's regular working hours, or compensation

for services outside the employee's regular working hours,

commissions, bonuses or similar payments, and the payment

would have been made to the employee if he or she had

continued in employment with the municipality, or the payment

is for unused accrued bona fide sick, vacation or other leave

that the employee would have been able to use if the employee

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had continued in employment with the municipality.

(3) With respect to any plan year, only compensation not

in excess of the amount to which the limit of section 401(a)

(17) of the IRS Code (26 U.S.C. § 401(a)(17)) has been

indexed shall be taken into account.

(4) For purposes of this definition, amounts under

section 125 of the IRS Code (26 U.S.C. § 125) shall include

any amounts not available to a member in cash in lieu of

health coverage because the member is unable to certify that

he or she has other health coverage. An amount will be

treated as an amount under section 125 of the IRS Code only

if the municipality does not otherwise request or collect

information regarding the member's other health coverage as

part of the enrollment process for the health plan.

"Designated beneficiary." Each eligible employee, upon

becoming a member, shall designate a person or persons as the

beneficiary to receive any distribution payable under the plan

in the event of the member's death. The member may change the

designation of a beneficiary from time to time in accordance

with procedures established by the plan administrator. Any

designation of a beneficiary shall only be effective if it is

made in writing on the form prescribed by the plan administrator

and is received by the plan administrator prior to the member's

death. If the member has not named a beneficiary or if none of

the named beneficiaries is living when a payment is to be made,

one of the following shall apply:

(1) the spouse of the deceased member shall be the

beneficiary;

(2) if the member has no spouse living at the time of

such payment, the then-living children of the member shall be

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the beneficiaries in equal shares; or

(3) if the member has neither spouse nor children living

at the time of such payment, the estate of the member shall

be the beneficiary.

"Eligible employee." Employees of a municipality who meet

the requirements of section 9321 (relating to eligibility).

"Employment commencement date." For any employee, the date

on which he or she is first entitled to be credited with an hour

of service.

"Hour of service." Shall be as follows:

(1) In accordance with 29 CFR 2530.200b-2 (relating to

hour of service), an hour of service shall be defined as:

(i) each hour that the employee is directly or

indirectly paid or entitled to payment by the

municipality for the performance of employment duties;

(ii) each hour the employee is entitled, either by

award or agreement, to back pay from the municipality,

irrespective of mitigation of damages; and

(iii) each hour the employee is directly or

indirectly paid or entitled to payment by the

municipality on account of a period of time during which

no duties are performed due to vacation, holiday,

illness, incapacity, including disability, jury duty,

layoff, leave of absence or military duty.

(2) The following shall apply:

(i) No hours of service shall be credited to an

employee for payments made under a plan maintained solely

for the purpose of complying with applicable workers'

compensation, unemployment compensation or disability

insurance laws.

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(ii) No more than 501 hours of service shall be

credited to an employee under paragraph (1)(iii) for any

single continuous period during which no duties are

performed by the employee, except to the extent otherwise

provided in the plan.

(iii) No hour of service shall be credited to an

employee for payments for medical or medical-related

expense reimbursement.

(iv) No hour of service shall be credited twice.

(v) Hours of service shall be credited at least as

liberally as set forth by the rules in 29 CFR 2530.200b-

"Investment option." Any investment vehicle designated by a

plan administrator.

"IRS Code." The Internal Revenue Code of 1986 (Public Law

99-514, 26 U.S.C. § 1 et seq.).

"Limitation year." The 12-consecutive-month period that

begins January 1 and ends the following December 31 of each

year.

"Mandatory member contribution account." The individual

investment account established by the municipality for employee

contributions made under section 9332 (relating to mandatory

member contributions), as adjusted for withdrawals,

distributions, earnings, losses and expenses.

"Mandatory member contributions." For any member, the

contributions made on his or her behalf as provided in section

9332.

"Member." An individual who becomes a member under

Subchapter C (relating to membership) and for whom one or more

accounts are maintained under the plan.

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"Municipality." A borough, incorporated town, township,

regional police department or a city other than a city of the

first class.

"Municipality contribution account." An account established

by a municipality under section 9331 (relating to municipality

contribution account).

"Municipality contributions." A municipality contribution to

a member under section 9333 (relating to pick up of member

contributions).

"Nonuniformed employee." An employee of a municipality who

does not meet the requirements of section 9321 (relating to

eligibility).

"Normal retirement age." The date that an employee becomes

55 years of age.

"Plan." The defined contribution plan adopted by a

municipality in accordance with this chapter and the tax-

qualification requirements of section 401(a) of the IRS Code (26

U.S.C. § 401(a)).

"Plan administrator." The committee or individual appointed

by the municipality to supervise the administration of the plan

under section 9312 (relating to plan administrator).

"Plan year." The 12-consecutive-month period that begins

January 1 and ends the following December 31. A short plan year

may exist when a municipality adopts the plan after January 1 of

the plan year.

"Qualified domestic relations order" or "QDRO." A domestic

relations order which creates or recognizes an alternate payee's

right, or assigns to an alternate payee the right, to receive

all or a portion of the benefits payable under a plan, so long

as the order satisfies State domestic relations requirements as

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provided by law.

"Qualified military service." An employee's military service

if the employee is entitled to reemployment with the

municipality following the employee's military service.

"Returning veteran." An employee who on or after December

12, 1994, returns from qualified military service to employment

with a municipality within the period of time that the

employee's reemployment rights are protected by law.

"Rollover contribution account." An account credited with a

member's rollover contributions under the plan, adjusted for

withdrawals and distributions, earnings, losses and expenses.

"Trust." The account established by a municipality under

section 9383 (relating to plan assets to be held in trust).

"Trust agreement." Any agreement and declaration of trust

executed under the plan.

"Trustee." The corporate trustee or one or more individuals

collectively appointed and acting as trustee under the trust

agreement.

"Uniformed services." Active duty of full-time service in

any of the following:

(1) United States Armed Forces.

(2) Army National Guard.

(3) Air National Guard.

(4) Commissioned corps of the Public Health Service.

(5) Any other category of persons designated by the

President of the United States in time of war or emergency.

"Valuation date." The last day of each plan year and each

interim date on which the plan specifies that a valuation of the

trust shall be made.

"Year of vesting service." For determining an employee's

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vested status under the plan, an employee shall earn one year of

vesting service for each plan year during which the employee is

credited with at least 1,000 hours of service.

SUBCHAPTER B

MUNICIPAL ALTERNATIVE RETIREMENT PLAN

Sec.

9311. Establishment.

9312. Plan administrator.

9313. Powers and duties of the plan administrator.

9314. Plan assets to be held in trust.

9315. Managing plan assets.

9316. Plan expenses.

9317. Indemnification.

§ 9311. Establishment.

A municipality may by ordinance establish a retirement plan

for its eligible employees in place of, and as an alternative

to, other retirement plans authorized under law prior to the

effective date of this section.

§ 9312. Plan administrator.

(a) Responsibilities.--A municipality that establishes a

plan under section 9311 (relating to establishment) may be the

plan administrator or may delegate any or all administrative

responsibilities to a third party. The ordinance shall designate

a trustee to hold the required accounts under the plan.

(b) Written agreement.--A municipality may enter into an

agreement with one or more financial institutions or pension

management organizations to administer the plan and the

investment of funds held pursuant to the plan, which must be in

writing. The administrator shall be selected in accordance with

the following:

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(1) the municipality shall solicit proposals from

financial institutions and pension management organizations;

and

(2) proposals shall be evaluated based on specific

criteria adopted by the municipality, which shall include

experience, customer service history and other relevant

criteria.

sub section (a) shall be rebid at least once every 10 years.

§ 9313. Powers and duties of the plan administrator.

(a) General rule.--

(1) The plan administrator shall promulgate rules and

computations and shall take other actions necessary for

administering the plan.

(2) A plan administrator's rules, interpretations,

computations and actions shall be final, conclusive and

binding.

(b) Specific powers and duties.--The powers and duties of

the plan administrator shall include the following:

(1) Commingle or pool assets with the assets of third

parties.

(2) Pay administrative fees, costs and expenses of

managing, investing and administering the plan, trust and

individual investment accounts with funds from the balance of

the individual investment accounts, except as funds may be

appropriated from the General Fund.

(3) Establish investment guidelines and limits on the

types of investments that participants may make, consistent

with its fiduciary obligations.

(4) Change the terms of the plan as may be necessary to

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maintain the tax-qualified status of the plan.

(5) Allow for eligible rollovers and transfers between

trustees into the trust from qualified plans of other

employers, regardless of whether the employers are private

employers or public employers.

(6) Establish procedures to provide for the lawful

payment of benefits.

(7) Establish procedures for distributions of small

accounts as required.

(8) Establish procedures or promulgate rules and

regulations as necessary for the administration and

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

establishing:

(i) Procedures for eligible participants to change

voluntary contribution amounts or 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 and voluntary contributions

from a participant's compensation.

(iii) Procedures for rollovers and transfers between

trustees as allowed under law and permitted by the plan.

(iv) Standards and criteria for providing at least

six options from three or more providers of investment

options to eligible individuals regarding the investment

of amounts deferred under the plan.

(v) Standards and criteria for disclosing to the

participants the anticipated and actual income

attributable to amounts invested, property rights and any

fees, costs and expenses to be made against amounts

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deferred to cover the costs and expenses of administering

and managing the plan or trust.

(vi) Procedures, standards and criteria for the

making of distributions from the plan upon termination

from employment or death or other circumstances

consistent with the purpose of the plan.

§ 9314. Plan assets to be held in trust.

(a) General rule.--All contributions to the plan shall be

held in trust by a trustee for investment and reinvestment and

as provided under the terms of the trust agreement and this

plan. The municipality shall appoint the initial trustee or

trustees upon establishment of a plan under section 9311

(relating to establishment).

(b) Prohibitions.--The corpus or income of the trust or

custodial account may not be diverted to or used for any purpose

other than the exclusive benefit of the members and

beneficiaries of the members.

through the distribution of an annuity or insurance contract,

any refunds or credits in excess of plan benefits shall be paid

to the trust or custodial account.

§ 9315. Managing plan assets.

(a) Fiduciary.--The plan administrator is the named

fiduciary of the plan, and following the initial appointment of

the trustee by the municipality, the plan administrator may:

(1) Appoint one or more trustees to hold all assets of

the plan and may enter into a trust agreement with each

trustee appointed by the plan administrator.

(2) Designate and monitor an investment manager and

delegate fiduciary responsibility for selecting and

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monitoring investment options to the investment manager.

(3) Determine whether an expense may be paid out of plan

assets and, if so, how the expense will be divided among

member and beneficiary accounts.

(4) Determine how revenue share funds will be allocated

among the accounts.

(b) Power to appoint and remove.--After the initial

appointment of a trustee, the plan administrator shall have the

sole responsibility and power to appoint and remove any trustee

or investment manager managing assets of the plan.

§ 9316. Plan expenses.

(a) Payment.--All expenses of administering the plan shall

be paid out of plan assets, except for such expenses as are paid

by the municipality.

(b) Discretion of the plan administrator.--The plan

administrator shall have sole discretion to determine whether a

plan expense shall be paid by the municipality, which shall not

be limited by a prior decision or practice regarding payment of

plan expenses.

with revenue share funds paid to the plan. If any revenue share

funds are remaining after the payment of expenses, the funds

shall be allocated to the account of each member, or member

beneficiary, who is entitled to an allocation of municipality

contributions for the plan year in which the revenue share

amount was paid to the plan.

§ 9317. Indemnification.

A municipality may purchase a bond and liability insurance to

cover any of its potential liabilities regarding the plan and

trust established by this act .

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SUBCHAPTER C

MEMBERSHIP

Sec.

9321. Eligibility.

9322. Membership.

9323. Membership upon reemployment.

9324. Participation in a defined benefit pension plan.

9325. Termination of membership.

§ 9321. Eligibility.

The following employees of a municipality that has adopted a

plan under section 9311 (relating to establishment) shall be

eligible for membership in the plan:

(1) A regular, full-time police officer employed by a

borough, town, township or regional police department

maintaining a police force of three or more regular, full-

time police officers who were hired on or after the effective

date of the plan established under section 9311.

(2) A regular, full-time police officer employed by a

city of the second class, second class A or third class who

was hired on or after the effective date of the plan

established under section 9311.

(3) A regular, full-time firefighter who is employed by

a city of the second class, second class A, third class or

borough maintaining a fire department of three or more

regular full-time firefighters, and who was hired on or after

the effective date of the plan established under section

9311.

§ 9322. Membership.

(a) Immediate membership.--An eligible employee under

section 9321 (relating to eligibility) shall become a plan

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member on the first day of the payroll cycle following the

employee's employment commencement date.

(b) Extension of membership.--Nonuniformed employees shall

not be eligible for inclusion in the plan. A municipality may

establish a separate defined contribution plan for its

nonuniformed employees.

§ 9323. Membership upon reemployment.

A former member whose employment with a municipality was

terminated shall become a member upon reemployment with the

municipality if the employee is an eligible employee upon

reemployment.

§ 9324. Participation in a defined benefit pension plan.

(a) Ineligibility.--Members of a plan established under this

act shall be ineligible to participate in a defined benefit

pension plan sponsored by the employee's municipality, except

for a pension plan that the employee participated in prior to

the establishment of the plan.

(b) Previous pension plans.--If an employee participated in

another pension plan offered by the municipality prior to the

establishment of a plan under this chapter, the benefits of that

pension plan shall not be increased or decreased.

participate in a supplemental deferred compensation plan

established by the employee's municipality under section 457(b)

of the IRS Code (26 U.S.C. § 457(b)).

§ 9325. Termination of membership.

Membership in a plan shall terminate as of the later of:

(1) the date of a member's termination from employment

with the sponsoring municipality; or

(2) the date no further benefits are payable to the

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member under the plan.

SUBCHAPTER D

CONTRIBUTIONS

Sec.

9331. Municipality contribution account.

9332. Mandatory member contributions.

9333. Pick up of member contributions.

9334. Municipal contributions.

9335. Rollover contributions.

9336. Limitation on contributions.

9337. Corrections.

§ 9331. Municipality contribution account.

A municipality shall establish an account into which are

credited the municipality contributions allocated to a member

under the plan, as adjusted for withdrawals, distributions,

earnings, losses and expenses.

§ 9332. Mandatory member contributions.

(a) General rule.--Each member shall make a mandatory

contribution to the plan each payroll period and the following

shall apply:

(1) The plan shall establish in the trust an individual

investment account for each member. All contributions by a

member and vested municipality contributions for or on behalf

of a member shall be credited to the member'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 member's

individual investment accounts. Employer defined

contributions shall be recorded and accounted for separately

from participant contributions, but all interest, investment

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earnings and losses, and investment and administrative fees

and costs and expenses shall be allocated proportionately.

(2) The account shall separately track participant

contributions, including investment gains and losses, and

employer contributions, including investment gains and

losses, but all interest, investment gains and losses and

administrative fees, costs and expenses shall be allocated

proportionately.

(b) Amount of contribution.--The mandatory contribution

shall be 6% of the total compensation for a member who pays into

Social Security or 9% of the total compensation for a member who

does not pay into Social Security.

§ 9333. Pick up of member contributions.

(a) General rule.--The municipality shall adopt an ordinance

to "pick up" mandatory employee contributions under section

414(h) of the IRS Code (26 U.S.C. § 414(h)).

(b) Deductions.--Mandatory member contributions that are

picked up by the sponsoring municipality will be deducted

through regular payroll deductions on a pretax basis.

contributions that are picked up by the municipality are treated

as municipality contributions for Federal income tax purposes

and shall not be treated as taxable contributions to the member.

§ 9334. Municipal contributions.

(a) General rule.--For each plan year, a municipality that

has established a plan under section 9311 (relating to

establishment) shall make a contribution to the plan on behalf

of each member.

(b) Amount of contribution.--The contribution shall be 4.5%

of a member's total compensation.

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credited to a member account each payroll period, or any other

frequency as the municipality determines appropriate, but not

less frequently than annually.

§ 9335. Rollover contributions.

(a) General rule.--Subject to the plan administrator's

approval, a plan may accept rollovers from eligible employees.

(b) Qualifying rollover accounts.--A plan may accept

rollovers of qualifying distributions of pretax contributions

from plans described in IRS Code section s 401(a) and (k) and

403(a) and (b), governmental IRS Code section 457(b) plans and

traditional individual retirement accounts.

§ 9336. Limitation on contributions.

(a) General rule.--The annual additions allocated to a

member's accounts for any limitations year shall not exceed the

lesser of the following:

(1) fifty-three thousand dollars, as adjusted for

increases in the cost-of-living index under section 415(d) of

the IRS Code (26 U.S.C. § 415(d)); or

(2) one hundred percent of the member's compensation for

the limitations year.

(b) Excess additions.--If a member's annual additions would

exceed the limits under section 415 of the IRS Code (26 U.S.C. §

415), such annual additions shall be reduced by reducing the

components t hereof in the order in which they are listed in the

definition of annual additions in Subchapter A (relating to

preliminary provisions).

§ 9337. Corrections.

If the limitations under section 415 of the IRS Code (26

U.S.C. § 415) would otherwise fail to be satisfied, a correction

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may be made, as determined by the plan administrator.

SUBCHAPTER E

VESTING

Sec.

9341. Member contribution account.

9342. Municipality contribution account.

9343. Normal retirement age, death or disability.

9344. Rollover contribution account.

9345. Forfeitures.

9346. Termination.

§ 9341. Member contribution account.

A member shall become fully vested in all contributions,

mandatory or otherwise, to the member's individual investment

account immediately.

§ 9342. Municipality contribution account.

A member shall become vested in the member's municipality

contribution account a ccording to the following schedule:

Years of vesting service Percentage vested

4 25%

6 50%

8 75%

10 100%

§ 9343. Normal retirement age, death or disability.

Notwithstanding anything in this chapter to the contrary, a

member shall become fully vested in a member contribution

account if, prior to severance from employment, the member

reaches his normal retirement age, has died or has become

disabled.

§ 9344. Rollover contribution account.

A member shall become fully vested immediately for any

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amounts credited to his rollover contribution account.

§ 9345. Forfeitures.

(a) General rule.--A member who has a severance from

employment prior to completing the vesting requirements in

section 9342 (relating to municipality contribution account)

shall forfeit the unvested portion of the employee's

municipality contribution account.

(b) Use of forfeited plan funds.--A plan administrator may

use plan forfeitures to pay reasonable administrative expenses

incurred by the plan. Any forfeited amounts not used to pay

reasonable administrative expenses shall be used to reduce

municipality contributions.

§ 9346. Termination.

Upon termination of the plan, all members shall become fully

vested in their accounts to the extent funded.

SUBCHAPTER F

MEMBER ACCOUNTS

Sec.

9351. Accounts.

9352. Valuation of accounts.

§ 9351. Accounts.

The following accounts, as applicable, shall be maintained by

the trustee for each member:

(1) Mandatory member contribution account.

(2) Municipality contribution account.

(3) Rollover contribution account.

§ 9352. Valuation of accounts.

Each member account shall be valued at fair market value and

adjusted as of each valuation date to reflect income, gains,

losses, expenses and all other transactions associated with the

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member's account since the last valuation date.

SUBCHAPTER G

DISTRIBUTIONS

Sec.

9361. Time of distribution.

9362. Distribution amount.

9363. Form of distribution.

9364. Election of annuity benefit.

9365. Default form of payment.

9366. Rollovers from the plan.

9367. Distribution upon death.

9368. Required minimum distributions.

9369. Definitions.

§ 9361. Time of distribution.

(a) General rule.--A member's vested account balance shall

be distributable as soon as practicable following the member's

severance from employment with a municipality. If the

distribution is to commence prior to the member's attainment of

normal retirement age, the member must consent in writing to the

distribution. If a member fails to request a distribution of his

account or there was no consent to an earlier distribution, the

member's vested account balance shall be distributed no later

than the 60th day following the later of:

(1) the last day of the plan year in which the member

has a severance from employment with a municipality; or

(2) the last day of the plan year in which the member

attains normal retirement age.

(b) Exception.--Notwithstanding the foregoing, a member's

vested account balance shall be paid by April 1 of the calendar

year following the later of:

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(1) the calendar year in which the member attains 70.5

years of age; or

(2) the calendar year in which the member retires.

§ 9362. Distribution amount.

Upon severance from employment, a member shall be entitled to

his vested account balance, which shall be the value as of the

valuation date on or most recently preceding the date of

distribution.

§ 9363. Form of distribution.

By filing the prescribed forms with the plan administrator

prior to the commencement of benefits, a member may elect to

have his vested account balance paid in one of the following

forms:

(1) Single lump sum.

(2) Annuity.

(3) Substantially equal installments occurring at least

annually for a specified number of years.

§ 9364. Election of annuity benefit.

(a) Default option.--The default annuity option is a

straight life annuity.

(b) Election other than life annuity.--If a member elects to

receive his benefit as an annuity that is a form other than a

straight life annuity, the member shall receive a benefit that

is the actuarial equivalent of the straight life annuity

benefit.

purchase an annuity contract from a third-party insurance

company to provide any annuity benefit selected by a member, and

the following shall apply:

(1) The plan shall be the named owner and the member

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shall be the named annuitant of the annuity contract.

(2) The terms of the plan shall control where there is a

conflict between the terms of the plan and the terms of an

annuity contract issued hereunder .

§ 9365. Default form of payment.

If, by the date payment is to be made, a member fails to

elect the form in which his vested account balance is to be

paid, the member's vested account balance shall be paid to the

member as follows:

(1) fifty percent in a lump sum; and

(2) fifty percent in a straight life annuity.

§ 9366. Rollovers from the plan.

An eligible member may elect, at the time and in the manner

prescribed by the plan administrator, to have any portion of an

eligible rollover distribution from the plan paid directly to an

eligible retirement plan in a direct rollover, as described in

section 401(a)(31) of the IRS Code (26 U.S.C. § 401(a)(31)).

§ 9367. Distribution upon death.

(a) Death before distributions begin.--If a member dies

while he is still employed with a municipality, the member's

designated beneficiary shall be entitled to an amount equal to

the value of the member's account determined as of the valuation

date on or most recently preceding the date of distribution.

(b) Death following severance from employment.--

(1) If a member dies after his severance from employment

with the municipality but before his vested account balance

has been fully distributed, the member's designated

beneficiary shall be entitled to an amount equal to the value

of the member's account determined as of the valuation date

on or most recently preceding the date of distribution to the

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beneficiary.

(2) If a distribution commenced in the form of

installments prior to the member's death, the member's

remaining account balance shall be paid to the designated

beneficiary at least as rapidly as the method in effect prior

to the member's death.

(3) If a distribution commenced in the form of an

annuity prior to the member's death, the member's remaining

account balance shall be paid in accordance with the method

of payment in effect.

(4) If a member dies after his severance from employment

with the municipality and has received a distribution of his

entire account, no further amount shall be paid to anyone.

(1) The amount payable to a designated beneficiary under

sub sections (a) and (b) shall be payable in a single lump sum

no later than 12 months after the date of the member's death

except, however, if annuity or installment payments have

begun, they may continue to be paid in accordance with the

method payment in effect.

(2) If the deceased member's spouse is the sole

designated beneficiary, the spouse may elect to delay receipt

of the member's vested account balance until a time that is

no later than December 31 of the later of the calendar year

following the calendar year in which the member died or the

calendar year the member would have attained 70.5 years of

age.

(3) If the surviving spouse dies before distributions

begin, the deceased member's vested account balance shall be

distributed as if the surviving spouse were the member.

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§ 9368. Required minimum distributions.

The following shall apply:

(1) Notwithstanding any provisions of this chapter to

the contrary, all distributions under the plan shall be made

in accordance with a reasonable and good faith interpretation

of section 401(a)(9) of the IRS Code (26 U.S.C. § 401(a)(9)),

including the incidental death benefit requirement of section

401(a)(9)(G), the corresponding treasury regulation.

(2) The provisions of the IRS Code and treasury

regulation specified in paragraph (1) shall override any

inconsistent distribution options under the plan.

§ 9369. Definitions.

The following words and phrases when used in this subchapter

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

context clearly indicates otherwise:

"Eligible member." A member, member's surviving spouse,

member's spouse or former spouse who is an alternate payee under

a QDRO or member's designated beneficiary who is not the

member's spouse.

"Eligible retirement plan." Shall be as follows:

(1) An individual retirement account described in

section 408(a) of the IRS Code (26 U.S.C. § 408(a)), an

individual retirement annuity described in section 408(b) of

the IRS Code (26 U.S.C. § 408(b)), an annuity plan described

in section 403(a) of the IRS Code (26 U.S.C. § 403(a)), a

qualified trust described in section 401(a) of the IRS Code

(26 U.S.C. § 401(a)), an annuity contract described in

section 403(b) of the IRS Code (26 U.S.C. § 403(b)), a

governmental deferred compensation plan under section 457(b)

of the IRS Code (26 U.S.C. § 457(b)) or a Roth individual

20150SB0755PN1017 - 26 -

retirement account described in section 408A of the IRS Code

(26 U.S.C. § 408A).

(2) With respect to a designated beneficiary who is not

the member's spouse, an eligible retirement plan is an

individual retirement account described in section 408(a) of

the IRS Code, a Roth individual retirement account described

in section 408A of the IRS Code, or individual retirement

annuity described in section 408(b) of the IRS Code, other

than an endowment contract, established on behalf of the

designated beneficiary and treated as an inherited individual

retirement account or annuity in accordance with section

401(c)(11) of the IRS Code (26 U.S.C. § 401(c)(11)).

"Eligible rollover distribution." Any distribution of all or

any portion of a member's account if the amount was not rolled

over to an eligible retirement plan, except that an eligible

rollover distribution does not include:

(1) A distribution that is one of a series of

substantially equal periodic payments, but not less

frequently than annually, made for the life or life

expectancy of an eligible member or the joint lives or joint

life expectancies of the eligible member and his or her

beneficiary, or for a specified period of 10 years or more.

(2) A distribution to the extent such distribution is

required under section 401(a)(9) of the IRS Code (26 U.S.C. §

401(a)(9)).

SUBCHAPTER H

MILITARY SERVICE

Sec.

9371. Qualified military service.

9372. Survivor benefits.

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§ 9371. Qualified military service.

(a) General rule.--Notwithstanding any provision of this

plan to the contrary, contributions, benefits and service credit

with respect to qualified military service will be provided in

accordance with section 414(u) of the IRS Code (26 U.S.C. §

414(u)).

(b) Missed mandatory employee contributions.--A returning

veteran has up to three times the period of military service,

but not to exceed five years, to make up any missed mandatory

employee contributions, and the following shall apply:

(1) The contributions are subject to the limits that

would have applied during the military service period.

(2) A municipality shall pick up the contributions if

the contributions would have been picked up by the

municipality absent the period of military service.

(1) For a member returning from qualified military

leave, a municipality shall contribute any municipality

contributions that would have been made during the military

service period.

(2) Municipality contributions made under paragraph (1)

shall be calculated by using the same rate of compensation

the rehired member would have received during the military

service period. If this is not reasonably certain, the

municipality may use the employee's average compensation

during the 12-month period immediately preceding the

qualified military service.

§ 9372. Survivor benefits.

The survivor of a member who has died while performing

qualified military service shall be entitled to any additional

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benefits that would be provided under the plan if the member had

resumed employment and then terminated employment on account of

death.

SUBCHAPTER I

IN-SERVICE WITHDRAWALS

Sec.

9381. General.

9382. Retirement age.

9383. Payments to alternate employees under a QDRO.

9384. Alterations to plans.

§ 9381. General.

Except as permitted by section 9382 (relating to retirement

age), a member may not withdraw any portion of the member's

vested account while employed with a municipality.

§ 9382. Retirement age.

Upon written request to the plan administrator on the forms

as the plan administrator may require, a member who has attained

59.5 years of age may request a withdrawal of all or a portion

of the employee's vested account balance.

§ 9383. Payments to alternate employees under a QDRO.

(a) Distributions.--Any distribution to an alternate payee

pursuant to a domestic relations order, including any interest

in a member's account awarded to an alternate payee by a

domestic relations order, shall be made as soon as practicable

after such order is determined by the plan administrator to be a

QDRO and otherwise acceptable under the terms of the plan,

unless the QDRO has specified a time of distribution.

(b) Alternate payee accounts.--If distributions are not made

as soon as practicable under sub section (a), any interest in a

member's accounts assigned or made payable or distributable to

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the alternate payee under a QDRO shall be transferred to a

separate account established for such alternate payee. If a

single amount or a single percentage of the vested portion of

such member's accounts is assigned or made payable or

distributable to the alternate payee under a QDRO, the transfers

to the alternate payee account shall be made pro rata from the

member's accounts, unless otherwise provided by the QDRO.

(1) An alternate payee may, on the form prescribed by

and filed with the plan administrator, designate a

beneficiary to receive the benefits assigned to the alternate

payee by a QDRO in the event of the alternate payee's death

prior to receipt of all or any portion of the benefits.

(2) If the alternate payee has not designated a

beneficiary or if the designated beneficiary is not living

when a distribution is scheduled, the benefits shall be paid

to the alternate payee's estate, except as a QDRO may

otherwise provide.

(d) Latest time of distribution.--Distribution to an

alternate payee of an employee's alternate payee account shall

be made as of the date specified in the QDRO, or, if earlier,

the time described under this section if the alternate payee so

elects. However, payment shall be made no later than the date

the member's vested account balance is distributed or is

scheduled to be distributed.

§ 9384. Alterations to plans.

(a) General rule.--If a municipality establishes a plan

under section 9311 (relating to establishment), the provisions

of this chapter shall constitute the exclusive benefits to be

provided to employee members and the following shall apply:

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(1) No ordinance or resolution enact ed by a municipality

after establishment of a plan under this act shall alter the

provisions t hereof , nor shall the benefits to be provided by

a plan be altered by any subsequent award of an arbitrator

under the act of June 24, 1968 (P.L.237, No.111), referred to

as the Policemen and Firemen Collective Bargaining Act.

(2) A plan administrator shall have the authority to

amend the plan as necessary or desirable to maintain the

qualified status of the plan under section s 401(a) of the IRS

Code (26 U.S.C. § 401(a)) or to facilitate the administration

or operation of the plan to the extent the amendment would

not materially increase the cost of the plan or significantly

alter the benefits payable under the plan.

(b) Limitations.--Notwithstanding subsection (a)(2), a

municipality, trustee or plan administrator may not divert any

part of the assets of the plan to purposes other than the

exclusive purposes of providing benefits to members and their

designated beneficiaries who have an interest in the plan and of

defraying the reasonable expenses of administering the plan.

nothing in this chapter shall be construed to diminish the

established benefits for current employee members . On and after

the effective date of this section, it shall be unlawful for a

municipality to improve a benefit formula or to add or improve

any feature of an existing plan that would result in additional

cost to the municipality, nor shall the benefits provided by an

existing plan be altered by any subsequent award of an

arbitrator under the Policemen and Firemen Collective Bargaining

Act.

(d) Assignment of a plan.--The interest and rights of any

20150SB0755PN1017 - 31 -

person in the plan, trust or any distribution to be made under

the plan shall not be subject to option nor be assignable either

by voluntary or involuntary assignment or by operation of law,

including, without limitation, bankruptcy, wage garnishment,

attachment or other creditor's process, and the following shall

apply:

(1) Any action in violation of this section shall be

void.

(2) Pursuant to a QDRO, the assignment of a member's

account shall not constitute a violation of this section as

long as the order is approved by the plan administrator.

Section 2. This act shall take effect immediately.

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