PRINTER'S NO. 854
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
778
Session of
2017
INTRODUCED BY McGINNIS, METCALFE, BLOOM, COX, CUTLER, DIAMOND,
IRVIN, KAUFER, KAUFFMAN, KEEFER, F. KELLER, KNOWLES, MILLARD,
MUSTIO, O'NEILL, ORTITAY, ROTHMAN, SANKEY, SCHEMEL, STAATS,
TOPPER AND WARD, MARCH 9, 2017
REFERRED TO COMMITTEE ON STATE GOVERNMENT, MARCH 9, 2017
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes, in retirement for school
employees, further providing for actuarial cost method; and,
in retirement for State employees and officers, further
providing for actuarial cost method.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 8328(c)(4), (d)(2), (e) and (g)(2) of
Title 24 of the Pennsylvania Consolidated Statutes are amended
to read:
§ 8328. Actuarial cost method.
* * *
(c) Accrued liability contribution rate.--
* * *
(4) (i) For the fiscal year beginning July 1, 2011, the
accrued liability contribution rate shall be computed as
the rate of total compensation of all active members
which shall be certified by the actuary as sufficient to
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fund as a level percentage of compensation over a period
of 24 years from July 1, 2011, the present value of the
liabilities for all prospective benefits calculated as of
June 30, 2010, including the supplemental benefits as
provided in sections 8348, 8348.1, 8348.2, 8348.3,
8348.4, 8348.5, 8348.6 and 8348.7, in excess of the
actuarially calculated assets in the fund (calculated
recognizing all realized and unrealized investment gains
and losses each year in level annual installments over a
ten-year period).
(ii) The balance of any recognized accrued liability
net of market value of assets as of June 30, 2016, shall
be funded in annual graduated contributions from July 1,
2017, until the balance equals zero. The first annual
payment shall be equal to 7.4% of the balance of the
recognized accrued liability net of market value of
assets as of June 30, 2016. Each subsequent annual
payment shall be equal to the previous annual payment
plus an amount equal to 3.5% of the previous annual
payment. In the event that the remaining balance is less
than the previous annual payment, the final payment shall
be equal to the remaining balance plus an amount equal to
7.25% of the balance.
(iii) In the event that the accrued liability is
increased by legislation enacted subsequent to June 30,
2010, and before July 1, 2016, such additional liability
shall be funded as a level percentage of compensation
over a period of ten years from the July 1 second
succeeding the date such legislation is enacted.
(iv) In the event that the accrued liability is
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changed by legislation enacted subsequent to June 30,
2016, such additional liability shall be funded in equal
dollar annual contributions over a period of 20 years
from the July 1 second succeeding the date such
legislation is enacted.
(d) Supplemental annuity contribution rate.--
* * *
(2) (i) For fiscal years beginning July 1, 2011,
contributions from the Commonwealth and other employers
whose employees are members of the system required to
provide for the payment of supplemental annuities as
provided in sections 8348, 8348.1, 8348.2, 8348.3,
8348.4, 8348.5, 8348.6 and 8348.7 shall be paid as part
of the accrued liability contribution rate as provided
for in subsection (c)(4), and there shall not be a
separate supplemental annuity contribution rate
attributable to those supplemental annuities.
(ii) In the event that supplemental annuities are
increased by legislation enacted subsequent to June 30,
2010, and before July 1, 2016, the additional liability
for the increase in benefits shall be funded as a level
percentage of compensation over a period of ten years
from the July 1 second succeeding the date such
legislation is enacted.
(iii) In the event that supplemental annuities are
increased by legislation enacted subsequent to June 30,
2016, the additional liability for the increase in
benefits shall be funded in equal dollar annual
contributions over a period of 20 years from the July 1
second succeeding the date such legislation is enacted.
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(e) Experience adjustment factor.--
(1) For each year after the establishment of the accrued
liability contribution rate for the fiscal year beginning
July 1, 2011, any increase or decrease in the unfunded
accrued liability, excluding the gains or losses on the
assets of the health insurance account, due to actual
experience differing from assumed experience, changes in
actuarial assumptions, changes in contributions caused by the
final contribution rate being different from the actuarially
required contribution rate, active members making shared-risk
contributions or changes in the terms and conditions of the
benefits provided by the system by judicial, administrative
or other processes other than legislation, including, but not
limited to, reinterpretation of the provisions of this part,
shall be amortized as a level percentage of compensation over
a period of 24 years beginning with the July 1 second
succeeding the actuarial valuation determining said increases
or decreases[.] when the actuarial valuation occurs on or
before June 30, 2015, and in equal dollar annual
contributions over a period of 20 years beginning with the
July 1 second succeeding the actuarial valuation determining
said increases or decreases when the actuarial valuation
occurs after June 30, 2016. When the actuarial valuation
occurs after June 30, 2016, the actuarial value of system
assets used to determine the experience adjustment factor
shall be the market value of assets as of the date of the
actuarial valuation.
(2) (Reserved).
* * *
(g) Temporary application of collared contribution rate.--
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* * *
(2) If, for any of the fiscal years beginning July 1,
2011, July 1, 2012, [and on or after] July 1, 2013, July 1,
2014, July 1, 2015, and July 1, 2016, the actuarially
required contribution rate, calculated without regard for the
costs added by legislation, is more than 3%, 3.5%, 4.5%,
4.5%, 4.5% and 4.5%, respectively, of the total compensation
of all active members greater than the prior year's final
contribution rate, then the collared contribution rate shall
be applied and be equal to the prior year's final
contribution rate increased by 3%, 3.5%, 4.5%, 4.5%, 4.5% and
4.5%, respectively, of total compensation of all active
members. Otherwise, and for all other fiscal years, the
collared contribution rate shall not be applicable. In no
case shall the collared contribution rate be less than 4% of
the total compensation of all active members.
* * *
Section 2. Section 5508(c)(3), (e)(2), (f)(1) and (h) of
Title 71 are amended to read:
§ 5508. Actuarial cost method.
* * *
(c) Accrued liability contribution rate.--
* * *
(3) (i) For the fiscal year beginning July 1, 2010, the
accrued liability contribution rate shall be computed as
the rate of total compensation of all active members
which shall be certified by the actuary as sufficient to
fund in equal dollar installments over a period of 30
years from July 1, 2010, the present value of the
liabilities for all prospective benefits calculated as of
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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.
(ii) The balance of any recognized accrued liability
net of market value of assets as of December 31, 2016,
shall be funded in annual graduated contributions from
July 1, 2017, until the balance equals zero. The first
annual payment shall be equal to 8.15% of the balance of
the recognized accrued liability net of market value of
assets as of December 31, 2016. Each subsequent annual
payment shall be equal to the previous annual payment
plus an amount equal to 2.50% of the previous annual
payment. In the event that the remaining balance is less
than the previous annual payment, the final payment shall
be equal to the remaining balance plus an amount equal to
7.5% of the balance.
(iii) If the accrued liability is changed by
legislation enacted subsequent to December 31, 2009, and
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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.
(iv) If the accrued liability is changed by
legislation enacted subsequent to December 31, 2016, such
change in liability shall be funded in equal dollar
annual contributions over a period of 20 years from the
first day of July following the valuation date coincident
with or next following the date such legislation is
enacted.
* * *
(e) Supplemental annuity contribution rate.--
* * *
(2) (i) For fiscal years beginning on or after July 1,
2010, 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.
(ii) 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
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the first day of July following the valuation date
coincident with or next following the date such
legislation is enacted.
(iii) In the event that supplemental annuities are
increased by legislation enacted subsequent to December
31, 2016, the additional liability for the increase in
benefits shall be funded in equal dollar annual
contributions over a period of 20 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) (i) For each year after the establishment of
the accrued liability contribution rate and the
supplemental annuity contribution rate for the fiscal
year beginning July 1, 2010, any increase or decrease in
the unfunded accrued liability and any increase or
decrease in the liabilities and funding for supplemental
annuities, due to actual experience differing from
assumed experience (recognizing all realized and
unrealized investment gains and losses over a five-year
period), changes in contributions caused by the final
contribution rate being different from the actuarially
required contribution rate, State employees making
shared-risk member contributions, changes in actuarial
assumptions or changes in the terms and conditions of the
benefits provided by the system by judicial,
administrative or other processes other than legislation,
including, but not limited to, reinterpretation of the
provisions of this part, shall be amortized in equal
dollar annual contributions over a period of 30 years
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beginning with the July 1 succeeding the actuarial
valuation determining said increases or decreases[.] when
the actuarial valuation occurs on or before December 31,
2015.
(ii) For each year after the establishment of the
accrued liability contribution rate and the supplemental
annuity contribution rate for the fiscal year beginning
July 1, 2017, 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,
changes in contributions caused by the final contribution
rate being different from the actuarially required
contribution rate, State employees making shared-risk
member contributions, changes in actuarial assumptions or
changes in the terms and conditions of the benefits
provided by the system by judicial, administrative or
other processes other than legislation, including, but
not limited to, reinterpretation of the provisions of
this part, shall be amortized in equal dollar annual
contributions over a period of 20 years beginning with
the July 1 succeeding the actuarial valuation determining
said increases or decreases when the actuarial valuation
occurs after December 31, 2016, and the actuarial value
of system assets used to determine the experience
adjustment factor shall be the market value of assets as
of the date of the actuarial valuation.
* * *
(h) Temporary application of collared contribution rate.--
The collared contribution rate for each year shall be determined
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by comparing the actuarially required contribution rate
calculated without regard for costs added by legislation to the
prior year's final contribution rate. If, for any of the fiscal
years beginning July 1, 2011, July 1, 2012, [and on or after]
July 1, 2013, July 1, 2014, July 1, 2015, and July 1, 2016, the
actuarially required contribution rate calculated without regard
for costs added by legislation is more than 3%, 3.5%, 4.5%,
4.5%, 4.5% and 4.5%, respectively, of the total compensation of
all active members greater than the prior year's final
contribution rate, then the collared contribution rate shall be
applied and be equal to the prior year's final contribution rate
increased by the respective percentage above of total
compensation of all active members. Otherwise, and for all
subsequent fiscal years, the collared contribution rate shall
not be applicable. In no case shall the collared contribution
rate be less than 4% of total compensation of all active
members.
* * *
Section 3. The Public School Employees' Retirement Board
shall, notwithstanding any other provision of law, recertify to
the Secretary of the Budget the contributions, rates, factors
and amounts under 24 Pa.C.S. § 8502(k). The board's
recertification shall reflect all changes in the contributions,
rates, factors and amounts previously certified by the board for
the fiscal year beginning July 1, 2017, which are required to
comply with 24 Pa.C.S. § 8328. The recertification shall occur
within 15 days of the effective date of this section and shall
supersede the prior certification.
Section 4. The State Employees' Retirement Board shall,
notwithstanding any other provision of law, recertify to the
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Secretary of the Budget the contributions, rates, factors and
amounts under 71 Pa.C.S. § 5902(k). The board's recertification
shall reflect all changes in the contributions, rates, factors
and amounts previously certified by the board prior to the
effective date of this section for the fiscal year beginning
July 1, 2017, which are required to comply with 71 Pa.C.S. §
5508. The recertification shall occur within 15 days of the
effective date of this section and shall supersede the prior
certification.
Section 5. This act shall take effect immediately.
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