Regular Session 2019-2020 Senate Bill 0951 P.N. 1369

PRINTER'S NO. 1369

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

951

Session of

2019

INTRODUCED BY BLAKE, BROWNE, DiSANTO, PHILLIPS-HILL, HAYWOOD,

SCHWANK, COSTA AND YUDICHAK, NOVEMBER 12, 2019

REFERRED TO FINANCE, NOVEMBER 12, 2019

AN ACT

Amending Titles 24 (Education), 64 (Public Authorities and

Quasi-public Corporations) and 71 (State Government) of the

Pennsylvania Consolidated Statutes, in general provisions,

further providing for definitions; in membership,

contributions and benefits, further providing for

appropriations by the Commonwealth and establishing the

Public School Employees' Contribution Fund; in School

Employees' Defined Contribution Plan, further providing for

powers and duties of board; in administration and

miscellaneous provisions, further providing for Public School

Employees' Retirement Board, for administrative duties of

board, for health insurance and for duties of board to report

to State Employees' Retirement Board, providing for duties of

the board to report to the investment office and further

providing for management of fund and accounts, for Public

School Employees' Retirement Fund, for State accumulation

account, for health insurance account, for Northern Ireland-

related investments, for fraud and adjustment of errors, for

payments to school entities by Commonwealth commencing with

the 2019-2020 school year and for establishment; in group

health insurance program, further providing for

administration, for Public School Retirees' Health Insurance

Fund and for management of fund; in public authorities,

establishing the Commonwealth Pension Investment Office; in

preliminary provisions, further providing for definitions and

providing for certification by Secretary of the Budget; in

membership, credited service, classes of service, and

eligibility for benefits, further providing for mandatory and

optional membership in the system and participation in the

plan; establishing the State Employees' Contribution Fund; in

benefits, further providing for termination of annuities; in

State Employees' Defined Contribution Plan, further providing

for termination of distributions and for powers and duties of

board; in administration, funds, accounts and general

provisions, further providing for the State Employees'

Retirement Board, for administrative duties of the board and

for duties of the board to report to the Public School

Employees' Retirement Board, providing for duties of the

board to report to the investment office and further

providing for management of fund and accounts, for State

Employees' Retirement Fund, for Northern Ireland-related

investments, for benefits completion plan and for fraud and

adjustment of errors.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Section 102 of Title 24 of the Pennsylvania

Consolidated Statutes is amended by adding a definition to read:

§ 102. Definitions.

Subject to additional definitions contained in subsequent

provisions of this title which are applicable to specific

provisions of this title, the following words and phrases when

used in this title shall have the meanings given to them in this

section unless the context clearly indicates otherwise:

* * *

"Investment office." The Commonwealth Pension Investment

Office established under 64 Pa.C.S. Ch. 81 (relating

to Commonwealth Pension Investment Office).

* * *

Section 2. Section 8330(b) of Title 24 is amended to read:

§ 8330. Appropriations by the Commonwealth.

* * *

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

make an appropriation sufficient to provide for the separate

obligations of the Commonwealth to the fund and the trust as

certified by the board. Such amount shall be paid in accordance

with section 8535.1 (relating to payments to school entities by

Commonwealth commencing with the 2019-2020 school year) by the

State Treasurer through the Department of Revenue into the fund

20190SB0951PN1369 - 2 -

or the trust within 30 days of receipt of the requisition

presented each quarter by the board in accordance with

Subchapter B.1 (relating to Public School Employees'

Contribution Fund).

Section 3. Chapter 83 of Title 24 is amended by adding a

subchapter to read:

SUBCHAPTER B.1

PUBLIC SCHOOL EMPLOYEES' CONTRIBUTION FUND

Sec.

8331. Definitions.

8332. Establishment and use of contribution fund.

8333. Certification of amounts payable from contribution fund.

8334. Payments from contribution fund.

§ 8331. 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:

"Contribution fund." The Public School Employees'

Contribution Fund established under section 8332 (relating to

establishment and use of contribution fund).

§ 8332. Establishment and use of contribution fund.

(a) Establishment.--The Public School Employees'

Contribution Fund is established as a restricted account in the

General Fund.

(b) Use of contribution fund.--Money in the contribution

fund, including interest, income, dividends and other earnings

on money deposited into the contribution fund shall be used for

the payment of the Commonwealth's share of contributions under

sections 8326 (relating to contributions by the Commonwealth)

and 8535.1 (relating to payments to school entities by

20190SB0951PN1369 - 3 -

Commonwealth commencing with the 2019-2020 school year) and the

unfunded actuarial accrued liability under section 8328

(relating to actuarial cost method) due each fiscal year.

be invested by the State Treasurer in securities as provided by

law for the investment in the sinking funds of the Commonwealth.

§ 8333. Certification of amounts payable from contribution

fund.

(a) Certification.--

(1) (Reserved).

(2) Within 10 days after the board certifies the amount

determined to be due from the Commonwealth to the State

Treasurer in accordance with sections 8330 and 8502(k) and

(l), the State Treasurer shall certify 100% of the amount

determined to be due from the Commonwealth as certified under

section 8502(l) to be transferred to the contribution fund by

the Department of Revenue.

(b) Duties of Department of Revenue.--Within 10 days after

the State Treasurer certifies the amount under subsection (a)

(2), the Department of Revenue shall transfer money in the

amount certified from the tax imposed under section 302 of the

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

of 1971, into the contribution fund.

§ 8334. Payments from contribution fund.

(a) Appropriation.--

(1) Money transferred by the Department of Revenue into

the contribution fund under section 8333(b) (relating to

certification of amounts payable from contribution fund) is

appropriated to the department for the payment of the

Commonwealth's share of required contributions under sections

20190SB0951PN1369 - 4 -

8326 (relating to contributions by the Commonwealth) and

8535.1 (relating to payments to school entities by

Commonwealth commencing with the 2019-2020 school year) as

certified by the board under section 8502(k) and (l)

(relating to administrative duties of board).

(2) Any money remaining in the contribution fund,

including earned interest, at the end of a calendar quarter

is appropriated to the board as an additional contribution to

the Public School Employees' Retirement Fund in excess of the

actuarially required contribution for the quarter. Money

appropriated under this paragraph shall be transferred to the

board within 30 days of the end of the calendar quarter.

(b) Treatment of transfers.--Amounts transferred to the

Public School Employees' Retirement Fund under subsection (a)(2)

must be in addition to employer contributions required under

sections 8326, 8327 (relating to payments by employers) and

8535.1 and may not be used to replace any portion of the

employer contributions certified by the board under section 8328

(relating to actuarial cost method). The board shall accept the

transferred money and apply the money to offset the current

unfunded actuarial accrued liability of the Public School

Employees' Retirement Fund. Amounts received by the board under

this subchapter shall be recognized over a specific period of

time as determined by the board in consultation with the board's

actuary.

the full amount of the required contributions into the

contribution fund under sections 8326 and 8535.1 as certified by

the board under sections 8502(k) and (l) and 8330 (relating to

appropriations by Commonwealth) without regard to whether

20190SB0951PN1369 - 5 -

sufficient amounts have been transferred to the contribution

fund or appropriated from the contribution fund to the

department under this subchapter.

Section 4. Section 8411(15) of Title 24 is amended and the

section is amended by adding a paragraph to read:

§ 8411. Powers and duties of board.

The board, in addition to its powers and duties set forth in

Chapter 85 (relating to administration and miscellaneous

provisions), shall have the following powers and duties to

establish the plan and trust and to administer the provisions of

this part:

* * *

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

lieu of staff except final adjudications and as prohibited by

law. Any duties or responsibilities of the board not required

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

third-party provider or the investment office subject to

appeal to the board.

* * *

(19) The board may elect to invest moneys of the plan

and trust with the investment office.

Section 5. Sections 8501(f) and 8502(a)(3), (b)(1), (c)(1),

(d), (f), (i) and (o) of Title 24 are amended and the sections

are amended by adding subsections to read:

§ 8501. Public School Employees' Retirement Board.

* * *

(b.1) Trustees of investment office.--An individual who is a

trustee of the investment office may not be appointed as member

of the board or named as a designee unless the individual first

resigns as a trustee of the investment office.

20190SB0951PN1369 - 6 -

* * *

(f) Board training.--Each member of the board will be

required to obtain eight hours of mandatory training in asset

allocation and investment strategies, investment risk, risk

management, setting return assumptions, actuarial cost analysis

and retirement portfolio management on an annual basis.

§ 8502. Administrative duties of board.

(a) Employees.--

* * *

(3) 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. The board may designate board employees

to work on the integration management team established under

64 Pa.C.S. § 8111 (relating to integration management team)

to assist in the performance of the team's duties. Work

completed by designated employees shall be considered a part

of the designated employees' duties as officers and employees

of the board.

(b) Professional personnel.--

(1) The board shall contract for the services of a chief

medical examiner, an actuary, investment advisors,

counselors, an investment coordinator, and such other

professional personnel as it deems advisable. The board's

authority to contract for the services of investment advisors

and counselors includes the authority to enter into

agreements with the investment office to provide services.

* * *

20190SB0951PN1369 - 7 -

(1) The board shall, through the Governor, submit to the

General Assembly annually a budget covering the

administrative expenses of the system and a separate budget

covering the administrative expenses of the plan. The

separate budgets shall include those expenses necessary to

establish the plan and trust. The budgets prepared under this

subsection shall not include the expenses of the investment

office budgeted under 64 Pa.C.S. § 8104(o) (relating to

Commonwealth Pension Investment Office).

* * *

(d) Meetings.--The board shall hold at least [six] four

regular meetings annually and such other meetings as it may deem

necessary.

* * *

(f) Functions.--The board shall perform such other functions

as are required for the execution of this part and 64 Pa.C.S.

Ch. 81 (relating to Commonwealth Pension Investment Office) and

shall have the right to inspect the employment records of

employers.

* * *

(i) Data.--The board and the investment office shall keep in

convenient form such data as are stipulated by the actuary in

order that an annual actuarial valuation of the various accounts

of the fund can be completed within six months of the close of

each fiscal year. The board shall have final authority over the

means by which data is collected, maintained and stored and in

so doing shall protect the rights of its membership as to

privacy and confidentiality.

* * *

(o) Independent audits.--The board shall provide for annual

20190SB0951PN1369 - 8 -

audits of the system and the plan by an independent certified

public accounting firm. The audits shall include the board's

accrual and expenditure of directed commissions. The board may

use the same independent certified public accounting firm for

the audits of [both] the system [and the plan.], the plan and

the investment office. The board's audits under this subsection

shall include the portion of the fund managed and invested by

the investment office. In preparing audits of the fund managed

and investment by the investment office, the board may accept

and rely on the certifications by the independent auditors

retained by the investment office under 64 Pa.C.S. § 8105(a)(4)

(relating to powers and duties) of audits performed under 64

Pa.C.S. § 8105 (e)(24).

* * *

(s) Appointment of trustees to investment office.--The board

shall appoint trustees as authorized under 64 Pa.C.S. Ch. 81

(relating to Commonwealth Pension Investment Office) and may

take actions required and authorized relating to the

establishment of the investment office and the management and

investment of the fund under this part and 64 Pa.C.S. Ch. 81.

Section 5.1. Section 8502.2(b) of Title 24 is amended to

read:

§ 8502.2. Health insurance.

* * *

(b) Separate account.--All funds related to the health

insurance program shall be maintained and accounted for

separately from the Public School Employees' Retirement Fund.

The board may elect to invest any or all of the moneys of the

program with the investment office.

* * *

20190SB0951PN1369 - 9 -

Section 6. Section 8504 of Title 24 is amended by adding

subsections to read:

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

Retirement Board.

* * *

(d) Duty to cooperate.--The board must cooperate with the

State Employees' Retirement Board in effectuating all

requirements and obligations of the board under 64 Pa.C.S. Ch.

81 (relating to Commonwealth Pension Investment Office).

(e) Investment office.--The following apply:

(1) The board shall notify the State Employees'

Retirement Board when the board names individuals as trustees

of the investment office. The board shall enter into joint

agreements with the State Employees' Retirement Board to

contract with a third-party consultant to establish and

maintain a pool of candidates to be trustees of the

investment office under 64 Pa.C.S. § 8104(c) (relating to

Commonwealth Pension Investment Office).

(2) If the board initiates and approves a proposed joint

resolution of the board and the State Employees' Retirement

Board to remove a trustee of the investment office under 64

Pa.C.S. § 8104(d), the board shall transmit a certified copy

of the proposed joint resolution to the secretary of the

State Employees' Retirement Board for consideration and

action by the State Employees' Retirement Board.

(3) If the secretary of the board receives a certified

copy of a proposed joint resolution to remove a trustee of

the investment office under 64 Pa.C.S. § 8104(d) which was

initiated by the State Employees' Retirement Board or a

resolution approved by the trustees of the investment office

20190SB0951PN1369 - 10 -

to remove a trustee of the office, the board shall

expeditiously consider and act on the proposed joint

resolution or the resolution of the trustees of the

investment office, and the board's secretary shall notify the

secretary of the State Employees' Retirement Board and the

chief executive officer of the investment office of the

board's action.

(4) Upon the approval of a joint resolution under this

subsection, the board's secretary shall inform the Governor,

the General Assembly and the chief executive officer of the

investment office of the action.

Section 7. Title 24 is amended by adding a section to read:

§ 8504.1. Duties of the board to report to the investment

office.

(a) Projection of contributions and disbursements.--

Periodically, but not less than annually, the board shall report

to the investment office the expected future annual

contributions to the fund by members and employers, benefit

payments from the fund and other disbursements from the fund,

including, but not limited to, the administrative expenses,

projected for a period of not less than 10 years.

(b) Expected fund transfers.--Periodically, but not less

than annually, the board shall report to the investment office

the expected amounts to be transferred on a monthly basis from

the restricted account for the board established under 64

Pa.C.S. § 8106(h) (relating to relationship to SERB and PSERB)

to the account or funds held by the State Treasurer under

section 8521(g) (relating to management of fund and accounts).

communicate to the investment office the transfers required

20190SB0951PN1369 - 11 -

under 64 Pa.C.S. § 8106(h)(3).

Section 8. Section 8521(a), (d), (e), (f) and (g) of Title

24 are amended and the section is amended by adding a subsection

to read:

§ 8521. Management of fund and accounts.

(a) Control and management of fund.--The members of the

board shall be the [trustees] co-trustees of the fund with the

trustees of the investment office. Regardless of any other

provision of law governing the investments of funds under the

control of an administrative board of the State government, but

subject to the provisions of this part and 64 Pa.C.S. Ch 81

(relating to Commonwealth Pension Investment Office)

transferring certain authority to manage and invest the fund

from the board to the investment office and retaining certain

other authority with the board, the trustees of the board shall

have exclusive control and management of the said fund and full

power to invest the same, in accordance with the provisions of

this section, subject, however, to the exercise of that degree

of judgment, skill and care under the circumstances then

prevailing which persons of prudence, discretion and

intelligence who are familiar with such matters exercise in the

management of their own affairs not in regard to speculation,

but in regard to the permanent disposition of the fund,

considering the probable income to be derived therefrom as well

as the probable safety of their capital. The trustees shall have

the power to hold, purchase, sell, lend, assign, transfer, or

dispose of any of the securities and investments in which any of

the moneys in the fund shall have been invested as well as of

the proceeds of said investments, including any directed

commissions which have accrued to the benefit of the fund as a

20190SB0951PN1369 - 12 -

consequence of the investments, and of any moneys belonging to

said fund, subject in every case to meeting the standard of

prudence set forth in this subsection.

(a.1) Investment through investment office required.--

Notwithstanding any other provision of law, the trustees shall

invest all moneys in the fund exclusively through the investment

office.

* * *

(d) Payments from fund.--[All payments from the fund shall

be made by the State Treasurer in accordance with requisitions

signed by the secretary of the board, or his designee, and

ratified by resolution of the board.]

(1) All payments made after the effective date of this

paragraph as a disbursement for benefits, administrative

expenses of the board or related to investments by the board

or expenses in the performance of the board's duties related

to the management and investment of the fund shall be made by

the State Treasurer in accordance with requisitions signed by

the secretary of the board, or the secretary's designee, and

ratified by resolution of the board.

(2) All payments from the fund being made as a result of

the management and investment of the fund by the investment

office under 64 Pa.C.S. Ch. 81 shall be made by the State

Treasurer in accordance with requisitions signed by the chief

executive officer of the investment office or designee as

authorized by resolution of the trustees of the investment

office.

(e) Fiduciary status of board.--The members of the board,

employees of the board, and agents thereof shall stand in a

fiduciary relationship to the members of the system regarding

20190SB0951PN1369 - 13 -

the investments and disbursements of any of the moneys of the

fund, to the extent the administration of benefits under this

part and the management and investment of the fund have been

retained by the board and have not been granted to the

investment office, and shall not profit either directly or

indirectly with respect thereto. The board may, when possible

and consistent with its fiduciary duties imposed by this

subsection or other law, including its obligation to invest and

manage the fund for the exclusive benefit of the members of the

system, consider whether an investment in any project or

business enhances and promotes the general welfare of this

Commonwealth and its citizens, including, but not limited to,

investments that increase and enhance the employment of

Commonwealth residents, encourage the construction and retention

of adequate housing and stimulate further investment and

economic activity in this Commonwealth. The board shall, through

the Governor, submit to the General Assembly annually, at the

same time the board submits its budget covering administrative

expenses, a report identifying the nature and amount of all

existing investments made pursuant to this subsection.

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

Public School Employees' Retirement System" or "The Public

School Employes' Retirement System" all of the business of the

system shall be transacted, its fund invested by the board, all

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

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

the extent that business transactions, fund investments,

requisitions for money drawn and payments made and cash,

securities and property are held by the name of "The

Commonwealth Pension Investment Office" under 64 Pa.C.S. §

20190SB0951PN1369 - 14 -

8105(d) (relating to powers and duties), and 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.

(g) Deposits in banks and trust companies.--For the purpose

of receiving contributions from members and employers and

meeting disbursements for annuities and other payments in excess

of the receipts, there shall be kept available by the State

Treasurer an amount, not exceeding 10% of the total amount in

the fund, which may not be transferred to the investment office

under the authority to manage and invest the fund granted to the

investment office under 64 Pa.C.S. Ch. 81 on deposit in any

bank, savings bank or savings and loan association in this

Commonwealth organized under the laws thereof or under the laws

of the United States or with any trust company or companies

incorporated by any law of this Commonwealth, provided any of

such banks, trust companies, savings banks or savings and loan

associations shall furnish adequate security for said deposit.

The sum deposited in any one bank or trust company shall not

exceed 25% of the paid-up capital and surplus of said bank or

trust company or, in the case of savings banks or savings and

loan associations, shall not exceed 25% of the unappropriated

surplus. Any amount in excess of the needs of the board shall be

transferred to the restricted account for the board established

under 64 Pa.C.S. § 8106(h) (relating to relationship to SERB and

PSERB).

* * *

Section 9. Section 8522(a), 8524 and 8526 of Title 24 are

20190SB0951PN1369 - 15 -

amended to read:

§ 8522. Public School Employees' Retirement Fund.

(a) General rule.--The fund shall consist of all moneys in

the several separate funds in the State Treasury set apart to be

used under the direction of the board for the benefit of members

of the system, without regard to whether any portion of the fund

is invested and managed by the board or the investment office,

severally or jointly as co-trustees; and the Treasury Department

shall credit to the fund all moneys received from the Department

of Revenue arising from the contributions relating to or on

behalf of the members of the system required under the

provisions of Chapter 83 (relating to membership, contributions

and benefits) and all earnings from investments or moneys of

said fund. There shall be established and maintained by the

board the several ledger accounts specified in sections 8523

(relating to members' savings account), 8524 (relating to State

accumulation account), 8525 (relating to annuity reserve

account) and 8526 (relating to health insurance account). The

board may also establish additional ledger accounts to account

for earnings generated by the investment office.

* * *

§ 8524. State accumulation account.

The State accumulation account shall be the ledger account to

which shall be credited all contributions of the Commonwealth

and other employers as well as the earnings of the fund,

including earnings generated by the investment office, except

the premium assistance contributions and earnings thereon in the

health insurance account. Valuation interest shall be allowed on

the total amount of such account less any earnings of the fund

credited during the year. The reserves necessary for the payment

20190SB0951PN1369 - 16 -

of annuities and death benefits resulting from membership in the

system as approved by the board and as provided in Chapter 83

(relating to membership, contributions and benefits) shall be

transferred from the State accumulation account to the annuity

reserve account. At the end of each year the required interest

shall be transferred from the State accumulation account to the

credit of the members' savings account and the annuity reserve

account. The administrative expenses of the board shall be

charged to the State accumulation account. Employer defined

contributions, mandatory pickup contributions and a

participant's voluntary contributions, together with any income

or interest earned thereon, may be temporarily placed into the

State accumulation account pending allocation or distribution to

the participant's individual investment account.

§ 8526. Health insurance account.

The health insurance account shall be the ledger account to

which shall be credited the contributions from the Commonwealth

and other employers as determined in accordance with section

8328(f) (relating to actuarial cost method) for the payment of

health insurance premium assistance for participating eligible

annuitants as provided in section 8509 (relating to health

insurance premium assistance program). All earnings derived from

investment of the assets of the health insurance account shall

be credited to this account. The board is authorized to

separately invest the amounts in the health insurance account in

a prudent manner intended to maximize the safety of the capital

contained in the health insurance account. The direct

administrative expenses of the board related to the

administration of the health insurance program, as provided in

section 8509, shall be charged to this account. The board may

20190SB0951PN1369 - 17 -

elect to invest moneys of the program with the investment

office.

Section 10. Section 8527 of Title 24 is amended by adding a

subsection to read:

§ 8527. Northern Ireland-related investments.

* * *

(d) Duties transferred.--After the transfer of the assets

and investments of the fund to the investment office, the duties

and responsibilities of the board under this section shall be

transferred to the trustees of the investment office.

Section 11. Sections 8534(b) and 8535.1(3) of Title 24 are

amended to read:

§ 8534. Fraud and adjustment of errors.

* * *

(b) Adjustment of errors.--Should any change or mistake in

records of the board or the investment office result in any

member, participant, beneficiary, survivor annuitant or

successor payee receiving from the system or plan more or less

than he would have been entitled to receive had the records been

correct, then regardless of the intentional or unintentional

nature of the error and upon the discovery of such error, the

board shall correct the error and if the error affects

contributions to or payments from the system, then so far as

practicable shall adjust the payments which may be made for and

to such person in such a manner that the actuarial equivalent of

the benefit to which he was correctly entitled shall be paid. If

the error affects contributions to or payments from the plan,

the board shall take such action as shall be provided for in the

plan document.

§ 8535.1. Payments to school entities by Commonwealth

20190SB0951PN1369 - 18 -

commencing with the 2019-2020 school year.

For each school year, beginning with the 2019-2020 school

year, each school entity shall be paid by the Commonwealth for

contributions based upon school service of active members of the

system and active participants of the plan after June 30, 2018,

as follows:

* * *

(3) School entities shall have up to [five] three days

after receipt of the Commonwealth's portion of the employer's

liability to forward the payment to the fund or the trust.

School entities are expected to make the full payment to the

fund or the trust in accordance with section 8327 (relating

to payments by employers) in the event the receipt of the

Commonwealth's portion of the employer's liability is delayed

because of delinquent salary reporting or other conduct by

the school entities.

* * *

Section 12. Section 8542 of Title 24, added July 2, 2019

(P.L.434, No.72), is amended by adding a subsection to read:

§ 8542. Establishment.

* * *

(e) Delegation to investment office.--The board shall

delegate the board's responsibilities and obligations to

establish and administer the program to the investment office,

which shall independently comply with the provisions of this

subchapter.

Section 13. Section 8901 of Title 24 is amended by adding a

paragraph to read:

§ 8901. Administration.

The board may sponsor a group health insurance program to be

20190SB0951PN1369 - 19 -

funded by and for eligible persons. The board may administer the

program itself or through any legal entity authorized by law to

do so. The program may also be administered in whole or in part

on a fully insured or self-funded basis at the board's sole

discretion. In addition to the powers granted by other

provisions of this part, the board shall have the powers

necessary or convenient to carry out this part, including, but

not limited to, the power to:

* * *

(12) Elect to invest moneys of the Health Insurance Fund

with the investment office.

Section 14. Sections 8902(a) and (b)(2) and 8903(a) of Title

24 are amended to read:

§ 8902. Public School Retirees' Health Insurance Fund.

(a) Establishment of fund.--The Public School Retirees'

Health Insurance Fund is established in the State Treasury. The

moneys of the fund are appropriated on a continuing basis and

shall be used exclusively for the purposes set forth in this

part. All of the assets of the fund shall be maintained and

accounted for, separate from all other funds and moneys of the

Commonwealth and the Public School Employees' Retirement Fund

identified in section 8522 (relating to Public School Employees'

Retirement Fund). The board may elect to invest moneys of the

fund with the investment office.

(b) Reserve account.--

* * *

(2) The moneys in the reserve account may be invested by

the board separate from other moneys of the fund. All

earnings derived from investment of the assets of the reserve

account shall be credited to the reserve account. The board

20190SB0951PN1369 - 20 -

may elect to invest moneys of the reserve account with the

investment office.

* * *

§ 8903. Management of fund.

(a) Control and management of fund.--The members of the

board shall be the trustees of the fund. Regardless of any other

provisions of law governing the investment of funds under the

control of an administrative board of the State government, the

trustees shall have exclusive control and management of the fund

and full power to invest the fund in accordance with the

provisions of this section, subject, however, to the exercise of

that degree of judgment, skill and care under the circumstances

then prevailing which persons of prudence, discretion and

intelligence who are familiar with such matters exercise in the

management of their own affairs, not in regard to speculation

but in regard to the permanent disposition of the fund,

considering the probable income to be derived therefrom as well

as the probable safety of their capital. The trustees shall have

the power to hold, purchase, sell, lend, assign, transfer or

dispose of any of the securities and investments in which any of

the moneys in the fund shall have been invested as well as of

the proceeds of the investments, including, but not limited to,

directed commissions which have accrued to the benefit of the

fund as a consequence of the investments and of the moneys

belonging to the fund, subject in every case to meeting the

standard of prudence set forth in this section. The board may

elect to invest moneys the fund with the investment office.

* * *

Section 15. Part III of Title 64 is amended by adding a

chapter to read:

20190SB0951PN1369 - 21 -

CHAPTER 81

COMMONWEALTH PENSION INVESTMENT OFFICE

Sec.

8101. Scope of chapter.

8102. Legislative intent.

8103. Definitions.

8104. Commonwealth Pension Investment Office.

8105. Powers and duties.

8106. Relationship to SERB and PSERB.

8107. Agreements with other client boards.

8108. Penalty for fraud.

8109. Applicability of other statutes.

8110. Publication and access to meetings and records.

8111. Integration management team.

8112. Application and construction.

§ 8101. Scope of chapter.

This chapter relates to the Commonwealth Pension Investment

Office.

§ 8102. Legislative intent.

The General Assembly recognizes the following public policy

purposes and declares that the following objectives of the

Commonwealth are to be served by this chapter:

(1) The primary objective of this chapter to which all

other objectives and purposes are secondary is to establish a

highly professional and expert investment office to serve in

a fiduciary capacity the investment needs of SERS and PSERS.

(2) The establishment of the Commonwealth Pension

Investment Office to prudently and expertly invest funds of

the public retirement systems is consistent with the

Commonwealth's commitment to ensure a secure retirement for

20190SB0951PN1369 - 22 -

public school employees and State public servants throughout

this Commonwealth.

(3) The establishment of a Commonwealth Pension

Investment Office is intended to attract and retain high-

quality financial professionals to manage and invest the

funds of the retirement systems in a cost-efficient manner.

(4) It is essential to the members of the public

retirement systems that their fiduciaries are held to a high

ethical standard, free of conflicts and political influence,

operating with discipline and consistency in its investment

strategy and administration.

(5) Establishment of a Commonwealth Pension Investment

Office will strengthen fiduciary investment management and

modernize oversight to enhance accountability and

transparency.

§ 8103. 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:

"Actuary." A consultant to the investment office who shall

be:

(1) a member of the American Academy of Actuaries;

(2) an individual who has demonstrated to the

satisfaction of the Insurance Commissioner of Pennsylvania

that the individual has the educational background necessary

for the practice of actuarial science and has had at least

seven years of actuarial experience; or

(3) a firm, partnership or corporation of which at least

one member meets the requirements of paragraph (1) or (2).

"Client board." SERB, PSERB and any public pension board in

20190SB0951PN1369 - 23 -

this Commonwealth that enters into an agreement with the

investment office to entrust pension assets and money to the

investment office for investment.

"Client funds." The retirement funds and any pension assets

and money of a public pension board in this Commonwealth

entrusted to the investment office for investment.

"Institutional investor." An entity which pools money to

purchase securities, real property and other investment assets

or originates loans. The term includes:

(1) A bank, insurance company pension, hedge fund, Real

Estate Investment Trust, investment advisor, endowment and

mutual fund.

(2) An operating company which invests excess capital in

securities, real property and other investment assets.

"Investment office." The Commonwealth Pension Investment

Office.

"PSERB." The Public School Employees' Retirement Board.

"PSERS." The Public School Employees' Retirement System.

"Retirement funds." The State Employees' Retirement Fund and

the Public School Employees' Retirement Fund.

"Senior investment professional." An individual performing

investment functions as determined by the investment office

trustees based on the level of responsibility, experience and

education required for the position.

"SERB." The State Employees' Retirement Board.

"SERS." The State Employees' Retirement System.

§ 8104. Commonwealth Pension Investment Office.

(a) Establishment.--The Commonwealth Pension Investment

Office is established as an independent administrative board

which shall be a body corporate and politic.

20190SB0951PN1369 - 24 -

(b) Membership.--

(1) The investment office shall consist of the following

trustees appointed from the pool of candidates identified

under subsection (c), each of whom shall be subject to the

qualification criteria under paragraph (2) and subsections

(g), (h), (i) and (j):

(i) Three trustees appointed by PSERB.

(ii) Three trustees appointed by SERB.

(iii) Three trustees appointed by a majority of the

trustees appointed under subparagraphs (i) and (ii).

(2) Two trustees appointed by SERB, two trustees

appointed by PSERB and two trustees appointed by the trustees

appointed by SERB and PSERB, must have at least five years of

institutional investment experience.

contract with a third-party consultant to establish and maintain

a pool of candidates for trustees of the investment office. The

pool of candidates shall consist of individuals who meet the

requirements under subsection (g).

(d) Removal.--A trustee of the investment office shall only

be removed from the trustee's position by a resolution adopted

by a majority of the other trustees and a joint resolution of

SERB and PSERB for:

(1) Misconduct in office, including a violation of the

restrictions under subsections (i), (j) and (k), willful

neglect of duty or conduct evidencing unfitness for office or

incompetence.

(2) Conviction of an offense graded as a felony, an

infamous crime or offense under the laws of this Commonwealth

or an equivalent offense under Federal law or the law of

20190SB0951PN1369 - 25 -

another jurisdiction.

(3) Abandonment of office under subsection (m).

(e) Initial appointments.--

(1) The terms of the three initial investment office

trustees appointed by SERB shall, as designated by SERB at

the time of appointment, expire:

(i) one on the fourth June 30 after the effective

date of this subsection;

(ii) one on the fifth June 30 after the effective

date of this subsection; and

(iii) one on the sixth June 30 after the effective

date of this subsection.

(2) The terms of the three initial investment office

trustees appointed by PSERB shall, as designated by PSERB at

the time of appointment, expire:

(i) one on the fourth June 30 after the effective

date of this subsection;

(ii) one on the fifth June 30 after the effective

date of this subsection; and

(iii) one on the sixth June 30 after the effective

date of this subsection.

(3) The terms of the three initial investment office

trustees appointed by the six trustees appointed by SERB and

PSERB shall, as designated by the six trustees appointed by

SERB and PSERB at the time of appointment, expire:

(i) one on the fourth June 30 after the effective

date of this subsection;

(ii) one on the fifth June 30 after the effective

date of this subsection; and

(iii) one on the sixth June 30 after the effective

20190SB0951PN1369 - 26 -

date of this subsection.

(f) Terms of office.--Upon the expiration of a term under

subsection (e) of a trustee appointed under subsection (b), the

following shall apply:

(1) The term of office of a trustee shall be four years.

(2) An appointment to fill a vacancy shall be for the

remainder of the unexpired or holdover term and shall be made

by the appointing authority of the trustee being replaced.

(3) A trustee shall serve no more than two full or

partial terms.

(g) Qualifications.--A person shall not be eligible to be

appointed as a trustee of the investment office unless the

person has been determined by the third-party consultant under

subsection (c) that the person possesses at least one of the

following qualifications:

(1) An earned Ph.D. in economics or finance from a

nationally or internationally accredited doctorate-granting

institution.

(2) At least 12 years of professional experience in the

financial management of public pensions or at least 12 years

of professional experience as a certified public accountant

or chartered management global accountant with financial

management or pension expertise.

(3) At least 12 years of professional experience in

financial risk management with public pensions.

(4) At least 12 years of senior professional management,

financial, information technology, legal or human resource

experience relevant to the business of the investment office.

(5) The Chartered Financial Analyst credential of the

CFA Institute with at least 10 years of institutional

20190SB0951PN1369 - 27 -

investing experience.

(6) The Chartered Alternative Investment Analyst

credential of the Chartered Alternative Investment Analyst

Association with at least 10 years of institutional investing

experience.

(7) The Certified Financial Risk Manager credential of

the Global Association of Risk Professionals with at least 10

years of institutional investing experience.

(8) A Professional Risk Manager Designation of the

Professional Risk Managers' International Association with at

least ten years of institutional investing experience.

(9) Twenty years of institutional investing or risk

management experience with:

(i) public pension plans, corporate pension plans,

family offices, sovereign wealth funds, endowments and

foundations, each with assets in excess of $500,000,000;

(ii) money management firms with assets in excess of

$2,000,000,000; and

(iii) consulting firms to large pools of capital in

excess of $5,000,000,000.

(10) Twenty years of teaching experience in economics or

finance, 10 of which must have occurred at a nationally or

internationally accredited doctorate-granting university,

master-granting college or university or a baccalaureate

college.

(11) The Certified Public Accountant credential or

Certified Internal Auditor credential from the Institute of

Internal Auditors with at least 10 years of experience with

entities under paragraph (9) or federally chartered banking

entities.

20190SB0951PN1369 - 28 -

(h) Additional qualifications.--In addition to the

qualifications under subsection (g), a person appointed as

trustees of the investment office under subsection (b)(2) shall

possess demonstrated professional experience and competencies in

at least one of the following:

(1) Highly sophisticated risk management and related

decision-making experience.

(2) Highly sophisticated investment decision-making

experience.

(3) Direct investment or operating experience in large

capital-intensive infrastructure, real estate, public market

indexing or private market investments or assets.

(4) Significant executive leadership relevant to the

business of the investment office, including experience

developing vision and strategy, achieving operational

effectiveness and fostering an ethical and performance-based

culture.

(i) Restrictions.--An individual shall not be eligible to be

appointed or to serve as a trustee of the investment office or

to be employed or continued to be employed as a senior

investment professional of the investment office if any of the

following apply to the individual:

(1) The individual has been indicted or charged with,

convicted of, pleaded guilty or nolo contendere to or

forfeited bail concerning:

(i) a felony; or

(ii) a misdemeanor involving fraud, theft or

dishonesty under the laws of any jurisdiction in the

United States.

(2) The individual has been dismissed from other

20190SB0951PN1369 - 29 -

employment for gross misconduct or has intentionally made a

false statement concerning a material fact in connection with

the application to be employed by or to serve as a trustee of

the investment office.

(3) The individual has had a judgment entered against

the individual by a court of competent jurisdiction in a

civil matter involving a breach of fiduciary duties.

(4) The individual has been the subject of an adverse

action by a law enforcement agency or a regulatory or

oversight body, including the Securities and Exchange

Commission, Financial Industry Regulatory Authority, United

States Department of Labor, United States Department of

Justice or a state regulator, which resulted in a settlement,

sanction, payment of a fine, injunction or other negative

finding, whether individually, or as a partner, principal

member, managing director or other position of leadership of

any entity subject to such penalty or finding.

(5) The individual is a member of SERB or PSERB, an

elected public official or a candidate for an elected public

office. A trustee or employee of the investment office who is

appointed or elected a member of a client board, or who

assumes a position, employment or office that makes the

individual an ex officio member of a client board shall

immediately resign as trustee or employee of the investment

office.

(6) The individual currently holds or has held an

elected office in this Commonwealth in the past five years.

(7) The individual has been a board member of SERB or

PSERB in the past five years.

(8) The individual currently holds or has held office in

20190SB0951PN1369 - 30 -

a political party or political committee in the past five

years.

(9) The individual currently is or has been a staff

member of an elected official for the past five years.

(10) The individual has been an employee of or an

investment manager or investment consultant for the

investment office, PSERS or SERS, in the past five years.

(11) The individual holds any other Commonwealth board

position.

(12) The individual has an actual or perceived conflict

of interest.

(13) The individual has been convicted of a felony or

has lost a professional accreditation for misconduct.

(i.1) Additional restrictions.--An individual shall not be

eligible to be appointed or to serve as a trustee of the

investment office if the individual is an annuitant of SERS or

PSERS or a participant receiving distributions from the State

Employees' Defined Contribution Plan or the Public School

Employees' Defined Contribution Plan who is not over normal

retirement age as defined in the State Employees' Retirement

Code or the Public School Employees' Retirement Code and who has

not been an annuitant or a participant receiving distributions

for more than one year.

(j) Additional prohibitions.--In addition to the other

prohibitions contained under this chapter, trustees and

employees of the investment office shall:

(1) not accept any discount, gift, gratuity,

compensation, travel, lodging or other thing of value

directly or indirectly from a person or entity seeking or

doing business with the investment office or a client board;

20190SB0951PN1369 - 31 -

(2) not hold or campaign for public office;

(3) not solicit funds for a charitable, educational,

religious, health, fraternal, civic or other nonprofit entity

from a person or entity doing business with or seeking to do

business with the investment office or a client board;

(4) avoid impropriety and the appearance of impropriety

and observe standards and conduct that promote public

confidence;

(5) not accept employment with or be retained by any

person or nongovernmental entity doing business with the

investment office or a client board for a period of two years

following their termination of employment as a senior

investment professional with the investment office or as a

trustee of the investment office;

(6) not directly or indirectly solicit, request, suggest

or recommend to a person or nongovernmental entity doing

business with the investment office, SERB or PSERB, the

appointment or employment of a person in any capacity;

(7) disclose if the individual, or their spouse or an

immediate family member, is or becomes employed by a service

provider to the investment office, SERB or PSERB;

(8) not engage in:

(i) insider trading, which is the buying or selling

of a security, in breach of a fiduciary duty or other

relationship of trust and confidence, on the basis of

material, nonpublic information about the security as

prohibited by judicial opinions interpreting section

10(b) of the Securities Exchange Act of 1934 and

Securities and Exchange Commission Rule 10b-5;

(ii) front running, which is the trading of a

20190SB0951PN1369 - 32 -

security with knowledge that an investment office

decision or trading order to buy or sell a security is

pending; and

(iii) any other conduct in violation of antifraud

provisions of policies adopted by the investment office.

The investment office shall adopt policies and procedures

providing a fair and reasonable process for resolving

complaints of violations of this subsection, which shall

provide that a trustee or employee who is a subject of a

complaint is provided full and fair opportunity to be

heard throughout the process.

(k) Oath of office.--Each trustee of the investment office

shall take an oath of office that the trustee will, so far as it

devolves upon the trustee, diligently and honestly, administer

the affairs of the investment office and that the trustee will

not knowingly violate or willfully permit to be violated any of

the provisions of law applicable to this chapter. The oath shall

be subscribed by the trustee taking the oath and certified by

the officer before whom the oath is taken and shall be

immediately filed in the Office of the Secretary of the

Commonwealth.

(l) Meetings.--Regular meetings of the trustees shall be

held at least six times each year until a single chief

investment officer is appointed under section 8104(s), after

which the trustees may schedule fewer, but not less than four,

regular meetings each year. The trustees may hold other meetings

as deemed necessary. The time and place of the meetings shall be

fixed by the trustees. A majority of the appointed trustees of

the investment office shall constitute a quorum for the

transaction of business.

20190SB0951PN1369 - 33 -

(m) Abandonment.--A trustee of the investment office shall

be deemed to have abandoned office upon failure to attend any

regular or special meeting of the investment office without

excuse approved by resolution of the investment office for two

consecutive meetings.

(n) Fiduciary relationship.--The trustees of the investment

office, employees of the investment office and agents of the

investment office shall be co-trustees with the client boards of

the respective retirement fund s or other client fund s to the

extent assigned to the investment office or agreed on under this

chapter and shall stand in a fiduciary relationship to the

client boards and the members and beneficiaries of the systems

and plans that the investment office administers under section

8105(b).

(o) Administrative and investment expenses.--

(1) The trustees of the investment office shall:

(i) annually prepare and approve a budget, which

shall include expenses necessary for the administration

of the investment office;

(ii) the following apply:

(A) Allocate the administrative expenses of the

investment office to client funds that are not the

retirement funds, as the office determines

appropriate.

(B) sixty percent of the administrative expenses

remaining after allocation under clause (A) shall be

allocated to the Public School Employees' Retirement

Fund and 40% shall be allocated to the State

Employees' Retirement Fund;

(iii) allocate the investment expenses related to

20190SB0951PN1369 - 34 -

the investment and management of the client funds to each

of the client funds as they determine is just and proper

based on the amount of each client fund in each

investment and the expenses related to each investment;

(iv) administrative expenses approved by the

trustees shall be paid from the investment earnings of

the client funds;

(v) concurrently with the budget, the investment

office shall prepare annually a list of proposed

expenditures which the investment office intends to pay

through the use of directed commissions and a list of the

actual expenditures from the past year paid by the

investment office through the use of directed

commissions. Directed commission expenditures shall be

made by the investment office for the exclusive benefit

of the client boards and client board members and

beneficiaries;

(vi) at least 30 days before the approval of the

budget, provide a proposed budget and the lists under

subparagraph (v) to SERB and PSERB for review and

comment;

(vii) consider comments received from SERB and PSERB

and make amendments to the budget as a result of the

comments;

(viii) approve a budget covering the administrative

expenses of the investment office; and

(ix) by November 1 of the calendar year preceding

that for which the budget is being prepared, provide a

copy of the final approved budget and the list of

proposed and actual expenditures of directed commissions

20190SB0951PN1369 - 35 -

to SERB and PSERB.

(2) Notwithstanding any other provision of law, the

investment office's budget and approved expenditures shall be

regarded as final and not subject to review, modification,

alteration, revision, reduction, approval or disapproval by

the Governor or the Secretary of the Budget and shall not be

subject to section 610 or 615 of the act of April 9, 1929

(P.L.177, No.175), known as The Administrative Code of 1929.

(p) Liability.--A trustee shall not be personally liable

for:

(1) obligations of the investment office; and

(2) actions within the scope of the investment office

made in good faith.

(q) Compensation and expenses.--

(1) Trustees of the investment office shall receive

salary established initially by the transitional integration

management team in consultation with the third-party

consultant selected under subsection (c). After the initial

appointment of trustees to the office, salaries shall be

reviewed by the third-party consultant selected under

subsection (c) at the end of every trustee's four-year term.

The third-party consultant shall take into consideration

benchmarking criteria and salaries of other trustees in the

industry. In no case shall the annual salary of a trustee be

reduced during the trustee's term of office.

(2) In addition to the salary under paragraph (1) and

subject to an aggregate per annum limitation and any other

rules and regulations as the investment office shall

determine, a trustee of the investment office shall be

entitled to necessary expenses, including travel expenses,

20190SB0951PN1369 - 36 -

incurred in the discharge of duties.

(3) Trustees of the investment office are not eligible

for membership in SERS or participation in the State

Employees' Defined Contribution Plan and may not receive

service credit or eligibility points or make contributions

based on service or compensation as a trustee of the

investment office. This paragraph shall not prevent a trustee

who concurrently is employed in another position as a State

employee as defined in 71 Pa.C.S. § 5102 (relating to

definitions) from making contributions or earning service

credit or eligibility points in SERS or the State Employees'

Defined Contribution Plan as otherwise provided for under the

71 Pa.C.S. (relating to State government) based only on the

position as a State employee.

(4) Trustees of the investment office are not eligible

for enrollment or coverage in medical or health insurance

provided by the Commonwealth or the investment office as a

result of service as a trustee of the investment office.

(r) Chair.--The chair of the investment office shall be

elected by the trustees of the investment office from the

membership of the investment office.

(s) Appointments.--Appointments to the investment office

shall be made and a majority of the appointed trustees of the

investment office shall take the oath of office within one year

of the effective date of this subsection. Transfer of the

retirement funds, except money retained by SERB and PSERB and

held by the State Treasurer under 71 Pa.C.S. § 5931(g) (relating

to management of fund and accounts) and 24 Pa.C.S. § 8521(g)

(relating to management of fund and accounts) to the investment

office shall take place, and the management and investment by

20190SB0951PN1369 - 37 -

the investment office of the portions of the retirement funds

transferred to the investment office shall begin the second July

1 following a majority of the appointed trustees of the

investment office taking the oath of office. Notwithstanding

section 8105(a)(4) (relating to powers and duties), the trustees

of the investment office shall select a single chief investment

officer by the July 1 following a majority of the appointed

trustees of the investment office taking the oath of office.

§ 8105. Powers and duties.

(a) General powers.--The investment office shall have all

the powers necessary or convenient for investing client funds in

accordance with the directives or policies provided by the

client boards, including the following rights and powers:

(1) The investment office shall employ individuals as

necessary to carry out the powers and duties of the

investment office. Investment office employees shall:

(i) be considered State employees for purposes of 71

Pa.C.S. Pt. XXV (relating to retirement for State

employees and officers);

(ii) serve at the pleasure of the investment office;

and

(iii) retain status in the classified service.

(2) The investment office shall establish a system of

classification and compensation of the employees of the

investment office. The investment office shall have the sole

authority to establish the number, classification and

compensation of investment office employees who are not

covered by a collective bargaining agreement, including the

discretion to:

(i) revise or establish new standards for the hiring

20190SB0951PN1369 - 38 -

and qualifications for employment and may take into

consideration the location of the work and the conditions

under which the service is rendered;

(ii) revise or set new titles, salaries and wages of

individuals employed under this paragraph;

(iii) establish different standards for different

kinds, grades and classes of similar work or service;

(iv) revise or establish new bureaus, divisions,

departments and offices;

(v) approve or disapprove the payment of extra

compensation to employees hired under this paragraph; and

(vi) revise or establish new rules and policies

providing for travel, lodging and other expenses for

which employees hired under this paragraph may be

reimbursed.

(3) Within 180 days of a majority of the appointed

trustees of the investment office taking the oath of office,

the investment office shall transmit to the Legislative

Reference Bureau for publication in the Pennsylvania Bulletin

and shall post of the investment office's publicly accessible

Internet website the classification system for all employees

of the investment office.

(4) The investment office shall have the sole authority

to establish the number of employees, including, without

limitation, the selection and retention of a chief executive

officer, one or more chief investment officers, senior

investment professionals, other investment professionals,

legal counsel and other employees necessary to carry out the

investment office's powers and duties who shall serve at the

pleasure of the investment office. Except as otherwise

20190SB0951PN1369 - 39 -

determined by the investment office, the positions of chief

executive officer, chief investment officer, investment

professionals, legal counsel and all other employees of the

investment office shall be placed under the unclassified

service provisions of the former act of August 5, 1941

(P.L.752, No.286), known as the Civil Service Act. An

employee transferred from SERS or PSERS to the investment

office under this chapter shall retain any civil service

employment status assigned to the employee.

(5) The investment office shall contract for the

services of an independent auditor, investment advisors,

managers and consultants and other professional personnel as

the investment office deems advisable. The investment office

may contract for the services of an actuary. The investment

office may contract for legal services. Notwithstanding any

other provision of law, a contract or bid for services under

this section shall not be subject to 62 Pa.C.S. Pt. I

(relating to Commonwealth Procurement Code).

(6) The investment office, acting either on its own

behalf or, in its sole discretion, through the Department of

General Services, may negotiate any lease and rent or

purchase any property to maintain an office or offices for

the conduct of one or more functions of the investment

office.

(7) Notwithstanding the act of April 9, 1929 (P.L.177,

No.175), known as The Administrative Code of 1929, and 62

Pa.C.S. Pt. I, the investment office acting on the investment

office's behalf or, in the investment office's sole

discretion through the Department of General Services which

shall serve as the purchasing agent, may purchase or contract

20190SB0951PN1369 - 40 -

for the purchase of any equipment or materials necessary to

carry out and conduct the powers and duties of the investment

office.

(8) The investment office is not subject to the

provisions of The Administrative Code of 1929 relating to the

number, classification and compensation of investment office

employees.

(b) Control and management of the client funds.--

(1) The following shall apply:

(i) Subject to subparagraph (ii) and notwithstanding

any other provision of law governing the investments of

client funds, the investment office shall have exclusive

control and management of the client funds and full power

to invest the client funds to the extent of the duties,

rights, powers and authority:

(A) assigned to the investment office; and

(B) which are not reserved or retained by the

client boards.

(ii) The investment office shall exercise the

prevailing degree of judgment, skill and care which a

person of prudence, discretion and intelligence who is

familiar with investment matters exercises in the

management of the individual's own affairs, without

speculation, considering, in regard to the permanent

disposition of the client funds, the probable income to

be derived from the client funds and the probable safety

of their capital.

(2) Subject to paragraph (1)(ii), the investment office

shall have the power to hold, purchase, sell, lend, assign,

transfer or dispose of:

20190SB0951PN1369 - 41 -

(i) securities and investments in which any money in

the client funds has been invested;

(ii) the proceeds of the investments under

subparagraph (i), including any directed commissions

which have accrued to the benefit of the client funds as

a consequence of the investments; and

(iii) money in the c lient funds.

authority to invest the retirement funds and any other client

fund and be subject to the restrictions and conditions on

investment of each retirement fund and any other client fund

that is identical to the authority granted by law to SERB and

PSERB and the board of any other client fund to invest the

respective retirement funds and client fund. The investment

office authority shall include:

(1) Diversifying investments in order to minimize the

risk of large sustained losses, unless it is clearly prudent

not to diversify.

(2) Administering assets of each client fund solely for

the purpose of ensuring the fulfillment of the purpose of

each client fund at a reasonable cost.

(3) Acquiring interest in a business organization

existing under the laws of any jurisdiction. The liability of

the investment office acquired under this paragraph shall be

limited to the amount of its investment.

(4) Holding, purchasing, selling, lending, assigning,

transferring or disposing of:

(i) securities and investments in which money in the

client funds has been invested;

(ii) proceeds of investments under subparagraph (i),

20190SB0951PN1369 - 42 -

including any directed commissions which have accrued to

the benefit of the client funds as a consequence of the

investments; and

(iii) money in client funds.

(5) Investing, reinvesting, assigning, reassigning,

selling, transferring and managing client funds and

portfolios of client boards.

(6) Exercising any shareholder or other voting rights

arising from an investment.

(7) Performing necessary due diligence to source new

investment opportunities and monitor existing investments,

which may include on-site meetings with current or potential

investment managers and investment funds, on-site inspection

of physical assets or on-site investor meetings necessary for

the proper investment of client funds.

(8) Soliciting proxies in connection with contests for

corporate control of corporations in which client funds have

been invested.

(9) Negotiating with, selecting and retaining:

(i) investment managers and service providers;

(ii) portfolio systems services;

(iii) consultants;

(iv) investment information resources; and

(v) any other sources of expertise, research or

services necessary to conduct investment activities,

protect client funds or otherwise support the management

and investment of client funds.

(10) Executing all contracts, agreements or other legal

documents necessary to effectuate the investment of client

funds or to implement a portfolio management system.

20190SB0951PN1369 - 43 -

(11) Delegating to the chief investment officer and

appropriate employees of the investment office all applicable

powers and duties relating to investment and administrative

functions necessary to prudently manage and invest client

funds.

(12) Prudently expending money from investment income to

support the investment of and accounting for the assets of

SERS and PSERS and to support other purposes necessary to the

activities of the investment office, including the payment of

professional development dues for the employees of the

investment office.

(13) Taking any other action necessary and prudent in

the investment of client funds.

(14) Exercising any other right or action or fulfilling

any obligations necessary to accomplish the investment

office's mission or comply with the laws of this

Commonwealth.

(15) Combining assets of all or a portion of the client

funds in a single investment or investment vehicle if the

investment office accounts for amounts contributed and

allocates the returns, costs and expenses on a pro rata

basis.

(d) Name for transacting business.--

(1) Except as provided in paragraphs (2) and (3), the

business of the investment office shall be transacted in the

name "The Commonwealth Pension Investment Office."

(2) Notwithstanding any law to the contrary, the

investment office may establish a nominee registration

procedure for the purpose of registering securities in order

to facilitate the purchase, sale or other disposition of

20190SB0951PN1369 - 44 -

securities pursuant to the provisions of this chapter. This

paragraph only applies to the assets of the client funds

subject to the investment and management of the investment

office under this chapter .

(3) As applicable, the investment office may use the

names for transacting business under 24 Pa.C.S. Pt. IV

(relating to relating to retirement for school employees) or

71 Pa.C.S. Pt. XXV and the respective nominee registration

procedures established by SERB and PSERB for the management

and investment of the respective retirement funds.

(e) Duties.--The trustees of the investment office shall:

(1) exercise administrative oversight over all functions

and operations;

(2) oversee the investment process and the investments

made by investment office employees and develop investment

policies, processes and standards for the delegation of

authority for the investment office employees to make

investments;

(3) make recommendations to client boards regarding

investment policy, asset allocation, strategy and procedures;

(4) meet with each client board at least once annually;

(5) act as the investment fiduciary of the client funds;

(6) provide reports directly to each client board at

least monthly, including monthly investment reports

containing information and data, in a form established by the

client board, to be used by the client boards to prepare

monthly financial statements for the respective client funds;

(7) invest and reinvest client funds consistent and in

accordance with the asset allocations established by the

client boards;

20190SB0951PN1369 - 45 -

(8) account for all principal, interest, other income

and dividends and for expenses related to investment of

client funds;

(9) provide to SERB annually, at times and in a format

established by SERB, the investment reporting information and

data on a calendar year basis required by SERB for the

preparation of SERB comprehensive annual financial reports,

annual audits and report required under 71 Pa.C.S. § 5931(e)

(relating to m anagement of fund and accounts) which shall be

submitted to the General Assembly through the Governor;

(10) provide to PSERB annually, at times and in a format

established by PSERB, the investment reporting information

and data required by PSERB for the preparation of the PSERB

comprehensive annual financial reports, annual audits and

report required under 24 Pa.C.S. § 8521(e) (relating to

m anagement of fund and accounts) which shall be submitted to

the General Assembly through the Governor;

(11) provide to other client boards reports necessary

for the performance of the client boards' duties at the time

and in a format established in the agreements between the

investment office and the client boards for the management

and investment of the client boards' retirement and pension

systems and plans assets;

(12) set policies for investing and operational

activities pertaining to the management and investment of the

client funds;

(13) monitor overall and asset class performance;

(14) hire and supervise employees;

(15) set the investment office's budget, complement and

compensation;

20190SB0951PN1369 - 46 -

(16) review and conduct general oversight of business

planning, financial position and results, risk management,

compliance, internal controls and information systems, human

resources, communications and stakeholder relations;

(17) provide all necessary support associated with

prudent investment management, including, but not limited to,

legal, accounting, compliance, auditing, risk monitoring and

reporting services;

(18) formulate and adopt policies, procedures and bylaws

necessary and appropriate to carry out investment office

functions and enable the consolidation of the SERB investment

functions and the PSERB investment functions and continue the

operations of both;

(19) collect the principal and interest or other income

and dividends of investments when due and payable and pay the

principal and interest or other income and dividends, when

collected, into the appropriate fund as directed by the

client boards;

(20) sue and be sued in its own name and be responsible

for instituting or defending against legal proceedings

arising out of the investment office's investment of client

funds;

(21) keep data in convenient form as stipulated by SERB,

PSERB and other client boards to ensure that SERB and PSERB

can perform duties under 24 Pa.C.S. Pt. IV or 71 Pa.C.S. Pt.

XXV and that the other client boards can perform duties under

the client boards' enabling legislation and the provisions of

the client boards' retirement and pension systems and plans

of which they are trustees;

(22) at the request of a client board, provide

20190SB0951PN1369 - 47 -

information pertaining to the respective client fund as the

client board may require and maintain and preserved records

as the client board may direct for the expeditious discharge

of the client board's duties;

(23) invest and manage the client funds in a manner as

to provide for the benefit payment and administrative budget

obligations of the client boards, transfer to the restricted

account in the respective retirement funds established under

section 8106(h) (relating to relationship to SERB and PSERB)

sufficient funds to make all transfers to the accounts

established under 71 Pa.C.S. § 5931(g) and 24 Pa.C.S. §

8521(g) when requested by the SERB or the PSERB and make

transfers when requested;

(24) provide for annual audits of the investment office,

including the investment office's accrual and expenditure of

directed commissions, and the portions of the client funds

the investment office manages and invests by independently

certified public accountants. The trustees may use the same

independently certified public accountant for the audits of

all client funds; and

(25) act expeditiously on any joint resolution approved

by SERB and PSERB to remove a trustee of the investment

office and inform the Governor, the General Assembly, SERB

and PSERB of the approval or disapproval of the joint

resolution.

§ 8106. Relationship to SERB and PSERB.

(a) Coordination.--The powers, duties and authority granted

to the investment office are subject to the restrictions,

limitations, directions and powers regarding investment and

administration of the retirement funds retained by SERB and

20190SB0951PN1369 - 48 -

PSERB.

(b) No authority over benefits.--Nothing under this chapter

shall be deemed to grant the investment office any authority or

power to administer, calculate or determine the eligibility for

or amount of benefits, set contribution rates, assess employer,

employee or Commonwealth contributions or establish membership

or participation or any other benefit and contribution related

terms and conditions under 24 Pa.C.S. Pt. IV (relating to

retirement for school employees) or 71 Pa.C.S. Pt. XXV (relating

to retirement for State employees and officers) or other law

establishing a benefit, plan or program administered by SERB or

PSERB.

exclusively manage and invest the State Employees' Retirement

Fund and the Public School Employees' Retirement Fund other than

the portion of the retirement funds retained by SERB and PSERB

in cash or short-term investments for the collection of

contributions, payment of benefits and operation of SERS and

PSERS, subject to and limited by the authority and power that

remains vested in SERB and PSERB over SERB's and PSERB's

respective funds, the administration of benefits and the core

strategic decisions established and adopted by SERB and PSERB

under 71 Pa.C.S. § 5931 (relating to management of fund and

accounts) and 24 Pa.C.S. § 8521 (relating to management of fund

and accounts).

(d) Retained authority.--SERB and PSERB retain the right,

pertaining to the retirement funds, to:

(1) set the strategic asset allocation, actuarial

assumptions, including assumed investment returns and rates

of inflation, whether economic or demographic and risk policy

20190SB0951PN1369 - 49 -

of the funds;

(2) set liquidity requirements and require the

investment office to maintain assets in cash or other liquid

investments and to transfer cash to SERB and PSERB as

requested;

(3) monitor progress against long-term-fund-level

performance targets; and

(4) manage and invest a cash or short-term investment

account as part of the retirement funds for the collection of

contributions, payment of benefits and operations of SERS and

PSERS.

(e) Additional investment agreements with SERB and PSERB.--

The investment office may enter into agreements with SERB and

PSERB for the management or investment of other assets or

programs of which SERB or PSERB are trustees that are not part

of the retirement funds.

(f) Agreements for administrative services.--The investment

office may enter into agreements with SERB, PSERB or other

agencies and departments of the Commonwealth to receive

administrative support and services, including human resources,

information technology, purchasing or accounting or auditing

services.

(g) Contracting authority.--The investment office shall be

the sole contracting authority to retain external investment

management and consulting services on behalf of the retirement

funds, other than the portion of the retirement funds retained

by SERB and PSERB in cash or short-term investments for the

collection of contributions, payment of benefits and operations

of SERS and PSERS, except for consultants SERB and PSERB retain

to provide expert advice to SERB and PSERB in exercising SERB's

20190SB0951PN1369 - 50 -

and PSERB's decision-making authority under this chapter and in

exercising SERB's and PSERB's decision-making authority and

investment authority for the management or investment of other

assets or programs of which SERB or PSERB are trustees that are

not part of the retirement funds.

(h) Client board management accounts.--

(1) The portion of the retirement funds held in the

accounts established under 71 Pa.C.S. § 5931(g) and 24

Pa.C.S. § 8521(g) that is transferred to the investment

office to be managed and invested shall be transferred to

restricted accounts in each of the respective retirement

funds that shall be established to provide for the transfer

of investment earnings determined necessary by SERB and PSERB

for the payment of benefits and administrative costs of SERB

and PSERB.

(2) The amount in each restricted account identified in

paragraph (1) shall not exceed 10% of the total amount of the

respective fund and shall be kept available by the State

Treasurer and on deposit in a bank in this Commonwealth

organized under the laws of this Commonwealth or under the

laws of the United States or with any trust company or

companies incorporated by any law of this Commonwealth,

provided:

(i) any of the banks or trust companies shall

furnish adequate security for the deposit, and the sum

deposited in any one bank or trust company shall not

exceed 25% of the paid-up capital and surplus of the bank

or trust company; and

(ii) the State Treasurer may also invest the money

in the accounts as provided by law for the investments in

20190SB0951PN1369 - 51 -

the sinking funds of the Commonwealth.

(3) Money deposited into the restricted accounts,

including interest and earnings, shall be used to transfer to

the accounts and funds held by the State Treasurer under 71

Pa.C.S. § 5931(g) and 24 Pa.C.S. § 8521(g) for the payment of

benefits and administrative expenses of SERS and PSERS. The

investment office also may use the respective restricted

accounts of each retirement fund to fund investments and

deposit proceeds of investments credited to that retirement

fund.

(4) The investment office shall make monthly and other

transfers into the restricted accounts as determined and

communicated to the investment office by SERB and PSERB.

(5) The State Treasurer shall transfer funds to the

account or funds held by the State Treasurer under 71 Pa.C.S.

§ 5931(g) for SERB and shall transfer to the account or funds

held by the State Treasurer under 24 Pa.C.S. § 8521(g) for

PSERB from SERB's and PSERB's designated restricted accounts

established under this subsection for the payment of SERB's

and PSERB's respective obligations as deemed necessary by

SERB and PSERB.

(6) The client systems shall annually prepare an

anticipated monthly transfer schedule from the client

system's respective restricted accounts to the accounts and

funds held by the State Treasurer under 71 Pa.C.S. § 5931(g)

and 24 Pa.C.S. § 8521(g) for the investment office to

estimate the total amount of funds to be transferred.

(7) Funds transferred to the restricted accounts and the

accounts or funds held by the State Treasurer under 71

Pa.C.S. § 5931(g) and 24 Pa.C.S. § 8521(g) shall be

20190SB0951PN1369 - 52 -

reconciled on a regular basis with SERS and PSERS based on

actual cash needs.

(8) The investment office and State Treasurer may

establish similar accounts or fund transfer arrangements for

client boards other than SERB and PSERB as provided in

agreements between the investment office and the client

boards for the management and investment of the assets of the

retirement or pension systems or plans of which they are

trustees.

§ 8107. Agreements with other client boards.

The investment office may enter into agreements with the

pension boards of other public pension plans or systems in this

Commonwealth for the management or investment of other assets or

programs of retirement or pension systems or plans of which

those boards are trustees.

§ 8108. Penalty for fraud.

A person who knowingly makes a false statement or falsifies

or permits to be falsified a record of the investment office, a

client board or a client fund in an attempt to defraud the

investment office, a client board or a client fund commits a

misdemeanor of the second degree.

§ 8109. Applicability of other statutes.

(a) General rule.--The following statutes shall apply to the

investment office:

(1) The act of July 19, 1957 (P.L.1017, No.451), known

as the State Adverse Interest Act.

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

the Right-to-Know Law, subject to the provisions in section

8110 (relating to publication and access to meetings and

records).

20190SB0951PN1369 - 53 -

(3) The provisions of 65 Pa.C.S. Chs. 7 (relating to

open meetings) and 11 (relating to ethics standards and

financial disclosure).

(b) Status of investment office.--Notwithstanding any other

provision of law, the investment office shall be:

(1) An independent agency for the purposes of the act of

October 15, 1980 (P.L.950, No.164), known as the Commonwealth

Attorneys Act.

(2) An agency for the purposes of the following:

(i) The act of July 31, 1968 (P.L.769, No.240),

referred to as the Commonwealth Documents Law; and

(ii) The act of June 25, 1982 (P.L.633, No.181),

known as the Regulatory Review Act.

(3) A State-affiliated entity under 62 Pa.C.S. Pt. I

(relating to the Commonwealth Procurement Code) for contracts

made effective under 62 Pa.C.S. § 543(a) (relating to

effective contracts) after the effective date of this

section.

(4) An independent administrative board under the act of

April 9, 1929 (P.L.177, No.175), known as The Administrative

Code of 1929. Notwithstanding the status of the investment

office as an independent administrative board under The

Administrative Code of 1929, except as expressly provided

under this chapter, the investment office shall not be

subject to the following provisions of The Administrative

Code of 1929:

(i) Section 212, with respect to the Executive

Board's authority to approve bureaus or divisions as may

be required for the proper conduct of the work of the

investment office;

20190SB0951PN1369 - 54 -

(ii) Section 214, with respect to the Governor's

authority to approve the number of all employees and to

approve the compensation of employees not covered by a

collective bargaining agreement, and with respect to the

authority of the Executive Board to fix the standard

compensation for any kind, grade or class of service or

employment not covered by a collective bargaining

agreement. The Governor's power and authority to appoint

and fix the compensation of a comptroller and all

accountants, auditors, clerks, stenographers, bookkeepers

and other assistants and employees as may be required for

the proper conduct of the work of the comptroller shall

not be affected by this subparagraph.

(iii) Section 220, with respect to the Governor's

authority to assign rooms to be used as the investment

office's office, unless the investment office elects to

use rooms in buildings owned by the Commonwealth, or to

approve the investment office's decision to establish and

maintain branch offices for the conduct of one or more

functions of the investment office.

(iv) Section 610.

(v) Section 615, with respect to the Governor's or

Secretary of the Budget's authority for approval or

disapproval of estimates of the amount of money required

or the levels of activity and accomplishment for each

program carried on by the investment office, authority

for the establishment of an authorized personnel

complement level or the authority to disapprove or reduce

any amount appropriated by the General Assembly to the

investment office.

20190SB0951PN1369 - 55 -

(vi) Section 709, with respect to the Governor's and

Executive Board's authority to approve personnel

complement level, the authority to standardize the wages

or fix, approve or disapprove the compensation for each

investment professional and other officers and employees

of the investment office who are not covered by a

collective bargaining agreement and the authority to

approve or disapprove the establishment of bureaus and

divisions and the establishment of branch offices.

investment office shall possess the power and privileges of a

corporation.

§ 8110. Publication and access to meetings and records.

(a) Records.--

(1) The investment office shall keep records of its

proceedings, which records shall be accessible to the public,

except as otherwise provided under this chapter or by other

law. The investment office may discuss, deliberate on and

make decisions on a portion of the annual investment plan or

other related financial or investment matters, personnel

matters, legal matters and other privileged, confidential or

otherwise nonpublic matters in executive session consistent

with the provisions of 65 Pa.C.S. Ch. 7 (relating to open

meetings) and the act of February 14, 2008 (P.L.6, No.3),

known as the Right-to-Know Law.

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

used or retained by the investment office or its employees,

investment professionals or agents relating to an investment

shall not constitute a public record subject to public access

under the Right-to-Know Law, if, in the reasonable judgment

20190SB0951PN1369 - 56 -

of the investment office, the 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 confidentiality of the

information;

(ii) cause substantial competitive harm to the

person from whom sensitive investment or financial

information relating to the investment was received; or

(iii) have a substantial detrimental impact on the

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 under this chapter.

(3) The sensitive investment or financial information

excluded from access under paragraph (2)(i), to the extent

not otherwise excluded from access, shall constitute a public

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

once:

(i) The investment office is no longer required by

its agreement to maintain confidentiality.

(ii) The later of the following occurs:

(A) the 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 later of the following occurs:

20190SB0951PN1369 - 57 -

(A) the 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 under this

chapter; or

(B) the entity in which the investment was made

is liquidated.

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

under this subsection shall be construed to designate any

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

by the investment office or its employees, investment

professionals or agents relating to an investment as a public

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

(5) Notwithstanding the provisions of this subsection,

the following information regarding an alternative investment

vehicle shall be subject to public access under the Right-to-

Know Law:

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

alternative investment vehicle.

(ii) The identity of the manager of the alternative

investment vehicle.

(iii) The dollar amount of the commitment made by

the system or plan to the alternative investment vehicle.

(iv) The dollar amount of cash contributions made by

the system or plan to the alternative investment vehicle

since inception.

(v) The dollar amount of cash distributions received

by the system or plan from the alternative investment

vehicle since inception.

(vi) The net internal rate of return of the

20190SB0951PN1369 - 58 -

alternative investment vehicle since inception, provided

that the system or plan shall not be required to disclose

the net internal rate of return under circumstances in

which, because of the limited number of portfolio assets

remaining in the alternative investment vehicle, the

disclosure could reveal the values of specifically

identifiable remaining portfolio assets to the detriment

of the alternative investment.

(vii) The aggregate value of the remaining portfolio

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

in the alternative investment vehicle, provided that the

system or plan shall not be required to disclose the

value under circumstances in which, because of the

limited number of portfolio assets remaining in the

alternative investment vehicle, the disclosure could

reveal the values of specifically identifiable remaining

portfolio assets to the detriment of the alternative

investment.

(viii) The dollar amount of total management fees

and costs paid to the alternative investment vehicle by

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

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

used or retained by the investment office or its employees or

agents relating to the contributions, account value or

benefits payable to or on account of a participant of the

State Employees' Defined Contribution Plan or the School

Employees' Defined Contribution Plan shall not constitute a

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

Know Law, if, in the reasonable judgment of the investment

office, the access would disclose any of the following

20190SB0951PN1369 - 59 -

regarding a participant of the State Employees' Defined

Contribution Plan or the School Employees' Defined

Contribution Plan:

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

information pertaining to the voluntary contributions,

including rollover contributions and trustee-to-trustee

transfers, of the participant.

(ii) The investment option selections of the

participant.

(iii) The balance of the participant's individual

investment account, including the amount distributed to

the participant, and any investment gains or losses or

rates of return.

(iv) The identity of the participant's designated

beneficiary, successor payee or alternate payee.

(v) The benefit payment option or form of

distribution of the participant's account.

(7) Nothing in this section shall be construed to:

(i) Designate any record, material or data received,

prepared, used or retained by the investment office 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.

(ii) Mean that the release or publicizing of a

record, material or data that would not constitute a

public record under this subsection is a violation of the

investment office's fiduciary duties.

(8) This subsection shall apply to a record, material or

data under this subsection, notwithstanding whether:

20190SB0951PN1369 - 60 -

(i) the record, material or data was created,

generated or stored before the effective date of this

section;

(ii) the record, material or data was previously

released or made public; or

(iii) a request for the record, material or data was

made or is pending final response under the former act of

June 21, 1957 (P.L. 390, No. 212), referred to as the

Right-to-Know Law, or the Right-to-Know Law.

(b) Audio and video recording.--Public sessions of the

investment office shall be audio and video recorded and made

available on the investment office's publicly accessible

Internet website.

office shall disclose and report to the public, subject to the

limitations and exemptions in subsection (a):

(1) Travel or other expenses incurred by trustees and

staff and paid for by an external investment manager, fund or

consultant.

(2) Investment manager fees, costs and expenses, for

traditional investments.

(3) All records related to investment performance for

SERS and PSERS.

(4) Total fund performance and performance of certain

asset classes relative to benchmarks.

(5) Returns, costs, and fees of individual investments.

(d) Protection of rights.--

(1) The public information and disclosure provisions of

this section shall apply only to investments made and

contracts entered into by the investment office.

20190SB0951PN1369 - 61 -

(2) Records, contracts, agreements, documents, fees,

costs, returns, information and other matters related to

investments made under contracts, agreements or investments

entered into by SERB and PSERB, including any amendments to

those contracts, agreements or investments, are subject to

such disclosure, publication and access as determined by SERB

and PSERB under the law, rules, regulations, terms and

conditions that would be in effect had this chapter not been

enacted.

§ 8111. Integration management team.

(a) Establishment.--A transitional integration management

team is established to:

(1) initiate and oversee the creation of and transition

to the newly established investment office prior to a

majority of the appointed trustees of the investment office

taking the oath of office; and

(2) to provide advice to and the preliminary

administrative support for the investment office prior to the

investment office employing its own administrative staff.

(b) Composition.--The integration management team shall be

composed of the secretaries of SERB and PSERB, with each

secretary appointing from SERB's and PSERB's respective

retirement system staffs, three employees of SERS or PSERS.

regularly to outline action steps necessary to establish the

investment office and its administrative and investment

professional staff in a manner and on a timeline consistent with

the statutory requirement for creation of the investment office.

(d) Staff.--

(1) The integration management team may utilize the

20190SB0951PN1369 - 62 -

staff or employees of SERS and PSERS and may contract through

SERS and PSERS with consultants and advisors to assist it to

perform its duties.

(2) The chief counsels of SERB and PSERB shall provide

legal services to the integration management team as

requested.

(e) Transition.--SERB and PSERB shall work cooperatively to

transition to the creation of the investment office and enter

into agreements specifying the rights and obligations SERB and

PSERB have to each other in carrying out SERB's and the PSERB's

respective responsibilities under this chapter and to further

the intent of this section.

(f) Allocation of costs.--Sixty percent of the costs of the

integration management team, other than costs related to SERS

and PSERS employees, shall be allocated to the Public School

Employees' Retirement Fund and 40% of the costs of the

integration management team, other than costs related to SERS

and PSERS employees, shall be allocated to the State Employees'

Retirement Fund.

(g) Performance of duties.--

(1) Performance of duties and work for the integration

management team shall be part of the job responsibilities and

duties of the SERB and PSERB secretaries and other SERS and

PSERS employees assigned to those tasks.

(2) Until such time as the investment office has

employed its own administrative officers and established its

own administrative procedures, either the SERB secretary or

PSERB secretary may administer the oath of office to

appointed trustees of the investment office.

(h) Monthly reports.--The integration management team shall

20190SB0951PN1369 - 63 -

provide monthly progress reports to SERB and PSERB, the

Governor, the majority and minority leaders of the Senate, the

majority and minority chairpersons of the Appropriations

committee of the Senate, the majority and minority leaders of

the House of Representatives and the majority and minority

chairpersons of the Appropriations Committee of the House of

Representatives.

(i) Dissolution.--The integration management team shall

dissolve the earlier of two years after a majority of the

appointed trustees of the investment office taking the oath of

office or when the investment office provides notice to SERB and

PSERB.

§ 8112. Application and construction.

(a) Notice to members and participants.--Notice by

publication, including newsletters, newspapers, forms, first

class mail, letters, manuals and, to the extent authorized by a

policy adopted by the investment office, electronically,

including, but not limited to, e-mail or Internet websites,

distributed or made available to members, participants or

beneficiaries of the client boards in a manner reasonably

calculated to give actual notice of the provisions of this

chapter that require notice to members, participants or

beneficiaries of retirement or pension systems or plans

administered by the client boards shall be deemed sufficient

notice for all purposes.

(b) Construction and administration.--This title shall be

construed and administered in such a manner that the State

Employees' Retirement System, the State Employees' Defined

Contribution Plan, the Public School Employees' Retirement

System and the School Employees' Defined Contribution Plan shall

20190SB0951PN1369 - 64 -

satisfy the requirements necessary to qualify as a qualified

pension plan under section 401(a) of the Internal Revenue Code

of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)) and other

applicable provisions of the Internal Revenue Code of 1986. The

rules, regulations and procedures adopted and promulgated by the

trustees of the investment office under section 8105(e)(18)

(relating to powers and duties) may include those necessary to

accomplish the purpose of this section.

in this chapter to provisions of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), including for

this purpose administrative regulations promulgated under the

Internal Revenue Code of 1986 are intended to include laws and

regulations in effect on the effective date of this section and

as may be amended or supplemented or supplanted by successor

provisions after the effective date of this section.

(d) References.--As of the second July 1 following a

majority of the appointed trustees of the investment office

taking the oath of office, unless the context clearly indicates

otherwise, a reference to the State Employees' Retirement Board

or the Public School Employees' Retirement Board in a statutory

provision other than this title, 24 Pa.C.S. Pt. IV (relating to

retirement for school employees) and 71 Pa.C.S. Pt XXV (relating

to retirement for state employees and officers) relating to the

management and investment of the State Employees' Retirement

Fund or the Public School Employees' Retirement Fund shall

include a reference to the Commonwealth Pension Investment

Office.

Section 16. Section 5102 of Title 71 is amended by adding a

definition to read:

20190SB0951PN1369 - 65 -

§ 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:

* * *

"Investment office." The Commonwealth Pension Investment

Office, established under 64 Pa.C .S. Ch. 81 (relating to

Commonwealth Pension Investment Office).

* * *

Section 17. Title 71 is amended by adding a section to read:

§ 5105. Certification by Secretary of the Budget.

(a) Federal determination.--The Secretary of the Budget

shall seek a determination from the Federal Government that the

dedicated funding mechanism in Chapter 56 (relating to State

Employees' Contribution Fund) will not negatively affect the

Commonwealth's ability to receive the normal and customary

Federal reimbursement for the Federal share of the State

employee pension costs. The Secretary of the Budget shall

provide each appropriate Federal agency with the data necessary

to review the dedicated funding mechanism contained in Chapter

56.

(b) Information to standing committees.--Within 30 days of

receiving a final determination under subsection (a), the

Secretary of the Budget shall provide a copy of the

determination to the chair and minority chair of the

Appropriations Committee of the Senate and the chair and

minority chair of the Appropriations Committee of the House of

Representatives with the following information:

(1) If the Federal Government determines the funding

mechanism in Chapter 56 does not negatively impact the

20190SB0951PN1369 - 66 -

Commonwealth's ability to receive the normal and customary

Federal reimbursement for the Federal share of the State

employee pension costs, the certification of the Federal

response, which must indicate the fiscal year in which the

dedicated funding mechanism will commence.

(2) If the Federal Government does not approve the

dedicated funding mechanism or indicates approval may result

in lower Federal reimbursement of State employee pension

costs, notification that the dedicated funding mechanism

cannot be implemented.

the determination under subsection (b)(1), the Secretary of the

Budget shall transmit to the Legislative Reference Bureau for

publication in the Pennsylvania Bulletin the certification,

which must indicate the fiscal year in which the dedicated

funding mechanism will commence.

Section 18. Section 5301(a)(17), (a.1), (c), (c.1) and (d)

(2) of Title 71 are amended and subsection (a) is amended by

adding a paragraph to read:

§ 5301. Mandatory and optional membership in the system and

participation in the plan.

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

mandatory as of the effective date of employment for all State

employees except the following:

* * *

(17) State employees, other than any Class A-5 exempt

employees and State employees listed in paragraph (18),

performing service as Class A-5 exempt employees, whose first

period of State service starts on or after January 1, 2019,

provided that a State employee listed in this paragraph who

20190SB0951PN1369 - 67 -

is not listed in paragraphs (1) through (16) or paragraph

(18) shall be mandatory members unless the employee elected

to be solely a participant in the plan under section 5306.4

(relating to election to become a Class A-6 member or solely

a participant in the plan).

(18) State employees who are trustees of the investment

office.

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

who is a member of the system as a member of Class A-5 or Class

A-6 shall be a mandatory participant in the plan for that same

service as of the effective date of Class A-5 or Class A-6

membership in the system except for service as a Class A-5

exempt employee. A State employee who elected to be solely a

participant in the plan shall be a mandatory participant in the

plan for all service except for service as a Class A-5 exempt

employee and service as an employee listed in subsection (a)

(18).

* * *

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

(15) and (18) shall not have the right to elect membership in

the system. The State employees listed in subsection (a)(18)

shall not be eligible for membership in the system for service,

notwithstanding any other election or membership in any other

class of service.

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

employees listed in subsection (a)(11), (12), (13), (14) [and

(15)], (15) and (18) or who first become a member of the system

before January 1, 2019, or who could have elected membership in

the system but did not do so in the required time period shall

20190SB0951PN1369 - 68 -

not be eligible to be active participants in the plan unless an

election is made under section 5306.5. Class A-5 exempt

employees shall not be eligible to participate in the plan for

service performed as a Class A-5 exempt employee. State

employees who are not mandatory participants in the plan under

subsection (a.1) or eligible for optional participation in the

plan under subsection (b.1) shall not be eligible to participate

in the plan unless an election is made under section 5306.5. The

State employees listed in subsection (a)(18) shall not be

eligible for participation in the plan for service,

notwithstanding any other election or membership in any other

class of service or election or participation in the plan.

(d) Return to service.--

* * *

(2) An annuitant or a participant receiving

distributions who returns to service as a State employee on

or after January 1, 2019, except as a State employee listed

in subsection (a)(18), shall resume active membership in the

system and, if an active member of Class A-5 or Class A-6,

shall be an active participant in the plan as of the

effective date of employment, except as otherwise provided in

section 5706(a), regardless of the optional membership or

participation category of the position: Provided, however,

That a participant or former participant who previously

elected to be solely a participant under section 5306.4 or

5306.5 shall be a participant in the plan and not an active

member of the system, except for service as a Class A-5

exempt employee.

* * *

Section 19. (Reserved).

20190SB0951PN1369 - 69 -

Section 20. Title 71 is amended by adding a chapter to read:

CHAPTER 56

STATE EMPLOYEES' CONTRIBUTION FUND

Sec.

5601. Definitions.

5602. Establishment and use of contribution fund.

5603. Certification of amounts payable from contribution fund.

5604. Payments from contribution fund.

§ 5601. 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:

"Contribution fund." The State Employees' Contribution Fund

established under section 5602 (relating to establishment and

use of contribution fund).

§ 5602. Establishment and use of contribution fund.

(a) Establishment.--The State Employees' Contribution Fund

is established as a restricted account in the General Fund.

(b) Use of contribution fund.--Money in the contribution

fund, including interest, income, dividends and other earnings

on money deposited into the contribution fund, shall be used for

the payment of the Commonwealth's share of contributions under

section 5507 (relating to contributions to the system by the

Commonwealth and other employers) and the unfunded actuarial

accrued liability under section 5508 (relating to actuarial cost

method) due each fiscal year.

be invested by the State Treasurer in securities as provided by

law for the investment in the sinking funds of the Commonwealth.

§ 5603. Certification of amounts payable from contribution

20190SB0951PN1369 - 70 -

fund.

(a) Certification.--

(1) (Reserved).

(2) Within 10 days after the board certifies the amount

determined to be due from the Commonwealth to the State

Treasurer in accordance with section 5902(k) and (l), the

State Treasurer shall certify 100% of the amount determined

to be due from the Commonwealth as certified under section

5902(l) to be transferred to the contribution fund by the

Department of Revenue.

(b) Duties of Department of Revenue.--Within 10 days after

the State Treasurer certifies the amount under subsection (a)

(2), the Department of Revenue shall transfer money in the

amount certified from the tax imposed under section 302 of the

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

of 1971, into the contribution fund.

§ 5604. Payments from contribution fund.

(a) Appropriation.--

(1) Money transferred by the Department of Revenue into

the contribution fund under section 5603(b) (relating to

certification of amounts payable from contribution fund) is

appropriated to the Department of Revenue for the payment of

the Commonwealth's share of required contributions under

section 5507 (relating to contributions to the system by the

Commonwealth and other employers) as certified by the board

under section 5902(k) and (l) (relating to administrative

duties of the board).

(2) Any money remaining in the contribution fund,

including earned interest, at the end of a calendar quarter

is appropriated to the board as an additional contribution to

20190SB0951PN1369 - 71 -

the State Employees' Retirement Fund in excess of the

actuarially required contribution for the quarter. Money

appropriated under this paragraph shall be transferred to the

board within 30 days of the end of the calendar quarter.

(b) Treatment of transfers.--Amounts transferred to the

State Employees' Retirement Fund under subsection (a)(2) must be

in addition to employer contributions required under section

5507 and may not be used to replace any portion of the employer

contributions certified by the board under section 5508

(relating to actuarial cost method). The board shall accept the

transferred money and apply the money to offset the current

unfunded actuarial accrued liability of the State Employees'

Retirement Fund. Amounts received by the board under this

chapter shall be recognized over a specific period of time as

determined by the board in consultation with the board's

actuary.

the full amount of the required contributions into the

contribution fund under section 5507 as certified by the board

under section 5902(k) and (l) without regard to whether

sufficient amounts have been transferred to the contribution

fund or appropriated from the contribution fund to the

department under this chapter.

Section 21. Section 5706(a)(2) of Title 71 is amended to

read:

§ 5706. Termination of annuities.

(a) General rule.--

* * *

(2) This subsection shall not apply in the case of any

annuitant who:

20190SB0951PN1369 - 72 -

(i) may render services to the Commonwealth in the

capacity of an independent contractor; [or]

(ii) is over normal retirement age or who has been

an annuitant for more than one year and who may render

service to the Commonwealth:

(A) as a member of an independent board or

commission or as a member of a departmental

administrative or advisory board or commission when

such members of independent or departmental boards or

commissions are compensated on a per diem basis for

not more than 150 days per calendar year; or

(B) as a member of an independent board or

commission requiring appointment by the Governor,

with advice and consent of the Senate, where the

annual salary payable to the member does not exceed

$35,000 and where the member has been an annuitant

for at least six months immediately preceding the

appointment[.]; or

(iii) may render services to the Commonwealth as a

trustee of the investment office.

* * *

Section 22. Section 5810(a) of Title 71 is amended by adding

a paragraph to read:

§ 5810. Termination of distributions.

(a) Return to State service.--

* * *

(3) This subsection shall not apply to a participant

receiving distributions or an inactive participant who

returns to State service as a trustee of the investment

office and is over normal retirement age or who has been an

20190SB0951PN1369 - 73 -

annuitant for more than one year and may render service to

the Commonwealth.

* * *

Section 23. Section 5812(15) is amended and the section is

amended by adding paragraphs to read:

§ 5812. Powers and duties of board.

The board, in addition to its powers and duties set forth in

Chapter 59 (relating to administration, funds, accounts, general

provisions), shall have the following powers and duties to

establish the plan and trust and administer the provisions of

this chapter and part:

* * *

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

lieu of staff, except final adjudications and as prohibited

by law. Any duties or responsibilities of the board not

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

to a third-party provider or the investment office subject to

appeal to the board.

* * *

(19) The board may enter into agreements with the

investment office to manage and invest all or part of the

trust and the participants' individual investment accounts.

(20) Notwithstanding any other provision of law, the

trustees of the investment office shall invest all moneys of

the fund exclusively through the investment office.

Section 24. Section 5901(f) of Title 71 is amended and the

section is amended by adding a subsection to read:

§ 5901. The State Employees' Retirement Board.

* * *

(b.1) Trustees of investment office.--An individual who is a

20190SB0951PN1369 - 74 -

trustee of the investment office may not be appointed as member

of the board unless the individual first resigns as a trustee of

the investment office.

* * *

(f) Board training.--Each member of the board will be

required to obtain eight hours of mandatory training in asset

allocation and investment strategies, investment risk, risk

management, actuarial cost analysis, setting return assumptions

and retirement portfolio management on an annual basis.

Section 25. Section 5902(b)(1), (c)(1), (d), (f), (i) and

(n) of Title 71 are amended, subsections (a), (a.1) and (e) are

amended by adding paragraphs and the section is amended by

adding a subsection to read:

§ 5902. Administrative duties of the board.

(a) Employees.--

* * *

(3) The secretary may designate officers and employees

of the board to work on the integration management team

established under 64 Pa.C.S. § 8111 (relating to integration

management team) to assist in the performance of the team's

duties. Work completed by designated employees shall be

considered a part of the designated employees' duties as

officers and employees 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:

* * *

(7) Serve on the integration management team established

20190SB0951PN1369 - 75 -

under 64 Pa.C.S. § 8111 and perform all tasks and duties

necessary to establish the investment office.

(b) Professional personnel.--

(1) 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's authority to contract for the services

of investment advisors and counselors includes the authority

to enter into agreements with the investment office to

provide the services. The board may contract for legal

services.

* * *

(1) The board shall, through the Governor, submit to the

General Assembly annually a budget covering the

administrative expenses of the system and a separate budget

covering the administrative expenses of the plan. Budgets

under this paragraph shall include those expenses necessary

to establish the plan and trust. The budgets prepared under

this subsection shall not include the expenses of the

investment office budgeted under 64 Pa.C.S. § 8104(p)

(relating to Commonwealth Pension Investment Office).

* * *

(d) Meetings.--The board shall hold at least [six] four

regular meetings annually and such other meetings as it may deem

necessary.

(e) Records.--

* * *

(4.1) Notwithstanding the provisions of this subsection,

the following information regarding an alternative investment

20190SB0951PN1369 - 76 -

vehicle shall be subject to public access under the Right-to-

Know Law:

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

alternative investment vehicle.

(ii) The identity of the manager of the alternative

investment vehicle.

(iii) The dollar amount of the commitment made by

the system or plan to the alternative investment vehicle.

(iv) The dollar amount of cash contributions made by

the system or plan to the alternative investment vehicle

since inception.

(v) The dollar amount of cash distributions received

by the system or plan from the alternative investment

vehicle since inception.

(vi) The net internal rate of return of the

alternative investment vehicle since inception.

Disclosure under this subparagraph shall not include the

net internal rate of return under circumstances in which,

because of the limited number of portfolio assets

remaining in the alternative investment vehicle,

disclosure could reveal the values of specifically

identifiable remaining portfolio assets to the detriment

of the alternative investment.

(vii) The aggregate value of the remaining portfolio

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

in the alternative investment vehicle. Disclosure under

this subparagraph shall not include the value under

circumstances in which, because of the limited number of

portfolio assets remaining in the alternative investment

vehicle, disclosure could reveal the values of

20190SB0951PN1369 - 77 -

specifically identifiable remaining portfolio assets to

the detriment of the alternative investment.

(viii) The dollar amount of total management fees

and costs paid to the alternative investment vehicle by

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

* * *

(f) Functions.--The board shall perform such other functions

as are required for the execution of the provisions of this part

and 64 Pa.C.S. Ch. 81 (relating to Commonwealth Pension

Investment Office).

* * *

(i) Data.--The board and the investment office 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.

* * *

(n) Independent audits.--The board shall provide for annual

audits of the system and the plan by independent certified

public accountants. The 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. The board's audits under this

subsection shall include the portion of the fund managed and

invested by the investment office. In preparing audits of the

fund managed and investment by the investment office, the board

may accept and rely on the certifications by the independent

auditors retained by the investment office under 64 Pa.C.S. §

8105(a)(4) (relating to powers and duties) of audits performed

under 64 Pa.C.S.§ 8105(e)(24).

20190SB0951PN1369 - 78 -

* * *

(r) Appointment of trustees to investment office.--The board

shall appoint trustees as authorized under 64 Pa.C.S. Ch. 81 and

may take actions required and authorized relating to the

establishment of the investment office and the management and

investment of the fund under this part and 64 Pa.C.S. Ch. 81.

Section 26. Section 5904 of Title 71 is amended by adding a

subsection to read:

§ 5904. Duties of the board to report to the Public School

Employees' Retirement Board.

* * *

(e) Investment office.--The following apply:

(1) The board shall notify the Public School Employees'

Retirement Board when the board names individuals as trustees

of the investment office. The board shall enter into joint

agreements with the Public School Employees' Retirement Board

to contract with a third-party consultant to establish and

maintain a pool of candidates to be trustees of the

investment office under 64 Pa.C.S. § 8104(c) (relating to

(relating to Commonwealth Pension Investment Office).

(2) If the board initiates and approves a proposed joint

resolution of the board and the Public School Employees'

Retirement Board to remove a trustee of the investment office

under 64 Pa.C.S. § 8104(d), the board shall transmit a

certified copy of the proposed joint resolution to secretary

of the Public School Employees' Retirement Board for

consideration and action by the Public School Employees'

Retirement Board.

(3) If the secretary of the board receives a certified

copy of a proposed joint resolution to remove a trustee of

20190SB0951PN1369 - 79 -

the investment office under 64 Pa.C.S. § 8104(d) which was

initiated by the Public School Employees' Retirement Board or

a resolution approved by the trustees of the investment

office to remove a trustee of the office, the board shall

expeditiously consider and act on the proposed joint

resolution or the resolution of the trustees of the

investment office and the board's secretary shall notify the

secretary of the Public School Employees' Retirement Board

and the chief executive officer of the investment office of

the board's action.

(4) Upon the approval of a joint resolution under this

subsection, the board's secretary shall inform the Governor,

the General Assembly and the chief executive officer of the

investment office of the action.

Section 27. Title 71 is amended by adding a section to read:

§ 5904.1. Duties of the board to report to the investment

office.

(a) Projection of contributions and disbursements.--

Periodically, but not less than annually, the board shall report

to the investment office the expected future annual

contributions to the fund by members and employers, benefit

payments from the fund and other disbursements from the fund,

including, but not limited to, the administrative expenses,

projected for a period of not less than the next 10 years.

(b) Expected fund transfers.--Periodically, but not less

than annually, the board shall report to the investment office

the expected amounts to be transferred on a monthly basis from

the restricted account for the board established under 64

Pa.C.S. § 8106(h) (relating to relationship to SERB and PSERB)

to the account or funds held by the State Treasurer under

20190SB0951PN1369 - 80 -

section 5931(g) (relating to management of fund and accounts).

communicate to the investment office the transfers required

under 64 Pa.C.S. § 8106(h)(3).

(d) Removal of investment office trustee.--If the board

takes action either to approve or disapprove a resolution by the

trustees of the investment office or a proposed joint resolution

with the Public School Employees' Retirement Board to remove a

trustee of the investment office, it shall transmit notice of

the action to the investment office without regard to whether

the board or the Public School Employees' Retirement Board

initiated the proposed joint resolution.

Section 28. Sections 5931(a), (d), (e), (f) and (g) and

5932(a) of Title 71 are amended to read:

§ 5931. Management of fund and accounts.

(a) Control and management of fund.--The members of the

board shall be the [trustees of the fund] co-trustees of the

fund with the trustees of the investment office. Regardless of

any other provision of law governing the investments of funds

under the control of an administrative board of the State

government, but subject to the provisions of this part and 64

Pa.C.S. Ch. 81 (relating to Commonwealth Pension Investment

Office) transferring certain authority to manage and invest the

fund from the board to the investment office and retaining

certain other authority with the board, the trustees shall have

exclusive control and management of the said fund and full power

to invest the same in accordance with the provisions of this

section, subject, however, to the exercise of that degree of

judgment, skill and care under the circumstances then prevailing

which persons of prudence, discretion and intelligence, who are

20190SB0951PN1369 - 81 -

familiar with such matters, exercise in the management of their

own affairs not in regard to speculation, but in regard to the

permanent disposition of the funds, considering the probable

income to be derived therefrom as well as the probable safety of

their capital. The trustees shall have the power to hold,

purchase, sell, lend, assign, transfer or dispose of any of the

securities and investments in which any of the moneys in the

fund shall have been invested as well as of the proceeds of said

investments, including any directed commissions which have

accrued to the benefit of the fund as a consequence of the

investments, and of any moneys belonging to said fund, subject

in every case to meeting the standard of prudence set forth in

this subsection.

* * *

(d) Payments from fund.--[All payments from the fund shall

be made by the State Treasurer in accordance with requisitions

signed by the secretary of the board, or his designee, and

ratified by resolution of the board.]

(1) All payments being made after the effective date of

this paragraph as a disbursement for benefits, administrative

expenses of the board or are related to investments by the

board or expenses in the performance of the board's duties

related to the management and investment of the fund shall be

made by the State Treasurer in accordance with requisitions

signed by the secretary of the board, or the secretary's

designee, and ratified by resolution of the board.

(2) All payments from the fund being made as a result of

the management and investment of the fund by the investment

office under 64 Pa.C.S. Ch. 81 shall be made by the State

Treasurer in accordance with requisitions signed by the chief

20190SB0951PN1369 - 82 -

executive officer of the investment office or designee as

authorized by resolution of the trustees of the investment

office.

(e) Fiduciary status of board.--The members of the board,

employees of the board and agents thereof shall stand in a

fiduciary relationship to the members of the system regarding

the investments and disbursements of any of the moneys of the

fund to the extent the administration of benefits under this

part and the management and investment of the fund have been

retained by the board and have not been granted to the

investment office and shall not profit either directly or

indirectly with respect thereto. The board may, when possible

and consistent with its fiduciary duties imposed by this

subsection or other law, including its obligation to invest and

manage the fund for the exclusive benefit of the members of the

system, consider whether an investment in any project or

business enhances and promotes the general welfare of this

Commonwealth and its citizens, including, but not limited to,

investments that increase and enhance the employment of

Commonwealth residents, encourage the construction and retention

of adequate housing and stimulate further investment and

economic activity in this Commonwealth. The board shall, through

the Governor, submit to the General Assembly annually, at the

same time the board submits its budget covering administrative

expenses, a report identifying the nature and amount of all

existing investments made pursuant to this subsection.

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

State Employees' Retirement System" or "The State Employes'

Retirement System" all of the business of the system shall be

transacted, its fund invested by the board, all requisitions for

20190SB0951PN1369 - 83 -

money drawn and payments made, and all of its cash and

securities and other property shall be held, except to the

extent that business transactions, fund investments,

requisitions for money drawn and payments made and cash,

securities and property are held by the name of "The

Commonwealth Pension Investment Office" under 64 Pa.C.S. §

8105(d) (relating to powers and duties), and 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 law.

(g) Deposits in banks and trust companies.--For the purpose

of receiving contributions from members and employers and

meeting disbursements for annuities and other payments in excess

of the receipts, there shall be kept available by the State

Treasurer an amount, not exceeding 10% of the total amount in

the fund that shall not be transferred to the investment office

under the authority to manage and invest the fund granted to it

by 64 Pa.C.S. Ch. 81, on deposit in any bank or banks in this

Commonwealth organized under the laws thereof or under the laws

of the United States or with any trust company or companies

incorporated by any law of this Commonwealth, provided any of

such banks or trust companies shall furnish adequate security

for said deposit, and provided that the sum so deposited in any

one bank or trust company shall not exceed 25% of the paid-up

capital and surplus of said bank or trust company. Any amount in

excess of the needs of the board shall be transferred to the

restricted account for the board established under 64 Pa.C.S. §

8106(h) (relating to relationship to SERB and PSERB).

20190SB0951PN1369 - 84 -

* * *

§ 5932. State Employees' Retirement Fund.

(a) General rule.--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

without regard to whether any portion of the fund is invested

and managed by the board or the investment office, severally or

jointly as co-trustees; 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).

* * *

Section 29. Section 5940 of Title 71 is amended by adding a

subsection to read:

§ 5940. Northern Ireland-related investments.

* * *

(d) Duties transferred.--After the transfer of the assets

and investments of the fund to the investment office, the duties

and responsibilities of the board under this section shall be

transferred to the trustees of the investment office.

Section 30. Sections 5941 and 5954(b) of Title 71 are

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amended to read:

§ 5941. Benefits completion plan.

(a) Establishment of plan.--Notwithstanding any other law to

the contrary, the board shall establish and serve as trustee of

a retirement benefit plan within the meaning of, in conformity

with and then only to the extent and so long as permitted by IRC

§ 415(m) for the purpose of providing such retirement benefits

as would otherwise have been payable under this part to

annuitants of the system on or after July 2, 2001, but for the

application of the limitations on benefits of IRC § 415. The

board may, in its sole discretion and within the limits of IRC §

415(m) and this section, determine all terms and provisions of

the plan, including, but not limited to, the cost of and

procedures for funding the plan as provided in this section. The

Commonwealth and other employers whose employees are members of

the system shall make contributions to the plan on behalf of all

members in such amounts as shall be certified by the board.

(b) Agreement with investment office.--The board may enter

into an agreement with the investment office to perform all or

part of the investment management of the assets of the

retirement benefit plan established under this section.

§ 5954. Fraud and adjustment of errors.

* * *

(b) Adjustment of errors.--Should any change or mistake in

records of the board or the investment office result in any

member, participant, beneficiary, 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

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board or the investment office 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, the board shall take action as

provided for in the plan document.

Section 31. The following apply to contributions and

benefits:

(1) Except as set forth in paragraph (2), nothing in

this act shall be construed to imply a change in the

contributions or benefits of any of the following:

(i) A member of the Public School Employes'

Retirement System.

(ii) A participant in the Public School Employees'

Defined Contribution Plan.

(iii) A member of the State Employees' Retirement

System.

(iv) A participant in the State Employees' Defined

Contribution Plan.

(v) A beneficiary, survivor annuitant or alternate

payee of an individual under subparagraph (i), (ii),

(iii) or (iv).

(2) Paragraph (1) does not apply to a trustee of the

Commonwealth Pension Investment Office who is a member of the

State Employees' Retirement System or a participant in the

State Employees' Defined Contribution Plan.

Section 32. The following apply:

(1) This section applies to an amendment or addition

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made by this act to a provision of 24 Pa.C.S. Pt. IV, 64

Pa.C.S. or 71 Pa.C.S. Pt. XXV in relation to the management

and investment of any of the following:

(i) The Public School Employees' Retirement Fund.

(ii) The State Employees' Retirement Fund.

(iii) Any of the following of which the Public

School Employees' Retirement Board or the State

Employees' Retirement Board is a trustee:

(A) A retirement or pension system or plan, fund

or trust.

(B) A fund or trust of a benefit plan.

(2) A provision under paragraph (1) shall not create a

contractual right, either express or implied, in the manner,

method, board or office which manages or invests money

referred to in paragraph (1)(i), (ii) or (iii) in any of the

following:

(i) A member of the Public School Employees'

Retirement System.

(ii) A participant in the Public School Employees'

Defined Contribution Plan.

(iii) A member of the State Employees' Retirement

System.

(iv) A participant in the State Employees' Defined

Contribution Plan.

(v) A person claiming an interest in the account of

an individual under subparagraph (i), (ii), (iii), (iii)

or (iv).

Section 33. This act shall be construed and administered in

a manner that the Public School Employees' Retirement System,

the School Employees' Defined Contribution Plan, the State

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Employees' Retirement System and the State Employees' Defined

Contribution Plan will satisfy the requirements necessary to

qualify as a qualified pension plan under 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). Policies, procedures and

bylaws under the addition of 64 Pa.C.S. § 8105(e)(18) may

include those necessary to accomplish the purpose of this

section.

Section 34. Nothing in this act shall be construed to affect

the authority of the Auditor General to obtain a copy of a

record, material or data in connection with an audit.

Section 35. The amendment of 71 Pa.C.S. § 5902(e) shall

apply only to an investment made and a contract entered into on

or after the effective date of this section. For an investment

made or a contract entered into before the effective date of

this section, the State Employees' Retirement Board shall

determine disclosure, publication and access to information

related to the investment or contract under law and under

contractual agreement in effect on or before the effective date

of this section.

Section 36. Public officials shall be held harmless, as

follows:

(1) Notwithstanding any other provision of law,

fiduciary requirement, investment standard of practice or

other requirement to the contrary, the members of the Public

School Employees' Retirement Board, the employees and

officials of the Public School Employees' Retirement System

and their investment advisors, counselors and consultants

retained under 24 Pa.C.S. § 8502(b) shall not be held liable

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or in breach or violation, either as individuals or in their

official capacity or as a governmental or corporate entity,

for the transfer of all or a portion of the Public School

Employees' Retirement Fund and other assets or programs which

are not part of the Public School Employees' Retirement Fund

to the Commonwealth Pension Investment Office for management

and investment.

(2) Notwithstanding any other provision of law,

fiduciary requirement, investment standard of practice or

other requirement to the contrary, the members of the State

Employees' Retirement Board, the employees and officials of

the State Employees' Retirement System and their investment

advisors, counselors and consultants retained under 71

Pa.C.S. § 5902(b) shall not be held liable or in breach or

violation, either as individuals or in their official

capacity or as a governmental or corporate entity, for the

transfer of all or a portion of the State Employees'

Retirement Fund and other assets or programs which are not

part of the State Employees' Retirement Fund to the

Commonwealth Pension Investment Office for management and

investment.

Section 37. The following apply to transfer:

(1) The following are subjects of transfer:

(i) Money.

(ii) Agreements, partnerships and leases.

(iii) Investments in the State Employees' Retirement

Fund in excess of money reserved by the State Employees'

Retirement Board in the State Employees' Retirement Fund.

(iv) Money held by the State Treasurer for receipt

of member and employer contributions under:

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(A) 24 Pa.C.S. § 8521(g); and

(B) 71 Pa.C.S. § 5931(g).

(v) Disbursement of benefit payments and other

disbursements. This paragraph includes administrative

expenses of:

(A) the Public School Employees' Retirement

System; and

(B) the State Employees' Retirement System.

(vi) Except as necessary under section 38,

allocations, appropriations, equipment, supplies,

records, contracts, rights and obligations.

(2) Subjects of transfer under paragraph (1) shall be

transferred to the Commonwealth Pension Investment Office on

the second July 1 after trustees of the Commonwealth Pension

Investment Office sufficient to constitute a quorum take the

oath of office.

(3) The Public School Employees' Retirement Board and

the State Employees' Retirement Board may enter into

agreements with the Commonwealth Pension Investment Office

and with managers, general partners and other counterparties

of investments to be transferred to effectuate the transfer.

(4) If the Public School Employees' Retirement Board is

retaining records of the Public School Employees' Retirement

Fund which will be needed by the Commonwealth Pension

Investment Office as co-trustee, the Public School Employees'

Retirement Board shall make and transfer the necessary

copies.

(5) If the State Employees' Retirement Board is

retaining records of the State Employees' Retirement Fund

which will be needed by the Commonwealth Pension Investment

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Office as co-trustee, the State Employees' Retirement Board

shall make and transfer the necessary copies.

Section 38. The following apply to personnel retention:

(1) The Public School Employees' Retirement Board shall

identify the personnel it will retain to perform

administrative functions retained under this act. This

paragraph includes collection of member and employer

contributions, payment of benefits and investment-related

functions retained under this act.

(2) The State Employees' Retirement Board shall identify

the personnel it will retain to perform administrative

functions retained under this act. This paragraph includes

collection of member and employer contributions, payment of

benefits and the investment-related functions.

Section 39. This act shall take effect immediately.

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