THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY WILLIAMS AND D. EVANS, JULY 3, 2009

AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, AS AMENDED, JULY 30, 2009   

AN ACT

Amending the act of December 18, 1984 (P.L.1005, No.205),

entitled "An act mandating actuarial funding standards for

all municipal pension systems; establishing a recovery

program for municipal pension systems determined to be

financially distressed; providing for the distribution of the

tax on the premiums of foreign fire insurance companies; and

making repeals," further providing for contents of actuarial

<--

valuation report, for minimum funding standard and for

alternative funding mechanism adding special provisions for

<--

amortization of unfunded actuarial accrued liability and

minimum municipal obligation in cities of the first class;

and providing for special taxing authority for cities of the

first class.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 202(b)(4)(v) of the act of December 18,

<--

1984 (P.L.1005, No.205), known as the Municipal Pension Plan

Funding Standard and Recovery Act, is amended by adding a clause

to read:

Section 202.  Contents of actuarial valuation report.

* * *

(b)  Contents of actuarial exhibits; defined benefit plans

self-insured in whole or in part.--For any pension plan which is

a defined benefit plan and which is self-insured in whole or in

part, all applicable actuarial exhibits shall be prepared in

accordance with the entry age normal actuarial cost method with

entry age established as the actual entry age for all plan

members unless the municipality applies for and is granted

authorization by the commission to use an alternative actuarial

cost method. Authorization shall be granted if the municipality

demonstrates on an individual pension plan basis that there are

compelling reasons of an actuarial nature for the use of an

alternative actuarial cost method. The commission shall issue

rules and regulations specifying the criteria which the

commission will use to determine the question of the existence

of compelling reasons for the use of an alternative actuarial

cost method, the documentation which a municipality seeking the

authorization will be required to supply and the acceptable

alternative actuarial cost methods which the commission may

authorize. The actuarial cost method shall be used to value all

aspects of the benefit plan or plans of the pension plan unless

the municipality applies for and is granted authorization by the

commission to use approximation techniques other than the

actuarial cost method for aspects of the benefit plan or plans

of the pension plan other than the retirement benefit.

Authorization shall be granted if the municipality demonstrates

on an individual pension plan basis that there are compelling

reasons of an actuarial nature for the use of these

approximation techniques. The commission shall issue rules and

regulations specifying the criteria which the commission will

use to determine the question of the existence of compelling

reasons for the use of approximation techniques, the

documentation which a municipality seeking the authorization

will be required to supply and the acceptable approximation

technique which the commission may authorize. The actuarial

exhibits shall use actuarial assumptions which are, in the

judgment of the actuary and the governing body of the plan, the

best available estimate of future occurrences in the case of

each assumption. With respect to economic actuarial assumptions,

the assumptions shall either be within the range specified in

rules and regulations issued by the commission or documentation

explaining and justifying the choice of assumptions outside the

range shall accompany the report. The actuarial exhibits shall

measure all aspects of the benefit plan or plans of the pension

plan in accordance with modifications in the benefit plan or

plans, if any, and salaries which as of the valuation date are

known or can reasonably be expected to be in force during the

ensuing plan year. The actuarial valuation report shall contain

the following actuarial exhibits:

* * *

(4)  An exhibit of any additional funding costs

associated with the amortization of any unfunded actuarial

accrued liability of the pension plan, indicating for each

increment of unfunded actuarial accrued liability specified

in paragraph (3), the level annual dollar contribution

required to pay an amount equal to the actuarial assumption

as to investment earnings applied to the principal amount of

the remaining balance of the increment of unfunded actuarial

accrued liability and to retire by the applicable

amortization target date specified in this paragraph the

principal amount of the remaining balance of the increment of

unfunded actuarial accrued liability. The amortization target

date applicable for each type of increment of unfunded

actuarial accrued liability shall be as follows:

* * *

(v)  * * *

(C)  Notwithstanding any other provision of this

act or other law, a city of the first class, in its

sole discretion, may amortize its entire unfunded

actuarial accrued liability, as measured on a

valuation date selected by the city of the first

class and occurring in the plan year commencing after

January 1, 2009, and ending before December 31, 2010,

as a level dollar amount with the amortization target

date being the end of the plan year occurring 30

years after the plan year commencing after January 1,

2009, and ending before December 31, 2010, with

payments to commence in the next plan year. In order

for a city of the first class to extend the

applicable amortization period pursuant to this

clause, the city of the first class must file a

revised actuarial valuation report reflecting the

amortization period extension provided for under this

clause with the executive director of the commission

no later than March 31, 2010. Any such revised

actuarial valuation report may not be filed in lieu

of the actuarial valuation report prepared in

compliance with clause (A) and required to be filed

on or before March 31, 2009, and may be used only for

the purposes of recalculating the minimum municipal

obligation of the city of the first class for plan

years commencing after January 1, 2009, and

calculating the minimum municipal obligation of the

city of the first class for the plan year commencing

after January 1, 2009, to reflect the amortization

period extension. Any such revised actuarial

valuation report shall not affect distributions under

the General Municipal Pension System State Aid

Program under Chapter 4.

* * *

Section 2.  Section 302 of the act is amended by adding a

subsection to read:

Section 302.  Minimum funding standard; defined benefit plans

self-insured in whole or in part.

* * *

(f)  Cities of the first class.--Notwithstanding any other

provision of this act or other law, a city of the first class is

authorized to defer a portion of the minimum municipal

obligation provided for in this section:

(1)  for the plan year ending June 30, 2010, in an amount

not to exceed $155,000,000; and

(2)  for the plan year ending June 30, 2011, in an amount

not to exceed $80,000,000.

The amounts deferred shall bear interest at the actuarial

assumed rate of 8.25%, which shall be calculated from the

beginning of the plan year in which the deferral was made.

Accrued interest on any amounts deferred shall be paid yearly on

or before June 30, 2010, June 30, 2011, and June 30, 2012. On or

before June 30, 2013, the city of the first class shall repay at

least $90,000,000 of any amounts deferred, plus interest accrued

on all amounts deferred; or, if the total amount deferred is

less than $90,000,000, the total amount deferred, plus interest

accrued on that amount, shall be repaid. The balance of all

amounts deferred, including interest accrued and unpaid on

amounts deferred, shall be repaid by June 30, 2014. Any of the

amounts deferred, including interest accrued on deferred

amounts, which remain unpaid at the end of the plan year ending

June 30, 2014, shall be added to the minimum municipal

obligation of the city of the first class for the following plan

year, with interest calculated and due until the date that the

amounts due are paid. The calculation of the unfunded actuarial

accrued liability made by and certified by an approved actuary

under section 202 shall not include any amounts deferred

pursuant to this subsection, so long as the city of the first

class is paying interest accrued on such deferred amounts and

repaying such deferred amounts in accordance with the terms of

this subsection. The repayment of any amounts deferred,

including interest accrued on deferred amounts, as and when

required in this subsection, shall constitute a commitment and

obligation, binding and absolute, on the city of the first

class; and the city of the first class shall include all amounts

due to be paid under this subsection in the budget of the city,

and all amounts due to be paid shall be appropriated and paid in

order to make timely repayment of any amounts deferred,

including interest accrued on deferred amounts, with such

payment being unconditional and without setoff. Any person who

is beneficially interested in the city of the first class paying

its minimum municipal obligation under this subsection shall

have standing to institute a legal proceeding for mandamus to

enforce the obligation of the city of the first class to make

payments under this subsection in the same manner as payment

requirements of an alternative funding mechanism may be enforced

under section 1001. A person who is beneficially interested

under this subsection is any person who is a beneficially

interested person under section 1001(f).

Section 1.  Chapter 10 heading of the act of December 18,

<--

1984 (P.L.1005, No.205), known as the Municipal Pension Plan

Funding Standard and Recovery Act, added June 18, 1998 (P.L.626,

No.82), is amended to read:

CHAPTER 10

[ALTERNATIVE FUNDING MECHANISM]

PROVISIONS RELATING TO CITIES OF THE FIRST CLASS

Section 3 2.  Section 1001(b) of the act, added June 18, 1998 

<--

(P.L.626, No.82), is amended and the section is amended by

adding a subsection to read:

Section 1001.  Alternative funding mechanism.

* * *

(b)  Period of payment requirements prior to July 1, 2009.--

The period of the city's payment requirements under an

alternative funding mechanism implemented prior to December 31,

2002, shall be the greater of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after

December 31, 2002, but before July 1, 2009, the period described

in paragraph (1) shall be the period of the city's payment

requirements.

(b.1)  Period of payment requirements beginning July 1,

2009.--The period of the city's payment requirements under an

alternative funding mechanism implemented or refinanced in whole

or in part on or after July 1, 2009, and prior to the beginning

of the plan year that commences in 2019, shall be the greater

of:

(1)  the remaining period not exceeding 30 years during

which the city would have amortized the unfunded actuarial

accrued liability reported in its last actuarial valuation

report filed under Chapter 2 using the total amortization

payment and interest assumption, reported in that actuarial

valuation report; or

(2)  30 years.

If an alternative funding mechanism is implemented after July 1,

2019, the period described in paragraph (1) shall be the period

of the city's payment requirements.

* * *

Section 3.  The act is amended by adding sections to read:

<--

Section 1002.  Special provisions for amortization of unfunded

actuarial accrued liability and minimum municipal

obligation.

(a)  Amortization of unfunded actuarial accrued liability.--

(1)  Notwithstanding any other provision of this act or

other law, a city of the first class, in its sole discretion,

may amortize its entire unfunded actuarial accrued liability,

as measured on a valuation date selected by the city of the

first class and occurring in the plan year commencing after

January 1, 2009, and ending before December 31, 2010, as a

level dollar amount with the amortization target date being

the end of the plan year occurring 30 years after the plan

year commencing on July 1, 2009, with payments to commence in

the next plan year.

(2)  In order for a city of the first class to extend the

applicable amortization period pursuant to this subsection,

the city of the first class must file a revised actuarial

valuation report reflecting the amortization period extension

provided for under this section and the actuarial assumed

rate in effect on the valuation date with the commission no

later than March 31, 2010.

(3)  Any such revised actuarial valuation report may not

be filed in lieu of the actuarial valuation report prepared

in compliance with section 202(b)(4)(v)(A) and required to be

filed on or before March 31, 2009, and may be used only for

the purposes of recalculating the minimum municipal

obligation of the city of the first class for the plan year

commencing on July 1, 2009, and calculating the minimum

municipal obligation of the city of the first class for the

plan year commencing on July 1, 2010, to reflect the

amortization period extension. The revised report shall

supersede the original report to the extent of the revisions.

(4)  Any such revised actuarial valuation report shall

not affect distributions under the General Municipal Pension

System State Aid Program under Chapter 4.

(b)  Revised minimum municipal obligation for certain plan

years.--

(1)  Notwithstanding any other provision of this act or

other law, a city of the first class is authorized to defer a

portion of the minimum municipal obligation provided for

section 302:

(i)  for the plan year ending June 30, 2010, in an

amount not to exceed $155,000,000; and

(ii)  for the plan year ending June 30, 2011, in an

amount not to exceed $80,000,000.

(2)  The amounts deferred shall bear interest at the rate

of 8.25%, which shall be calculated from the beginning of the

plan year in which the deferral was made. Accrued interest on

any amounts deferred shall be paid yearly on or before June

30, 2010, June 30, 2011, and June 30, 2012. 

(3)  On or before June 30, 2013, the city of the first

class shall repay:

(i)  at least $90,000,000 of any amounts deferred,

plus interest accrued on all amounts deferred; or

(ii)  if the total amount deferred is less than

$90,000,000, the total amount deferred, plus interest

accrued on that amount.

(4)  The balance of all amounts deferred, including

interest accrued and unpaid on amounts deferred, shall be

repaid by June 30, 2014.

(5)  Any of the amounts deferred, including interest

accrued on deferred amounts, which remain unpaid at the end

of the plan year ending June 30, 2014, shall be added to the

minimum municipal obligation of the city of the first class

for the following plan year, with interest calculated and due

until the date that the amounts due are paid.

(6)  The calculation of the unfunded actuarial accrued

liability made by and certified by an approved actuary under

section 202 shall not include any amounts deferred pursuant

to this subsection, so long as the city of the first class is

paying interest accrued on such deferred amounts and repaying

such deferred amounts in accordance with the terms of this

subsection.

(7)  The repayment of any amounts deferred, including

interest accrued on deferred amounts, as and when required in

this subsection, shall constitute a commitment and

obligation, binding and absolute, on the city of the first

class; and the city of the first class shall include all

amounts due to be paid under this subsection in the budget of

the city, and all amounts due to be paid shall be

appropriated and paid in order to make timely repayment of

any amounts deferred, including interest accrued on deferred

amounts, with such payment being unconditional and without

setoff.

(8)  (i)  Any person who is beneficially interested in

the city of the first class paying its minimum municipal

obligation under this subsection shall have standing to

institute a legal proceeding for mandamus to enforce the

obligation of the city of the first class to make

payments under this subsection in the same manner as

payment requirements of an alternative funding mechanism

may be enforced under section 1001.

(ii)  For purposes of this paragraph, a person is

beneficially interested under this subsection if the

person is a beneficially interested person under section

1001(f).

(9)  The city of the first class shall be required to pay

the balance of its minimum municipal obligation in full when

due in each plan year.

Section 1003.  Special taxing authority.

(a)  Imposition of special tax.–-

(1)  Solely for the purposes set forth in subsection (b),

a city of the first class is authorized to impose a tax on

the sale at retail of tangible personal property or services

or use of tangible personal property or services purchased at

retail, as those terms are defined in Article II of the act

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

of 1971, which tax shall be in addition to the tax authorized

under the provisions of section 503(a) and (b) of the act of

June 5, 1991 (P.L.9, No.6), known as the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class. The tax authorized by this subsection shall not

be levied, assessed and collected upon the occupancy of a

room or rooms in a hotel in the city.

(2)  The tax authorized under this subsection shall be

imposed and collected at the rate of 1%, and shall be

computed as set forth at section 503(e)(2) of the

Pennsylvania Intergovernmental Cooperation Authority Act for

Cities of the First Class.

(3)  The tax authorized under this subsection shall be

administered, collected, deposited and disbursed in the same

manner as the tax imposed under Chapter 5 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class and the situs of the tax authorized under this

subsection shall be determined in accordance with that act

and Article II-A of the Tax Reform Code of 1971. The

department shall use the money received by the department to

cover its costs of administration of the tax authorized by

the provisions of Chapter 5 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class to cover the costs of administration of the tax

authorized by this section; and the department shall not

retain any additional amounts for the costs of collection of

the tax authorized by this section. No additional fee shall

be charged for either a license or any renewal in addition to

a license or renewal fee otherwise authorized and imposed

pursuant to Article II of the Tax Reform Code of 1971.

(b)  Municipal action.--

(1)  If a city of the first class determines to impose

the tax authorized by subsection (a), the governing body of

the city shall adopt or shall previously have adopted an

ordinance which shall state the tax rate.

(2)  The city ordinance, including an ordinance adopted

prior to the effective date of this article, may take effect

no earlier than 20 days after the adoption of the ordinance

or 20 days after the effective date of this section,

whichever is later.

(3)  A certified copy of a city ordinance imposing the

tax authorized by subsection (a) shall be delivered to the

department within ten days prior to or after the effective

date of that ordinance.

(4)  A certified copy of a repeal ordinance shall be

delivered to the department at least 30 days prior to the

effective date of the repeal.

(c)  Use of tax receipts.--Any moneys received by the city

from the levy, assessment and collection of the tax authorized

under subsection (a) may only be used to:

(1)  pay as and when due in any plan year any amounts of

the city's minimum municipal obligation provided for in

section 302, including, but not limited to, amounts deferred

pursuant to section 1002(b) and interest accrued on deferred

amounts; and

(2)  reimburse the city for payments made by the city,

from sources other than the tax authorized in subsection (a),

of the city's minimum municipal obligation for that year,

including, but not limited to, amounts deferred pursuant to

section 1002(b) and interest accrued on deferred amounts.

(d)  Expiration.--

(1)  This section shall expire July 1, 2014.

(2)  Notwithstanding the expiration of this section, any

tax imposed pursuant to subsection (a) on sales or uses

occurring before July 1, 2014, shall be paid to and received

by the department and, along with interest and penalties,

less any refunds and credits paid, shall be credited to the

Local Sales and Use Tax Fund created pursuant to the

Pennsylvania Intergovernmental Cooperation Authority Act for

Cities of the First Class as if this section had not expired.

Such moneys shall be disbursed to the city imposing the tax

in the manner provided by section 509 of the Pennsylvania

Intergovernmental Cooperation Authority Act for Cities of the

First Class.

(e)  Effect of imposition, expiration or repeal of tax.--The

imposition, termination or repeal of the tax authorized under

subsection (a) shall not affect in any way the amount of

supplemental State assistance allocable to the city imposing the

tax.

Section 1004.  Additional assistance.

Notwithstanding any other provision of this act or other law,

a city of the first class shall continue to receive State

supplemental assistance and any other assistance available under

this act.

Section 4.  This act shall take effect immediately.