PRINTER'S NO. 218
No. 209 Session of 1987
INTRODUCED BY GREENLEAF, HELFRICK, BELL, FUMO, ANDREZESKI AND
WENGER, JANUARY 28, 1987
REFERRED TO STATE GOVERNMENT, JANUARY 28, 1987
AN ACT
1 Amending the act of March 30, 1811 (P.L.145, No.99), entitled
2 "An act to amend and consolidate the several acts relating to
3 the settlement of the public accounts and the payment of the
4 public monies, and for other purposes," authorizing deferred
5 compensation programs for officers and employees of the
6 Commonwealth and its political subdivisions; and providing
7 procedures for the establishment and administration of these
8 programs.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Section VIII of the act of March 30, 1811
12 (P.L.145, No.99), entitled "An act to amend and consolidate the
13 several acts relating to the settlement of the public accounts
14 and the payment of the public monies, and for other purposes,"
15 amended July 18, 1974 (P.L.472, No.168), is amended to read:
16 Section VIII. And be it further enacted by the authority
17 aforesaid, That the state treasurer shall pay all grants,
18 salaries, annuities, gratuities, and pensions established by
19 law, and make all other payments which are or shall be so fixed
20 by law, that the sum to be paid cannot be affected by the
1 settlement of any account, nor increased nor diminished by the
2 discretionary powers of the auditor-general and state treasurer;
3 Provided however, That in relation to pensions payable under
4 decrees of courts, the state treasurer may, if he deems it
5 proper, refer the said decrees or certificates back to the court
6 for revision, stating his reasons therefor: And also provided,
7 That the treasurer or other officer in charge of payrolls for
8 the Commonwealth or any county, city, town or other political
9 subdivision may make systematic investments in mutual funds,
10 savings accounts or government bonds or make premium payments on
11 life insurance or annuity contracts to any institution or
12 company licensed and authorized in accordance with the rules and
13 regulations promulgated by the appropriate State agencies to
14 accept deposits or sell such products in this State for the
15 purpose of funding a deferred compensation program for employes.
16 Section 2. The act is amended by adding a section to read:
17 Section VIII.2. (a) The Commonwealth of Pennsylvania may
18 establish deferred compensation plans for its elected and
19 appointed officers and its employes who perform services for the
20 Commonwealth or a political subdivision, pursuant to section
21 four hundred fifty-seven of the Internal Revenue Code of 1954
22 (92 Stat. 2779, 26 U.S.C. § 457). Likewise, a political
23 subdivision of the Commonwealth may establish deferred
24 compensation plans for its elected and appointed officers and
25 its employes, pursuant to section four hundred fifty-seven of
26 the Internal Revenue Code of 1954.
27 (b) As used in this section "Commonwealth officer" or
28 "employe" means:
29 (1) any individual who is an elected or appointed official
30 of the Commonwealth; or
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1 (2) any individual employed by the Commonwealth or a
2 political subdivision.
3 "Compensation" means pay for normal services rendered.
4 (c) Any eligible deferred compensation plans established for
5 Commonwealth officers or employes shall be established by the
6 State Employees' Retirement Board.
7 (d) Any eligible deferred compensation plans established for
8 the officers, employes or other individuals performing services
9 for a political subdivision shall be established by the
10 governing body of the political subdivision.
11 (e) In order to establish and administer eligible deferred
12 compensation plans, the powers and duties of the State
13 Employees' Retirement Board or the governing body of a political
14 subdivision shall include, but not be limited to:
15 (1) Entering into written agreements with one or more
16 financial organizations to administer the deferred compensation
17 plan for State employes or employes of political subdivisions
18 and to invest funds held pursuant to such plan. Any such written
19 agreement and deferred compensation plan shall conform with the
20 provisions of section four hundred fifty-seven of the Internal
21 Revenue Code of 1954 and regulations adopted pursuant thereto.
22 (2) Promulgating rules and regulations establishing
23 procedures whereby eligible individuals may elect to participate
24 in or withdraw from participation in a plan on a quarterly
25 basis, and whereby such individuals may designate the amount of
26 compensation to be deferred above a minimum monthly deposit of
27 ten dollars; arranging for a deduction from the compensation of
28 eligible individuals the amounts to be deferred under a plan;
29 establishing standards or criteria for the selection by the
30 State Employees' Retirement Board or the governing body of the
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1 political subdivision of financial institutions, insurance
2 companies or other organizations which may be qualified as
3 managers on behalf of the Commonwealth, or a political
4 subdivision, of funds deferred under a plan on behalf of any
5 eligible individual; establishing standards and criteria for the
6 providing of options to eligible individuals concerning the
7 method of investing amounts deferred under any plan and of
8 informing eligible individuals of specific options offered by
9 qualified managers; establishing standards and criteria for the
10 disclosure to eligible individuals of the anticipated and actual
11 income attributable to such amounts, property and rights and all
12 fees, costs and charges to be made against such amounts deferred
13 to cover the costs of administering and managing the funds.
14 (3) An annual review of any qualified fund manager for the
15 purpose of making certain it continues to meet all standards and
16 criteria established, including the termination of any qualified
17 fund manager who does not continue to meet all standards and
18 criteria as established.
19 (4) Establishing procedures where any officer or employe may
20 cease making deferrals or where deferred amounts may be
21 withdrawn in cases of financial hardship or the separation of
22 such individual from service with the Commonwealth or political
23 subdivision.
24 (5) All deferred compensation plans shall be administered in
25 compliance with section four hundred fifty-seven of the Internal
26 Revenue Code of 1954, as amended, and its accompanying
27 regulations. Any income deferred under such authorized agreement
28 shall continue to be included as regular compensation for
29 computing retirement and benefits earned by any Commonwealth or
30 political subdivision officer or employe, but any sum deferred
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1 shall not be included in the computation of any Federal income
2 taxes to be withheld.
3 (f) All amounts deferred under a deferred compensation plan
4 shall constitute taxable income for purposes of the act of March
5 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971,"
6 and shall constitute taxable income for State and local earned
7 income taxes.
8 (g) Neither the Commonwealth nor any political subdivision
9 shall be responsible for any investment loss incurred in the
10 program, nor shall the Commonwealth or political subdivision
11 contribute to its deferred compensation program. The expenses
12 arising from allowing individuals to elect to participate in a
13 deferred compensation plan, to choose a fund manager, to deduct
14 from compensation amounts deferred under a plan and to transfer
15 to the fund manager amounts so deducted shall be borne by the
16 Commonwealth or the political subdivision. All other expenses
17 arising from the administration of a deferred compensation plan
18 shall be assessed against the accounts created on behalf of
19 participating individuals either by the fund managers or by the
20 Commonwealth or a political subdivision. The obligation of the
21 Commonwealth or political subdivision officer or employe shall
22 be a contractual obligation only with no preferred or special
23 interest in deferred funds to such officer or employe or
24 contractor.
25 (h) All funds which shall be withheld or deferred by the
26 Commonwealth or political subdivision in accordance with the
27 terms of this act shall remain an asset of the Commonwealth or
28 political subdivision until such time as the funds are
29 distributed to the participant or his beneficiary in accordance
30 with the terms of the agreement between the participant and the
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1 State Employees' Retirement Board or between the participant and
2 the governing body of the political subdivision. Such deferred
3 compensation plans shall exist and serve in addition to, and
4 shall not be a part of, any retirement or pension system for
5 officers and employes.
6 (i) Investment of deferred funds by any corporation,
7 institution, insurance company or custodial bank which the State
8 Employees' Retirement Board or governing body of a political
9 subdivision has approved shall not be unreasonably delayed, and
10 in no case shall the deduction of deferred funds be delayed more
11 than thirty days from the date of payroll deduction to the date
12 that funds are transmitted to the appropriate investment
13 vehicle.
14 (j) No officer or employe participant or beneficiary shall
15 have the right to commute, sell, assign or otherwise transfer or
16 convey the rights to receive any payments under agreements
17 entered into pursuant to this section and such payments and
18 rights are expressly declared to be nonassignable and
19 nontransferable.
20 (k) A participant may withdraw from the agreement in
21 accordance with the approved plan by notice, in writing, signed
22 by the participant and approved by the administrator and such
23 withdrawal shall discontinue future deferrals by the State or
24 the political subdivision, but shall not operate to withdraw any
25 funds theretofore contributed, except in cases of approved
26 financial hardship.
27 (l) Every officer or employe of the State or political
28 subdivision who, upon the effective date of this act, has either
29 been in office or employed by the State or political
30 subdivision, shall immediately be eligible for participation in
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1 a deferred compensation plan. Thereafter, every officer or
2 employe of the State or political subdivision shall become
3 eligible upon employment.
4 (m) For the purposes of this act only, notwithstanding the
5 provisions of the act of September 26, 1961 (P.L.1661, No.692),
6 known as the "State Employes Group Life Insurance Law," the act
7 of January 17, 1966 (1965 P.L.1624, No.577), entitled "An act
8 amending the act of April 9, 1929 (P.L.177, No.175), entitled
9 'An act providing for and reorganizing the conduct of the
10 executive and administrative work of the Commonwealth by the
11 Executive Department thereof and the administrative departments,
12 boards, commissions, and officers thereof, including the boards
13 of trustees of State Normal Schools, or Teachers Colleges;
14 abolishing, creating, reorganizing or authorizing the
15 reorganization of certain administrative departments, boards,
16 and commissions; defining the powers and duties of the Governor
17 and other executive and administrative officers, and of the
18 several administrative departments, boards, commissions, and
19 officers; fixing the salaries of the Governor, Lieutenant
20 Governor, and certain other executive and administrative
21 officers; providing for the appointment of certain
22 administrative officers, and of all deputies and other
23 assistants and employes in certain departments, boards, and
24 commissions; and prescribing the manner in which the number and
25 compensation of the deputies and all other assistants and
26 employes of certain departments, boards and commissions shall be
27 determined,' authorizing the Secretary of Property and Supplies
28 to transact business as an insurance broker for the purpose of
29 contracting insurance and surety bonds for any department,
30 board, agency or commission of this Commonwealth and for any
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1 State authority established by law," or the act of July 31, 1968
2 (P.L.691, No.229), entitled "An act reenacting and amending the
3 act of September 26, 1961 (P.L.1661, No.692), entitled 'An act
4 providing for group life insurance for State employes;
5 establishing a schedule; providing for payment; providing for
6 reduction of insurance upon retirement; authorizing the
7 Secretary of Property and Supplies to act as exclusive agent for
8 the purpose of contracting for insurance; and providing for
9 administration and advisory services by the Department of
10 Property and Supplies,' providing for contributions by the
11 State, increasing the amounts of insurance provided under the
12 schedule, reducing the period of continuous service required for
13 eligibility, deleting the provision relating to insurance
14 coverage for retired employes and consulting services and
15 extending coverage to permanent part-time employes," insurance
16 companies selected as qualified fund managers by eligible
17 individuals may pay commissions to agents or brokers licensed to
18 transact business in this Commonwealth in accordance with their
19 standard practice followed in other similar plans as if the
20 premium has been paid by such eligible individual.
21 Section 3. This act shall take effect in 120 days.
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