THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY D. EVANS, BRIGGS, PARKER, WILLIAMS, GALLOWAY, DePASQUALE, KORTZ, W. KELLER, MYERS, SHAPIRO AND SIPTROTH, MAY 11, 2010

AS REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, AS AMENDED, JUNE 7, 2010  

AN ACT

Amending Titles 24 (Education) and 71 (State Government) of the

Pennsylvania Consolidated Statutes, in Title 24, further

providing for definitions, for contributions by the

Commonwealth, for payments by employers, for actuarial cost

method, for additional supplemental annuities, for further

additional supplemental annuities, for supplemental annuities

commencing 1994, for supplemental annuities commencing 1998,

for supplemental annuities commencing 2002, for supplemental

annuities commencing 2003, for administrative duties of board

and for payments to school entities by Commonwealth; in Title

71, providing for definitions; further providing for rights

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and duties of State employees and members, for contributions

by the Commonwealth and other employers, for actuarial cost

method, for additional supplemental annuities, for further

additional supplemental annuities, for supplemental annuities

commencing 1994, for supplemental annuities commencing 1998,

for supplemental annuities commencing 2002, for supplemental

annuities commencing 2003, for special supplemental

postretirement adjustment of 2002, for administrative duties

of the board, for State accumulation account and for

supplemental annuity account; and providing for

recertification to the Secretary of the Budget and for

holding certain public officials harmless.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definition of "employer" in section 8102 of

Title 24 of the Pennsylvania Consolidated Statutes is amended to

read:

§ 8102.  Definitions.

The following words and phrases when used in this part shall

have, unless the context clearly indicates otherwise, the

meanings given to them in this section:

* * *

"Employer."  Any governmental entity directly responsible for

the employment and payment of the school employee and charged

with the responsibility of providing public education within

this Commonwealth, including but not limited to: State-owned

colleges and universities, the Pennsylvania State University,

community colleges, area vocational-technical schools,

intermediate units, the State Board of Education, Scotland

School for Veterans' Children, Thaddeus Stevens State School of

Technology, and the [Pennsylvania State Oral] Western

Pennsylvania School for the Deaf.

* * *

Section 2.  Sections 8326(a), 8327(a) and (c), 8328,

8348.1(f), 8348.2(f), 8348.3(f), 8348.5(f), 8348.6(f),

8348.7(f), 8502(k) and 8535(3) of Title 24 are amended to read:

§ 8326.  Contributions by the Commonwealth.

(a)  Contributions on behalf of active members.--The

Commonwealth shall make contributions into the fund on behalf of

all active members, including members on activated military

service leave, in an amount equal to one-half the amount

certified by the board as necessary to provide, together with

the members' contributions, annuity reserves on account of

prospective annuities as provided in this part in accordance

with section 8328[(a), (b), (c) and (e)] (relating to actuarial

cost method). In case a school employee has elected membership

in a retirement program approved by the employer, the

Commonwealth shall contribute to such program on account of his

membership an amount no greater than the amount it would have

contributed had the employee been a member of the Public School

Employees' Retirement System.

* * *

§ 8327.  Payments by employers.

(a)  General rule.--Each employer, including the Commonwealth

as employer of employees of the Department of Education, State-

owned colleges and universities, Thaddeus Stevens [State School]

College of Technology, [Pennsylvania State Oral] Western

Pennsylvania School for the Deaf, Scotland School for Veterans'

Children, and the Pennsylvania State University, shall make

payments to the fund each quarter in an amount equal to one-half

the sum of the percentages, as determined under section 8328

(relating to actuarial cost method), applied to the total

compensation during the pay periods in the preceding quarter of

all its employees who were members of the system during such

period, including members on activated military service leave.

In the event a member on activated military service leave does

not return to service for the necessary time or receives an

undesirable, bad conduct or dishonorable discharge or does not

elect to receive credit for activated military service under

section 8302(b.1)(3) (relating to credited school service), the

contributions made by the employer on behalf of such member

shall be returned with valuation interest upon application by

the employer.

* * *

(c)  Payments by employers after June 30, 1995.--After June

30, 1995, each employer, including the Commonwealth as employer

of employees of the Department of Education, State-owned

colleges and universities, Thaddeus Stevens State School of

Technology, [Pennsylvania State Oral] Western Pennsylvania 

School for the Deaf, Scotland School for Veterans' Children and

The Pennsylvania State University, shall make payments to the

fund each quarter in an amount computed in the following manner:

(1)  For an employer that is a school entity, the amount

shall be the sum of the percentages as determined under

section 8328 applied to the total compensation during the pay

periods in the preceding quarter of all employees who were

active members of the system during such period, including

members on activated military service leave. In the event a

member on activated military service leave does not return to

service for the necessary time or receives an undesirable,

bad conduct or dishonorable discharge or does not elect to

receive credit for activated military service under section

8302(b.1)(3), the contribution made by the employer on behalf

of such member shall be returned with valuation interest upon

application by the employer.

(2)  For an employer that is not a school entity, the

amount computed under subsection (a).

(3)  For any employer, whether or not a school entity, in

computing the amount of payment due each quarter, there shall

be excluded from the total compensation referred to in this

subsection and subsection (a) any amount of compensation of a

noneligible member on the basis of which member contributions

have not been made by reason of the limitation under IRC §

401(a)(17). Any amount of contribution to the fund paid by

the employer on behalf of a noneligible member on the basis

of compensation which was subject to exclusion from total

compensation in accordance with the provisions of this

paragraph shall, upon the board's determination or upon

application by the employer, be returned to the employer with

valuation interest.

§ 8328.  Actuarial cost method.

(a)  Employer contribution rate [on behalf of active

members].--The amount of the total employer contributions [on

behalf of all active members] shall be computed by the actuary

as a percentage of the total compensation of all active members

during the period for which the amount is determined and shall

be so certified by the board. The total employer contribution

rate shall be the sum of the final contribution rate as computed

in subsection (h) plus the premium assistance contribution rate

as computed in subsection (f). The [total] actuarially required 

contribution rate [on behalf of all active members] shall

consist of the normal contribution rate as defined in subsection

(b), the accrued liability contribution rate as defined in

subsection (c) and the supplemental annuity contribution rate as

defined in subsection (d). Beginning July 1, 2004, the [total]

actuarially required contribution rate shall be modified by the

experience adjustment factors as calculated in subsection (e)

[but in no case shall it be less than 4% plus the premium

assistance contribution rate].

(b)  Normal contribution rate.--The normal contribution rate

shall be determined after each actuarial valuation. [Until all

accrued liability contributions have been completed, the] The 

normal contribution rate shall be determined, on the basis of an

annual interest rate and such mortality and other tables as

shall be adopted by the board in accordance with generally

accepted actuarial principles, as a level percentage of the

compensation of the average new active member, which percentage,

if contributed on the basis of his prospective compensation

through the entire period of active school service, would be

sufficient to fund the liability for any prospective benefit

payable to him, in excess of that portion funded by his

prospective member contributions[, except for the supplemental

benefits provided in sections 8348 (relating to supplemental

annuities), 8348.1 (relating to additional supplemental

annuities), 8348.2 (relating to further additional supplemental

annuities), 8348.3 (relating to supplemental annuities

commencing 1994), 8348.4 (relating to special supplemental

postretirement adjustment), 8348.5 (relating to supplemental

annuities commencing 1998), 8348.6 (relating to supplemental

annuities commencing 2002) and 8348.7 (relating to supplemental

annuities commencing 2003)].

(c)  Accrued liability contribution rate.--

(1)  For the fiscal [year] years beginning July 1, 2002,

and ending June 30, 2011, the accrued liability contribution

rate shall be computed as the rate of total compensation of

all active members which shall be certified by the actuary as

sufficient to fund over a period of ten years from July 1,

2002, the present value of the liabilities for all

prospective benefits of active members, except for the

supplemental benefits provided in sections 8348 (relating to

supplemental annuities), 8348.1 (relating to additional

supplemental annuities), 8348.2 (relating to further

additional supplemental annuities), 8348.3 (relating to

supplemental annuities commencing 1994), 8348.4 (relating to

special supplemental postretirement adjustment), 8348.5

(relating to supplemental annuities commencing 1998), 8348.6

(relating to supplemental annuities commencing 2002) and

8348.7 (relating to supplemental annuities commencing 2003),

in excess of the total assets in the fund (calculated by

recognizing the actuarially expected investment return

immediately and recognizing the difference between the actual

investment return and the actuarially expected investment

return over a five-year period), excluding the balance in the

annuity reserve account, and of the present value of normal

contributions and of member contributions payable with

respect to all active members on July 1, 2002, during the

remainder of their active service.

(2)  [Thereafter] For the fiscal years beginning July 1,

2003, and ending June 30, 2011, the amount of each annual

accrued liability contribution shall be equal to the amount

of such contribution for the fiscal year, beginning July 1,

2002, except that, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2002, but before

July 1, 2003, such additional liability shall be funded over

a period of ten years from the first day of July, coincident

with or next following the effective date of the increase.

The amount of each annual accrued liability contribution for

such additional legislative liabilities shall be equal to the

amount of such contribution for the first annual payment.

(3)  Notwithstanding any other provision of law,

beginning July 1, 2004, and ending June 30, 2011, the

outstanding balance of the increase in accrued liability due

to the change in benefits enacted in 2001 and the outstanding

balance of the net actuarial loss incurred in fiscal year

2000-2001 shall be amortized in equal dollar annual

contributions over a period that ends 30 years after July 1,

2002, and the outstanding balance of the net actuarial loss

incurred in fiscal year 2001-2002 shall be amortized in equal

dollar annual contributions over a period that ends 30 years

after July 1, 2003. For fiscal years beginning on or after

July 1, 2004, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2003, such

additional liability shall be funded in equal dollar annual

contributions over a period of ten years from the first day

of July coincident with or next following the effective date

of the increase.

(4)  For the fiscal year beginning July 1, 2011, the

accrued liability contribution rate shall be computed as the

rate of total compensation of all active members which shall

be certified by the actuary as sufficient to fund as a level

percentage of compensation over a period of 30 years from

July 1, 2011, the present value of the liabilities for all

prospective benefits calculated as of June 30, 2010,

including the supplemental benefits as provided in sections

8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and

8348.7, in excess of the actuarially calculated assets in the

fund (calculated recognizing all realized and unrealized

investment gains and losses each year in level annual

installments over a ten-year period). In the event that the

accrued liability is increased by legislation enacted

subsequent to June 30, 2010, such additional liability shall

be funded as a level percentage of compensation over a period

of ten years from the July 1 second succeeding the date such

legislation is enacted.

(d)  Supplemental annuity contribution rate.--[Contributions]

(1)  For the period of July 1, 2002, to June 30, 2011,

contributions from the Commonwealth and other employers

required to provide for the payment of the supplemental

annuities provided for in sections 8348, 8348.1, 8348.2,

8348.4 and 8348.5 shall be paid over a period of ten years

from July 1, 2002. The funding for the supplemental annuities

commencing 2002 provided for in section 8348.6 shall be as

provided in section 8348.6(f). The funding for the

supplemental annuities commencing 2003 provided for in

section 8348.7 shall be as provided in section 8348.7(f). The

amount of each annual supplemental annuities contribution

shall be equal to the amount of such contribution for the

fiscal year beginning July 1, 2002. [In the event that

supplemental annuities are increased by legislation enacted

subsequent to June 30, 2002, the additional liability for the

increased benefits to be amortized shall be funded in equal

dollar annual installments over a period of ten years.]

(2)  For fiscal years beginning July 1, 2011,

contributions from the Commonwealth and other employers whose

employees are members of the system required to provide for

the payment of supplemental annuities as provided in sections

8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and

8348.7 shall be paid as part of the accrued liability

contribution rate as provided for in subsection (c)(4), and

there shall not be a separate supplemental annuity

contribution rate attributable to those supplemental

annuities. In the event that supplemental annuities are

increased by legislation enacted subsequent to June 30, 2010,

the additional liability for the increase in benefits shall

be funded as a level percentage of compensation over a period

of ten years from the July 1 second succeeding the date such

legislation is enacted.

(e)  Experience adjustment factor.--

(1)  For each year after the establishment of the accrued

liability contribution rate for the fiscal year beginning

July 1, [2002] 2011, any increase or decrease in the unfunded

accrued liability, excluding the gains or losses on the

assets of the health insurance account, due to actual

experience differing from assumed experience, changes in

actuarial assumptions[,] assumptions, changes in

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contributions caused by the final contribution rate being

different from the actuarially required contribution rate or 

changes in the terms and conditions of the benefits provided

by the system by judicial, administrative or other processes

other than legislation, including, but not limited to,

reinterpretation of the provisions of this part, shall be

amortized [in equal dollar annual contributions] as a level

percentage of compensation over a period of [ten] 30 years

beginning with the July 1 second succeeding the actuarial

valuation determining said increases or decreases.

(2)  [Notwithstanding the provisions of paragraph (1),

for each year after the establishment of the accrued

liability contribution rate for the fiscal year beginning

July 1, 2003, any increase or decrease in the unfunded

accrued liability, excluding the gains or losses on the

assets of the health insurance account, due to actual

experience differing from assumed experience, changes in

actuarial assumptions, changes in the terms and conditions of

the benefits provided by the system by judicial,

administrative or other processes other than legislation,

including, but not limited to, reinterpretation of the

provisions of this part, shall be amortized in equal dollar

annual contributions over a period of 30 years beginning with

the July 1 second succeeding the actuarial valuation

determining said increases and decreases] (Reserved).

(f)  Premium assistance contribution rate.--For each fiscal

year beginning with July 1, 1991, the total contribution rate as

calculated according to this section shall be increased annually

in the full amount certified by the board as necessary to fund

the premium assistance program in accordance with section 8509

(relating to health insurance premium assistance program),

notwithstanding any other provisions of this section.

(g)  Temporary application of collared contribution rate.--

(1)  The collared contribution rate for each year shall

be determined by comparing the actuarially required

contribution rate, calculated without regard for the costs

added by legislation, to the prior year's final contribution

rate.

(2)  If, for any of the fiscal years beginning July 1,

2011, July 1, 2012, and on or after July 1, 2013, the

actuarially required contribution rate, calculated without

regard for the costs added by legislation, is more than 3%,

3.5% and 4.5%, respectively, of the total compensation of all

active members greater than the prior year's final

contribution rate, then the collared contribution rate shall

be applied and be equal to the prior year's final

contribution rate increased by 3%, 3.5% and 4.5%,

respectively, of total compensation of all active members.

Otherwise, and for all other fiscal years, the collared

contribution rate shall not be applicable. In no case shall

the collared contribution rate be less than 4% of the total

compensation of all active members.

(h)  Final contribution rate.--

(1)  For the fiscal year beginning July 1, 2010, the

final contribution rate shall be 5% of the total compensation

of all active members. For each subsequent fiscal year for

which the collared contribution rate is applicable, the final

contribution rate shall be the collared contribution rate as

calculated in subsection (g), plus the costs added by

legislation.

(2)  For all other fiscal years, the final contribution

rate shall be the actuarially required contribution rate,

provided that the final contribution rate shall not be less

than the normal contribution rate as provided in subsection

(b).

(i)  Definitions.--As used in this section, the following

words and phrases shall have the meanings given to them in this

subsection unless the context clearly indicates otherwise:

"Actuarially required contribution rate."  The sum of the

following:

(1)  the normal contribution rate as calculated in

subsection (b);

(2)  the accrued liability contribution rate as

calculated in subsection (c);

(3)  the supplemental annuity contribution rate as

calculated in subsection (d);

(4)  the experience adjustment factor as calculated in

subsection (e); and

(5)  any costs added by legislation enacted prior to the

last actuarial valuation.

"Costs added by legislation."  The sum, if positive, of all

changes in the actuarially required contribution rate resulting

from legislation enacted in the year since the last actuarial

valuation and not included in the determination of the prior

year's final contribution rate, computed as the rate of total

compensation of all active members certified by the actuary as

sufficient to make the employer normal contributions and

sufficient to amortize legislatively created changes in the

unfunded actuarial liability as a level percentage of

compensation over a period of ten years from the July 1 second

succeeding the date of enactment.

§ 8348.1.  Additional supplemental annuities.

* * *

(f)  Funding.--The actuary shall annually certify the amount

of Commonwealth appropriations for the next fiscal year needed

to fund, over a period of ten years from July 1, 2002, the

additional monthly supplemental annuity provided for in this

section[. The board shall submit the actuary's certification to

the Secretary of the Budget on or before November 1 of each

year. If, in any year after 1984, the amount certified is

disapproved under section 610 of the act of April 9, 1929

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

insufficient to meet the funding requirements of this subsection

or is not appropriated on or before July 1, the additional

supplemental annuity provided for in this section shall be

suspended until such time as an amount certified and approved as

sufficient is appropriated], which amounts shall be paid during

the period beginning July 1, 2002, and ending June 30, 2011. For

fiscal years beginning on or after July 1, 2011, the additional

liability provided in this section shall be funded as part of

the actuarial accrued liability as provided in section 8328

(relating to actuarial cost method).

* * *

§ 8348.2.  Further additional supplemental annuities.

* * *

(f)  Funding.--The actuary shall annually estimate the amount

of Commonwealth appropriations for the next fiscal year needed

to fund, over a period of ten years from July 1, 2002, the

additional monthly supplemental annuity provided for in this

section[. The board shall submit the actuary's estimation to the

Secretary of the Budget on or before November 1 of each year.

If, in any year after 1988, the amount estimated is disapproved

under section 610 of the act of April 9, 1929 (P.L.177, No.175),

known as The Administrative Code of 1929, as insufficient to

meet the funding requirements of this subsection or is not

appropriated on or before July 1, the additional supplemental

annuity provided for in this section shall be suspended until

such time as an amount certified and approved as sufficient is

appropriated], which amounts shall be paid during the period

beginning July 1, 2002, and ending June 30, 2011. For fiscal

years beginning on or after July 1, 2011, the additional

liability provided in this section shall be funded as part of

the actuarial accrued liability as provided in section 8328

(relating to actuarial cost method).

* * *

§ 8348.3.  Supplemental annuities commencing 1994.

* * *

(f)  Funding.--[The]

(1)  For the period beginning July 1, 2002, and ending

June 30, 2011, the additional liability for the increase in

benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years

beginning July 1, 2002.

(2)  For fiscal years beginning on or after July 1, 2011,

the additional liability provided in this section shall be

funded as part of the actuarial accrued liability as provided

in section 8328 (relating to actuarial cost method).

* * *

§ 8348.5.  Supplemental annuities commencing 1998.

* * *

(f)  Funding.--[The]

(1)  For the period beginning July 1, 2002, and ending

June 30, 2011, the additional liability for the increase in

benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years

beginning July 1, 2002.

(2)  For fiscal years beginning on or after July 1, 2011,

the additional liability provided in this section shall be

funded as part of the actuarial accrued liability as provided

in section 8328 (relating to actuarial cost method).

(3)  Notwithstanding the provisions of section 212 of the

act of April 22, 1998 (P.L.1341, No.6A), known as the General

Appropriation Act of 1998, regarding payment for cost-of-

living increases for annuitants, payments for cost-of-living

increases for annuitants shall be made under section 8535

(relating to payments to school entities by Commonwealth).

* * *

§ 8348.6.  Supplemental annuities commencing 2002.

* * *

(f)  Funding.--[The]

(1)  For the period beginning July 1, 2002, and ending

June 30, 2011, the additional liability for the increase in

benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years

beginning July 1, 2003.

(2)  For fiscal years beginning on or after July 1, 2011,

the additional liability provided in this section shall be

funded as part of the actuarial accrued liability as provided

in section 8328 (relating to actuarial cost method).

* * *

§ 8348.7.  Supplemental annuities commencing 2003.

* * *

(f)  Funding.--[The]

(1)  For the period beginning July 1, 2002, and ending

June 30, 2011, the additional liability for the increase in

benefits provided in this section shall be funded in equal

dollar annual installments over a period of ten years

beginning July 1, 2004.

(2)  For fiscal years beginning on or after July 1, 2011,

the additional liability provided in this section shall be

funded as part of the actuarial accrued liability as provided

in section 8328 (relating to actuarial cost method).

* * *

§ 8502.  Administrative duties of board.

* * *

(k)  Certification of employer contributions.--The board

shall, each year in addition to the itemized budget required

under section 8330 (relating to appropriations by the

Commonwealth), certify to the employers and the Commonwealth the

employer contribution rate expressed as a percentage of members'

payroll necessary for the funding of prospective annuities for

active members and the annuities of annuitants, and certify the

rates and amounts of the normal contributions as determined

pursuant to section 8328(b) (relating to actuarial cost method),

accrued liability contributions as determined pursuant to

section 8328(c), supplemental annuities contribution rate as

determined pursuant to section 8328(d) [and], the experience

adjustment factor as determined pursuant to section 8328(e)

[and], premium assistance contributions as determined pursuant

to section 8328(f), the costs added by legislation as determined

pursuant to section 8328(i), the actuarial required contribution

rate as determined pursuant to section 8328(i), the collared

contribution rate as determined pursuant to section 8328(g) and

the final contribution rate as determined pursuant to section

8328(h), which shall be paid to the fund and credited to the

appropriate accounts. These certifications shall be regarded as

final and not subject to modification by the [Budget Secretary]

Secretary of the Budget.

* * *

§ 8535.  Payments to school entities by Commonwealth.

For each school year beginning with the 1995-1996 school

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

contributions based upon school service of active members of the

system after June 30, 1995, as follows:

* * *

(3)  School entities shall have up to five days after

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

liability to make payment to the Public School Employees'

Retirement Fund. School entities are expected to make the

full payment to the Public School Employees' Retirement Fund

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

§ 5501.1.  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:

"Actuarially required contribution rate."  The employer

contribution rate as calculated pursuant to section 5508(a),

(b), (c), (e) and (f) (relating to actuarial cost method).

"Costs added by legislation."  The sum, if positive, of all

changes in the actuarially required contribution rate resulting

from legislation enacted in the year since the last actuarial

valuation and not included in the determination of the prior

year's final contribution rate, computed as the rate of total

compensation of all active members certified by the actuary as

sufficient to make the employer normal contributions and

sufficient to amortize legislatively created changes in the

unfunded actuarial liability as a level percentage of

compensation over a period of ten years from the July 1

following the valuation date.

Section 4.  Sections 5507, 5508, 5708.1(f), 5708.2(f),

5708.3(f), 5708.5(f), 5708.6(f), 5708.7(f), 5708.8(g), 5902(k), 

5907(c), 5934 and 5938 of Title 71 are amended to read:

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§ 5507.  Contributions by the Commonwealth and other employers.

(a)  Contributions on behalf of active members.--The

Commonwealth and other employers whose employees are members of

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

active members in such amounts as shall be certified by the

board as necessary to provide, together with the members' total

accumulated deductions, annuity reserves on account of

prospective annuities other than those provided in section 5708

(relating to supplemental annuities), 5708.1 (relating to

additional supplemental annuities), 5708.2 (relating to further

additional supplemental annuities), 5708.3 (relating to

supplemental annuities commencing 1994), 5708.4 (relating to

special supplemental postretirement adjustment), 5708.5

(relating to supplemental annuities commencing 1998), 5708.6

(relating to supplemental annuities commencing 2002), 5708.7

(relating to supplemental annuities commencing 2003) and 5708.8

(relating to special supplemental postretirement adjustment of

2002), in accordance with the actuarial cost method provided in

section 5508(a), (b), (c), (d) and (f) (relating to actuarial

cost method).

(b)  Contributions on behalf of annuitants.--The Commonwealth

and other employers whose employees are members of the system 

shall make contributions on behalf of annuitants in such amounts

as shall be certified by the board as necessary to fund the

liabilities for supplemental annuities in accordance with the

actuarial cost method provided in section 5508(e) (relating to

actuarial cost method).

(c)  Contributions transferred by county retirement

systems.--

(1)  Each county retirement system or pension plan which

is notified by certification from the board that a former

contributor who was transferred to State employment pursuant

to 42 Pa.C.S. § 1905 (relating to county-level court

administrators) has elected to convert county service to

State service in accordance with section 5303.1 (relating to

election to convert county service to State service) shall

transfer to the board an amount equal to the actuarial

liability for the additional benefits that result in the

system as a result of the conversion as certified by the

board. This amount shall be calculated in such a manner and

using such actuarial factors and assumptions as the board,

after obtaining the advice of its actuary, shall determine

and shall be calculated by determining the present value of

the future benefits for the former county contributors and

subtracting from that present value the present value of

future employee contributions and future employer normal cost

contributions.

(2)  The transfer shall occur no later than 180 days

after the certification by the board of the actuarial

liability for the additional benefits or 30 days following

the date of termination of service if the member terminates

State service after making the election to convert service,

whichever occurs first.

(3)  If any county retirement system or pension plan

fails to transfer, within the required time, the money

certified by the board under this subsection, then the

service of such members for the period of converted service

shall be credited, and the board shall notify the county

which employed the employee who is converting the county

service and the State Treasurer of the amount due. The State

Treasurer shall withhold out of any grants, subsidies or

other payments from the State General Fund appropriation or

appropriations next due such county an amount equal to the

amount which the county retirement system or pension plan

failed to pay and shall pay the amount so withheld to the

board for the payment of the amount due from that county's

retirement system or pension plan for the converted service.

(d)  Payment of final contribution rate.--Notwithstanding the

calculation of the actuarially required contribution rate and

the provisions of subsections (a) and (b), the Commonwealth and

other employers whose employees are members of the system shall

make contributions to the fund on behalf of all active members

and annuitants in such amounts as shall be certified by the

board in accordance with section 5508(i).

(e)  Benefits completion plan contributions.--In addition to

all other contributions required under this section and section

5508, the Commonwealth and other employers shall make

contributions as certified by the board pursuant to section 5941

(relating to benefits completion plan).

§ 5508.  Actuarial cost method.

(a)  Employer contribution rate on behalf of active

members.--The amount of the Commonwealth and other employer

contributions on behalf of all active members shall be computed

by the actuary as a percentage of the total compensation of all

active members during the period for which the amount is

determined and shall be so certified by the board. The [total

employer] actuarially required contribution rate on behalf of

all active members shall consist of the employer normal

contribution rate, as defined in subsection (b), and the accrued

liability contribution rate as defined in subsection (c). The

[total employer] actuarially required contribution rate on

behalf of all active members shall be modified by the experience

adjustment factor as calculated in subsection (f) [but in no

case shall it be less than zero. The total employer contribution

rate shall be modified by the experience adjustment factor as

calculated in subsection (f), but in no case shall it be less

than:

(1)  2% for the fiscal year beginning July 1, 2004;

(2)  3% for the fiscal year beginning July 1, 2005; and

(3)  4% for the fiscal year beginning July 1, 2006, and

thereafter].

(b)  Employer normal contribution rate.--The employer normal

contribution rate shall be determined after each actuarial

valuation on the basis of an annual interest rate and such

mortality and other tables as shall be adopted by the board in

accordance with generally accepted actuarial principles. The

employer normal contribution rate shall be determined as a level

percentage of the compensation of the average new active member,

which percentage, if contributed on the basis of his prospective

compensation through his entire period of active State service,

would be sufficient to fund the liability for any prospective

benefit payable to him[, except for the supplemental benefits

provided for in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

annuities), 5708.2 (relating to further additional supplemental

annuities), 5708.3 (relating to supplemental annuities

commencing 1994), 5708.4 (relating to special supplemental

postretirement adjustment), 5708.5 (relating to supplemental

annuities commencing 1998), 5708.6 (relating to supplemental

annuities commencing 2002), 5708.7 (relating to supplemental

annuities commencing 2003) and 5708.8 (relating to special

supplemental postretirement adjustment of 2002),] in excess of

that portion funded by his prospective member contributions.

(c)  Accrued liability contribution rate.--

(1)  For the fiscal [year] years beginning July 1, 2002, 

and July 1, 2003, the accrued liability contribution rate

shall be computed as the rate of total compensation of all

active members which shall be certified by the actuary as

sufficient to fund over a period of ten years from July 1,

2002, the present value of the liabilities for all

prospective benefits, except for the supplemental benefits as

provided in sections 5708 (relating to supplemental

annuities), 5708.1 (relating to additional supplemental

annuities), 5708.2 (relating to further additional

supplemental annuities), 5708.3 (relating to supplemental

annuities commencing 1994), 5708.4 (relating to special

supplemental postretirement adjustment), 5708.5 (relating to

supplemental annuities commencing 1998), 5708.6 (relating to

supplemental annuities commencing 2002), 5708.7 (relating to

supplemental annuities commencing 2003) and 5708.8 (relating

to special supplemental postretirement adjustment of 2002),

in excess of the total assets in the fund (calculated

recognizing all investment gains and losses over a five-year

period), excluding the balance in the supplemental annuity

account, and the present value of employer normal

contributions and of member contributions payable with

respect to all active members on December 31, 2001, and

excluding contributions to be transferred by county

retirement systems or pension plans pursuant to section

5507(c) (relating to contributions by the Commonwealth and

other employers). The amount of each annual accrued liability

contribution shall be equal to the amount of such

contribution for the fiscal year beginning July 1, 2002,

except that, if the accrued liability is increased by

legislation enacted subsequent to June 30, 2002, but before

July 1, 2003, such additional liability shall be funded over

a period of ten years from the first day of July, coincident

with or next following the effective date of the increase.

The amount of each annual accrued liability contribution for

such additional legislative liabilities shall be equal to the

amount of such contribution for the first annual payment.

(2)  Notwithstanding any other provision of law,

beginning July 1, 2004, and ending June 30, 2010, the

outstanding balance of the increase in accrued liability due

to the change in benefits enacted in 2001 shall be amortized

in equal dollar annual contributions over a period that ends

30 years after July 1, 2002, and the outstanding balance of

the net actuarial loss incurred in calendar year 2002 shall

be amortized in equal dollar annual contributions over a

period that ends 30 years after July 1, 2003. For fiscal

years beginning on or after July 1, 2004, and ending June 30,

2010, if the accrued liability is increased by legislation

enacted subsequent to June 30, 2003, but before January 1,

2009, such additional liability shall be funded in equal

dollar annual contributions over a period of ten years from

the first day of July coincident with or next following the

effective date of the increase.

(3)  For the fiscal year beginning July 1, 2010, the

accrued liability contribution rate shall be computed as the

rate of total compensation of all active members which shall

be certified by the actuary as sufficient to fund as a level

percentage of compensation over a period of 30 years from

July 1, 2010, the present value of the liabilities for all

prospective benefits calculated as of the immediately prior

valuation date, including the supplemental benefits as

provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4,

5708.5, 5708.6, 5708.7 and 5708.8, but excluding the benefits

payable from the retirement benefit plan established pursuant

to section 5941 (relating to benefits completion plan), in

excess of the actuarially calculated assets in the fund

(calculated recognizing all realized and unrealized

investment gains and losses each year in level annual

installments over five years), including the balance in the

supplemental annuity account, and the present value of

employer normal contributions and of member contributions

payable with respect to all active members, inactive members

on leave without pay, vestees and special vestees on December

31, 2009. If the accrued liability is changed by legislation

enacted subsequent to December 31, 2009, such change in

liability shall be funded as a level percentage of

compensation over a period of ten years from the first day of

July following the valuation date coincident with or next

following the date such legislation is enacted.

(d)  Special provisions on calculating contributions.--In

calculating the contributions required by subsections (a), (b)

and (c), the active members of Class C shall be considered to be

members of Class A. In addition, the actuary shall determine the

Commonwealth or other employer contributions required for active

members of Class C and officers of the Pennsylvania State Police

and enforcement officers and investigators of the Pennsylvania

Liquor Control Board who are members of Class A to finance their

benefits in excess of those to which other members of Class A

are entitled. Such additional contributions shall be determined

separately for officers and employees of the Pennsylvania State

Police and for enforcement officers and investigators of the

Pennsylvania Liquor Control Board. Such contributions payable on

behalf of officers and employees of the Pennsylvania State

Police shall include the amounts received by the system under

the provisions of the act of May 12, 1943 (P.L.259, No.120),

referred to as the Foreign Casualty Insurance Premium Tax

Allocation Law, and on behalf of enforcement officers or

investigators of the Pennsylvania Liquor Control Board, the

amounts received by the system under the provisions of the act

of April 12, 1951 (P.L.90, No.21), known as the Liquor Code.

(e)  Supplemental annuity contribution rate.--[Contributions]

(1)  For the period July 1, 2002, to June 30, 2010,

contributions from the Commonwealth and other employers whose

employees are members of the system required to provide for

the payment of supplemental annuities as provided in sections

5708, 5708.1, 5708.2, 5708.3, 5708.4 and 5708.5 shall be paid

over a period of ten years from July 1, 2002. The funding for

the supplemental annuities commencing 2002 provided for in

section 5708.6 shall be as provided in section 5708.6(f). The

funding for the supplemental annuities commencing 2003

provided for in section 5708.7 shall be as provided in

section 5708.7(f). The funding for the special supplemental

postretirement adjustment of 2002 under section 5708.8 shall

be as provided in section 5708.8(g). The amount of each

annual supplemental annuities contribution shall be equal to

the amount of such contribution for the fiscal year beginning

July 1, 2002. [In the event that supplemental annuities are

increased by legislation enacted subsequent to June 30, 2002,

the additional liability for the increase in benefits shall

be funded in equal dollar annual installments over a period

of ten years from the July first, coincident with or next

following the effective date of such legislation.]

(2)  For fiscal years beginning on or after July 1, 2010,

contributions from the Commonwealth and other employers whose

employees are members of the system required to provide for

the payment of supplemental annuities as provided in sections

5708, 5708.1, 5708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7

and 5708.8 shall be paid as part of the accrued liability

contribution rate as provided for in subsection (c)(3) and

there shall not be a separate supplemental annuity

contribution rate attributable to those supplemental

annuities. In the event that supplemental annuities are

increased by legislation enacted subsequent to December 31,

2009, the additional liability for the increase in benefits

shall be funded as a level percentage of compensation over a

period of ten years from the first day of July following the

valuation date coincident with or next following the date

such legislation is enacted.

(f)  Experience adjustment factor.--

(1)  For each year after the establishment of the accrued

liability contribution rate and the supplemental annuity

contribution rate for the fiscal year beginning July 1,

[2002] 2010, any increase or decrease in the unfunded accrued 

liability[, including liability] and any increase or decrease

in the liabilities and funding for supplemental annuities,

due to actual experience differing from assumed experience[,]

(recognizing all realized and unrealized investment gains and

losses over a five-year period), changes in contributions

caused by the final contribution rate being different from

the actuarially required contribution rate, changes in

actuarial assumptions[,] or changes in the terms and

conditions of the benefits provided by the system by

judicial, administrative or other processes other than

legislation, including, but not limited to, reinterpretation

of the provisions of this part, shall be amortized [in equal

dollar annual contributions] as a level percentage of

compensation over a period of [ten] 30 years beginning with

the July 1 succeeding the actuarial valuation determining

said increases or decreases.

(2)  [Notwithstanding the provisions of paragraph (1),

for each year after the establishment of the accrued

liability contribution rate for the fiscal year beginning

July 1, 2003, any increase or decrease in the unfunded

accrued liability due to actual experience differing from

assumed experience, changes in actuarial assumptions, changes

in the terms and conditions of the benefits provided by the

system by judicial, administrative or other processes other

than legislation, including, but not limited to,

reinterpretation of the provisions of this part, shall be

amortized in equal dollar annual contributions over a period

of 30 years beginning with the July 1 succeeding the

actuarial valuation determining said increases and decreases]

The actuarially required contribution rate shall be the sum

of the normal contribution rate, the accrued liability

contribution rate and the supplemental annuity contribution

rate, modified by the experience adjustment factor as

calculated in paragraph (1).

(g)  Determination of liability for special vestee.--

Notwithstanding any other provision of this part or other law,

the total additional accrued actuarial liability resulting from

eligibility of special vestees for benefits upon the attainment

of superannuation age shall be determined by the actuary as part

of the first annual valuation made after June 30, 1997. The

resulting additional accrued actuarial liability shall be paid

by The Pennsylvania State University to the board in one lump

sum payment within 90 days of the board's certification of the

amount to The Pennsylvania State University.

(h)  Temporary application of collared contribution rate.--

The collared contribution rate for each year shall be determined

by comparing the actuarially required contribution rate

calculated without regard for costs added by legislation to the

prior year's final contribution rate. If for any of the fiscal

years beginning July 1, 2011, July 1, 2012 and on or after July

1, 2013, the actuarially required contribution rate calculated

without regard for costs added by legislation is more than 3%,

3.5% and 4.5%, respectively, of the total compensation of all

active members greater than the prior year's final contribution

rate, then the collared contribution rate shall be applied and

be equal to the prior year's final contribution rate increased

by the respective percentage above of total compensation of all

active members. Otherwise, and for all subsequent fiscal years,

the collared contribution rate shall not be applicable. In no

case shall the collared contribution rate be less than 4% of

total compensation of all active members.

(i)  Final contribution rate.--For the fiscal year beginning

July 1, 2010, the final contribution rate shall be 5% of total

compensation of all active members. For each subsequent fiscal

year for which the collared contribution rate is applicable, the

final contribution rate shall be the collared contribution rate

plus the costs added by legislation. For all other fiscal years,

the final contribution rate shall be the actuarially required

contribution rate, provided that the final contribution rate

shall not be less than the employer normal contribution rate, as

defined in subsection (b).

§ 5708.1.  Additional supplemental annuities.

* * *

(f)  Funding.--The actuary shall annually certify the amount

of appropriations for the next fiscal year needed to fund, over

a period of ten years from July 1, 2002, the additional monthly

supplemental annuity provided for in this section[. The board

shall submit the actuary's certification to the Secretary of the

Budget on or before November 1 of each year. If, in any year

after 1984, the amount certified is disapproved under section

610 of the act of April 9, 1929 (P.L.177, No.175), known as The

Administrative Code of 1929, as insufficient to meet the funding

requirements of this subsection or is not appropriated on or

before July 1, the additional supplemental annuity provided for

in this section shall be suspended until such time as an amount

certified and approved as sufficient is appropriated], which

amounts shall be paid during the period beginning July 1, 2002,

and ending June 30, 2010. For fiscal years beginning on or after

July 1, 2010, the additional liability provided in this section

shall be funded as part of the actuarial accrued liability as

provided in section 5508 (relating to actuarial cost method).

* * *

§ 5708.2.  Further additional supplemental annuities.

* * *

(f)  Funding.--The actuary shall annually estimate the amount

of Commonwealth appropriations for the next fiscal year needed

to fund, over a period of ten years from July 1, 2002, the

additional monthly supplemental annuity provided for in this

section[. The board shall submit the actuary's estimation to the

Secretary of the Budget on or before November 1 of each year.

If, in any year after 1988, the amount estimated is disapproved

under section 610 of the act of April 9, 1929 (P.L.177, No.175),

known as The Administrative Code of 1929, as insufficient to

meet the funding requirements of this subsection or is not

appropriated on or before July 1, the additional supplemental

annuity provided for in this section shall be suspended until

such time as an amount certified and approved as sufficient is

appropriated], which amounts shall be paid during the period

beginning July 1, 2002, and ending June 30, 2010. For fiscal

years beginning on or after July 1, 2010, the additional

liability provided in this section shall be funded as part of

the actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5708.3.  Supplemental annuities commencing 1994.

* * *

(f)  Funding.--[The] For the period beginning July 1, 2002,

and ending June 30, 2010, the additional liability for the

increase in benefits provided in this section shall be funded in

equal dollar annual installments over a period of ten years

beginning July 1, 2002. For fiscal years beginning on or after

July 1, 2010, the additional liability for the increase in

benefits provided in this section shall be funded as part of the

actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5708.5.  Supplemental annuities commencing 1998.

* * *

(f)  Funding.--[The] For the period beginning July 1, 2002,

and ending June 30, 2010, the additional liability for the

increase in benefits provided in this section shall be funded in

equal dollar annual installments over a period of ten years

beginning July 1, 2002. For fiscal years beginning on or after

July 1, 2010, the additional liability for the increase in

benefits provided in this section shall be funded as part of the

actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5708.6.  Supplemental annuities commencing 2002.

* * *

(f)  Funding.--[The] For the period beginning July 1, 2003,

and ending June 30, 2010, the additional liability for the

increase in benefits provided in this section shall be funded in

equal dollar annual installments over a period of ten years

beginning July 1, 2003. For fiscal years beginning on or after

July 1, 2010, the additional liability for the increase in

benefits provided in this section shall be funded as part of the

actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5708.7.  Supplemental annuities commencing 2003.

* * *

(f)  Funding.--[The] For the period beginning July 1, 2004,

and ending June 30, 2010, the additional liability for the

increase in benefits provided in this section shall be funded in

equal dollar annual installments over a period of ten years

beginning July 1, 2004. For fiscal years beginning on or after

July 1, 2010, the additional liability for the increase in

benefits provided in this section shall be funded as part of the

actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5708.8.  Special supplemental postretirement adjustment of

2002.

* * *

(g)  Funding.--[The] For the period beginning July 1, 2003,

and ending June 30, 2010, the additional liability for the

increase in benefits provided in this section shall be funded in

equal dollar annual installments over a period of ten years

beginning July 1, 2003. For fiscal years beginning on or after

July 1, 2010, the additional liability for the increase in

benefits provided in this section shall be funded as part of the

actuarial accrued liability as provided in section 5508

(relating to actuarial cost method).

* * *

§ 5902.  Administrative duties of the board.

* * *

(k)  Certification of employer contributions.--The board

shall, each year in addition to the itemized budget required

under section 5509 (relating to appropriations and assessments

by the Commonwealth), certify, as a percentage of the members'

payroll, the employers' contributions as determined pursuant to

section 5508 (relating to actuarial cost method) necessary for

the funding of prospective annuities for active members and the

annuities of annuitants and certify the rates and amounts of the

employers' normal contributions as determined pursuant to

section 5508(b), accrued liability contributions as determined

pursuant to section 5508(c), supplemental annuities contribution

rate as determined pursuant to section 5508(e) [and], the

experience adjustment factor as determined pursuant to section

5508(f), the collared contribution rate pursuant to section

5508(h) and the final contribution rate pursuant to section

5508(i), which shall be paid to the fund and credited to the

appropriate accounts. The board may allocate the final

contribution rate and certify various employer contribution

rates based upon the different benefit eligibility, class of

service multiplier, superannuation age and other benefit

differences resulting from State service credited for individual

members even though such allocated employer contribution rate on

behalf of any given member may be more or less than 5% of the

member's compensation for the period from July 1, 2010, to June

30, 2011, or may differ from the prior year's contribution for

that member by more or less than the percentages used to

calculate the collared contribution rate for that year and may

be below any minimum contribution rate established for the

collared contribution rate or final contribution rate. These

certifications shall be regarded as final and not subject to

modification by the [Budget Secretary] Secretary of the Budget.

* * *

§ 5907.  Rights and duties of State employees and members.

<--

* * *

(c)  Multiple service membership.--Any active member who was

formerly an active member in the Public School Employees'

Retirement System may elect to become a multiple service member.

Such election shall occur no later than [30] 365 days after

becoming an active member in this system.

* * *

§ 5934.  State accumulation account.

The State accumulation account shall be the ledger account to

which shall be credited all contributions of the Commonwealth or

other employers whose employees are members of the system and

made in accordance with the provisions of section 5507(a) or (d) 

(relating to contributions by the Commonwealth and other

employers) except that the amounts received under the provisions

of the act of May 12, 1943 (P.L.259, No.120), and the amounts

received under the provisions of the Liquor Code, act of April

12, 1951 (P.L.90, No.21), shall be credited to the State Police

benefit account or the enforcement officers' benefit account as

the case may be. All amounts transferred to the fund by county

retirement systems or pension plans in accordance with the

provisions of section 5507(c) also shall be credited to the

State accumulation account. All amounts transferred to the fund

by the Public School Employees' Retirement System in accordance

with section 5303.2(e) (relating to election to convert school

service to State service), except amounts credited to the

members' savings account, and all amounts paid by the Department

of Corrections in accordance with section 5303.2(f) also shall

be credited to the State accumulation account. The State