AN ACT

 

1Amending Titles 24 (Education), 51 (Military Affairs) and 71
2(State Government) of the Pennsylvania Consolidated Statutes,
3extensively revising pension provisions: for the Public
4School Employees' Retirement System, in the areas of
5preliminary provisions, of membership, contributions and
6benefits, of School Employees' Defined Contribution Plan, of
7administration and miscellaneous provisions and of health
8insurance for retired school employees; for military
9pensions, in the area of military leave of absence; for the
10State Employees' Retirement System, in the areas of
11preliminary provisions, of membership, credited service,
12classes of service and eligibility for benefits, of School
13Employees' Defined Contribution Plan and of contributions, of
14benefits, administration, funds, accounts, general
15provisions; and providing, as to the revisions, for
16construction, applicability, funding, amortization, re-
17amortization, recertification, liability and legal challenge.

18The General Assembly of the Commonwealth of Pennsylvania
19hereby enacts as follows:

20ARTICLE I

21Section 101. The definitions of <-"active member," "alternate 
22payee," "basic contribution rate," "beneficiary," "class of 
23service multiplier," <-"alternate payee," "beneficiary,"
24"compensation," "creditable nonschool service," "credited
25service," "date of termination of service," "distribution,"

1"domestic relations order," "eligible annuitants," <-"final 
2average salary," "inactive member," "intervening military
3service," "irrevocable beneficiary," "leave for service with a
4collective bargaining organization," "previous school service,"
5"salary deductions," <-"standard single life annuity," 
6"superannuation or normal retirement age," "survivor annuitant"<-
7and "valuation interest" in section 8102 of Title 24 of the
8Pennsylvania Consolidated Statutes are amended and the section
9is amended by adding definitions to read:

10§ 8102. Definitions.

11The following words and phrases when used in this part shall
12have, unless the context clearly indicates otherwise, the
13meanings given to them in this section:

14* * *

15"Accumulated employer defined contributions." The total of
16the employer defined contributions paid into the trust on
17account of a participant's school service together with any
18investment earnings and losses and adjustments for fees, costs
19and expenses credited or charged thereon.

20"Accumulated mandatory participant contributions." The total
21of the mandatory pickup participant contributions paid into the
22trust on account of a participant's school service together with
23any investment earnings and losses and adjustments for fees,
24costs and expenses credited or charged thereon.

25"Accumulated total defined contributions." The total of the
26accumulated mandatory participant contributions, accumulated
27employer defined contributions and accumulated voluntary
28contributions, reduced by any distributions, standing to the
29credit of a participant in an individual investment account in
30the trust.

1"Accumulated voluntary contributions." The total of
2voluntary contributions paid into the trust by a participant and
3any amounts rolled over by a participant or transferred by a
4direct trustee-to-trustee transfer into the trust together with
5any investment earnings and losses and adjustments for fees,
6costs and expenses credited or charged thereon.

<-7"Active member." A school employee for whom pickup
8contributions are being made to the fund or for whom such
9contributions otherwise required for current school service are
10not being made solely by reason of any provision of this part
11relating to the limitations under section 401(a)(17) or 415(b)
12of the Internal Revenue Code of 1986 (Public Law 99-514, 26
13U.S.C. § 401(a)(17) or 415(b)) or any provision of this part
14limiting compensation.

15"Active participant." A school employee for whom mandatory
16pickup participant contributions are being made to the trust or
17for whom such contributions otherwise required for current
18school service are not being made solely by reason of any
19provision of this part relating to the limitations under section
20401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public
21Law 99-514, 26 U.S.C. § 401(a)(17) or 415) or any provision of
22this part limiting compensation.

23* * *

24"Alternate payee." Any spouse, former spouse, child or 
25dependent of a member or participant who is recognized by a 
26domestic relations order as having a right to receive all or a 
27portion of the moneys payable to that member or participant 
28under this part.

29* * *

<-30"Annualized service credit." For purposes of determining

1final average salary, the amount of service credit the member
2would have earned if the member worked the number of months that
3the employer typically expects a full-time employee in the same
4position or with the same contract to work during a fiscal year.
5If the member worked fewer months than the number of months for
6the position or contract, the annualized service credit is equal
7to the ratio of the number of months for the position or
8contract over the number of months the member worked, multiplied
9by the actual service credit for the year. Annualized service
10credit is rounded to two decimals and may not be greater than
111.00.

12* * *

13"Basic contribution rate." For Class T-A, T-B and T-C
14service, the rate of 6 1/4%. For Class T-D service, the rate of
157 1/2%. For all active members on the effective date of this
16provision who are currently paying 5 1/4% and elect Class T-D
17service, the rate of 6 1/2%. For Class T-E service, the rate of
187 1/2%. For Class T-F service, the rate of 10.30%. For Class T-G
19service, the rate of 7.5%. For Class T-H service, the rate of
2012.5%. For service performed by a member of the system in a
21fiscal year beginning on or after July 1, 2015, the basic
22contribution rate and shared risk contribution rate shall be
23applied to an amount that may not exceed the Social Security
24taxable wage base in effect at the beginning of the fiscal year.

25"Beneficiary." [The] In the case of the system, the person 
26or persons last designated in writing to the board by a member 
27to receive his accumulated deductions or a lump sum benefit upon 
28the death of such member. In the case of the plan, the spouse of 
29a participant. If the participant is not married or the spouse 
30consents, then the person or persons last designated in writing
 

1to the board by the participant to receive the participant's 
2vested accumulated total defined contributions or a lump sum 
3benefit upon the death of the participant.

4* * *

<-5"Class of service multiplier."

6Class of service

Multiplier

7T-A

.714

8T-B

.625

9T-C

1.000

10T-D

1.000

11T-E

1.000

12T-F

1.000

13T-G

1.000

14T-H

1.000

15"Combined service employee." A current or former school
16employee who is both a member of the system and a participant in
17the plan.

18* * *

19"Compensation." Pickup contributions and mandatory pickup 
20participant contributions plus any remuneration received as a 
21school employee excluding reimbursements for expenses incidental 
22to employment and excluding any bonus, severance payments, any 
23other remuneration or other emolument received by a school 
24employee during his school service which is not based on the 
25standard salary schedule under which he is rendering service, 
26payments for unused sick leave or vacation leave, bonuses or 
27other compensation for attending school seminars and 
28conventions, payments under health and welfare plans based on 
29hours of employment or any other payment or emolument which may 
30be provided for in a collective bargaining agreement which may
 

1be determined by the Public School Employees' Retirement Board 
2to be for the purpose of enhancing compensation as a factor in 
3the determination of final average salary, and for participants, 
4excluding payments for military leave, and any other payments 
5made by an employer while the participant is on USERRA leave, 
6leave of absence granted under 51 Pa.C.S. § 4102 (relating to 
7leaves of absence for certain government employees), military 
8leave of absence granted under 51 Pa.C.S. § 7302 (relating to 
9granting military leaves of absence), military leave of absence 
10granted under section 1176 of the act of March 10, 1949 (P.L.30, 
11No.14), known as the Public School Code of 1949, or other types 
12of military leave, including other types of leave payments, 
13stipends, differential wage payments as defined in the Internal 
14Revenue Code of 1986 § 414(u)(12) and any other payments, 
15provided, however, that the limitation under section 401(a)(17) 
16of the Internal Revenue Code of 1986 (Public Law 99-514, 26 
17U.S.C. § 401(a)(17)) taken into account for the purpose of 
18member contributions, including regular or joint coverage member 
19contributions, regardless of class of service, shall apply to 
20each member who first became a member of the Public School 
21Employes' Retirement System on or after July 1, 1996, and who by 
22reason of such fact is a noneligible member subject to the 
23application of the provisions of section 8325.1 (relating to 
24annual compensation limit under IRC § 401(a)(17))[.] and shall 
25apply to each participant. <-For purposes of determining final 
26average salary and applying the basic contribution rate, 
27compensation received for service performed in a fiscal year 
28beginning on or after July 1, 2015, as a member of the system, 
29may not exceed the Social Security taxable wage base in effect 
30at the beginning of the fiscal year.

1* * *

2"Creditable nonschool service." Service other than service 
3as a school employee for which an active member may obtain 
4credit in the system.

5"Credited service." School or creditable nonschool service 
6for which the required contributions have been made to the fund, 
7or for which the contributions otherwise required for such 
8service were not made solely by reason of any provision of this 
9part relating to the limitations under section 401(a)(17) or 
10415(b) of the Internal Revenue Code of 1986 (Public Law 99-514, 
1126 U.S.C. § 401(a)(17) or 415(b)) <-or a provision of this part 
12limiting compensation, or for which salary deductions to the 
13system or lump sum payments have been agreed upon in writing.

14"Date of termination of service." The last date of service 
15for which:

16(1) pickup contributions are made for an active member 
17[or,];

18(2) in the case of an inactive member, the effective 
19date of his resignation or the date his employment is 
20formally discontinued by his employer or two years following 
21the last day of service for which contributions were made, 
22whichever is earliest[.];

23(3) mandatory pickup participant contributions are made
24for an active participant;

25(4) in the case of an inactive participant, the date of
26his resignation or the date his employment is formally
27discontinued by his employer; or

28(5) in the case of a combined service employee, the
29latest of the dates in paragraph (3) or (4).

30* * *

1"Distribution." Payment of all or any portion of a person's 
2interest in either the Public School Employees' Retirement Fund 
3or the School Employees' Defined Contribution Trust or both 
4which is payable under this part.

5"Domestic relations order." Any judgment, decree or order, 
6including approval of a property settlement agreement, entered 
7on or after the effective date of this definition by a court of 
8competent jurisdiction pursuant to a domestic relations law 
9which relates to the marital property rights of the spouse or 
10former spouse of a member or participant, including the right to 
11receive all or a portion of the moneys payable to that member or 
12participant under this part in furtherance of the equitable 
13distribution of marital assets. The term includes orders of 
14support as that term is defined by 23 Pa.C.S. § 4302 (relating 
15to definitions) and orders for the enforcement of arrearages as 
16provided in 23 Pa.C.S. § 3703 (relating to enforcement of 
17arrearages).

18* * *

19"Eligible annuitants." All current and prospective 
20annuitants with 24 1/2 or more eligibility points and all 
21current and prospective disability annuitants. Beginning January 
221, 1995, ["eligible annuitants" shall include] the term includes 
23members with 15 or more eligibility points who terminated or who 
24terminate school service on or after attaining superannuation 
25retirement age and who are annuitants with an effective date of 
26retirement after superannuation age. The term does not include 
27participants.

28* * *

29"Employer defined contributions." Contributions equal to 4%
30of an active participant's compensation that are made by an

1employer for current service to the trust to be credited in the
2active participant's individual investment account.

<-3"Final average salary." [The]

4(1) As applied to service performed and service credit
5purchased before July 1, 2015, as a member of the system, the
6highest average compensation received as an active member,
7not limited by the Social Security taxable wage base, during
8any three nonoverlapping periods of 12 consecutive months
9with the compensation for part-time service being annualized
10on the basis of the fractional portion of the school year for
11which credit is received; except, if the employee was not a
12member for three such periods, the total compensation
13received as an active member annualized in the case of part-
14time service divided by the number of such periods of
15membership; in the case of a member with multiple service
16credit, the final average salary shall be determined by
17reference to compensation received by him as a [school
18employee] member of the system or a State employee, other
19than as a participant in the State Employees' Defined
20Contribution Plan, or both; and, in the case of a noneligible
21member, subject to the application of the provisions of
22section 8325.1 (relating to annual compensation limit under
23IRC § 401(a)(17)).

24(2) As applied to service performed and service credit
25purchased on or after July 1, 2015, as a member of the
26system, the highest average compensation received as an
27active member, as limited by the Social Security taxable wage
28base, during any five fiscal years, with the compensation for
29part-time service being annualized on the basis of the
30fractional portion of the school year for which credit is

1received, provided that if the compensation received during a
2fiscal year included in the period used to determine final
3average salary exceeds that of the average of the previous
4four fiscal years, as limited by the Social Security taxable
5wage base, with the compensation for part-time service being
6annualized on the basis of the fractional portion of the
7school year for which credit is received, and with
8compensation for a partial year of service being annualized,
9by more than 10%, the amount in excess of 10% shall be
10excluded from the computation of final average salary. If the
11employee was not a member for five fiscal years, the formula
12under this definition shall be applied to the extent
13practicable. In the case of a member with multiple service
14credit, the salary shall be determined by reference to
15include compensation received as a school employee or State
16employee or both. In the case of a noneligible member, the
17salary shall be subject to the application of the provisions
18of section 8325.1 (relating to annual compensation limit
19under IRC § 401(a)(17)).

20* * *

21"Inactive member." A member for whom no pickup contributions 
22are being made to the fund, except in the case of an active 
23member for whom such contributions otherwise required for 
24current school service are not being made solely by reason of 
25any provision of this part relating to the limitations under 
26section 401(a)(17) or 415(b) of the Internal Revenue Code of 
271986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)) <-or 
28any provision of this part limiting compensation, who has 
29accumulated deductions standing to his credit in the fund and 
30for whom contributions have been made within the last two school
 

1years or a multiple service member who is active in the State 
2Employees' Retirement System.

3"Inactive participant." A participant for whom no mandatory
4pickup participant contributions are being made to the trust,
5except in the case of an active participant for whom such
6contributions otherwise required for current school service are
7not being made solely by reason of any provision of this part
8relating to limitations under section 401(a)(17) or 415 of the
9Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
10401(a)(17) or 415), who has vested accumulated total defined
11contributions standing to his credit in the trust and who has
12not filed an application for an annuity.

13"Individual investment account." The account in the trust to
14which are credited the amounts of the contributions made by a
15participant and the participant's employer in accordance with
16the provisions of this part, together with all investment
17earnings after deduction for fees, costs and expenses,
18investment losses and charges for distributions.

19"Intervening military service." Active military service of a 
20member who was a school employee and an active member of the 
21system immediately preceding his induction into the armed 
22services or forces of the United States in order to meet a draft 
23obligation excluding any voluntary extension of such 
24obligational service and who becomes a school employee and an 
25active member of the system within 90 days of the expiration of 
26such service.

27* * *

28"Irrevocable beneficiary." The person or persons permanently 
29designated by a member or participant in writing to the board 
30pursuant to an approved domestic relations order to receive all
 

1or a portion of the accumulated deductions, vested accumulated 
2total defined contributions or lump sum benefit payable upon the 
3death of such member or participant.

4"Irrevocable successor payee." The person permanently
5designated in writing by a participant receiving vested
6distributions to the board pursuant to an approved domestic
7relations order to receive one or more distributions from the
8plan upon the death of such participant.

9* * *

10"Leave for service with a collective bargaining 
11organization." Paid leave granted to an active member or active 
12participant by an employer for purposes of working full time for 
13or serving full time as an officer of a Statewide employee 
14organization or a local collective bargaining representative 
15under the act of July 23, 1970 (P.L.563, No.195), known as the 
16Public Employe Relations Act: Provided, That greater than one-
17half of the members of the employee organization are active 
18members of the system or active participants of the plan; that 
19the employer shall fully compensate the member or active 
20participant, including, but not limited to, salary, wages, 
21pension and retirement contributions and benefits, other 
22benefits and seniority, as if he were in full-time active 
23service; and that the employee organization shall fully 
24reimburse the employer for such salary, wages, pension and 
25retirement contributions and benefits and other benefits and 
26seniority.

27"Mandatory pickup participant contributions." Contributions
28equal to 7.5% of compensation that are made by the employer for
29active participants for current service.

30* * *

1"Participant." An active participant, inactive participant
2or participant receiving distributions.

3"Participant receiving distributions." A participant in the
4plan who has commenced receiving distributions from his
5individual investment account but who has not received a total
6distribution of his vested interest in the individual investment
7account.

<-8"Part-time service." For the purposes of calculating final
9average salary, the determination of whether service for a
10fiscal year is part time is based on annualized service credit
11for the year. If the annualized service credit is 1.00, the
12service rendered during the fiscal year is full time. If the
13annualized service credit is less than 1.00, the service
14rendered during the fiscal year is part time.

15* * *

16"Plan." The School Employees' Defined Contribution Plan as
17established by the provisions of this part and the board.

18"Plan document." The documents created by the board under
19section 8402 (relating to plan document) that contain the terms
20and provisions of the plan and trust as established by the board
21regarding the establishment, administration and investment of
22the plan and trust.

23"Previous school service." Service [rendered] as a school 
24employee,<- including service in any summer school conducted by a 
25school district of the Commonwealth, but excluding service 
26rendered during which the school employee was or could have been 
27a participant in the plan, prior to the member's most recent 
28entrance in the system.

29* * *

30"Reemployed from USERRA leave." Resumption of active

1participation as a school employee after a period of USERRA
2leave, provided the resumption of active participation was
3within the time period and under conditions and circumstances
4such that the school employee was entitled to reemployment
5rights under 38 U.S.C. Ch. 43 (relating to employment and
6reemployment rights of members of the uniformed services).

7* * *

8"Required beginning date." The latest date by which
9distributions of a participant's interest in his individual
10investment account must commence under the Internal Revenue Code
11of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).

12* * *

13"Salary deductions." The amounts certified by the board, 
14deducted from the compensation of an active member or active 
15participant or the State service compensation of a multiple 
16service member who is an active member of the State Employees' 
17Retirement System or active participant of the School Employees' 
18Defined Contribution Plan and paid into the fund or trust.

19* * *

<-20"Standard single life annuity." For Class T-A, T-B and T-C
21credited service of a member, an annuity equal to 2% of the
22final average salary, multiplied by the total number of years
23and fractional part of a year of credited service of a member in
24that class. For Class T-D credited service of a member, an
25annuity equal to 2.5% of the final average salary, multiplied by
26the total number of years and fractional part of a year of
27credited service in that class. For Class T-E credited service
28of a member, an annuity equal to 2% of the final average salary,
29multiplied by the total number of years and fractional part of a
30year of credited service of a member in that class. For Class T-


1F credited service of a member, an annuity equal to 2.5% of the
2final average salary, multiplied by the total number of years
3and fractional part of a year of credited service of a member[.]
4in that class. For Class T-G credited service of a member, an
5annuity equal to 2% of the final average salary, multiplied by
6the total number of years and fractional part of a year of
7credited service of a member in the class. For Class T-H
8credited service of a member, an annuity equal to 2.5% of the
9final average salary that is multiplied by the total number of
10years and fractional part of a year of credited service of a
11member in the class.

12"State Employees' Defined Contribution Plan." The defined
13contribution plan for State employees established by 71 Pa.C.S.
14Pt. XXV (relating to retirement for State employees and
15officers).

16* * *

17"Successor payee." The person or persons last designated in
18writing by a participant receiving distributions to the board to
19receive one or more distributions upon the death of such
20participant.

21* * *

<-22"Superannuation or normal retirement age."

23Class of service

Age

24T-A

25 

62 or any age upon accrual of
35 eligibility points

26T-B

62

27T-C [and], T-D, T-G
28and T-H

29 

30 

 

1 

62 or age 60 provided the
member has at least 30
eligibility points or any
age upon accrual of 35




eligibility points

2T-E and T-F

3 

4 

5 

6 

7 

8 

9 

65 with accrual of at least
three eligibility points
or a combination of age
and eligibility points
totaling 92, provided the
member has accrued at
least 35 eligibility
points

<-10"Survivor annuitant." The person or persons last designated
11by a member under a joint and survivor annuity option to receive
12an annuity upon the death of such member. A combined service 
13employee may designate different persons to be survivor 
14annuitants for the benefits from the system and beneficiaries or 
15successor payees for the benefits from the plan.

16* * *

17"Trust." The School Employees' Defined Contribution Trust
18established under Chapter 84 (relating to School Employees'
19Defined Contribution Plan).

20"USERRA leave." Any period of time for service in the
21uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
22employment and reemployment rights of members of the uniformed
23services) by a participant or former participant who terminated
24school service to perform such service in the uniformed
25services, if such current or former participant is entitled to
26reemployment rights under 38 U.S.C. Ch. 43 with respect to such
27uniformed service.

28"Valuation interest." Interest at 5 1/2% per annum,
29compounded annually and applied to all accounts of the fund
30other than the members' savings account.

1* * *

2"Voluntary contributions." Contributions made by a
3participant to the trust and credited to his individual
4investment account in excess of his mandatory pickup participant
5contributions, either by salary deductions paid through the
6employer or by an eligible rollover or direct trustee-to-trustee
7transfers.

8Section 102. Section 8103 of Title 24 is amended by adding
9subsections to read:

10§ 8103. Construction of part.

11* * *

12(c) Construction regarding inactive member and inactive
13participant.--As used in this part:

14(1) The term "inactive member" does not include a
15combined service employee who is an "inactive participant,"
16unless the combined service employee is concurrently employed
17in a position in which such employee is a member of the
18system.

19(2) The term "inactive participant" does not include a
20combined service employee who is an "inactive member," unless
21the combined service employee is concurrently employed in a
22position in which such employee is a participant in the plan.

23(d) Provisions severable.--The provisions of this part are
24severable and if any of its provisions shall be held to be
25unconstitutional, the decision of the court shall not affect or
26impair any of the remaining provisions. It is hereby declared to
27be the legislative intent that this part would have been adopted
28had such unconstitutional provisions not been included.

29(e) References to certain Federal statutes.--References in
30this part to the IRC or the Uniformed Services Employment and

1Reemployment Rights Act of 1994 (Public Law 103-353, 108 Stat.
23149), including administrative regulations promulgated under
3the IRC or the Uniformed Services Employment and Reemployment
4Rights Act of 1994, are intended to include laws and regulations
5in effect on the effective date of this section and amended,
6supplemented or supplanted on and after the effective date of
7this section.

8(f) Construction.--

9(1) This part may not be construed to mean that the
10limitations on benefits or other requirements under IRC §
11401(a) or other applicable provisions of the IRC that are 
12applicable to participants in the plan do not apply to the
13participants or to the members of the system and the benefits
14payable under Part IV.

15(2) This part may not be construed to mean that an 
16interpretation or application of the provisions of Part IV or 
17benefits available to members of the Public School Employees' 
18Retirement System was not in accordance with the provisions 
19of Part IV or other applicable law, including the IRC and the 
20Uniformed Services Employment and Reemployment Rights Act of 
211994 before the effective date of this section.

22(3) This part may not be construed to mean that the
23release or publicizing of a record, material or data that
24would not constitute a public record under section 8502(e)(2)
25(relating to administrative duties of board) is a violation
26of the fiduciary duties of the board.

27(g) Applicability.--The following shall apply:

28(1) The amendment of Part IV regarding the establishment
29of and participation in the plan shall apply to current and
30former members of the system who have returned to school

1service on or after July 1, 2015, after a termination of
2school service, notwithstanding the following:

3(i) Whether the termination occurred before or after
4July 1, 2015.

5(ii) Whether the school employee was an annuitant,
6inactive member, vestee or special vestee or withdrew
7accumulated deductions during the period of termination.

8(2) A terminated school employee who returns to school
9service on or after July 1, 2015, is subject to the
10provisions of Part IV regarding participation in the plan or
11membership in the system that are in effect on the effective
12date of reemployment, including, but not limited to, benefit
13formulas and accrual rates, eligibility for annuities and
14distributions, contribution rates, definitions, purchase of
15creditable school and nonschool service provisions and
16actuarial and funding assumptions.

17(3) This part shall apply to a record, material or data
18under 8502(e)(2) notwithstanding whether:

19(i) the record, material or data was created,
20generated or stored before the effective date of this
21section;

22(ii) the record, material or data was previously
23released or made public; or

24(iii) a request for the record, material or data was
25made or is pending final response under the former act of
26June 21, 1957 (P.L.390, No.212), referred to as the
27Right-to-Know Law, or the act of February 14, 2008
28(P.L.6, No.3), known as the Right-to-Know Law.

29Section 103. Title 24 is amended by adding a section to
30read:

1§ 8103.1. Reference to Public School Employees' Retirement
2System.

3As of the effective date of this section, unless the context
4clearly indicates otherwise, a reference to the Public School
5Employees' Retirement System in a statutory provision, other
6than this part and 71 Pa.C.S. Pt. XXV (relating to retirement
7for State employees and officers), shall include a reference to
8the plan, and a reference to the Public School Employees'
9Retirement Fund shall include a reference to the trust.

10Section 104. Section 8301 of Title 24 is amended to read:

11§ 8301. Mandatory and optional membership.

12(a) Mandatory membership in system and participation in 
13plan.--[Membership] Unless an election to be a participant in 
14the plan is made, membership in the system shall be mandatory as
15of the effective date of employment for all school employees
16except the following:

17(1) Any officer or employee of the Department of
18Education, State-owned educational institutions, community
19colleges, area vocational-technical schools, technical
20institutes, or the Pennsylvania State University and who is a
21member of the State Employees' Retirement System or a member
22of another retirement program approved by the employer.

23(2) Any school employee who is not a member of the 
24system and who is employed on a per diem or hourly basis for
25less than 80 full-day sessions or 500 hours in any fiscal
26year or annuitant who returns to school service under the
27provisions of section 8346(b) (relating to termination of
28annuities).

29(3) Any officer or employee of a governmental entity who
30subsequent to December 22, 1965<-, and prior to July 1, 1975,

1administers, supervises, or teaches classes financed wholly
2or in part by the Federal Government so long as he continues
3in such service.

4(4) Any part-time school employee who has an individual
5retirement account pursuant to the Federal act of September
62, 1974 (Public Law 93-406, 88 Stat. 829), known as the
7Employee Retirement Income Security Act of 1974.

8(5) Any school employee whose most recent period of
9school service starts on or after July 1, 2015.

10(b) Prohibited membership.--The school employees categorized
11in subsection (a)(1) [and], (2) and (5) shall not have the right
12to elect membership in the system.

13(c) Optional membership in system.--The school employees
14categorized in subsection (a)(3) and, if otherwise eligible,
15subsection (a)(4) shall have the right to elect membership in
16the system on or before July 1, 2015. Once such election is
17exercised, membership shall commence from the original date of
18eligibility and shall continue until the termination of such
19service[.] or until the school employee elects to be a
20participant in the plan.

21(d) Mandatory participation in the plan.--Unless the
22employee is or elects to be a participant in the State Employes'
23Defined Contribution Plan, a member of the State Employees'
24Retirement System or a member of another retirement program
25approved by the employer, a school employee who, on or after
26July 1, 2015, begins school service or returns to school service
27after a break in service shall be a mandatory participant in the
28plan as a result of the school service. A school employee who is
29a nonmember and waived membership under subsection (a)(4) shall
30be a mandatory participant in the plan commencing for the school

1service rendered on or after July 1, 2015.

2(e) Certain agreements.--The agreement of an employer to
3make contributions to the fund or to enroll its employees as
4members in the system shall be deemed to be an agreement to make
5contributions to the trust or to enroll its employees in the
6plan.

7Section 105. Section 8302(a), (b) and (c) of Title 24 are
8amended and the section is amended by adding a subsection to
9read:

10§ 8302. Credited school service.

11(a) Computation of credited service.--In computing credited
12school service of a member for the determination of benefits, a
13full-time salaried school employee shall receive one year of
14credit for each school year or the corresponding fraction
15thereof, in accordance with the proportion of the full school
16year for which the required regular member contributions have
17been made to the fund, or for which such contributions otherwise
18required for such service were not made to the fund solely by
19reason of any provision of this part relating to the limitations
20under IRC § 401(a)(17) or 415(b) or another provision of this 
21part limiting compensation. A per diem or hourly school employee
22shall receive one year of credited service for each
23nonoverlapping period of 12 consecutive months in which he is
24employed and for which contributions are made to the fund, or
25would have been made to the fund but for such limitations under
26the IRC, or another provision of this part limiting compensation
27for at least 180 full-day sessions or 1,100 hours of employment.
28If such member was employed and contributions were made to the 
29fund for less than 180 full-day sessions or 1,100 hours, he
30shall be credited with a fractional portion of a year determined

1by the ratio of the number of full-day sessions or hours of
2service actually rendered and for which contributions are made 
3to the fund to 180 full-day sessions or 1,100 hours, as the case
4may be. A part-time salaried employee shall be credited with the
5fractional portion of the year which corresponds to the service
6actually rendered and for which contributions are or would have 
7been made to the fund in relation to the service required as a
8comparable full-time salaried employee. In no case shall a
9member receive more than one year of credited service for any 12
10consecutive months or a member who has elected multiple service
11receive an aggregate in the two systems of more than one year of
12credited service for any 12 consecutive months.

13(b) Approved leaves of absence.--An active member shall
14receive credit, and an active participant shall receive vesting 
15credit, for an approved leave of absence provided that:

16(1) the member returns for a period at least equal to
17the length of the leave or one year as a member of the system 
18or the participant returns to school service as an active 
19participant in the plan, whichever is less, to the school
20district which granted his leave, unless such condition is
21waived by the employer; and

22(2) the proper contributions are made by the member and
23the employer or by the active participant and the employer.

24* * *

25(c) Cancellation of credited service.--All credited service 
26in the system shall be cancelled if a member withdraws his
27accumulated deductions. A partial or total distribution of 
28accumulated total defined contributions to a combined service 
29employee shall not cancel service credited in the system.

30(d) Military service by a participant.--A participant who

1has performed USERRA leave shall be treated and may make
2contributions as follows:

3(1) A participant who is reemployed from USERRA leave
4shall be treated as not having incurred a break in school
5service by reason of the USERRA leave and shall be granted
6vesting credit as if the participant had not been on USERRA
7leave. If a participant who is reemployed from USERRA leave
8subsequently makes mandatory pickup participant contributions
9in the amounts and in the time periods required by 38 U.S.C.
10Ch. 43 (relating to employment and reemployment rights of
11members of the uniformed services) and IRC § 414(u) as if the
12participant had continued in his school employment and
13performed school service and been compensated during the
14period of USERRA leave, then the participant's employer shall
15make the corresponding employer defined contributions. Such
16an employee shall have his contributions, benefits, rights
17and obligations determined under this part as if he was an
18active participant who performed school service during the
19USERRA leave in the job position that he would have held had
20he not been on USERRA leave and received the compensation on
21which the mandatory pickup participant contributions to
22receive school service credit for the USERRA leave were
23determined, including the right to make voluntary
24contributions on such compensation as permitted by law.

25(2) A participant who is reemployed from USERRA leave
26and does not make the mandatory pickup participant
27contributions or makes only part of the mandatory pickup
28participant contributions within the allowed payment period
29shall not be eligible to make mandatory pickup participant
30contributions and voluntary contributions at a later date for

1the period of USERRA leave for which the mandatory pickup
2participant contributions were not timely made.

3(3) A participant who performs USERRA leave from which
4the employee could have been reemployed from USERRA leave had
5the school employee returned to school service in the time
6frames required by 38 U.S.C. Ch. 43 for reemployment rights,
7but did not do so, shall not be eligible to make mandatory
8pickup participant contributions or voluntary contributions
9for the period of USERRA leave should the employee later
10return to school service and be a participant in the plan.

11(4) An active participant or inactive participant who,
12on or after the effective date of this subsection, is granted
13a leave of absence under 51 Pa.C.S. § 4102 (relating to
14leaves of absence for certain government employees) or a
15military leave under 51 Pa.C.S. Ch. 73 (relating to military
16leave of absence) that is not USERRA leave shall not be
17eligible to make mandatory pickup participant contributions
18or voluntary contributions during or for the leave of absence
19or military leave, and shall not have employer defined
20contributions made during such leave, without regard to
21whether or not the participant received salary, wages,
22stipends, differential wage payments or other payments from
23his employer during the leave, notwithstanding any provision
24to the contrary in 51 Pa.C.S. § 4102 or Ch. 73.

25(5) If a participant dies while performing USERRA leave,
26then the beneficiaries or successor payees, as the case may
27be, of the deceased participant are entitled to any
28additional benefits, other than benefit accruals relating to
29the period of qualified military service, provided under this
30part had the participant resumed and then terminated

1employment on account of death.

<-2Section 106. Sections 8303(c) and 8303.1 of Title 24 are
3amended to read:

4§ 8303. Eligibility points for retention and reinstatement of
5service credits.

6* * *

7(c) Purchase of previous creditable service.--Every active
8member of the system or a multiple service member who is an
9active member of the State Employees' Retirement System on or
10after the effective date of this part may purchase credit and
11receive eligibility points:

12(1) as a member of Class T-C, Class T-D, Class T-E [or],
13Class T-F, Class T-G or Class T-H for previous creditable
14school service [or creditable nonschool service] of the same
15class; [or]

16(2) as a member of Class [T-D for previous creditable
17school service, provided the member elects to become a Class
18T-D member pursuant to section 8305.1 (relating to election
19to become a Class T-D member);] T-C, Class T-D, Class T-G or
20Class T-H for creditable nonschool service as Class T-C,
21except as otherwise provided in this part; or

22(3) as a member of Class T-E or Class T-F for creditable
23nonschool service as the same class;

24upon written agreement by the member and the board as to the
25manner of payment of the amount due for credit for such service;
26except, that any purchase for reinstatement of service credit
27shall be for all service previously credited.

28* * *

<-29Section 106. Section 8303.1 of Title 24 is amended to read:

30§ 8303.1. Waiver of adjustments.

1(a) Allowance.--Upon appeal by an affected member, 
2participant, beneficiary or survivor annuitant, the board may
3waive an adjustment or any portion of an adjustment made under
4section 8534(b) (relating to fraud and adjustment of errors) if
5in the opinion of the board or the board's designated
6representative:

7(1) the adjustment or portion of the adjustment will
8cause undue hardship to the member, participant, beneficiary
9or survivor annuitant;

10(2) the adjustment was not the result of erroneous
11information supplied by the member, participant, beneficiary
12or survivor annuitant;

13(3) the member or participant had no knowledge or notice
14of the error before adjustment was made, and the member, 
15participant, beneficiary or survivor annuitant took action
16with respect to their benefits based on erroneous information
17provided by the system or plan; and

18(4) the member, participant, beneficiary or survivor
19annuitant had no reasonable grounds to believe the erroneous
20information was incorrect before the adjustment was made.

21(b) Time period.--

22(1) In order to obtain consideration of a waiver under
23this section, the affected member, participant, beneficiary
24or survivor annuitant must appeal to the board in writing
25within 30 days after receipt of notice that benefits have
26been adjusted or, if no notice was given, within 30 days
27after the adjustment was known or should have been known to
28the affected member, participant, beneficiary or survivor
29annuitant.

30(2) For any adjustments made prior to the effective date

1of this subsection for which the member, participant,
2beneficiary or survivor annuitant appealed to the board and
3was denied, an appeal under this section must be filed within
490 days of the effective date of this subsection.

<-5(3) For any adjustments made prior to the effective date
6of this paragraph for which the participant appealed to the
7board and was denied, an appeal under this section must be
8filed within 90 days of the effective date of this paragraph.

9Section 107. Title 24 is amended by adding a section to
10read:

11§ 8303.2. Spouses rights, benefits and effect of nomination of
12spouse.

13(a) No rights of participation in spouse.--The spouse of a
14participant does not have any of the rights, options or
15privileges of a participant. The rights of a spouse shall remain
16derivative of those of the participant, including, but not
17limited to, rights under the act of July 8, 1978 (P.L.752,
18No.140), known as the Public Employee Pension Forfeiture Act,
19section 16(b) of Article V of the Constitution of Pennsylvania,
20and a spouse may not compel a participant to take, or prevent a
21participant from taking, any action regarding membership, rights
22or benefits in the plan in which he is a participant other than
23those expressly set forth in this part; nor may a spouse take
24any action on behalf of a participant, except as otherwise duly
25authorized under this part.

26(b) No waiver of benefits without spousal consent.--To the
27extent that the law allows a participant to waive any benefits
28or return of contributions which the participant is entitled to
29receive now or in the future, or is receiving, no such waiver
30will be valid unless the spouse of the participant consents to

1it as provided for in this part.

2(c) Effect of nomination of spouse as beneficiary by law.--
3Whenever the spouse of a participant in the plan is deemed to be
4the beneficiary by operation of law instead of by a written
5nomination of beneficiary filed with the board, then the person
6last nominated as beneficiary in writing filed with the board
7shall become the contingent beneficiary.

8Section 108. Section 8305(b) of Title 24 is amended and the
9section is amended by adding subsections a subsection<- to read:

10§ 8305. Classes of service.

11* * *

12(b) Other class membership.--A school employee who is a
13member of a class of service other than Class T-C on the
14effective date of this part may elect to become a member of
15Class T-C or Class T-D or may retain his membership in such
16other class until the service is discontinued or he elects to
17become a full coverage member or elects to purchase credit for
18previous school or creditable nonschool service. Any service
19thereafter as a member of the system shall be credited as Class
20T-C or T-D service as applicable.

21* * *

22(f) Ineligibility for active membership and classes of
23service.--An individual who elects to be a participant in the
24plan or who is a school employee on July 1, 2015, but who is not
25a member of the system, or who first becomes a school employee
26on or after July 1, 2015, or who returns to school service on or
27after July 1, 2015, after a termination of school service, shall
28be ineligible for active membership in the system. Instead, any
29such school employee shall be a participant in the plan as a
30result of such school service, subject to the provisions in

1section 8301 (relating to mandatory and optional membership).

<-2(g) Class T-G membership.--Notwithstanding any other
3provision of law, a member who is, becomes, or is eligible to
4become, a Class T-D member and who performs school service on or
5after July 1, 2015, shall perform the service as a Class T-G
6member and shall be classified as a Class T-G member for all
7school service performed on or after July 1, 2015, upon payment
8of regular member contributions.

9(h) Class T-H membership.--Notwithstanding any other
10provision of law, any Class T-G member shall have the right to
11elect into Class T-H membership, provided the member elects to
12become a Class T-H member pursuant to section 8305.3 (relating
13to election to become a Class T-H member), upon written election
14filed with the board and payment of regular member
15contributions.

16Section 109. Sections 8305.1(c) and <-8305.2(c) and (d) 
<-178305.2(d) of Title 24 are amended to read:

18§ 8305.1. Election to become a Class T-D member.

19* * *

20(c) Effect of election.--An election to become a Class T-D
21member shall remain in effect until the termination of
22employment except as otherwise provided in this part. Those
23members who, on the effective date of this section, contribute
24at the rate of 5 1/4% shall be deemed to have accepted the basic
25contribution rate of 6 1/2% for all Class T-D service performed
26on or after January 1, 2002. Those members who, on the effective
27date of this section, contribute at the rate of 6 1/4% shall be
28deemed to have accepted the basic contribution rate of 7 1/2%
29for all Class T-D service performed on or after January 1, 2002.
30Upon termination and a subsequent reemployment that occurs
 

1before July 1, 2015, the class of service of the school employee 
2shall be credited in the class of service otherwise provided for 
3in this part. If the reemployment occurs on or after July 1, 
42015, the school employee's eligibility for membership in the 
5system or participation in the plan shall be as provided in this 
6part.

7* * *

8§ 8305.2. Election to become a Class T-F member.

9* * *

<-10(c) Effect of election.--An election to become a Class T-F
11member shall be irrevocable and shall commence from the original
12date of eligibility[. A member who elects Class T-F membership
13shall receive Class T-F service credit on any and all future
14service, regardless of whether the member terminates service or
15has a break in service.] and shall remain in effect for all
16future school service creditable in the system except as
17otherwise provided in this part.

18(d) Effect of failure to make election.--If a member fails 
19to timely file an election to become a Class T-F member, then 
20the member shall be enrolled as a member of Class T-E, unless 
21the school employee elects or is required to be a participant in 
22the plan, and the member shall never be able to elect Class T-F 
23service, regardless of whether the member terminates service or 
24has a break in service.

<-25Section 110. Title 24 is amended by adding a section to
26read:

27§ 8305.3.  Election to become a Class T-H member.

28(a)  General rule.--A school employee who first becomes a
29Class T-G member on or after July 1, 2015, and who is eligible
30to become a Class T-H member may elect to become a member of

1Class T-H.

2(b)  Time for making election.--

3(1) Except as otherwise provided in paragraph (2), a
4member must elect to become a Class T-H member by filing a
5written election with the board within 60 days of
6notification by the board that the member is eligible for the
7election.

8(2) A Class T-G member, who is eligible to elect to
9become a Class T-H member but who begins USERRA leave during
10the election period without having elected Class T-H, may
11make the election within 60 days after returning to school
12service from the USERRA leave.

13(c)  Effect of election.--An election to become a Class T-H
14member shall be irrevocable, commence from the original date of
15eligibility and remain in effect for all future school service
16creditable in the system, except as otherwise provided in this
17part. A member who elects Class T-H membership shall receive
18Class T-H service credit on any and all future service, except
19as otherwise provided in this part.

20(d)  Effect of failure to make election.--If a member fails
21to timely file an election to become a Class T-H member, then
22the member shall be enrolled as a member of Class T-G and the
23member shall never be able to elect Class T-H service,
24regardless of whether the member terminates service or has a
25break in service.

<-26Section 110. (Reserved).

27Section 111. (Reserved).

<-28Section 112. Sections 8306(b), 8307(a) and (b), 8308, 8310,
298321(a), 8322.1(a), 8323(a), (c) and (d), 8324(a), (b), (c) and
30(d), 8325, 8325.1(a), 8326(a) and (c), 8327, 8328(a), (b), (c),

1(d), (e) and (g), 8330 and 8341 of Title 24 are amended to read:

<-2Section 112. Sections 8306(b), 8307(a) and (b), 8310,
38322.1(a), 8323(a) and (d), 8324(b), (c) and (d), 8325,
48325.1(a), 8326(a) and (c), 8327, 8328(a), (b), (c), (d), (e)
5and (g), 8330 and 8341 of Title 24 are amended to read:

6§ 8306. Eligibility points.

7* * *

8(b) Transitional rule.--For the purposes of the transition:

9(1) In determining whether a member, other than a
10disability annuitant who returns to school service after June
1130, 2001, upon termination of the disability annuity, who is
12not a school employee or a State employee on June 30, 2001,
13and July 1, 2001, and who has previous school service, has
14the five eligibility points required by the definition of
15"vestee" in sections 8102 (relating to definitions), 8307
16(relating to eligibility for annuities), 8308 (relating to
17eligibility for vesting) and 8345 (relating to member's
18options), only eligibility points earned by performing
19credited school service as an active member of the system or
20credited State service as an active member of the State 
21Employees' Retirement System after June 30, 2001, shall be
22counted until such member earns one eligibility point by
23performing credited school service or credited State service
24after June 30, 2001, at which time all eligibility points as
25determined under subsection (a) shall be counted.

26(2) A member subject to paragraph (1) shall be
27considered to have satisfied any requirement for five
28eligibility points contained in this part if the member has
29at least ten eligibility points determined under subsection
30(a).

1§ 8307. Eligibility for annuities.

2(a) Superannuation annuity.--An active or an inactive member
3who attains superannuation age shall be entitled to receive a
4superannuation annuity upon termination of service and filing of
5a proper application. A combined service employee who is an 
6active or inactive participant and attains superannuation age 
7shall be entitled to receive a superannuation annuity upon 
8termination of service and filing of a proper application.

9(b) Withdrawal annuity.--A vestee in Class T-C <-[or], Class
10T-D<-, Class T-G or Class T-H with five or more eligibility points
11or an active or inactive Class T-C or Class T-D member or a 
12combined service employee with Class T-C or Class T-D service
13who terminates school service having five or more eligibility
14points shall, upon filing a proper application, be entitled to
15receive an early annuity. A vestee in Class T-E or Class T-F
16with ten or more eligibility points or an active or inactive
17Class T-E or Class T-F member or a combined service employee 
18with Class T-E or Class T-F service who terminates school
19service having ten or more eligibility points shall, upon filing
20a proper application, be entitled to receive an early annuity.

21* * *

<-22§ 8308. Eligibility for vesting.

23Any Class T-C [or], Class T-D, Class T-G or Class T-H member
24who terminates school service with five or more eligibility
25points shall be entitled to vest his retirement benefits until
26attainment of superannuation age. Any Class T-E or Class T-F
27member who terminates school service with ten or more
28eligibility points shall be entitled to vest his retirement
29benefits until attainment of superannuation age.

30§ 8310. Eligibility for refunds.

1Upon termination of service any active member, regardless of
2eligibility for benefits, may elect to receive his accumulated
3deductions in lieu of any benefit from the system to which he is
4entitled.

<-5§ 8321. Regular member contributions for current service.

6(a) General.--Regular member contributions shall be made to
7the fund on behalf of each active member for current service
8except for any period of current service in which the making of
9such contributions has ceased solely by reason of any provision
10of this part relating to the limitations under IRC § 401(a)(17)
11or 415(b) or any provision of this part limiting compensation.

12* * *

13§ 8322.1. Pickup contributions.

14(a) Treatment for purposes of IRC § 414(h).--All
15contributions to the fund required to be made under sections
168321 (relating to regular member contributions for current
17service) and 8322 (relating to joint coverage member
18contributions), with respect to current school service rendered
19by an active member on or after January 1, 1983, shall be picked
20up by the employer and shall be treated as the employer's
21contribution for purposes of IRC § 414(h).

22* * *

23§ 8323. Member contributions for creditable school service.

24(a) Previous school service, sabbatical leave and full
25coverage.--The contributions to be paid by an active member or
26an eligible State employee for credit in the system for
27reinstatement of all previously credited school service, school
28service not previously credited, sabbatical leave as if he had
29been in full-time daily attendance, or full-coverage membership
30shall be sufficient to provide an amount equal to the

1accumulated deductions which would have been standing to the
2credit of the member for such service had regular member
3contributions been made with full coverage at the rate of
4contribution necessary to be credited as Class T-C service,
5Class T-D service if the member is a Class T-D member, Class T-E 
6service if the member is a Class T-E member <-[or], Class T-F 
7service if the member is a Class T-F member<-, Class T-G service 
8if the member is a Class T-G member or Class T-H service if the 
9member is a Class T-H member and had such contributions been
10credited with statutory interest during the period the
11contributions would have been made and during all periods of
12subsequent school service as an active member or inactive member
13and State service as an active member or inactive member on 
14leave without pay up to the date of purchase.

15* * *

<-16(c) Approved leave of absence other than sabbatical leave
17and activated military service leave.--The contributions to be
18paid by an active member for credit for an approved leave of
19absence, other than sabbatical leave and activated military
20service leave, shall be sufficient to transfer his membership to
21Class T-C or to Class T-D if the member is a Class T-D member,
22to Class T-E if the member is a Class T-E member or to Class T-F
23if the member is a Class T-F member or to Class T-G service if
24the member is a Class T-G member, or to Class T-H service if the
25member is a Class T-H member and further to provide an annuity
26as a Class T-C member or Class T-D member if the member is a
27Class T-D member, to Class T-E if the member is a Class T-E
28member or to Class T-F if the member is a Class T-F member or to
29Class T-G service if the member is a Class T-G member, or to
30Class T-H service if the member is a Class T-H member for such

1additional credited service. Such amount shall be the sum of the
2amount required in accordance with the provisions of subsection
3(b) and an amount determined as the sum of the member's basic
4contribution rate and the normal contribution rate as provided
5in section 8328 (relating to actuarial cost method) during such
6period multiplied by the compensation which was received or
7which would have been received during such period and with
8statutory interest during all periods of subsequent school and
9State service up to the date of purchase.

10* * *

11(d) Certification and payment of contributions.--

12(1) In all cases other than for the purchase of credit
13for sabbatical leave and activated military service leave
14beginning before the effective date of paragraph (2), the
15amount payable shall be certified by the board in accordance
16with methods approved by the actuary and may be paid in a
17lump sum within 90 days or in the case of an active member or
18an eligible State employee who is an active member of the
19State Employees' Retirement System it may be amortized with
20statutory interest through salary deductions to the system 
21in amounts agreed upon by the member and the board. The
22salary deduction amortization plans agreed to by members and
23the board may include a deferral of payment amounts and
24statutory interest until the termination of school service or
25State service or becoming a participant and combined service 
26employee as the board in its sole discretion decides to
27allow. The board may limit salary deduction amortization
28plans to such terms as the board in its sole discretion
29determines. In the case of an eligible State employee who is
30an active member of the State Employees' Retirement System,

1the agreed upon salary deductions shall be remitted to the
2State Employees' Retirement Board, which shall certify and
3transfer to the board the amounts paid.

4(2) In the case of activated military service leave
5beginning before the effective date of this paragraph, the
6amount payable may be paid according to this subsection or
7subsection (c.1), but all lump sum payments must be made
8within one year of the termination of activated military
9service leave.

10§ 8324. Contributions for purchase of credit for creditable 
11nonschool service and noncreditable school service.

<-12(a) Source of contributions.--The total contributions to
13purchase credit as a member of Class T-C, Class T-E [or], Class
14T-F, Class T-G or Class T-H for creditable nonschool service of
15an active member or an eligible State employee shall be paid
16either by the member, the member's previous employer, the
17Commonwealth, or a combination thereof, as provided by law.

18* * *<-

19(b) Nonintervening military service.--The amount due for the 
20purchase of credit for military service other than intervening 
21military service shall be determined by applying the member's 
22basic contribution rate plus the normal contribution rate as 
23provided in section 8328 (relating to actuarial cost method) at 
24the time of entry of the member into school service subsequent 
25to such military service to one-third of his total compensation 
26received during the first three years of such subsequent 
27credited school service and multiplying the product by the 
28number of years and fractional part of a year of creditable 
29nonintervening military service being purchased together with 
30statutory interest during all periods of subsequent school
 

1service as an active member or inactive member and State service 
2as an active member or inactive member on leave without pay to 
3date of purchase. Upon certification of the amount due, payment 
4may be made in a lump sum within 90 days or in the case of an 
5active member or an eligible State employee who is an active 
6member of the State Employees' Retirement System it may be 
7amortized with statutory interest through salary deductions to 
8the system in amounts agreed upon by the member and the board. 
9The salary deduction amortization plans agreed to by members and 
10the board may include a deferral of payment amounts and 
11statutory interest until the termination of school service or 
12State service or becoming a participant and a combined service 
13employee as the board in its sole discretion decides to allow. 
14The board may limit salary deduction amortization plans to such 
15terms as the board in its sole discretion determines. In the 
16case of an eligible State employee who is an active member of 
17the State Employees' Retirement System, the agreed upon salary 
18deductions shall be remitted to the State Employees' Retirement 
19Board, which shall certify and transfer to the board the amounts 
20paid. Application may be filed for all such military service 
21credit upon completion of three years of subsequent credited 
22school service and shall be credited as Class T-C service. In 
23the event that a Class T-E member makes a purchase of credit for 
24such military service, then such service shall be credited as 
25Class T-E service. In the event that a Class T-F member makes a 
26purchase of credit for such military service, then such service 
27shall be credited as Class T-F service.

28(c) Intervening military service.--Contributions on account
29of credit for intervening military service shall be determined
30by the member's basic contribution rate and compensation at the

1time of entry of the member into active military service,
2together with statutory interest during all periods of
3subsequent school service as an active member or inactive member 
4and State service as an active member or inactive member on 
5leave without pay to date of purchase. Upon application for such
6credit the amount due shall be certified in the case of each
7member by the board, in accordance with methods approved by the
8actuary, and contributions may be made by one of the following
9methods:

10(1) Regular monthly payments during active military
11service.

12(2) A lump sum payment within 90 days of certification
13of the amount due.

14(3) Salary deductions to the system in amounts agreed
15upon by the member and the board. The salary deduction
16amortization plans agreed to by the members and the board may
17include a deferral of payment amounts and statutory interest
18until the termination of school service or State service or 
19becoming a participant and a combined service employee as the
20board in its sole discretion decides to allow. The board may
21limit salary deduction amortization plans to such terms as
22the board in its sole discretion determines. In the case of
23an eligible State employee who is an active member of the
24State Employees' Retirement System, the agreed upon salary
25deductions shall be remitted to the State Employees'
26Retirement Board, which shall certify and transfer to the
27board the amounts paid.

28(d) Other creditable nonschool service and noncreditable 
29school service.--

30(1) Contributions on account of Class T-C credit for
 

1creditable nonschool service other than military service 
2shall be determined by applying the member's basic 
3contribution rate plus the normal contribution rate as 
4provided in section 8328 at the time of the member's entry 
5into school service subsequent to such creditable nonschool 
6service to his total compensation received during the first 
7year of subsequent credited school service and multiplying 
8the product by the number of years and fractional part of a 
9year of creditable nonschool service being purchased together 
10with statutory interest during all periods of subsequent 
11school service as an active member or inactive member or 
12State service as an active member or inactive member on leave 
13without pay to the date of purchase, except that in the case 
14of purchase of credit for creditable nonschool service as set 
15forth in section 8304(b)(5) (relating to creditable nonschool 
16service) the member shall pay only the employee's share 
17unless otherwise provided by law. Upon certification of the 
18amount due, payment may be made in a lump sum within 90 days 
19or in the case of an active member or an eligible State 
20employee who is an active member of the State Employees' 
21Retirement System it may be amortized with statutory interest 
22through salary deductions to the system in amounts agreed 
23upon by the member and the board. The salary deduction 
24amortization plans agreed to by the members and the board may 
25include a deferral of payment amounts and statutory interest 
26until the termination of school service or State service or 
27becoming a participant and combined service employee as the 
28board in its sole discretion decides to allow. The board may 
29limit salary deduction amortization plans to such terms as 
30the board in its sole discretion determines. In the case of
 

1an eligible State employee who is an active member of the 
2State Employees' Retirement System, the agreed upon salary 
3deductions shall be remitted to the State Employees' 
4Retirement Board, which shall certify and transfer to the 
5board the amounts paid.

6(2) Contributions on account of Class T-E or Class T-F
7credit for creditable nonschool service other than military
8service shall be the present value of the full actuarial cost
9of the increase in the projected superannuation annuity
10caused by the additional service credited on account of the
11purchase. Upon certification of the amount due, payment may
12be made in a lump sum within 90 days or, in the case of an
13active member or an eligible State employee who is an active
14member of the State Employees' Retirement System, it may be
15amortized with statutory interest through salary deductions
16to the system in amounts agreed upon by the member and the
17board. The salary deduction amortization plans agreed to by
18the members and the board may include a deferral of payment
19amounts and statutory interest until the termination of
20school service or State service or becoming a participant and 
21combined service employee as the board in its sole discretion
22decides to allow. The board may limit salary deduction
23amortization plans to the terms as the board in its sole
24discretion determines. In the case of an eligible State
25employee who is an active member of the State Employees'
26Retirement System, the agreed upon salary deductions shall be
27remitted to the State Employees' Retirement Board, which
28shall certify and transfer to the board the amounts paid.

29(3) Contributions on account of Class T-E or Class T-F 
30credit for noncreditable school service other than military
 

1service shall be the present value of the full actuarial cost 
2of the increase in the projected superannuation annuity 
3caused by the additional service credited on account of the 
4purchase. Upon certification of the amount due, payment may 
5be made in a lump sum within 90 days or, in the case of an 
6active member or an eligible State employee who is an active 
7member of the State Employees' Retirement System, it may be 
8amortized with statutory interest through salary deductions 
9to the system in amounts agreed upon by the member and the 
10board. The salary deduction amortization plans agreed to by 
11the members and the board may include a deferral of payment 
12amounts and statutory interest until the termination of 
13school service or State service or becoming a participant and 
14combined service employee as the board in its sole discretion 
15decides to allow. The board may limit salary deduction 
16amortization plans to the terms as the board in its sole 
17discretion determines. In the case of an eligible State 
18employee who is an active member of the State Employees' 
19Retirement System, the agreed upon salary deductions shall be 
20remitted to the State Employees' Retirement Board, which 
21shall certify and transfer to the board the amounts paid.

22* * *

23§ 8325. Incomplete payments.

24(a) Right to pay balance due.--In the event that a member
25terminates school service or becomes a participant or a multiple
26service member who is an active member of the State Employees'
27Retirement System terminates State service before any agreed
28upon payments or return of benefits on account of returning to
29school service or entering State service and electing multiple
30service have been completed, the member or multiple service

1member who is an active member of the State Employees'
2Retirement System shall have the right to pay within 30 days of
3termination of school service or State service or becoming a 
4participant the balance due, including interest, in a lump sum,
5and the annuity shall be calculated including full credit for
6the previous school service, creditable nonschool service, or
7full-coverage membership.

8(b) Effect of failure to pay balance due.--In the event a
9member does not pay the balance due within 30 days of
10termination of school service or becoming a participant or in
11the event a member dies in school service or within 30 days of
12termination of school service or in the case of a multiple
13service member who is an active member of the State Employees'
14Retirement System does not pay the balance due within 30 days of
15termination of State service or dies in State service or within
1630 days of termination of State service or becoming a 
17participant and before the agreed upon payments have been
18completed, the present value of the benefit otherwise payable
19shall be reduced by the balance due, including interest, and the
20benefit payable shall be calculated as the actuarial equivalent
21of such reduced present value.

22§ 8325.1. Annual compensation limit under IRC § 401(a)(17).

23(a) General rule.--In addition to other applicable
24limitations set forth in this part, and notwithstanding any
25provision of this part to the contrary, the annual compensation
26of each noneligible member and each participant taken into
27account for benefit purposes under this subchapter shall not
28exceed the limitation under IRC § 401(a)(17). On and after July
291, 1996, any reference in this part to the limitation under IRC
30§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of

11993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
2compensation limit set forth in this subsection. The OBRA '93
3annual compensation limit is $150,000, as adjusted by the
4commissioner for increases in the cost of living in accordance
5with IRC § 401(a)(17)(B). The cost-of-living adjustment in
6effect for a calendar year applies to any determination period
7which is a period, not exceeding 12 months, over which
8compensation is determined, beginning in such calendar year. If
9a determination period consists of fewer than 12 months, the
10OBRA '93 compensation limit will be multiplied by a fraction,
11the numerator of which is the number of months in the
12determination period and the denominator of which is 12.

13* * *

14§ 8326. Contributions by the Commonwealth.

15(a) Contributions on behalf of active members and 
16participants.--The Commonwealth shall make contributions into
17the fund on behalf of all active members and participants,
18including members and participants on activated military service
19leave, in an amount equal to one-half the amount certified by
20the board as necessary to provide, together with the members'
21contributions, annuity reserves on account of prospective
22annuities as provided in this part in accordance with section
238328 (relating to actuarial cost method). In case a school
24employee has elected membership in a retirement program approved
25by the employer, the Commonwealth shall contribute to such
26program on account of his membership an amount no greater than
27the amount it would have contributed had the employee been a
28member of the Public School Employees' Retirement System.

29* * *

30(c) Contributions after June 30, 1995.--

1(1) The Commonwealth shall make contributions into the
2fund on behalf of all active members and participants,
3including members and participants on activated military
4service leave, for service performed after June 30, 1995, in
5the following manner:

6(i) For members and participants who are employees
7of employers that are school entities, no Commonwealth
8contributions shall be made.

9(ii) For members and participants who are employees
10of employers that are not school entities, the amount
11computed under subsection (a).

12(2) The Commonwealth shall make contributions into the
13fund on behalf of annuitants for all amounts due to the fund
14after June 30, 1995, including, but not limited to, amounts
15due pursuant to section 8328(d) and (f), in the following
16manner:

17(i) For members and participants who are employees
18of employers who are school entities, no Commonwealth
19contributions shall be made.

20(ii) For members and participants who are employees
21of employers who are not school entities, the amount
22computed under subsection (b).

23§ 8327. Payments by employers.

24(a) General rule.--[Each]

25(1) For payments prior to June 30, 2015, each employer,
26including the Commonwealth as employer of employees of the
27Department of Education, State-owned colleges and
28universities, Thaddeus Stevens College of Technology, Western 
29Pennsylvania School for the Deaf, Scotland School for
30Veterans' Children[,] and [the] The Pennsylvania State

1University, shall make payments to the fund each quarter in
2an amount equal to one-half the sum of the percentages, as
3determined under section 8328 (relating to actuarial cost
4method), applied to the total compensation during the pay
5periods in the preceding quarter of all its employees who
6were members of the system during such period, including
7members on activated military service leave. In the event a
8member on activated military service leave does not return to
9service for the necessary time or receives an undesirable,
10bad conduct or dishonorable discharge or does not elect to
11receive credit for activated military service under section
128302(b.1)(3) (relating to credited school service), the
13contributions made by the employer on behalf of such member
14shall be returned with valuation interest upon application by
15the employer.

16(2) For payments after June 30, 2015, each employer,
17including the Commonwealth as employer of employees of the
18Department of Education, State-owned colleges and
19universities, Thaddeus Stevens College of Technology, Western
20Pennsylvania School for the Deaf, Scotland School for
21Veterans' Children and The Pennsylvania State University,
22shall make payments to the fund each quarter in an amount
23equal to one-half the sum of the percentages, as determined
24under section 8328, applied to the total compensation during
25the pay periods in the preceding quarter of all its employees
26who were members of the system during such period, including
27members on activated military service leave, plus the accrued
28liability contribution rate applied to the total compensation
29of all active participants in the plan. In the event a member
30on activated military service leave does not return to

1service for the necessary time or receives an undesirable,
2bad conduct or dishonorable discharge or does not elect to
3receive credit for activated military service under section
48302(b.1)(3), the contributions made by the employer on
5behalf of such member shall be returned with valuation
6interest upon application by the employer.

7(b) Deduction from appropriations.--

8(1) To facilitate the payment of amounts due from any
9employer to the fund and the trust through the State
10Treasurer and to permit the exchange of credits between the
11State Treasurer and any employer, the Secretary of Education
12and the State Treasurer shall cause to be deducted and paid
13into the fund and the trust from the amount of any moneys due
14to any employer on account of any appropriation for schools
15or other purposes amounts equal to the employer and pickup
16contributions which an employer is required to pay to the
17fund and the trust, as certified by the board, and as remains
18unpaid on the date such appropriations would otherwise be
19paid to the employer. Such amount shall be credited to the
20appropriate accounts in the fund and the trust.

21(2) To facilitate the payments of amounts due from any
22charter school, as defined in Article XVII-A of the act of 
23March 10, 1949 (P.L.30, No.14), known as the Public School
24Code of 1949, to the fund and the trust through the State
25Treasurer and to permit the exchange of credits between the
26State Treasurer and any employer, the Secretary of Education
27and the State Treasurer shall cause to be deducted and paid
28into the fund and the trust from any funds appropriated to
29the Department of Education for basic education of the
30chartering school district of a charter school and public

1school employees' retirement contributions amounts equal to
2the employer and pickup contributions which a charter school
3is required to pay to the fund and the trust, as certified by
4the board, and as remains unpaid on the date such
5appropriations would otherwise be paid to the chartering
6school district or charter school. Such amounts shall be
7credited to the appropriate accounts in the fund and the 
8trust. Any reduction in payments to a chartering school
9district made pursuant to this section shall be deducted from
10the amount due to the charter school district pursuant to the
11Public School Code of 1949.

12(c) Payments by employers after June 30, 1995, and before 
13July 1, 2015.--After June 30, 1995, and before July 1, 2015,
14each employer, including the Commonwealth as employer of
15employees of the Department of Education, State-owned colleges
16and universities, Thaddeus Stevens College of Technology,
17Western Pennsylvania School for the Deaf, Scotland School for
18Veterans' Children and The Pennsylvania State University, shall
19make payments to the fund and the trust each quarter in an
20amount computed in the following manner:

21(1) For an employer that is a school entity, the amount
22shall be the sum of the percentages as determined under
23section 8328 applied to the total compensation during the pay
24periods in the preceding quarter of all employees who were
25active members of the system or active participants of the 
26plan during such period, including members or active 
27participants on activated military service leave. In the
28event a member on activated military service leave does not
29return to service for the necessary time or receives an
30undesirable, bad conduct or dishonorable discharge or does

1not elect to receive credit for activated military service
2under section 8302(b.1)(3), the contribution made by the
3employer on behalf of such member shall be returned with
4valuation interest upon application by the employer.

5(2) For an employer that is not a school entity, the
6amount computed under subsection (a).

7(3) For any employer, whether or not a school entity, in
8computing the amount of payment due each quarter, there shall
9be excluded from the total compensation referred to in this
10subsection and subsection (a) any amount of compensation of a
11noneligible member on the basis of which member or 
12participant contributions have not been made by reason of the
13limitation under IRC § 401(a)(17), except as otherwise 
14provided in this part. Any amount of contribution to the fund
15or trust paid by the employer on behalf of a noneligible
16member or participant on the basis of compensation which was
17subject to exclusion from total compensation in accordance
18with the provisions of this paragraph shall, upon the board's
19determination or upon application by the employer, be
20returned to the employer with valuation interest.

21(d) Payments by employers after June 30, 2015.--After June
2230, 2015, each employer, including the Commonwealth as employer
23of employees of the Department of Education, State-owned
24colleges and universities, Thaddeus Stevens College of
25Technology, Western Pennsylvania School for the Deaf, Scotland
26School for Veterans' Children and The Pennsylvania State
27University, shall make payments to the fund and the trust each
28quarter in an amount computed in the following manner:

29(1) For an employer that is a school entity, the amount
30shall be the sum of the percentages as determined under

1section 8328 applied to the total compensation during the pay
2periods in the preceding quarter of all employees who were
3active members of the system during such period, including
4members on activated military service leave, plus the accrued
5liability contribution rate applied to the total compensation
6of all active participants in the plan. In the event a member
7on activated military service leave does not return to
8service for the necessary time or receives an undesirable,
9bad conduct or dishonorable discharge or does not elect to
10receive credit for activated military service under section
118302(b.1)(3), the contribution made by the employer on behalf
12of such member shall be returned with valuation interest upon
13application by the employer.

14(2) For an employer that is not a school entity, the
15amount computed under subsection (a).

16(3) For any employer, whether or not a school entity, in
17computing the amount of payment due each quarter, there shall
18be excluded from the total compensation referred to in this
19subsection and subsection (a) any amount of compensation of a
20noneligible member or participant on the basis of which
21member or participant contributions have not been made by
22reason of the limitation under IRC § 401(a)(17). Any amount
23of contribution to the fund paid by the employer on behalf of
24a noneligible member or participant on the basis of
25compensation which was subject to exclusion from total
26compensation in accordance with the provisions of this
27paragraph shall, upon the board's determination or upon
28application by the employer, be returned to the employer with
29valuation interest.

30(e) Deemed agreed to.--The agreement of an employer listed

1in the definition of school employee under section 8102
2(relating to definitions) or any other law to make contributions
3to the fund or to enroll its employees as members in the system
4shall be deemed to be an agreement to make contributions to the
5trust or enroll its employees in the plan.

6(f) Contributions.--The employer employing a participant
7shall pick up the required mandatory participant contributions
8by a reduction in the compensation of the participant.

9(g) Contributions resulting from members reemployed from
10USERRA leave.--When a school employee reemployed from USERRA
11leave makes the member contributions required to be granted
12school service credit for the USERRA leave after June 30, 2015,
13either by actual payment or by actuarial debt under section 8325
14(relating to incomplete payments), the employer that employed
15the school employee when the member contributions are made or
16the last employer before termination in the case of payment
17under section 8325 shall make the employer contributions that
18would have been made under this section if the employee making
19the member contributions after he is reemployed from USERRA
20leave continued to be employed in his school office or position
21instead of performing USERRA leave.

22§ 8328. Actuarial cost method.

23(a) Employer contribution rate.--The amount of the total
24employer contributions shall be computed by the actuary as a
25percentage of the total compensation of all active members and 
26active participants, as applicable, during the period for which
27the amount is determined and shall be so certified by the board.
28The total employer contribution rate shall be the sum of the 
29final contribution rate as computed in subsection (h) plus the 
30premium assistance contribution rate as computed in subsection
 

1(f). The actuarially required contribution rate shall consist of
2the normal contribution rate as defined in subsection (b), the
3accrued liability contribution rate as defined in subsection (c)
4and the supplemental annuity contribution rate as defined in
5subsection (d). Beginning July 1, 2004, the actuarially required
6contribution rate shall be modified by the experience adjustment
7factors as calculated in subsection (e).

8(b) Normal contribution rate.--[The]

9(1) For the fiscal year ending June 30, 2014, the normal
10contribution rate shall be determined after each actuarial
11valuation. Until all accrued liability contributions have
12been completed, the normal contribution rate shall be
13determined, on the basis of an annual interest rate and such
14mortality and other tables as shall be adopted by the board
15in accordance with generally accepted actuarial principles,
16as a level percentage of the compensation of the average new
17active member, which percentage, if contributed on the basis
18of his prospective compensation through the entire period of
19active school service, would be sufficient to fund the
20liability for any prospective benefit payable to him, in
21excess of that portion funded by his prospective member
22contributions, excluding the shared-risk contributions.

23(2) For fiscal years beginning on or after July 1, 2014,
24the normal contribution rate shall be determined after each
25actuarial valuation. Until all accrued liability
26contributions have been completed, the normal contribution
27rate shall be determined, on the basis of an annual interest
28rate and such mortality and other tables as shall be adopted
29by the board in accordance with generally accepted actuarial
30principles, as a level percentage of the compensation of all

1active members not limited by the Social Security taxable
2wage base, which percentage, if contributed on the basis of
3the member's prospective compensation through the entire
4period of active school service, would be sufficient to fund
5the liability for any prospective benefit payable to him, in
6excess of that portion funded by his prospective member
7contributions, excluding the shared-risk contributions.

8(c) Accrued liability contribution rate.--

9(1) For the fiscal years beginning July 1, 2002, and 
10ending June 30, 2011, the accrued liability contribution rate
11shall be computed as the rate of total compensation of all
12active members which shall be certified by the actuary as
13sufficient to fund over a period of ten years from July 1,
142002, the present value of the liabilities for all
15prospective benefits of active members, except for the
16supplemental benefits provided in sections 8348 (relating to 
17supplemental annuities), 8348.1 (relating to additional 
18supplemental annuities), 8348.2 (relating to further 
19additional supplemental annuities), 8348.3 (relating to 
20supplemental annuities commencing 1994), 8348.4 (relating to 
21special supplemental postretirement adjustment), 8348.5
22(relating to supplemental annuities commencing 1998), 8348.6
23(relating to supplemental annuities commencing 2002) and
248348.7 (relating to supplemental annuities commencing 2003),
25in excess of the total assets in the fund (calculated by
26recognizing the actuarially expected investment return
27immediately and recognizing the difference between the actual
28investment return and the actuarially expected investment
29return over a five-year period), excluding the balance in the
30annuity reserve account, and of the present value of normal

1contributions and of member contributions payable with
2respect to all active members on July 1, 2002, during the
3remainder of their active service.

4(2) For the fiscal years beginning July 1, 2003, and 
5ending June 30, 2011, the amount of each annual accrued
6liability contribution shall be equal to the amount of such
7contribution for the fiscal year, beginning July 1, 2002,
8except that, if the accrued liability is increased by
9legislation enacted subsequent to June 30, 2002, but before
10July 1, 2003, such additional liability shall be funded over
11a period of ten years from the first day of July, coincident
12with or next following the effective date of the increase.
13The amount of each annual accrued liability contribution for
14such additional legislative liabilities shall be equal to the
15amount of such contribution for the first annual payment.

16(3) Notwithstanding any other provision of law,
17beginning July 1, 2004, and ending June 30, 2011, the
18outstanding balance of the increase in accrued liability due
19to the change in benefits enacted in 2001 and the outstanding
20balance of the net actuarial loss incurred in fiscal year
212000-2001 shall be amortized in equal dollar annual
22contributions over a period that ends 30 years after July 1,
232002, and the outstanding balance of the net actuarial loss
24incurred in fiscal year 2001-2002 shall be amortized in equal
25dollar annual contributions over a period that ends 30 years
26after July 1, 2003. For fiscal years beginning on or after
27July 1, 2004, if the accrued liability is increased by
28legislation enacted subsequent to June 30, 2003, such
29additional liability shall be funded in equal dollar annual
30contributions over a period of ten years from the first day

1of July coincident with or next following the effective date
2of the increase.

3(4) For the fiscal year beginning July 1, 2011, the 
4accrued liability contribution rate shall be computed as the 
5rate of total compensation of all active members which shall 
6be certified by the actuary as sufficient to fund as a level 
7percentage of compensation over a period of 24 years from 
8July 1, 2011, the present value of the liabilities for all 
9prospective benefits calculated as of June 30, 2010, 
10including the supplemental benefits as provided in sections 
118348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 
128348.7, in excess of the actuarially calculated assets in the 
13fund (calculated recognizing all realized and unrealized 
14investment gains and losses each year in level annual 
15installments over a ten-year period<-, provided that the 
16resulting actuarially calculated assets are constrained 
17within a range of 70% to 130% of market value). In the event 
18that the accrued liability is [increased] changed by 
19legislation enacted subsequent to June 30, 2010, such 
20[additional] change in liability shall be funded as a level 
21percentage of compensation over a period of ten years from 
22the July 1 second succeeding the date such legislation is 
23enacted.

<-24(5) Notwithstanding the above, for the fiscal years
25beginning July 1, 2014, compensation shall be defined as the
26total compensation of all active members not limited by the
27Social Security taxable wage base and active participants.

28(d) Supplemental annuity contribution rate.--

29(1) For the period of July 1, 2002, to June 30, 2011, 
30contributions from the Commonwealth and other employers

1required to provide for the payment of the supplemental
2annuities provided for in sections 8348, 8348.1, 8348.2,
38348.4 and 8348.5 shall be paid over a period of ten years
4from July 1, 2002. The funding for the supplemental annuities
5commencing 2002 provided for in section 8348.6 shall be as
6provided in section 8348.6(f). The funding for the
7supplemental annuities commencing 2003 provided for in
8section 8348.7 shall be as provided in section 8348.7(f). The
9amount of each annual supplemental annuities contribution
10shall be equal to the amount of such contribution for the
11fiscal year beginning July 1, 2002.

12(2) For fiscal years beginning July 1, 2011, and ending 
13June 30, 2014, contributions from the Commonwealth and other 
14employers whose employees are members of the system required 
15to provide for the payment of supplemental annuities as 
16provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4, 
178348.5, 8348.6 and 8348.7 shall be paid as part of the 
18accrued liability contribution rate as provided for in 
19subsection (c)(4), and there shall not be a separate 
20supplemental annuity contribution rate attributable to those 
21supplemental annuities. In the event that supplemental 
22annuities are increased by legislation enacted subsequent to 
23June 30, 2010, [the] but before July 1, 2013, such additional 
24liability for the increase in benefits shall be funded as a 
25level percentage of compensation over a period of ten years 
26from the July 1 second succeeding the date such legislation 
27is enacted.

28(3) For fiscal years beginning on or after July 1, 2014,
29contributions from employers whose employees are members of
30the system required to provide for the payment of

1supplemental annuities as provided in sections 8348, 8348.1,
28348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be
3paid as part of the accrued liability contribution rate as
4provided for in subsection (c)(4), and there shall not be a
5separate supplemental annuity contribution rate attributable
6to those supplemental annuities. In the event that
7supplemental annuities are increased by legislation enacted
8subsequent to June 30, 2013, the additional liability for the
9increase in benefits shall be funded as a level percentage of
10compensation of all active members not limited by the Social
11Security taxable wage base and active participants over a
12period of ten years from the July 1 second succeeding the
13date such legislation is enacted.

14(e) Experience adjustment factor.--

15(1) For each year after the establishment of the accrued
16liability contribution rate for the fiscal year beginning
17July 1, 2011, and ending June 30, 2014, any increase or
18decrease in the unfunded accrued liability, excluding the
19gains or losses on the assets of the health insurance
20account, due to actual experience differing from assumed
21experience, changes in actuarial assumptions, changes in 
22contributions caused by the final contribution rate being 
23different from the actuarially required contribution rate, 
24active members making shared-risk contributions or changes in
25the terms and conditions of the benefits provided by the
26system by judicial, administrative or other processes other
27than legislation, including, but not limited to,
28reinterpretation of the provisions of this part, recognized 
29by the actuarial valuations on June 30, 2011, and June 30, 
302012, shall be amortized as a level percentage of
 

1compensation over a period of 24 years beginning with the
2July 1 second succeeding the actuarial valuation determining 
3said increases or decreases.

4(2) (Reserved).

5(3) For fiscal years beginning July 1, 2014, any
6increase or decrease in the unfunded accrued liability,
7excluding the gains or losses on the assets of the health
8insurance account, due to actual experience differing from
9assumed experience, changes in actuarial assumptions, changes
10in contributions caused by the final contribution rate being
11different from the actuarially required contribution rate,
12active members making shared-risk contributions or changes in
13the terms and conditions of the benefits provided by the
14system by judicial, administrative or other processes other
15than legislation, including, but not limited to,
16reinterpretation of the provisions of this part, shall be
17amortized as a level percentage of the compensation of all
18active members, not limited by the Social Security taxable
19wage base, and active participants over a period of 24 years
20beginning with the July 1 second succeeding the actuarial
21valuation determining such increases or decreases.

22* * *

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

24(1) The collared contribution rate for each year shall
25be determined by comparing the actuarially required
26contribution rate, calculated without regard for the costs
27added by legislation, to the prior year's final contribution
28rate.

29(2) If, for any of the fiscal years beginning July 1,
302011, and July 1, 2012, [and on or after July 1, 2013,] the

1actuarially required contribution rate, calculated without
2regard for the costs added by legislation, is more than 3%[,]
3or 3.5% [and 4.5%], respectively, of the total compensation
4of all active members greater than the prior year's final
5contribution rate, then the collared contribution rate shall
6be applied and be equal to the prior year's final
7contribution rate increased by 3%[,] or 3.5% [and 4.5%],
8respectively, of total compensation of all active members.
9Otherwise, and for all other fiscal years, the collared
10contribution rate shall not be applicable. In no case shall
11the collared contribution rate be less than 4% of the total
12compensation of all active members.

13(3) If, for any of the fiscal years beginning July 1,
142013, July 1, 2014, July 1, 2015, July 1, 2016, July 1, 2017,
15and on or after July 1, 2018, the actuarially required
16contribution rate, calculated without regard for the costs
17added by legislation, is more than 2.25%, 2.75%, 3.25%,
183.75%, 4.25% and 4.5%, respectively, of the total
19compensation of all active members and active participants
20greater than the prior year's final contribution rate, then
21the collared contribution rate shall be applied and be equal
22to the prior year's final contribution rate increased by
232.25%, 2.75%, 3.25%, 3.75%, 4.25% and 4.5%, respectively, of
24total compensation of all active members, not limited by the
25Social Security taxable wage base, and active participants.

26(4) For purposes of applying the collared contribution
27rate, compensation for determining the normal contribution
28rate shall be defined as the total compensation of all active
29members not limited by the Social Security taxable wage base
30and active participants.

1* * *

2§ 8330. Appropriations by the Commonwealth.

3(a) Annual submission of budget.--The board shall prepare
4and through the Governor submit annually to the General Assembly
5an itemized budget consisting of the amounts necessary to be
6appropriated by the Commonwealth out of the General Fund
7required to meet the separate obligations to the fund and the 
8trust accruing during the fiscal period beginning July 1 of the
9following year.

10(b) Appropriation and payment.--The General Assembly shall
11make an appropriation sufficient to provide for the separate
12obligations of the Commonwealth to the fund and the trust. Such
13amount shall be paid by the State Treasurer through the
14Department of Revenue into the fund or the trust, as the case 
15may be, within 30 days of receipt of the requisition presented
16each quarter by the board.

17§ 8341. Return of accumulated deductions.

18Any member upon termination of service may, in lieu of all
19benefits payable from the system under this chapter to which he
20may be entitled, elect to receive his accumulated deductions.

21Section 113. Section 8342 of Title 24 is amended by adding a
22subsection to read:

23§ 8342. Maximum single life annuity.

24* * *

25(d) Coordination of benefits.--The determination and payment
26of the maximum single life annuity under this section shall be
27in addition to any payments a combined service employee may be
28entitled to receive, has received or is receiving as a result of
29being a participant in the plan.

30Section 114. Sections 8344, <-8345(a), 8346 and 8349 heading,

1(a) and (b) of Title 24 are amended to read:

2§ 8344. Disability annuities.

3(a) Amount of annuity.--A member who has made application
4for a disability annuity as provided in section 8507(k)
5(relating to rights and duties of school employees [and
6members], members and participants) and has been found to be
7eligible in accordance with the provisions of sections 8307(c)
8(relating to eligibility for annuities) and 8505(c)(1) (relating
9to duties of board regarding applications and elections of
10members) shall receive a disability annuity payable from the
11effective date of disability and continued until a subsequent
12determination by the board that the annuitant is no longer
13entitled to a disability annuity. The disability annuity shall
14be a single life annuity that is equal to a sum of the standard
15single life [annuity] annuities determined separately for each 
16class of service if the total number of years of credited
17service is greater than 16.667, otherwise [the] each standard
18single life annuity shall be multiplied by the lesser of the
19following ratios:

20Y*/Y or 16.667/Y

21where Y = total number of years of credited service and Y* =
22total years of credited service if the member were to continue
23as a school employee until attaining superannuation age, or if
24the member has attained superannuation age then the number of
25years of credited service. In no event shall the disability
26annuity plus any cost-of-living increases be less than $100 for
27each full year of credited service. The member shall be entitled
28to the election of a joint and survivor annuity on that portion
29of the disability annuity to which he is entitled under section
308342 (relating to maximum single life annuity).

1(b) Reduction on account of earned income.--Payments on
2account of disability shall be reduced by that amount by which
3the earned income of the annuitant, as reported in accordance
4with section 8508(b) (relating to rights and duties of
5annuitants) for the preceding year together with the disability
6annuity payments for the year, exceeds the greater of $5,000 or
7the last year's salary of the annuitant as a [school employee]
8member of the system, provided that the annuitant shall not
9receive less than his member's annuity or the amount to which he
10may be entitled under section 8342, whichever is greater.

11(c) Termination and modification of payments.--Payment of
12that portion of the disability annuity in excess of the annuity
13to which the annuitant was entitled on the effective date of
14disability calculated in accordance with section 8342 shall
15cease if the annuitant is no longer eligible under the
16provisions of section 8505(c)(2) or section 8508(b) or (c) and
17if such annuitant on the date of termination of service was
18eligible for an annuity, he may file an application with the
19board for an election of an optional modification of the annuity
20to which he was entitled in accordance with section 8342.

21(d) Withdrawal of accumulated deductions.--Upon termination
22of disability annuity payments in excess of an annuity
23calculated in accordance with section 8342, a disability
24annuitant who:

25(1) is a Class T-C [or], Class T-D<-, Class T-G or Class 
26T-H member; or

27(2) is a Class T-E or Class T-F member with less than
28ten eligibility points

29and who does not return to school service may file an 
30application with the board for an amount equal to the
 

1accumulated deductions, shared-risk member contributions and 
2statutory interest standing to his credit at the effective date 
3of disability less the total payments received on account of his 
4member's annuity.

5(e) Limitation regarding annual benefit under IRC §
6415(b).--Notwithstanding any provision of this part to the
7contrary, no benefit shall be payable to the extent that such
8benefit exceeds any limitation under IRC § 415(b) in effect with
9respect to governmental plans, as such term is defined in IRC §
10414(d), on the date the benefit payment becomes effective.

11(f) Coordination of benefits.--The determination and payment
12of a disability annuity under this section shall be in addition
13to any payments a combined service employee may be entitled to
14receive, has received or is receiving as a result of being a
15participant in the plan.

<-16§ 8345. Member's options.

17(a) General rule.--Any Class T-C [or], Class T-D, Class T-G
18or Class T-H member who is a vestee with five or more
19eligibility points, any Class T-E or Class T-F member who is a
20vestee with ten or more eligibility points, or any other
21eligible member upon termination of school service who has not
22withdrawn his accumulated deductions as provided in section 8341
23(relating to return of accumulated deductions) may apply for and
24elect to receive either a maximum single life annuity, as
25calculated in accordance with the provisions of section 8342
26(relating to maximum single life annuity), or a reduced annuity
27certified by the actuary to be actuarially equivalent to the
28maximum single life annuity and in accordance with one of the
29following options, except that no member shall elect an annuity
30payable to one or more survivor annuitants other than his spouse

1or alternate payee of such a magnitude that the present value of
2the annuity payable to him for life plus any lump sum payment he
3may have elected to receive is less than 50% of the present
4value of his maximum single life annuity. In no event shall a
5Class T-E or Class T-F member receive an annual benefit,
6calculated as of the effective date of retirement, greater than
7the member's final average salary.

8(1) Option 1.--A life annuity to the member with a
9guaranteed total payment equal to the present value of the
10maximum single life annuity on the effective date of
11retirement with the provision that, if, at his death, he has
12received less than such present value, the unpaid balance
13shall be payable to his beneficiary.

14(2) Option 2.--A joint and survivor annuity payable
15during the lifetime of the member with the full amount of
16such annuity payable thereafter to his survivor annuitant, if
17living at his death.

18(3) Option 3.--A joint and fifty percent (50%) survivor
19annuity payable during the lifetime of the member with one-
20half of such annuity payable thereafter to his survivor
21annuitant, if living at his death.

22(4) Option 4.--Some other benefit which shall be
23certified by the actuary to be actuarially equivalent to the
24maximum single life annuity, subject to the following
25restrictions:

26(i) Any annuity shall be payable without reduction
27during the lifetime of the member.

28(ii) The sum of all annuities payable to the
29designated survivor annuitants shall not be greater than
30one and one-half times the annuity payable to the member.

1(iii) A portion of the benefit may be payable as a
2lump sum, except that such lump sum payment shall not
3exceed an amount equal to the accumulated deductions
4standing to the credit of the member. The balance of the
5present value of the maximum single life annuity adjusted
6in accordance with section 8342(b) shall be paid in the
7form of an annuity with a guaranteed total payment, a
8single life annuity, or a joint and survivor annuity or
9any combination thereof but subject to the restrictions
10of subparagraphs (i) and (ii) of this paragraph. This
11subparagraph shall not apply to a Class T-E or Class T-F
12member. For purposes of this subparagraph only, the term
13"actuarially equivalent," as applied to any lump sum
14withdrawal attributable to contributions credited to the
15member's savings account on or after July 1, 2015,
16together with all interest thereon, shall mean equal
17present values, computed on the basis of the interest
18rate and such mortality and other tables as adopted by
19the board pursuant to section 8328(b) (relating to
20actuarial cost method) in effect on the effective date of
21retirement of the member.

22* * *

23§ 8346. Termination of annuities.

24(a) General rule.--If an annuitant returns to school service
25or enters or has entered State service and elects multiple
26service membership, any annuity payable to him under this part
27shall cease effective upon the date of his return to school
28service or entering State service without regard to whether he 
29is a mandatory, optional or prohibited member of the system or 
30participant in the plan or, if a multiple service member,
 

1whether he is a mandatory, optional or prohibited member or 
2participant of the State Employees' Retirement System or State 
3Employees' Defined Contribution Plan and in the case of an
4annuity other than a disability annuity the present value of
5such annuity, adjusted for full coverage in the case of a joint
6coverage member who makes the appropriate back contributions for
7full coverage, shall be frozen as of the date such annuity
8ceases. An annuitant who is credited with an additional 10% of
9membership service as provided in section 8302(b.2) (relating to
10credited school service) and who returns to school service,
11except as provided in subsection (b), shall forfeit such
12credited service and shall have his frozen present value
13adjusted as if his 10% retirement incentive had not been applied
14to his account. In the event that the cost-of-living increase
15enacted December 18, 1979, occurred during the period of such
16State or school employment, the frozen present value shall be
17increased, on or after the member attains superannuation age, by
18the percent applicable had he not returned to service.

19(a.1) Return of benefits.--In the event an annuitant whose
20annuity ceases pursuant to this section receives any annuity
21payment, including a lump sum payment pursuant to section 8345
22(relating to member's options) on or after the date of his
23return to school service or entering State service, the
24annuitant shall return to the board the amount so received plus
25statutory interest. The amount payable shall be certified in
26each case by the board in accordance with methods approved by
27the actuary and shall be paid in a lump sum within 90 days or in
28the case of an active member or a State employee who is an
29active member of the State Employees' Retirement System may be
30amortized with statutory interest through salary deductions to
 

1the system in amounts agreed upon by the member and the board.
2The salary deduction amortization plans agreed to by the member
3and the board may include a deferral of payment amounts and
4statutory interest until the termination of school service or
5State service as the board in its sole discretion decides to
6allow. The board may limit salary deduction amortization plans
7to such terms as the board in its sole discretion determines. In
8the case of a State employee who is an active member of the
9State Employees' Retirement System, the agreed upon salary
10deductions shall be remitted to the State Employees' Retirement
11Board, which shall certify and transfer to the board the amounts
12paid.

13(b) Return to school service during emergency.--When, in the
14judgment of the employer, an emergency creates an increase in
15the work load such that there is serious impairment of service
16to the public or in the event of a shortage of appropriate
17subject certified teachers or other personnel, an annuitant or 
18participant receiving distributions may be returned to school
19service for a period not to extend beyond the school year during
20which the emergency or shortage occurs, without loss of his
21annuity or distributions. The annuitant shall not be entitled to
22earn any credited service, and no contributions may be made by
23the annuitant, the employer or the Commonwealth on account of
24such employment. Such service shall not be subject to member 
25contributions or be eligible for qualification as creditable 
26school service or for participation in the plan, mandatory 
27pickup participant contributions or employer defined 
28contributions.

29(b.1) Return to school service in an extracurricular
30position.--

1(1) An annuitant or participant receiving distributions
2may be employed under separate contract by a public school or
3charter school in an extracurricular position performed
4primarily outside regular instructional hours and not part of
5mandated curriculum without loss of annuity. [Neither the]
6The annuitant [nor], the participant receiving distributions 
7and the employer shall not make contributions to the member's
8savings account, the individual investment account or State
9accumulation account respectively for such service. Further,
10such contract shall contain a waiver whereby the annuitant
11waives any potential retirement benefits that could arise
12from the contract and releases the employer and the board
13from any liability for such benefits. Such service shall not 
14be subject to member or participant contributions or be 
15eligible for qualification as creditable school service or 
16for participation in the plan, mandatory pickup participant 
17contributions or employer defined contributions.

18(2) Nothing in this subsection shall be construed to
19abridge or limit any rights provided under a collective
20bargaining agreement or any rights provided under the act of 
21July 23, 1970 (P.L.563, No.195), known as the Public Employe
22Relations Act.

23(3) For purposes of this subsection, the term
24"extracurricular position" means a contract position filled
25by an annuitant that is separate from the established
26academic course structure, including the position of athletic
27director.

28(c) Subsequent discontinuance of service.--Upon subsequent
29discontinuance of service, such [member] terminating school 
30employee other than a former annuitant who had the effect of his

1frozen present value eliminated in accordance with subsection
2(d) or a former disability annuitant shall be entitled to an
3annuity which is actuarially equivalent to [the sum of] the
4present value as determined under subsection (a) [and] to which 
5shall be added, if the service after reemployment was as a 
6member of the system, the present value of a maximum single life
7annuity based on years of service credited subsequent to reentry
8in the system and his final average salary computed by reference
9to his compensation as a member of the system or as a member of 
10the State Employees' Retirement System during his entire period
11of school and State service.

12(d) Elimination of the effect of frozen present value.--

13(1) An annuitant who returns to school service as an 
14active member of the system and earns three eligibility
15points by performing credited school service following the
16most recent period of receipt of an annuity under this part,
17or an annuitant who enters State service other than a 
18participant in the State Employees' Defined Contribution Plan
19and:

20(i) is a multiple service member; or

21(ii) who elects multiple service membership, and 
22earns three eligibility points by performing credited
23State service or credited school service following the
24most recent period of receipt of an annuity under this
25part, and who had the present value of his annuity frozen
26in accordance with subsection (a), shall qualify to have
27the effect of the frozen present value resulting from all
28previous periods of retirement eliminated, provided that
29all payments under Option 4 and annuity payments payable
30during previous periods of retirement plus interest as

1set forth in paragraph (3) shall be returned to the fund
2in the form of an actuarial adjustment to his subsequent
3benefits or in such form as the board may otherwise
4direct.

5(2) Upon subsequent discontinuance of service and the
6filing of an application for an annuity, a former annuitant
7who qualifies to have the effect of a frozen present value
8eliminated under this subsection shall be entitled to receive
9the higher of either:

10(i) an annuity (prior to optional modification)
11calculated as if the freezing of the former annuitant's
12account pursuant to subsection (a) had not occurred,
13adjusted by crediting Class T-C school service as Class
14T-D service as provided for in section 8305(c) (relating
15to classes of service) and further adjusted according to
16paragraph (3), provided that a former annuitant of the
17system or a former annuitant of the State Employees'
18Retirement System who retired under a provision of law
19granting additional service credit if termination of
20school or State service or retirement occurred during a
21specific period of time shall not be permitted to retain
22the additional service credit under the prior law when
23the annuity is computed for his most recent retirement;
24or

25(ii) an annuity (prior to optional modification)
26calculated as if the former annuitant did not qualify to
27have the effect on the frozen present value eliminated,

28unless the former annuitant notifies the board in writing by
29the later of the date the application for annuity is filed or
30the effective date of retirement that the former annuitant

1wishes to receive the lower annuity.

2(3) In addition to any other adjustment to the present
3value of the maximum single life annuity that a member may be
4entitled to receive that occurs as a result of any other
5provision of law, the present value of the maximum single
6life annuity shall be reduced by all amounts paid or payable
7to him during all previous periods of retirement plus
8interest on these amounts until the date of subsequent
9retirement. The interest for each year shall be calculated
10based upon the annual interest rate adopted for that school
11year by the board for the calculation of the normal
12contribution rate pursuant to section 8328(b) (relating to
13actuarial cost method).

14§ 8349. Payment of benefits from the system.

15(a) Annuities.--Any annuity granted under the provisions of
16this part and paid from the fund shall be paid in equal monthly
17installments.

18(b) Death benefits.--If the amount of a death benefit
19payable from the fund to a beneficiary of a member under section
208347 (relating to death benefits) or under the provisions of
21Option 1 of section 8345(a)(1) (relating to member's options) is
22$10,000 or more, such beneficiary may elect to receive payment
23according to one of the following options:

24(1) A lump sum payment.

25(2) An annuity actuarially equivalent to the amount
26payable.

27(3) A lump sum payment and an annuity such that the
28annuity is actuarially equivalent to the amount payable less
29the lump sum payment specified by the beneficiary.

30* * *

1Section 115. Title 24 is amended by adding a chapter to
2read:

3CHAPTER 84

4SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN

5Sec.

68401. Establishment.

78402. Plan document.

88403. Individual investment accounts.

98404. Participant contributions.

108405. Mandatory pickup participant contributions.

118406. Employer defined contributions.

128407. Eligibility for benefits.

138408. Death benefits.

148409. Vesting.

158410. Termination of distributions.

168411. Agreements with financial institutions and other
17organizations.

188412. Powers and duties of board.

198413. Responsibility for investment loss.

208414. Investments based on participants' investment allocation
21choices.

228415. Expenses.

238416. Election by members to be participants.

248417. Tax qualification.

25§ 8401. Establishment.

26(a) School Employees' Defined Contribution Plan.--The School
27Employees' Defined Contribution Plan is established. The board
28shall administer and manage the plan, which shall be a defined
29contribution plan exclusively for the benefit of those school
30employees who participate in the plan and their beneficiaries

1within the meaning of and in conformity with IRC § 401(a). The
2board shall determine the terms and provisions of the plan not
3inconsistent with this part, the IRC and other applicable law
4and shall provide for the plan's administration.

5(b) School Employees' Defined Contribution Trust.--The
6School Employees' Defined Contribution Trust is established as
7part of the plan in accordance with this part. The trust shall
8be comprised of the individual investment accounts and all
9assets and moneys in those accounts. The members of the board
10shall be the trustees of the trust, which shall be administered
11exclusively for the benefit of those school employees who
12participate in the plan and their beneficiaries within the
13meaning of and in conformity with IRC § 401(a). The board shall
14determine the terms and provisions of the trust not inconsistent
15with this part, the IRC and other applicable law and shall
16provide for the investment and administration of the trust.

17(c) Assets held in trust.--All assets and income in the plan
18that have been or shall be withheld or contributed by the
19participants, the Commonwealth and employers in accordance with
20this part shall be held in trust in any funding vehicle
21permitted by the applicable provisions of IRC for the exclusive
22benefit of the plan's participants and their beneficiaries until
23such time as the funds are distributed to the participants or
24their beneficiaries in accordance with the terms of the plan
25document. The assets of the plan held in trust for the exclusive
26benefit of the participants and their beneficiaries may be used
27for the payment of the fees, costs and expenses related to the
28administration and investment of the plan and the trust.

29(d) Name for transacting business.--By the name of "The
30School Employees' Defined Contribution Plan," all of the

1business of the plan shall be transacted, the trust invested,
2all requisitions for money drawn and payments made and all of
3its cash and securities and other property shall be held, except
4that, any other law to the contrary notwithstanding, the board
5may establish a nominee registration procedure for the purpose
6of registering securities in order to facilitate the purchase,
7sale or other disposition of securities pursuant to the
8provisions of this part.

9§ 8402. Plan document.

10The board shall set forth the terms and provisions of the
11plan and trust in a document containing the terms and conditions
12of the plan and in a trust declaration that shall be published
13in the Pennsylvania Bulletin. The creation of the document
14containing the terms and conditions of the plan and the trust
15declaration and the establishment of the terms and provisions of
16the plan and the trust need not be promulgated by regulation or
17formal rulemaking and shall not be subject to the act of July
1831, 1968 (P.L.769, No.240), referred to as the Commonwealth
19Documents Law. A reference in this part or other law to the plan
20shall include the plan document unless the context clearly
21indicates otherwise.

22§ 8403. Individual investment accounts.

23The board shall:

24(1) establish in the trust an individual investment
25account for each participant in the plan. All contributions
26by a participant or an employer for or on behalf of a
27participant shall be credited to the participant's individual
28investment account, together with all interest and investment
29earnings and losses. Investment and administrative fees,
30costs and expenses shall be charged to the participants'

1individual investment accounts; and

2(2) separately track participant contributions,
3including investment gains and losses, and employer
4contributions, including investment gains and losses, but all
5interest, investment gains and losses and administrative
6fees, costs and expenses shall be allocated proportionately.

7§ 8404. Participant contributions.

8(a) Mandatory contributions.--A participant shall make
9mandatory pickup participant contributions through payroll
10deductions to the participant's individual investment account
11equal to 7.5% of compensation for current school service. The
12employer shall cause such contributions for current service to
13be made and deducted from each payroll or on such schedule as
14established by the board. After the effective date of this
15section, an employer employing a participant in the plan shall
16pick up the required mandatory participant contributions by a
17reduction in the compensation of the participant.

18(b) Voluntary contributions.--A participant may make
19voluntary contributions up to the limits permitted by IRC
20through payroll deductions or through direct trustee-to-trustee
21transfers or through transfers of money received in an eligible
22rollover into the trust to the extent allowed by IRC § 402. Such
23rollovers shall be made in a form and manner as determined by
24the board, shall be credited to the participant's individual
25investment account and shall be separately accounted for by the
26board.

27(c) Prohibition on contributions.--No contributions shall be
28allowed that would cause a violation of the limitations related
29to contributions applicable to governmental plans contained in
30IRC § 415 or in other provisions of law. In the event that any

1disallowed contributions are made, any participant contributions
2in excess of the limitations and investment earnings on those
3contributions shall be refunded to the participant by the board.

4§ 8405. Mandatory pickup participant contributions.

5(a) Treatment for purposes of IRC § 414(h).--The
6contributions to the trust required to be made under section
78404(a) (relating to participant contributions) with respect to
8current school service rendered by an active participant shall
9be picked up by the employer and shall be treated as the
10employer's contribution for purposes of IRC § 414(h). After the
11effective date of this section, an employer employing a
12participant in the plan shall pick up the required mandatory
13participant contributions by a reduction in the compensation of
14the participant.

15(b) Treatment for other purposes.--For all other purposes
16under this part and otherwise, such mandatory pickup participant
17contributions shall be treated as contributions made by a
18participant in the same manner and to the same extent as if the
19contributions were made directly by the participant and not
20picked up.

21§ 8406. Employer defined contributions.

22(a) Contributions for current service.--The employer of a
23participant shall make employer defined contributions for
24current service of an active participant that shall be credited
25to the active participant's individual investment account.
26Employer defined contributions must be recorded and accounted
27for separately from participant contributions.

28(b) Contributions resulting from participants reemployed
29from USERRA leave.--When a school employee reemployed from
30USERRA leave makes the mandatory pickup participant

1contributions permitted to be made for the USERRA leave, the
2employer by whom the school employee is employed at the time the
3participant contributions are made shall make whatever employer
4defined contributions would have been made under this section
5had the employee making the participant contributions after
6being reemployed from USERRA leave continued to be employed in
7the employee's school position instead of performing USERRA
8leave. Such employer defined contributions shall be placed in
9the participant's individual investment account as otherwise
10provided by this part.

11(c) Limitations on contributions.--No contributions shall be
12allowed that would cause a violation of the limitations related
13to contributions applicable to governmental plans contained in
14IRC § 415 or in other provisions of law. In the event that any
15disallowed contributions are made, any employer defined
16contributions in excess of the limitations and investment
17earnings thereon shall be refunded to the employer by the board.

18§ 8407. Eligibility for benefits.

19(a) Termination of service.--A participant who terminates
20school service shall be eligible to withdraw the vested
21accumulated total defined contributions standing to the
22participant's credit in the participant's individual investment
23account or a lesser amount as the participant may request.
24Payment shall be made in a lump sum unless the board has
25established other forms of distribution in the plan document,
26subject to the provisions of subsection (g). A participant who
27withdraws the vested accumulated total defined contributions
28shall no longer be a participant in the plan, notwithstanding
29that the participant may have contracted to receive an annuity
30or other form of payment from a provider retained by the board

1for such purposes.

2(b) Required distributions.--All payments pursuant to this
3section shall start and be made in compliance with the minimum
4distribution requirements and incidental death benefit rules of
5IRC § 401(a)(9). The board shall take any action and make any
6distributions it may determine are necessary to comply with
7those requirements.

8(c) Spousal consent not required.--A participant who is
9married may receive a lump sum distribution or other
10distribution directly from the board without the consent of the
11participant's spouse, unless the plan document provides
12otherwise.

13(d) Combined service employee.--A participant who is a
14combined service employee must be terminated from all positions
15that result in either membership in the system or participation
16in the plan to be eligible to receive a distribution.

17(e) Loans.--Loans or other distributions, including hardship
18or unforeseeable emergency distributions, from the plan to
19school employees who have not terminated school service are not
20permitted, except as required by law.

21(f) Small individual investment accounts.--

22(1) A participant who terminates school service and
23whose vested accumulated total defined contributions are
24below the threshold established by law as of the date of
25termination of service may be paid the vested accumulated
26total defined contributions in a lump sum as provided in IRC
27§ 401(a)(31).

28(2) The board may also provide in the plan document
29that, notwithstanding subsection (g), a participant whose
30vested accumulated employer defined contributions are below

1the thresholds established by the board may receive those
2distributions without the obligation to purchase an annuity.
3The threshold may be established as a dollar amount, an
4annuity amount, in some other form individually or in
5combination as the board determines.

6(g) Requirement to purchase annuity.--Except as prohibited
7by the IRC or as otherwise provided in this part, a participant
8who is eligible and elects to receive a distribution of vested
9accumulated employer defined contributions shall be required to
10purchase an annuity with the distribution under such conditions
11as provided in the plan document. The conditions may include 
12that the board is authorized to make the distribution directly 
13to the annuity provider.

14§ 8408. Death benefits.

15(a) General rule.--In the event of the death of an active
16participant or inactive participant, the board shall pay to the
17participant's beneficiary the vested balance in the
18participant's individual investment account in a lump sum or in
19such other manner as the board may establish in the plan
20document.

21(b) Death of participant receiving distributions.--In the
22event of the death of a participant receiving distributions, the
23board shall pay to the participant's beneficiary the vested
24balance in the participant's individual investment account in a
25lump sum or in such other manner as the board may establish in
26the plan document or, if the board has established alternative
27methods of distribution in the plan document under which the
28participant was receiving distributions, to the participant's
29beneficiary or successor payee as provided in the plan document.

30(c) Contracts.--The board may contract with financial

1institutions, insurance companies or other types of third-party
2providers to allow participants who receive a lump sum
3distribution to receive payments and death benefits in a form
4and manner as provided by the contract. The contracts may, but
5are not required to, provide that any payment and death benefit
6options for a married former participant be in the form of a
7joint and survivor annuity unless the spouse consents to another
8payment option.

9(d) Spousal consent.--All nomination or change of
10beneficiaries made by a married participant shall be subject to
11the consent of the participant's spouse as provided for in this
12part.

13§ 8409. Vesting.

14(a) Participant and voluntary contributions.--Subject to the
15forfeiture and attachment provisions of section 8533 (relating
16to taxation, attachment and assignment of funds) or otherwise as
17provided by law, a participant shall be fully vested with
18respect to all mandatory pickup participant contributions and
19voluntary contributions paid by or on behalf of the participant
20to the trust plus interest and investment earnings on the
21participant contributions but minus investment fees and
22administrative charges.

23(b) Employer defined contributions.--

24(1) Subject to the forfeiture and attachment provisions
25of section 8533 or otherwise as provided by law, a
26participant shall be vested with respect to employer defined
27contributions paid plus interest and investment earnings by
28or on behalf of the participant to the trust according to the
29following schedule:

30(i) During the first and second year of school

1service as a participant in the plan, 0%.

2(ii) At and after the second year of school service
3as a participant in the plan, 50%.

4(iii) At and after the third year of school service
5as a participant in the plan, 75%.

6(iv) At and after the fourth year of school service
7as a participant in the plan, 100%.

8(2) The board shall establish in the plan document:

9(i) How the required time periods of school service
10in the plan are determined and calculated.

11(ii) The effect of periods that school employees
12spend on paid or unpaid leave on the determination of a
13participant's vested status in the plan.

14(iii) The effect of termination of school service or
15distributions from the plan on a participant's vested
16status in the plan.

17(iv) Other terms and conditions for the
18implementation and administration of this section.

19(3) Nonvested employer defined contributions, including
20interest and investment gains and losses that are forfeited
21by a participant, shall be applied to the participant's most
22recent employer's obligations assessed under this section in
23future years.

24(c) USERRA leave and vesting credit.--A participant in the
25plan who is reemployed from USERRA leave or who dies while
26performing USERRA leave shall receive vesting credit under this
27section for the school service that would have been performed
28had the member not performed USERRA leave.

29§ 8410. Termination of distributions.

30(a) Return to school service.--

1(1) A participant receiving distributions or an inactive
2participant who returns to school service shall cease
3receiving distributions and shall not be eligible to receive
4distributions until the participant subsequently terminates
5school service, without regard to whether the participant is
6a mandatory, optional or prohibited member of the system or
7participant in the plan.

8(2) This subsection shall not apply to a distribution of
9accumulated employer defined contributions or other
10distributions that the participant has received and used to
11purchase an annuity from a provider contracted by the board.

12(b) Return of benefits paid during USERRA leave.--

13(1) If a former school employee is reemployed from
14USERRA leave and received any payments or annuity from the
15plan during the USERRA leave, the employee shall return to
16the board the amount so received plus interest as provided in
17the plan document.

18(2) The amount payable shall be certified in each case
19by the board in accordance with methods approved by the
20actuary and shall be paid in a lump sum within 30 days or, in
21the case of an active participant, may be amortized with
22interest as provided in the plan document through salary
23deductions to the trust in amounts agreed upon by the active
24participant and the board, but not longer than a period that
25starts with the date of reemployment and continuing for up to
26three times the length of the active participant's immediate
27past period of USERRA leave. The repayment period shall not
28exceed five years.

29§ 8411. Agreements with financial institutions and other
30organizations.

<-1To establish and administer the plan, the board may enter
2into written agreements with one or more financial institutions
3or other organizations relating to the plan's administration and
4investment of funds held pursuant to the plan.

<-5(a) Written agreement.--To establish and administer the
6plan, the board shall enter into a written agreement with one or
7more financial institutions or pension management organizations
8to administer the plan and the investment of funds held pursuant
9to the plan. The administrator shall be selected in accordance
10with the following:

11(1) The board shall solicit proposals from financial
12institutions and pension management organizations.

13(2) The board shall publish the solicitation under
14paragraph (1) in the Pennsylvania Bulletin.

15(3) Proposals received shall be evaluated based on
16specific criteria adopted by the board. The criteria shall
17include experience, customer service history and other
18criteria.

19(b) Rebid.--A contract to administer the plan under
20subsection (a) shall be rebid at least once every ten years.

21§ 8412. Powers and duties of board.

22The board shall have the following powers and duties to
23establish the plan and trust and to administer the provisions of
24this part:

25(1) The board may commingle or pool assets with the
26assets of other persons or entities.

27(2) The board shall pay all administrative fees, costs
28and expenses of managing, investing and administering the
29plan, the trust and the individual investment accounts from
30the balance of such individual investment accounts, except as

1the General Assembly otherwise provides through
2appropriations from the General Fund.

3(3) The board may establish investment guidelines and
4limits on the types of investments that participants may
5make, consistent with the board's fiduciary obligations.

6(4) The board shall have the power to change the terms
7of the plan as may be necessary to maintain the tax-qualified
8status of the plan.

9(5) The board may establish a process for election to
10participate in the plan by those school employees for whom
11participation is not mandatory.

12(6) The board may perform an annual or more frequent
13review of any qualified fund manager for the purpose of
14assuring it continues to meet all standards and criteria
15established.

16(7) The board may allow for eligible rollovers and
17direct trustee-to-trustee transfers into the trust from
18qualified plans of other employers, regardless of whether the
19employers are private employers or public employers.

20(8) The board may allow a former participant to maintain
21the participant's individual investment account within the
22plan.

23(9) The board shall administer <-or ensure the 
24administration of the plan in compliance with the
25qualification and other rules of IRC.

26(10) The board may establish procedures to provide for
27the lawful payment of benefits.

28(11) The board shall determine what constitutes a
29termination of school service.

30(12) The board may establish procedures for

1distributions of small accounts as required or permitted by
2IRC.

3(13) The board may establish procedures in the plan
4document or to promulgate rules and regulations as it deems
5necessary for the administration and management of the plan,
6including, but not limited to, establishing:

7(i) Procedures by which eligible participants may
8change voluntary contribution amounts or their investment
9choices on a periodic basis or make other elections
10regarding their participation in the plan.

11(ii) Procedures for deducting mandatory pickup
12participant contributions and voluntary contributions
13from a participant's compensation.

14(iii) Procedures for rollovers and trustee-to-
15trustee transfers allowed under the IRC and permitted by
16the board as part of the plan.

<-17(iv) Standards and criteria for disclosing and
18providing not less than ten options to eligible
19individuals regarding investments of amounts deferred
20under the plan, provided that one of the available
21options must serve as the default option for participants
22who do not make a timely election and that, to the extent
23commercially available, one option must have an annuity
24investment feature.

<-25(iv) Standards and criteria for providing not less
26than ten options in accordance with three or more
27providers of investment options to eligible individuals
28regarding investment of amounts deferred under the plan.
29The standards and criteria must provide for a variety of
30investment options. One of the available options must

1serve as the default option for participants who do not
2make a timely election and, to the extent commercially
3available, one option must have an annuity.

4(v) Standards and criteria for disclosing to the
5participants the anticipated and actual income
6attributable to amounts invested, property rights and all
7fees, costs and expenses to be made against amounts
8deferred to cover the costs and expenses of administering
9and managing the plan or trust.

10(vi) Procedures, standards and criteria for the
11making of distributions from the plan upon termination
12from employment or death or in other circumstances
13consistent with the purpose of the plan.

14(14) The board may waive any reporting or information
15requirement contained in this part if the board determines
16that the information is not needed for the administration of
17the plan.

18(15) The board may contract any services and duties in
19lieu of staff except final adjudications and as prohibited by
20law. Any duties or responsibilities of the board not required
21by law to be performed by the board may be delegated to a
22third-party provider subject to appeal to the board.

23(16) The board may provide that any duties of the
24employer or information provided by the participant to the
25employer be performed or received directly by the board.

26(17) The provisions and restrictions of the act of July
272, 2010 (P.L.266, No.44), known as Protecting Pennsylvania's
28Investments Act, shall not apply to the plan or trust or the
29investments thereof, but the board may offer to the plan
30participants investment vehicles that would be allowed under

1the Protecting Pennsylvania's Investments Act. The board
2shall also to the extent commercially available provide that
3one option for participants have an annuity investment
4feature.

5(18) The board shall ensure that participants are
6provided with educational materials about investment options
7and choices.

8§ 8413. Responsibility for investment loss.

9The Commonwealth, the board, an employer or a school entity
10or other political subdivision shall not be responsible for any
11investment loss incurred under the plan or for the failure of
12any investment to earn any specific or expected return or to
13earn as much as any other investment opportunity, whether or not
14such other opportunity was offered to participants in the plan.

15§ 8414. Investments based on participants' investment
16allocation choices.

17(a) Investment by participant.--All contributions, interest
18and investment earnings shall be invested based on a
19participant's investment allocation choices. All investment
20allocation choices shall be credited proportionally between
21contributions from the participant and employer defined
22contributions. Each participant shall be credited individually
23with the amount of contributions, interest and investment
24earnings.

25(b) Investment of contributions made by entities other than
26Commonwealth.--Investment of contributions by any corporation,
27institution, insurance company or custodial bank or other entity
28that the board has approved shall not be unreasonably delayed
29and in no case shall the investment of contributions be delayed
30more than 30 days from the date of payroll deduction or

1voluntary contributions are made to the date that funds are
2invested. Any interest earned on the funds pending investment
3shall be allocated to the employers and credited to the
4individual investment accounts of participants who are then
5participating in the plan, unless the interest is used to defray
6administrative costs and fees that would otherwise be required
7to be borne by participants who are then participating in the
8plan.

9§ 8415. Expenses.

10All expenses, fees and costs of administering the plan and
11the trust and investing the assets of the trust shall be borne
12by the participants and paid from assessments against the
13balances of the individual investment accounts as established by
14the board, except that for fiscal years ending before July 1,
152015, the expenses, fees and costs of establishing and
16administering the plan and trust shall be paid by the
17Commonwealth through annual appropriations from the General
18Fund, made on the basis of estimates from the board.

19§ 8416. Election by members to be participants.

20(a) General rule.--Any school employee who is an active
21member or inactive member on or after July 1, 2015, and who is
22employed in a position that would otherwise be eligible for
23participation in the plan may elect to become a participant in
24the plan.

25(b) Time for making election.--An eligible school employee
26may elect to become a participant and a combined service
27employee at any time before termination of school service by
28filing a written election with the board.

29(c) Effect of election.--The following apply:

30(1) An election to become a participant shall be

1irrevocable. Participation shall be effective at the
2beginning of the next pay period commencing after the
3election is filed with the board.

4(2) A member who elects to become a participant shall
5remain a participant for all future school service.

6(3) Any prior school or nonschool service credited in
7the system shall remain in the class of service in which it
8is credited on the effective date of participation.

9(4) A combined service employee shall not be eligible to
10receive an annuity from the system or a withdrawal of
11accumulated deductions until the employee has terminated
12school service.

13(5) A participant shall not be entitled to purchase any
14previous school service or creditable nonschool service.

15(6) The eligibility of a combined service employee for
16an annuity from the system and, if eligible, the amount of
17the annuity shall be as determined under this part.

18§ 8417. Tax qualification.

19(a) Required distributions.--All payments under this chapter
20shall start and be made in compliance with the minimum
21distribution requirements and incidental death benefit rules of
22IRC § 401(a).

23(b) Limitations.--The following shall apply:

24(1) (i) Except as provided under subparagraph (ii) and
25notwithstanding a provision of this part, a contribution
26or benefit related to the plan may not exceed a
27limitation under IRC § 415 with respect to governmental
28plans that is in effect on the date the contribution or
29benefit payment takes effect.

30(ii) An increase in a limitation under IRC § 415

1shall apply to the participants on or after the effective
2date of this section.

3(iii) For the purposes of this paragraph, the term
4"government plans" shall have the same meaning as in IRC
5§ 414(d).

6(2) (i) Except as provided under subparagraph (ii), an
7amendment of this part on or after the effective date of
8this section that increases contributions or benefits for
9active participants, inactive participants or
10participants receiving distributions may not be deemed to 
11provide for a contribution or benefit in excess of a
12limitation, adjusted on or after the effective date of
13this section, under IRC § 415 unless specifically
14provided by legislation.

15(ii) Notwithstanding subparagraph (i), an increase
16in benefits on or after the effective date of this
17section for a participant in the plan shall be authorized
18and apply to the fullest extent allowed by law.

19Section 116. Section 8501(a), (c) and (d) of Title 24 are
20amended to read:

21§ 8501. Public School Employees' Retirement Board.

22(a) Status and membership.--The board shall be an
23independent administrative board and shall consist of 15
24members: the Secretary of Education, ex officio; the State
25Treasurer, ex officio; two Senators; two members of the House of
26Representatives; the executive secretary of the Pennsylvania
27School Boards Association, ex officio; two to be appointed by
28the Governor, at least one of whom shall not be a school
29employee or an officer or employee of the State; three to be
30elected by the active professional members of the system and
 

1active professional participants of the plan from among their
2number; one to be elected by annuitants or a participant of the 
3plan who has terminated school service and is receiving or is 
4eligible to receive distributions from among their number; one
5to be elected by the active nonprofessional members of the
6system or active nonprofessional participants of the plan from
7among their number; and one to be elected by members of
8Pennsylvania public school boards from among their number. The
9appointments made by the Governor shall be confirmed by the
10Senate and each election shall be conducted in a manner approved
11by the board. The terms of the appointed and nonlegislative
12elected members shall be three years. The members from the
13Senate shall be appointed by the President pro tempore of the
14Senate and shall consist of one member from the majority and one
15member from the minority. The members from the House of
16Representatives shall be appointed by the Speaker of the House
17of Representatives and shall consist of one member from the
18majority and one member from the minority. The legislative
19members shall serve on the board for the duration of their
20legislative terms and shall continue to serve until 30 days
21after the convening of the next regular session of the General
22Assembly after the expiration of their respective legislative
23terms