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 and<-,
7of administration 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;<- 
18and providing for task force on pension systems.

19The General Assembly of the Commonwealth of Pennsylvania
20hereby enacts as follows:

21ARTICLE I

22Section 101. The definitions of "alternate payee,"<-
23"beneficiary," "compensation," "creditable nonschool service,"
24"credited service," "date of termination of service,"
25"distribution," "domestic relations order," "eligible

1annuitants," "inactive member," "intervening military service,"
2"irrevocable beneficiary," "leave for service with a collective
3bargaining organization," "previous school service," "salary
4deductions," "survivor annuitant" and "valuation interest" in
5section 8102 of Title 24 of the Pennsylvania Consolidated
6Statutes are amended and the section is amended by adding
7definitions to read:

<-8Section 101. Section 8102 of Title 24 of the Pennsylvania
9Consolidated Statutes is amended by adding a definition 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 participant." A school employee for whom mandatory
8pickup participant contributions are being made to the trust or
9for whom such contributions otherwise required for current
10school service are not being made solely by reason of any
11provision of this part relating to the limitations under section
12401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public
13Law 99-514, 26 U.S.C. § 401(a)(17) or 415) or any provision of
14this part limiting compensation.

15* * *

16"Alternate payee." Any spouse, former spouse, child or
17dependent of a member or participant who is recognized by a
18domestic relations order as having a right to receive all or a
19portion of the moneys payable to that member or participant
20under this part.

21* * *

22"Beneficiary." [The] In the case of the system, the person
23or persons last designated in writing to the board by a member
24to receive his accumulated deductions or a lump sum benefit upon
25the death of such member. In the case of the plan, the spouse of
26a participant. If the participant is not married or the spouse
27consents, then the person or persons last designated in writing
28to the board by the participant to receive the participant's
29vested accumulated total defined contributions or a lump sum
30benefit upon the death of the participant.

1* * *

2"Combined service employee." A current or former school
3employee who is both a member of the system and a participant in
4the plan.

5* * *

6"Compensation." Pickup contributions and mandatory pickup
7participant contributions plus any remuneration received as a
8school employee excluding reimbursements for expenses incidental
9to employment and excluding any bonus, severance payments, any
10other remuneration or other emolument received by a school
11employee during his school service which is not based on the
12standard salary schedule under which he is rendering service,
13payments for unused sick leave or vacation leave, bonuses or
14other compensation for attending school seminars and
15conventions, payments under health and welfare plans based on
16hours of employment or any other payment or emolument which may
17be provided for in a collective bargaining agreement which may
18be determined by the Public School Employees' Retirement Board
19to be for the purpose of enhancing compensation as a factor in
20the determination of final average salary, and for participants,
21excluding payments for military leave, and any other payments
22made by an employer while the participant is on USERRA leave,
23leave of absence granted under 51 Pa.C.S. § 4102 (relating to
24leaves of absence for certain government employees), military
25leave of absence granted under 51 Pa.C.S. § 7302 (relating to
26granting military leaves of absence), military leave of absence
27granted under section 1176 of the act of March 10, 1949 (P.L.30,
28No.14), known as the Public School Code of 1949, or other types
29of military leave, including other types of leave payments,
30stipends, differential wage payments as defined in the Internal

1Revenue Code of 1986 § 414(u)(12) and any other payments,
2provided, however, that the limitation under section 401(a)(17)
3of the Internal Revenue Code of 1986 (Public Law 99-514, 26
4U.S.C. § 401(a)(17)) taken into account for the purpose of
5member contributions, including regular or joint coverage member
6contributions, regardless of class of service, shall apply to
7each member who first became a member of the Public School
8Employes' Retirement System on or after July 1, 1996, and who by
9reason of such fact is a noneligible member subject to the
10application of the provisions of section 8325.1 (relating to
11annual compensation limit under IRC § 401(a)(17))[.] and shall
12apply to each participant.

13* * *

14"Creditable nonschool service." Service other than service
15as a school employee for which an active member may obtain
16credit in the system.

17"Credited service." School or creditable nonschool service
18for which the required contributions have been made to the fund,
19or for which the contributions otherwise required for such
20service were not made solely by reason of any provision of this
21part relating to the limitations under section 401(a)(17) or
22415(b) of the Internal Revenue Code of 1986 (Public Law 99-514,
2326 U.S.C. § 401(a)(17) or 415(b)), or for which salary
24deductions to the system or lump sum payments have been agreed
25upon in writing.

26"Date of termination of service." The last date of service
27for which:

28(1) pickup contributions are made for an active member
29[or,];

30(2) in the case of an inactive member, the effective

1date of his resignation or the date his employment is
2formally discontinued by his employer or two years following
3the last day of service for which contributions were made,
4whichever is earliest[.];

5(3) mandatory pickup participant contributions are made
6for an active participant;

7(4) in the case of an inactive participant, the date of
8his resignation or the date his employment is formally
9discontinued by his employer; or

10(5) in the case of a combined service employee, the
11latest of the dates in paragraph (3) or (4).

12* * *

13"Distribution." Payment of all or any portion of a person's
14interest in either the Public School Employees' Retirement Fund
15or the School Employees' Defined Contribution Trust or both
16which is payable under this part.

17"Domestic relations order." Any judgment, decree or order,
18including approval of a property settlement agreement, entered
19on or after the effective date of this definition by a court of
20competent jurisdiction pursuant to a domestic relations law
21which relates to the marital property rights of the spouse or
22former spouse of a member or participant, including the right to
23receive all or a portion of the moneys payable to that member or
24participant under this part in furtherance of the equitable
25distribution of marital assets. The term includes orders of
26support as that term is defined by 23 Pa.C.S. § 4302 (relating
27to definitions) and orders for the enforcement of arrearages as
28provided in 23 Pa.C.S. § 3703 (relating to enforcement of
29arrearages).

30* * *

1"Eligible annuitants." All current and prospective
2annuitants with 24 1/2 or more eligibility points and all
3current and prospective disability annuitants. Beginning January
41, 1995, ["eligible annuitants" shall include] the term includes
5members with 15 or more eligibility points who terminated or who
6terminate school service on or after attaining superannuation
7retirement age and who are annuitants with an effective date of
8retirement after superannuation age. The term does not include
9participants.

10* * *

11"Employer defined contributions." Contributions equal to 4%
12of an active participant's compensation that are made by an
13employer for current service to the trust to be credited in the
14active participant's individual investment account.

15* * *

16"Inactive member." A member for whom no pickup contributions
17are being made to the fund, except in the case of an active
18member for whom such contributions otherwise required for
19current school service are not being made solely by reason of
20any provision of this part relating to the limitations under
21section 401(a)(17) or 415(b) of the Internal Revenue Code of
221986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)), who
23has accumulated deductions standing to his credit in the fund
24and for whom contributions have been made within the last two
25school years or a multiple service member who is active in the
26State Employees' Retirement System.

27"Inactive participant." A participant for whom no mandatory
28pickup participant contributions are being made to the trust,
29except in the case of an active participant for whom such
30contributions otherwise required for current school service are

1not being made solely by reason of any provision of this part
2relating to limitations under section 401(a)(17) or 415 of the
3Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
4401(a)(17) or 415), who has vested accumulated total defined
5contributions standing to his credit in the trust and who has
6not filed an application for an annuity.

7"Individual investment account." The account in the trust to
8which are credited the amounts of the contributions made by a
9participant and the participant's employer in accordance with
10the provisions of this part, together with all investment
11earnings after deduction for fees, costs and expenses,
12investment losses and charges for distributions.

13"Intervening military service." Active military service of a
14member who was a school employee and an active member of the
15system immediately preceding his induction into the armed
16services or forces of the United States in order to meet a draft
17obligation excluding any voluntary extension of such
18obligational service and who becomes a school employee and an
19active member of the system within 90 days of the expiration of
20such service.

21* * *

22"Irrevocable beneficiary." The person or persons permanently
23designated by a member or participant in writing to the board
24pursuant to an approved domestic relations order to receive all
25or a portion of the accumulated deductions, vested accumulated
26total defined contributions or lump sum benefit payable upon the
27death of such member or participant.

28"Irrevocable successor payee." The person permanently
29designated in writing by a participant receiving vested
30distributions to the board pursuant to an approved domestic

1relations order to receive one or more distributions from the
2plan upon the death of such participant.

3* * *

4"Leave for service with a collective bargaining
5organization." Paid leave granted to an active member or active
6participant by an employer for purposes of working full time for
7or serving full time as an officer of a Statewide employee
8organization or a local collective bargaining representative
9under the act of July 23, 1970 (P.L.563, No.195), known as the
10Public Employe Relations Act: Provided, That greater than one-
11half of the members of the employee organization are active
12members of the system or active participants of the plan; that
13the employer shall fully compensate the member or active
14participant, including, but not limited to, salary, wages,
15pension and retirement contributions and benefits, other
16benefits and seniority, as if he were in full-time active
17service; and that the employee organization shall fully
18reimburse the employer for such salary, wages, pension and
19retirement contributions and benefits and other benefits and
20seniority.

21"Mandatory pickup participant contributions." Contributions
22equal to 7.5% of compensation that are made by the employer for
23active participants for current service.

24* * *

25"Participant." An active participant, inactive participant
26or participant receiving distributions.

27"Participant receiving distributions." A participant in the
28plan who has commenced receiving distributions from his
29individual investment account but who has not received a total
30distribution of his vested interest in the individual investment

1account.

2* * *

3"Plan." The School Employees' Defined Contribution Plan as
4established by the provisions of this part and the board.

5"Plan document." The documents created by the board under
6section 8402 (relating to plan document) that contain the terms
7and provisions of the plan and trust as established by the board
8regarding the establishment, administration and investment of
9the plan and trust.

10"Previous school service." Service [rendered] as a school
11employee, including service in any summer school conducted by a
12school district of the Commonwealth, but excluding service
13rendered during which the school employee was or could have been
14a participant in the plan, prior to the member's most recent
15entrance in the system.

16* * *

17"Reemployed from USERRA leave." Resumption of active
18participation as a school employee after a period of USERRA
19leave, provided the resumption of active participation was
20within the time period and under conditions and circumstances
21such that the school employee was entitled to reemployment
22rights under 38 U.S.C. Ch. 43 (relating to employment and
23reemployment rights of members of the uniformed services).

24* * *

25"Required beginning date." The latest date by which
26distributions of a participant's interest in his individual
27investment account must commence under the Internal Revenue Code
28of 1986 (Public Law 99-514, 26 U.S.C. § 401(a)(9)).

29* * *

30"Salary deductions." The amounts certified by the board,

1deducted from the compensation of an active member or active
2participant or the State service compensation of a multiple
3service member who is an active member of the State Employees'
4Retirement System or active participant of the School Employees'
5Defined Contribution Plan and paid into the fund or trust.

6* * *

7"State Employees' Defined Contribution Plan." The defined
8contribution plan for State employees established by 71 Pa.C.S.
9Pt. XXV (relating to retirement for State employees and
10officers).

11* * *

12"Successor payee." The person or persons last designated in
13writing by a participant receiving distributions to the board to
14receive one or more distributions upon the death of such
15participant.

16* * *

17"Survivor annuitant." The person or persons last designated
18by a member under a joint and survivor annuity option to receive
19an annuity upon the death of such member. A combined service
20employee may designate different persons to be survivor
21annuitants for the benefits from the system and beneficiaries or
22successor payees for the benefits from the plan.

23* * *

24"Trust." The School Employees' Defined Contribution Trust
25established under Chapter 84 (relating to School Employees'
26Defined Contribution Plan).

27"USERRA leave." Any period of time for service in the
28uniformed services as defined in 38 U.S.C. Ch. 43 (relating to
29employment and reemployment rights of members of the uniformed
30services) by a participant or former participant who terminated

1school service to perform such service in the uniformed
2services, if such current or former participant is entitled to
3reemployment rights under 38 U.S.C. Ch. 43 with respect to such
4uniformed service.

5"Valuation interest." Interest at 5 1/2% per annum,
6compounded annually and applied to all accounts of the fund
7other than the members' savings account.

8* * *

9"Voluntary contributions." Contributions made by a
10participant to the trust and credited to his individual
11investment account in excess of his mandatory pickup participant
12contributions, either by salary deductions paid through the
13employer or by an eligible rollover or direct trustee-to-trustee
14transfers.

15Section 102. Section 8103 of Title 24 is amended by adding
16subsections to read:

17§ 8103. Construction of part.

18* * *

19(c) Construction regarding inactive member and inactive
20participant.--As used in this part:

21(1) The term "inactive member" does not include a
22combined service employee who is an "inactive participant,"
23unless the combined service employee is concurrently employed
24in a position in which such employee is a member of the
25system.

26(2) The term "inactive participant" does not include a
27combined service employee who is an "inactive member," unless
28the combined service employee is concurrently employed in a
29position in which such employee is a participant in the plan.

30(d) Provisions severable.--The provisions of this part are

1severable and if any of its provisions shall be held to be
2unconstitutional, the decision of the court shall not affect or
3impair any of the remaining provisions. It is hereby declared to
4be the legislative intent that this part would have been adopted
5had such unconstitutional provisions not been included.

6(e) References to certain Federal statutes.--References in
7this part to the IRC or the Uniformed Services Employment and
8Reemployment Rights Act of 1994 (Public Law 103-353, 108 Stat.
93149), including administrative regulations promulgated under
10the IRC or the Uniformed Services Employment and Reemployment
11Rights Act of 1994, are intended to include laws and regulations
12in effect on the effective date of this section and amended,
13supplemented or supplanted on and after the effective date of
14this section.

15(f) Construction.--

16(1) This part may not be construed to mean that the
17limitations on benefits or other requirements under IRC §
18401(a) or other applicable provisions of the IRC that are 
19applicable to participants in the plan do not apply to the
20participants or to the members of the system and the benefits
21payable under Part IV.

22(2) This part may not be construed to mean that an
23interpretation or application of the provisions of Part IV or
24benefits available to members of the Public School Employees'
25Retirement System was not in accordance with the provisions
26of Part IV or other applicable law, including the IRC and the
27Uniformed Services Employment and Reemployment Rights Act of
281994 before the effective date of this section.

29(3) This part may not be construed to mean that the
30release or publicizing of a record, material or data that

1would not constitute a public record under section 8502(e)(2)
2(relating to administrative duties of board) is a violation
3of the fiduciary duties of the board.

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

5(1) The amendment of Part IV regarding the establishment
6of and participation in the plan shall apply to current and
7former members of the system who have returned to school
8service on or after July 1, 2015, after a termination of
9school service, notwithstanding the following:

10(i) Whether the termination occurred before or after
11July 1, 2015.

12(ii) Whether the school employee was an annuitant,
13inactive member, vestee or special vestee or withdrew
14accumulated deductions during the period of termination.

15(2) A terminated school employee who returns to school
16service on or after July 1, 2015, is subject to the
17provisions of Part IV regarding participation in the plan or
18membership in the system that are in effect on the effective
19date of reemployment, including, but not limited to, benefit
20formulas and accrual rates, eligibility for annuities and
21distributions, contribution rates, definitions, purchase of
22creditable school and nonschool service provisions and
23actuarial and funding assumptions.

24(3) This part shall apply to a record, material or data
25under 8502(e)(2) notwithstanding whether:

26(i) the record, material or data was created,
27generated or stored before the effective date of this
28section;

29(ii) the record, material or data was previously
30released or made public; or

1(iii) a request for the record, material or data was
2made or is pending final response under the former act of
3June 21, 1957 (P.L.390, No.212), referred to as the
4Right-to-Know Law, or the act of February 14, 2008
5(P.L.6, No.3), known as the Right-to-Know Law.

6Section 103. Title 24 is amended by adding a section to
7read:

8§ 8103.1. Reference to Public School Employees' Retirement
9System.

10As of the effective date of this section, unless the context
11clearly indicates otherwise, a reference to the Public School
12Employees' Retirement System in a statutory provision, other
13than this part and 71 Pa.C.S. Pt. XXV (relating to retirement
14for State employees and officers), shall include a reference to
15the plan, and a reference to the Public School Employees'
16Retirement Fund shall include a reference to the trust.

17Section 104. Section 8301 of Title 24 is amended to read:

<-18Section 102. Sections 8301(a), 8346(a) and (d)(1) and
198507(a) of Title 24 are amended to read:

20§ 8301. Mandatory and optional membership.

21(a) Mandatory membership <-in system and participation in 
22plan.--[Membership] Unless an election to be a participant in 
23the plan is made, membership

24(<-a) Mandatory membership.--Membership in the system shall be
25mandatory as of the effective date of employment for all school
26employees except the following:

27(1) Any officer or employee of the Department of
28Education, State-owned educational institutions, community
29colleges, area vocational-technical schools, technical
30institutes, or the Pennsylvania State University and who is a

1member of the State Employees' Retirement System<-, the State 
2Employees' Defined Contribution Plan or a member of another
3retirement program approved by the employer.

4(2) Any school employee who is not a member of the 
5system and who is employed on a per diem or hourly basis for
6less than 80 full-day sessions or 500 hours in any fiscal
7year or annuitant who returns to school service under the
8provisions of section 8346(b) (relating to termination of
9annuities).

10(3) Any officer or employee of a governmental entity who
11subsequent to December 22, 1965, and prior to July 1, 1975,
12administers, supervises, or teaches classes financed wholly
13or in part by the Federal Government so long as he continues
14in such service.

15(4) Any part-time school employee who has an individual
16retirement account pursuant to the Federal act of September
172, 1974 (Public Law 93-406, 88 Stat. 829), known as the
18Employee Retirement Income Security Act of 1974.

<-19(5) Any school employee whose most recent period of
20school service starts on or after July 1, 2015.

21(b) Prohibited membership.--The school employees categorized
22in subsection (a)(1) [and], (2) and (5) shall not have the right
23to elect membership in the system.

24(c) Optional membership in system.--The school employees
25categorized in subsection (a)(3) and, if otherwise eligible,
26subsection (a)(4) shall have the right to elect membership in
27the system on or before July 1, 2015. Once such election is
28exercised, membership shall commence from the original date of
29eligibility and shall continue until the termination of such
30service[.] or until the school employee elects to be a

1participant in the plan.

2(d) Mandatory participation in the plan.--Unless the
3employee is or elects to be a participant in the State Employes'
4Defined Contribution Plan, a member of the State Employees'
5Retirement System or a member of another retirement program
6approved by the employer, a school employee who, on or after
7July 1, 2015, begins school service or returns to school service
8after a break in service shall be a mandatory participant in the
9plan as a result of the school service. A school employee who is
10a nonmember and waived membership under subsection (a)(4) shall
11be a mandatory participant in the plan commencing for the school
12service rendered on or after July 1, 2015.

13(e) Certain agreements.--The agreement of an employer to
14make contributions to the fund or to enroll its employees as
15members in the system shall be deemed to be an agreement to make
16contributions to the trust or to enroll its employees in the
17plan.

18Section 105. Section 8302(a), (b) and (c) of Title 24 are
19amended and the section is amended by adding a subsection to
20read:

21§ 8302. Credited school service.

22(a) Computation of credited service.--In computing credited
23school service of a member for the determination of benefits, a
24full-time salaried school employee shall receive one year of
25credit for each school year or the corresponding fraction
26thereof, in accordance with the proportion of the full school
27year for which the required regular member contributions have
28been made to the fund, or for which such contributions otherwise
29required for such service were not made to the fund solely by
30reason of any provision of this part relating to the limitations

1under IRC § 401(a)(17) or 415(b) or another provision of this
2part limiting compensation. A per diem or hourly school employee
3shall receive one year of credited service for each
4nonoverlapping period of 12 consecutive months in which he is
5employed and for which contributions are made to the fund, or
6would have been made to the fund but for such limitations under
7the IRC, or another provision of this part limiting compensation
8for at least 180 full-day sessions or 1,100 hours of employment.
9If such member was employed and contributions were made to the
10fund for less than 180 full-day sessions or 1,100 hours, he
11shall be credited with a fractional portion of a year determined
12by the ratio of the number of full-day sessions or hours of
13service actually rendered and for which contributions are made
14to the fund to 180 full-day sessions or 1,100 hours, as the case
15may be. A part-time salaried employee shall be credited with the
16fractional portion of the year which corresponds to the service
17actually rendered and for which contributions are or would have
18been made to the fund in relation to the service required as a
19comparable full-time salaried employee. In no case shall a
20member receive more than one year of credited service for any 12
21consecutive months or a member who has elected multiple service
22receive an aggregate in the two systems of more than one year of
23credited service for any 12 consecutive months.

24(b) Approved leaves of absence.--An active member shall
25receive credit, and an active participant shall receive vesting
26credit, for an approved leave of absence provided that:

27(1) the member returns for a period at least equal to
28the length of the leave or one year as a member of the system
29or the participant returns to school service as an active
30participant in the plan, whichever is less, to the school

1district which granted his leave, unless such condition is
2waived by the employer; and

3(2) the proper contributions are made by the member and
4the employer or by the active participant and the employer.

5* * *

6(c) Cancellation of credited service.--All credited service
7in the system shall be cancelled if a member withdraws his
8accumulated deductions. A partial or total distribution of
9accumulated total defined contributions to a combined service
10employee shall not cancel service credited in the system.

11(d) Military service by a participant.--A participant who
12has performed USERRA leave shall be treated and may make
13contributions as follows:

14(1) A participant who is reemployed from USERRA leave
15shall be treated as not having incurred a break in school
16service by reason of the USERRA leave and shall be granted
17vesting credit as if the participant had not been on USERRA
18leave. If a participant who is reemployed from USERRA leave
19subsequently makes mandatory pickup participant contributions
20in the amounts and in the time periods required by 38 U.S.C.
21Ch. 43 (relating to employment and reemployment rights of
22members of the uniformed services) and IRC § 414(u) as if the
23participant had continued in his school employment and
24performed school service and been compensated during the
25period of USERRA leave, then the participant's employer shall
26make the corresponding employer defined contributions. Such
27an employee shall have his contributions, benefits, rights
28and obligations determined under this part as if he was an
29active participant who performed school service during the
30USERRA leave in the job position that he would have held had

1he not been on USERRA leave and received the compensation on
2which the mandatory pickup participant contributions to
3receive school service credit for the USERRA leave were
4determined, including the right to make voluntary
5contributions on such compensation as permitted by law.

6(2) A participant who is reemployed from USERRA leave
7and does not make the mandatory pickup participant
8contributions or makes only part of the mandatory pickup
9participant contributions within the allowed payment period
10shall not be eligible to make mandatory pickup participant
11contributions and voluntary contributions at a later date for
12the period of USERRA leave for which the mandatory pickup
13participant contributions were not timely made.

14(3) A participant who performs USERRA leave from which
15the employee could have been reemployed from USERRA leave had
16the school employee returned to school service in the time
17frames required by 38 U.S.C. Ch. 43 for reemployment rights,
18but did not do so, shall not be eligible to make mandatory
19pickup participant contributions or voluntary contributions
20for the period of USERRA leave should the employee later
21return to school service and be a participant in the plan.

22(4) An active participant or inactive participant who,
23on or after the effective date of this subsection, is granted
24a leave of absence under 51 Pa.C.S. § 4102 (relating to
25leaves of absence for certain government employees) or a
26military leave under 51 Pa.C.S. Ch. 73 (relating to military
27leave of absence) that is not USERRA leave shall not be
28eligible to make mandatory pickup participant contributions
29or voluntary contributions during or for the leave of absence
30or military leave, and shall not have employer defined

1contributions made during such leave, without regard to
2whether or not the participant received salary, wages,
3stipends, differential wage payments or other payments from
4his employer during the leave, notwithstanding any provision
5to the contrary in 51 Pa.C.S. § 4102 or Ch. 73.

6(5) If a participant dies while performing USERRA leave,
7then the beneficiaries or successor payees, as the case may
8be, of the deceased participant are entitled to any
9additional benefits, other than benefit accruals relating to
10the period of qualified military service, provided under this
11part had the participant resumed and then terminated
12employment on account of death.

13Section 106. Section 8303.1 of Title 24 is amended to read:

14§ 8303.1. Waiver of adjustments.

15(a) Allowance.--Upon appeal by an affected member,
16participant, beneficiary or survivor annuitant, the board may
17waive an adjustment or any portion of an adjustment made under
18section 8534(b) (relating to fraud and adjustment of errors) if
19in the opinion of the board or the board's designated
20representative:

21(1) the adjustment or portion of the adjustment will
22cause undue hardship to the member, participant, beneficiary
23or survivor annuitant;

24(2) the adjustment was not the result of erroneous
25information supplied by the member, participant, beneficiary
26or survivor annuitant;

27(3) the member or participant had no knowledge or notice
28of the error before adjustment was made, and the member,
29participant, beneficiary or survivor annuitant took action
30with respect to their benefits based on erroneous information

1provided by the system or plan; and

2(4) the member, participant, beneficiary or survivor
3annuitant had no reasonable grounds to believe the erroneous
4information was incorrect before the adjustment was made.

5(b) Time period.--

6(1) In order to obtain consideration of a waiver under
7this section, the affected member, participant, beneficiary
8or survivor annuitant must appeal to the board in writing
9within 30 days after receipt of notice that benefits have
10been adjusted or, if no notice was given, within 30 days
11after the adjustment was known or should have been known to
12the affected member, participant, beneficiary or survivor
13annuitant.

14(2) For any adjustments made prior to the effective date
15of this subsection for which the member, participant,
16beneficiary or survivor annuitant appealed to the board and
17was denied, an appeal under this section must be filed within
1890 days of the effective date of this subsection.

19(3) For any adjustments made prior to the effective date
20of this paragraph for which the participant appealed to the
21board and was denied, an appeal under this section must be
22filed within 90 days of the effective date of this paragraph.

23Section 107. Title 24 is amended by adding a section to
24read:

25§ 8303.2. Spouses rights, benefits and effect of nomination of
26spouse.

27(a) No rights of participation in spouse.--The spouse of a
28participant does not have any of the rights, options or
29privileges of a participant. The rights of a spouse shall remain
30derivative of those of the participant, including, but not

1limited to, rights under the act of July 8, 1978 (P.L.752,
2No.140), known as the Public Employee Pension Forfeiture Act,
3section 16(b) of Article V of the Constitution of Pennsylvania,
4and a spouse may not compel a participant to take, or prevent a
5participant from taking, any action regarding membership, rights
6or benefits in the plan in which he is a participant other than
7those expressly set forth in this part; nor may a spouse take
8any action on behalf of a participant, except as otherwise duly
9authorized under this part.

10(b) No waiver of benefits without spousal consent.--To the
11extent that the law allows a participant to waive any benefits
12or return of contributions which the participant is entitled to
13receive now or in the future, or is receiving, no such waiver
14will be valid unless the spouse of the participant consents to
15it as provided for in this part.

16(c) Effect of nomination of spouse as beneficiary by law.--
17Whenever the spouse of a participant in the plan is deemed to be
18the beneficiary by operation of law instead of by a written
19nomination of beneficiary filed with the board, then the person
20last nominated as beneficiary in writing filed with the board
21shall become the contingent beneficiary.

22Section 108. Section 8305(b) of Title 24 is amended and the
23section is amended by adding a subsection to read:

24§ 8305. Classes of service.

25* * *

26(b) Other class membership.--A school employee who is a
27member of a class of service other than Class T-C on the
28effective date of this part may elect to become a member of
29Class T-C or Class T-D or may retain his membership in such
30other class until the service is discontinued or he elects to

1become a full coverage member or elects to purchase credit for
2previous school or creditable nonschool service. Any service
3thereafter as a member of the system shall be credited as Class
4T-C or T-D service as applicable.

5* * *

6(f) Ineligibility for active membership and classes of
7service.--An individual who elects to be a participant in the
8plan or who is a school employee on July 1, 2015, but who is not
9a member of the system, or who first becomes a school employee
10on or after July 1, 2015, or who returns to school service on or
11after July 1, 2015, after a termination of school service, shall
12be ineligible for active membership in the system. Instead, any
13such school employee shall be a participant in the plan as a
14result of such school service, subject to the provisions in
15section 8301 (relating to mandatory and optional membership).

16Section 109. Sections 8305.1(c) and 8305.2(d) of Title 24
17are 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(d) Effect of failure to make election.--If a member fails
11to timely file an election to become a Class T-F member, then
12the member shall be enrolled as a member of Class T-E, unless
13the school employee elects or is required to be a participant in
14the plan, and the member shall never be able to elect Class T-F
15service, regardless of whether the member terminates service or
16has a break in service.

17Section 110. (Reserved).

18Section 111. (Reserved).

19Section 112. Sections 8306(b), 8307(a) and (b), 8310,
208322.1(a), 8323(a) and (d), 8324(b), (c) and (d), 8325,
218325.1(a), 8326(a) and (c), 8327, 8328(a), (b), (c), (d), (e)
22and (g), 8330 and 8341 of Title 24 are amended to read:

23§ 8306. Eligibility points.

24* * *

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

26(1) In determining whether a member, other than a
27disability annuitant who returns to school service after June
2830, 2001, upon termination of the disability annuity, who is
29not a school employee or a State employee on June 30, 2001,
30and July 1, 2001, and who has previous school service, has

1the five eligibility points required by the definition of
2"vestee" in sections 8102 (relating to definitions), 8307
3(relating to eligibility for annuities), 8308 (relating to
4eligibility for vesting) and 8345 (relating to member's
5options), only eligibility points earned by performing
6credited school service as an active member of the system or
7credited State service as an active member of the State
8Employees' Retirement System after June 30, 2001, shall be
9counted until such member earns one eligibility point by
10performing credited school service or credited State service
11after June 30, 2001, at which time all eligibility points as
12determined under subsection (a) shall be counted.

13(2) A member subject to paragraph (1) shall be
14considered to have satisfied any requirement for five
15eligibility points contained in this part if the member has
16at least ten eligibility points determined under subsection
17(a).

18§ 8307. Eligibility for annuities.

19(a) Superannuation annuity.--An active or an inactive member
20who attains superannuation age shall be entitled to receive a
21superannuation annuity upon termination of service and filing of
22a proper application. A combined service employee who is an
23active or inactive participant and attains superannuation age
24shall be entitled to receive a superannuation annuity upon
25termination of service and filing of a proper application.

26(b) Withdrawal annuity.--A vestee in Class T-C or Class T-D
27with five or more eligibility points or an active or inactive
28Class T-C or Class T-D member or a combined service employee
29with Class T-C or Class T-D service who terminates school
30service having five or more eligibility points shall, upon

1filing a proper application, be entitled to receive an early
2annuity. A vestee in Class T-E or Class T-F with ten or more
3eligibility points or an active or inactive Class T-E or Class
4T-F member or a combined service employee with Class T-E or
5Class T-F service who terminates school service having ten or
6more eligibility points shall, upon filing a proper application,
7be entitled to receive an early annuity.

8* * *

9§ 8310. Eligibility for refunds.

10Upon termination of service any active member, regardless of
11eligibility for benefits, may elect to receive his accumulated
12deductions in lieu of any benefit from the system to which he is
13entitled.

14§ 8322.1. Pickup contributions.

15(a) Treatment for purposes of IRC § 414(h).--All
16contributions to the fund required to be made under sections
178321 (relating to regular member contributions for current
18service) and 8322 (relating to joint coverage member
19contributions), with respect to current school service rendered
20by an active member on or after January 1, 1983, shall be picked
21up by the employer and shall be treated as the employer's
22contribution for purposes of IRC § 414(h).

23* * *

24§ 8323. Member contributions for creditable school service.

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

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

14* * *

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

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

1allow. The board may limit salary deduction amortization
2plans to such terms as the board in its sole discretion
3determines. In the case of an eligible State employee who is
4an active member of the State Employees' Retirement System,
5the agreed upon salary deductions shall be remitted to the
6State Employees' Retirement Board, which shall certify and
7transfer to the board the amounts paid.

8(2) In the case of activated military service leave
9beginning before the effective date of this paragraph, the
10amount payable may be paid according to this subsection or
11subsection (c.1), but all lump sum payments must be made
12within one year of the termination of activated military
13service leave.

14§ 8324. Contributions for purchase of credit for creditable
15nonschool service and noncreditable school service.

16* * *

17(b) Nonintervening military service.--The amount due for the
18purchase of credit for military service other than intervening
19military service shall be determined by applying the member's
20basic contribution rate plus the normal contribution rate as
21provided in section 8328 (relating to actuarial cost method) at
22the time of entry of the member into school service subsequent
23to such military service to one-third of his total compensation
24received during the first three years of such subsequent
25credited school service and multiplying the product by the
26number of years and fractional part of a year of creditable
27nonintervening military service being purchased together with
28statutory interest during all periods of subsequent school
29service as an active member or inactive member and State service
30as an active member or inactive member on leave without pay to

1date of purchase. Upon certification of the amount due, payment
2may be made in a lump sum within 90 days or in the case of an
3active member or an eligible State employee who is an active
4member of the State Employees' Retirement System it may be
5amortized with statutory interest through salary deductions to
6the system in amounts agreed upon by the member and the board.
7The salary deduction amortization plans agreed to by members and
8the board may include a deferral of payment amounts and
9statutory interest until the termination of school service or
10State service or becoming a participant and a combined service
11employee as the board in its sole discretion decides to allow.
12The board may limit salary deduction amortization plans to such
13terms as the board in its sole discretion determines. In the
14case of an eligible State employee who is an active member of
15the State Employees' Retirement System, the agreed upon salary
16deductions shall be remitted to the State Employees' Retirement
17Board, which shall certify and transfer to the board the amounts
18paid. Application may be filed for all such military service
19credit upon completion of three years of subsequent credited
20school service and shall be credited as Class T-C service. In
21the event that a Class T-E member makes a purchase of credit for
22such military service, then such service shall be credited as
23Class T-E service. In the event that a Class T-F member makes a
24purchase of credit for such military service, then such service
25shall be credited as Class T-F service.

26(c) Intervening military service.--Contributions on account
27of credit for intervening military service shall be determined
28by the member's basic contribution rate and compensation at the
29time of entry of the member into active military service,
30together with statutory interest during all periods of

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

8(1) Regular monthly payments during active military
9service.

10(2) A lump sum payment within 90 days of certification
11of the amount due.

12(3) Salary deductions to the system in amounts agreed
13upon by the member and the board. The salary deduction
14amortization plans agreed to by the members and the board may
15include a deferral of payment amounts and statutory interest
16until the termination of school service or State service or
17becoming a participant and a combined service employee as the
18board in its sole discretion decides to allow. The board may
19limit salary deduction amortization plans to such terms as
20the board in its sole discretion determines. In the case of
21an eligible State employee who is an active member of the
22State Employees' Retirement System, the agreed upon salary
23deductions shall be remitted to the State Employees'
24Retirement Board, which shall certify and transfer to the
25board the amounts paid.

26(d) Other creditable nonschool service and noncreditable
27school service.--

28(1) Contributions on account of Class T-C credit for
29creditable nonschool service other than military service
30shall be determined by applying the member's basic

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

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

4(2) Contributions on account of Class T-E or Class T-F
5credit for creditable nonschool service other than military
6service shall be the present value of the full actuarial cost
7of the increase in the projected superannuation annuity
8caused by the additional service credited on account of the
9purchase. Upon certification of the amount due, payment may
10be made in a lump sum within 90 days or, in the case of an
11active member or an eligible State employee who is an active
12member of the State Employees' Retirement System, it may be
13amortized with statutory interest through salary deductions
14to the system in amounts agreed upon by the member and the
15board. The salary deduction amortization plans agreed to by
16the members and the board may include a deferral of payment
17amounts and statutory interest until the termination of
18school service or State service or becoming a participant and
19combined service employee as the board in its sole discretion
20decides to allow. The board may limit salary deduction
21amortization plans to the terms as the board in its sole
22discretion determines. In the case of an eligible State
23employee who is an active member of the State Employees'
24Retirement System, the agreed upon salary deductions shall be
25remitted to the State Employees' Retirement Board, which
26shall certify and transfer to the board the amounts paid.

27(3) Contributions on account of Class T-E or Class T-F
28credit for noncreditable school service other than military
29service shall be the present value of the full actuarial cost
30of the increase in the projected superannuation annuity

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

20* * *

21§ 8325. Incomplete payments.

22(a) Right to pay balance due.--In the event that a member
23terminates school service or becomes a participant or a multiple
24service member who is an active member of the State Employees'
25Retirement System terminates State service before any agreed
26upon payments or return of benefits on account of returning to
27school service or entering State service and electing multiple
28service have been completed, the member or multiple service
29member who is an active member of the State Employees'
30Retirement System shall have the right to pay within 30 days of

1termination of school service or State service or becoming a
2participant the balance due, including interest, in a lump sum,
3and the annuity shall be calculated including full credit for
4the previous school service, creditable nonschool service, or
5full-coverage membership.

6(b) Effect of failure to pay balance due.--In the event a
7member does not pay the balance due within 30 days of
8termination of school service or becoming a participant or in
9the event a member dies in school service or within 30 days of
10termination of school service or in the case of a multiple
11service member who is an active member of the State Employees'
12Retirement System does not pay the balance due within 30 days of
13termination of State service or dies in State service or within
1430 days of termination of State service or becoming a
15participant and before the agreed upon payments have been
16completed, the present value of the benefit otherwise payable
17shall be reduced by the balance due, including interest, and the
18benefit payable shall be calculated as the actuarial equivalent
19of such reduced present value.

20§ 8325.1. Annual compensation limit under IRC § 401(a)(17).

21(a) General rule.--In addition to other applicable
22limitations set forth in this part, and notwithstanding any
23provision of this part to the contrary, the annual compensation
24of each noneligible member and each participant taken into
25account for benefit purposes under this subchapter shall not
26exceed the limitation under IRC § 401(a)(17). On and after July
271, 1996, any reference in this part to the limitation under IRC
28§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
291993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
30compensation limit set forth in this subsection. The OBRA '93

1annual compensation limit is $150,000, as adjusted by the
2commissioner for increases in the cost of living in accordance
3with IRC § 401(a)(17)(B). The cost-of-living adjustment in
4effect for a calendar year applies to any determination period
5which is a period, not exceeding 12 months, over which
6compensation is determined, beginning in such calendar year. If
7a determination period consists of fewer than 12 months, the
8OBRA '93 compensation limit will be multiplied by a fraction,
9the numerator of which is the number of months in the
10determination period and the denominator of which is 12.

11* * *

12§ 8326. Contributions by the Commonwealth.

13(a) Contributions on behalf of active members and
14participants.--The Commonwealth shall make contributions into
15the fund on behalf of all active members and participants,
16including members and participants on activated military service
17leave, in an amount equal to one-half the amount certified by
18the board as necessary to provide, together with the members'
19contributions, annuity reserves on account of prospective
20annuities as provided in this part in accordance with section
218328 (relating to actuarial cost method). In case a school
22employee has elected membership in a retirement program approved
23by the employer, the Commonwealth shall contribute to such
24program on account of his membership an amount no greater than
25the amount it would have contributed had the employee been a
26member of the Public School Employees' Retirement System.

27* * *

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

29(1) The Commonwealth shall make contributions into the
30fund on behalf of all active members and participants,

1including members and participants on activated military
2service leave, for service performed after June 30, 1995, in
3the following manner:

4(i) For members and participants who are employees
5of employers that are school entities, no Commonwealth
6contributions shall be made.

7(ii) For members and participants who are employees
8of employers that are not school entities, the amount
9computed under subsection (a).

10(2) The Commonwealth shall make contributions into the
11fund on behalf of annuitants for all amounts due to the fund
12after June 30, 1995, including, but not limited to, amounts
13due pursuant to section 8328(d) and (f), in the following
14manner:

15(i) For members and participants who are employees
16of employers who are school entities, no Commonwealth
17contributions shall be made.

18(ii) For members and participants who are employees
19of employers who are not school entities, the amount
20computed under subsection (b).

21§ 8327. Payments by employers.

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

23(1) For payments prior to June 30, 2015, each employer,
24including the Commonwealth as employer of employees of the
25Department of Education, State-owned colleges and
26universities, Thaddeus Stevens College of Technology, Western
27Pennsylvania School for the Deaf, Scotland School for
28Veterans' Children[,] and [the] The Pennsylvania State
29University, shall make payments to the fund each quarter in
30an amount equal to one-half the sum of the percentages, as

1determined under section 8328 (relating to actuarial cost
2method), applied to the total compensation during the pay
3periods in the preceding quarter of all its employees who
4were members of the system during such period, including
5members on activated military service leave. In the event a
6member on activated military service leave does not return to
7service for the necessary time or receives an undesirable,
8bad conduct or dishonorable discharge or does not elect to
9receive credit for activated military service under section
108302(b.1)(3) (relating to credited school service), the
11contributions made by the employer on behalf of such member
12shall be returned with valuation interest upon application by
13the employer.

14(2) For payments after June 30, 2015, each employer,
15including the Commonwealth as employer of employees of the
16Department of Education, State-owned colleges and
17universities, Thaddeus Stevens College of Technology, Western
18Pennsylvania School for the Deaf, Scotland School for
19Veterans' Children and The Pennsylvania State University,
20shall make payments to the fund each quarter in an amount
21equal to one-half the sum of the percentages, as determined
22under section 8328, applied to the total compensation during
23the pay periods in the preceding quarter of all its employees
24who were members of the system during such period, including
25members on activated military service leave, plus the accrued
26liability contribution rate applied to the total compensation
27of all active participants in the plan. In the event a member
28on activated military service leave does not return to
29service for the necessary time or receives an undesirable,
30bad conduct or dishonorable discharge or does not elect to

1receive credit for activated military service under section
28302(b.1)(3), the contributions made by the employer on
3behalf of such member shall be returned with valuation
4interest upon application by the employer.

5(b) Deduction from appropriations.--

6(1) To facilitate the payment of amounts due from any
7employer to the fund and the trust through the State
8Treasurer and to permit the exchange of credits between the
9State Treasurer and any employer, the Secretary of Education
10and the State Treasurer shall cause to be deducted and paid
11into the fund and the trust from the amount of any moneys due
12to any employer on account of any appropriation for schools
13or other purposes amounts equal to the employer and pickup
14contributions which an employer is required to pay to the
15fund and the trust, as certified by the board, and as remains
16unpaid on the date such appropriations would otherwise be
17paid to the employer. Such amount shall be credited to the
18appropriate accounts in the fund and the trust.

19(2) To facilitate the payments of amounts due from any
20charter school, as defined in Article XVII-A of the act of
21March 10, 1949 (P.L.30, No.14), known as the Public School
22Code of 1949, to the fund and the trust through the State
23Treasurer and to permit the exchange of credits between the
24State Treasurer and any employer, the Secretary of Education
25and the State Treasurer shall cause to be deducted and paid
26into the fund and the trust from any funds appropriated to
27the Department of Education for basic education of the
28chartering school district of a charter school and public
29school employees' retirement contributions amounts equal to
30the employer and pickup contributions which a charter school

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

10(c) Payments by employers after June 30, 1995, and before
11July 1, 2015.--After June 30, 1995, and before July 1, 2015,
12each employer, including the Commonwealth as employer of
13employees of the Department of Education, State-owned colleges
14and universities, Thaddeus Stevens College of Technology,
15Western Pennsylvania School for the Deaf, Scotland School for
16Veterans' Children and The Pennsylvania State University, shall
17make payments to the fund and the trust each quarter in an
18amount computed in the following manner:

19(1) For an employer that is a school entity, the amount
20shall be the sum of the percentages as determined under
21section 8328 applied to the total compensation during the pay
22periods in the preceding quarter of all employees who were
23active members of the system or active participants of the
24plan during such period, including members or active
25participants on activated military service leave. In the
26event a member on activated military service leave does not
27return to service for the necessary time or receives an
28undesirable, bad conduct or dishonorable discharge or does
29not elect to receive credit for activated military service
30under section 8302(b.1)(3), the contribution made by the

1employer on behalf of such member shall be returned with
2valuation interest upon application by the employer.

3(2) For an employer that is not a school entity, the
4amount computed under subsection (a).

5(3) For any employer, whether or not a school entity, in
6computing the amount of payment due each quarter, there shall
7be excluded from the total compensation referred to in this
8subsection and subsection (a) any amount of compensation of a
9noneligible member on the basis of which member or
10participant contributions have not been made by reason of the
11limitation under IRC § 401(a)(17), except as otherwise
12provided in this part. Any amount of contribution to the fund
13or trust paid by the employer on behalf of a noneligible
14member or participant on the basis of compensation which was
15subject to exclusion from total compensation in accordance
16with the provisions of this paragraph shall, upon the board's
17determination or upon application by the employer, be
18returned to the employer with valuation interest.

19(d) Payments by employers after June 30, 2015.--After June
2030, 2015, each employer, including the Commonwealth as employer
21of employees of the Department of Education, State-owned
22colleges and universities, Thaddeus Stevens College of
23Technology, Western Pennsylvania School for the Deaf, Scotland
24School for Veterans' Children and The Pennsylvania State
25University, shall make payments to the fund and the trust each
26quarter in an amount computed in the following manner:

27(1) For an employer that is a school entity, the amount
28shall be the sum of the percentages as determined under
29section 8328 applied to the total compensation during the pay
30periods in the preceding quarter of all employees who were

1active members of the system during such period, including
2members on activated military service leave, plus the accrued
3liability contribution rate applied to the total compensation
4of all active participants in the plan. In the event a member
5on activated military service leave does not return to
6service for the necessary time or receives an undesirable,
7bad conduct or dishonorable discharge or does not elect to
8receive credit for activated military service under section
98302(b.1)(3), the contribution made by the employer on behalf
10of such member shall be returned with valuation interest upon
11application by the employer.

12(2) For an employer that is not a school entity, the
13amount computed under subsection (a).

14(3) For any employer, whether or not a school entity, in
15computing the amount of payment due each quarter, there shall
16be excluded from the total compensation referred to in this
17subsection and subsection (a) any amount of compensation of a
18noneligible member or participant on the basis of which
19member or participant contributions have not been made by
20reason of the limitation under IRC § 401(a)(17). Any amount
21of contribution to the fund paid by the employer on behalf of
22a noneligible member or participant on the basis of
23compensation which was subject to exclusion from total
24compensation in accordance with the provisions of this
25paragraph shall, upon the board's determination or upon
26application by the employer, be returned to the employer with
27valuation interest.

28(e) Deemed agreed to.--The agreement of an employer listed
29in the definition of school employee under section 8102
30(relating to definitions) or any other law to make contributions

1to the fund or to enroll its employees as members in the system
2shall be deemed to be an agreement to make contributions to the
3trust or enroll its employees in the plan.

4(f) Contributions.--The employer employing a participant
5shall pick up the required mandatory participant contributions
6by a reduction in the compensation of the participant.

7(g) Contributions resulting from members reemployed from
8USERRA leave.--When a school employee reemployed from USERRA
9leave makes the member contributions required to be granted
10school service credit for the USERRA leave after June 30, 2015,
11either by actual payment or by actuarial debt under section 8325
12(relating to incomplete payments), the employer that employed
13the school employee when the member contributions are made or
14the last employer before termination in the case of payment
15under section 8325 shall make the employer contributions that
16would have been made under this section if the employee making
17the member contributions after he is reemployed from USERRA
18leave continued to be employed in his school office or position
19instead of performing USERRA leave.

20§ 8328. Actuarial cost method.

21(a) Employer contribution rate.--The amount of the total
22employer contributions shall be computed by the actuary as a
23percentage of the total compensation of all active members and
24active participants, as applicable, during the period for which
25the amount is determined and shall be so certified by the board.
26The total employer contribution rate shall be the sum of the
27final contribution rate as computed in subsection (h) plus the
28premium assistance contribution rate as computed in subsection
29(f). The actuarially required contribution rate shall consist of
30the normal contribution rate as defined in subsection (b), the

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

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

7(1) For the fiscal year ending June 30, 2014, the normal
8contribution rate shall be determined after each actuarial
9valuation. Until all accrued liability contributions have
10been completed, the normal contribution rate shall be
11determined, on the basis of an annual interest rate and such
12mortality and other tables as shall be adopted by the board
13in accordance with generally accepted actuarial principles,
14as a level percentage of the compensation of the average new
15active member, which percentage, if contributed on the basis
16of his prospective compensation through the entire period of
17active school service, would be sufficient to fund the
18liability for any prospective benefit payable to him, in
19excess of that portion funded by his prospective member
20contributions, excluding the shared-risk contributions.

21(2) For fiscal years beginning on or after July 1, 2014,
22the normal contribution rate shall be determined after each
23actuarial valuation. Until all accrued liability
24contributions have been completed, the normal contribution
25rate shall be determined, on the basis of an annual interest
26rate and such mortality and other tables as shall be adopted
27by the board in accordance with generally accepted actuarial
28principles, as a level percentage of the compensation of all
29active members not limited by the Social Security taxable
30wage base, which percentage, if contributed on the basis of

1the member's prospective compensation through the entire
2period of active school service, would be sufficient to fund
3the liability for any prospective benefit payable to him, in
4excess of that portion funded by his prospective member
5contributions, excluding the shared-risk contributions.

6(c) Accrued liability contribution rate.--

7(1) For the fiscal years beginning July 1, 2002, and
8ending June 30, 2011, the accrued liability contribution rate
9shall be computed as the rate of total compensation of all
10active members which shall be certified by the actuary as
11sufficient to fund over a period of ten years from July 1,
122002, the present value of the liabilities for all
13prospective benefits of active members, except for the
14supplemental benefits provided in sections 8348 (relating to
15supplemental annuities), 8348.1 (relating to additional
16supplemental annuities), 8348.2 (relating to further
17additional supplemental annuities), 8348.3 (relating to
18supplemental annuities commencing 1994), 8348.4 (relating to
19special supplemental postretirement adjustment), 8348.5
20(relating to supplemental annuities commencing 1998), 8348.6
21(relating to supplemental annuities commencing 2002) and
228348.7 (relating to supplemental annuities commencing 2003),
23in excess of the total assets in the fund (calculated by
24recognizing the actuarially expected investment return
25immediately and recognizing the difference between the actual
26investment return and the actuarially expected investment
27return over a five-year period), excluding the balance in the
28annuity reserve account, and of the present value of normal
29contributions and of member contributions payable with
30respect to all active members on July 1, 2002, during the

1remainder of their active service.

2(2) For the fiscal years beginning July 1, 2003, and
3ending June 30, 2011, the amount of each annual accrued
4liability contribution shall be equal to the amount of such
5contribution for the fiscal year, beginning July 1, 2002,
6except that, if the accrued liability is increased by
7legislation enacted subsequent to June 30, 2002, but before
8July 1, 2003, such additional liability shall be funded over
9a period of ten years from the first day of July, coincident
10with or next following the effective date of the increase.
11The amount of each annual accrued liability contribution for
12such additional legislative liabilities shall be equal to the
13amount of such contribution for the first annual payment.

14(3) Notwithstanding any other provision of law,
15beginning July 1, 2004, and ending June 30, 2011, the
16outstanding balance of the increase in accrued liability due
17to the change in benefits enacted in 2001 and the outstanding
18balance of the net actuarial loss incurred in fiscal year
192000-2001 shall be amortized in equal dollar annual
20contributions over a period that ends 30 years after July 1,
212002, and the outstanding balance of the net actuarial loss
22incurred in fiscal year 2001-2002 shall be amortized in equal
23dollar annual contributions over a period that ends 30 years
24after July 1, 2003. For fiscal years beginning on or after
25July 1, 2004, if the accrued liability is increased by
26legislation enacted subsequent to June 30, 2003, such
27additional liability shall be funded in equal dollar annual
28contributions over a period of ten years from the first day
29of July coincident with or next following the effective date
30of the increase.

1(4) For the fiscal year beginning July 1, 2011, the
2accrued liability contribution rate shall be computed as the
3rate of total compensation of all active members which shall
4be certified by the actuary as sufficient to fund as a level
5percentage of compensation over a period of 24 years from
6July 1, 2011, the present value of the liabilities for all
7prospective benefits calculated as of June 30, 2010,
8including the supplemental benefits as provided in sections
98348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and
108348.7, in excess of the actuarially calculated assets in the
11fund (calculated recognizing all realized and unrealized
12investment gains and losses each year in level annual
13installments over a ten-year period, provided that the
14resulting actuarially calculated assets are constrained
15within a range of 70% to 130% of market value). In the event
16that the accrued liability is [increased] changed by
17legislation enacted subsequent to June 30, 2010, such
18[additional] change in liability shall be funded as a level
19percentage of compensation over a period of ten years from
20the July 1 second succeeding the date such legislation is
21enacted.

22(d) Supplemental annuity contribution rate.--

23(1) For the period of July 1, 2002, to June 30, 2011,
24contributions from the Commonwealth and other employers
25required to provide for the payment of the supplemental
26annuities provided for in sections 8348, 8348.1, 8348.2,
278348.4 and 8348.5 shall be paid over a period of ten years
28from July 1, 2002. The funding for the supplemental annuities
29commencing 2002 provided for in section 8348.6 shall be as
30provided in section 8348.6(f). The funding for the

1supplemental annuities commencing 2003 provided for in
2section 8348.7 shall be as provided in section 8348.7(f). The
3amount of each annual supplemental annuities contribution
4shall be equal to the amount of such contribution for the
5fiscal year beginning July 1, 2002.

6(2) For fiscal years beginning July 1, 2011, and ending
7June 30, 2014, contributions from the Commonwealth and other
8employers whose employees are members of the system required
9to provide for the payment of supplemental annuities as
10provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4,
118348.5, 8348.6 and 8348.7 shall be paid as part of the
12accrued liability contribution rate as provided for in
13subsection (c)(4), and there shall not be a separate
14supplemental annuity contribution rate attributable to those
15supplemental annuities. In the event that supplemental
16annuities are increased by legislation enacted subsequent to
17June 30, 2010, [the] but before July 1, 2013, such additional
18liability for the increase in benefits shall be funded as a
19level percentage of compensation over a period of ten years
20from the July 1 second succeeding the date such legislation
21is enacted.

22(3) For fiscal years beginning on or after July 1, 2014,
23contributions from employers whose employees are members of
24the system required to provide for the payment of
25supplemental annuities as provided in sections 8348, 8348.1,
268348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be
27paid as part of the accrued liability contribution rate as
28provided for in subsection (c)(4), and there shall not be a
29separate supplemental annuity contribution rate attributable
30to those supplemental annuities. In the event that

1supplemental annuities are increased by legislation enacted
2subsequent to June 30, 2013, the additional liability for the
3increase in benefits shall be funded as a level percentage of
4compensation of all active members not limited by the Social
5Security taxable wage base and active participants over a
6period of ten years from the July 1 second succeeding the
7date such legislation is enacted.

8(e) Experience adjustment factor.--

9(1) For each year after the establishment of the accrued
10liability contribution rate for the fiscal year beginning
11July 1, 2011, and ending June 30, 2014, any increase or
12decrease in the unfunded accrued liability, excluding the
13gains or losses on the assets of the health insurance
14account, due to actual experience differing from assumed
15experience, changes in actuarial assumptions, changes in
16contributions caused by the final contribution rate being
17different from the actuarially required contribution rate,
18active members making shared-risk contributions or changes in
19the terms and conditions of the benefits provided by the
20system by judicial, administrative or other processes other
21than legislation, including, but not limited to,
22reinterpretation of the provisions of this part, recognized
23by the actuarial valuations on June 30, 2011, and June 30,
242012, shall be amortized as a level percentage of
25compensation over a period of 24 years beginning with the
26July 1 second succeeding the actuarial valuation determining
27said increases or decreases.

28(2) (Reserved).

29(3) For fiscal years beginning July 1, 2014, any
30increase or decrease in the unfunded accrued liability,

1excluding the gains or losses on the assets of the health
2insurance account, due to actual experience differing from
3assumed experience, changes in actuarial assumptions, changes
4in contributions caused by the final contribution rate being
5different from the actuarially required contribution rate,
6active members making shared-risk contributions or changes in
7the terms and conditions of the benefits provided by the
8system by judicial, administrative or other processes other
9than legislation, including, but not limited to,
10reinterpretation of the provisions of this part, shall be
11amortized as a level percentage of the compensation of all
12active members, not limited by the Social Security taxable
13wage base, and active participants over a period of 24 years
14beginning with the July 1 second succeeding the actuarial
15valuation determining such increases or decreases.

16* * *

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

18(1) The collared contribution rate for each year shall
19be determined by comparing the actuarially required
20contribution rate, calculated without regard for the costs
21added by legislation, to the prior year's final contribution
22rate.

23(2) If, for any of the fiscal years beginning July 1,
242011, and July 1, 2012, [and on or after July 1, 2013,] the
25actuarially required contribution rate, calculated without
26regard for the costs added by legislation, is more than 3%[,]
27or 3.5% [and 4.5%], respectively, of the total compensation
28of all active members greater than the prior year's final
29contribution rate, then the collared contribution rate shall
30be applied and be equal to the prior year's final

1contribution rate increased by 3%[,] or 3.5% [and 4.5%],
2respectively, of total compensation of all active members.
3Otherwise, and for all other fiscal years, the collared
4contribution rate shall not be applicable. In no case shall
5the collared contribution rate be less than 4% of the total
6compensation of all active members.

7(3) If, for any of the fiscal years beginning July 1,
82013, July 1, 2014, July 1, 2015, July 1, 2016, July 1, 2017,
9and on or after July 1, 2018, the actuarially required
10contribution rate, calculated without regard for the costs
11added by legislation, is more than 2.25%, 2.75%, 3.25%,
123.75%, 4.25% and 4.5%, respectively, of the total
13compensation of all active members and active participants
14greater than the prior year's final contribution rate, then
15the collared contribution rate shall be applied and be equal
16to the prior year's final contribution rate increased by
172.25%, 2.75%, 3.25%, 3.75%, 4.25% and 4.5%, respectively, of
18total compensation of all active members, not limited by the
19Social Security taxable wage base, and active participants.

20(4) For purposes of applying the collared contribution
21rate, compensation for determining the normal contribution
22rate shall be defined as the total compensation of all active
23members not limited by the Social Security taxable wage base
24and active participants.

25* * *

26§ 8330. Appropriations by the Commonwealth.

27(a) Annual submission of budget.--The board shall prepare
28and through the Governor submit annually to the General Assembly
29an itemized budget consisting of the amounts necessary to be
30appropriated by the Commonwealth out of the General Fund

1required to meet the separate obligations to the fund and the
2trust accruing during the fiscal period beginning July 1 of the
3following year.

4(b) Appropriation and payment.--The General Assembly shall
5make an appropriation sufficient to provide for the separate
6obligations of the Commonwealth to the fund and the trust. Such
7amount shall be paid by the State Treasurer through the
8Department of Revenue into the fund or the trust, as the case
9may be, within 30 days of receipt of the requisition presented
10each quarter by the board.

11§ 8341. Return of accumulated deductions.

12Any member upon termination of service may, in lieu of all
13benefits payable from the system under this chapter to which he
14may be entitled, elect to receive his accumulated deductions.

15Section 113. Section 8342 of Title 24 is amended by adding a
16subsection to read:

17§ 8342. Maximum single life annuity.

18* * *

19(d) Coordination of benefits.--The determination and payment
20of the maximum single life annuity under this section shall be
21in addition to any payments a combined service employee may be
22entitled to receive, has received or is receiving as a result of
23being a participant in the plan.

24Section 114. Sections 8344, 8346 and 8349 heading, (a) and
25(b) of Title 24 are amended to read:

26§ 8344. Disability annuities.

27(a) Amount of annuity.--A member who has made application
28for a disability annuity as provided in section 8507(k)
29(relating to rights and duties of school employees [and
30members], members and participants) and has been found to be

1eligible in accordance with the provisions of sections 8307(c)
2(relating to eligibility for annuities) and 8505(c)(1) (relating
3to duties of board regarding applications and elections of
4members) shall receive a disability annuity payable from the
5effective date of disability and continued until a subsequent
6determination by the board that the annuitant is no longer
7entitled to a disability annuity. The disability annuity shall
8be a single life annuity that is equal to a sum of the standard
9single life [annuity] annuities determined separately for each
10class of service if the total number of years of credited
11service is greater than 16.667, otherwise [the] each standard
12single life annuity shall be multiplied by the lesser of the
13following ratios:

14Y*/Y or 16.667/Y

15where Y = total number of years of credited service and Y* =
16total years of credited service if the member were to continue
17as a school employee until attaining superannuation age, or if
18the member has attained superannuation age then the number of
19years of credited service. In no event shall the disability
20annuity plus any cost-of-living increases be less than $100 for
21each full year of credited service. The member shall be entitled
22to the election of a joint and survivor annuity on that portion
23of the disability annuity to which he is entitled under section
248342 (relating to maximum single life annuity).

25(b) Reduction on account of earned income.--Payments on
26account of disability shall be reduced by that amount by which
27the earned income of the annuitant, as reported in accordance
28with section 8508(b) (relating to rights and duties of
29annuitants) for the preceding year together with the disability
30annuity payments for the year, exceeds the greater of $5,000 or

1the last year's salary of the annuitant as a [school employee]
2member of the system, provided that the annuitant shall not
3receive less than his member's annuity or the amount to which he
4may be entitled under section 8342, whichever is greater.

5(c) Termination and modification of payments.--Payment of
6that portion of the disability annuity in excess of the annuity
7to which the annuitant was entitled on the effective date of
8disability calculated in accordance with section 8342 shall
9cease if the annuitant is no longer eligible under the
10provisions of section 8505(c)(2) or section 8508(b) or (c) and
11if such annuitant on the date of termination of service was
12eligible for an annuity, he may file an application with the
13board for an election of an optional modification of the annuity
14to which he was entitled in accordance with section 8342.

15(d) Withdrawal of accumulated deductions.--Upon termination
16of disability annuity payments in excess of an annuity
17calculated in accordance with section 8342, a disability
18annuitant who:

19(1) is a Class T-C [or], Class T-D member; or

20(2) is a Class T-E or Class T-F member with less than
21ten eligibility points

22and who does not return to school service may file an
23application with the board for an amount equal to the
24accumulated deductions, shared-risk member contributions and
25statutory interest standing to his credit at the effective date
26of disability less the total payments received on account of his
27member's annuity.

28(e) Limitation regarding annual benefit under IRC §
29415(b).--Notwithstanding any provision of this part to the
30contrary, no benefit shall be payable to the extent that such

1benefit exceeds any limitation under IRC § 415(b) in effect with
2respect to governmental plans, as such term is defined in IRC §
3414(d), on the date the benefit payment becomes effective.

4(f) Coordination of benefits.--The determination and payment
5of a disability annuity under this section shall be in addition
6to any payments a combined service employee may be entitled to
7receive, has received or is receiving as a result of being a
8participant in the plan.

<-9* * *

10§ 8346. Termination of annuities.

11(a) General rule.--If an annuitant returns to school service
12or enters or has entered State service and elects multiple
13service membership, any annuity payable to him under this part
14shall cease effective upon the date of his return to school
15service or entering State service without regard to whether he 
16is a mandatory, optional or prohibited member of the system <-or 
17participant in the plan or, if a multiple service member, 
18whether he is a mandatory, optional or prohibited member or 
19participant of the State Employees' Retirement System or State 
20Employees' Defined Contribution Plan and in the case of an
21annuity other than a disability annuity the present value of
22such annuity, adjusted for full coverage in the case of a joint
23coverage member who makes the appropriate back contributions for
24full coverage, shall be frozen as of the date such annuity
25ceases. An annuitant who is credited with an additional 10% of
26membership service as provided in section 8302(b.2) (relating to
27credited school service) and who returns to school service,
28except as provided in subsection (b), shall forfeit such
29credited service and shall have his frozen present value
30adjusted as if his 10% retirement incentive had not been applied

1to his account. In the event that the cost-of-living increase
2enacted December 18, 1979, occurred during the period of such
3State or school employment, the frozen present value shall be
4increased, on or after the member attains superannuation age, by
5the percent applicable had he not returned to service.

<-6(a.1) Return of benefits.--In the event an annuitant whose
7annuity ceases pursuant to this section receives any annuity
8payment, including a lump sum payment pursuant to section 8345
9(relating to member's options) on or after the date of his
10return to school service or entering State service, the
11annuitant shall return to the board the amount so received plus
12statutory interest. The amount payable shall be certified in
13each case by the board in accordance with methods approved by
14the actuary and shall be paid in a lump sum within 90 days or in
15the case of an active member or a State employee who is an
16active member of the State Employees' Retirement System may be
17amortized with statutory interest through salary deductions to
18the system in amounts agreed upon by the member and the board.
19The salary deduction amortization plans agreed to by the member
20and the board may include a deferral of payment amounts and
21statutory interest until the termination of school service or
22State service as the board in its sole discretion decides to
23allow. The board may limit salary deduction amortization plans
24to such terms as the board in its sole discretion determines. In
25the case of a State employee who is an active member of the
26State Employees' Retirement System, the agreed upon salary
27deductions shall be remitted to the State Employees' Retirement
28Board, which shall certify and transfer to the board the amounts
29paid.

30(b) Return to school service during emergency.--When, in the

1judgment of the employer, an emergency creates an increase in
2the work load such that there is serious impairment of service
3to the public or in the event of a shortage of appropriate
4subject certified teachers or other personnel, an annuitant or
5participant receiving distributions may be returned to school
6service for a period not to extend beyond the school year during
7which the emergency or shortage occurs, without loss of his
8annuity or distributions. The annuitant shall not be entitled to
9earn any credited service, and no contributions may be made by
10the annuitant, the employer or the Commonwealth on account of
11such employment. Such service shall not be subject to member
12contributions or be eligible for qualification as creditable
13school service or for participation in the plan, mandatory
14pickup participant contributions or employer defined
15contributions.

16(b.1) Return to school service in an extracurricular
17position.--

18(1) An annuitant or participant receiving distributions
19may be employed under separate contract by a public school or
20charter school in an extracurricular position performed
21primarily outside regular instructional hours and not part of
22mandated curriculum without loss of annuity. [Neither the]
23The annuitant [nor], the participant receiving distributions
24and the employer shall not make contributions to the member's
25savings account, the individual investment account or State
26accumulation account respectively for such service. Further,
27such contract shall contain a waiver whereby the annuitant
28waives any potential retirement benefits that could arise
29from the contract and releases the employer and the board
30from any liability for such benefits. Such service shall not

1be subject to member or participant contributions or be
2eligible for qualification as creditable school service or
3for participation in the plan, mandatory pickup participant
4contributions or employer defined contributions.

5(2) Nothing in this subsection shall be construed to
6abridge or limit any rights provided under a collective
7bargaining agreement or any rights provided under the act of 
8July 23, 1970 (P.L.563, No.195), known as the Public Employe
9Relations Act.

10(3) For purposes of this subsection, the term
11"extracurricular position" means a contract position filled
12by an annuitant that is separate from the established
13academic course structure, including the position of athletic
14director.

15(c) Subsequent discontinuance of service.--Upon subsequent
16discontinuance of service, such [member] terminating school
17employee other than a former annuitant who had the effect of his
18frozen present value eliminated in accordance with subsection
19(d) or a former disability annuitant shall be entitled to an
20annuity which is actuarially equivalent to [the sum of] the
21present value as determined under subsection (a) [and] to which
22shall be added, if the service after reemployment was as a
23member of the system, the present value of a maximum single life
24annuity based on years of service credited subsequent to reentry
25in the system and his final average salary computed by reference
26to his compensation as a member of the system or as a member of
27the State Employees' Retirement System during his entire period
28of school and State service.

29* * *<-

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

1(1) An annuitant who returns to school service<- as an 
2active member of the system and earns three eligibility
3points by performing credited school service following the
4most recent period of receipt of an annuity under this part,
5or an annuitant who enters State service other than a 
6participant in the State Employees' Defined Contribution Plan
7and:

8(i) is a multiple service member; or

9(ii) who elects multiple service membership, and 
10earns three eligibility points by performing credited
11State service or credited school service following the
12most recent period of receipt of an annuity under this
13part, and who had the present value of his annuity frozen
14in accordance with subsection (a), shall qualify to have
15the effect of the frozen present value resulting from all
16previous periods of retirement eliminated, provided that
17all payments under Option 4 and annuity payments payable
18during previous periods of retirement plus interest as
19set forth in paragraph (3) shall be returned to the fund
20in the form of an actuarial adjustment to his subsequent
21benefits or in such form as the board may otherwise
22direct.

<-23(2) Upon subsequent discontinuance of service and the
24filing of an application for an annuity, a former annuitant
25who qualifies to have the effect of a frozen present value
26eliminated under this subsection shall be entitled to receive
27the higher of either:

28(i) an annuity (prior to optional modification)
29calculated as if the freezing of the former annuitant's
30account pursuant to subsection (a) had not occurred,

1adjusted by crediting Class T-C school service as Class
2T-D service as provided for in section 8305(c) (relating
3to classes of service) and further adjusted according to
4paragraph (3), provided that a former annuitant of the
5system or a former annuitant of the State Employees'
6Retirement System who retired under a provision of law
7granting additional service credit if termination of
8school or State service or retirement occurred during a
9specific period of time shall not be permitted to retain
10the additional service credit under the prior law when
11the annuity is computed for his most recent retirement;
12or

13(ii) an annuity (prior to optional modification)
14calculated as if the former annuitant did not qualify to
15have the effect on the frozen present value eliminated,

16unless the former annuitant notifies the board in writing by
17the later of the date the application for annuity is filed or
18the effective date of retirement that the former annuitant
19wishes to receive the lower annuity.

20(3) In addition to any other adjustment to the present
21value of the maximum single life annuity that a member may be
22entitled to receive that occurs as a result of any other
23provision of law, the present value of the maximum single
24life annuity shall be reduced by all amounts paid or payable
25to him during all previous periods of retirement plus
26interest on these amounts until the date of subsequent
27retirement. The interest for each year shall be calculated
28based upon the annual interest rate adopted for that school
29year by the board for the calculation of the normal
30contribution rate pursuant to section 8328(b) (relating to

1actuarial cost method).

2§ 8349. Payment of benefits from the system.

3(a) Annuities.--Any annuity granted under the provisions of
4this part and paid from the fund shall be paid in equal monthly
5installments.

6(b) Death benefits.--If the amount of a death benefit
7payable from the fund to a beneficiary of a member under section
88347 (relating to death benefits) or under the provisions of
9Option 1 of section 8345(a)(1) (relating to member's options) is
10$10,000 or more, such beneficiary may elect to receive payment
11according to one of the following options:

12(1) A lump sum payment.

13(2) An annuity actuarially equivalent to the amount
14payable.

15(3) A lump sum payment and an annuity such that the
16annuity is actuarially equivalent to the amount payable less
17the lump sum payment specified by the beneficiary.

18* * *

19Section 115. Title 24 is amended by adding a chapter to
20read:

21CHAPTER 84

22SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN

23Sec.

248401. Establishment.

258402. Plan document.

268403. Individual investment accounts.

278404. Participant contributions.

288405. Mandatory pickup participant contributions.

298406. Employer defined contributions.

308407. Eligibility for benefits.

18408. Death benefits.

28409. Vesting.

38410. Termination of distributions.

48411. Agreements with financial institutions and other
5organizations.

68412. Powers and duties of board.

78413. Responsibility for investment loss.

88414. Investments based on participants' investment allocation
9choices.

108415. Expenses.

118416. Election by members to be participants.

128417. Tax qualification.

13§ 8401. Establishment.

14(a) School Employees' Defined Contribution Plan.--The School
15Employees' Defined Contribution Plan is established. The board
16shall administer and manage the plan, which shall be a defined
17contribution plan exclusively for the benefit of those school
18employees who participate in the plan and their beneficiaries
19within the meaning of and in conformity with IRC § 401(a). The
20board shall determine the terms and provisions of the plan not
21inconsistent with this part, the IRC and other applicable law
22and shall provide for the plan's administration.

23(b) School Employees' Defined Contribution Trust.--The
24School Employees' Defined Contribution Trust is established as
25part of the plan in accordance with this part. The trust shall
26be comprised of the individual investment accounts and all
27assets and moneys in those accounts. The members of the board
28shall be the trustees of the trust, which shall be administered
29exclusively for the benefit of those school employees who
30participate in the plan and their beneficiaries within the

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

5(c) Assets held in trust.--All assets and income in the plan
6that have been or shall be withheld or contributed by the
7participants, the Commonwealth and employers in accordance with
8this part shall be held in trust in any funding vehicle
9permitted by the applicable provisions of IRC for the exclusive
10benefit of the plan's participants and their beneficiaries until
11such time as the funds are distributed to the participants or
12their beneficiaries in accordance with the terms of the plan
13document. The assets of the plan held in trust for the exclusive
14benefit of the participants and their beneficiaries may be used
15for the payment of the fees, costs and expenses related to the
16administration and investment of the plan and the trust.

17(d) Name for transacting business.--By the name of "The
18School Employees' Defined Contribution Plan," all of the
19business of the plan shall be transacted, the trust invested,
20all requisitions for money drawn and payments made and all of
21its cash and securities and other property shall be held, except
22that, any other law to the contrary notwithstanding, the board
23may establish a nominee registration procedure for the purpose
24of registering securities in order to facilitate the purchase,
25sale or other disposition of securities pursuant to the
26provisions of this part.

27§ 8402. Plan document.

28The board shall set forth the terms and provisions of the
29plan and trust in a document containing the terms and conditions
30of the plan and in a trust declaration that shall be published

1in the Pennsylvania Bulletin. The creation of the document
2containing the terms and conditions of the plan and the trust
3declaration and the establishment of the terms and provisions of
4the plan and the trust need not be promulgated by regulation or
5formal rulemaking and shall not be subject to the act of July
631, 1968 (P.L.769, No.240), referred to as the Commonwealth
7Documents Law. A reference in this part or other law to the plan
8shall include the plan document unless the context clearly
9indicates otherwise.

10§ 8403. Individual investment accounts.

11The board shall:

12(1) establish in the trust an individual investment
13account for each participant in the plan. All contributions
14by a participant or an employer for or on behalf of a
15participant shall be credited to the participant's individual
16investment account, together with all interest and investment
17earnings and losses. Investment and administrative fees,
18costs and expenses shall be charged to the participants'
19individual investment accounts; and

20(2) separately track participant contributions,
21including investment gains and losses, and employer
22contributions, including investment gains and losses, but all
23interest, investment gains and losses and administrative
24fees, costs and expenses shall be allocated proportionately.

25§ 8404. Participant contributions.

26(a) Mandatory contributions.--A participant shall make
27mandatory pickup participant contributions through payroll
28deductions to the participant's individual investment account
29equal to 7.5% of compensation for current school service. The
30employer shall cause such contributions for current service to

1be made and deducted from each payroll or on such schedule as
2established by the board. After the effective date of this
3section, an employer employing a participant in the plan shall
4pick up the required mandatory participant contributions by a
5reduction in the compensation of the participant.

6(b) Voluntary contributions.--A participant may make
7voluntary contributions up to the limits permitted by IRC
8through payroll deductions or through direct trustee-to-trustee
9transfers or through transfers of money received in an eligible
10rollover into the trust to the extent allowed by IRC § 402. Such
11rollovers shall be made in a form and manner as determined by
12the board, shall be credited to the participant's individual
13investment account and shall be separately accounted for by the
14board.

15(c) Prohibition on contributions.--No contributions shall be
16allowed that would cause a violation of the limitations related
17to contributions applicable to governmental plans contained in
18IRC § 415 or in other provisions of law. In the event that any
19disallowed contributions are made, any participant contributions
20in excess of the limitations and investment earnings on those
21contributions shall be refunded to the participant by the board.

22§ 8405. Mandatory pickup participant contributions.

23(a) Treatment for purposes of IRC § 414(h).--The
24contributions to the trust required to be made under section
258404(a) (relating to participant contributions) with respect to
26current school service rendered by an active participant shall
27be picked up by the employer and shall be treated as the
28employer's contribution for purposes of IRC § 414(h). After the
29effective date of this section, an employer employing a
30participant in the plan shall pick up the required mandatory

1participant contributions by a reduction in the compensation of
2the participant.

3(b) Treatment for other purposes.--For all other purposes
4under this part and otherwise, such mandatory pickup participant
5contributions shall be treated as contributions made by a
6participant in the same manner and to the same extent as if the
7contributions were made directly by the participant and not
8picked up.

9§ 8406. Employer defined contributions.

10(a) Contributions for current service.--The employer of a
11participant shall make employer defined contributions for
12current service of an active participant that shall be credited
13to the active participant's individual investment account.
14Employer defined contributions must be recorded and accounted
15for separately from participant contributions.

16(b) Contributions resulting from participants reemployed
17from USERRA leave.--When a school employee reemployed from
18USERRA leave makes the mandatory pickup participant
19contributions permitted to be made for the USERRA leave, the
20employer by whom the school employee is employed at the time the
21participant contributions are made shall make whatever employer
22defined contributions would have been made under this section
23had the employee making the participant contributions after
24being reemployed from USERRA leave continued to be employed in
25the employee's school position instead of performing USERRA
26leave. Such employer defined contributions shall be placed in
27the participant's individual investment account as otherwise
28provided by this part.

29(c) Limitations on contributions.--No contributions shall be
30allowed that would cause a violation of the limitations related

1to contributions applicable to governmental plans contained in
2IRC § 415 or in other provisions of law. In the event that any
3disallowed contributions are made, any employer defined
4contributions in excess of the limitations and investment
5earnings thereon shall be refunded to the employer by the board.

6§ 8407. Eligibility for benefits.

7(a) Termination of service.--A participant who terminates
8school service shall be eligible to withdraw the vested
9accumulated total defined contributions standing to the
10participant's credit in the participant's individual investment
11account or a lesser amount as the participant may request.
12Payment shall be made in a lump sum unless the board has
13established other forms of distribution in the plan document,
14subject to the provisions of subsection (g). A participant who
15withdraws the vested accumulated total defined contributions
16shall no longer be a participant in the plan, notwithstanding
17that the participant may have contracted to receive an annuity
18or other form of payment from a provider retained by the board
19for such purposes.

20(b) Required distributions.--All payments pursuant to this
21section shall start and be made in compliance with the minimum
22distribution requirements and incidental death benefit rules of
23IRC § 401(a)(9). The board shall take any action and make any
24distributions it may determine are necessary to comply with
25those requirements.

26(c) Spousal consent not required.--A participant who is
27married may receive a lump sum distribution or other
28distribution directly from the board without the consent of the
29participant's spouse, unless the plan document provides
30otherwise.

1(d) Combined service employee.--A participant who is a
2combined service employee must be terminated from all positions
3that result in either membership in the system or participation
4in the plan to be eligible to receive a distribution.

5(e) Loans.--Loans or other distributions, including hardship
6or unforeseeable emergency distributions, from the plan to
7school employees who have not terminated school service are not
8permitted, except as required by law.

9(f) Small individual investment accounts.--

10(1) A participant who terminates school service and
11whose vested accumulated total defined contributions are
12below the threshold established by law as of the date of
13termination of service may be paid the vested accumulated
14total defined contributions in a lump sum as provided in IRC
15§ 401(a)(31).

16(2) The board may also provide in the plan document
17that, notwithstanding subsection (g), a participant whose
18vested accumulated employer defined contributions are below
19the thresholds established by the board may receive those
20distributions without the obligation to purchase an annuity.
21The threshold may be established as a dollar amount, an
22annuity amount, in some other form individually or in
23combination as the board determines.

24(g) Requirement to purchase annuity.--Except as prohibited
25by the IRC or as otherwise provided in this part, a participant
26who is eligible and elects to receive a distribution of vested
27accumulated employer defined contributions shall be required to
28purchase an annuity with the distribution under such conditions
29as provided in the plan document. The conditions may include 
30that the board is authorized to make the distribution directly
 

1to the annuity provider.

2§ 8408. Death benefits.

3(a) General rule.--In the event of the death of an active
4participant or inactive participant, the board shall pay to the
5participant's beneficiary the vested balance in the
6participant's individual investment account in a lump sum or in
7such other manner as the board may establish in the plan
8document.

9(b) Death of participant receiving distributions.--In the
10event of the death of a participant receiving distributions, the
11board shall pay to the participant's beneficiary the vested
12balance in the participant's individual investment account in a
13lump sum or in such other manner as the board may establish in
14the plan document or, if the board has established alternative
15methods of distribution in the plan document under which the
16participant was receiving distributions, to the participant's
17beneficiary or successor payee as provided in the plan document.

18(c) Contracts.--The board may contract with financial
19institutions, insurance companies or other types of third-party
20providers to allow participants who receive a lump sum
21distribution to receive payments and death benefits in a form
22and manner as provided by the contract. The contracts may, but
23are not required to, provide that any payment and death benefit
24options for a married former participant be in the form of a
25joint and survivor annuity unless the spouse consents to another
26payment option.

27(d) Spousal consent.--All nomination or change of
28beneficiaries made by a married participant shall be subject to
29the consent of the participant's spouse as provided for in this
30part.

1§ 8409. Vesting.

2(a) Participant and voluntary contributions.--Subject to the
3forfeiture and attachment provisions of section 8533 (relating
4to taxation, attachment and assignment of funds) or otherwise as
5provided by law, a participant shall be fully vested with
6respect to all mandatory pickup participant contributions and
7voluntary contributions paid by or on behalf of the participant
8to the trust plus interest and investment earnings on the
9participant contributions but minus investment fees and
10administrative charges.

11(b) Employer defined contributions.--

12(1) Subject to the forfeiture and attachment provisions
13of section 8533 or otherwise as provided by law, a
14participant shall be vested with respect to employer defined
15contributions paid plus interest and investment earnings by
16or on behalf of the participant to the trust according to the
17following schedule:

18(i) During the first and second year of school
19service as a participant in the plan, 0%.

20(ii) At and after the second year of school service
21as a participant in the plan, 50%.

22(iii) At and after the third year of school service
23as a participant in the plan, 75%.

24(iv) At and after the fourth year of school service
25as a participant in the plan, 100%.

26(2) The board shall establish in the plan document:

27(i) How the required time periods of school service
28in the plan are determined and calculated.

29(ii) The effect of periods that school employees
30spend on paid or unpaid leave on the determination of a

1participant's vested status in the plan.

2(iii) The effect of termination of school service or
3distributions from the plan on a participant's vested
4status in the plan.

5(iv) Other terms and conditions for the
6implementation and administration of this section.

7(3) Nonvested employer defined contributions, including
8interest and investment gains and losses that are forfeited
9by a participant, shall be applied to the participant's most
10recent employer's obligations assessed under this section in
11future years.

12(c) USERRA leave and vesting credit.--A participant in the
13plan who is reemployed from USERRA leave or who dies while
14performing USERRA leave shall receive vesting credit under this
15section for the school service that would have been performed
16had the member not performed USERRA leave.

17§ 8410. Termination of distributions.

18(a) Return to school service.--

19(1) A participant receiving distributions or an inactive
20participant who returns to school service shall cease
21receiving distributions and shall not be eligible to receive
22distributions until the participant subsequently terminates
23school service, without regard to whether the participant is
24a mandatory, optional or prohibited member of the system or
25participant in the plan.

26(2) This subsection shall not apply to a distribution of
27accumulated employer defined contributions or other
28distributions that the participant has received and used to
29purchase an annuity from a provider contracted by the board.

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

1(1) If a former school employee is reemployed from
2USERRA leave and received any payments or annuity from the
3plan during the USERRA leave, the employee shall return to
4the board the amount so received plus interest as provided in
5the plan document.

6(2) The amount payable shall be certified in each case
7by the board in accordance with methods approved by the
8actuary and shall be paid in a lump sum within 30 days or, in
9the case of an active participant, may be amortized with
10interest as provided in the plan document through salary
11deductions to the trust in amounts agreed upon by the active
12participant and the board, but not longer than a period that
13starts with the date of reemployment and continuing for up to
14three times the length of the active participant's immediate
15past period of USERRA leave. The repayment period shall not
16exceed five years.

17§ 8411. Agreements with financial institutions and other
18organizations.

19(a) Written agreement.--To establish and administer the
20plan, the board shall enter into a written agreement with one or
21more financial institutions or pension management organizations
22to administer the plan and the investment of funds held pursuant
23to the plan. The administrator shall be selected in accordance
24with the following:

25(1) The board shall solicit proposals from financial
26institutions and pension management organizations.

27(2) The board shall publish the solicitation under
28paragraph (1) in the Pennsylvania Bulletin.

29(3) Proposals received shall be evaluated based on
30specific criteria adopted by the board. The criteria shall

1include experience, customer service history and other
2criteria.

3(b) Rebid.--A contract to administer the plan under
4subsection (a) shall be rebid at least once every ten years.

5§ 8412. Powers and duties of board.

6The board shall have the following powers and duties to
7establish the plan and trust and to administer the provisions of
8this part:

9(1) The board may commingle or pool assets with the
10assets of other persons or entities.

11(2) The board shall pay all administrative fees, costs
12and expenses of managing, investing and administering the
13plan, the trust and the individual investment accounts from
14the balance of such individual investment accounts, except as
15the General Assembly otherwise provides through
16appropriations from the General Fund.

17(3) The board may establish investment guidelines and
18limits on the types of investments that participants may
19make, consistent with the board's fiduciary obligations.

20(4) The board shall have the power to change the terms
21of the plan as may be necessary to maintain the tax-qualified
22status of the plan.

23(5) The board may establish a process for election to
24participate in the plan by those school employees for whom
25participation is not mandatory.

26(6) The board may perform an annual or more frequent
27review of any qualified fund manager for the purpose of
28assuring it continues to meet all standards and criteria
29established.

30(7) The board may allow for eligible rollovers and

1direct trustee-to-trustee transfers into the trust from
2qualified plans of other employers, regardless of whether the
3employers are private employers or public employers.

4(8) The board may allow a former participant to maintain
5the participant's individual investment account within the
6plan.

7(9) The board shall administer or ensure the
8administration of the plan in compliance with the
9qualification and other rules of IRC.

10(10) The board may establish procedures to provide for
11the lawful payment of benefits.

12(11) The board shall determine what constitutes a
13termination of school service.

14(12) The board may establish procedures for
15distributions of small accounts as required or permitted by
16IRC.

17(13) The board may establish procedures in the plan
18document or to promulgate rules and regulations as it deems
19necessary for the administration and management of the plan,
20including, but not limited to, establishing:

21(i) Procedures by which eligible participants may
22change voluntary contribution amounts or their investment
23choices on a periodic basis or make other elections
24regarding their participation in the plan.

25(ii) Procedures for deducting mandatory pickup
26participant contributions and voluntary contributions
27from a participant's compensation.

28(iii) Procedures for rollovers and trustee-to-
29trustee transfers allowed under the IRC and permitted by
30the board as part of the plan.

1(iv) Standards and criteria for providing not less
2than ten options in accordance with three or more
3providers of investment options to eligible individuals
4regarding investment of amounts deferred under the plan.
5The standards and criteria must provide for a variety of
6investment options. One of the available options must
7serve as the default option for participants who do not
8make a timely election and, to the extent commercially
9available, one option must have an annuity.

10(v) Standards and criteria for disclosing to the
11participants the anticipated and actual income
12attributable to amounts invested, property rights and all
13fees, costs and expenses to be made against amounts
14deferred to cover the costs and expenses of administering
15and managing the plan or trust.

16(vi) Procedures, standards and criteria for the
17making of distributions from the plan upon termination
18from employment or death or in other circumstances
19consistent with the purpose of the plan.

20(14) The board may waive any reporting or information
21requirement contained in this part if the board determines
22that the information is not needed for the administration of
23the plan.

24(15) The board may contract any services and duties in
25lieu of staff except final adjudications and as prohibited by
26law. Any duties or responsibilities of the board not required
27by law to be performed by the board may be delegated to a
28third-party provider subject to appeal to the board.

29(16) The board may provide that any duties of the
30employer or information provided by the participant to the

1employer be performed or received directly by the board.

2(17) The provisions and restrictions of the act of July
32, 2010 (P.L.266, No.44), known as Protecting Pennsylvania's
4Investments Act, shall not apply to the plan or trust or the
5investments thereof, but the board may offer to the plan
6participants investment vehicles that would be allowed under
7the Protecting Pennsylvania's Investments Act. The board
8shall also to the extent commercially available provide that
9one option for participants have an annuity investment
10feature.

11(18) The board shall ensure that participants are
12provided with educational materials about investment options
13and choices.

14§ 8413. Responsibility for investment loss.

15The Commonwealth, the board, an employer or a school entity
16or other political subdivision shall not be responsible for any
17investment loss incurred under the plan or for the failure of
18any investment to earn any specific or expected return or to
19earn as much as any other investment opportunity, whether or not
20such other opportunity was offered to participants in the plan.

21§ 8414. Investments based on participants' investment
22allocation choices.

23(a) Investment by participant.--All contributions, interest
24and investment earnings shall be invested based on a
25participant's investment allocation choices. All investment
26allocation choices shall be credited proportionally between
27contributions from the participant and employer defined
28contributions. Each participant shall be credited individually
29with the amount of contributions, interest and investment
30earnings.

1(b) Investment of contributions made by entities other than
2Commonwealth.--Investment of contributions by any corporation,
3institution, insurance company or custodial bank or other entity
4that the board has approved shall not be unreasonably delayed
5and in no case shall the investment of contributions be delayed
6more than 30 days from the date of payroll deduction or
7voluntary contributions are made to the date that funds are
8invested. Any interest earned on the funds pending investment
9shall be allocated to the employers and credited to the
10individual investment accounts of participants who are then
11participating in the plan, unless the interest is used to defray
12administrative costs and fees that would otherwise be required
13to be borne by participants who are then participating in the
14plan.

15§ 8415. Expenses.

16All expenses, fees and costs of administering the plan and
17the trust and investing the assets of the trust shall be borne
18by the participants and paid from assessments against the
19balances of the individual investment accounts as established by
20the board, except that for fiscal years ending before July 1,
212015, the expenses, fees and costs of establishing and
22administering the plan and trust shall be paid by the
23Commonwealth through annual appropriations from the General
24Fund, made on the basis of estimates from the board.

25§ 8416. Election by members to be participants.

26(a) General rule.--Any school employee who is an active
27member or inactive member on or after July 1, 2015, and who is
28employed in a position that would otherwise be eligible for
29participation in the plan may elect to become a participant in
30the plan.

1(b) Time for making election.--An eligible school employee
2may elect to become a participant and a combined service
3employee at any time before termination of school service by
4filing a written election with the board.

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

6(1) An election to become a participant shall be
7irrevocable. Participation shall be effective at the
8beginning of the next pay period commencing after the
9election is filed with the board.

10(2) A member who elects to become a participant shall
11remain a participant for all future school service.

12(3) Any prior school or nonschool service credited in
13the system shall remain in the class of service in which it
14is credited on the effective date of participation.

15(4) A combined service employee shall not be eligible to
16receive an annuity from the system or a withdrawal of
17accumulated deductions until the employee has terminated
18school service.

19(5) A participant shall not be entitled to purchase any
20previous school service or creditable nonschool service.

21(6) The eligibility of a combined service employee for
22an annuity from the system and, if eligible, the amount of
23the annuity shall be as determined under this part.

24§ 8417. Tax qualification.

25(a) Required distributions.--All payments under this chapter
26shall start and be made in compliance with the minimum
27distribution requirements and incidental death benefit rules of
28IRC § 401(a).

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

30(1) (i) Except as provided under subparagraph (ii) and

1notwithstanding a provision of this part, a contribution
2or benefit related to the plan may not exceed a
3limitation under IRC § 415 with respect to governmental
4plans that is in effect on the date the contribution or
5benefit payment takes effect.

6(ii) An increase in a limitation under IRC § 415
7shall apply to the participants on or after the effective
8date of this section.

9(iii) For the purposes of this paragraph, the term
10"government plans" shall have the same meaning as in IRC
11§ 414(d).

12(2) (i) Except as provided under subparagraph (ii), an
13amendment of this part on or after the effective date of
14this section that increases contributions or benefits for
15active participants, inactive participants or
16participants receiving distributions may not be deemed to 
17provide for a contribution or benefit in excess of a
18limitation, adjusted on or after the effective date of
19this section, under IRC § 415 unless specifically
20provided by legislation.

21(ii) Notwithstanding subparagraph (i), an increase
22in benefits on or after the effective date of this
23section for a participant in the plan shall be authorized
24and apply to the fullest extent allowed by law.

25Section 116. Section 8501(a), (c) and (d) of Title 24 are
26amended to read:

27§ 8501. Public School Employees' Retirement Board.

28(a) Status and membership.--The board shall be an
29independent administrative board and shall consist of 15
30members: the Secretary of Education, ex officio; the State

1Treasurer, ex officio; two Senators; two members of the House of
2Representatives; the executive secretary of the Pennsylvania
3School Boards Association, ex officio; two to be appointed by
4the Governor, at least one of whom shall not be a school
5employee or an officer or employee of the State; three to be
6elected by the active professional members of the system and
7active professional participants of the plan from among their
8number; one to be elected by annuitants or a participant of the
9plan who has terminated school service and is receiving or is
10eligible to receive distributions from among their number; one
11to be elected by the active nonprofessional members of the
12system or active nonprofessional participants of the plan from
13among their number; and one to be elected by members of
14Pennsylvania public school boards from among their number. The
15appointments made by the Governor shall be confirmed by the
16Senate and each election shall be conducted in a manner approved
17by the board. The terms of the appointed and nonlegislative
18elected members shall be three years. The members from the
19Senate shall be appointed by the President pro tempore of the
20Senate and shall consist of one member from the majority and one
21member from the minority. The members from the House of
22Representatives shall be appointed by the Speaker of the House
23of Representatives and shall consist of one member from the
24majority and one member from the minority. The legislative
25members shall serve on the board for the duration of their
26legislative terms and shall continue to serve until 30 days
27after the convening of the next regular session of the General
28Assembly after the expiration of their respective legislative
29terms or until a successor is appointed for the new term,
30whichever occurs first. The chairman of the board shall be

1elected by the board members. Each ex officio member of the
2board and each legislative member of the board may appoint a
3duly authorized designee to act in his stead. In the event that
4a board member, who is designated as an active participant or as
5the participant in the plan who is receiving or is eligible to
6receive distributions, receives a total distribution of the
7board member's interest in the plan, that board member may
8continue to serve on the board for the remainder of the term.

9* * *

10(c) Oath of office.--Each member of the board shall take an
11oath of office that he will, so far as it devolves upon him,
12diligently and honestly administer the affairs of said board,
13the system and the plan and that he will not knowingly violate
14or willfully permit to be violated any of the provisions of law
15applicable to this part. Such oath shall be subscribed by the
16member making it and certified by the officer before whom it is
17taken and shall be immediately filed in the office of the
18Secretary of the Commonwealth.

19(d) Compensation and expenses.--The members of the board who
20are members of the system or participants in the plan shall
21serve without compensation. Members of the board who are members
22of the system or participants in the plan and who are employed
23by a governmental entity shall not suffer loss of salary or
24wages through serving on the board. The board, on request of the
25employer of any member of the board who is an active
26professional or nonprofessional member of the system or active
27professional or nonprofessional participant in the plan, may
28reimburse such employer for the salary or wages of the member or
29participant, or for the cost of employing a substitute for such
30member or participant, while the member or participant is

1necessarily absent from employment to execute the duties of the
2board. The members of the board who are not members of either
3the school system or the State Employees' Retirement System may
4be paid $100 per day when attending meetings and all board
5members shall be reimbursed for any necessary expenses. However,
6when the duties of the board as mandated are not executed, no
7compensation or reimbursement for expenses of board members
8shall be paid or payable during the period in which such duties
9are not executed.

10* * *

11Section 117. Section 8502(b), (c), (e), (h), (i), (j), (k),
12(n) and (o) of Title 24 are amended and the section is amended
13by adding a subsection to read:

14§ 8502. Administrative duties of board.

15* * *

16(b) Professional personnel.--The board shall contract for
17the services of a chief medical examiner, an actuary, investment
18advisors, counselors, an investment coordinator, and such other
19professional personnel as it deems advisable. The board may
20utilize the same individuals and firms contracted under this
21subsection for both the system and the plan but shall allocate
22the fees, costs and expenses incurred under this subsection
23between the system and the plan as appropriate.

24(c) Expenses.--

25(1) The board shall, through the Governor, submit to the
26General Assembly annually a budget covering the
27administrative expenses of [this part.] the system and a
28separate budget covering the administrative expenses of the
29plan. The separate budget shall include those expenses
30necessary to establish the plan and trust.

1(2) Such expenses of the system as approved by the
2General Assembly in an appropriation bill shall be paid from
3investment earnings of the fund.

4(3) For fiscal years ending on or before June 30, 2015,
5such expenses of the plan as approved by the General Assembly
6through an appropriation shall be paid from the General
7Fund. For fiscal years beginning on or after July 1, 2015,
8such expenses of the plan as approved by the General Assembly
9shall be paid from interest, pursuant to section 8414(b)
10(relating to investments based on participant investment
11allocation choices) or assessments on the balances of the
12participants' individual investment accounts.

13(4) Concurrently with its administrative budget, the
14board shall also submit to the General Assembly annually a
15list of proposed expenditures which the board intends to pay
16through the use of directed commissions, together with a list
17of the actual expenditures from the past year actually paid
18by the board through the use of directed commissions. All
19such directed commission expenditures shall be made by the
20board for the exclusive benefit of the system and its members
21and for the exclusive benefit of the plan and its
22participants, respectively.

23* * *

24(e) Records.--

25(1) The board shall keep a record of all its proceedings
26which shall be [open to inspection by] accessible to the
27public, except as otherwise provided in this part or by other
28law.

29(2) Any record, material or data received, prepared,
30used or retained by the board or its employees, investment

1professionals or agents relating to an investment shall not
2constitute a public record subject to public [inspection]
3access under the act of [June 21, 1957 (P.L.390, No.212),
4referred to] February 14, 2008 (P.L.6, No.3), known as the
5Right-to-Know Law, if, in the reasonable judgment of the
6board, the [inspection] access would:

7(i) in the case of an alternative investment or
8alternative investment vehicle involve the release of
9sensitive investment or financial information relating to
10the alternative investment or alternative investment
11vehicle which the fund or trust was able to obtain only
12upon agreeing to maintain its confidentiality;

13(ii) cause substantial competitive harm to the
14person from whom sensitive investment or financial
15information relating to the investment was received; or

16(iii) have a substantial detrimental impact on the
17value of an investment to be acquired, held or disposed
18of by the fund or trust, or would cause a breach of the
19standard of care or fiduciary duty set forth in this
20part.

21(3) (i) The sensitive investment or financial
22information excluded from [inspection] access under
23paragraph (2)(i), to the extent not otherwise excluded
24from [inspection] access, shall constitute a public
25record subject to public [inspection] access under the
26Right-to-Know Law once the board is no longer required by
27its agreement to maintain confidentiality.

28(ii) The sensitive investment or financial
29information excluded from [inspection] access under
30paragraph (2)(ii), to the extent not otherwise excluded

1from [inspection] access, shall constitute a public
2record subject to public [inspection] access under the
3Right-to-Know Law once:

4(A) the [inspection] access no longer causes
5substantial competitive harm to the person from whom
6the information was received; or

7(B) the entity in which the investment was made
8is liquidated;

9whichever is later.

10(iii) The sensitive investment or financial
11information excluded from [inspection] access under
12paragraph (2)(iii), to the extent not otherwise excluded
13from [inspection] access, shall constitute a public
14record subject to public [inspection] access under the
15Right-to-Know Law once:

16(A) the [inspection] access no longer has a
17substantial detrimental impact on the value of an
18investment of the fund or trust and would not cause a
19breach of the standard of care or fiduciary duty set
20forth in this part; or

21(B) the entity in which the investment was made
22is liquidated;

23whichever is later.

24(4) Except for the provisions of paragraph (3), nothing
25in this subsection shall be construed to designate any
26record, material or data received, prepared, used or retained
27by the board or its employees, investment professionals or
28agents relating to an investment as a public record subject
29to public [inspection] access under the Right-to-Know Law.

30(5) Notwithstanding the provisions of this subsection,

1the following information regarding an alternative investment
2vehicle shall be subject to public [inspection] access under
3the Right-to-Know Law:

4(i) The name, address and vintage year of the
5alternative investment vehicle.

6(ii) The identity of the manager of the alternative
7investment vehicle.

8(iii) The dollar amount of the commitment made by
9the system or plan to the alternative investment vehicle.

10(iv) The dollar amount of cash contributions made by
11the system or plan to the alternative investment vehicle
12since inception.

13(v) The dollar amount of cash distributions received
14by the system or plan from the alternative investment
15vehicle since inception.

16(vi) The net internal rate of return of the
17alternative investment vehicle since inception, provided
18that the system or plan shall not be required to disclose
19the net internal rate of return under circumstances in
20which, because of the limited number of portfolio assets
21remaining in the alternative investment vehicle, the
22disclosure could reveal the values of specifically
23identifiable remaining portfolio assets to the detriment
24of the alternative investment.

25(vii) The aggregate value of the remaining portfolio
26assets attributable to the system's or plan's investment
27in the alternative investment vehicle, provided that the
28system or plan shall not be required to disclose the
29value under circumstances in which, because of the
30limited number of portfolio assets remaining in the

1alternative investment vehicle, the disclosure could
2reveal the values of specifically identifiable remaining
3portfolio assets to the detriment of the alternative
4investment.

5(viii) The dollar amount of total management fees
6and costs paid to the alternative investment vehicle by
7the system or plan on an annual fiscal year-end basis.

8(6) Any record, material or data received, prepared,
9used or retained by the board or its employees or agents
10relating to a participant shall not constitute a public
11record subject to public access under the Right-to-Know Law,
12if, in the reasonable judgment of the board, the access would
13disclose any of the following:

14(i) The existence, date, amount and any other
15information pertaining to the voluntary contributions,
16including rollover contributions and trustee-to-trustee
17transfers, of any participant.

18(ii) The investment option selections of any
19participant.

20(iii) The balance of a participant's individual
21investment account, including the amount distributed to
22the participant, and any investment gains or losses, or
23rates of return.

24(iv) The identity of a participant's designated
25beneficiary, successor payee or alternate payee.

26(v) The benefit payment option of a participant.

27(7) Nothing in this part shall be construed to designate
28any record, material or data received, prepared, used or
29retained by the board or its employees or agents relating to
30the contributions, investments, account value or benefits

1payable to or on account of a participant as a public record
2subject to public access under the Right-to-Know Law.

3* * *

4(h) Regulations and procedures.--The board shall, with the
5advice of the Attorney General and the actuary, adopt and
6promulgate rules and regulations for the uniform administration
7of the system. The actuary shall approve in writing all
8computational procedures used in the calculation of
9contributions and benefits pertaining to the system, and the
10board shall by resolution adopt such computational procedures,
11prior to their application by the board. Such rules, regulations
12and computational procedures as so adopted from time to time and
13as in force and effect at any time, together with such tables as
14are adopted and published pursuant to subsection (j) as
15necessary for the calculation of annuities and other benefits,
16shall be as effective as if fully set forth in this part. Any
17actuarial assumption specified in or underlying any such rule,
18regulation or computational procedure and utilized as a basis
19for determining any benefit shall be applied in a uniform
20manner.

21(i) Data.--The board shall keep in convenient form such data
22as are stipulated by the actuary in order that an annual
23actuarial valuation of the various accounts of the fund can be
24completed within six months of the close of each fiscal year.
25The board shall have final authority over the means by which
26data is collected, maintained and stored and in so doing shall
27protect the rights of its membership as to privacy and
28confidentiality.

29(j) Actuarial investigation and valuation.--The board shall
30have the actuary make an annual valuation of the various

1accounts of the fund within six months of the close of each
2fiscal year. In the fiscal year 1975 and in every fifth year
3thereafter, the board shall have the actuary conduct an
4actuarial investigation and evaluation of the system based on
5data including the mortality, service, and compensation
6experience provided by the board annually during the preceding
7five years concerning the members and beneficiaries of the
8system. The board shall by resolution adopt such tables as are
9necessary for the actuarial valuation of the fund and
10calculation of contributions, annuities, and other benefits
11