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SENATE AMENDED
PRIOR PRINTER'S NO. 2703
PRINTER'S NO. 4478
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1961
Session of
2019
INTRODUCED BY SCHMITT, TOBASH, EVERETT, KEEFER, B. MILLER, RYAN,
OWLETT, GREINER, MILLARD, ZIMMERMAN, MOUL, BERNSTINE, GLEIM,
KORTZ, BROOKS, RADER, JONES, TOOHIL, GILLEN AND DUSH,
OCTOBER 18, 2019
SENATOR HUTCHINSON, FINANCE, IN SENATE, AS AMENDED,
OCTOBER 6, 2020
AN ACT
Amending Title 71 (State Government) of the Pennsylvania
Consolidated Statutes, in administration relating to
retirement of State employees and officers, further providing
for administrative duties of the board. IN STATE EMPLOYEES'
DEFINED CONTRIBUTION PLAN, FURTHER PROVIDING FOR INDIVIDUAL
INVESTMENT ACCOUNTS, FOR PARTICIPANT CONTRIBUTIONS, FOR
EMPLOYER DEFINED CONTRIBUTIONS, FOR VESTING, FOR POWERS AND
DUTIES OF BOARD, FOR INVESTMENTS BASED ON PARTICIPANT'S
INVESTMENT ALLOCATION CHOICES AND FOR EXPENSES; IN
ADMINISTRATION, FUNDS, ACCOUNTS AND GENERAL PROVISIONS,
FURTHER PROVIDING FOR ADMINISTRATIVE DUTIES OF THE BOARD AND
FOR TAXATION, ATTACHMENT AND ASSIGNMENT OF FUNDS; AND MAKING
A RELATED REPEAL.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 5902 of Title 71 of the Pennsylvania
Consolidated Statutes is amended by adding a subsection to read:
§ 5902. Administrative duties of the board.
* * *
SECTION 1. SECTIONS 5803, 5804(C), 5806(C), 5809(A) AND (B),
5812(2), 5814(B) AND 5815 OF TITLE 71 OF THE PENNSYLVANIA
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CONSOLIDATED STATUTES ARE AMENDED TO READ:
§ 5803. INDIVIDUAL INVESTMENT ACCOUNTS.
THE BOARD SHALL ESTABLISH IN THE TRUST AN INDIVIDUAL
INVESTMENT ACCOUNT FOR EACH PARTICIPANT IN THE PLAN. ALL
CONTRIBUTIONS BY A PARTICIPANT OR AN EMPLOYER FOR OR ON BEHALF
OF A PARTICIPANT SHALL BE CREDITED TO THE PARTICIPANT'S
INDIVIDUAL INVESTMENT ACCOUNT, TOGETHER WITH ALL INTEREST AND
INVESTMENT EARNINGS AND LOSSES. INVESTMENT AND ADMINISTRATIVE
FEES, COSTS AND EXPENSES SHALL BE CHARGED TO THE PARTICIPANTS'
INDIVIDUAL INVESTMENT ACCOUNTS EXCEPT AS OTHERWISE PROVIDED
UNDER THIS PART OR AS THE GENERAL ASSEMBLY OTHERWISE PROVIDES BY
APPROPRIATIONS FROM THE GENERAL FUND. EMPLOYER DEFINED
CONTRIBUTIONS SHALL BE RECORDED AND ACCOUNTED FOR SEPARATELY
FROM PARTICIPANT CONTRIBUTIONS, BUT ALL INTEREST, INVESTMENT
EARNINGS AND LOSSES, AND INVESTMENT AND ADMINISTRATIVE FEES,
COSTS AND EXPENSES CHARGED AGAINST INDIVIDUAL INVESTMENT
ACCOUNTS SHALL BE ALLOCATED PROPORTIONATELY.
§ 5804. PARTICIPANT CONTRIBUTIONS.
* * *
(C) PROHIBITED CONTRIBUTIONS.--NO CONTRIBUTIONS MAY BE
ALLOWED THAT WOULD CAUSE A VIOLATION OF THE LIMITATIONS RELATED
TO CONTRIBUTIONS APPLICABLE TO GOVERNMENTAL PLANS CONTAINED IN
IRC § 415 OR IN OTHER PROVISIONS OF LAW. IN THE EVENT THAT ANY
DISALLOWED CONTRIBUTIONS ARE MADE, ANY PARTICIPANT CONTRIBUTIONS
IN EXCESS OF THE LIMITATIONS AND INVESTMENT EARNINGS ON THOSE
CONTRIBUTIONS, BUT MINUS INVESTMENT FEES AND ADMINISTRATIVE
CHARGES APPLIED AGAINST THOSE CONTRIBUTIONS, SHALL BE REFUNDED
TO THE PARTICIPANT BY THE BOARD.
§ 5806. EMPLOYER DEFINED CONTRIBUTIONS.
* * *
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(C) LIMITATIONS ON CONTRIBUTIONS.--NO CONTRIBUTIONS MAY BE
ALLOWED THAT WOULD CAUSE A VIOLATION OF THE LIMITATIONS RELATED
TO CONTRIBUTIONS APPLICABLE TO GOVERNMENTAL PLANS CONTAINED IN
IRC § 415 OR IN OTHER PROVISIONS OF LAW. IN THE EVENT THAT ANY
DISALLOWED CONTRIBUTIONS ARE MADE, ANY EMPLOYER DEFINED
CONTRIBUTIONS IN EXCESS OF THE LIMITATIONS AND INVESTMENT
EARNINGS ON THE CONTRIBUTIONS, BUT MINUS INVESTMENT FEES AND
ADMINISTRATIVE CHARGES APPLIED AGAINST THOSE CONTRIBUTIONS,
SHALL BE REFUNDED TO THE EMPLOYER BY THE BOARD.
§ 5809. VESTING.
(A) PARTICIPANT AND VOLUNTARY CONTRIBUTIONS.--SUBJECT TO THE
FORFEITURE AND ATTACHMENT PROVISIONS OF SECTION 5953 (RELATING
TO TAXATION, ATTACHMENT AND ASSIGNMENT OF FUNDS) OR OTHERWISE AS
PROVIDED BY LAW, A PARTICIPANT SHALL BE VESTED IMMEDIATELY WITH
RESPECT TO ALL MANDATORY PICKUP PARTICIPANT CONTRIBUTIONS AND
VOLUNTARY CONTRIBUTIONS PAID BY OR ON BEHALF OF THE PARTICIPANT
TO THE TRUST IN ADDITION TO INTEREST AND INVESTMENT GAINS OR
LOSSES ON THE PARTICIPANT CONTRIBUTIONS BUT MINUS INVESTMENT
FEES AND ADMINISTRATIVE CHARGES APPLIED AGAINST THOSE
CONTRIBUTIONS.
(B) EMPLOYER DEFINED CONTRIBUTIONS.--
(1) SUBJECT TO THE FORFEITURE AND ATTACHMENT PROVISIONS
OF SECTION 5953 OR OTHERWISE AS PROVIDED BY LAW, A
PARTICIPANT SHALL BE VESTED WITH RESPECT TO ALL EMPLOYER
DEFINED CONTRIBUTIONS PAID TO THE PARTICIPANT'S INDIVIDUAL
INVESTMENT ACCOUNT IN THE TRUST IN ADDITION TO INTEREST AND
INVESTMENT GAINS AND LOSSES ON THE EMPLOYER DEFINED
CONTRIBUTIONS BUT MINUS INVESTMENT FEES AND ADMINISTRATIVE
CHARGES APPLIED AGAINST THOSE CONTRIBUTIONS ACCORDING TO THE
FOLLOWING SCHEDULE:
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(I) UNTIL SUCH TIME AS A PARTICIPANT HAS EARNED
THREE ELIGIBILITY POINTS AS A MEMBER OF THE SYSTEM OR
PARTICIPANT IN THE PLAN, 0%;
(II) AT AND AFTER THE ATTAINMENT OF THREE
ELIGIBILITY POINTS AS A MEMBER OF THE SYSTEM OR
PARTICIPANT IN THE PLAN, 100%.
(2) FOR PURPOSES OF THIS SUBSECTION, ALL ELIGIBILITY
POINTS CREDITED TO A MEMBER OF THE SYSTEM IN ANY CLASS OF
SERVICE SHALL BE USED FOR DETERMINING VESTED STATUS IN THE
PLAN EVEN IF THE EMPLOYEE WAS NOT A PARTICIPANT IN THE PLAN
AT THE TIME THE ELIGIBILITY POINTS WERE EARNED.
(3) NONVESTED EMPLOYER DEFINED CONTRIBUTIONS AND THE
INTEREST AND INVESTMENT GAINS AND LOSSES ON THE NONVESTED
EMPLOYER DEFINED CONTRIBUTIONS THAT ARE FORFEITED WHEN A
PARTICIPANT TERMINATES STATE SERVICE BEFORE ACCRUING THREE
ELIGIBILITY POINTS AS PROVIDED UNDER SECTION 5307(C)(3)
(RELATING TO ELIGIBILITY POINTS) [ARE CREDITED TO THE
PARTICIPANT'S MOST RECENT EMPLOYER'S FUTURE OBLIGATION
ASSESSED UNDER SECTION 5509 (RELATING TO APPROPRIATIONS AND
ASSESSMENTS BY THE COMMONWEALTH).] SHALL BE RETAINED BY THE
BOARD AND USED FOR THE PAYMENT OF THE ADMINISTRATIVE FEES,
COSTS AND EXPENSES OF THE PLAN.
* * *
§ 5812. POWERS AND DUTIES OF BOARD.
THE BOARD, IN ADDITION TO ITS POWERS AND DUTIES SET FORTH IN
CHAPTER 59 (RELATING TO ADMINISTRATION, FUNDS, ACCOUNTS, GENERAL
PROVISIONS), SHALL HAVE THE FOLLOWING POWERS AND DUTIES TO
ESTABLISH THE PLAN AND TRUST AND ADMINISTER THE PROVISIONS OF
THIS CHAPTER AND PART:
* * *
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(2) THE BOARD SHALL PAY ALL ADMINISTRATIVE FEES, COSTS
AND EXPENSES OF MANAGING, INVESTING AND ADMINISTERING THE
PLAN, THE TRUST AND THE INDIVIDUAL INVESTMENT ACCOUNTS FROM
THE BALANCE OF SUCH INDIVIDUAL INVESTMENT ACCOUNTS EXCEPT AS
OTHERWISE PROVIDED UNDER THIS PART OR AS THE GENERAL ASSEMBLY
OTHERWISE PROVIDES BY APPROPRIATIONS FROM THE GENERAL FUND.
THE BOARD MAY ASSESS, AND EACH EMPLOYER SHALL PAY, AN ANNUAL
PER-PARTICIPANT CHARGE FOR THE PAYMENT OF ADMINISTRATIVE
FEES, COSTS AND EXPENSES UNDER THIS PARAGRAPH.
* * *
§ 5814. INVESTMENTS BASED ON PARTICIPANT'S INVESTMENT
ALLOCATION CHOICES.
* * *
(B) INVESTMENT OF CONTRIBUTIONS MADE BY ENTITIES OTHER THAN
THE COMMONWEALTH.--INVESTMENT OF CONTRIBUTIONS BY ANY
CORPORATION, INSTITUTION, INSURANCE COMPANY, CUSTODIAL BANK OR
OTHER ENTITY THAT THE BOARD HAS APPROVED SHALL NOT BE
UNREASONABLY DELAYED, AND IN NO CASE MAY THE INVESTMENT OF
CONTRIBUTIONS BE DELAYED MORE THAN 30 DAYS FROM THE DATE OF
PAYROLL DEDUCTION OR THE DATE VOLUNTARY CONTRIBUTIONS ARE MADE
TO THE DATE THAT FUNDS ARE INVESTED. ANY INTEREST EARNED ON THE
FUNDS PENDING INVESTMENT SHALL BE USED TO PAY ADMINISTRATIVE
[COSTS AND FEES THAT WOULD OTHERWISE BE REQUIRED TO BE BORNE BY
PARTICIPANTS WHO ARE THEN PARTICIPATING IN THE PLAN OR PAID BY
APPROPRIATIONS FROM THE GENERAL FUND] FEES, COSTS AND EXPENSES
OF THE PLAN.
§ 5815. EXPENSES.
ALL FEES, COSTS AND EXPENSES OF ESTABLISHING AND
ADMINISTERING THE PLAN AND THE TRUST AND INVESTING THE ASSETS OF
THE TRUST SHALL BE BORNE BY THE PARTICIPANTS AND PAID FROM
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ASSESSMENTS AGAINST THE BALANCES OF THE INDIVIDUAL INVESTMENT
ACCOUNTS AS ESTABLISHED BY THE BOARD, EXCEPT THAT THE FEES,
COSTS AND EXPENSES OF ESTABLISHING AND ADMINISTERING THE PLAN
AND THE TRUST THAT ARE NOT PAID UNDER SECTIONS 5809 (RELATING TO
VESTING), 5812(2) (RELATING TO POWERS AND DUTIES OF BOARD),
5814(B) (RELATING TO INVESTMENTS BASED ON PARTICIPANT'S
INVESTMENT ALLOCATION CHOICES) AND 5953(A)(2)(II) (RELATING TO
TAXATION, ATTACHMENT AND ASSIGNMENT OF FUNDS) SHALL BE PAID BY
THE COMMONWEALTH THROUGH ANNUAL APPROPRIATIONS.
SECTION 2. SECTION 5902(C)(3) OF TITLE 71 IS AMENDED AND THE
SECTION IS AMENDED BY ADDING A SUBSECTION TO READ:
§ 5902. ADMINISTRATIVE DUTIES OF THE BOARD.
* * *
(C) EXPENSES.--
* * *
(3) FOR FISCAL YEARS ENDING ON OR BEFORE JUNE 30, 2020,
AND FOR ANY ADDITIONAL FISCAL YEARS AS THE GENERAL ASSEMBLY
MAY PROVIDE, SUCH EXPENSES OF THE PLAN AS APPROVED BY THE
GENERAL ASSEMBLY IN AN APPROPRIATION BILL SHALL BE PAID FROM
THE GENERAL FUND. FOR FISCAL YEARS BEGINNING ON OR AFTER JULY
1, 2020, SUCH EXPENSES OF THE PLAN AS APPROVED BY THE GENERAL
ASSEMBLY THAT ARE NOT PAID UNDER SECTIONS 5809 (RELATING TO
VESTING), 5812(2) (RELATING TO POWERS AND DUTIES OF BOARD),
5814(B) (RELATING TO INVESTMENTS BASED ON PARTICIPANT'S
INVESTMENT ALLOCATION CHOICES) AND 5953(A)(2)(II) (RELATING
TO TAXATION, ATTACHMENT AND ASSIGNMENT OF FUNDS) SHALL BE
PAID [FROM INTEREST UNDER SECTION 5814(B) (RELATING TO
INVESTMENTS BASED ON PARTICIPANT'S INVESTMENT ALLOCATION
CHOICES) OR ASSESSMENTS ON THE BALANCES OF THE PARTICIPANTS'
INDIVIDUAL INVESTMENT ACCOUNTS OR] AS OTHERWISE PROVIDED IN
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THIS PART EXCEPT AS THE GENERAL ASSEMBLY OTHERWISE PROVIDES
BY APPROPRIATIONS FROM THE GENERAL FUND.
* * *
(r) Additional report on investment performance.--In
addition to any other report required to be made by the board
under this part, the board shall prepare a separate report of
the investment performance of the State Employees' Retirement
System for the period of July 1 through June 30 of each year.
Section 2. The addition of 71 Pa.C.S. § 5902(r) shall apply
beginning with the first period of July 1 through June 30 that
commences after the effective date of this section.
Section 3. This act shall take effect in 30 days.
SECTION 3. SECTION 5953(A)(2)(II) OF TITLE 71 IS AMENDED TO
READ:
§ 5953. TAXATION, ATTACHMENT AND ASSIGNMENT OF FUNDS.
(A) GENERAL RULE.--
* * *
(2) * * *
(II) IN ACCORDANCE WITH SECTION 16(B) OF ARTICLE V
OF THE CONSTITUTION OF PENNSYLVANIA AND NOTWITHSTANDING
THIS PARAGRAPH, THE PUBLIC EMPLOYEE PENSION FORFEITURE
ACT, OR 42 PA.C.S. § 3352 (RELATING TO PENSION RIGHTS),
THE ACCUMULATED MANDATORY PARTICIPANT CONTRIBUTIONS AND
ACCUMULATED VOLUNTARY CONTRIBUTIONS STANDING TO THE
CREDIT OF A PARTICIPANT SHALL NOT BE FORFEITED BUT SHALL
BE AVAILABLE FOR PAYMENT OF FINES AND RESTITUTION AS
PROVIDED BY LAW. IN ACCORDANCE WITH SECTION 16(B) OF
ARTICLE V OF THE CONSTITUTION OF PENNSYLVANIA, AMOUNTS IN
THE TRUST THAT HAVE BEEN ORDERED TO BE DISTRIBUTED TO AN
ALTERNATE PAYEE AS THE RESULT OF AN EQUITABLE
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DISTRIBUTION OF MARITAL PROPERTY AS PART OF AN APPROVED
DOMESTIC RELATIONS ORDER ENTERED BEFORE THE DATE OF THE
ORDER OR ACTION IN A COURT OR OTHER TRIBUNAL RESULTING IN
A FORFEITURE OF A PARTICIPANT'S INTEREST IN THE TRUST
SHALL NOT BE SUBJECT TO THE PROVISIONS OF THE PUBLIC
EMPLOYEE PENSION FORFEITURE ACT OR 42 PA.C.S. § 3352. ANY
ACCUMULATED EMPLOYER DEFINED CONTRIBUTIONS FORFEITED AS A
RESULT OF THIS PARAGRAPH OR OTHER LAW SHALL BE RETAINED
BY THE BOARD AND NOTWITHSTANDING SECTIONS 5812(2)
(RELATING TO POWERS AND DUTIES OF BOARD), 5815 (RELATING
TO EXPENSES) AND 5902(C) (RELATING TO ADMINISTRATIVE
DUTIES OF THE BOARD) USED FOR THE PAYMENT OF
ADMINISTRATIVE FEES, COSTS AND EXPENSES OF THE PLAN.
* * *
SECTION 4. THE FOLLOWING SHALL APPLY:
(1) THE AMENDMENT OF 71 PA.C.S. §§ 5803, 5804(C),
5806(C), 5809(A) AND (B), 5812(2), 5814(B), 5815, 5902(C)(3)
AND 5953(A)(2)(II):
(I) SHALL NOT BE CONSTRUED TO MEAN THAT A METHOD OF
FUNDING OR PAYING THE ADMINISTRATIVE FEES, COSTS AND
EXPENSES OF THE STATE EMPLOYEES' DEFINED CONTRIBUTION
PLAN WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF 71
PA.C.S. PT. XXV, OTHER APPLICABLE LAW OR ANY TRUST OR
PLAN DOCUMENT ESTABLISHED UNDER 71 PA.C.S. PT. XXV PRIOR
TO THE EFFECTIVE DATE OF THIS SECTION; AND
(II) IN RELATION TO THE REQUIREMENTS FOR PROVIDING
FOR THE FUNDING OR PAYMENT OF THE ADMINISTRATIVE FEES,
COSTS AND EXPENSES OF THE STATE EMPLOYEES' DEFINED
CONTRIBUTION PLAN, ANY CONSTRUCTION OF 71 PA.C.S. PT. XXV
AS AMENDED BY THE AMENDMENT OF §§ 5803, 5804(C), 5806(C),
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5809(A) AND (B), 5812(2), 5814(B), 5815, 5902(C)(3),
5953(A)(2)(II) OR ANY RULE, REGULATION, TRUST OR PLAN
DOCUMENT ADOPTED OR ESTABLISHED UNDER 71 PA.C.S. PT. XXV,
SHALL NOT CREATE IN ANY PARTICIPANT OF THE STATE
EMPLOYEES' DEFINED CONTRIBUTION PLAN OR IN ANY OTHER
PERSON CLAIMING AN INTEREST IN THE ACCOUNT OF ANY
PARTICIPANT A CONTRACTUAL RIGHT, EITHER EXPRESS OR
IMPLIED, IN METHOD OR AMOUNT OF FUNDING OR PAYMENT OF THE
FEES, COSTS AND EXPENSES OF THE STATE EMPLOYEES' DEFINED
CONTRIBUTION PLAN.
(2) THE AMENDMENT OF 71 PA.C.S. § 5809(B)(3) SHALL ONLY
APPLY TO FORFEITURES AFTER JUNE 30, 2020.
(3) THE ADDITION OF 71 PA.C.S. § 5902(R) SHALL APPLY
BEGINNING WITH THE FIRST PERIOD OF JULY 1 THROUGH JUNE 30
THAT COMMENCES AFTER THE EFFECTIVE DATE OF THIS SECTION.
SECTION 5. REPEALS ARE AS FOLLOWS:
(1) THE GENERAL ASSEMBLY DECLARES THAT THE REPEAL UNDER
PARAGRAPH (2) IS NECESSARY TO EFFECTUATE THE AMENDMENT OF 71
PA.C.S. §§ 5803, 5804(C), 5806(C), 5812(2), 5814(B), 5815,
5902(C)(3) AND 5953(A)(2)(II).
(2) SECTION 1748-E OF THE ACT OF APRIL 9, 1929 (P.L.343,
NO.176), KNOWN AS THE FISCAL CODE, IS REPEALED.
SECTION 6. THIS ACT SHALL TAKE EFFECT AS FOLLOWS:
(1) THE ADDITION OF 71 PA.C.S. § 5902(R) SHALL TAKE
EFFECT IN 30 DAYS.
(2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT
IMMEDIATELY.
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