PRINTER'S NO. 894
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
724
Session of
2019
INTRODUCED BY CORMAN AND BROWNE, JUNE 6, 2019
REFERRED TO FINANCE, JUNE 6, 2019
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes as follows:
In Title 24:
for retirement for school employees, in preliminary
provisions, further providing for definitions; in
membership, contributions and benefits, further providing
for payments by employers and providing for
nonparticipating employer withdrawal liability and
further providing for actuarial cost method; in School
Employees' Defined Contribution Plan, further providing
for vesting; in administration and miscellaneous
provisions, further providing for Public School Employees
Retirement Board; and, in preliminary provisions, further
providing for definitions.
In Title 71:
for retirement for State employees and officers, in
membership, credited service, classes of service and
eligibility for benefits regarding administration of the
State Employees' Retirement Fund, further providing for
election to become a Class A-6 member or solely a
participant in the plan and for eligibility for death
benefits; and, in benefits, further providing for maximum
single life annuity.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "eligible annuitants" and
"eligibility points" in section 8102 of Title 24 of the
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Pennsylvania Consolidated Statutes are amended to read:
§ 8102. Definitions.
The following words and phrases when used in this part shall
have, unless the context clearly indicates otherwise, the
meanings given to them in this section:
* * *
"Eligible annuitants." All current and prospective
annuitants of the system with 24 1/2 or more eligibility points
and all current and prospective disability annuitants. Beginning
January 1, 1995, "eligible annuitants" shall include members
with 15 or more eligibility points who terminated or who
terminate school service on or after attaining superannuation
retirement age and who are annuitants with an effective date of
retirement after superannuation age. Beginning July 1, 2019,
"eligible annuitants" shall include:
(1) Class DC participants with 24 1/2 or more
eligibility points who have terminated school service, who
are Medicare eligible and who received all or a part of their
distributions; and
(2) Class DC participants with 15 or more eligibility
points who terminate school service on or after attaining age
67 and receive all or a part of their distributions.
"Eligibility points." Points which are accrued by an active
member, a participant, a multiple service member who is an
active member of the State Employees' Retirement System for
credited service or by a member or participant who has been
reemployed from USERRA leave or dies while performing USERRA
leave and are used in the determination of eligibility for
benefits as provided in section 8306 (relating to eligibility
points). A participant shall earn one eligibility point for each
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fiscal year in which the participant contributes to the trust.
Eligibility points earned as Class T-G or Class T-H participants
shall apply only for purposes of determining vesting of employer
defined contributions under section 8409(b) (relating to
vesting).
* * *
Section 2. Section 8327(b) and (d) of Title 24 are amended
to read:
§ 8327. Payments by employers.
* * *
(b) Deduction from appropriations.--
(1) To facilitate the payment of amounts due from any
employer to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from the amount of any moneys due
to any employer on account of any appropriation for schools
or other purposes amounts equal to the employer
contributions, employer defined contributions [and pickup
contributions which], pickup contributions, mandatory
participant contributions, voluntary contributions, amounts
owed pursuant to section 8327.1 (relating to nonparticipating
employer withdrawal liability) and other amounts related to
plan administration that an employer is required to pay to
the fund and the trust, as certified by the board, and as
remains unpaid on the date such appropriations would
otherwise be paid to the employer. Such amount shall be
credited to the appropriate accounts in the fund and the
trust.
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(2) To facilitate the payments of amounts due from any
charter school, as defined in Article XVII-A of the act of
March 10, 1949 (P.L.30, No.14), known as the Public School
Code of 1949, to the fund and the trust through the State
Treasurer and to permit the exchange of credits between the
State Treasurer and any employer, the Secretary of Education
and the State Treasurer shall cause to be deducted and paid
into the fund and the trust from any funds appropriated to
the Department of Education for public school employees'
retirement contributions and basic education of the
chartering school district of a charter school [and public
school employees' retirement contributions amounts] equal to
the employer contributions, employer defined contributions
[and pickup contributions which], pickup contributions,
mandatory participant contributions, voluntary contributions,
amounts pursuant to section 8327.1 and other amounts related
to plan administration that a charter school is required to
pay to the fund and the trust, as certified by the board, and
as remains unpaid on the date such appropriations would
otherwise be paid to the chartering school district or
charter school. Such amounts shall be credited to the
appropriate accounts in the fund and the trust. Any reduction
in payments to a chartering school district made pursuant to
this section shall be deducted from the amount due to the
charter school district pursuant to the Public School Code of
1949.
* * *
(d) Payments by employers after June 30, 2019.--After June
30, 2019, each employer, including the Commonwealth as employer
of employees of the Department of Education, State-owned
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colleges and universities, Thaddeus Stevens College of
Technology, Western Pennsylvania School for the Deaf, Scotland
School for Veterans' Children and The Pennsylvania State
University, shall make payments to the fund and the trust within
30 days after the end of each quarter, or as determined by the
board , in an amount computed in the following manner:
(1) For an employer that is a school entity, the amount
shall be the sum of the percentages as determined under
section 8328 applied to the total compensation during the pay
periods in the preceding quarter of all employees who were
active members of the system during such period, including
members on activated military service leave and USERRA leave.
In the event a member on activated military service leave or
USERRA leave does not return to service for the necessary
time or receives an undesirable, bad conduct or dishonorable
discharge or does not elect to receive credit for activated
military service under section 8302(b.1)(3), the contribution
made by the employer on behalf of such member shall be
returned with valuation interest upon application by the
employer.
(2) For an employer that is not a school entity, the
amount computed under subsection (a).
(3) For any employer, whether or not a school entity, in
computing the amount of payment due each quarter, there shall
be excluded from the total compensation referred to in this
subsection and subsection (a) any amount of compensation of a
noneligible member or participant on the basis of which
member or participant contributions have not been made by
reason of the limitation under IRC § 401(a)(17). Any amount
of contribution to the fund paid by the employer on behalf of
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a noneligible member or participant on the basis of
compensation that was subject to exclusion from total
compensation in accordance with the provisions of this
paragraph shall, upon the board's determination or upon
application by the employer, be returned to the employer with
valuation interest.
* * *
Section 3. Title 24 is amended by adding a section to read:
§ 8327.1. Nonparticipating employer withdrawal liability.
(a) General rule.--A nonparticipating employer is liable to
the system for withdrawal liability in the amount determined
under subsection (c). A nonparticipating employer is an employer
that is determined by the board to have ceased:
(1) covered operations under the system; or
(2) to have an obligation to contribute under the system
for all or any of the employer's school employees but
continues covered operations.
(b) Determination.--An employer shall, within the time
prescribed by the board in a written request, furnish such
information as the board deems necessary to administer this
section and to determine whether an employer is a
nonparticipating employer. If the board determines that an
employer is a nonparticipating employer, the board shall:
(1) determine the nonparticipation date;
(2) determine the amount of the employer's withdrawal
liability;
(3) notify the employer of the amount of the withdrawal
liability; and
(4) collect the amount of the withdrawal liability.
(c) Calculation of withdrawal liability.--A nonparticipating
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employer's withdrawal liability shall be determined as of the
employer's nonparticipation date and shall be calculated as
follows:
(1) For a nonparticipating employer under subsection (a)
(1), the excess of the actuarial present value of the vested
accrued benefits of the system's members over the market
value of assets, both as of the date of the last actuarial
valuation adopted by the board prior to the employer's
nonparticipation date, shall be multiplied by withdrawal
fraction, calculated as follows:
(i) The numerator of the withdrawal fraction shall
be the total present value of accrued benefits of all
active members of the employer.
(ii) The denominator of the withdrawal fraction
shall be the total present value of accrued benefits of
all active members of the system.
(2) For a nonparticipating employer under subsection (a)
(2), the excess of the actuarial accrued liability of the
system's members over the market value of assets, both as of
the date of the last actuarial valuation adopted by the board
prior to the employer's nonparticipation date, shall be
multiplied by a withdrawal fraction, calculated as follows:
(i) The numerator of the withdrawal fraction shall
be the total present value of accrued benefits of all
active members of the employer.
(ii) The denominator of the withdrawal fraction
shall be the total present value of accrued benefits of
all active members of the system.
(d) Value of benefits.--The actuarial present value of the
vested accrued benefits and total present value of accrued
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benefits shall be determined based on the unit credit actuarial
cost method, applying the system's provisions and actuarial
assumptions used in the last actuarial valuation adopted by the
board prior to the nonparticipation date. The actuarial accrued
liability shall be determined based on the same actuarial cost
method used to determine the actuarially required contribution
rate in section 8328(i) (relating to actuarial cost method),
applying the system's provisions and actuarial assumptions used
in the last actuarial valuation adopted by the board prior to
the nonparticipating date.
(e) Interest rate assumption.--For purposes of calculating
the withdrawal liability in subsection (c)(1):
(1) For a nonparticipating employer under subsection (a)
(1), the interest rate assumption shall be reduced by an
amount determined by the actuary to reflect the increased
investment, mortality and other actuarial risk associated
with the accrued benefit of the members of the
nonparticipating employer on a basis approved by the board.
(2) For a nonparticipating employer under subsection (a)
(2), the interest rate assumption shall be the same annual
interest rate used to determine the annual normal
contribution rate under section 8328(b) as of the date of the
last actuarial valuation adopted by the board prior to the
employer's nonparticipation date.
(f) Payment.--A nonparticipating employer shall pay the
withdrawal liability as follows:
(1) The withdrawal liability for a nonparticipating
employer under subsection (a)(1) shall be paid in a lump sum
no later than the time prescribed by the board in the notice
of the amount of the withdrawal liability.
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(2) The withdrawal liability for a nonparticipating
employer under subsection (a)(2) shall be paid based on the
schedule and method of payment determined by the board. In
addition, the obligations of such nonparticipating employer
under this section shall not impair the obligation of the
nonparticipating employer to continue to pay the employer
contribution rate under section 8328 as adjusted for the
withdrawal liability. For purposes of this section, the board
may determine whether a member should be treated as being
employed by a single employer, regardless of whether the
employer is a nonparticipating employer. In making such
determination, the board may rely on the provisions of the
IRC § 414(b), (c) and (m) and corresponding regulations or
may establish other relevant factors the board deems
necessary.
(3) The board is authorized to pursue all causes of
action and collection remedies as permitted under applicable
law to collect the withdrawal liability and to seek relief
under section 8327(b) (relating to payments by employers),
each without regard to whether the nonparticipating employer
has ceased all operations.
Section 4. Sections 8328(a), 8409(b)(3) and 8501(a) of Title
24 are amended to read:
§ 8328. Actuarial cost method.
(a) Employer contribution rate.--The amount of the total
employer contributions shall be computed by the actuary as a
percentage of the total compensation of all active members and
active participants, as applicable, during the period for which
the amount is determined and shall be so certified by the board.
The total employer contribution rate shall be the sum of
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paragraphs (1), (2) and (3) divided by the total compensation of
all active members and active participants:
(1) the final contribution [rate as] amount computed by
multiplying the final contribution rate calculated in
subsection (h) [plus] by the total compensation of all active
members;
(2) the premium assistance contribution [rate as
computed in subsection (f). The actuarially required
contribution rate shall consist of the normal contribution
rate as defined in subsection (b), the accrued liability
contribution rate as defined in subsection (c) and the
supplemental annuity contribution rate as defined in
subsection (d). Beginning July 1, 2004, the actuarially
required contribution rate shall be modified by the
experience adjustment factors as calculated in subsection
(e).] amount computed by multiplying the premium assistance
contribution rate calculated in subsection (f) by the total
compensation of all active members and active participants;
and
(3) the employer defined contributions as defined under
section 8102 (relating to definitions).
The actuarially required contribution shall be no less than the
normal cost plus the cost to fully amortize the unfunded
actuarial accrued liability calculated using actuarial methods
and assumptions that are consistent with generally accepted
actuarial standards and generally accepted accounting
principles, including professional actuarial standards of
practice.
* * *
§ 8409. Vesting.
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* * *
(b) Employer defined contributions.--
* * *
(3) Nonvested employer defined contributions, including
interest and investment gains and losses that are forfeited
by a participant, shall be [applied to the participant's most
recent employer's obligations assessed in future years]
retained by the board and used for the payment of expenses of
the plan.
* * *
§ 8501. Public School Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and shall consist of 15
members: the Secretary of Education, ex officio; the State
Treasurer, ex officio; the Secretary of Banking and Securities,
ex officio; two Senators; two members of the House of
Representatives; the executive secretary of the Pennsylvania
School Boards Association, ex officio; one to be appointed by
the Governor; three to be elected by the active professional
members of the system and active professional participants in
the plan from among their number; one to be elected by
annuitants [or participants in the plan who have terminated
school service and are receiving or are eligible to receive
distributions] and Class DC participants receiving
distributions, from among their number; one to be elected by the
active nonprofessional members of the system [or] and active
nonprofessional participants in the plan from among their
number; and one to be elected by members of Pennsylvania public
school boards from among their number. The appointments made by
the Governor shall be confirmed by the Senate and each election
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shall be conducted in a manner approved by the board. The terms
of the appointed and nonlegislative elected members shall be
three years. The members from the Senate shall be appointed by
the President pro tempore of the Senate and shall consist of one
member from the majority and one member from the minority. The
members from the House of Representatives shall be appointed by
the Speaker of the House of Representatives and shall consist of
one member from the majority and one member from the minority.
The legislative members shall serve on the board for the
duration of their legislative terms and shall continue to serve
until 30 days after the convening of the next regular session of
the General Assembly after the expiration of their respective
legislative terms or until a successor is appointed for the new
term, whichever occurs first. The chairman of the board shall be
elected by the board members. Each ex officio member of the
board and each legislative member of the board may appoint a
duly authorized designee to act in his stead. In the event that
a board member, who is designated as an active participant or as
the participant in the plan who is receiving or is eligible to
receive distributions, receives a total distribution of the
board member's interest in the plan, that board member may
continue to serve on the board for the remainder of his term.
* * *
Section 5. The definition of "eligible person" in section
8702(a) of Title 24 is amended to read:
§ 8702. Definitions.
(a) General rule.--Subject to additional definitions
contained in subsequent provisions of this part which are
applicable to specific provisions of this part, the following
words and phrases when used in this part shall have the meanings
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given to them in this section unless the context clearly
indicates otherwise:
"Eligible person." An individual who is:
(1) an annuitant or survivor annuitant or the spouse or
dependent of an annuitant or survivor annuitant; or
(2) a Class DC participant [receiving distributions] who
has terminated school service, has at least 10 eligibility
points, who is Medicare eligible and who has received all or
part of their distributions, or a successor payee[,] or the
spouse or dependent of [a participant receiving distributions
or a] a Class DC participant described under this paragraph
or successor payee.
* * *
Section 6. Sections 5306.4(c) and (d), 5310 and 5702(a)(1)
of Title 71 are amended to read:
§ 5306.4. Election to become a Class A-6 member or solely a
participant in the plan.
* * *
(c) Effect of election to be a Class A-6 member.--An
election to become a Class A-6 member shall be irrevocable and
shall become effective on the effective date of membership in
the system and shall remain in effect for all future creditable
State service, other than service performed as a Class A-5
exempt employee. Payment and adjustment of regular member
contributions and mandatory pickup participant contributions for
Class A-5 State service and for Class A-6 State service
performed prior to the election of Class A-6 membership shall be
made in a form, manner and time determined by the board. Upon
termination and subsequent reemployment, a member who elected
Class A-6 membership shall be credited as a Class A-6 member for
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creditable State service performed after reemployment, except as
a Class A-5 exempt employee, regardless of termination of
employment, termination of membership by withdrawal of
accumulated deductions or status as an annuitant, vestee or
inactive member after the termination of service.
(d) Effect of election to be solely a participant in the
plan.--An election to become solely a participant in the plan
shall be irrevocable and shall become effective on the date that
membership in the system would have been effective had the
election not been made and shall remain in effect for all future
State service, other than service performed as a Class A-5
exempt employee. [Payment] Adjustment of regular member
contributions for Class A-5 State service and payment of
mandatory participant pickup contributions for service solely as
a participant in the plan performed prior to the election shall
be made in a form, manner and time determined by the board. Upon
termination and subsequent reemployment, a State employee who
elected to be solely a participant in the plan shall resume
active participation for State service performed after
reemployment, except as a Class A-5 exempt employee, regardless
of termination of employment, termination of participation by a
partial or total distribution of vested total defined
contributions or status as an annuitant, vestee or inactive
member of the system as a Class A-5 exempt employee after the
termination of service.
* * *
§ 5310. Eligibility for death benefits.
In the event of the death of a member who is eligible for an
annuity in accordance with section 5308(a) or (b) (relating to
eligibility for annuities), his beneficiary shall be entitled to
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a death benefit. [For purposes of this section, a member with
ten or more eligibility points shall be considered eligible for
an annuity based on Class A-5 service or Class A-6 service even
if under superannuation age.]
§ 5702. Maximum single life annuity.
(a) General rule.--Any full coverage member who is eligible
to receive an annuity pursuant to the provisions of section
5308(a) or (b) (relating to eligibility for annuities) who
terminates State service, or if a multiple service member who is
a school employee who is an active member of the Public School
Employees' Retirement System who terminates school service,
before attaining age 70 shall be entitled to receive a maximum
single life annuity attributable to his credited service and
equal to the sum of the following single life annuities
beginning at the effective date of retirement:
(1) A single life annuity that is the sum of the
standard single life annuities determined separately for each
class of service multiplied by the appropriate class of
service multiplier applicable to each standard single life
annuity. In case the member on the effective date of
retirement is under superannuation age for any service, a
reduction factor calculated to provide benefits actuarially
equivalent to an annuity starting at superannuation age and
subject to the provisions of subsection [(e)] (f) shall be
applied to the product determined for that service: Provided,
however, That any standard single life annuity resulting from
Class A-5 service shall be reduced by a percentage determined
by multiplying the number of months, including a fraction of
a month as a full month, by which the effective date of
retirement precedes superannuation age by 0.25% if the
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effective date of retirement is on or after the date the
member has attained age 57 and the member has 25 or more
eligibility points, and that any standard single life annuity
resulting from Class A-6 service shall be reduced by a
percentage determined by multiplying the number of months,
including a fraction of a month as a full month, by which the
effective date of retirement precedes superannuation age by
0.25% if the effective date of retirement is on or after the
date the member has attained age 62 and the member has 25 or
more eligibility points. The class of service multiplier for
any period of concurrent service shall be multiplied by the
proportion of total State and school compensation during such
period attributable to State service as a member of the
system. In the event a member has two multipliers for one
class of service, separate standard single life annuities
shall be calculated for the portion of service in the class
applicable to each class of service multiplier.
* * *
Section 7. This act shall take effect in 60 days.
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