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A02165
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
724
Session of
2019
INTRODUCED BY CORMAN AND BROWNE, JUNE 6, 2019
AS AMENDED ON THIRD CONSIDERATION, JUNE 17, 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; IN ADMINISTRATION AND MISCELLANEOUS
PROVISIONS, PROVIDING FOR THE ESTABLISHMENT OF THE PUBLIC
MARKETS EMERGING INVESTMENT MANAGER PROGRAM; and, in
preliminary provisions, further providing for
definitions.
In Title 71:
for retirement for State employees and officers, in
preliminary provisions relating to retirement for State
employees and officers, further providing for
definitions; 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
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hereby enacts as follows:
Section 1. The definitions of "eligible annuitants" and
"eligibility points" in section 8102 of Title 24 of the
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
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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
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
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otherwise be paid to the employer. Such amount shall be
credited to the appropriate accounts in the fund and the
trust.
(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.
* * *
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(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
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
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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
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
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liability; and
(4) collect the amount of the withdrawal liability.
(c) Calculation of withdrawal liability.--A nonparticipating
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
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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
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
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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.
(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
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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
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
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practice.
* * *
§ 8409. Vesting.
* * *
(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
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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
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 4.1. CHAPTER 85 OF TITLE 24 IS AMENDED BY ADDING A
SUBCHAPTER TO READ:
SUBCHAPTER D
PUBLIC MARKETS EMERGING INVESTMENT MANAGER PROGRAM
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SEC.
8541. DEFINITIONS.
8542. ESTABLISHMENT.
8543. FUNDING.
8544. PARTICIPATION CRITERIA.
8545. PREFERENCE.
8546. REQUIREMENTS AND LIMITATIONS OF FIRMS.
8547. ADMINISTRATION.
§ 8541. DEFINITIONS.
THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS SUBCHAPTER
SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
CONTEXT CLEARLY INDICATES OTHERWISE:
"PROGRAM." THE PUBLIC MARKETS EMERGING INVESTMENT MANAGER
PROGRAM ESTABLISHED UNDER SECTION 8542 (RELATING TO
ESTABLISHMENT).
§ 8542. ESTABLISHMENT.
(A) FIDUCIARY DUTY OF BOARD.--CONSISTENT WITH THE BOARD'S
FIDUCIARY RESPONSIBILITIES, THE BOARD SHALL ESTABLISH A PUBLIC
MARKETS EMERGING INVESTMENT MANAGER PROGRAM.
(B) LOCATION OF MANAGERS.--THE BOARD SHALL LOCATE FUND
MANAGERS WITH A HISTORY OF GENERATING POSITIVE RISK ADJUSTED
RETURNS.
(C) SOURCE LIST.--AFTER LOCATION OF FUND MANAGERS, THE BOARD
SHALL PROVIDE A SOURCE OF POTENTIAL MANAGERS FOR THE MAIN FUND.
(D) ASSISTANCE WITH MARKETING.--IN ORDER TO GROW PUBLIC
MARKET EMERGING INVESTMENTS FIRMS, THE BOARD SHALL ASSIST IN
USING THE SYSTEM'S NAME IN THE MANAGER'S MARKETING EFFORTS.
§ 8543. FUNDING.
THE BOARD SHALL ALLOCATE AN AMOUNT OF AT LEAST $250,000,000
AND NOT MORE THAN $1,000,000,000 TO THE PROGRAM. FUNDING FOR
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EACH INVESTMENT MANAGER SHALL COME FROM ASSETS ALLOCATED WITHIN
THE MAIN FUND, SIMILAR TO OR MOST CLOSELY RELATED TO THE
INVESTMENT MANAGER'S MANDATE. THE MAXIMUM NUMBER OF INVESTMENT
MANAGERS IN THE PROGRAM AT ANY ONE TIME MAY NOT EXCEED 10,
EXCEPT THAT THE PROGRAM MAY BE IMPLEMENTED AND RUN WITH LESS
THAN 10 INVESTMENT MANAGERS.
§ 8544. PARTICIPATION CRITERIA.
IN ORDER TO BE CONSIDERED TO PARTICIPATE IN THE PROGRAM, AN
INVESTMENT MANAGER MUST MEET THE FOLLOWING CRITERIA:
(1) BE REGISTERED UNDER THE INVESTMENT ADVISORS ACT OF
1940 (54 STAT. 847, 15 U.S.C. § 80B-1 ET SEQ.) OR BE EXEMPT
FROM THE INVESTMENT ADVISORS ACT OF 1940.
(2) HAVE THE ABILITY TO DEMONSTRATE REAL AND CONTENTED
TRANSPARENCY OF POSITIONS AND TRANSACTIONS.
(3) HAVE THE ABILITY TO PROVIDE AND SHOW QUARTERLY
LIQUIDITY.
(4) A FIRM, PORTFOLIO MANAGER OR ANY COMBINATION OF FIRM
AND PORTFOLIO MANAGER MUST HAVE A FIVE YEAR HISTORICAL
PERFORMANCE RECORD VERIFIED BY AT LEAST ONE CONSULTANT OR
ACCOUNTING FIRM IN ACCORDANCE WITH THE GLOBAL INVESTMENT
PERFORMANCE STANDARD IN EFFECT ON THE EFFECTIVE DATE OF THIS
SECTION.
§ 8545. PREFERENCE.
PREFERENCE SHALL BE GIVEN TO INVESTMENT MANAGERS DEEMED TO
MEET THE OBJECTIVES, GOALS AND REQUIRED CRITERIA CONTAINED UNDER
THIS SUBSECTION, PLUS DEMONSTRATION OF AT LEAST ONE OF THE
FOLLOWING CHARACTERISTICS:
(1) BE AN INVESTMENT MANAGEMENT FIRM HEADQUARTERED OR
INCORPORATED WITHIN THIS COMMONWEALTH.
(2) BE A:
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(I) VETERAN-OWNED INVESTMENT MANAGEMENT FIRM, WITH
PROPER DD 214 VERIFICATION AND HONORABLE DISCHARGE; OR
(II) SERVICE-DISABLED VETERAN-OWNED INVESTMENT
MANAGEMENT FIRM WITH A LETTER FROM THE UNITED STATES
DEPARTMENT OF VETERAN AFFAIRS.
(3) BE A MINORITY-OWNED OR WOMEN-OWNED INVESTMENT
MANAGEMENT FIRM APPROVED BY THE OFFICE OF MINORITY AND WOMEN
BUSINESS ENTERPRISE IN ACCORDANCE WITH THE CRITERIA
ESTABLISHED BY EXECUTIVE ORDER NO. 1987-18 AND 4 PA. CODE §
68.204 (RELATING TO ELIGIBILITY STANDARDS).
§ 8546. REQUIREMENTS AND LIMITATIONS OF FIRMS.
(A) EQUITY, COMMODITY OR ABSOLUTE RETURN EXPOSURE FIRMS.--
FIRMS CONSIDERED TO PROVIDE EQUITY, COMMODITY OR ABSOLUTE RETURN
EXPOSURE MAY NOT HAVE MORE THAN $1,500,000,000 OF TOTAL ASSETS
UNDER MANAGEMENT WHEN HIRED. IF THE TOTAL ASSETS UNDER
MANAGEMENT EXCEED $3,000,000,000, THE INVESTMENT MANAGERS SHALL
BE TERMINATED IN A REASONABLE PERIOD OF TIME.
(B) FIXED-INCOME EXPOSURE FIRMS.--FIRMS CONSIDERED TO
PROVIDE FIXED-INCOME EXPOSURE SHALL HAVE NO MORE THAN
$3,000,000,000 OF TOTAL ASSETS UNDER MANAGEMENT WHEN HIRED. IF
THE TOTAL ASSETS UNDER MANAGEMENT EXCEEDS $6,000,000,000,
EXISTING INVESTMENT MANAGERS SHALL BE TERMINATED WITHIN A
REASONABLE PERIOD OF TIME.
(C) PERFORMANCE-BASED FEE ACCOUNTS.--FOR PERFORMANCE-BASED
FEE ACCOUNTS, A MANAGER MUST EXCEED BOTH A HURDLE RATE AND A
HIGH WATER MARK BEFORE THE MANAGER CAN EARN THE PERFORMANCE-
BASED FEE.
(D) TRANSITION TO MAIN FUND.--INVESTMENT MANAGERS HIRED INTO
THE PROGRAM MAY CONTINUE IN THE PROGRAM FOR A PERIOD OF AT LEAST
THREE YEARS, BUT NOT MORE THAN FIVE YEARS. IF THE INVESTMENT
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MANAGER GENERATES STRONG RISK ADJUSTED RETURNS, THE INVESTMENT
OFFICE SHALL USE BEST EFFORTS TO MAKE A PLACE IN THE MAIN FUND
FOR THE INVESTMENT MANAGER. THE INVESTMENT OFFICE SHALL CONSIDER
THINGS SUCH AS THE INVESTMENT MANAGER'S ASSETS UNDER MANAGEMENT
AND PROJECTED ABILITY TO CONTINUE GENERATING STRONG RISK
ADJUSTED RETURNS IN THE FUTURE.
§ 8547. ADMINISTRATION.
(A) AUTHORITY TO HIRE.--THE BOARD AND THE INVESTMENT OFFICE
MAY HIRE AND FUND ANY INVESTMENT MANAGER MEETING THE OBJECTIVES,
GOALS AND CRITERIA UNDER THIS SECTION.
(B) PROHIBITION OF INVESTMENT.--AN INVESTMENT MAY NOT BE
MADE INTO AN INVESTMENT VEHICLE THAT PRIMARILY INCLUDES PRIVATE
EQUITY, PRIVATE DEBT, VENTURE CAPITAL OR PRIVATE REAL ESTATE
INSTRUMENTS. AN INVESTMENT IN AN ABSOLUTE RETURN STRATEGY SHALL
BE SUBJECT TO MANAGER SELECTION REQUIREMENTS WITHIN THE ABSOLUTE
RETURN POLICY.
(C) EMERGING MANAGER PORTFOLIO MANAGER.--THE INVESTMENT
OFFICE SHALL APPOINT AN EMERGING MANAGER PORTFOLIO MANAGER WHO
SHALL BE RESPONSIBLE FOR ADMINISTERING THE PROGRAM. THE EMERGING
MANAGER PORTFOLIO MANAGER SHALL MEET WITH MANAGERS THAT APPEAR
TO MEET THE OBJECTIVES, GOALS AND CRITERIA OF THIS SECTION. THE
EMERGING MANAGER PORTFOLIO MANAGER SHALL RECOMMEND QUALIFIED
INVESTMENT MANAGERS FOR INCLUSION INTO THE MAIN FUND AND SHALL
FURTHER ADVISE THE INVESTMENT OFFICE IF TERMINATION OF AN
INVESTMENT MANAGER IS RECOMMENDED. AN INVESTMENT MANAGER MAY BE
TERMINATED BY THE EMERGING MANAGER PORTFOLIO MANAGER, WITH
APPROVAL FROM THE INVESTMENT OFFICE, IF THE INVESTMENT MANAGER
IS UNDERPERFORMING, NOT GENERATING STRONG RISK ADJUSTED RETURNS,
NOT MEETING THE CRITERIA TO MOVE INTO THE MAIN FUND, CHANGES
INVESTMENT PROCESSES, HAS PERSONNEL TURNOVER OR ANY OTHER REASON
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WHICH IS DEEMED BY THE INVESTMENT OFFICE TO BE IN THE BEST
INTERESTS OF THE SYSTEM.
(D) INTERNAL REVIEW COMMITTEE.--AN INVESTMENT MANAGER
CONSIDERED FOR HIRING INTO THE PROGRAM SHALL MEET WITH THE
INTERNAL REVIEW COMMITTEE. THE INTERNAL REVIEW COMMITTEE SHALL
REVIEW EACH MANAGER CONSIDERED FOR INCLUSION IN THE PROGRAM AND
PROVIDE FEEDBACK TO THE EMERGING MANAGER PORTFOLIO MANAGER.
INVESTMENT OFFICE APPROVAL SHALL BE REQUIRED TO HIRE A MANAGER
INTO THE PROGRAM, INCLUDING THE EMERGING MANAGER PORTFOLIO
MANAGER, THE EMERGING MANAGER PORTFOLIO MANAGER'S SUPERVISOR AND
THE CHIEF INVESTMENT OFFICER.
(E) APPROVAL FOR EXCEPTIONAL INVESTMENT MANAGER.--IF THE
EMERGING MANAGER PORTFOLIO MANAGER, THE CHIEF INVESTMENT OFFICER
OR OTHER QUALIFIED STAFF HAVE LOCATED AN EXCEPTIONAL INVESTMENT
MANAGER THAT DOES NOT MEET THE REQUIRED CRITERIA ESTABLISHED
UNDER THIS SECTION, THE INVESTMENT OFFICE SHALL OBTAIN BOARD
APPROVAL FOR HIRING. THE INVESTMENT OFFICE SHALL PRESENT TO THE
BOARD THE SPECIFIC REASONS FOR HIRING THE INVESTMENT MANAGER.
(F) CONTRACT REQUIREMENTS.--EACH INVESTMENT MANAGER SHALL
MANAGE ITS PORTFOLIO WITHIN THE CONSTRAINTS OF THE CONTRACT
ENTERED INTO BETWEEN THE INVESTMENT MANAGER AND THE BOARD, THE
INVESTMENT POLICY STATEMENT, OBJECTIVES AND GUIDELINES, ANY
APPLICABLE ADDENDUM AND ANY APPLICABLE AMENDMENTS TO THE
CONTRACT AND INVESTMENT POLICY STATEMENT, OBJECTIVES AND
GUIDELINES. THE INVESTMENT OFFICE AND BOARD SHALL HAVE AUTHORITY
TO NEGOTIATE THE INVESTMENT CONTRACT WITH THE INVESTMENT
MANAGER, INCLUDING THE INVESTMENT GUIDELINES.
(G) INSURANCE.--EACH OF THE STANDARD INSURANCE PROVISIONS IN
THE INVESTMENT POLICY STATEMENT, OBJECTIVES AND GUIDELINES,
EXCEPT FOR THE MAXIMUM DEDUCTIBLES, SHALL APPLY TO THE
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INVESTMENT MANAGER UNTIL THE INVESTMENT MANAGER IS EITHER
MANAGING OVER $100,000,000 FOR THE PROGRAM OR IS MOVED OUT OF
THE PROGRAM INTO THE MAIN FUND. THE MAXIMUM DEDUCTIBLE FOR BOTH
THE ERROR AND OMISSIONS INSURANCE AND THE FIDELITY BOND SHALL BE
THE GREATER OF 10% OF AUDITED RETAINED EARNINGS OR THE
FOLLOWING:
ASSET SIZE MAXIMUM DEDUCTIBLE
$0 - $50,000,000 $50,000
$50,000,000 - $75,000,000 $100,000
$75,000,000 - $100,000,000 $200,000
(H) FUNDING.--BOARD APPROVAL SHALL BE REQUIRED FOR TOTAL
CAPITAL ALLOCATIONS EXCEEDING $100,000,000. INVESTMENT STRATEGY
LIMITATIONS SHALL BE CONSISTENT WITH INVESTMENT POLICY STATEMENT
CONSTRAINTS. THE EMERGING MANAGER PORTFOLIO MANAGER , THE
EMERGING MANAGER PORTFOLIO MANAGER' S SUPERVISOR AND THE CHIEF
INVESTMENT OFFICER SHALL DETERMINE THE AMOUNT OF THE INITIAL
ALLOCATION AND EACH SUBSEQUENT ALLOCATION TO EACH INVESTMENT
MANAGER.
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
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
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(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 5.1. The definition of "enforcement officer" in
section 5102 of Title 71 is amended by adding a paragraph to
read:
§ 5102. Definitions.
The following words and phrases as used in this part, unless
a different meaning is plainly required by the context, shall
have the following meanings:
* * *
"Enforcement officer."
* * *
(5) Individuals who are employed by the Office of State
Inspector General on or after the effective date of this
paragraph as investigators, agents and their immediate
supervisors, who are charged with the enforcement of laws and
who have, within the scope of their employment, the police
power to enforce the laws under the authority of Article V-A
of the act of April 9, 1929 (P.L.177, No.175), known as The
Administrative Code of 1929.
* * *
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
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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
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
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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
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
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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
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
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applicable to each class of service multiplier.
* * *
Section 6.1. Notwithstanding any provision of 71 Pa.C.S. §§
5507 and 5508 to the contrary, for purposes of 71 Pa.C.S. §
5508(c)(4), any change in the accrued liability that results
from the addition of paragraph (5) of the definition of
"enforcement officer" in 71 Pa.C.S. § 5102 shall be funded in
equal dollar installments as a percentage of compensation of all
affected active members and affected active participants
employed by the Office of State Inspector General over a period
of 10 years from the first day of July following the valuation
date coincident with or next following the effective date of
this section.
Section 6.2. The provisions of this act are severable. If
any provision of this act or its application to any person or
circumstance is held invalid, the invalidity shall not affect
other provisions or applications of this act which can be given
effect without the invalid provision or application.
Section 6.3. The following shall apply:
(1) Except as provided under paragraph (2), the addition
of paragraph (5) of the definition of "enforcement officer"
in 71 Pa.C.S. § 5102 shall apply retroactively to September
18, 2017.
(2) The addition of paragraph (5) of the definition of
"enforcement officer" in 71 Pa.C.S. § 5102 shall not apply
retroactively to September 18, 2017, for an employee hired
after December 31, 2018.
(3) The addition of paragraph (5) of the definition of
"enforcement officer" in 71 Pa.C.S. § 5102 shall not apply to
a current or former employee of the Office of Inspector
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General who dies prior to 60 days after the effective date of
this section.
(4) Except as provided under paragraph (5), only service
performed by employees under paragraph (5) of the definition
of "enforcement officer" in 71 Pa.C.S. § 5102 after September
17, 2017, may be service as an enforcement officer.
(5) Only service performed on or after the effective
date of this section by employees under paragraph (5) of the
definition of "enforcement officer" in 71 Pa.C.S. § 5102 who
were hired after December 31, 2018, may be service as an
enforcement officer.
Section 7. This act shall take effect in 60 days.
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