Bill Text: PA HB2454 | 2011-2012 | Regular Session | Introduced

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Bill Title: In preliminary provisions, further providing for definitions and construction and providing for references; in retirement membership, contributions and benefits, further providing for mandatory and optional membership, credited school service, waiver of adjustments, providing for spouses rights and benefits and further providing for classes of service, elections, eligibility points, eligibility for annuities, eligibility for refunds, pickup contributions, member contributions, contributions to for purchase of credit, incomplete payments, annual compensation limit, contributions by Commonwealth, payments by employers, actuarial cost method, appropriations by Commonwealth, return of accumulated deductions, maxim single life annuity disability annuities, termination of annuities, various supplemental annuities and payment of benefits; providing for school employees' defined contribution plan; in administrative and miscellaneous provisions, further providing for the Public School Employees' Retirement Board, administrative duties of board, health insurance, advisory and reporting duties, application and election duties, duties of employers, rights and duties of school employees and members, management of fund and accounts, Public School Employees' Retirement Fund, State accumulation account, annuity reserve account, State guarantee, taxation, attachment and assignment of funds, approval of domestic relations orders, irrevocable survivor annuitant and amendment of approved domestic relations orders, providing for irrevocable successor payee, further providing for fraud and adjustment of errors, providing for spousal consent and further providing for payments to school entities by Commonwealth; in health insurance for retired school employees, further providing for definitions; and, in military leave of absence, further providing for retirement rights.

Spectrum: Partisan Bill (Republican 43-1)

Status: (Introduced - Dead) 2012-06-13 - Referred to FINANCE [HB2454 Detail]

Download: Pennsylvania-2011-HB2454-Introduced.html

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PRINTER'S NO. 3735
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2454 Session of2012
INTRODUCED BY KAMPF, SACCONE, STEPHENS, BENNINGHOFF, GABLER, AUMENT, BARRAR, BEAR, BLOOM, CLYMER, CUTLER, DENLINGER, EMRICK, EVANKOVICH, GINGRICH, GROVE, HACKETT, HARPER, HARRIS, HENNESSEY, HUTCHINSON, KAUFFMAN, F. KELLER, KILLION, LAWRENCE, MAHER, MALONEY, MASSER, MILLER, MOUL, MUSTIO, O'NEILL, PERRY, QUIGLEY, ROSS, SCHMOTZER, SWANGER, TALLMAN, TOBASH, TOEPEL, TOOHIL, TRUITT, TURZAI AND WATSON, JUNE 13, 2012
REFERRED TO COMMITTEE ON FINANCE, JUNE 13, 2012
AN ACT
Amending Titles 24 (Education) and 51 (Military Affairs) of the
Pennsylvania Consolidated Statutes, in preliminary
provisions, further providing for definitions and
construction and providing for references; in retirement
membership, contributions and benefits, further providing for
mandatory and optional membership, credited school service,
waiver of adjustments, providing for spouses rights and
benefits and further providing for classes of service,
elections, eligibility points, eligibility for annuities,
eligibility for refunds, pickup contributions, member
contributions, contributions to for purchase of credit,
incomplete payments, annual compensation limit, contributions
by Commonwealth, payments by employers, actuarial cost
method, appropriations by Commonwealth, return of accumulated
deductions, maxim single life annuity disability annuities,
termination of annuities, various supplemental annuities and
payment of benefits; providing for school employees' defined
contribution plan; in administrative and miscellaneous
provisions, further providing for the Public School
Employees' Retirement Board, administrative duties of board,
health insurance, advisory and reporting duties, application
and election duties, duties of employers, rights and duties
of school employees and members, management of fund and
accounts, Public School Employees' Retirement Fund, State
accumulation account, annuity reserve account, State
guarantee, taxation, attachment and assignment of funds,
approval of domestic relations orders, irrevocable survivor
annuitant and amendment of approved domestic relations
orders, providing for irrevocable successor payee, further
providing for fraud and adjustment of errors, providing for
spousal consent and further providing for payments to school
entities by Commonwealth; in health insurance for retired
school employees, further providing for definitions; and, in
military leave of absence, further providing for retirement
rights.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "alternate payee,"
"beneficiary," "compensation," "creditable nonschool service,"
"credited service," "date of termination of service,"
"distribution," "domestic relations order," "eligible
annuitants," "final average salary," "inactive member,"
"intervening military service," "irrevocable beneficiary,"
"leave for service with a collective bargaining organization,"
"previous school service," "salary deductions" and "survivor
annuitant" in section 8102 of Title 24 of the Pennsylvania
Consolidated Statutes are amended and the section is amended by
adding definitions 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:
* * *
"Accumulated employer defined contributions." The total of
the employer defined contributions paid into the trust on
account of a participant's school service together with any
investment earnings and losses and adjustment for fees, costs
and expenses credited or charged thereon.
"Accumulated mandatory participant contributions." The total
of the mandatory pickup participant contributions paid into the
trust on account of a participant's school service together with
20120HB2454PN3735 - 2 -
any investment earnings and losses and adjustments for fees,
costs and expenses credited or charged thereon.
"Accumulated total defined contributions." The total of the
accumulated mandatory participant contributions, accumulated
employer defined contributions and accumulated voluntary
contributions, reduced by any distributions, standing to the
credit of a participant in an individual investment account in
the trust.
"Accumulated voluntary contributions." The total of
voluntary contributions paid into the trust by a participant and
any amounts rolled over by a participant or transferred by a
direct trustee-to-trustee transfer into the trust together with
any investment earnings and losses and adjustment for fees,
costs and expenses credited or charged thereon.
* * *
"Active participant." A school employee for whom mandatory
pickup participant contributions are being made to the trust or
for whom such contributions otherwise required for current
school service are not being made solely by reason of any
provision of this part relating to the limitations under section
401(a)(17) or 415 of the Internal Revenue Code of 1986 (Public
Law 99-514, 26 U.S.C. § 401(a)(17) or 415.
* * *
"Alternate payee." Any spouse, former spouse, child or
dependent of a member or participant who is recognized by a
domestic relations order as having a right to receive all or a
portion of the moneys payable to that member or participant
under this part.
* * *
"Beneficiary." The person or persons last designated in
20120HB2454PN3735 - 3 -
writing to the board by a member to receive his accumulated
deductions or a lump sum benefit upon the death of such member.
The term shall also include the spouse of a participant. If the
participant is not married or the spouse consents, then the
person or persons last designated in writing to the board by a
participant to receive his accumulated total defined
contributions or a lump sum benefit upon the death of such
participant. A combined service employee may designate different
beneficiaries for his benefits from the system and the plan.
* * *
"Combined service employee." A current or former school
employee who is both a member of the system and a participant in
the plan.
* * *
"Compensation." Pickup contributions and mandatory pickup
participant contributions plus any remuneration received as a
school employee excluding reimbursements for expenses incidental
to employment and excluding any bonus, severance payments, any
other remuneration or other emolument received by a school
employee during his school service which is not based on the
standard salary schedule under which he is rendering service,
payments for unused sick leave or vacation leave, bonuses or
other compensation for attending school seminars and
conventions, payments under health and welfare plans based on
hours of employment or any other payment or emolument which may
be provided for in a collective bargaining agreement which may
be determined by the Public School Employees' Retirement Board
to be for the purpose of enhancing compensation as a factor in
the determination of final average salary, and for participants,
excluding payments for military leave, and any other payments
20120HB2454PN3735 - 4 -
made by an employer while the participant is on USERRA leave,
leave of absence granted under 51 Pa.C.S. § 4102 (relating to
leave of absence for certain government employees), military
leave of absence granted under 51 Pa.C.S. § 7302 (relating to
granting military leaves of absence), military leave of absence
granted under 24 P.S. § 11-1176, or other types of military
leave, including other types of leave payments, stipends,
differential wage payments as defined in IRC § 414(u)(12) and
any other payments, provided, however, that the limitation under
section 401(a)(17) of the Internal Revenue Code of 1986 (Public
Law 99-514, 26 U.S.C. § 401(a)(17)) taken into account for the
purpose of member contributions, including regular or joint
coverage member contributions, regardless of class of service,
shall apply to each member who first became a member of the
Public School Employes' Retirement System on or after July 1,
1996, and who by reason of such fact is a noneligible member
subject to the application of the provisions of section 8325.1
(relating to annual compensation limit under IRC § 401(a)(17))
and shall apply to each participant.
* * *
"Creditable nonschool service." Service other than service
as a school employee for which an active member may obtain
credit in the system.
"Credited service." School or creditable nonschool service
for which the required contributions have been made to the fund,
or for which the contributions otherwise required for such
service were not made solely by reason of any provision of this
part relating to the limitations under section 401(a)(17) or
415(b) of the Internal Revenue Code of 1986 (Public Law 99-514,
26 U.S.C. § 401(a)(17) or 415(b)), or for which salary
20120HB2454PN3735 - 5 -
deductions to the system or lump sum payments have been agreed
upon in writing.
"Date of termination of service." The last date of service
for which:
(1) pickup contributions are made for an active member
[or,];
(2) in the case of an inactive member, the effective
date of his resignation or the date his employment is
formally discontinued by his employer or two years following
the last day of service for which contributions were made,
whichever is earliest[.];
(3) mandatory pickup participant contributions are made
for an active participant;
(4) in the case of an inactive participant, the date of
his resignation or the date his employment is formally
discontinued by his employer; or
(5) in the case of a combined service employee, the
latest of the dates in paragraph(3) or (4).
* * *
"Distribution." Payment of all or any portion of a person's
interest in the Public School Employees' Retirement Fund or the
School Employees' Defined Contribution Trust which is payable
under this part.
"Domestic relations order." Any judgment, decree or order,
including approval of a property settlement agreement, entered
on or after the effective date of this definition by a court of
competent jurisdiction pursuant to a domestic relations law
which relates to the marital property rights of the spouse or
former spouse of a member or participant, including the right to
receive all or a portion of the moneys payable to that member or
20120HB2454PN3735 - 6 -
participant under this part in furtherance of the equitable
distribution of marital assets. The term includes orders of
support as that term is defined by 23 Pa.C.S. § 4302 (relating
to definitions) and orders for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages).
* * *
"Eligible annuitants." All current and prospective
annuitants 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. The term eligible annuitants shall not
include participants.
* * *
"Employer defined contributions."
(1) Unless paragraph (2) is applicable, contributions
equal to four percent of an active participant's compensation
that are made by an employer for current service to the trust
to be credited in the participant's individual investment
account.
(2) For active participants who elected to be
participants under section 8416 (relating to elections by
members to be participants), contributions equal to 7% of an
active participant's compensation which are made by an
employer for current service to the trust to be credited in
the participant's individual investment account. This
paragraph shall apply to a participant only until termination
20120HB2454PN3735 - 7 -
of service such that the participant is eligible for benefits
under section 8407 (relating to eligibility for benefits)
without regard to whether or not a participant actually
receives benefits. For subsequent school service as an active
participant, the employer defined contributions shall equal
4% of an active participant's compensation.
"Final average salary." The highest average compensation
received as an active member during any three nonoverlapping
periods of 12 consecutive months with the compensation for part-
time service being annualized on the basis of the fractional
portion of the school year for which credit is received; except,
if the employee was not a member for three such periods, the
total compensation received as an active member annualized in
the case of part-time service divided by the number of such
periods of membership; in the case of a member with multiple
service credit, the final average salary shall be determined by
reference to compensation received by him as a [school employee]
member of the system or a State employee other than as a
participant in the State Employees' Defined Contribution Plan or
both; and, in the case of a noneligible member, subject to the
application of the provisions of section 8325.1 (relating to
annual compensation limit under IRC § 401(a)(17)).
* * *
"Inactive member." A member for whom no pickup contributions
are being made to the fund, except in the case of an active
member for whom such contributions otherwise required for
current school service are not being made solely by reason of
any provision of this part relating to the limitations under
section 401(a)(17) or 415(b) of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401(a)(17) or 415(b)), who
20120HB2454PN3735 - 8 -
has accumulated deductions standing to his credit in the fund
and for whom contributions have been made within the last two
school years or a multiple service member who is active in the
State Employees' Retirement System.
"Inactive participant." A participant for whom no mandatory
pickup participant contributions are being made to the trust,
except in the case of an active participant for whom such
contributions otherwise required for current school service are
not being made solely by reason of any provision of this part
relating to limitations under section 401(a)(17) or 415 of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
§401(a)(17) or 415), but who has accumulated total defined
contributions standing to his credit in the trust and who has
not filed an application for an annuity.
"Individual investment account." The account in the trust to
which are credited the amounts of the contributions made by a
participant and the participant's employer in accordance with
the provisions of this part, together with all interest and
investment earnings after deduction for fees, costs and
expenses, investment losses and charges for distributions.
"Intervening military service." Active military service of a
member who was a school employee and an active member of the
system immediately preceding his induction into the armed
services or forces of the United States in order to meet a draft
obligation excluding any voluntary extension of such
obligational service and who becomes a school employee and an
active member of the system within 90 days of the expiration of
such service.
* * *
"Irrevocable beneficiary." The person or persons permanently
20120HB2454PN3735 - 9 -
designated by a member or a participant in writing to the board
pursuant to an approved domestic relations order to receive all
or a portion of the accumulated deductions, accumulated total
defined contributions or lump sum benefit payable upon the death
of such member.
* * *
"Irrevocable successor payee." The person permanently
designated by a participant receiving distributions in writing
to the Board pursuant to an approved domestic relations order to
receive one or more distributions from the plan upon the death
of such participant.
* * *
"Leave for service with a collective bargaining
organization." Paid leave granted to an active member or active
participant by an employer for purposes of working full time for
or serving full time as an officer of a Statewide employee
organization or a local collective bargaining representative
under the act of July 23, 1970 (P.L.563, No.195), known as the
Public Employe Relations Act: Provided, That greater than one-
half of the members of the employee organization are active
members of the system; that the employer shall fully compensate
the member, including, but not limited to, salary, wages,
pension and retirement contributions and benefits, other
benefits and seniority, as if he were in full-time active
service; and that the employee organization shall fully
reimburse the employer for such salary, wages, pension and
retirement contributions and benefits and other benefits and
seniority.
"Mandatory pickup participant contributions." Contributions
equal to 4% of compensation that are made by the employer for
20120HB2454PN3735 - 10 -
active participants for current service that are picked up by
the employer.
* * *
"Participant." An active participant, inactive participant
or participant receiving distributions.
"Participant receiving distributions." A participant in the
plan who has commenced receiving distributions from his
individual investment account but who has not received a total
distribution of his interest in the account.
* * *
"Plan." The School Employees' Defined Contribution Plan as
established by the provisions of this part and the board.
"Plan document." The documents created by the board under
section 8402 (relating to plan document) that contains the terms
and provisions of the plan and trust as established by the board
regarding the establishment, administration and investment of
the plan and trust.
"Previous school service." Service [rendered] as a school
employee including service in any summer school conducted by a
school district of the Commonwealth, but excluding service
rendered during which the school employee was or could have been
a participant in the plan, prior to the member's most recent
entrance in the system.
* * *
"Reemployed from USERRA leave." Resumption of active
participation as a school employee after a period of USERRA
leave, provided the resumption of active participation was
within the time period and under conditions and circumstances
such that the school employee was entitled to reemployment
rights under 38 U.S.C. Ch. 43 (relating to employment and
20120HB2454PN3735 - 11 -
reemployment rights of members of the uniformed services).
* * *
"Required beginning date." The latest date by which
distributions of a participant's interest in his individual
investment account must commence under IRC § 401(a)(9).
* * *
"Salary deductions." The amounts certified by the board,
deducted from the compensation of an active member or active
participant or the State service compensation of a multiple
service member who is an active member of the State Employees'
Retirement System and paid into the fund or trust.
* * *
"School Employees' Defined Contribution Plan." The defined
contribution plan for school employees established by Part IV
(relating to retirement for school employees).
* * *
"State Employees' Defined Contribution Plan." The defined
contribution plan for State employees established by part XXV
(relating to retirement for State employees and officers).
* * *
"Successor payee." The person or persons last designated by
a participant receiving distributions in writing to the Board to
receive one or more distributions upon the death of such
participant. A combined service employee may designate different
persons to be successor payees for the benefits from the plan
and beneficiaries or survivor annuitants for the benefits from
the system.
* * *
"Survivor annuitant." The person or persons last designated
by a member under a joint and survivor annuity option to receive
20120HB2454PN3735 - 12 -
an annuity upon the death of such member. A combined service
employee may designate different persons to be survivor
annuitants for the benefits from the system and beneficiaries or
successor payees for the benefits from the plan.
* * *
"Trust." The School Employees' Defined Contribution Trust
established under Chapter 84 (relating to school employees'
defined contribution plan).
"USERRA leave." Any period of time for service in the
uniformed services (as defined in 38 U.S.C. Ch. 43 (relating to
employment and reemployment rights of members of the uniformed
services)) by a participant or former participant who terminated
school service to perform such service in the uniformed
services, if such current or former participant is entitled to
reemployment rights under 38 U.S.C. Ch. 38 with respect to such
uniformed service.
* * *
"Voluntary contributions." Contributions made by a
participant to the trust and credited to his individual
investment account in excess of his mandatory pickup participant
contributions, either by salary deductions paid through the
employer or by an eligible rollover or direct trustee-to-trustee
transfers.
Section 2. Section 8103 of Title 24 is amended by adding a
subsection to read:
§ 8103. Construction of part.
* * *
(c) Construction regarding inactive member and inactive
participant.--As used in this part, the term "inactive member"
does not include a combined service employee who is an "inactive
20120HB2454PN3735 - 13 -
participant," unless the combined service employee is
concurrently employed in a position in which such employee is a
member of the system. The term "inactive participant" does not
include a combined service employee who is an "inactive member,"
unless the combined service employee is concurrently employed in
a position in which such employee is participant in the plan.
Section 3. Title 24 is amended by adding a section to read:
§ 8103.1. Reference to Public School Employees' Retirement
System.
As of the effective date of this section, unless the context
clearly indicates otherwise, any reference to the Public School
Employees' Retirement System in a statutory provision, other
than this part, shall include a reference to the plan, and any
reference to the Public School Employees' Retirement Fund shall
include a reference to the trust.
Section 4. Sections 8301 and 8302(a), (b) and (c) of Title
24 are amended and the sections are amended by adding
subsections to read:
§ 8301. Mandatory and optional membership in the system and
participation in the plan.
(a) Mandatory membership.--[Membership] Unless an election
to be a participant in the plan is made, membership in the
system shall be mandatory as of the effective date of employment
for all school employees except the following:
(1) [Any] Subject to the provisions in subsection (a.1),
any officer or employee of the Department of Education,
State-owned educational institutions, community colleges,
area vocational-technical schools, technical institutes[,] or
[the] The Pennsylvania State University and who is a member
of the [State Employees' Retirement System] system or a
20120HB2454PN3735 - 14 -
member of another retirement program approved by the
employer.
(2) [Any] Subject to the provisions in subsection (a.2),
any school employee who is not a member of the system and who
is employed on a per diem or hourly basis for less than 80
full-day sessions or 500 hours in any fiscal year or
annuitant who returns to school service under the provisions
of section 8346(b) (relating to termination of annuities).
(3) Any officer or employee of a governmental entity who
subsequent to December 22, 1965, and prior to July 1, 1975,
administers, supervises[,] or teaches classes financed wholly
or in part by the Federal Government so long as he continues
in such service.
(4) [Any] Subject to the provisions in subsection (a.2),
any part-time school employee who has an individual
retirement account pursuant to the Federal act of September
2, 1974 (Public Law 93-406, 88 Stat. 829), known as the
Employee Retirement Income Security Act of 1974.
(5) School employees whose most recent period of school
service starts on or after July 1, 2015.
(a.1) (1) Any officer or employee of the Department of
Education, State-owned educational institutions, community
colleges and The Pennsylvania State University who is an
active member on December 31, 2014, and January 1, 2015,
shall remain an active member in their class of service until
termination of school service. Any officer or employee of the
Department of Education, State-owned educational
institutions, community colleges and The Pennsylvania State
University who becomes a school employee, or who returns to
school service, on or after January 1, 2015, shall not be
20120HB2454PN3735 - 15 -
eligible for membership in the system and shall not be
eligible to become a participant in the plan.
(2) Any officer or employee of an area vocational-
technical school or technical institute who is an active
member on June 30, 2015, and July 1, 2015, shall remain an
active member in their class of service until termination of
school service. Any officer or employee of an area
vocational-technical school or technical institute who
becomes a school employee, or who returns to school service,
on or after July 1, 2015, shall be a mandatory participant in
the plan and shall not be eligible to elect membership or
participation in the State Employees' Retirement System or
plan or another retirement program approved by the employer.
(3) Any school employee other than those listed in
subsection (a)(1) who are active members on June 30, 2015 and
July 1, 2015, shall remain active members in their class of
service until termination of school service.
(a.2) On or after July 1, 2015, any school employee who is
not a member of the system and who is employed on a per diem or
hourly basis, or annuitant who returns to school service under
the provisions of section 8346(b), shall be a mandatory
participant in the plan, unless the school employee is:
(1) a part-time school employee who has an individual
retirement account pursuant to the Employee Retirement Income
Security Act of 1974; and
(2) makes an election not to become a participant.
(b) Prohibited membership in the system.--The school
employees categorized in subsection (a)(1) [and (2)], (2), (4)
and (5) shall not have the right to elect membership in the
system.
20120HB2454PN3735 - 16 -
(c) Optional membership in the system.--The school employees
categorized in subsection (a)(3) and, if otherwise eligible,
subsection (a)(4) shall have the right to elect membership in
the system on or before July 1, 2015. Once such election is
exercised, membership shall commence from the original date of
eligibility and shall continue until the termination of such
service or the school employee elects to be a participant of the
plan.
(d) Mandatory participation in the plan.--Subject to the
exceptions in subsections (a.1) and (a.2), a school employee who
begins school service, or who returns to school service after a
break in service, on or after July 1, 2015, shall be a mandatory
participant in the plan as a result of such school service.
§ 8302. Credited school service.
(a) Computation of credited service.--In computing credited
school service of a member for the determination of benefits, a
full-time salaried school employee shall receive one year of
credit for each school year or the corresponding fraction
thereof, in accordance with the proportion of the full school
year for which the required regular member contributions have
been made to the fund, or for which such contributions otherwise
required for such service were not made solely by reason of any
provision of this part relating to the limitations under IRC §
401(a)(17) or 415(b). A per diem or hourly school employee shall
receive one year of credited service for each nonoverlapping
period of 12 consecutive months in which he is employed and for
which contributions are made to the fund, or would have been
made but for such limitations under the IRC, for at least 180
full-day sessions or 1,100 hours of employment. If such member
was employed and contributions were made to the fund for less
20120HB2454PN3735 - 17 -
than 180 full-day sessions or 1,100 hours, he shall be credited
with a fractional portion of a year determined by the ratio of
the number of full-day sessions or hours of service actually
rendered and for which contributions are made to the fund to 180
full-day sessions or 1,100 hours, as the case may be. A part-
time salaried employee shall be credited with the fractional
portion of the year which corresponds to the service actually
rendered in relation to the service required as a comparable
full-time salaried employee. In no case shall a member receive
more than one year of credited service for any 12 consecutive
months or a member who has elected multiple service receive an
aggregate in the two systems of more than one year of credited
service for any 12 consecutive months.
(b) Approved leaves of absence.--An active member or active
participant shall receive credit for an approved leave of
absence provided that:
(1) the member returns for a period at least equal to
the length of the leave or one year as a member of the system
or the participant returns to school service as an active
participant in the plan, whichever is less, to the school
district which granted his leave, unless such condition is
waived by the employer; and
(2) the proper contributions are made by the member and
the employer.
* * *
(c) Cancellation of credited service.--All credited service
in the system shall be cancelled if a member withdraws his
accumulated deductions. A partial or total distribution of
accumulated total defined contributions to a combined service
employee shall not cancel service credited in the system.
20120HB2454PN3735 - 18 -
(d) Military service by a participant.--A participant who
has performed USERRA leave shall be treated and may make
contributions as provided by this subsection.
(1) A participant who is reemployed from USERRA leave
shall be treated as not having incurred a break in school
service by reason of the USERRA leave. If a participant who
is reemployed from USERRA leave subsequently makes mandatory
pickup participant contributions in the amounts and in the
time periods required by 38 U.S.C. Ch. 43 (relating to
employment and reemployment rights of members of the
uniformed services) and IRC § 414(u) as if the participant
had continued in his school employment and performed school
service and been compensated during the period of USERRA
leave, then the participant's employer shall make the
corresponding employer defined contributions. Such an
employee shall have his contributions, benefits, rights and
obligations determined under this part as if he was an active
participant who performed school service during the USERRA
leave in the job position that he would have held had he not
been on USERRA leave and received the compensation on which
the mandatory pickup participant contributions to receive
school service credit for the USERRA leave were determined,
including the right to make voluntary contributions on such
compensation as permitted by law.
(2) A participant who is reemployed from USERRA leave
who does not make the mandatory pickup participant
contributions or makes only part of the mandatory pickup
participant contributions within the allowed payment period
shall not be eligible to make mandatory pickup participant
contributions and voluntary contributions at a later date for
20120HB2454PN3735 - 19 -
the period of USERRA leave for which the mandatory pickup
participant contributions were not timely made.
(3) A participant employee who performs USERRA leave
from which the employee could have been reemployed from
USERRA leave had the school employee returned to school
service in the time frames required by 38 U.S.C. Ch. 43 for
reemployment rights, but did not do so, shall not be eligible
to make mandatory pickup participant contributions or
voluntary contributions for the period of USERRA leave should
the employee later return to school service and be a
participant in the plan.
(4) An active participant or inactive participant who,
on or after the effective date of this subsection, is granted
a leave of absence under 51 Pa.C.S. § 4102 (relating to
leaves of absence for certain government employees) or a
military leave under 51 Pa.C.S. Ch. 73 (relating to military
leave of absence), that is not USERRA leave shall not be able
to make mandatory pickup participant contributions or
voluntary contributions during or for the leave of absence or
military leave, and shall not have employer defined
contributions made during such leave, without regard to
whether or not the school employee received salary, wages,
stipends, differential wage payments or other payments from
his employer during the leave, notwithstanding any provision
to the contrary in 51 Pa.C.S. § 4102 or Ch 73.
(5) If a participant dies while performing USERRA leave,
then the beneficiaries or successor payees, as the case may
be, of the deceased participant are entitled to any
additional benefits, other than benefit accruals relating to
the period of qualified military service, provided under this
20120HB2454PN3735 - 20 -
part had the participant resumed and then terminated
employment on account of death.
Section 5. Section 8303.1 of Title 24 is amended to read:
§ 8303.1. Waiver of adjustments.
(a) Allowance.--Upon appeal by an affected member,
participant, beneficiary or survivor annuitant, the board may
waive an adjustment or any portion of an adjustment made under
section 8534(b) (relating to fraud and adjustment of errors) if
in the opinion of the board or the board's designated
representative:
(1) the adjustment or portion of the adjustment will
cause undue hardship to the member, participant, beneficiary
or survivor annuitant;
(2) the adjustment was not the result of erroneous
information supplied by the member, participant, beneficiary
or survivor annuitant;
(3) the member or participant had no knowledge or notice
of the error before adjustment was made, and the member,
participant, beneficiary or survivor annuitant took action
with respect to their benefits based on erroneous information
provided by the system or plan; and
(4) the member, participant, beneficiary or survivor
annuitant had no reasonable grounds to believe the erroneous
information was incorrect before the adjustment was made.
(b) Time period.--In order to obtain consideration of a
waiver under this section, the affected member, participant,
beneficiary or survivor annuitant must appeal to the board in
writing within 30 days after receipt of notice that benefits
have been adjusted or, if no notice was given, within 30 days
after the adjustment was known or should have been known to the
20120HB2454PN3735 - 21 -
affected member, participant, beneficiary or survivor annuitant.
For any adjustments made prior to the effective date of this
subsection for which the member, participant, beneficiary or
survivor annuitant appealed to the board and was denied, an
appeal under this section must be filed within 90 days of the
effective date of this subsection.
Section 6. Title 24 is amended by adding a section to read:
§ 8303.2. Spouses rights, benefits and effect of nomination of
spouse.
(a) No rights of participation in spouse.--The spouse of a
participant of the plan does not have any of the rights, options
or privileges of a participant. The rights of a spouse shall
remain derivative of those of the participant, including, but
not limited to, rights under the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture Act,
section 16(b) of Article V of the Constitution of Pennsylvania,
and a spouse may not compel a participant to take, or prevent a
participant from taking, any action regarding membership, rights
or benefits in the plan in which they are a participant other
than those expressly set forth in this part; nor may a spouse
take any action on behalf of a participant, except as otherwise
duly authorized under this part.
(b) No waiver of benefits without spousal consent.--To the
extent that the law allows a participant in the plan to waive
any benefits or return of contributions which the participant is
entitled to receive now or in the future, or is receiving, no
such waiver will be valid unless the spouse consents to it as
provided for in this part.
(c) Effect of nomination of spouse as beneficiary by law.--
Whenever the spouse of a participant in the plan is deemed to be
20120HB2454PN3735 - 22 -
the beneficiary by operation of law instead of by a written
nomination of beneficiary filed with the board, then the person
last nominated as beneficiary in writing filed with the board
shall become the contingent beneficiary.
Section 7. Section 8305(b) of Title 24 is amended and the
section is amended by adding a subsection to read:
§ 8305. Classes of service.
* * *
(b) Other class membership.--A school employee who is a
member of a class of service other than Class T-C on the
effective date of this part may elect to become a member of
Class T-C or Class T-D or may retain his membership in such
other class until the service is discontinued or he elects to
become a full coverage member or elects to purchase credit for
previous school or creditable nonschool service. Any service
thereafter as a member of the system shall be credited as Class
T-C or T-D service as applicable.
* * *
(f) Ineligibility for active membership and classes of
service.--An individual who elects to be a participant in the
plan or who first becomes a school employee on or after July 1,
2015, or who returns to school service on or after July 1, 2015
after a termination of school service, shall be ineligible for
active membership in the system. Instead, any such school
employee shall be a participant in the plan as a result of such
school service, subject to the provisions in section 8301
(relating to mandatory and optional membership).
Section 8. Sections 8305.1(c) and 8305.2(c) and (d) of Title
24 are amended to read:
§ 8305.1. Election to become a Class T-D member.
20120HB2454PN3735 - 23 -
* * *
(c) Effect of election.--An election to become a Class T-D
member shall remain in effect until the termination of
employment. Those members who, on the effective date of this
section, contribute at the rate of 5 1/4% shall be deemed to
have accepted the basic contribution rate of 6 1/2% for all
Class T-D service performed on or after January 1, 2002. Those
members who, on the effective date of this section, contribute
at the rate of 6 1/4% shall be deemed to have accepted the basic
contribution rate of 7 1/2% for all Class T-D service performed
on or after January 1, 2002. Upon termination and a subsequent
reemployment that occurs before July 1, 2015, the school
employee's class of service shall be credited in the class of
service otherwise provided for in this part. If the reemployment
occurs on or after July 1, 2015, the school employee's
eligibility for membership in the system or participation in the
plan shall be as provided in this part.
* * *
§ 8305.2. Election to become a Class T-F member.
* * *
(c) Effect of election.--An election to become a Class T-F
member shall be irrevocable and shall commence from the original
date of eligibility and shall remain in effect for all future
school service creditable in the system. A member who elects
Class T-F membership shall receive Class T-F service credit on
any and all future service, regardless of whether the member
terminates service or has a break in service.
(d) Effect of failure to make election.--If a member fails
to timely file an election to become a Class T-F member, then
the member shall be enrolled as a member of Class T-E, unless
20120HB2454PN3735 - 24 -
the school employee elects or is required to be a participant in
the plan, and the member shall never be able to elect Class T-F
service, regardless of whether the member terminates service or
has a break in service.
Section 9. Section 8306 (b) of Title 24 is amended and the
section is amended by adding a subsection to read:
§ 8306. Eligibility points.
* * *
(b) Transitional rule.--For the purposes of the transition:
(1) In determining whether a member, other than a
disability annuitant who returns to school service after June
30, 2001, upon termination of the disability annuity, who is
not a school employee or a State employee on June 30, 2001,
and July 1, 2001, and who has previous school service, has
the five eligibility points required by the definition of
"vestee" in sections 8102 (relating to definitions), 8307
(relating to eligibility for annuities), 8308 (relating to
eligibility for vesting) and 8345 (relating to member's
options), only eligibility points earned by performing
credited school service as an active member of the system or
credited State service as an active member of the State
Employees' Retirement System after June 30, 2001, shall be
counted until such member earns one eligibility point by
performing credited school service or credited State service
after June 30, 2001, at which time all eligibility points as
determined under subsection (a) shall be counted.
(2) A member subject to paragraph (1) shall be
considered to have satisfied any requirement for five
eligibility points contained in this part if the member has
at least ten eligibility points determined under subsection
20120HB2454PN3735 - 25 -
(a).
(c) Transitional rule for members electing participation.--
In determining whether a school employee, who is an active
member or an inactive member on July 1, 2015, and who elects to
become a participant in the plan under section 8416 (relating to
election by members to be participants) has the five or ten
eligibility points required by sections 8102, 8307(b), 8308,
8344(b) (relating to disability annuities) and 8345(a), any such
combined service employee shall be considered to have satisfied
any requirement for five or ten eligibility points, as
applicable, if the combined service employee does not terminate
school service for three or more years after the effective date
of participation in the plan.
Section 10. Sections 8307 (a) and (b) of Title 24 are
amended and the section is amended by adding a subsection to
read:
§ 8307. Eligibility for annuities.
(a) Superannuation annuity.--An active or an inactive
member, or a combined service employee who is an active or
inactive participant, and who attains superannuation age shall
be entitled to receive a superannuation annuity upon termination
of service and filing of a proper application.
(a.1) Points.--Notwithstanding any regulation promulgated by
the board, application or interpretation of Part IV (relating to
retirement for school employees), or administrative practice to
the contrary, a combined service employee's eligibility for a
superannuation annuity or other rights and benefits based on
attaining superannuation age or a superannuation score of 92
shall be determined by including only those eligibility points
actually accrued.
20120HB2454PN3735 - 26 -
(b) Withdrawal annuity.--A vestee in Class T-C or Class T-D
with five or more eligibility points or an active or inactive
Class T-C or Class T-D member, or a combined service employee
with Class T-C or T-D service, who terminates school service
having five or more eligibility points shall, upon filing a
proper application, be entitled to receive an early annuity. A
vestee in Class T-E or Class T-F with ten or more eligibility
points or an active or inactive Class T-E or Class T-F member,
or a combined service employee with Class T-E or T-F service,
who terminates school service having ten or more eligibility
points shall, upon filing a proper application, be entitled to
receive an early annuity.
* * *
Section 10.1. Sections 8310, 8322.1(a), 8323(a) and (d),
8324(b), (c) and (d), 8325, 8325.1(a) and 8326(c) of Title 24
are amended to read:
§ 8310. Eligibility for refunds.
Upon termination of service any active member, regardless of
eligibility for benefits, may elect to receive his accumulated
deductions in lieu of any benefit from the system to which he is
entitled.
§ 8322.1. Pickup contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions to the fund required to be made under sections
8321 (relating to regular member contributions for current
service) and 8322 (relating to joint coverage member
contributions), with respect to current school service rendered
by an active member on or after January 1, 1983, shall be picked
up by the employer and shall be treated as the employer's
contribution for purposes of IRC § 414(h).
20120HB2454PN3735 - 27 -
* * *
§ 8323. Member contributions for creditable school service.
(a) Previous school service, sabbatical leave and full
coverage.--The contributions to be paid by an active member or
an eligible State employee for credit in the system for
reinstatement of all previously credited school service, school
service not previously credited, sabbatical leave as if he had
been in full-time daily attendance, or full-coverage membership
shall be sufficient to provide an amount equal to the
accumulated deductions which would have been standing to the
credit of the member for such service had regular member
contributions been made with full coverage at the rate of
contribution necessary to be credited as Class T-C service,
Class T-D service if the member is a Class T-D member, Class T-E
service if the member is a Class T-E member or Class T-F service
if the member is a Class T-F member and had such contributions
been credited with statutory interest during the period the
contributions would have been made and during all periods of
subsequent school service as an active member or inactive member
and State service as an active member or inactive member on
leave without pay up to the date of purchase.
* * *
(d) Certification and payment of contributions.--
(1) In all cases other than for the purchase of credit
for sabbatical leave and activated military service leave
beginning before the effective date of paragraph (2), the
amount payable shall be certified by the board in accordance
with methods approved by the actuary and may be paid in a
lump sum within 90 days or in the case of an active member or
an eligible State employee who is an active member of the
20120HB2454PN3735 - 28 -
State Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by members and the
board may include a deferral of payment amounts and statutory
interest until the termination of school service or State
service or becoming a participant and combined service
employee as the board in its sole discretion decides to
allow. The board may limit salary deduction amortization
plans to such terms as the board in its sole discretion
determines. In the case of an eligible State employee who is
an active member of the State Employees' Retirement System,
the agreed upon salary deductions shall be remitted to the
State Employees' Retirement Board, which shall certify and
transfer to the board the amounts paid.
(2) In the case of activated military service leave
beginning before the effective date of this paragraph, the
amount payable may be paid according to this subsection or
subsection (c.1), but all lump sum payments must be made
within one year of the termination of activated military
service leave.
§ 8324. Contributions for purchase of credit for creditable
nonschool service and noncreditable school service.
* * *
(b) Nonintervening military service.--The amount due for the
purchase of credit for military service other than intervening
military service shall be determined by applying the member's
basic contribution rate plus the normal contribution rate as
provided in section 8328 (relating to actuarial cost method) at
the time of entry of the member into school service subsequent
20120HB2454PN3735 - 29 -
to such military service to one-third of his total compensation
received during the first three years of such subsequent
credited school service and multiplying the product by the
number of years and fractional part of a year of creditable
nonintervening military service being purchased together with
statutory interest during all periods of subsequent school
service as an active or inactive member and State service as an
active member or inactive member on leave without pay to date of
purchase. Upon certification of the amount due, payment may be
made in a lump sum within 90 days or in the case of an active
member or an eligible State employee who is an active member of
the State Employees' Retirement System it may be amortized with
statutory interest through salary deductions to the system in
amounts agreed upon by the member and the board. The salary
deduction amortization plans agreed to by members and the board
may include a deferral of payment amounts and statutory interest
until the termination of school service or State service as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as the
board in its sole discretion determines. In the case of an
eligible State employee who is an active member of the State
Employees' Retirement System, the agreed upon salary deductions
shall be remitted to the State Employees' Retirement Board,
which shall certify and transfer to the board the amounts paid.
Application may be filed for all such military service credit
upon completion of three years of subsequent credited school
service and shall be credited as Class T-C service. In the event
that a Class T-E member makes a purchase of credit for such
military service, then such service shall be credited as Class
T-E service. In the event that a Class T-F member makes a
20120HB2454PN3735 - 30 -
purchase of credit for such military service, then such service
shall be credited as Class T-F service.
(c) Intervening military service.--Contributions on account
of credit for intervening military service shall be determined
by the member's basic contribution rate and compensation at the
time of entry of the member into active military service,
together with statutory interest during all periods of
subsequent school service as an active or inactive member and
State service as an active member or inactive member on leave
without pay to date of purchase. Upon application for such
credit the amount due shall be certified in the case of each
member by the board, in accordance with methods approved by the
actuary, and contributions may be made by one of the following
methods:
(1) Regular monthly payments during active military
service.
(2) A lump sum payment within 90 days of certification
of the amount due.
(3) Salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by the members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service as
the board in its sole discretion decides to allow. The board
may limit salary deduction amortization plans to such terms
as the board in its sole discretion determines. In the case
of an eligible State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees'
Retirement Board, which shall certify and transfer to the
20120HB2454PN3735 - 31 -
board the amounts paid.
(d) Other creditable nonschool service and noncreditable
school service.--
(1) Contributions on account of Class T-C credit for
creditable nonschool service other than military service
shall be determined by applying the member's basic
contribution rate plus the normal contribution rate as
provided in section 8328 at the time of the member's entry
into school service subsequent to such creditable nonschool
service to his total compensation received during the first
year of subsequent credited school service and multiplying
the product by the number of years and fractional part of a
year of creditable nonschool service being purchased together
with statutory interest during all periods of subsequent
school service as an active or inactive member or State
service as an active member or inactive member on leave
without pay to the date of purchase, except that in the case
of purchase of credit for creditable nonschool service as set
forth in section 8304(b)(5) (relating to creditable nonschool
service) the member shall pay only the employee's share
unless otherwise provided by law. Upon certification of the
amount due, payment may be made in a lump sum within 90 days
or in the case of an active member or an eligible State
employee who is an active member of the State Employees'
Retirement System it may be amortized with statutory interest
through salary deductions to the system in amounts agreed
upon by the member and the board. The salary deduction
amortization plans agreed to by the members and the board may
include a deferral of payment amounts and statutory interest
until the termination of school service or State service or
20120HB2454PN3735 - 32 -
becoming a participant and combined service employee as the
board in its sole discretion decides to allow. The board may
limit salary deduction amortization plans to such terms as
the board in its sole discretion determines. In the case of
an eligible State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees'
Retirement Board, which shall certify and transfer to the
board the amounts paid.
(2) Contributions on account of Class T-E or Class T-F
credit for creditable nonschool service other than military
service shall be the present value of the full actuarial cost
of the increase in the projected superannuation annuity
caused by the additional service credited on account of the
purchase. Upon certification of the amount due, payment may
be made in a lump sum within 90 days or, in the case of an
active member or an eligible State employee who is an active
member of the State Employees' Retirement System, it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
the members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service as the board in its sole
discretion decides to allow. The board may limit salary
deduction amortization plans to the terms as the board in its
sole discretion determines. In the case of an eligible State
employee who is an active member of the State Employees'
Retirement System, the agreed upon salary deductions shall be
remitted to the State Employees' Retirement Board, which
20120HB2454PN3735 - 33 -
shall certify and transfer to the board the amounts paid.
(3) Contributions on account of Class T-E or Class T-F
credit for noncreditable school service other than military
service shall be the present value of the full actuarial cost
of the increase in the projected superannuation annuity
caused by the additional service credited on account of the
purchase. Upon certification of the amount due, payment may
be made in a lump sum within 90 days or, in the case of an
active member or an eligible State employee who is an active
member of the State Employees' Retirement System, it may be
amortized with statutory interest through salary deductions
to the system in amounts agreed upon by the member and the
board. The salary deduction amortization plans agreed to by
the members and the board may include a deferral of payment
amounts and statutory interest until the termination of
school service or State service or becoming a participant and
combined service employee as the board in its sole discretion
decides to allow. The board may limit salary deduction
amortization plans to the terms as the board in its sole
discretion determines. In the case of an eligible State
employee who is an active member of the State Employees'
Retirement System, the agreed upon salary deductions shall be
remitted to the State Employees' Retirement Board, which
shall certify and transfer to the board the amounts paid.
* * *
§ 8325. Incomplete payments.
In the event that a member terminates school service or
begins service as a participant without concurrently being an
active member of the system or a multiple service member who is
an active member of the State Employees' Retirement System
20120HB2454PN3735 - 34 -
terminates State service before any agreed upon payments or
return of benefits on account of returning to school service or
entering State service and electing multiple service have been
completed, the member or multiple service member who is an
active member of the State Employees' Retirement System shall
have the right to pay within 30 days of termination of school
service or State service or becoming a participant the balance
due, including interest, in a lump sum, and the annuity shall be
calculated including full credit for the previous school
service, creditable nonschool service, or full-coverage
membership. In the event a member does not pay the balance due
within 30 days of termination of school service or becoming a
participant or in the event a member dies in school service or
within 30 days of termination of school service or in the case
of a multiple service member who is an active member of the
State Employees' Retirement System does not pay the balance due
within 30 days of termination of State service or dies in State
service or within 30 days of termination of State service or
becoming a participant and before the agreed upon payments have
been completed, the present value of the benefit otherwise
payable shall be reduced by the balance due, including interest,
and the benefit payable shall be calculated as the actuarial
equivalent of such reduced present value.
§ 8325.1. Annual compensation limit under IRC § 401(a)(17).
(a) General rule.--In addition to other applicable
limitations set forth in this part, and notwithstanding any
provision of this part to the contrary, the annual compensation
of each noneligible member and each participant taken into
account for benefit purposes under this subchapter shall not
exceed the limitation under IRC § 401(a)(17). On and after July
20120HB2454PN3735 - 35 -
1, 1996, any reference in this part to the limitation under IRC
§ 401(a)(17) shall mean the Omnibus Budget Reconciliation Act of
1993 (OBRA '93) (Public Law 103-66, 107 Stat. 312) annual
compensation limit set forth in this subsection. The OBRA '93
annual compensation limit is $150,000, as adjusted by the
commissioner for increases in the cost of living in accordance
with IRC § 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any determination period
which is a period, not exceeding 12 months, over which
compensation is determined, beginning in such calendar year. If
a determination period consists of fewer than 12 months, the
OBRA '93 compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period and the denominator of which is 12.
* * *
§ 8326. Contributions by the Commonwealth.
* * *
(c) Contributions after June 30, 1995, and before July 1,
2015.--
(1) The Commonwealth shall make contributions into the
fund on behalf of all active members, including members on
activated military service leave, for service performed after
June 30, 1995, and before July 1, 2015, in the following
manner:
(i) For members who are employees of employers that
are school entities, no Commonwealth contributions shall
be made.
(ii) For members who are employees of employers that
are not school entities, the amount computed under
subsection (a).
20120HB2454PN3735 - 36 -
(2) The Commonwealth shall make contributions into the
fund on behalf of annuitants for all amounts due to the fund
after June 30, 1995, and before July 1, 2015, including, but
not limited to, amounts due pursuant to section 8328(d) and
(f), in the following manner:
(i) For members who are employees of employers who
are school entities, no Commonwealth contributions shall
be made.
(ii) For members who are employees of employers who
are not school entities, the amount computed under
subsection (b).
Section 11. Section 8327 of Title 24 is amended to read:
§ 8327. Payments by employers.
(a) General rule.--[Each]
(1) For payments prior to June 30, 2015, 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] The Pennsylvania State
University, shall make payments to the fund each quarter in
an amount equal to one-half the sum of the percentages, as
determined under section 8328 (relating to actuarial cost
method), applied to the total compensation during the pay
periods in the preceding quarter of all its employees who
were members of the system during such period, including
members on activated military service leave. In the event a
member on activated military service leave does not return to
service for the necessary time or receives an undesirable,
bad conduct or dishonorable discharge or does not elect to
20120HB2454PN3735 - 37 -
receive credit for activated military service under section
8302(b.1)(3) (relating to credited school service), the
contributions made by the employer on behalf of such member
shall be returned with valuation interest upon application by
the employer.
(2) For payments after June 30, 2015, 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 each quarter in an amount
equal to one-half 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 its employees
who were members of the system during such period, including
members on activated military service leave, plus the accrued
liability contribution rate applied to the total compensation
of all active participants in the plan. In the event a member
on activated military service 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 contributions made by the employer on
behalf of such member shall be returned with valuation
interest upon application by the employer.
(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
20120HB2454PN3735 - 38 -
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 and pickup
contributions which an employer is required to pay to the
fund, 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.
(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 basic education of the
chartering school district of a charter school and public
school employees' retirement contributions amounts equal to
the employer and pickup contributions which 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
20120HB2454PN3735 - 39 -
Public School Code of 1949.
(c) Payments by employers after June 30, 1995.--After June
30, 1995, and before July 1, 2015, 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 each quarter 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 or active participants of the
plan during such period, including members on activated
military service leave. In the event a member on activated
military service 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
20120HB2454PN3735 - 40 -
noneligible member 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 a noneligible
member or participant on the basis of compensation which 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.
(d) Payments by employers after June 30, 2015.--After June
30, 2015, 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 trust each
quarter 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, plus the accrued
liability contribution rate applied to the total compensation
of all active participants in the plan. In the event a member
on activated military service 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
20120HB2454PN3735 - 41 -
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 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 a noneligible
member or participant on the basis of compensation which 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.
(e) Deemed agreed to.--The agreement of an employer listed
in the definition of school employee under section 8102
(relating to definitions) or any other law to make contributions
to the fund or to enroll its employees as members in the system
shall be deemed to be an agreement to make contributions to the
trust or enroll its employees in the plan.
(f) Contributions.--The employer employing a participant
shall pick up the required mandatory participant contributions
by a reduction in the compensation of the employee.
Section 12. Sections 8328 (b), (c), (d), (e), (g) and (h),
8330 and 8341 of Title 24 are amended to read:
§ 8328. Actuarial cost method.
* * *
20120HB2454PN3735 - 42 -
(b) Normal contribution rate.--[The]
(1) For the fiscal year ending June 30, 2015, the normal
contribution rate shall be determined after each actuarial
valuation. Until all accrued liability contributions have
been completed, the normal contribution rate shall be
determined, on the basis of an annual interest rate and such
mortality and other tables as shall be adopted by the board
in accordance with generally accepted actuarial principles,
as a level percentage of the compensation of the average new
active member, which percentage, if contributed on the basis
of his prospective compensation through the entire period of
active school service, would be sufficient to fund the
liability for any prospective benefit payable to him, in
excess of that portion funded by his prospective member
contributions, excluding the shared-risk contributions.
(2) For fiscal years beginning on or after July 1, 2015,
the normal contribution rate shall be determined after each
actuarial valuation. Until all accrued liability
contributions have been completed, the normal contribution
rate shall be determined, on the basis of an annual interest
rate and such mortality and other tables as shall be adopted
by the board in accordance with generally accepted actuarial
principles, as a level percentage of the compensation of all
active members, which percentage, if contributed on the basis
of the member's prospective compensation through the entire
period of active school service, would be sufficient to fund
the liability for any prospective benefit payable to him, in
excess of that portion funded by his prospective member
contributions, excluding the shared-risk contributions.
(c) Accrued liability contribution rate.--
20120HB2454PN3735 - 43 -
(1) For the fiscal years beginning July 1, 2002, and
ending June 30, 2011, the accrued liability contribution rate
shall be computed as the rate of total compensation of all
active members which shall be certified by the actuary as
sufficient to fund over a period of ten years from July 1,
2002, the present value of the liabilities for all
prospective benefits of active members, except for the
supplemental benefits provided in sections 8348 (relating to
supplemental annuities), 8348.1 (relating to additional
supplemental annuities), 8348.2 (relating to further
additional supplemental annuities), 8348.3 (relating to
supplemental annuities commencing 1994), 8348.4 (relating to
special supplemental postretirement adjustment), 8348.5
(relating to supplemental annuities commencing 1998), 8348.6
(relating to supplemental annuities commencing 2002) and
8348.7 (relating to supplemental annuities commencing 2003),
in excess of the total assets in the fund (calculated by
recognizing the actuarially expected investment return
immediately and recognizing the difference between the actual
investment return and the actuarially expected investment
return over a five-year period), excluding the balance in the
annuity reserve account, and of the present value of normal
contributions and of member contributions payable with
respect to all active members on July 1, 2002, during the
remainder of their active service.
(2) For the fiscal years beginning July 1, 2003, and
ending June 30, 2011, the amount of each annual accrued
liability contribution shall be equal to the amount of such
contribution for the fiscal year, beginning July 1, 2002,
except that, if the accrued liability is increased by
20120HB2454PN3735 - 44 -
legislation enacted subsequent to June 30, 2002, but before
July 1, 2003, such additional liability shall be funded over
a period of ten years from the first day of July, coincident
with or next following the effective date of the increase.
The amount of each annual accrued liability contribution for
such additional legislative liabilities shall be equal to the
amount of such contribution for the first annual payment.
(3) Notwithstanding any other provision of law,
beginning July 1, 2004, and ending June 30, 2011, the
outstanding balance of the increase in accrued liability due
to the change in benefits enacted in 2001 and the outstanding
balance of the net actuarial loss incurred in fiscal year
2000-2001 shall be amortized in equal dollar annual
contributions over a period that ends 30 years after July 1,
2002, and the outstanding balance of the net actuarial loss
incurred in fiscal year 2001-2002 shall be amortized in equal
dollar annual contributions over a period that ends 30 years
after July 1, 2003. For fiscal years beginning on or after
July 1, 2004, if the accrued liability is increased by
legislation enacted subsequent to June 30, 2003, such
additional liability shall be funded in equal dollar annual
contributions over a period of ten years from the first day
of July coincident with or next following the effective date
of the increase.
(4) For the fiscal year beginning July 1, 2011, and
ending June 30, 2015, the accrued liability contribution rate
shall be computed as the rate of total compensation of all
active members which shall be certified by the actuary as
sufficient to fund as a level percentage of compensation over
a period of 24 years from July 1, 2011, the present value of
20120HB2454PN3735 - 45 -
the liabilities for all prospective benefits calculated as of
June 30, 2010, including the supplemental benefits as
provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4,
8348.5, 8348.6 and 8348.7, in excess of the actuarially
calculated assets in the fund (calculated recognizing all
realized and unrealized investment gains and losses each year
in level annual installments over a ten-year period). In the
event that the accrued liability is increased by legislation
enacted subsequent to June 30, 2010, but before July 1, 2015,
such additional liability shall be funded as a level
percentage of compensation over a period of ten years from
the July 1 second succeeding the date such legislation is
enacted.
(5) For the fiscal year beginning July 1, 2015, the
accrued liability contribution rate shall be computed as the
rate of total compensation of all active members and active
participants which shall be certified by the actuary as
sufficient to fund as a level percentage of compensation over
a closed period of 30 years from July 1, 2015, the present
value of the liabilities for all prospective benefits of
members of the system calculated as of June 30, 2014,
including the supplemental benefits as provided in sections
8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and
8348.7, in excess of the actuarially calculated assets in the
fund (calculated recognizing all realized and unrealized
investment gains and losses each year in level annual
installments over a ten-year period). In no event, however,
will the amortization period be less than the average
remaining service lives of the active members. In the event
that the accrued liability is increased by legislation
20120HB2454PN3735 - 46 -
enacted subsequent to June 30, 2015, such additional
liability shall be funded in equal dollar installments as a
percentage of compensation of all active members and active
participants over a period of ten years from the July 1
second succeeding the date such legislation is enacted but in
no event greater than the remaining period over which the
accrued liability contribution rate is being determined.
(6) For purposes of determining the accrued liability
contribution rate in subsection (c) and the experience
adjustment factor in subsection (e) for The Pennsylvania
State University, the State System of Higher Education,
State-owned educational institutions and community colleges,
the term "compensation of all active members and active
participants" shall include an additional amount equal to the
difference between:
(i) the actual compensation of all active members
and active participants of The Pennsylvania State
University, the State System of Higher Education, State-
owned educational institutions and community colleges;
and,
(ii) the compensation of all active members, active
participants, active members of the State Employees'
Retirement System, active participants of the State
Employees' Defined Contribution Plan and employees who
are members or participants of an independent retirement
program approved by the employer of The Pennsylvania
State University, the State System of Higher Education,
State-owned educational institutions and community
collective colleges multiplied by a fraction equal to the
amount determined under subparagraph (i) as part of the
20120HB2454PN3735 - 47 -
June 30, 2014, actuarial valuation divided by the amount
of compensation of all active members, active
participants, active members of the State Employees'
Retirement System, active participants of the State
Employees' Defined Contribution Plan and employees who
are members or participants of an independent retirement
program approved by the employer determined as part of
the June 30, 2014, actuarial valuation.
(7) For the fiscal year beginning July 1, 2015, and all
subsequent fiscal years, The Pennsylvania State University,
the State System of Higher Education, each State-owned
educational institution and each community college shall make
such additional actuarial accrued liability contributions as
shall be certified by the board. The additional actuarial
accrued liability contributions shall be the product of:
(i) the amount by which the final contribution rate
exceeds the employer normal contribution rate determined
under subsection (b)(1); multiplied by,
(ii) and the difference between:
(A) the actual compensation of all active
members and active participants of each such
educational institution; and
(B) the compensation of all active members,
active participants, active members of the State
Employees' Retirement System, active participants of
the State Employees' Defined Contribution Plan and
employees who are members or participants of an
independent retirement program approved by the
employer of each such educational institution
multiplied by a fraction equal to the amount
20120HB2454PN3735 - 48 -
determined under clause (A) as part of the June 30,
2014, actuarial valuation divided by the amount of
compensation of all active members, active
participants, active members of the State Employees'
Retirement System, active participants of the State
Employees' Defined Contribution Plan and employees
who are members or participants of an independent
retirement program approved by the employer of each
such educational institution determined as part of
the June 30, 2014, actuarial valuation.
(d) Supplemental annuity contribution rate.--
(1) For the period of July 1, 2002, to June 30, 2011,
contributions from the Commonwealth and other employers
required to provide for the payment of the supplemental
annuities provided for in sections 8348, 8348.1, 8348.2,
8348.4 and 8348.5 shall be paid over a period of ten years
from July 1, 2002. The funding for the supplemental annuities
commencing 2002 provided for in section 8348.6 shall be as
provided in section 8348.6(f). The funding for the
supplemental annuities commencing 2003 provided for in
section 8348.7 shall be as provided in section 8348.7(f). The
amount of each annual supplemental annuities contribution
shall be equal to the amount of such contribution for the
fiscal year beginning July 1, 2002.
(2) For fiscal years beginning July 1, 2011, and ending
June 30, 2015, contributions from the Commonwealth and other
employers whose employees are members of the system required
to provide for the payment of supplemental annuities as
provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4,
8348.5, 8348.6 and 8348.7 shall be paid as part of the
20120HB2454PN3735 - 49 -
accrued liability contribution rate as provided for in
subsection (c)(4), and there shall not be a separate
supplemental annuity contribution rate attributable to those
supplemental annuities. In the event that supplemental
annuities are increased by legislation enacted subsequent to
June 30, 2010, [the] but before July 1, 2015, such additional
liability for the increase in benefits shall be funded as a
level percentage of compensation over a period of ten years
from the July 1 second succeeding the date such legislation
is enacted.
(3) For fiscal years beginning July 1, 2015,
contributions from employers whose employees are members of
the system required to provide for the payment of
supplemental annuities as provided in sections 8348, 8348.1,
8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be
paid as part of the accrued liability contribution rate as
provided for in subsection (c)(5), and there shall not be a
separate supplemental annuity contribution rate attributable
to those supplemental annuities. In the event that
supplemental annuities are increased by legislation enacted
subsequent to June 30, 2015, the additional liability for the
increase in benefits shall be funded in equal dollar
installments as a percentage of compensation of all active
members and active participants over a period of ten years
from the July 1 second succeeding the date such legislation
is enacted but in no event greater than the remaining period
over which the accrued liability contribution rate as
described in subsection (c)(5) is being determined.
(e) Experience adjustment factor.--
(1) For each year after the establishment of the accrued
20120HB2454PN3735 - 50 -
liability contribution rate for the fiscal year beginning
July 1, 2011, and ending June 30, 2015, any increase or
decrease in the unfunded accrued liability, excluding the
gains or losses on the assets of the health insurance
account, due to actual experience differing from assumed
experience, changes in actuarial assumptions, changes in
contributions caused by the final contribution rate being
different from the actuarially required contribution rate,
active members making shared-risk contributions or changes in
the terms and conditions of the benefits provided by the
system by judicial, administrative or other processes other
than legislation, including, but not limited to,
reinterpretation of the provisions of this part, recognized
by the actuarial valuations on June 30, 2011, and June 30,
2012, shall be amortized as a level percentage of
compensation over a period of 24 years beginning with the
July 1 second succeeding the actuarial valuation determining
said increases or decreases.
(2) (Reserved).
(3) For each year after the establishment of the accrued
liability contribution rate for the fiscal year beginning
July 1, 2015, any increase or decrease in the unfunded
accrued liability, excluding the gains or losses on the
assets of the health insurance account, due to actual
experience differing from assumed experience, changes in
actuarial assumptions, changes in contributions caused by the
final contribution rate being different from the actuarially
required contribution rate, active members making shared-risk
contributions or changes in the terms and conditions of the
benefits provided by the system by judicial, administrative
20120HB2454PN3735 - 51 -
or other processes other than legislation, including, but not
limited to, reinterpretation of the provisions of this part,
shall be funded from the July 1 second succeeding the
actuarial valuation determining such increases or decreases
as a level percentage of compensation over the same remaining
period over which the accrued liability contribution rate as
described in subsection (c)(5) is being determined.
* * *
(g) Temporary application of collared contribution rate.--
(1) The collared contribution rate for each year shall be
determined by comparing the actuarially required contribution
rate, calculated without regard for the costs added by
legislation, to the prior year's final contribution rate.
(2) If, for any of the fiscal years beginning July 1, 2011,
July 1, 2012, [and] or on or after July 1, 2013, the actuarially
required contribution rate, calculated without regard for the
costs added by legislation, is more than 3%, 3.5% and 4.5%,
respectively, of the total compensation of all active members
greater than the prior year's final contribution rate, then the
collared contribution rate shall be applied and be equal to the
prior year's final contribution rate increased by 3%, 3.5% and
4.5%, respectively, of total compensation of all active members.
Otherwise, and for all other fiscal years, the collared
contribution rate shall not be applicable. In no case shall the
collared contribution rate be less than 4% of the total
compensation of all active members.
(h) Final contribution rate.--
(1) For the fiscal year beginning July 1, 2010, the
final contribution rate is 5% of the total compensation of
all active members. For each subsequent fiscal year for which
20120HB2454PN3735 - 52 -
the collared contribution rate is applicable, the final
contribution rate shall be the collared contribution rate as
calculated in subsection (g), plus the costs added by
legislation.
(2) For all other fiscal years ending before June 30,
2015, the final contribution rate shall be the actuarially
required contribution rate, provided that the final
contribution rate shall not be less than the normal
contribution rate as provided in subsection (b).
* * *
§ 8330. Appropriations by the Commonwealth.
(a) Annual submission of budget.--The board shall prepare
and through the Governor submit annually to the General Assembly
an itemized budget consisting of the amounts necessary to be
appropriated by the Commonwealth out of the General Fund
required to meet the separate obligations to both the fund and
the trust accruing during the fiscal period beginning July 1 of
the following year.
(b) Appropriation and payment.--The General Assembly shall
make an appropriation sufficient to provide for the separate
obligations of the Commonwealth to both the fund and the trust.
Such amount shall be paid by the State Treasurer through the
Department of Revenue into the fund or the trust as the case may
be within 30 days of receipt of the requisition presented each
quarter by the board.
§ 8341. Return of accumulated deductions.
Any member upon termination of service may, in lieu of all
benefits payable from the system under this chapter to which he
may be entitled, elect to receive his accumulated deductions.
Section 13. Section 8342 of Title 24 is amended by adding a
20120HB2454PN3735 - 53 -
subsection to read:
§ 8342. Maximum single life annuity.
* * *
(d) Coordination of benefits.--The determination and payment
of the maximum single life annuity under this section shall be
in addition to any payments a combined service employee may be
entitled to receive, has received or is receiving as a result of
being a participant in the plan.
Section 14. Section 8344(b) of Title 24 is amended and the
section is amended by adding a subsection to read:
§ 8344. Disability annuities.
* * *
(b) Reduction on account of earned income.--Payments on
account of disability shall be reduced by that amount by which
the earned income of the annuitant, as reported in accordance
with section 8508(b) (relating to rights and duties of
annuitants) for the preceding year together with the disability
annuity payments for the year, exceeds the greater of $5,000 or
the last year's salary of the annuitant as a [school employee]
member of the system, provided that the annuitant shall not
receive less than his member's annuity or the amount to which he
may be entitled under section 8342, whichever is greater.
* * *
(f) Coordination of benefits.--The determination and payment
of a disability annuity under this section shall be in addition
to any payments a combined service employee may be entitled to
receive, has received or is receiving as a result of being a
participant in the plan.
Section 15. Sections 8346, 8348.1(f), 8348.2(f), 8348.3(f),
8348.5(f), 8348.6(f), 8348.7(f) and 8349(a) and (b) of Title 24
20120HB2454PN3735 - 54 -
are amended to read:
§ 8346. Termination of annuities.
(a) General rule.--If an annuitant returns to school service
or enters or has entered State service and elects multiple
service membership, any annuity payable to him under this part
shall cease effective upon the date of his return to school
service or entering State service without regard to whether he
is a mandatory, optional or prohibited member of the system or
participant in the plan or, if a multiple service member,
whether he is a mandatory, optional or prohibited member or
participant of the State Employees' Retirement System or State
Employees' Defined Contribution Plan and in the case of an
annuity other than a disability annuity the present value of
such annuity, adjusted for full coverage in the case of a joint
coverage member who makes the appropriate back contributions for
full coverage, shall be frozen as of the date such annuity
ceases. An annuitant who is credited with an additional 10% of
membership service as provided in section 8302(b.2) (relating to
credited school service) and who returns to school service,
except as provided in subsection (b), shall forfeit such
credited service and shall have his frozen present value
adjusted as if his 10% retirement incentive had not been applied
to his account. In the event that the cost-of-living increase
enacted December 18, 1979, occurred during the period of such
State or school employment, the frozen present value shall be
increased, on or after the member attains superannuation age, by
the percent applicable had he not returned to service.
(a.1) Return of benefits.--In the event an annuitant whose
annuity ceases pursuant to this section receives any annuity
payment, including a lump sum payment pursuant to section 8345
20120HB2454PN3735 - 55 -
(relating to member's options) on or after the date of his
return to school service or entering State service, the
annuitant shall return to the board the amount so received plus
statutory interest. The amount payable shall be certified in
each case by the board in accordance with methods approved by
the actuary and shall be paid in a lump sum within 90 days or in
the case of an active member or a State employee who is an
active member of the State Employees' Retirement System may be
amortized with statutory interest through salary deductions to
the system in amounts agreed upon by the member and the board.
The salary deduction amortization plans agreed to by the member
and the board may include a deferral of payment amounts and
statutory interest until the termination of school service or
State service as the board in its sole discretion decides to
allow. The board may limit salary deduction amortization plans
to such terms as the board in its sole discretion determines. In
the case of a State employee who is an active member of the
State Employees' Retirement System, the agreed upon salary
deductions shall be remitted to the State Employees' Retirement
Board, which shall certify and transfer to the board the amounts
paid.
(b) Return to school service during emergency.--When, in the
judgment of the employer, an emergency creates an increase in
the work load such that there is serious impairment of service
to the public or in the event of a shortage of appropriate
subject certified teachers or other personnel, an annuitant or
participant receiving distributions may be returned to school
service for a period not to extend beyond the school year during
which the emergency or shortage occurs, without loss of his
annuity or distributions. The annuitant shall not be entitled to
20120HB2454PN3735 - 56 -
earn any credited service, and no contributions may be made by
the annuitant, the employer or the Commonwealth on account of
such employment. Such service shall not be subject to member
contributions or be eligible for qualification as creditable
school service or for participation in the plan, mandatory
pickup participant contributions or employer defined
contributions.
(b.1) Return to school service in an extracurricular
position.--
(1) An annuitant or participant receiving distributions
may be employed under separate contract by a public school or
charter school in an extracurricular position performed
primarily outside regular instructional hours and not part of
mandated curriculum without loss of annuity. Neither the
annuitant, the participant receiving distributions, nor the
employer shall make contributions to the member's savings
account, the individual investment account or State
accumulation account respectively for such service. Further,
such contract shall contain a waiver whereby the annuitant
waives any potential retirement benefits that could arise
from the contract and releases the employer and the board
from any liability for such benefits. Such service shall not
be subject to member or participant contributions nor be
eligible for qualification as creditable school service or
for participation in the plan, mandatory pickup participant
contributions or employer defined contributions.
(2) Nothing in this subsection shall be construed to
abridge or limit any rights provided under a collective
bargaining agreement or any rights provided under the act of
July 23, 1970 (P.L.563, No.195), known as the Public Employe
20120HB2454PN3735 - 57 -
Relations Act.
(3) For purposes of this subsection, the term
"extracurricular position" means a contract position filled
by an annuitant that is separate from the established
academic course structure, including the position of athletic
director.
(c) Subsequent discontinuance of service.--Upon subsequent
discontinuance of service, such [member] terminating school
employee other than a former annuitant who had the effect of his
frozen present value eliminated in accordance with subsection
(d) or a former disability annuitant shall be entitled to an
annuity which is actuarially equivalent to the sum of the
present value as determined under subsection (a) [and] to which
shall be added, if the service after reemployment was as a
member of the system, the present value of a maximum single life
annuity based on years of service credited subsequent to reentry
in the system and his final average salary computed by reference
to his compensation as a member of the system or as a member of
the State Employees' Retirement System during his entire period
of school and State service.
(d) Elimination of the effect of frozen present value.--
(1) An annuitant who returns to school service as an
active member of the system and earns three eligibility
points by performing credited school service following the
most recent period of receipt of an annuity under this part,
or an annuitant who enters State service other than a
participant in the State Employees' Defined Contribution Plan
and:
(i) is a multiple service member; or
(ii) who elects multiple service membership, and
20120HB2454PN3735 - 58 -
earns three eligibility points by performing credited
State service or credited school service following the
most recent period of receipt of an annuity under this
part, and who had the present value of his annuity frozen
in accordance with subsection (a), shall qualify to have
the effect of the frozen present value resulting from all
previous periods of retirement eliminated, provided that
all payments under Option 4 and annuity payments payable
during previous periods of retirement plus interest as
set forth in paragraph (3) shall be returned to the fund
in the form of an actuarial adjustment to his subsequent
benefits or in such form as the board may otherwise
direct.
(2) Upon subsequent discontinuance of service and the
filing of an application for an annuity, a former annuitant
who qualifies to have the effect of a frozen present value
eliminated under this subsection shall be entitled to receive
the higher of either:
(i) an annuity (prior to optional modification)
calculated as if the freezing of the former annuitant's
account pursuant to subsection (a) had not occurred,
adjusted by crediting Class T-C school service as Class
T-D service as provided for in section 8305(c) (relating
to classes of service) and further adjusted according to
paragraph (3), provided that a former annuitant of the
system or a former annuitant of the State Employees'
Retirement System who retired under a provision of law
granting additional service credit if termination of
school or State service or retirement occurred during a
specific period of time shall not be permitted to retain
20120HB2454PN3735 - 59 -
the additional service credit under the prior law when
the annuity is computed for his most recent retirement;
or
(ii) an annuity (prior to optional modification)
calculated as if the former annuitant did not qualify to
have the effect on the frozen present value eliminated,
unless the former annuitant notifies the board in writing by
the later of the date the application for annuity is filed or
the effective date of retirement that the former annuitant
wishes to receive the lower annuity.
(3) In addition to any other adjustment to the present
value of the maximum single life annuity that a member may be
entitled to receive that occurs as a result of any other
provision of law, the present value of the maximum single
life annuity shall be reduced by all amounts paid or payable
to him during all previous periods of retirement plus
interest on these amounts until the date of subsequent
retirement. The interest for each year shall be calculated
based upon the annual interest rate adopted for that school
year by the board for the calculation of the normal
contribution rate pursuant to section 8328(b) (relating to
actuarial cost method).
§ 8348.1. Additional supplemental annuities.
* * *
(f) Funding.--The actuary shall annually certify the amount
of Commonwealth appropriations for the next fiscal year needed
to fund, over a period of ten years from July 1, 2002, the
additional monthly supplemental annuity provided for in this
section, which amounts shall be paid during the period beginning
July 1, 2002, and ending June 30, 2011. For fiscal years
20120HB2454PN3735 - 60 -
beginning on or after July 1, 2011, the additional liability
provided in this section shall be funded as part of the
actuarial accrued liability as provided in section 8328
(relating to actuarial cost method) for fiscal years ending
before July 1, 2015, and in this section.
* * *
§ 8348.2. Further additional supplemental annuities.
* * *
(f) Funding.--The actuary shall annually estimate the amount
of Commonwealth appropriations for the next fiscal year needed
to fund, over a period of ten years from July 1, 2002, the
additional monthly supplemental annuity provided for in this
section, which amounts shall be paid during the period beginning
July 1, 2002, and ending June 30, 2011. For fiscal years
beginning on or after July 1, 2011, the additional liability
provided in this section shall be funded as part of the
actuarial accrued liability as provided in [section] sections
8328 (relating to actuarial cost method) for fiscal years ending
before July 1, 2015, and 8348.1.
* * *
§ 8348.3. Supplemental annuities commencing 1994.
* * *
(f) Funding.--
(1) For the period beginning July 1, 2002, and ending
June 30, 2011, the additional liability for the increase in
benefits provided in this section shall be funded in equal
dollar annual installments over a period of ten years
beginning July 1, 2002.
(2) For fiscal years beginning on or after July 1, 2011,
the additional liability provided in this section shall be
20120HB2454PN3735 - 61 -
funded as part of the actuarial accrued liability as provided
in [section] sections 8328 (relating to actuarial cost
method) for fiscal years ending before July 1, 2015, and
8348.1.
* * *
§ 8348.5. Supplemental annuities commencing 1998.
* * *
(f) Funding.--
(1) For the period beginning July 1, 2002, and ending
June 30, 2011, the additional liability for the increase in
benefits provided in this section shall be funded in equal
dollar annual installments over a period of ten years
beginning July 1, 2002.
(2) For fiscal years beginning on or after July 1, 2011,
the additional liability provided in this section shall be
funded as part of the actuarial accrued liability as provided
in [section] sections 8328 (relating to actuarial cost
method) for fiscal years ending before July 1, 2015, and
8348.1.
(3) Notwithstanding the provisions of section 212 of the
act of April 22, 1998 (P.L.1341, No.6A), known as the General
Appropriation Act of 1998, regarding payment for cost-of-
living increases for annuitants, payments for cost-of-living
increases for annuitants shall be made under section 8535
(relating to payments to school entities by Commonwealth).
* * *
§ 8348.6. Supplemental annuities commencing 2002.
* * *
(f) Funding.--
(1) For the period beginning July 1, 2002, and ending
20120HB2454PN3735 - 62 -
June 30, 2011, the additional liability for the increase in
benefits provided in this section shall be funded in equal
dollar annual installments over a period of ten years
beginning July 1, 2003.
(2) For fiscal years beginning on or after July 1, 2011,
the additional liability provided in this section shall be
funded as part of the actuarial accrued liability as provided
in [section] sections 8328 (relating to actuarial cost
method) for fiscal years ending before July 1, 2015, and
8348.1.
* * *
§ 8348.7. Supplemental annuities commencing 2003.
* * *
(f) Funding.--
(1) For the period beginning July 1, 2002, and ending
June 30, 2011, the additional liability for the increase in
benefits provided in this section shall be funded in equal
dollar annual installments over a period of ten years
beginning July 1, 2004.
(2) For fiscal years beginning on or after July 1, 2011,
the additional liability provided in this section shall be
funded as part of the actuarial accrued liability as provided
in [section] sections 8328 (relating to actuarial cost
method) for fiscal years ending before July 1, 2015, and
8348.1.
* * *
§ 8349. Payment of benefits from the system.
(a) Annuities.--Any annuity granted under the provisions of
this part and paid from the fund shall be paid in equal monthly
installments.
20120HB2454PN3735 - 63 -
(b) Death benefits.--If the amount of a death benefit
payable from the fund to a beneficiary of a member under section
8347 (relating to death benefits) or under the provisions of
Option 1 of section 8345(a)(1) (relating to member's options) is
$10,000 or more, such beneficiary may elect to receive payment
according to one of the following options:
(1) A lump sum payment.
(2) An annuity actuarially equivalent to the amount
payable.
(3) A lump sum payment and an annuity such that the
annuity is actuarially equivalent to the amount payable less
the lump sum payment specified by the beneficiary.
* * *
Section 16. Title 24 is amended by adding a chapter to read:
CHAPTER 84
SCHOOL EMPLOYEES' DEFINED CONTRIBUTION PLAN
Sec.
8401. Establishment.
8402. Plan document.
8403. Individual investment accounts.
8404. Participant contributions.
8405. Mandatory participant pickup contributions.
8406. Employer defined contributions.
8407. Eligibility for benefits.
8408. Death benefits.
8409. Vesting.
8410. Termination of distributions.
8411. Agreements with financial institutions and other
organizations.
8412. Powers and duties of board.
20120HB2454PN3735 - 64 -
8413. Responsibility for investment loss.
8414. Investments based on participants' investment allocation
choices.
8415. Expenses.
8416. Election by members to be participants.
8417. Required distributions.
§ 8401. Establishment.
(a) School Employees' Defined Contribution Plan.---The plan
is established in accordance with this part. The board shall
administer and manage the plan, which shall be a defined
contribution plan exclusively for the benefit of those school
employees who participate in the plan and their beneficiaries
within the meaning of and in conformity with IRC § 401(a). The
board shall determine the terms and provisions of the plan not
inconsistent with this part, the Internal Revenue Code of 1986
and other applicable law and shall provide for the plan's
administration.
(b) School Employees Defined Contribution Trust.--The trust
is established as part of the plan in accordance with this part.
The trust shall be comprised of the individual investment
accounts and all assets and moneys in those accounts. The
members of the board shall be the trustees of the trust
established under this section, which shall be administered
exclusively for the benefit of those school employees who
participate in the plan and their beneficiaries within the
meaning of and conformity with IRC § 401(a). The board shall
determine the terms and provisions of the trust not inconsistent
with this part, the Internal Revenue Code of 1986 and other
applicable law and shall provide for the investment and
administration of the trust.
20120HB2454PN3735 - 65 -
(c) Assets held in trust.--All assets and income in the plan
that have been or shall be withheld or contributed by the
participants, the Commonwealth and employers in accordance with
this part shall be held in trust in any funding vehicle
permitted by the applicable provisions of IRC for the exclusive
benefit of the plan's participants and their beneficiaries until
such time as the funds are distributed to the participants or
their beneficiaries in accordance with the terms of the plan
document. The assets of the plan held in trust for the exclusive
benefit of the participants and beneficiaries may be used for
the payment of the fees, costs and expenses related to the
administration and investment of the plan and the trust.
(d) Name for transacting business.--By the name of "The
School Employees' Defined Contribution Plan," all of the
business of the plan shall be transacted, the trust invested,
all requisitions for money drawn and payments made, and all of
its cash and securities and other property shall be held, except
that, any other law to the contrary notwithstanding, the board
may establish a nominee registration procedure for the purpose
of registering securities in order to facilitate the purchase,
sale or other disposition of securities pursuant to the
provisions of this part.
§ 8402. Plan document.
The board shall set forth the terms and provisions of the
plan and trust that it determines in a plan document and trust
declaration that shall be published in the Pennsylvania
Bulletin. The creation of the plan document and trust
declaration and the establishment of the terms and provisions of
the plan and the trust need not be promulgated by regulation or
formal rulemaking and shall not be subject to the act of July
20120HB2454PN3735 - 66 -
31, 1968 (P.L.769, No.240), referred to as the Commonwealth
Documents Law. A reference in this part or other law to the plan
shall include the plan document unless the context clearly
indicates otherwise.
§ 8403. 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.
§ 8404. Participant contributions.
(a) Mandatory contributions.--Each participant shall make
mandatory pickup participant contributions through payroll
deductions to his individual investment account equal to 4% of
compensation for current school service. The employer shall
cause such contributions for current service to be made and
deducted from each payroll or on such schedule established by
the board.
(b) Voluntary contributions.--A participant may make
voluntary contributions up to the limits permitted by IRC
through direct trustee to trustee transfers or through transfers
of money received in an eligible rollover into the trust to the
extent allowed by IRC § 402. Such rollovers shall be made in a
form and manner as determined by the board, shall be credited to
the participant's individual investment account and shall be
separately accounted for by the board.
(c) Limitations on contributions.--No contributions shall be
20120HB2454PN3735 - 67 -
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 thereon
shall be refunded to the participant by the board.
§ 8405. Mandatory pickup participant contributions.
(a) Treatment for purposes of IRC § 414(h).--All
contributions to the trust required to be made under section
8404(a) (relating to participant contributions) with respect to
current school service rendered by an active participant shall
be picked up by the employer and shall be treated as the
employer's contribution for purposes of IRC § 414(h).
(b) Treatment for other purposes.--For all other purposes
under this part and otherwise, such mandatory pickup participant
contributions shall be treated as contributions made by a
participant in the same manner and to the same extent as if the
contributions were made directly by the participant and not
picked up.
§ 8406. Employer defined contributions.
(a) Contributions for current service.--The employer of a
participant shall make employer defined contributions for
current service of each active participant, which shall be
credited to the individual investment account.
(b) Contributions resulting from participants reemployed
from USERRA leave.--When a school employee reemployed from
USERRA leave makes the mandatory pickup participant
contributions permitted to be made for the USERRA leave, the
employer by whom the school employee is employed at the time the
participant contributions are made shall make whatever employer
20120HB2454PN3735 - 68 -
defined contributions would have been made under this section
had the employee making the participant contributions after
being reemployed from USERRA leave continued to be employed in
his school position instead of performing USERRA leave. Such
employer defined contributions shall be placed in the
participant's individual investment account as otherwise
provided by this part.
(c) Limitations on contributions.--No contributions shall 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 thereon shall be refunded to the employer by the board.
§ 8407. Eligibility for benefits.
(a) General.--A participant who terminates school service
shall be eligible to withdraw the accumulated total defined
contributions standing to his credit in his individual
investment account or such lesser amount as the participant may
request. Payment shall be made in a lump sum unless the board
has established other forms of distribution in the plan
document. A participant who withdraws his accumulated total
defined contributions shall no longer be a participant in the
plan, notwithstanding that the participant may have contracted
to receive an annuity or other form of payment from a provider
retained by the board for such purposes.
(b) Required distributions.--All payments pursuant to this
section shall start and be made in compliance with the minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a)(9). The board is authorized to take whatever
20120HB2454PN3735 - 69 -
actions and make whatever distributions it may determine are
necessary to comply with such requirements.
(c) Spousal consent not required.--A participant who is
married may receive a lump sum distribution or other
distribution directly from the board without the consent of the
spouse.
(d) Combined service.--A participant who is a combined
service employee must be terminated from all positions that
result in either membership in the system or participation in
the plan to be eligible to receive a distribution.
(e) Prohibition.--Loans or other distributions from the plan
to school employees who have not terminated school service are
not permitted.
(f) Small individual investment accounts.--A participant who
terminates school service and whose accumulated total defined
contributions are below the threshold established by law as of
the date of termination of service shall be paid his accumulated
total defined contributions in a lump sum as provided in IRC §
401(a)(31).
§ 8408. Death benefits.
(a) General.--In the event of the death of an active
participant or inactive participant, the board shall pay to the
participant's beneficiary the balance in the participant's
individual investment account in a lump sum or in such other
manner as the board may establish in the plan document.
(b) Lump sum distribution.--In the event of the death of a
participant receiving distributions, the board shall pay to the
participant's beneficiary the balance in the participant's
individual investment account in a lump sum or in such other
manner as the board may establish in the plan document or, if
20120HB2454PN3735 - 70 -
the board has established alternative methods of distribution in
the plan document under which the participant was receiving
distributions, to the participant's beneficiary as provided in
the plan document.
(c) Contracts.--The board may contract with financial
institutions, insurance companies or other types of third-party
providers to allow participants who receive a lump sum
distribution to receive payments and death benefits in a form
and manner as provided by the contract. These contracts may, but
are not required, to provide that any payment and death benefit
options for a married former participant be in the form of a
joint and survivor annuity unless the spouse consents to another
payment option.
(d) Spousal consent.--All nomination or changes of
beneficiaries made by a married participant shall be subject to
the consent of the participant's spouse as provided for in this
part.
§ 8409. Vesting.
Subject to the forfeiture and attachment provisions of
section 8533 (relating to taxation, attachment and assignment of
funds) or otherwise as provided by law, a participant shall be
100% vested with respect to all mandatory pickup participant
contributions, voluntary contributions and employer defined
contributions paid by or on behalf of the participant to the
trust plus interest and earnings on the participant and employer
contributions but minus investment fees and administrative
charges.
§ 8410. Termination of distributions.
(a) Return to school service.--A participant receiving
distributions or an inactive participant who returns to school
20120HB2454PN3735 - 71 -
service shall cease receiving distributions and shall not be
eligible to receive distributions until the participant
subsequently terminates school service, without regard to
whether the participant is a mandatory, optional or prohibited
member of the system or participant in the plan.
(b) Return of benefits paid during USERRA leave.--In the
event that a former school employee is reemployed from USERRA
leave who had received any payments or annuity from the plan
during the USERRA leave, the employee shall return to the board
the amount so received plus interest as provided in the plan
document. The amount payable shall be certified in each case by
the board in accordance with methods approved by the actuary and
shall be paid in a lump sum within 30 days or in the case of an
active participant may be amortized with interest as provided in
the plan document through salary deductions to the trust in
amounts agreed upon by the participant and the board, but not
longer than a period that starts with the date of reemployment
and continuing for up to three times the length of the
participant's immediate past period of USERRA leave, with the
repayment period not to exceed five years.
§ 8411. Agreements with financial institutions and other
organizations.
To establish and administer the plan, the board shall have
the power to enter into written agreements with one or more
financial institutions or other organizations relating to the
plan's administration and investment of funds held pursuant to
the plan.
§ 8412. Powers and duties of board.
The board shall have the following powers and duties to
establish the plan and trust and to administer the provisions of
20120HB2454PN3735 - 72 -
this part:
(1) The board may commingle or pool assets with the
assets of other persons or entities.
(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.
(3) The board may establish investment guidelines and
limits on the types of investments that participants can
make, consistent with the board's fiduciary obligations.
(4) The board shall at all times have the power to
change the terms of the plan as may be necessary to maintain
the tax-qualified status of the plan.
(5) The board may establish a process for election to
participate in the plan by those school employees from whom
participation is not mandatory.
(6) The board may perform an annual review of any
qualified fund manager for the purpose of assuring it
continues to meet all standards and criteria established.
(7) The board may allow for eligible rollovers and
direct trustee to trustee transfers into the trust from
qualified plans of other employers, regardless of whether the
employer is a private employer or a public employer.
(8) The board may allow a former participant to maintain
his or her individual investment account within the plan.
(9) The board shall administer the plan in compliance
with the qualification and other rules of IRC.
(10) The board may establish procedures to provide for
the lawful payment of benefits.
(11) The board shall determine what constitutes a
20120HB2454PN3735 - 73 -
termination of school service.
(12) The board may establish procedures for
distributions of small accounts as required or permitted by
IRC.
(13) The board shall have the power to establish
procedures in the plan document or to promulgate rules and
regulations as it deems necessary for the administration and
management of the plan, including, but not limited to,
establishing:
(i) Procedures whereby eligible participants may
change voluntary contribution amounts or their investment
choices on a periodic basis or make other elections
regarding their participation in the plan.
(ii) Procedures for deducting mandatory pick up
participant contributions and voluntary contributions
from a participant's compensation.
(iii) Procedures for rollovers and trustee-to-
trustee transfers allowed under IRC and permitted by the
board as part of the plan.
(iv) Standards and criteria for disclosing and
providing options to eligible individuals regarding
investments of amounts deferred under the plan, provided
that one of the available options must serve as the
default option for participants who do not make a timely
election.
(v) Standards and criteria for disclosing to the
participants the anticipated and actual income
attributable to amounts invested, property rights and all
fees, costs and expenses to be made against amounts
deferred to cover the costs and expenses of administering
20120HB2454PN3735 - 74 -
and managing the plan or trust.
(vi) Procedures, standards and criteria for the
making of distributions from the plan upon termination
from employment or death or in other circumstances
consistent with the purpose of the plan.
(14) The board may waive any reporting or information
requirement contained in this part if the board determines
that the information is not needed for the administration of
the plan.
(15) The board may contract any services and duties in
lieu of staff except final adjudications and as prohibited by
law. Any duties or responsibilities of the board not required
by law to be performed by the board can be delegated to a
third-party provider subject to appeal to the board.
(16) The board can provide that any duties of the
employer or information provided by the participant to the
employer can be performed or received directly by the board.
(17) The provisions and restrictions of the act of July
2, 2010 (P.L.266, No.44), known as Protecting Pennsylvania's
Investments Act, shall not apply to the plan or trust or the
investments thereof, but the board is authorized to offer to
the plan participants investment vehicles that would be
allowed under the Protecting Pennsylvania's Investments Act.
The board shall also to the extent commercially available
provide that one option for participants will have an annuity
investment feature.
§ 8413. Responsibility for investment loss.
Neither the Commonwealth, the board, an employer nor any
school entity or other political subdivision shall be
responsible for any investment loss incurred under this plan or
20120HB2454PN3735 - 75 -
for the failure of any investment to earn any specific or
expected return, or to earn as much as any other investment
opportunity, whether or not such other opportunity was offered
to participants in the plan.
§ 8414. Investments based on participants' investment
allocation choices.
(a) Vesting.--All contributions, interest and investment
earnings shall be 100% vested and shall be invested based on the
participant's investment allocation choices. Each participant
shall be credited individually with the amount of contributions,
interest and investment earnings.
(b) Investment.--Investment of contributions by any
corporation, institution, insurance company or custodial bank or
other entity that the board has approved shall not be
unreasonably delayed, and in no case shall the investment of
contributions be delayed more than 30 days from the date of
payroll deductions or voluntary contributions are made to the
date that funds are invested. Any interest earned on the funds
pending investment shall be allocated to the employers and
credited to the accounts of participants who are then
participating in the program unless the interest is used to
defray administrative costs and fees that would otherwise be
required to be borne by participants who are then participating
in the program.
§ 8415. Expenses.
All expenses, fees and cost of administering the plan and
investing the assets of the trust shall be borne by the
participants and paid from assessments against the balances of
the individual investment accounts as established by the board.
§ 8416. Election by members to be participants.
20120HB2454PN3735 - 76 -
(a) General rule.--Any school employee who is an active
member or inactive member on or after July 1, 2015, and who is
employed in a position that would otherwise be eligible for
participation in the plan may elect to become a participant in
the plan.
(b) Time for making election.--An eligible school employee
may elect to become a participant and a combined service
employee at any time before termination of school service by
filing a written election with the board.
(c) Effect of election.--An election to become a participant
shall be irrevocable. Participation shall be effective at the
beginning of the next pay period starting after the election is
filed with the board. A member who elects to become a
participant shall remain a participant for all future school
service. Any prior school or nonschool service credited in the
system shall remain in the class of service in which it is
credited on the effective date of participation. A combined
service employee shall not be eligible to receive an annuity
from the system or a withdrawal of accumulated deductions until
the employee has terminated school service. The eligibility of a
combined service employee for an annuity from the system and, if
eligible, the amount of such annuity shall be as determined
under this part.
§ 8417. Required distributions.
All payments pursuant to this chapter shall start and be made
in compliance with the minimum distribution requirements and
incidental death benefit rules of IRC § 401(a).
Section 17. Section 8501(a), (c) and (d) of Title 24 are
amended to read:
§ 8501. Public School Employees' Retirement Board.
20120HB2454PN3735 - 77 -
(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; two Senators; two members of the House of
Representatives; the executive secretary of the Pennsylvania
School Boards Association, ex officio; two to be appointed by
the Governor, at least one of whom shall not be a school
employee or an officer or employee of the State; three to be
elected by the active professional members of the system or
active professional participants of the plan from among their
number; one to be elected by annuitants or a participant of the
plan who has terminated school service and is receiving or is
eligible to receive distributions from among their number; one
to be elected by the active nonprofessional members of the
system or active nonprofessional participants of 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 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
20120HB2454PN3735 - 78 -
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 the term.
* * *
(c) Oath of office.--Each member of the board shall take an
oath of office that he will, so far as it devolves upon him,
diligently and honestly administer the affairs of said board,
the system and the plan and that he will not knowingly violate
or willfully permit to be violated any of the provisions of law
applicable to this part. Such oath shall be subscribed by the
member making it and certified by the officer before whom it is
taken and shall be immediately filed in the office of the
Secretary of the Commonwealth.
(d) Compensation and expenses.--The members of the board who
are members of the system or participants in the plan shall
serve without compensation. Members of the board who are members
of the system or participants in the plan and who are employed
by a governmental entity shall not suffer loss of salary or
wages through serving on the board. The board, on request of the
employer of any member of the board who is an active
professional or nonprofessional member of the system, may
reimburse such employer for the salary or wages of the member,
20120HB2454PN3735 - 79 -
or for the cost of employing a substitute for such member, while
the member is necessarily absent from employment to execute the
duties of the board. The members of the board who are not
members of either the school system or the State Employees'
Retirement System may be paid $100 per day when attending
meetings and all board members shall be reimbursed for any
necessary expenses. However, when the duties of the board as
mandated are not executed, no compensation or reimbursement for
expenses of board members shall be paid or payable during the
period in which such duties are not executed.
* * *
Section 18. Section 8502(b), (c), (e), (h), (i), (j), (k),
(n) and (o) of Title 24 are amended and the section is amended
by adding a subsection to read:
§ 8502. Administrative duties of board.
* * *
(b) Professional personnel.--The board shall contract for
the services of a chief medical examiner, an actuary, investment
advisors, counselors, an investment coordinator, and such other
professional personnel as it deems advisable. The board may
utilize the same individuals and firms contracted under this
subsection for both the system and the plan but shall allocate
the fees, costs and expenses incurred under this subsection
between the system and the plan as appropriate.
(c) Expenses.--The board shall, through the Governor, submit
to the General Assembly annually a budget covering the
administrative expenses of [this part] the system and a separate
budget covering the administrative expenses of the plan. Such
expenses of the system as approved by the General Assembly in an
appropriation bill shall be paid from investment earnings of the
20120HB2454PN3735 - 80 -
fund. Such expenses of the plan as approved by the General
Assembly shall be paid from interest, pursuant to section
8414(b) (relating to investments based on participant investment
allocation choices) or assessments on the balances of the
participants' individual investment accounts. Concurrently with
its administrative budget, the board shall also submit to the
General Assembly annually a list of proposed expenditures which
the board intends to pay through the use of directed
commissions, together with a list of the actual expenditures
from the past year actually paid by the board through the use of
directed commissions. All such directed commission expenditures
shall be made by the board for the exclusive benefit of the
system and its members.
* * *
(e) Records.--
(1) The board shall keep a record of all its proceedings
which shall be open to inspection by the public, except as
otherwise provided in this part or by other law.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public inspection under
the act of [June 21, 1957 (P.L.390, No.212), referred to]
February 14, 2008 (P.L.6, No.3), known as the Right-to-Know
Law, if, in the reasonable judgment of the board, the
inspection would:
(i) in the case of an alternative investment or
alternative investment vehicle involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
20120HB2454PN3735 - 81 -
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust, or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) (i) The sensitive investment or financial
information excluded from inspection under paragraph (2)
(i), to the extent not otherwise excluded from
inspection, shall constitute a public record subject to
public inspection under the Right-to-Know Law once the
board is no longer required by its agreement to maintain
confidentiality.
(ii) The sensitive investment or financial
information excluded from inspection under paragraph (2)
(ii), to the extent not otherwise excluded from
inspection, shall constitute a public record subject to
public inspection under the Right-to-Know Law once:
(A) the inspection no longer causes substantial
competitive harm to the person from whom the
information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from inspection under paragraph (2)
20120HB2454PN3735 - 82 -
(iii), to the extent not otherwise excluded from
inspection, shall constitute a public record subject to
public inspection under the Right-to-Know Law once:
(A) the inspection no longer has a substantial
detrimental impact on the value of an investment of
the fund or trust and would not cause a breach of the
standard of care or fiduciary duty set forth in this
part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public inspection under the Right-to-Know Law.
(5) Notwithstanding the provisions of this subsection,
the following information regarding an alternative investment
vehicle shall be subject to public inspection under the
Right-to-Know Law:
(i) The name, address and vintage year of the
alternative investment vehicle.
(ii) The identity of the manager of the alternative
investment vehicle.
(iii) The dollar amount of the commitment made by
the system or plan to the alternative investment vehicle.
(iv) The dollar amount of cash contributions made by
the system or plan to the alternative investment vehicle
since inception.
20120HB2454PN3735 - 83 -
(v) The dollar amount of cash distributions received
by the system or plan from the alternative investment
vehicle since inception.
(vi) The net internal rate of return of the
alternative investment vehicle since inception, provided
that the system or plan shall not be required to disclose
the net internal rate of return under circumstances in
which, because of the limited number of portfolio assets
remaining in the alternative investment vehicle, the
disclosure could reveal the values of specifically
identifiable remaining portfolio assets to the detriment
of the alternative investment.
(vii) The aggregate value of the remaining portfolio
assets attributable to the system's or plan's investment
in the alternative investment vehicle, provided that the
system or plan shall not be required to disclose the
value under circumstances in which, because of the
limited number of portfolio assets remaining in the
alternative investment vehicle, the disclosure could
reveal the values of specifically identifiable remaining
portfolio assets to the detriment of the alternative
investment.
(viii) The dollar amount of total management fees
and costs paid to the alternative investment vehicle by
the system or plan on an annual fiscal year-end basis.
(6) Any record, material or data received, prepared,
used or retained by the board or its employees or agents
relating to a participant shall not constitute a public
record subject to public access under the Right-to-Know Law,
if, in the reasonable judgment of the board, the access would
20120HB2454PN3735 - 84 -
disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions and trustee-to-trustee
transfers, of any participant.
(ii) The investment option selections of any
participant.
(iii) The balance of a participant's account,
including the amount distributed to the participant, and
any investment gains or losses, or rates of return.
(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The benefit payment option of a participant.
(7) Nothing in this subsection shall be construed to
designate any record, material or data received, prepared,
used or retained by the board or its employees or agents
relating to the contributions, investments, account value or
benefits payable to or on account of a participant as a
public record subject to public inspection under the Right-
to-Know Law.
* * *
(h) Regulations and procedures.--The board shall, with the
advice of the Attorney General and the actuary, adopt and
promulgate rules and regulations for the uniform administration
of the system. The actuary shall approve in writing all
computational procedures used in the calculation of
contributions and benefits pertaining to the system, and the
board shall by resolution adopt such computational procedures,
prior to their application by the board. Such rules, regulations
and computational procedures as so adopted from time to time and
20120HB2454PN3735 - 85 -
as in force and effect at any time, together with such tables as
are adopted and published pursuant to subsection (j) as
necessary for the calculation of annuities and other benefits,
shall be as effective as if fully set forth in this part. Any
actuarial assumption specified in or underlying any such rule,
regulation or computational procedure and utilized as a basis
for determining any benefit shall be applied in a uniform
manner.
(i) Data.--The board shall keep in convenient form such data
as are stipulated by the actuary in order that an annual
actuarial valuation of the various accounts of the fund can be
completed within six months of the close of each fiscal year.
The board shall have final authority over the means by which
data is collected, maintained and stored and in so doing shall
protect the rights of its membership as to privacy and
confidentiality.
(j) Actuarial investigation and valuation.--The board shall
have the actuary make an annual valuation of the various
accounts of the fund within six months of the close of each
fiscal year. In the fiscal year 1975 and in every fifth year
thereafter, the board shall have the actuary conduct an
actuarial investigation and evaluation of the system based on
data including the mortality, service, and compensation
experience provided by the board annually during the preceding
five years concerning the members and beneficiaries of the
system. The board shall by resolution adopt such tables as are
necessary for the actuarial valuation of the fund and the trust
and calculation of contributions, annuities, and other benefits
based on the reports and recommendations of the actuary. Within
30 days of their adoption, the secretary of the board shall
20120HB2454PN3735 - 86 -
cause those tables which relate to the calculation of annuities
and other benefits to be published in the Pennsylvania Bulletin
in accordance with the provisions of 45 Pa.C.S. § 725(a)
(relating to additional contents of Pennsylvania Bulletin) and,
unless the board specifies therein a later effective date, such
tables shall become effective on such publication. The board
shall include a report on the significant facts, recommendations
and data developed in each five-year actuarial investigation and
evaluation of the system in the annual financial statement
published pursuant to the requirements of subsection (n) for the
fiscal year in which such investigation and evaluation were
concluded.
(k) Certification of employer contributions to fund.--The
board shall, each year in addition to the itemized budget
required under section 8330 (relating to appropriations by the
Commonwealth), certify to the employers and the Commonwealth the
employer contribution rate expressed as a percentage of members'
payroll necessary for the funding of prospective annuities for
active members and the annuities of annuitants, and certify the
rates and amounts of the normal contributions as determined
pursuant to section 8328(b) (relating to actuarial cost method),
accrued liability contributions as determined pursuant to
section 8328(c), supplemental annuities contribution rate as
determined pursuant to section 8328(d), the experience
adjustment factor as determined pursuant to section 8328(e),
premium assistance contributions as determined pursuant to
section 8328(f), the costs added by legislation as determined
pursuant to section 8328(i), the actuarial required contribution
rate as determined pursuant to section 8328(i), the collared
contribution rate as determined pursuant to section 8328(g), the
20120HB2454PN3735 - 87 -
final contribution rate as determined pursuant to section
8328(h) and the shared-risk contribution rate as determined
under section 8321(b) (relating to regular member contributions
for current service), which shall be paid to the fund and
credited to the appropriate accounts. These certifications shall
be regarded as final and not subject to modification by the
Secretary of the Budget.
* * *
(n) Annual financial statement.--The board shall prepare and
have published, on or before January 1 of each year, [a
financial statement] financial statements as of the fiscal year
ending June 30 of the previous year showing the condition of the
fund, the trust and the various accounts, including, but not
limited to, the board's accrual and expenditure of directed
commissions, and setting forth such other facts, recommendations
and data as may be of use in the advancement of knowledge
concerning annuities and other benefits provided by this part.
The board shall submit said financial [statement] statements to
the Governor and shall make copies available to the employers
for the use of the school employees and the public.
(o) Independent audit.--The board shall provide for [an
annual audit] annual audits of the system and the plan by an
independent certified public accounting firm, which audit shall
include the board's accrual and expenditure of directed
commissions. The board may use the same independent certified
public accountant for the audits of both the system and the
plan.
* * *
(q) Participant and employer contributions to trust.--The
board shall, each year in addition to any fees and itemized
20120HB2454PN3735 - 88 -
budget required under section 8330, certify, as a percentage of
each participant's compensation, the employer defined
contributions, which shall be paid to the trust and credited to
each participant's individual investment account. These
certifications shall be regarded as final and not subject to
modification by the Secretary of the Budget. In addition, the
board shall cause all mandatory pickup participant contributions
made on behalf of a participant and all voluntary contributions
made by a participant to be credited to the participant's
individual investment account.
Section 19. Section 8502.2(a) of Title 24 is amended to
read:
§ 8502.2. Health insurance.
(a) Authority.--The board may sponsor a participant-funded
group health insurance program for annuitants, participants
receiving distributions, spouses of annuitants and participants
receiving distributions, survivor annuitants and their
dependents. The board may promulgate regulations regarding the
prudent and efficient operation of the program, including, but
not limited to:
(1) Establishment of an annual budget and disbursements
in accordance with the budget.
(2) Determination of the benefits structure.
(3) Determination of enrollment procedures.
(4) Establishment of premium rates sufficient to fully
fund the program, including administrative expenses.
(5) Contracting for goods, equipment, services,
consultants and other professional personnel as needed to
operate the program.
* * *
20120HB2454PN3735 - 89 -
Section 20. Section 8503 heading and (a) of Title 24 are
amended and the section is amended by adding a subsection to
read:
§ 8503. Duties of board to advise and report to employers [and
members], members and participants.
(a) Manual of regulations.--The board shall, with the advice
of the Attorney General and the actuary, prepare, within 90 days
of the effective date of this part, a manual incorporating rules
and regulations consistent with the provisions of this part for
the employers who shall make information contained therein
available to the general membership. The board shall thereafter
advise the employers within 90 days of any changes in such rules
and regulations due to changes in the law or due to changes in
administrative policies. As soon as practicable after the
commissioner's publication with respect thereto, the board shall
also advise the employers as to any cost-of-living adjustment
for the succeeding calendar year in the amount of the limitation
under IRC § 401(a)(17) and the dollar amounts of the limitations
under IRC § 415[(b)].
* * *
(b.1) Participant status statements.--The board shall have
furnished annually to each participant on or before December 31,
and more frequently as the board may agree or as required by
law, a statement showing the accumulated total defined
contributions credited to the participant's individual
investment account, the nature and type of investments and the
investment allocation of future contributions as of June 30 of
the previous year and requesting the participant to make any
necessary corrections or revision regarding his designated
beneficiary.
20120HB2454PN3735 - 90 -
* * *
Section 21. Section 8504(c) of Title 24 is amended to read:
§ 8504. Duties of board to report to State Employees'
Retirement Board.
* * *
(c) Applications for benefits for State employees.--Upon
receipt of notification and the required data from the State
Employees' Retirement Board that a former school employee who
elected multiple service has applied for a State employee's
retirement benefit or, in the event of his death, his legally
constituted representative has applied for such benefit, the
board shall:
(1) Certify to the State Employees' Retirement Board:
(i) The salary history as a member of the Public
School Employees' Retirement System and the final average
salary as calculated on the basis of the compensation
received as a State and school employee.
(ii) The annuity or benefit which the member or his
beneficiary is entitled to receive under this part and
modified according to the option selected.
(2) Transfer to the State Employees' Retirement Fund the
accumulated deductions standing to such member's credit and
the actuarial reserve required on account of the member's
years of credited service in the school system and his final
average salary determined on the basis of his compensation as
a member in both systems.
Section 22. Sections 8505 heading, (b), (h), and (i),
8506(a), (d), (e), (g) and (h) and 8507 heading, (a), (e) and
(f) of Title 24 are amended and the sections are amended by
adding subsections to read:
20120HB2454PN3735 - 91 -
§ 8505. Duties of board regarding applications and elections of
members and participants.
* * *
(b) State employees electing multiple service status.--Upon
receipt of notification from the State Employees' Retirement
Board that a former school employee has become an active member
in the State Employees' Retirement System and has elected to
become a member with multiple service status, the board shall:
(1) In case of a member who is receiving an annuity from
the system:
(i) Discontinue payments, transfer the present value
of the member's annuity at the time of entering State
service, plus the amount withdrawn in a lump sum payment,
on or after the date of entering State service, pursuant
to section 8345 (relating to member's options), with
statutory interest to date of transfer, minus the amount
to be returned to the board on account of return to
service that the board has determined is to be credited
in the members' savings account, from the annuity reserve
account to the members' savings account and resume
crediting of statutory interest on the amount restored to
his credit.
(ii) Transfer the balance of the present value of
the total annuity, minus the amount to be returned to the
board on account of return to service that the board has
determined is to be credited in the State accumulation
account, from the annuity reserve account to the State
accumulation account.
(iii) Certify to the member the amount of lump sum
and annuity payments with statutory interest the member
20120HB2454PN3735 - 92 -
is to return to the board and, of those amounts, which
amount shall be credited to the members' savings account
and credited with statutory interest as such payments are
returned and which amount shall be credited to the State
accumulation account.
(2) In case of a member who is not receiving an annuity
from the system and who has not withdrawn his accumulated
deductions, continue or resume the crediting of statutory
interest on his accumulated deductions.
(3) In case of a member who is not receiving an annuity
from the system and his accumulated deductions were
withdrawn, certify to the member the accumulated deductions
as they would have been at the time of his separation had he
been a full coverage member together with statutory interest
for all periods of subsequent State and school service
eligible for active membership in the system to the date of
repayment. Such amount shall be restored by him and shall be
credited with statutory interest as such payments are
restored.
* * *
(e.1) Certification to participants terminating service.--
The board shall certify to a participant, within one year of
termination of service of such participant, and, if the
participant is married, the board is authorized to advise the
participant's spouse, in writing of the accumulated total
defined contributions credited to the participant's individual
investment account as of the date stated in the writing, any
notices regarding rollover or other matters required by IRC or
other law, the obligation of the participant to commence
distributions from the plan by the participant's required
20120HB2454PN3735 - 93 -
beginning date, and the ability to receive all or part of the
balance in the participant's individual investment account in a
lump sum or in such other form as the board may authorize or as
is required by law.
* * *
(f.1) Notification to inactive participants approaching
required beginning date.--The board shall notify each inactive
participant who has terminated school service and had not
commenced distribution by 90 days before the participant's
required beginning date, and if the participant is married the
board is authorized to advise the participant's spouse, in
writing that he has an obligation to commence distributions by
his required beginning date in a form and manner required by IRC
§ 401(a)(9) and other applicable provisions of IRC.
* * *
(g.1) Initial payment to a participant.--The board shall
make the initial payment to a participant who has applied for a
distribution within 60 days of the filing of his application.
(h) Death benefits.--Upon receipt of notification of the
death of a member, an active participant, an inactive
participant or a former participant performing USERRA leave, the
board shall notify the designated beneficiary or survivor
annuitant of the benefits to which he is entitled and shall make
the first payment to the beneficiary under the plan elected by
the beneficiary within 60 days of receipt of certification of
death and other necessary data. If no beneficiary designation is
in effect at the date of the member's death or no notice has
been filed with the board to pay the amount of such benefits to
the member's estate, the board is authorized to pay such
benefits to the executor, administrator, surviving spouse or
20120HB2454PN3735 - 94 -
next-of-kin of the deceased member, and payment pursuant hereto
shall fully discharge the fund from any further liability to
make payment of such benefits to any other person. If the
surviving spouse or next-of-kin of the deceased member cannot be
found for the purpose of paying such benefits for a period of
seven years from the date of death of the member, then such
benefits shall be escheated to the Commonwealth for the benefit
of the fund.
(i) Medical insurance coverage.--Upon receipt of
notification from an insurance carrier offering a health
insurance program approved by the board that an annuitant or
terminated participant who has attained age 65 has elected
medical, major medical, and hospitalization insurance coverage
or notification that annuitants of the system with less than 24
1/2 eligibility points (other than disability annuitants of the
system), spouses of annuitants and survivor annuitants eligible
to elect to enroll in the approved health insurance program have
elected participation in such health insurance program, the
board may deduct from the annuity payments the appropriate
annual charges in equal monthly installments. Such deductions
shall be transmitted to the insurance carrier.
* * *
§ 8506. Duties of employers.
(a) Status of members and participants.--The employer shall,
each month, notify the board in a manner prescribed by the board
of the salary changes effective during the past month, the date
of all removals from the payroll, and the type of leave of any
member or participant who has been removed from the payroll for
any time during that month, and:
(1) if the removal is due to leave without pay, the
20120HB2454PN3735 - 95 -
employer shall furnish the board with the date of beginning
leave, the date of return to service, and the reason for
leave;
(2) if the removal is due to a transfer to another
employer, the former employer shall furnish such employer and
the board with a complete school service record, including
credited or creditable nonschool service; or
(3) if the removal is due to termination of school
service, the employer shall furnish the board with a complete
school service record including credited or creditable
nonschool service and in the case of death of the member the
employer shall so notify the board.
* * *
(c.1) Participant and employer defined contributions.--The
employer shall cause the mandatory pickup participant
contributions on behalf of a participant to be made and shall
cause to be deducted any voluntary contributions authorized by a
participant. The employer shall also cause the employer defined
contributions on behalf of a participant to be made. The
employer shall notify the board at times and in a manner
prescribed by the board of the compensation of any participant
to whom the limitation under IRC § 401(a)(17) either applies or
is expected to apply and shall cause such participant's
contributions to be deducted from payroll to cease at the
limitation under IRC § 401(a)(17) on the payroll date if and
when such limit shall be reached. The employer shall certify to
the board the amounts picked up and deducted and the employer
defined contributions being made and shall send the total amount
picked up, deducted and contributed together with a duplicate of
such voucher to the secretary of the board every pay period or
20120HB2454PN3735 - 96 -
on such schedule as established by the board.
(d) New employees subject to mandatory membership or
participation.--Upon the assumption of duties of each new school
employee whose membership in the system or plan is mandatory,
the employer shall no later than 30 days thereafter cause an
application for membership or participation, which application
shall include the employee's home address, birthdate certified
by the employer, previous school or State service and any other
information requested by the board, and a nomination of
beneficiary to be made by such employee, who shall be the
participant's spouse if the participant is married, unless the
spouse consents otherwise, and filed with the board and shall
make pickup contributions or mandatory pickup participant
contributions from the effective date of school employment.
(e) New employees subject to optional membership or
participation.--The employer shall inform any eligible school
employee whose membership in the system or participation in the
plan is not mandatory of his opportunity to become a member of
the system or participant in the plan provided that he elects to
purchase credit for all such continuous creditable service. If
such employee so elects, the employer shall no later than 30
days thereafter cause an application for membership which
application shall include the employee's home address, birthdate
certified by the employer, previous school or State service and
any other information requested by the board, and a nomination
of beneficiary, who shall be the participant's spouse if the
participant is married, unless the spouse consents otherwise, to
be made by him and filed with the board and shall cause proper
contributions to be made from the date of election of membership
or participation.
20120HB2454PN3735 - 97 -
* * *
(g) Former State employee contributors.--The employer shall,
upon the employment of a former member of the State Employees'
Retirement System who is not an annuitant of the State
Employees' Retirement System, advise such employee of his right
to elect multiple service membership within 365 days of entry
into the system and, in the case any such employee who so elects
has withdrawn his accumulated deductions, require him to restore
his accumulated deductions as they would have been at the time
of his separation had he been a full coverage member, together
with statutory interest for all periods of subsequent State and
school service to date of repayment. The employer shall advise
the board of such election. This subsection shall not apply to a
school employee who is employed in a position where he is or
could be a participant in the plan.
(h) Former State employee annuitants.--The employer shall,
upon the employment of an annuitant of the State Employees'
Retirement System who applies for membership in the system,
advise such employee that he may elect multiple service
membership within 365 days of entry into the system and that if
he so elects his annuity from the State Employees' Retirement
System will be discontinued effective upon the date of his
return to school service and, upon termination of school service
and application for an annuity, the annuity will be adjusted in
accordance with section 8346 (relating to termination of
annuities). The employer shall advise the board of such
election. This subsection shall not apply to a school employee
who is employed in a position where he is or could be a
participant in the plan.
* * *
20120HB2454PN3735 - 98 -
(k) School employees performing USERRA or military related
leave of absence.--The employer shall report to the board any
school employee who ceases to be an active participant to
perform USERRA service, or who is granted a leave of absence
under 51 Pa.C.S. § 4102 (relating to leaves of absences for
certain government employees) or a military leave of absence
under 51 Pa.C.S. § 7302 (relating to granting military leaves of
absence), the date on which such USERRA service, leave of
absence or military leave of absence began, the date on which
the school employee is reemployed from USERRA leave or returns
after the leave of absence or military leave of absence, if such
event occurs, and any other information the board may require or
direct.
(l) Differential wage payments and military leave of absence
payments.-—Notwithstanding the exclusion of differential wage
payments as defined in IRC § 414(u)(12) from compensation under
this part, the employer of any school employee on USERRA leave
shall report differential wage payments made to such employee to
the board, and the employer of any school employee on leave of
absence pursuant to 51 Pa.C.S. § 4102 shall report any payment
made to such employee, in the form and manner established by the
board.
(m) Obligation of educational institutions to report
participation and compensation of employees in independent
retirement programs.--The Pennsylvania State University, the
State System of Higher Education, State-owned educational
institutions and community colleges shall report to the board
the compensation and other information as the board may request
for employees who are participants or members in the State
Employees' Retirement System, plan or independent retirement
20120HB2454PN3735 - 99 -
programs approved by the employer.
§ 8507. Rights and duties of school employees [and members],
members and participants.
(a) Information on new employees.--Upon his assumption of
duties, each new school employee shall furnish his employer with
a complete record of his previous school or State service, or
creditable nonschool service, name and address of his spouse, if
married and he is or is eligible to be a participant in the
plan, proof of his date of birth, his home address, his current
status in the system and in the State Employees' Retirement
System and such other information as the board may require.
Willful failure to provide the information required by this
subsection to the extent available or the provision of erroneous
information upon entrance into the system shall result in the
forfeiture of the right of the member to subsequently assert any
right to benefits based on erroneous information or on any of
the required information which he failed to provide. In any case
in which the board finds that a member is receiving an annuity
based on false information, the additional amounts received
predicated on such false information together with statutory
interest doubled and compounded shall be deducted from the
present value of any remaining benefits to which the member is
legally entitled and such remaining benefits shall be
correspondingly decreased.
* * *
(b.1) Application for participation.--In the case of a new
employee who is not currently a participant in the plan and
whose participation is mandatory, or in the case of a new
employee whose participation is not mandatory but is permitted
and who desires to become a participant in the plan, the new
20120HB2454PN3735 - 100 -
employee shall execute an application for participation and a
nomination of a beneficiary, who shall be the participant's
spouse if the participant is married, unless the spouse consents
otherwise.
* * *
(d.1) Voluntary contributions by a participant.--Any active
participant who desires to make voluntary contributions to be
credited to his individual investment account shall notify the
board and, upon compliance with the requirements, procedures and
limitations established by the board in the plan document, may
do so subject to the limitations under IRC §§ 401(a) and 415 and
other applicable law.
(d.2) Contributions for USERRA leave.--Any active
participant or inactive participant or former participant who
was reemployed from USERRA leave who desires to make mandatory
pickup participant contributions and voluntary contributions for
his USERRA leave shall so notify the board within the time
period required under 38 U.S.C. Ch. 43 (relating to employment
and reemployment rights of members of the uniformed services)
and IRC § 414(u) of his desire to make such contributions. Upon
making the permitted mandatory pickup participant contributions
within the allowed time period, the employer shall make the
corresponding employer defined contributions at the same time.
(e) Beneficiary for death benefits from system.--Every
member shall nominate a beneficiary by written designation filed
with the board to receive the death benefit or the benefit
payable under the provisions of Option 1. Such nomination may be
changed at any time by the member by written designation filed
with the board. A member may also nominate a contingent
beneficiary or beneficiaries to receive the death benefit or the
20120HB2454PN3735 - 101 -
benefit payable under the provisions of Option 1.
(e.1) Beneficiary for death benefits from plan.--Every
participant shall nominate a beneficiary by written designation
filed with the board as provided in section 8506 (relating to
duties of employers) to receive the death benefit payable under
section 8347 (relating to death benefits). A participant may
also nominate a contingent beneficiary or beneficiaries to
receive the death benefit provided under this section. Such
nomination may be changed at any time by the participant by
written designation filed with the board, provided that, if the
participant is married, the participant's spouse consents to the
change unless the change is to name the spouse as beneficiary or
unless the change is limited to contingent beneficiaries and the
spouse is the primary beneficiary.
(f) Termination of service by members.--Each member who
terminates school service and who is not then a disability
annuitant shall execute on or before the date of termination of
service a written application, duly attested by the member or
his legally constituted representative, electing to do one of
the following:
(1) Withdraw his accumulated deductions.
(2) Vest his retirement rights and if he is a joint
coverage member, and so desires, elect to become a full
coverage member and agree to pay within 30 days of the date
of termination of service the lump sum required.
(3) Receive an immediate annuity, if eligible, and may,
if he is a joint coverage member, elect to become a full
coverage member and agree to pay within 30 days of date of
termination of service the lump sum required.
* * *
20120HB2454PN3735 - 102 -
(g.1) Deferral of retirement rights.--If a participant
terminates school service and does not commence receiving a
distribution, he shall nominate a beneficiary, who shall be the
member's spouse if the member is married, unless the spouse
consents otherwise, by written designation filed with the board,
and he may anytime thereafter, but no later than his required
beginning date, withdraw the accumulated total defined
contributions standing to his credit or apply for another form
of distribution required by law or authorized by the board.
* * *
(l) Continuing obligation regarding spouses.--A participant
shall have the continuing obligation to notify the board in
writing of any change in marital status and, if applicable, the
name and current address of the member's spouse.
Section 23. Sections 8521(b), 8522, 8524, 8525 and 8531 of
Title 24 are amended to read:
§ 8521. Management of fund and accounts.
* * *
(b) Crediting of interest.--The board annually shall allow
statutory interest, excluding the individual investment
accounts, to the credit of the members' savings account on the
mean amount of the accumulated deductions of all members for
whom interest is payable for the preceding year and valuation
interest on the mean amount of the annuity reserve account for
the preceding year to the credit of that account. The board
annually shall allow valuation interest calculated on the mean
amount for the preceding year of the balance in the State
accumulation account excluding any earnings of the fund credited
to the account during that year. In the event the total earnings
for the year do not exceed 5 1/2% of the mean amount for the
20120HB2454PN3735 - 103 -
preceding year of the total assets of the fund less earnings
credited to the fund during that year plus the administrative
expenses of the board, the difference required to be
appropriated from the General Fund shall be credited to the
State accumulation account.
* * *
§ 8522. Public School Employees' Retirement Fund.
The fund shall consist of all moneys in the several separate
funds in the State Treasury set apart to be used under the
direction of the board for the benefit of members of the system;
and the Treasury Department shall credit to the fund all moneys
received from the Department of Revenue arising from the
contributions relating to or on behalf of the members of the
system required under the provisions of Chapter 83 (relating to
membership, contributions and benefits) and all earnings from
investments or moneys of said fund. There shall be established
and maintained by the board the several ledger accounts
specified in sections 8523 (relating to members' savings
account), 8524 (relating to State accumulation account), 8525
(relating to annuity reserve account) and 8526 (relating to
health insurance account). The individual investment accounts
that are part of the trust are not part of the fund. Mandatory
pickup participant contributions, voluntary contributions and
employer defined contributions made under this part and any
income earned by the investment of such contributions shall not
be paid or credited to the fund but instead shall be paid to the
trust and credited to the individual investment accounts.
§ 8524. State accumulation account.
The State accumulation account shall be the ledger account to
which shall be credited all contributions of the Commonwealth
20120HB2454PN3735 - 104 -
and other employers as well as the earnings of the fund, except
the premium assistance contributions and earnings thereon in the
health insurance account. Valuation interest shall be allowed on
the total amount of such account less any earnings of the fund
credited during the year. The reserves necessary for the payment
of annuities and death benefits resulting from membership in the
system as approved by the board and as provided in Chapter 83
(relating to membership, contributions and benefits) shall be
transferred from the State accumulation account to the annuity
reserve account. At the end of each year the required interest
shall be transferred from the State accumulation account to the
credit of the members' savings account and the annuity reserve
account. The administrative expenses of the board shall be
charged to the State accumulation account.
§ 8525. Annuity reserve account.
(a) Credits and charges to account.--The annuity reserve
account shall be the ledger account to which shall be credited
the reserves held for the payment of annuities and death
benefits resulting from membership in the system on account of
all annuitants and the contributions from the Commonwealth and
other employers as determined in accordance with section 8328
(relating to actuarial cost method) for the payment of the
supplemental annuities provided in sections 8348 (relating to
supplemental annuities), 8348.1 (relating to additional
supplemental annuities), 8348.2 (relating to further additional
supplemental annuities), 8348.3 (relating to supplemental
annuities commencing 1994), 8348.4 (relating to special
supplemental postretirement adjustment), 8348.5 (relating to
supplemental annuities commencing 1998), 8348.6 (relating to
supplemental annuities commencing 2002) and 8348.7 (relating to
20120HB2454PN3735 - 105 -
supplemental annuities commencing 2003). The annuity reserve
account shall be credited with valuation interest. After the
transfers provided in sections 8523 (relating to members'
savings account) and 8524 (relating to State accumulation
account), all annuity and death benefit payments shall be
charged to the annuity reserve account and paid from the fund.
(b) Transfers from account.--Should an annuitant be
subsequently restored to active service either as a member of
the system or as a participant in the plan, the present value of
his member's annuity at the time of reentry into school service
shall be transferred from the annuity reserve account and placed
to his individual credit in the members' savings account. In
addition, the actuarial reserve for his annuity less the amount
transferred to the members' savings account shall be transferred
from the annuity reserve account to the State accumulation
account.
§ 8531. State guarantee regarding the system.
Statutory interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and other
benefits granted by the board from the system under the
provisions of this part relating to the establishment and
administration of the system are hereby made obligations of the
Commonwealth. All income, interest, and dividends derived from
deposits and investments of the system authorized by this part
shall be used for the payment of the said obligations of the
Commonwealth and shall not be used for any obligations of the
plan or trust.
Section 24. Sections 8533 and 8533.1 of Title 24 are amended
and the sections are amended by adding subsections to read:
§ 8533. Taxation, attachment and assignment of funds.
20120HB2454PN3735 - 106 -
(a) General rule.--Except as provided in subsections (b),
(c) [and (d)], (d) and (e), the right of a person to a member's
annuity, a State annuity, or retirement allowance, to the return
of contributions, any benefit or right accrued or accruing to
any person under the provisions of this part, and the moneys in
the fund are hereby exempt from any State or municipal tax, and
exempt from levy and sale, garnishment, attachment, the
provisions of Article XIII.1 of the the act of April 9, 1929
(P.L.343, No.176), known as The Fiscal Code, or any other
process whatsoever, and shall be unassignable. No participant or
beneficiary, successor payee, spouse or alternate payee of a
participant shall have the ability to commute, sell, assign,
alienate, anticipate, mortgage, pledge, hypothecate, commutate
or otherwise transfer or convey any benefit or interest in an
individual investment account or rights to receive or direct
distributions under this part or under agreements entered into
under this part except as otherwise provided in this part and in
the case of either a member or a participant.
(b) Forfeiture.--Rights under this part shall be subject to
forfeiture as provided by the act of July 8, 1978 (P.L.752,
No.140), known as the Public Employee Pension Forfeiture Act.
Forfeitures under this subsection or under any other provision
of law may not be applied to increase the benefits that any
member would otherwise receive under this part. Notwithstanding
this paragraph, the act of July 8, 1978 (P.L.752, No.140), known
as the Public Employee Pension Forfeiture Act, and section 16(b)
of Article V of the Constitution of Pennsylvania, 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
20120HB2454PN3735 - 107 -
fines and restitution as provided by law. Furthermore, amounts
in the trust that have been ordered to be distributed to an
alternate payee as the result of an equitable 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 Public
Employee Pension Forfeiture Act or section 16(b) of the Article
V of the Constitution of Pennsylvania. Any accumulated employer
defined contributions forfeited as a result of this subsection
or other law shall be retained by the board and used for the
payment of expenses of the plan.
(c) Domestic relations order.--Rights under this part shall
be subject to attachment in favor of an alternate payee as set
forth in an approved domestic relations order.
(d) Direct rollover.--Effective with distributions made on
or after January 1, 1993, and notwithstanding any other
provision of this part to the contrary, a distributee may elect,
at the time and in the manner prescribed by the board, to have
any portion of an eligible rollover distribution paid directly
to an eligible retirement plan by way of a direct rollover. For
purposes of this subsection, a "distributee" includes a member,
a spouse, [and] a member's surviving spouse, a participant's
surviving spouse [and] a member's former spouse who is an
alternate payee under an approved domestic relations order and a
participant's former spouse who is an alternate payee under an
approved domestic relations order and anyone else authorized
under IRC and the plan terms approved by the board to have an
eligible rollover distribution paid directly to an eligible
retirement plan by way of a direct rollover. For purposes of
20120HB2454PN3735 - 108 -
this subsection, the term "eligible rollover distribution" has
the meaning given such term by IRC § 402(f)(2)(A) and "eligible
retirement plan" has the meaning given such term by IRC § 402(c)
(8)(B), except that a qualified trust shall be considered an
eligible retirement plan only if it accepts the distributee's
eligible rollover distribution; however, in the case of an
eligible rollover distribution to a surviving spouse, an
eligible retirement plan is an "individual retirement account"
or an "individual retirement annuity" as those terms are defined
in IRC § 408(a) and (b).
(e) Married participants.--No married participant may take
an action inconsistent with the spousal consent provisions of
this part.
§ 8533.1. Approval of domestic relations orders.
(a) Certification regarding members.--A domestic relations
order pertaining to a member of the system shall be certified as
an approved domestic relations order by the secretary of the
board, or his designated representative, only if such order
meets all of the following:
(1) Requires the system to provide any type or form of
benefit or any option applicable to members already provided
under this part.
(2) Requires the system to provide no more than the
total amount of benefits than the member would otherwise
receive (determined on the basis of actuarial value) unless
increased benefits are paid to the member or alternate payee
based upon cost-of-living increases or increases based on
other than actuarial value.
(3) Specifies the amount or percentage of the member's
benefits to be paid by the system to each such alternate
20120HB2454PN3735 - 109 -
payee or the manner in which the amount or percentage is to
be determined.
(4) Specifies the retirement option to be selected by
the member upon retirement or states that the member may
select any retirement option offered by this part upon
retirement.
(5) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(6) Does not grant an alternate payee any of the rights,
options or privileges of a member under this part.
(7) Requires the member to execute an authorization
allowing each alternate payee to monitor the member's
compliance with the terms of the domestic relations order
through access to information concerning the member
maintained by the system.
(a.1) Certification regarding participants.--A domestic
relations order pertaining to a participant shall be certified
as an approved domestic relations order by the secretary of the
board, or his designated representative, only if that order
meets all of the following:
(1) Does not require the plan to provide any type or
form of benefit or any option applicable to members of the
system or participants in the plan.
(2) Does not require the segregation of the alternate
payee's share of the participant's individual investment
account into a subaccount or newly established individual
account titled in the name of the alternate payee.
20120HB2454PN3735 - 110 -
(3) Does not require the plan to recover and/or
distribute any funds which were distributed to the
participant and/or at the participant's direction prior to
the approval of the domestic relations order by the secretary
of the board or his designated representative.
(4) Requires the plan to pay to the alternate payee no
more than the lesser of the amount of the participant's
individual investment account specified by the domestic
relations order or the amount of the participant's individual
investment account as of the date of the transfer of the
alternate payee's share to the alternate payee.
(5) States that the plan shall not be required to recoup
or make good for losses in value to the participant's
individual investment account incurred between the date of
the valuation of the account used for equitable distribution
purposes and the date of distribution to the alternate payee.
(6) Specifies the amount or percentage of the
participant's individual investment account to be paid to the
alternate payee and the date upon which such valuation is
based.
(7) Specifies the name and last known mailing address,
if any, of the member and the name and last known mailing
address of each alternate payee covered by the order and
states that it is the responsibility of each alternate payee
to keep a current mailing address on file with the system.
(8) Does not grant an alternate payee the rights,
privileges or options available to a participant.
(9) Requires the participant to execute an authorization
allowing each alternate payee to monitor the participant's
compliance with the terms of the domestic relations order
20120HB2454PN3735 - 111 -
through access to information concerning the participant
maintained by the system. Any authorization granted under
this section shall be construed only as an authorization for
the alternate payee to receive information concerning the
participant which relates to the administration, calculation,
and payment of the alternate payee's share of the
participant's account and not as an authorization to exercise
the rights afforded to participants or obtain information
that is not related to the administration, calculation and
payment of the alternate payee's share of the participant's
account.
(10) In the case of participants who have not yet begun
to receive distributions as of the date the domestic
relations order is approved by the secretary of the board or
his designated representative, requires the immediate
distribution of the alternate payee's share of the
participant's individual investment account, which may be
made by direct payment, eligible rollover or trustee-to-
trustee transfer to another eligible plan or qualified
account owned by the alternate payee.
(11) In the case of participants who are currently
receiving distributions from the trust as of the date the
domestic relations order is approved by the secretary of the
board or his designated representative, the domestic
relations order may not order the board to pay the alternate
payee more than the balance available in the participant's
individual investment account as of the date the order is
approved or require that distributions continue to the
alternate payee after the death of the participant and final
settlement of the participant's account.
20120HB2454PN3735 - 112 -
(b) Determination by secretary.--Within a reasonable period
of time after receipt of a domestic relations order, the
secretary of the board, or his designated representative, shall
determine whether this order is an approved domestic relations
order and notify the member or participant and each alternate
payee of this determination. Notwithstanding any other provision
of law, the exclusive remedy of any member, participant or
alternate payee aggrieved by a decision of the secretary of the
board, or his designated representative, shall be the right to
an adjudication by the board under 2 Pa.C.S. Ch. 5 (relating to
practice and procedure) with appeal therefrom to the
Commonwealth Court under 2 Pa.C.S. Ch. 7 (relating to judicial
review) and 42 Pa.C.S. § 763(a)(1) (relating to direct appeals
from government agencies).
(c) Other orders.--The requirements for approval identified
in [subsection (a)] subsections (a) and (a.1) shall not apply to
any domestic relations order which is an order for support as
that term is defined in 23 Pa.C.S. § 4302 (relating to
definitions) or an order for the enforcement of arrearages as
provided in 23 Pa.C.S. § 3703 (relating to enforcement of
arrearages). These orders shall be approved to the extent that
they do not attach moneys in excess of the limits on attachments
as established by the laws of this Commonwealth and the United
States, require distributions of benefits in a manner that would
violate the laws of the United States, any state or this
Commonwealth or require the distribution of funds for support or
enforcement of arrearages against any participant who is not
receiving distributions from the plan at the time such order is
entered.
(d) Obligation discharged.--Only the requirements of this
20120HB2454PN3735 - 113 -
part and any regulations promulgated hereunder shall be used to
govern the approval or disapproval of a domestic relations
order. Therefore, if the secretary of the board, or his
designated representative, acts in accordance with the
provisions of this part and any promulgated regulations in
approving or disapproving a domestic relations order, then the
obligations of the system or plan with respect to such approval
or disapproval shall be discharged.
Section 25. Sections 8533.3 and 8533.4(a) of Title 24 are
amended to read:
§ 8533.3. Irrevocable survivor annuitant.
Notwithstanding any other provisions of this part, a domestic
relations order pertaining to a member may provide for an
irrevocable survivor annuitant. A domestic relations order
requiring the designation of an irrevocable survivor annuitant
shall be deemed to be one that requires a member to designate an
alternate payee as a survivor annuitant and that prohibits the
removal or change of that survivor annuitant without approval of
a court of competent jurisdiction, except by operation of law.
Such a domestic relations order may be certified as an approved
domestic relations order by the secretary of the board, or his
designated representative, in which case the irrevocable
survivor annuitant so ordered by the court cannot be changed by
the member without approval by the court. A person ineligible to
be designated as a survivor annuitant may not be designated an
irrevocable survivor annuitant.
§ 8533.4. Amendment of approved domestic relations orders.
(a) Deceased alternate payee.--In the event that the
alternate payee predeceases the member or participant and there
are benefits payable to the alternate payee, the divorce court
20120HB2454PN3735 - 114 -
may amend the approved domestic relations order to substitute a
person for the deceased alternate payee to receive any benefits
payable to the deceased alternate payee.
* * *
Section 26. Title 24 is amended by adding sections to read:
§ 8533.5. Irrevocable successor payee.
Notwithstanding any other provisions of this part, a domestic
relations order pertaining to a participant may provide for an
irrevocable successor payee, only if the participant is
receiving a payment pursuant to a payment option provided by the
board that allows for a successor payee. A domestic relations
order requiring the designation of an irrevocable successor
payee shall be deemed to be one that requires a participant who
is receiving payments from an annuity or other distribution
option to designate an alternate payee as a successor payee and
that prohibits the removal or change of that successor payee
without approval of a court of competent jurisdiction, except by
operation of law. Such a domestic relations order may be
certified as an approved domestic relations order by the
secretary of the board, or his designated representative, in
which case the irrevocable successor payee so ordered by the
court cannot be changed by the participant except by approval by
the court. A person ineligible to be designated as a successor
payee may not be designated as an irrevocable successor payee. A
court may not name an irrevocable successor payee if the
alternate payee is eligible to receive a lump sum distribution
of the alternate payee's portion of the marital portion of the
pension benefit.
§ 8533.6. Exemption from spousal consent.
If a domestic relations order approved under section 8533.1
20120HB2454PN3735 - 115 -
(relating to approval of domestic relations orders) requires any
nomination of irrevocable beneficiary or irrevocable survivor
annuitant or the selection of any benefit by a participant, the
provisions of this part requiring the spouse of a married
participant to be nominated as beneficiary or designated as
survivor annuitant or to grant consent to any action, election
or application of a participant shall not apply to any action or
nomination so required by the approved domestic relations order
to the extent that the required action or nomination is
inconsistent with the rights of the spouse set forth in this
part.
Section 27. Section 8534 of Title 24 is amended to read:
§ 8534. Fraud and adjustment of errors.
(a) Penalty for fraud.--Any person who shall knowingly make
any false statement or shall falsify or permit to be falsified
any record or records of this system or plan in any attempt to
defraud the system or plan as a result of such act shall be
guilty of a misdemeanor of the second degree.
(b) Adjustment of errors.--Should any change or mistake in
records result in any member, participant, beneficiary, [or],
survivor annuitant or successor payee receiving from the system
or plan more or less than he would have been entitled to receive
had the records been correct, then regardless of the intentional
or unintentional nature of the error and upon the discovery of
such error, the board shall correct the error and if the error
affects contributions to or payments from the system, then so
far as practicable shall adjust the payments which may be made
for and to such person in such a manner that the actuarial
equivalent of the benefit to which he was correctly entitled
shall be paid. If the error affects payments from the plan, the
20120HB2454PN3735 - 116 -
board shall take such action as shall be provided for in the
plan document.
Section 28. Title 24 is amended by adding a section to read:
§ 8534.1. Spousal consent; participants.
(a) General rule.--No married participant may:
(1) take any action regarding rights in the plan;
(2) make an election regarding benefits in the plan; or
(3) file a valid application regarding the consent of
the participant's spouse unless the participant's spouse
consents in writing to that action, election or application.
A consent shall be valid only if the consent is:
(i) signed after the participant's spouse receives
counseling or affirmatively waives the right to receive
counseling;
(ii) witnessed before a notary public; and
(iii) filed with the board within 90 days of the
filing of the application or within 90 days of the date
the action or election would otherwise be valid. A
consent or lack thereof shall not affect the effective
date of any action or election.
(b) Exceptions to consent.--Spousal consent shall not be
required where:
(1) the spouse cannot be located; or
(2) such other circumstances as the board may establish
in the plan document.
(c) Legal guardians and powers of attorney.--A legal
guardian, even if the participant, can execute a valid spousal
consent. A participant, as agent under a power of attorney, may
not execute a valid spousal consent unless the spouse is
incapacitated and the spouse had executed a valid durable power
20120HB2454PN3735 - 117 -
of attorney.
Section 29. Section 8535 of Title 24 is amended to read:
§ 8535. Payments to school entities by Commonwealth.
For each school year beginning with the 1995-1996 school year
and ending with the 2013-2014 school year, each school entity
shall be paid by the Commonwealth for contributions based upon
school service of active members of the system and active
participants of the plan after June 30, 1995, as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
Fund based upon school service of all active members,
including members on activated military service leave, and
active participants of the plan whose effective dates of
employment with their school entities are after June 30,
1994, and who also had not previously been employed by any
school entity within this Commonwealth an amount equal to the
amount certified by the Public School Employees' Retirement
Board as necessary to provide, together with the members' and
participants' contributions, reserves on account of
prospective annuities, supplemental annuities and the premium
assistance program as provided in this part in accordance
with section 8328 (relating to actuarial cost method),
multiplied by the market value/income aid ratio of the school
entity. For no school year shall any school entity receive
less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code [of 1949] was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the Public School Employees' Retirement
Fund based upon school service of all active members,
20120HB2454PN3735 - 118 -
including members on activated military service leave, and
active participants of the plan who are not described in
paragraph (1), one-half of the amount certified by the Public
School Employees' Retirement Board as necessary to provide,
together with the members' and participants' contributions,
reserves on account of prospective annuities, supplemental
annuities and the premium assistance program as provided in
this part in accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to make payment to the Public School Employees'
Retirement Fund. School entities are expected to make the
full payment to the Public School Employees' Retirement Fund
in accordance with section 8327 (relating to payments by
employers) in the event the receipt of the Commonwealth's
portion of the employer's liability is delayed because of
delinquent salary reporting or other conduct by the school
entities.
Section 30. Title 24 is amended by adding a section to read:
§ 8535.1 Payments to school entities by Commonwealth commencing
with the 2015-2016 school year.
For each school year, beginning with the 2015-2016 school
year, each school entity shall be paid by the Commonwealth for
contributions based upon school service of active members of the
system and active participants of the plan after June 30, 2015,
as follows:
(1) The Commonwealth shall pay each school entity for
contributions made to the fund based upon school service of
all active members, including members on activated military
service leave, and active participants of the plan whose
20120HB2454PN3735 - 119 -
effective dates of employment with their school entities are
after June 30, 2015, and who also had not previously been
employed by any school entity within this Commonwealth an
amount equal to the amount certified by the board as
necessary to provide, together with the members' and
participants' contributions, reserves on account of
prospective annuities, supplemental annuities and the premium
assistance program as provided in this part in accordance
with section 8328 (relating to actuarial cost method),
multiplied by the market value/income aid ratio of the school
entity. For no school year shall any school entity receive
less than the amount that would result if the market
value/income aid ratio as defined in section 2501(14.1) of
the Public School Code was 0.50.
(2) The Commonwealth shall pay each school entity for
contributions made to the fund based upon school service of
all active members, including members on activated military
service leave, and active participants of the plan who are
not described in paragraph (1), one-half of the amount
certified by the board as necessary to provide, together with
the members' and participants' contributions, reserves on
account of prospective annuities, supplemental annuities and
the premium assistance program as provided in this part in
accordance with section 8328.
(3) School entities shall have up to five days after
receipt of the Commonwealth's portion of the employer's
liability to make payment to the fund. School entities are
expected to make the full payment to the fund in accordance
with section 8327 (relating to payments by employers) in the
event the receipt of the Commonwealth's portion of the
20120HB2454PN3735 - 120 -
employer's liability is delayed because of delinquent salary
reporting or other conduct by the school entities.
Section 31. 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 an annuitant or
survivor annuitant or the spouse or dependent of an annuitant or
survivor annuitant, or an individual who is a participant
receiving distributions or a successor payee, or the spouse or
dependent of a participant receiving distributions or successor
payee.
* * *
Section 32. Section 7306(a) of Title 51 is amended and the
section is amended by adding a subsection to read:
§ 7306. Retirement rights.
(a) Options available to employees.--Any employee who is a
member of a retirement system other than an active or inactive
participant of the School Employees' Defined Contribution Plan
at the time he is granted a military leave of absence shall be
entitled to exercise any one of the following options in regard
thereto:
(1) He may continue to make regular payments into the
fund during the period of his military leave of absence. The
amount of such payments shall be the same as they would have
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been, had he not been granted a military leave of absence,
but had instead remained actively in his employment. The time
of making such payments shall be mutually agreed upon by the
employee and the retirement association of which he is a
member, but in no event shall be less frequent than
semiannually. The employer shall make its contributions on
the same basis as is used to compute the employee's
contributions. In this case, his retirement rights shall be
determined on the basis that he was in the active, continuous
and uninterrupted employ of his employer for the period
during which he was on military leave of absence.
(2) He may discontinue making payments into the fund
during the period of his military leave of absence. In such
event, the employer shall also discontinue making its
contributions during this period. In this case, his
retirement rights shall be determined by completely
disregarding the period of his military leave of absence for
all purposes.
* * *
(d) Participants of the School Employees' Defined
Contribution Plan.--An employee who is an active or inactive
participant of the School Employees' Defined Contribution Plan
at the time he is granted a military leave of absence shall be
entitled to make contributions to the Public School Employees'
Defined Contribution Trust for such leave as provided in the
Public School Employees' Retirement Code.
Section 33. References in this act to the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) or the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), including for this
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purpose administrative regulations promulgated thereunder, are
intended to include such laws and regulations in effect on the
effective date of this section and as they may hereafter be
amended or supplemented or supplanted by successor provisions.
Section 34. (1) None of the following shall create in any
member of the Public School Employees' Retirement System or
participant in the Public School Employees' Defined Contribution
Plan or in any other person claiming an interest in the account
of any such member or participant a contractual right, either
express or implied, in such provisions nor in any construction
of 24 Pa.C.S. Pt. IV or 51 Pa.C.S., as so amended or
supplemented, or any rules or regulations adopted under 24
Pa.C.S. Pt. IV or 51 Pa.C.S.:
(i) Anything in this act which amends or supplements
provisions of 51 Pa.C.S. or 24 Pa.C.S. Pt. IV in relation
to requirements for:
(A) spousal consent;
(B) qualification of the Public School
Employees' Defined Contribution Plan as a qualified
pension plan under the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. §§ 401(a) and 415(b))
or compliance with the Uniformed Services Employment
and Reemployment Rights Act of 1994 (Public Law
103-353, 108 Stat. 3149);
(C) contributions to, participation in or
benefits from the Public School Employees' Defined
Contribution Plan or Public School Employees' Defined
Contribution Trust;
(D) domestic relations orders regarding
alternate payees of participants in the Public School
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Employees' Defined Contribution Plan
(ii) Any construction of 24 Pa.C.S. Pt. IV or 51
Pa.C.S, as so amended or supplemented, or any rules or
regulations adopted under 24 Pa.C.S. Pt. IV or 51
Pa.C.S., or any term or provision of the Public School
Employees' Defined Contribution Plan or Public School
Employees' Defined Contribution Trust, whether
established by statute or in the plan document or trust
declaration.
(2) The provisions of 24 Pa.C.S. Pt. IV shall remain
subject to the Internal Revenue Code of 1986 and the
Uniformed Services Employment and Reemployment Rights Act of
1994 (Public Law 103-353, 108 Stat. 3149), and regulations
under those statutes, and the General Assembly reserves to
itself such further exercise of its legislative power to
amend or supplement such provisions as may from time to time
be required in order to maintain the qualification of such
system as a qualified pension plan under section 401(a) and
other applicable provisions of the Internal Revenue Code of
1986 and the Uniformed Services Employment and Reemployment
Rights Act of 1994 (Public Law 103-353, 108 Stat. 3149).
Section 35. Nothing in this act shall be construed or deemed
to imply that, but for the expressed applications of the
limitations on benefits or other requirements under section
401(a) or applicable provisions of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 401 et seq.) to
participants in the Public School Employees' Defined
Contribution Plan, those limitations would not otherwise apply
to such participants or to members of the Public School
Employees' Retirement System and the benefits payable pursuant
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to 24 Pa.C.S. Pt. IV.
Section 36. Notwithstanding any provisions of this part to
the contrary, no contributions or benefit related to the Public
School Employees' Defined Contribution Plan shall be made or
payable to the extent that such contributions or benefits exceed
any limitation under section 415 of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. § 415) as in effect with
respect to governmental plans as such term is defined in section
414(d) of the Internal Revenue Code of 1986 (Public Law 99-514,
26 U.S.C. § 414(d)) on the date the contributions or benefit
payment becomes effective, provided however, that any increase
in any limitation under section 415 of the Internal Revenue Code
of 1986 shall be applicable to all current and future
participants. No future amendment of this part that increases
contributions or benefits either for active participants,
inactive participants or participants receiving distributions
shall be deemed by the rules of statutory construction or
otherwise to provide for contributions or benefits in excess of
any limitation, as adjusted or subsequently increased, provided
for under section 415 of the Internal Revenue Code unless
specifically so provided by legislation. Notwithstanding this
provision, any future increase in benefits for any participants
in the plan are intended to be applicable to the fullest extent
allowed by law, and this section authorizes any such increases
in limitations or allowable benefits.
Section 37. The amendment of 24 Pa.C.S. Pt. IV regarding the
establishment of and participation in the Public School
Employees' Defined Contribution Plan shall apply to all current
and former members of the Public School Employees' Retirement
System who have returned to school service on or after July 1,
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2015, after a termination of school service, without regard to
whether the termination occurred before or after July 1, 2015,
and without regard to whether the school employee was an
annuitant, inactive member, vestee or special vestee or withdrew
accumulated deductions during the period of termination. A
terminated school employee who returns to school service on or
after July 1, 2015, does so with the expressed and specific
understanding that he is subject to and accepts the terms and
provisions of 24 Pa.C.S. Pt. IV as they exist regarding
participation in the plan or membership in the system on the
effective date of reemployment, including, but not limited to,
benefit formulas and accrual rates, eligibility for annuities
and distributions, contribution rates, definitions, purchase of
creditable school, nonschool, school and nonschool service
provisions and actuarial and funding assumptions.
Section 38. Nothing in this act shall be construed or deemed
to imply that any calculation or actuarial method used by the
Public School Employees' Retirement Board, its actuaries or the
Public School Employees' Retirement System was not in accordance
with the provisions of the 24 Pa.C.S. Pt. IV or other applicable
law prior to the effective date of this section.
Section 39. Notwithstanding any other provision of law, any
change in accrued liability of the Public School Employees'
Retirement System created by this act as a result of changes in
benefits shall be funded as a level percentage of compensation
over a period of 30 years beginning July 1, 2015, subject to any
limits imposed by this act on employer contributions to the
Public School Employees' Retirement System. For purposes of this
section, the provisions of Sections 8328(c)(6) and (c)(7) shall
apply.
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Section 40. Nothing in this act shall be construed or deemed
to imply that any interpretation or application of the
provisions of 24 Pa.C.S. Pt. IV or benefits available to members
of the Public School Employees' Retirement System was not in
accordance with the provisions of 24 Pa.C.S. Pt. IV or other
applicable law, including the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.) and the Uniformed
Services Employment and Reemployment Rights Act of 1994 (Public
Law 103-353, 108 Stat. 3149) prior to the effective date of this
section.
Section 41. This act shall be construed and administered in
such a manner that the Public School Employees' Defined
Contribution Plan will satisfy the requirements necessary to
qualify as a qualified pension plan under section 401(a) and
other applicable provisions of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.) and the Uniformed
Services Employment and Reemployment Rights Act of 1994 (Public
Law 103-353, 108 Stat. 3149). The rules, regulations and
procedures adopted and promulgated by the Public School
Employees' Retirement Board, and the terms and conditions of the
plan document and trust declaration adopted by the Public School
Employees' Retirement Board, may include those necessary to
accomplish the purpose of this section.
Section 42. If the application of any provision of this act
to any person is held invalid, the invalidity shall not affect
the application of this act to any other person, but the entire
act shall be invalid as to the person to whom part of it was
invalid. In the event that a school employee's participation in
the Public School Employees' Defined Contribution Plan is
declared invalid, the affected school employee shall return to
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the Public School Employees' Defined Contribution Trust any
distributions and shall be granted status and service credit in
the Public School Employees' Retirement System and shall be
required to make all contributions to the Public School
Employees' Retirement Fund as if this act had not been enacted.
The affected school employee's accumulated mandatory participant
contributions and accumulated voluntary contributions shall be
transferred to the affected employee's member savings account to
the extent necessary to fund that account with the member
contributions and interest that would have been standing to the
member's account had this act not been passed. Any remaining
balance shall be refunded to the school employee who shall be
responsible for paying to the fund in a manner and time
determined by the Public School Employees' Retirement Board any
additional funds required if the accumulated mandatory
participant contributions and accumulated voluntary
contributions were not sufficient. The accumulated employer
defined contributions shall be transferred to the State
accumulation account, and no further amount shall be due from
the employer or refund paid on account of the service performed
as a participant.
Section 43. This act shall take effect immediately.
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