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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY D. WHITE, ORIE, FOLMER, VOGEL, YAW, SMUCKER, ALLOWAY, PIPPY, BRUBAKER, EICHELBERGER, RAFFERTY, VANCE, WAUGH, MENSCH, GREENLEAF, WARD AND WOZNIAK, MARCH 28, 2011 |
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| REFERRED TO FINANCE, MARCH 28, 2011 |
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| AN ACT |
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1 | Amending Title 71 (State Government) of the Pennsylvania |
2 | Consolidated Statutes, further providing for definitions, for |
3 | mandatory and optional membership and for classes of service; |
4 | and providing for State Legislators' Defined Contribution |
5 | Program. |
6 | The General Assembly of the Commonwealth of Pennsylvania |
7 | hereby enacts as follows: |
8 | Section 1. Section 5102 of Title 71 of the Pennsylvania |
9 | Consolidated Statutes is amended by adding a definition to read: |
10 | § 5102. Definitions. |
11 | The following words and phrases as used in this part, unless |
12 | a different meaning is plainly required by the context, shall |
13 | have the following meanings: |
14 | * * * |
15 | "State Legislators' Defined Contribution Program." The |
16 | defined contribution program established under Ch. 56 (relating |
17 | to State Legislators' Defined Contribution Program). |
18 | * * * |
19 | Section 2. Section 5301(a)(3) and (c) of Title 71 are |
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1 | amended and subsection (a) is amended by adding paragraphs to |
2 | read: |
3 | § 5301. Mandatory and optional membership. |
4 | (a) Mandatory membership.--Membership in the system shall be |
5 | mandatory as of the effective date of employment for all State |
6 | employees except the following: |
7 | * * * |
8 | (3) Members of the General Assembly, other than members |
9 | of the General Assembly described under paragraphs (17) and |
10 | (18). |
11 | * * * |
12 | (17) Any person who is not a member of the General |
13 | Assembly on November 30, 2012, and who becomes a member of |
14 | the General Assembly on or after December 1, 2012. |
15 | (18) Any person who is a member of the General Assembly |
16 | on November 30, 2012, and who is reelected to serve as a |
17 | member of the General Assembly beginning on or after December |
18 | 1, 2012. |
19 | * * * |
20 | (c) Prohibited membership.-- |
21 | (1) The State employees listed in subsection (a)(12), |
22 | (13), (14) [and (15)], (15) and (17) shall not have the right |
23 | to elect membership in the system. |
24 | (2) A member of the General Assembly described under |
25 | subsection (a)(18) shall have no right to be an active member |
26 | of the system and accrue credited service for State service |
27 | as a member of the General Assembly subsequent to November |
28 | 30, 2012. |
29 | * * * |
30 | Section 3. Section 5306(a.2)(1) of Title 71, amended |
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1 | November 23, 2010 (P.L.1269, No.120), is amended to read: |
2 | § 5306. Classes of service. |
3 | * * * |
4 | (a.2) Class of membership for members of the General |
5 | Assembly.-- |
6 | (1) A person who: |
7 | (i) becomes a member of the General Assembly and an |
8 | active member of the system after June 30, 2001, and |
9 | before December 1, 2010; or |
10 | (ii) is a member of the General Assembly on July 1, |
11 | 2001, but is not an active member of the system because |
12 | membership in the system is optional pursuant to section |
13 | 5301 and who becomes an active member after June 30, |
14 | 2001, and before December 1, 2010; |
15 | and who was not a State police officer on or after July 1, |
16 | 1989, shall be classified as a Class D-4 member for State |
17 | service as a member of the General Assembly performed prior |
18 | to December 1, 2012 and receive credit as a Class D-4 member |
19 | for all State service as a member of the General Assembly |
20 | performed prior to December 1, 2012, upon payment of regular |
21 | member contributions for Class D-4 service and, subject to |
22 | the limitations contained in subsection (a.1)(7), if |
23 | previously a member of Class A or employed in a position for |
24 | which Class A service could have been earned, shall receive |
25 | Class AA service credit for all Class A State service, other |
26 | than State service performed as a State police officer or for |
27 | which a class of service other than Class A or Class D-4 was |
28 | or could have been elected or credited. |
29 | * * * |
30 | Section 4. Title 71 is amended by adding a chapter to read: |
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1 | CHAPTER 56 |
2 | STATE LEGISLATORS' DEFINED CONTRIBUTION PROGRAM |
3 | Sec. |
4 | 5601. Definitions. |
5 | 5602. Establishment. |
6 | 5603. State Legislators' Defined Contribution Program. |
7 | 5604. Powers and duties of board. |
8 | 5605. Prohibited interests. |
9 | 5606. Investments and expenses. |
10 | 5607. Trust fund. |
11 | 5608. Election period. |
12 | 5609. Participant contributions. |
13 | 5610. Employer contributions. |
14 | 5611. Vesting. |
15 | 5612. Prohibition. |
16 | § 5601. Definitions. |
17 | The following words and phrases when used in this chapter |
18 | shall have the meanings given to them in this section unless the |
19 | context clearly indicates otherwise: |
20 | "Participant." A qualified employee who elects to |
21 | participate in the State Legislators' Defined Contribution |
22 | Program. |
23 | "Program." The State Legislators' Defined Contribution |
24 | Program. |
25 | "Qualified employee." Any of the following: |
26 | (1) A person who is not a member of the General Assembly |
27 | on November 30, 2012, and who becomes a member of the General |
28 | Assembly on or after December 1, 2012. |
29 | (2) A person who is a member of the General Assembly on |
30 | November 30, 2012, and who is reelected to serve as a member |
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1 | of the General Assembly beginning on or after December 1, |
2 | 2012. |
3 | "Trust fund." The trust created under section 5607 (relating |
4 | to trust fund). |
5 | § 5602. Establishment. |
6 | The State Legislators' Defined Contribution Program is |
7 | established in accordance with this chapter. |
8 | § 5603. State Legislators' Defined Contribution Program. |
9 | The board shall administer the program, which shall be a |
10 | defined contribution retirement program for participants. The |
11 | board shall permit qualified employees to elect to participate |
12 | in the program. The benefits to be provided for or on behalf of |
13 | participants in the program shall be provided through |
14 | participant-directed investments, in accordance with IRC § |
15 | 401(a). Participants and employers shall contribute to the |
16 | program in accordance with sections 5609 (relating to |
17 | participant contributions) and 5610 (relating to employer |
18 | contributions). |
19 | § 5604. Powers and duties of board. |
20 | In order to administer the program, the powers and duties of |
21 | the board shall include all of the following: |
22 | (1) Entering into written agreements with financial or |
23 | other organizations to administer the program for |
24 | participants and to invest funds held under the program. The |
25 | program and any written agreement shall comply with the IRC, |
26 | including the plan qualification requirements imposed on |
27 | governmental plans under IRC § 401(a). |
28 | (2) Establishing procedures whereby qualified employees |
29 | may elect to participate in the program and participants may |
30 | change their investment choices on a periodic basis, as |
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1 | determined by the board, which shall not be less frequently |
2 | than quarterly. |
3 | (3) Arranging for a deduction, from the compensation of |
4 | participants, of participant contributions to the program. |
5 | (4) Establishing standards and criteria for selection by |
6 | the board of the financial institutions, insurance companies |
7 | or other organizations that may be qualified as managers, on |
8 | behalf of the board, of funds accumulated under the program |
9 | on behalf of any participant. |
10 | (5) Establishing standards and criteria for providing |
11 | options to qualified employees and participants concerning |
12 | the method of investing amounts accumulated under the |
13 | program. The investment options shall represent a broad cross |
14 | section of asset classes and risk profiles and shall include |
15 | lifestyle funds that are based upon age and projected |
16 | retirement date. |
17 | (6) Establishing procedures for informing qualified |
18 | employees and participants of specific options offered by |
19 | qualified managers. |
20 | (7) Designing a comprehensive, balanced and impartial |
21 | educational program to assist qualified employees and |
22 | participants in their choice of investment options under the |
23 | program, which shall include retirement planning education |
24 | and financial planning guidance on matters such as investment |
25 | diversification, investment risks, investment costs and asset |
26 | allocation. |
27 | (8) Establishing standards and criteria for the |
28 | disclosure to qualified employees and participants of the |
29 | anticipated and actual income attributable to the amounts, |
30 | property and rights and all fees, costs and charges to be |
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1 | made against the amounts accumulated to cover the costs of |
2 | administering and managing the funds. |
3 | (9) Establishing a process for election to participate |
4 | in the program. |
5 | (10) Performing an annual review of any qualified fund |
6 | manager for the purpose of assuring it continues to meet all |
7 | standards and criteria established. |
8 | (11) Allowing for rollovers into the program from plans |
9 | of other employers, regardless of the employer being a |
10 | private employer or a public employer. |
11 | (12) Allowing a former participant to maintain his or |
12 | her account within the program. |
13 | (13) Establishing procedures whereby any participant may |
14 | do one of the following: |
15 | (i) Withdraw accumulated amounts in cases of |
16 | financial hardship or separation of a participant from |
17 | State service or as otherwise permitted under the IRC. |
18 | (ii) Dispose of a participant's account under a |
19 | domestic relations order unless in conflict with the IRC. |
20 | (14) Administering the program in compliance with the |
21 | IRC. |
22 | (15) Promulgating regulations necessary to administer |
23 | this chapter. |
24 | (16) Establishing procedures to provide for the lawful |
25 | payment of benefits. |
26 | § 5605. Prohibited interests. |
27 | No member or employee of the board shall have any direct or |
28 | indirect financial interest in any of the investment products |
29 | that are made available to participants under the program. |
30 | § 5606. Investments and expenses. |
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1 | (a) Loss.--The board shall not be responsible for any |
2 | investment loss incurred in the program or for failure of any |
3 | investment to earn any specific or expected return or to earn as |
4 | much as any other investment opportunity, whether or not the |
5 | other investment opportunity was offered to participants in the |
6 | program. The expenses arising from allowing qualified employees |
7 | to elect to participate in the program and participants to |
8 | choose a fund manager, deduct from compensation amounts |
9 | contributed under the program and transfer to the fund manager |
10 | amounts so deducted shall be borne by the board. All other |
11 | expenses arising from the administration of the program shall be |
12 | assessed against the accounts created on behalf of participants |
13 | either by the fund managers or by the board. |
14 | (b) Investment.--Investment of contributions by any |
15 | corporation, institution, insurance company or custodial bank |
16 | that the board has approved shall not be unreasonably delayed |
17 | and the investment of contributions shall not be delayed more |
18 | than 30 days from the date of payroll deduction to the date that |
19 | funds are invested. Any interest earned on the funds pending |
20 | investment shall be allocated to the Commonwealth and credited |
21 | to the accounts of participants who are then participating in |
22 | the program unless the interest is used to defray administrative |
23 | costs and fees that would otherwise be required to be borne by |
24 | participants who are then participating in the program. |
25 | § 5607. Trust fund. |
26 | (a) Establishment.--All assets and income that have been or |
27 | shall be withheld by the employer in accordance with this |
28 | chapter shall be held in trust in any funding vehicle permitted |
29 | by applicable provisions of the IRC for the exclusive benefit of |
30 | the program's participants and their beneficiaries until the |
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1 | time when the funds are distributed to the participant or the |
2 | participant's beneficiary in accordance with the terms of the |
3 | agreement between the participant and the board. All such assets |
4 | and income withheld by the employer shall be held in trust as |
5 | set forth in this subsection in a special fund created within |
6 | the State Treasury of which the State Treasurer shall be |
7 | custodian. The assets of the program shall be held in trust for |
8 | the exclusive benefit of the program's participants and |
9 | beneficiaries and for the payment of reasonable expenses of the |
10 | program in accordance with section 5606 (relating to investments |
11 | and expenses) and IRC § 401. |
12 | (b) Trustees.--The members of the board shall be the |
13 | trustees of the trust established under subsection (a). |
14 | (c) Attachment.--Notwithstanding any other provision of law, |
15 | any benefit or interest available under the program, any right |
16 | to receive or direct payments under the program or any |
17 | distribution of payment made under the program shall not, except |
18 | as expressly specified by the program, be subject to assignment, |
19 | alienation, garnishment, attachment, transfer, anticipation, |
20 | sale, mortgage, pledge, hypothecation, commutation, execution or |
21 | levy, whether by voluntary or involuntary act of any interested |
22 | person. |
23 | § 5608. Election period. |
24 | A qualified employee may elect to participate in the program |
25 | by filing written notice with the board, in accordance with |
26 | procedures established by the board under section 5604(2) |
27 | (relating to powers and duties of board) within 90 days after |
28 | the date on which he or she become a qualified employee. |
29 | § 5609. Participant contributions. |
30 | Regular participant contributions shall be made to the |
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1 | program on behalf of each participant for current service in an |
2 | amount equal to a percentage of the participant's pensionable |
3 | compensation. The employer shall cause participant contributions |
4 | for current service to be made and deducted from each payroll. |
5 | Participants may elect to contribute to the program on their |
6 | behalf to the extent permitted by law. |
7 | § 5610. Employer contributions. |
8 | The General Assembly shall make payments to the trust fund on |
9 | behalf of the participant. The amount of the payments shall |
10 | match the contribution made by the participant under section |
11 | 5609 (relating to participant contributions) dollar for dollar, |
12 | but shall not exceed 4% of the participant's pensionable |
13 | earnings. |
14 | § 5611. Vesting. |
15 | A participant shall be vested after completing three years of |
16 | service as a member of the General Assembly during which he or |
17 | she is a participant in the program with respect to employer |
18 | contributions paid on behalf of the participant to the program |
19 | plus interest and earnings on the employer contributions but |
20 | minus investment fees and administrative charges. |
21 | § 5612. Prohibition. |
22 | No qualified employee may make an election to participate in |
23 | the program prior to December 1, 2012. |
24 | Section 5. This act shall take effect in 60 days. |
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