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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| HOUSE BILL |
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| INTRODUCED BY SCHRODER, CREIGHTON, CUTLER, HARRIS, MUSTIO, ROAE, ROCK, TALLMAN AND VULAKOVICH, MARCH 24, 2009 |
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| REFERRED TO COMMITTEE ON FINANCE, MARCH 24, 2009 |
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| AN ACT |
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1 | Amending Title 71 (State Government) of the Pennsylvania |
2 | Consolidated Statutes, providing for a State Legislators' |
3 | Defined Contribution Program. |
4 | The General Assembly of the Commonwealth of Pennsylvania |
5 | hereby enacts as follows: |
6 | Section 1. Section 5102 of Title 71 of the Pennsylvania |
7 | Consolidated Statutes is amended by adding a definition to read: |
8 | § 5102. Definitions. |
9 | The following words and phrases as used in this part, unless |
10 | a different meaning is plainly required by the context, shall |
11 | have the following meanings: |
12 | * * * |
13 | "State Legislators' Defined Contribution Program." The |
14 | defined contribution program established under Ch. 56 (relating |
15 | to State Legislators' Defined Contribution Program). |
16 | * * * |
17 | Section 2. Section 5301(a)(3) and (c) are amended and |
18 | subsection (a) is amended by adding paragraphs to read: |
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1 | § 5301. Mandatory and optional membership. |
2 | (a) Mandatory membership.--Membership in the system shall be |
3 | mandatory as of the effective date of employment for all State |
4 | employees except the following: |
5 | * * * |
6 | (3) Members of the General Assembly, except for members |
7 | of the General Assembly described under paragraphs (17) and |
8 | (18). |
9 | * * * |
10 | (17) Any person who is not a member of the General |
11 | Assembly on November 30, 2010, and who becomes a member of |
12 | the General Assembly on or after December 1, 2010. |
13 | (18) Any person who is a member of the General Assembly |
14 | on November 30, 2010, and who is elected to serve as a member |
15 | of the General Assembly beginning on or after December 1, |
16 | 2010, who elects to participate in the program in accordance |
17 | with Ch. 56 (relating to State Legislators’ Defined |
18 | Contribution Program). |
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 for service as a member of the General Assembly |
27 | subsequent to the date on which he or she elects to |
28 | participate in the program under Ch. 56 (relating to State |
29 | Legislators’ Defined Contribution Program). |
30 | * * * |
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1 | Section 3. Section 5306(a.2)(1)(i) of Title 71 of the |
2 | Pennsylvania Consolidated Statutes is amended to read: |
3 | § 5306. Classes of service. |
4 | * * * |
5 | (a.2) Class of membership for members of the General |
6 | Assembly.-- |
7 | (1) A person who: |
8 | (i) becomes a member of the General Assembly and an |
9 | active member of the system after June 30, 2001, and |
10 | before December 1, 2010; or |
11 | * * * |
12 | Section 4. Title 71 is amended by adding a chapter to read: |
13 | CHAPTER 56 |
14 | STATE LEGISLATORS' DEFINED CONTRIBUTION PROGRAM |
15 | Sec. |
16 | 5601. Definitions. |
17 | 5602. Establishment. |
18 | 5603. State Legislators' Defined Contribution Program. |
19 | 5604. Powers and duties of board. |
20 | 5605. Prohibited interests. |
21 | 5606. Investments and expenses. |
22 | 5607. Trust fund. |
23 | 5608. Election period. |
24 | 5609. Participant contributions. |
25 | 5610. Employer contributions. |
26 | 5611. Vesting. |
27 | 5612. Prohibition. |
28 | § 5601. Definitions. |
29 | The following words and phrases when used in this chapter |
30 | shall have the meanings given to them in this section unless the |
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1 | context clearly indicates otherwise: |
2 | "Participant." A qualified employee who elects to |
3 | participate in the State Legislators' Defined Contribution |
4 | Program. |
5 | "Program." The State Legislators' Defined Contribution |
6 | Program. |
7 | "Qualified employee." Any of the following: |
8 | (1) A person who is not a member of the General Assembly |
9 | on November 30, 2010, and who becomes a member of the General |
10 | Assembly on or after December 1, 2010. |
11 | (2) A person who is a member of the General Assembly on |
12 | November 30, 2010, and who is elected to serve as a member of |
13 | the General Assembly beginning on or after December 1, 2010. |
14 | "Trust fund." The trust created under section 5607 (relating |
15 | to trust fund). |
16 | § 5602. Establishment. |
17 | The State Legislators’ Defined Contribution Program is |
18 | established in accordance with this chapter. |
19 | § 5603. State Legislators' Defined Contribution Program. |
20 | The board shall administer the program, which shall be a |
21 | defined contribution retirement program for participants. The |
22 | benefits to be provided for or on behalf of participants in the |
23 | program shall be provided through participant-directed |
24 | investments, in accordance with IRC § 401(a). Participants and |
25 | employers shall contribute to the program in accordance with |
26 | sections 5609 (relating to participant contributions) and 5610 |
27 | (relating to employer contributions). |
28 | § 5604. Powers and duties of board. |
29 | In order to administer the program, the powers and duties of |
30 | the board shall include all of the following: |
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1 | (1) Entering into written agreements with financial or |
2 | other organizations to administer the program for |
3 | participants and to invest funds held under the program. The |
4 | program and any written agreement shall comply with the IRC, |
5 | including the plan qualification requirements imposed on |
6 | governmental plans under IRC § 401(a). |
7 | (2) Establishing procedures whereby qualified employees |
8 | may elect to participate in the program and participants may |
9 | change their investment choices on a periodic basis, as |
10 | determined by the board, which shall not be less frequently |
11 | than quarterly. |
12 | (3) Arranging for a deduction, from the compensation of |
13 | participants, of participant contributions to the program. |
14 | (4) Establishing standards and criteria for selection by |
15 | the board of the financial institutions, insurance companies |
16 | or other organizations that may be qualified as managers, on |
17 | behalf of the board, of funds accumulated under the program |
18 | on behalf of any participant. |
19 | (5) Establishing standards and criteria for providing |
20 | options to qualified employees and participants concerning |
21 | the method of investing amounts accumulated under the |
22 | program. The investment options shall represent a broad cross |
23 | section of asset classes and risk profiles and shall include |
24 | lifestyle funds that are based upon age and projected |
25 | retirement date. |
26 | (6) Establishing procedures for informing qualified |
27 | employees and participants of specific options offered by |
28 | qualified managers. |
29 | (7) Designing a comprehensive, balanced and impartial |
30 | educational program to assist qualified employees and |
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1 | participants in their choice of investment options under the |
2 | program, which shall include retirement planning education |
3 | and financial planning guidance on matters such as investment |
4 | diversification, investment risks, investment costs and asset |
5 | allocation. |
6 | (8) Establishing standards and criteria for the |
7 | disclosure to qualified employees and participants of the |
8 | anticipated and actual income attributable to the amounts, |
9 | property and rights and all fees, costs and charges to be |
10 | made against the amounts accumulated to cover the costs of |
11 | administering and managing the funds. |
12 | (9) Establishing a process for election to participate |
13 | in the program. |
14 | (10) Performing an annual review of any qualified fund |
15 | manager for the purpose of assuring it continues to meet all |
16 | standards and criteria established. |
17 | (11) Allowing for rollovers into the program from plans |
18 | of other employers, regardless of the employer being a |
19 | private employer or a public employer. |
20 | (12) Allowing a former participant to maintain his or |
21 | her account within the program. |
22 | (13) Establishing procedures whereby any participant may |
23 | do one of the following: |
24 | (i) Withdraw accumulated amounts in cases of |
25 | financial hardship or separation of a participant from |
26 | State service or as otherwise permitted under the IRC. |
27 | (ii) Dispose of a participant's account under a |
28 | domestic relations order unless in conflict with the IRC. |
29 | (14) Administering the program in compliance with the |
30 | IRC. |
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1 | (15) Promulgating regulations necessary to administer |
2 | this chapter. |
3 | (16) Establish procedures to provide for the lawful |
4 | payment of benefits. |
5 | § 5605. Prohibited interests. |
6 | No member or employee of the board shall have any direct or |
7 | indirect financial interest in any of the investment products |
8 | that are made available to participants under the program. |
9 | § 5606. Investments and expenses. |
10 | (a) Loss.--The board shall not be responsible for any |
11 | investment loss incurred in the program or for failure of any |
12 | investment to earn any specific or expected return or to earn as |
13 | much as any other investment opportunity, whether or not the |
14 | other investment opportunity was offered to participants in the |
15 | program. The expenses arising from allowing qualified employees |
16 | to elect to participate in the program and participants to |
17 | choose a fund manager, deduct from compensation amounts |
18 | contributed under the program and transfer to the fund manager |
19 | amounts so deducted shall be borne by the board. All other |
20 | expenses arising from the administration of the program shall be |
21 | assessed against the accounts created on behalf of participants |
22 | either by the fund managers or by the board. |
23 | (b) Investment.--Investment of contributions by any |
24 | corporation, institution, insurance company or custodial bank |
25 | that the board has approved shall not be unreasonably delayed |
26 | and the investment of contributions shall not be delayed more |
27 | than 30 days from the date of payroll deduction to the date that |
28 | funds are invested. Any interest earned on the funds pending |
29 | investment shall be allocated to the Commonwealth and credited |
30 | to the accounts of participants who are then participating in |
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1 | the program unless the interest is used to defray administrative |
2 | costs and fees that would otherwise be required to be borne by |
3 | participants who are then participating in the program. |
4 | § 5607. Trust fund. |
5 | (a) Establishment.--All assets and income that have been or |
6 | shall be withheld by the employer in accordance with this |
7 | chapter shall be held in trust in any funding vehicle permitted |
8 | by applicable provisions of the IRC for the exclusive benefit of |
9 | the program's participants and their beneficiaries until the |
10 | time when the funds are distributed to the participant or the |
11 | participant's beneficiary in accordance with the terms of the |
12 | agreement between the participant and the board. All such assets |
13 | and income withheld by the employer shall be held in trust as |
14 | set forth in this subsection in a special fund created within |
15 | the State Treasury of which the State Treasurer shall be |
16 | custodian. The assets of the program shall be held in trust for |
17 | the exclusive benefit of the program's participants and |
18 | beneficiaries and for the payment of reasonable expenses of the |
19 | program in accordance with section 5606 (relating to investments |
20 | and expenses) and IRC § 401. |
21 | (b) Trustees.--The members of the board shall be the |
22 | trustees of the trust established under subsection (a). |
23 | (c) Attachment.--Notwithstanding any other provision of law, |
24 | any benefit or interest available under the program, any right |
25 | to receive or direct payments under the program or any |
26 | distribution of payment made under the program shall not, except |
27 | as expressly specified by the program, be subject to assignment, |
28 | alienation, garnishment, attachment, transfer, anticipation, |
29 | sale, mortgage, pledge, hypothecation, commutation, execution or |
30 | levy, whether by voluntary or involuntary act of any interested |
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1 | person. |
2 | § 5608. Election period. |
3 | The election period for a qualified employee who is not a |
4 | member of the General Assembly on November 30, 2010, and who |
5 | becomes a member of the General Assembly on or after December 1, |
6 | 2010, shall begin on the date that the person becomes a |
7 | qualified employee and shall end 90 days after that date. The |
8 | election period for a qualified employee who is not a member of |
9 | the General Assembly on November 30, 2010, and is elected to |
10 | serve as a member of the General Assembly beginning on or after |
11 | December 1, 2010, shall begin on the first day of service as a |
12 | member of the General Assembly and shall end 90 days after that |
13 | date. |
14 | § 5609. Participant contributions. |
15 | Regular participant contributions shall be made to the |
16 | program on behalf of each participant for current service in an |
17 | amount equal to a percentage of the participant's pensionable |
18 | compensation. The employer shall cause participant contributions |
19 | for current service to be made and deducted from each payroll. |
20 | Participants may elect to contribute to the program on their |
21 | behalf to the extent permitted by law. |
22 | § 5610. Employer contributions. |
23 | The General Assembly shall make payments to the trust fund on |
24 | behalf of the participant. The amount of the payments shall |
25 | match the contribution made by the participant under section |
26 | 5609 (relating to participant contribution) dollar for dollar, |
27 | but shall not exceed 4% of the participant’s pensionable |
28 | earnings. |
29 | § 5611. Vesting. |
30 | A participant shall be vested after completing three years of |
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1 | service as a member of the General Assembly during which he or |
2 | she is a participant in the program with respect to employer |
3 | contributions paid on behalf of the participant to the program |
4 | plus interest and earnings on the employer contributions but |
5 | minus investment fees and administrative charges. |
6 | § 5612. Prohibition. |
7 | No qualified employee may make an election to participate in |
8 | the program prior to December 1, 2010. |
9 | Section 5. This act shall take effect in 60 days. |
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