Bill Text: PA HB552 | 2011-2012 | Regular Session | Introduced

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Bill Title: Further providing for definitions and for mandatory and optional membership; and providing for the State Employees' Optional Retirement Program.

Spectrum: Slight Partisan Bill (Republican 7-3)

Status: (Introduced - Dead) 2011-02-08 - Referred to STATE GOVERNMENT [HB552 Detail]

Download: Pennsylvania-2011-HB552-Introduced.html

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PRINTER'S NO. 519
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 552 Session of2011
INTRODUCED BY PETRI, CALTAGIRONE, D. COSTA, GABLER, MURT, RAPP, ROAE AND VULAKOVICH, FEBRUARY 8, 2011
REFERRED TO COMMITTEE ON STATE GOVERNMENT, FEBRUARY 8, 2011
AN ACT
Amending Title 71 (State Government) of the Pennsylvania
Consolidated Statutes, further providing for definitions and
for mandatory and optional membership; and providing for the
State Employees' Optional Retirement Program.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 5102 of Title 71 of the Pennsylvania
Consolidated Statutes is amended by adding a definition to read:
§ 5102. Definitions.
The following words and phrases as used in this part, unless
a different meaning is plainly required by the context, shall
have the following meanings:
* * *
"State Employees' Optional Retirement Program." The
alternative defined contribution retirement program established
under Subchapter F of Chapter 59 (relating to State Employees'
Optional Retirement Program).
* * *
Section 2. Section 5301 of Title 71 is amended to read:
§ 5301. Mandatory and optional membership.
(a) Mandatory membership.--Membership in the system shall be
mandatory as of the effective date of employment for all State
employees except the following:
(1) Governor.
(2) Lieutenant Governor.
(3) Members of the General Assembly.
(4) Heads or deputy heads of administrative departments.
(5) Members of any independent administrative board or
commission.
(6) Members of any departmental board or commission.
(7) Members of any advisory board or commission.
(8) Secretary to the Governor.
(9) Budget Secretary.
(10) Legislative employees.
(11) School employees who have elected membership in the
Public School Employees' Retirement System.
(12) School employees who have elected membership in an
independent retirement program approved by the employer,
provided that in no case, except as hereinafter provided,
shall the employer contribute on account of such elected
membership at a rate greater than the employer normal
contribution rate as determined in section 5508(b) (relating
to actuarial cost method). For the fiscal year 1986-1987 an
employer may contribute on account of such elected membership
at a rate which is the greater of 7% or the employer normal
contribution rate as determined in section 5508(b) and for
the fiscal year 1992-1993 and all years after that at a rate
of 9.29%.
(13) Persons who have elected to retain membership in
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the retirement system of the political subdivision by which
they were employed prior to becoming eligible for membership
in the State Employees' Retirement System.
(14) Persons who are not members of the system and are
employed on a per diem or hourly basis for less than 100 days
or 750 hours in a 12-month period.
(15) Employees of the Philadelphia Regional Port
Authority who have elected to retain membership in the
pension plan or retirement system in which they were enrolled
as employees of the predecessor Philadelphia Port Corporation
prior to the creation of the Philadelphia Regional Port
Authority.
(16) Employees of the Juvenile Court Judges' Commission
who, before the effective date of this paragraph, were
transferred from the State System of Higher Education to the
Juvenile Court Judges' Commission as a result of an
interagency transfer of staff approved by the Office of
Administration and who, while employees of the State System
of Higher Education, had elected membership in an independent
retirement program approved by the employer.
(17) Any person who becomes a State employee on or after
July 1, 2011, and who elects to participate in the State
Employees' Optional Retirement Program under Subchapter F of
Chapter 59 (relating to State Employees' Optional Retirement
Program).
(b) Optional membership.--The State employees listed in
subsection (a)(1) through (11) shall have the right to elect
membership in the system; once such election is exercised,
membership shall continue until the termination of State
service.
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(c) Prohibited membership.--The State employees listed in
subsection (a)(12), (13), (14) [and], (15) and (17) shall not
have the right to elect membership in the system.
(d) Return to service.--An annuitant who returns to service
as a State employee shall resume active membership in the system
as of the effective date of employment, except as otherwise
provided in section 5706(a) (relating to termination of
annuities), regardless of the optional membership category of
the position.
(e) Election prohibited.--Notwithstanding subsections (a)
(13) and (c), county employees who are transferred to State
employment and become State employees pursuant to 42 Pa.C.S. §
1905 (relating to county-level court administrators) shall not
have the election to remain a contributor in the retirement
system or pension plan of the county by which they were employed
prior to becoming eligible for membership in the State
Employees' Retirement System. Such employees shall be mandatory
members of the system provided they are otherwise eligible and
unless they are eligible for optional membership pursuant to
subsections (a)(1) through (11) and (b) or prohibited membership
pursuant to subsections (a)(14) and (c).
(f) Additional optional membership.--The State employees
listed in subsection (a)(16) shall be mandatory members of the
system as of the effective date of employment with the Juvenile
Court Judges' Commission unless they elect membership in an
independent retirement program approved by the Juvenile Court
Judges' Commission. Employees who elect membership in an
independent retirement program approved by the Juvenile Court
Judges' Commission shall be prohibited from being active members
in the system while employed by the Juvenile Court Judges'
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Commission. If an employee described in this subsection becomes
a State employee with an employer other than the Juvenile Court
Judges' Commission, then membership for that employee shall be
determined as otherwise provided for in this part. The election
of membership in the independent retirement program approved by
the Juvenile Court Judges' Commission must be made by the
transferred employee filing written notice with the employer
while a State employee no later than 90 days after the effective
date of this subsection. Upon receipt of such an election, the
Juvenile Court Judges' Commission shall certify the election to
the board and the independent retirement program.
Section 3. Chapter 59 of Title 71 is amended by adding a
subchapter to read:
SUBCHAPTER F
STATE EMPLOYEES' OPTIONAL RETIREMENT PROGRAM
Sec.
5971. Definitions.
5972. State Employees' Optional Retirement Program.
5973. Powers and duties of board.
5974. Taxation.
5975. Investments and expenses.
5976. Trust.
5977. Investments.
5978. Participant contributions.
5979. Employer contributions.
5980. Vesting.
§ 5971. Definitions.
The following words and phrases when used in this subchapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
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"Participant." A qualified employee who elects to
participate in the State Employees' Optional Retirement Program,
in lieu of becoming a member of the system.
"Program." The State Employees' Optional Retirement Program.
"Qualified employee." Any individual who becomes a State
employee on or after July 1, 2011, and who is not a member of
the system or a State employee categorized in section 5301(a)
(12), (13), (14) or (15) (relating to mandatory and optional
membership).
"Trust fund." The trust created under section 5976 (relating
to trust) to hold the assets of the program in trust for the
exclusive benefit of the program's participants and
beneficiaries and for the payment of reasonable expenses of the
program in accordance with section 5975 (relating to investments
and expenses) and IRC § 401.
§ 5972. State Employees' Optional Retirement Program.
The board shall establish and administer an optional defined
contribution retirement program to be known as the State
Employees' Optional Retirement Program under which retirement
benefits will be provided for qualified employees who elect to
participate in the program in lieu of membership in the system.
The benefits to be provided for or on behalf of participants in
the program shall be provided through participant-directed
investments, in accordance with IRC § 401(a). Participants and
employers shall contribute to the program in accordance with
sections 5978 (relating to participant contributions) and 5979
(relating to employer contributions).
§ 5973. Powers and duties of board.
In order to establish and administer the program, the powers
and duties of the board shall include all of the following:
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(1) Entering into written agreements with financial or
other organizations to administer the program for
participants and to invest funds held under the program. The
program and any written agreement shall comply with the IRC,
including the plan qualification requirements imposed on
governmental plans under IRC § 401(a).
(2) Establishing procedures whereby qualified employees
may elect to participate in the program and participants may
change their investment choices on a periodic basis, as
determined by the board, which shall not be less frequently
than quarterly.
(3) Arranging for a deduction, from the compensation of
participants, of employee contributions to the program.
(4) Establishing standards or criteria for selection by
the board of the financial institutions, insurance companies
or other organizations that may be qualified as managers, on
behalf of the board, of funds accumulated under the program
on behalf of any participant.
(5) Establishing standards and criteria for the
providing of options to qualified employees and participants
concerning the method of investing amounts accumulated under
the program if the options include a diversified mix of low-
cost investment products that span the risk-return spectrum.
(6) Establishing standards and criteria for informing
qualified employees and participants of specific options
offered by qualified managers.
(7) Designing a comprehensive, balanced and impartial
educational program to assist qualified employees and
participants in their choice of investment options under the
program, which shall include retirement planning education
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and financial planning guidance on matters such as investment
diversification, investment risks, investment costs and asset
allocation.
(8) Establishing standards and criteria for the
disclosure to qualified employees and participants of the
anticipated and actual income attributable to the amounts,
property and rights and all fees, costs and charges to be
made against the amounts accumulated to cover the costs of
administering and managing the funds.
(9) Establishing processes for election to participate
in the program. The election period shall begin on the date
that an individual becomes a qualified employee and shall end
90 days from that date.
(10) Performing an annual review of any qualified fund
manager for the purpose of assuring it continues to meet all
standards and criteria established.
(11) Establishing procedures whereby any participant may
do one of the following:
(i) Withdraw accumulated amounts in cases of
financial hardship or separation of a participant from
State service or as otherwise permitted under the IRC.
(ii) Dispose of a participant's account under a
domestic relations order unless in conflict with the IRC.
(12) Administering the program in compliance with the
IRC.
(13) Promulgating regulations necessary to administer
this subchapter.
§ 5974. Taxation.
All amounts deferred under the program shall constitute
taxable income for purposes of the act of March 4, 1971 (P.L.6,
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No.2), known as the Tax Reform Code of 1971, and shall
constitute taxable income for State and local earned income
taxes.
§ 5975. Investments and expenses.
The board shall not be responsible for any investment loss
incurred in the program or for failure of any investment to earn
any specific or expected return or to earn as much as any other
investment opportunity, whether or not the other investment
opportunity was offered to participants in the program. The
expenses arising from allowing qualified employees to elect to
participate in the program and participants to choose a fund
manager, deduct from compensation amounts contributed under the
program and transfer to the fund manager amounts so deducted
shall be borne by the board. All other expenses arising from the
administration of the program shall be assessed against the
accounts created on behalf of participants either by the fund
managers or by the board.
§ 5976. Trust.
(a) Establishment.--All assets and income that have been or
shall be withheld by the employer in accordance with this
subchapter shall be held in trust in any funding vehicle
permitted by applicable provisions of the IRC for the exclusive
benefit of the program's participants and their beneficiaries
until the time when the funds are distributed to the participant
or the participant's beneficiary in accordance with the terms of
the agreement between the participant and the board. All such
assets and income withheld by the employer shall be held in
trust as set forth in this subsection in a special fund created
within the State Treasury of which the State Treasurer shall be
custodian.
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(b) Trustees.--The members of the board shall be the
trustees of the trust established under subsection (a).
(c) Attachment.--Notwithstanding any other provision of law,
any benefit or interest available under the program, any right
to receive or direct payments under the program or any
distribution of payment made under the program shall not, except
as expressly specified by the program, be subject to assignment,
alienation, garnishment, attachment, transfer, anticipation,
sale, mortgage, pledge, hypothecation, commutation, execution or
levy, whether by voluntary or involuntary act of any interested
person.
§ 5977. Investments.
Investment of contributions by any corporation, institution,
insurance company or custodial bank 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 deduction to the date that funds are
invested. Any interest earned on the funds pending investment
shall be allocated to the Commonwealth 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.
§ 5978. Participant contributions.
Regular participant contributions shall be made to the
program on behalf of each active member for current service in
an amount equal to 6% of the participant's compensation. The
employer shall cause required participant contributions for
current service to be made and deducted from each payroll.
§ 5979. Employer contributions.
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The Commonwealth or any other employer of a participant shall
make payments to the trust fund on behalf of the participant in
an amount equal to 6% of the participant's total compensation.
§ 5980. Vesting.
A participant shall be vested after completing one year of
State service during which he or she is a participant in the
program with respect to employer contributions paid on behalf of
the participant to the program plus interest and earnings on the
employer contributions but minus investment fees and
administrative charges.
Section 4. This act shall take effect immediately.
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