PRINTER'S NO. 4286
No. 2835 Session of 2002
INTRODUCED BY HARHART, ALLEN, M. BAKER, BELARDI, BELFANTI,
BENNINGHOFF, BROWNE, M. COHEN, COLEMAN, DALLY, DeLUCA,
DeWEESE, FAIRCHILD, GEORGE, GORDNER, GRUCELA, HARHAI,
HENNESSEY, HESS, HORSEY, HUTCHINSON, LEH, MARKOSEK, McCALL,
McILHATTAN, MUNDY, PETRARCA, PICKETT, RUBLEY, SANTONI,
SATHER, SAYLOR, SCHRODER, SCHULER, SEMMEL, SOLOBAY, STABACK,
STEELMAN, STERN, T. STEVENSON, THOMAS, TIGUE, YOUNGBLOOD AND
ZUG, SEPTEMBER 23, 2002
REFERRED TO COMMITTEE ON EDUCATION, SEPTEMBER 23, 2002
AN ACT
1 Amending Title 24 (Education) of the Pennsylvania Consolidated
2 Statutes, adding definitions; further providing for actuarial
3 cost method, for the Public School Employees' Retirement
4 Fund, for the State accumulation account and for the annuity
5 reserve account; and establishing the supplemental annuity
6 reserve account.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. The definition of "valuation interest" in section
10 8102 of Title 24 of the Pennsylvania Consolidated Statutes is
11 amended and the section is amended by adding definitions to
12 read:
13 § 8102. Definitions.
14 The following words and phrases when used in this part shall
15 have, unless the context clearly indicates otherwise, the
16 meanings given to them in this section:
17 * * *
1 "Set-aside." Amounts credited annually to the supplemental
2 annuity reserve account calculated by multiplying the difference
3 of the fund's time-weighted rate of return for the preceding
4 year minus the board's actuarial interest rate assumption for
5 the preceding year, times the mean amount of the annuity reserve
6 account for the preceding year.
7 * * *
8 "Time-weighted rate of return." The fund's total investment
9 return, expressed as a percentage, including both realized and
10 unrealized gains and losses, based on the actuarial value of
11 assets used for determining annual contribution rates.
12 "Valuation interest." Interest at 5 1/2% per annum,
13 compounded annually and applied to all accounts other than the
14 members' savings account and the supplemental annuity reserve
15 account.
16 * * *
17 Section 2. Section 8328(c) of Title 24, amended April 23,
18 2002 (P.L.272, No.38), is amended to read:
19 § 8328. Actuarial cost method.
20 * * *
21 (c) Accrued liability contribution rate.--For the fiscal
22 year beginning July 1, 2002, the accrued liability contribution
23 rate shall be computed as the rate of total compensation of all
24 active members which shall be certified by the actuary as
25 sufficient to fund over a period of ten years from July 1, 2002,
26 the present value of the liabilities for all prospective
27 benefits of active members, except for the supplemental benefits
28 provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4,
29 8348.5, 8348.6 and 8348.7, in excess of the total assets in the
30 fund (calculated by recognizing the actuarially expected
20020H2835B4286 - 2 -
1 investment return immediately and recognizing the difference
2 between the actual investment return and the actuarially
3 expected investment return over a five-year period), excluding
4 the balance in the annuity reserve account and the balance in
5 the supplemental annuity reserve account, and of the present
6 value of normal contributions and of member contributions
7 payable with respect to all active members on July 1, 2002,
8 during the remainder of their active service. Thereafter, the
9 amount of each annual accrued liability contribution shall be
10 equal to the amount of such contribution for the fiscal year,
11 beginning July 1, 2002, except that, if the accrued liability is
12 increased by legislation enacted subsequent to June 30, 2002,
13 such additional liability shall be funded over a period of ten
14 years from the first day of July, coincident with or next
15 following the effective date of the increase. The amount of each
16 annual accrued liability contribution for such additional
17 legislative liabilities shall be equal to the amount of such
18 contribution for the first annual payment.
19 * * *
20 Section 3. Sections 8522 and 8524 of Title 24 are amended to
21 read:
22 § 8522. Public School Employees' Retirement Fund.
23 The fund shall consist of all moneys in the several separate
24 funds in the State Treasury set apart to be used under the
25 direction of the board for the benefit of members of the system;
26 and the Treasury Department shall credit to the fund all moneys
27 received from the Department of Revenue arising from the
28 contributions required under the provisions of Chapter 83
29 (relating to membership, contributions and benefits) and all
30 earnings from investments or moneys of said fund. There shall be
20020H2835B4286 - 3 -
1 established and maintained by the board the several ledger
2 accounts specified in sections 8523 (relating to members'
3 savings account), 8524 (relating to State accumulation account),
4 8525 (relating to annuity reserve account), 8525.1 (relating to
5 supplemental annuity reserve account) and 8526 (relating to
6 health insurance account).
7 § 8524. State accumulation account.
8 The State accumulation account shall be the ledger account to
9 which shall be credited all contributions of the Commonwealth
10 and other employers as well as the earnings of the fund, except
11 the premium assistance contributions and earnings thereon in the
12 health insurance account and the supplemental annuity
13 contributions and earnings on the assets in the supplemental
14 annuity reserve account. Valuation interest shall be allowed on
15 the total amount of such account less any earnings of the fund
16 credited during the year. The reserves necessary for the payment
17 of annuities and death benefits as approved by the board and as
18 provided in Chapter 83 (relating to membership, contributions
19 and benefits) shall be transferred from the State accumulation
20 account to the annuity reserve account. At the end of each year
21 the required interest shall be transferred from the State
22 accumulation account to the credit of the members' savings
23 account and the annuity reserve account[.] and beginning June
24 30, 2002, the required amounts representing the set-aside shall
25 be transferred from the State accumulation account to the credit
26 of the supplemental annuity reserve account. In addition, at the
27 end of each year beginning July 1, 2002, the transfer of any
28 amounts from the supplemental annuity reserve account, in
29 accordance with section 8525.1 (relating to supplemental annuity
30 reserve account), shall be credited to the State accumulation
20020H2835B4286 - 4 -
1 account. The administrative expenses of the board shall be
2 charged to the State accumulation account.
3 Section 4. Section 8525(a) of Title 24, amended April 23,
4 2002 (P.L.272, No.38), is amended to read:
5 § 8525. Annuity reserve account.
6 (a) Credits and charges to account.--The annuity reserve
7 account shall be the ledger account to which shall be credited
8 the reserves held for the payment of annuities and death
9 benefits on account of all annuitants and the contributions from
10 the Commonwealth and other employers as determined in accordance
11 with section 8328 (relating to actuarial cost method) for the
12 payment of the supplemental annuities provided in sections 8348
13 (relating to supplemental annuities), 8348.1 (relating to
14 additional supplemental annuities), 8348.2 (relating to further
15 additional supplemental annuities), 8348.3 (relating to
16 supplemental annuities commencing 1994), 8348.4 (relating to
17 special supplemental postretirement adjustment)[,] and 8348.5
18 (relating to supplemental annuities commencing 1998)[, 8348.6
19 (relating to supplemental annuities commencing 2002) and 8348.7
20 (relating to supplemental annuities commencing 2003)]. The
21 annuity reserve account shall be credited with valuation
22 interest. After the transfers provided in sections 8523
23 (relating to members' savings account) and 8524 (relating to
24 State accumulation account), all annuity and death benefit
25 payments, except supplemental annuities provided in sections
26 8348.6 (relating to supplemental annuities commencing 2002) and
27 8348.7 (relating to supplemental annuities commencing 2003),
28 shall be charged to the annuity reserve account and paid from
29 the fund.
30 * * *
20020H2835B4286 - 5 -
1 Section 5. Title 24 is amended by adding a section to read:
2 § 8525.1. Supplemental annuity reserve account.
3 The supplemental annuity reserve account shall be the ledger
4 account to which shall be credited the annual set-aside amounts
5 and contributions from the Commonwealth and other employers as
6 determined in accordance with sections 8328(d) (relating to
7 actuarial cost method), 8348.6(f) (relating to supplemental
8 annuities commencing 2002) and 8348.7(f) (relating to
9 supplemental annuities commencing 2003). In addition, all
10 earnings derived from investment of the reserves of the
11 supplemental annuity reserve account, determined by using the
12 fund's time-weighted rate of return, shall be credited to this
13 account. In any year in which the fund's time-weighted rate of
14 return is less than the board's actuarial interest rate
15 assumption for the year, the mean amount in the annuity reserve
16 account for the preceding year shall be multiplied by the
17 difference of the board's actuarial rate assumption for the
18 preceding year minus the actual time-weighted rate of return and
19 such amount shall be debited to the supplemental annuity reserve
20 account and credited to the State accumulation account
21 regardless of the resulting balance in the supplemental annuity
22 reserve account. Effective July 1, 2002, payment of the
23 supplemental annuities provided in section 8348.6, effective
24 July 1, 2003, payment of the supplemental annuities provided in
25 section 3848.7, and any additional supplemental annuity enacted
26 subsequent to July 1, 2003, shall be charged to the supplemental
27 annuity reserve account and paid by the fund.
28 Section 6. This act shall take effect in 60 days.
E10L24DMS/20020H2835B4286 - 6 -