THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY PILEGGI, BROWNE, BAKER, RAFFERTY, ORIE, STOUT, COSTA, FARNESE, ALLOWAY, WOZNIAK, FERLO, ERICKSON, BOSCOLA, WAUGH, EARLL, MENSCH, GREENLEAF, BRUBAKER AND D. WHITE, MAY 5, 2010

REFERRED TO FINANCE, MAY 5, 2010  

AN ACT

Amending the act of February 1, 1974 (P.L.34, No.15), entitled

"An act creating a Pennsylvania Municipal Retirement System

for the payment of retirement allowances to officers,

employes, firemen and police of political subdivisions and

municipal authorities and of institutions supported and

maintained by political subdivisions and municipal government

associations and providing for the administration of the same

by a board composed of the State Treasurer and others

appointed by the Governor; imposing certain duties on the

Pennsylvania Municipal Retirement Board and the actuary

thereof; providing the procedure whereby political

subdivisions and municipal authorities may join such system,

and imposing certain liabilities and obligations on such

political subdivisions and municipal authorities in

connection therewith, and as to certain existing retirement

and pension systems, and upon officers, employes, firemen and

police of such political subdivisions, institutions supported

and maintained by political subdivisions, and upon municipal

authorities; providing for the continuation of certain

municipal retirement systems now administered by the

Commonwealth; providing certain exemptions from taxation,

execution, attachment, levy and sale and providing for the

repeal of certain related acts," providing for implementation

provisions for Deferred Retirement Option Plans and for

corrective measures for maintaining tax qualified status of

the Pennsylvania Municipal Retirement System.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definitions of "annuitant," "member" and

"regular interest" in section 102 of the act of February 1, 1974

(P.L.34, No.15), known as the Pennsylvania Municipal Retirement

Law, are amended and the section is amended by adding

definitions to read:

Section 102.  Definitions.--As used in this act:

* * *

"Alternate payee" means a spouse, former spouse, child or

dependent of a member, who is recognized by an approved domestic

relations order as having a right to receive all or a portion of

the money payable to the member under this act.

"Annuitant" means a [former contributor in receipt of a

superannuation retirement allowance or other benefit provided by

this act] member during the time period:

(1)  beginning with the effective date of the member's

retirement; and

(2)  ending on the date of termination of the member's

annuity.

"Approved domestic relations order" means a domestic

relations order which has been approved under this act.

* * *

"Compensation" means remuneration actually received for

services rendered as a municipal employee, municipal fire

fighter or municipal police officer, excluding reimbursement for

expenses incidental to employment. The following apply:

(1)  Compensation shall be adjusted as appropriate to comply

with the terms of any contract entered into between the board

and the applicable municipality under Article IV.

(2)  For members who are enrolled in a plan that has adopted

the provisions of section 414(h) of the Internal Revenue Code

(26 U.S.C. § 414(h)), the term includes a contribution

designated as a pickup contribution.

(3)  Notwithstanding any provision of this act to the

contrary, a member's compensation shall not exceed the

limitations under section 401(a)(17) of the Internal Revenue

Code (26 U.S.C. § 401(a)(17)), as adjusted in accordance with

section 401(a)(17)(B) of the Internal Revenue Code (26 U.S.C. §

401(a)(17)(B)).

(i)  The adjustment in effect for a calendar year applies to

a period:

(A)  which begins in the calender year;

(B)  which does not exceed twelve months; and

(C)  over which compensation is determined.

(ii) If a determination period consists of fewer than twelve

months, the compensation limit shall be multiplied by a

fraction:

(A)  the numerator of which is the number of months in the

determination period; and

(B)  the denominator of which is twelve.

* * *

"Date of termination of service" means:

(1)  for an active member, the last day of employment in a

status covered by the eligibility requirements of the pension

plan; and

(2)  for an inactive member on leave without pay, the date of

resignation or the date employment is formally discontinued by

the municipality.

"Domestic relations order" means 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, including the right to receive all

or a portion of the money payable to that member under this act,

in furtherance of the equitable distribution of marital assets.

The term includes an "order of support" under 23 Pa.C.S. § 4302

(relating to definitions) and an order for the enforcement of

arrearages under 23 Pa.C.S. § 3703 (relating to enforcement of

arrearages).

"DROP" means the Deferred Retirement Option Plan established

by the board under this act and by a municipality under Chapter

11 of the Municipal Pension Plan Funding Standard and Recovery

Act.

"DROP interest" means the actual rate earned and credited by

the board on the subsidiary DROP participant accounts, which

shall not be less than zero percent nor more than four and one-

half percent, annually.

"DROP participant" means an annuitant who has elected to

participate in the DROP.

"Effective date of retirement" means one of the following:

(1)  For a member who files an application for an annuity

within ninety days after the date of termination of service, the

first day following the date of termination of service.

(2)  For a member who does not file an application for an

annuity within ninety days after the date of termination of

service, the later of:

(i)  the date the application is filed; or

(ii)  the date specified on the application.

(3)  For a member who applies for a disability retirement,

the date certified by the board as the effective date of

disability.

(4)  For a DROP participant, the day before the effective

date of DROP participation as determined in accordance with the

provisions of this act and Chapter 11 of the Municipal Pension

Funding Standard and Recovery Act.

* * *

"Internal Revenue Code" means the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

* * *

"Member" means an individual that is:

(1)  a municipal officer, employe, fireman or policeman[,]; 

or;

(2)  an employe of a municipal government association who

[has become a member of the Pennsylvania Municipal Retirement

System created by this act] is an active member, inactive

member, annuitant, disability annuitant or vested member.

* * *

"Municipal Pension Funding Standard and Recovery Act" means

the act of December 18, 1984 (P.L.1005, No.205), known as the

Municipal Pension Plan Funding Standard and Recovery Act.

* * *

"Regular interest" means the rate fixed by the board, from

time to time, on the basis of earnings on investments to be

applied to the following accounts maintained by the board:

(1)  member's accounts;

(2)  municipal accounts; and

(3) retired member's reserve account.

* * *

"Subsidiary DROP participant account" has the meaning given

in section 1102 of the Municipal Pension Funding Standard and

Recovery Act.

"Subsidiary DROP participant reserve account" means the

account maintained for each subsidiary DROP participant account.

* * *

Section 2.  Section 104(10), (12.1), (12.2) and (13) of the

act, amended May 17, 1980 (P.L.135, No.50), are amended and the

section is amended by adding clauses to read:

Section 104.  General Powers of the Board.--The board shall:

* * *

(10)  From time to time, with the advice of the Attorney

General and the actuary, to adopt and promulgate such rules and

regulations as may be required for the proper administration of

the fund created by this act and the several accounts

thereof[,]; to establish procedures which would permit an

eligible retired public safety officer to pay qualified

accident, health or long-term care insurance premiums as

permitted under section 402(l) of the Internal Revenue Code (26

U.S.C. § 402(1)); and to provide for the transaction of the

business of the board;

* * *

(12.1)  [From time to time, at the direction of

municipalities electing to] In accordance with the plan

contract, provide cost-of-living increases from [their] a plan's 

share of excess investment earnings[, the board shall allocate

excess investment earnings to provide additional "cost-of-

living" pension benefits] to those members of such

municipalities who have already retired. Such allocations shall

be made, with the advice of the actuary, on a fully funded basis

employing actuarial assumptions which reflect the nature of the

liability.

(12.2)  [From time to time, at the direction of

municipalities electing to apply their excess investment

earnings to member contributions] In accordance with the plan

contract, the board shall allocate excess investment earnings

for active members of such municipalities by applying such

allocation to member contributions. To the extent that

additional liabilities may accrue as a result of such

allocation, the actuary shall employ actuarial assumptions, on a

fully funded basis, to accurately reflect the nature of the

liability generated therefrom.

(12.3)  Promulgate regulations required for the proper

administration of the DROP.

(12.4)  Establish a subsidiary DROP participant account for

each DROP participant, provide for the separate investment and

funding of each account and establish a monthly rate of interest

to credit the money deposited in each account.

(13)  Perform such other functions as are required for the

execution of the provisions of this act and of other Federal and

State law and administer and interpret this act to ensure that

the system is maintained as tax qualified under the Internal

Revenue Code.

Section 3.  Section 108 of the act is amended to read:

Section 108.  Retirement Funds and Accounts.--The

Pennsylvania Municipal Retirement Fund shall consist of the

money received from municipalities arising from contributions by

municipalities, [and] from payroll deductions from salary or

compensation of members, and other contributions made by members

through the municipality to the system, from DROP participants

and from transfers made from municipal retirement or pension

systems and credited as provided in this act, and investment

earnings thereon.

The fund shall be a trust and the assets of the system shall

be held in trust. No part of the assets of the system shall be

used for or diverted to purposes other than for the exclusive

benefit of the members, their spouses or the members'

beneficiaries prior to the satisfaction of all liabilities of

the system with respect to them. The assets of the fund shall

only be used to pay:

(1)  Benefits to members in accordance with this act.

(2)  Necessary expenses of the system as established in this

act.

Contributions made by municipalities toward superannuation

retirement and death benefits of members shall be credited to

the municipal account of said fund, contributions made by

municipalities toward disability retirement of members shall be

credited to the total disability reserve account of said fund,

retirement benefits paid to DROP participants shall be credited

to the subsidiary DROP reserve account and payroll deductions

and other contributions of members shall be credited to the

member's account of said fund. Transfers made from existing

municipal retirement or pension systems shall be credited as

provided in this act.

The board shall keep separate accounts of each municipality

and for each separate class of employes enrolled by that

municipality under the several articles of this act, except the

total disability reserve account and the retired member's

reserve account which shall be maintained as pooled accounts.

Each municipality and the members thereof shall be liable to the

board for the amount of contributions required to cover the cost

of the retirement allowance and other benefits payable to such

members.

Upon the granting of a superannuation or voluntary or

involuntary withdrawal retirement allowance to any contributor,

the amount of such contributor's accumulated deductions in the

member's account shall lose their status as accumulated

deductions and shall be transferred to the retired member's

reserve account and the actuarial equivalent of the municipal

annuity shall be similarly transferred from the municipal

account to the retired member's reserve account.

Upon the granting of a superannuation retirement allowance to

a DROP participant, the full amount of the DROP participant's

monthly retirement benefit shall be deposited monthly in a

subsidiary DROP participant account in the subsidiary DROP

participant reserve account until the DROP participant

terminates employment.

Upon the granting of a disability retirement allowance to any

contributor, there shall be transferred to the retired member's

reserve account the amount of the contributor's accumulated

deductions in the member's account, the amount of the equivalent

actuarial value to the municipal annuity, and such additional

amount from the total disability reserve account as is needed in

addition thereto to provide the actuarial equivalent of the

total disability allowance to which the contributor is entitled.

Section 4.  Section 110 of the act, amended May 17, 1980

(P.L.135, No.50), is amended to read: 

Section 110.  Management and Investment of Fund; Interest

Credits.--(a)  The members of the board shall be trustees of the

fund, and shall have the exclusive management of said fund, with

full power to invest the moneys therein, subject to the terms,

conditions, limitations and restrictions imposed by law upon

fiduciaries. The said trustees shall have power to hold,

purchase, sell, assign, transfer and dispose of any securities

and investments in said fund, as well as the proceeds of such

investments, and of the money belonging to such fund.

(b)  The board shall annually allow regular interest to the

credit on each contributor's account, municipal account, the

retired members reserve account and the total disability reserve

account. [In addition, the board shall, after paying expenses,

annually allow such excess interest as each municipality deems

appropriate to the credit of the municipal accounts, member's

accounts, the member's excess investment accounts, retired

members reserve accounts and total disability reserve accounts.]

The board shall monthly credit DROP interest to the subsidiary

DROP participant accounts in accordance with established

procedures.

(c)  The board shall, after deducting money to pay for

appropriate expenses, allow excess interest as each contract

provides to the credit of the municipal accounts, member's

accounts, member's excess investment accounts and retired

members reserve accounts. Except as provided in a contract, the

board shall credit the excess interest to the plan's municipal

account.

Section 5.  Section 111 of the act is amended to read:

Section 111.  Municipal Guarantee.--The regular interest

charges payable, the DROP interest charges payable and the

creation and maintenance of the necessary reserves for the

payment of the municipal and member's annuities, as to any

municipality in accordance with this act, are hereby made the

obligation of that municipality.

In the case of the failure of a municipality to make payments

as required by this act, the Commonwealth shall withhold payment

to the municipality of any funds to which the municipality may

be entitled for pension purposes. The board may recover any sums

due to the fund by suit at law, or other appropriate remedy.

Section 6.  Section 112 of the act, amended July 5, 2005

(P.L.50, No.16), is amended to read:

Section 112.  Annual Estimates to Municipalities;

Administrative Expenses.--The board shall prepare and submit to

each municipality, on or before the first day of the third month

preceding the commencing of each municipality's fiscal year, an

itemized estimate of the amounts necessary to be appropriated by

the municipality to complete the payments of the obligations of

the municipality to the fund during its next fiscal year.

The board shall annually prepare and approve a budget

covering the administrative expenses of this act. Such expenses

as approved by the board shall be paid from receipts from

assessments made against each municipality for administrative

expenses. This assessment shall be based on the number of

members in each municipality and shall not exceed the sum of

twenty dollars ($20) per member per year. If, in [the calendar

years 1995 through 2005] any calendar year, the amount received

from such assessments, when imposed at the maximum rate, is not

sufficient to cover the administrative expenses, then the

balance of such expenses shall be paid from interest earnings on

the fund in excess of the regular interest credited to the

municipal, members' and retired members' reserve accounts and

DROP interest credited to the subsidiary DROP participant

reserve account and shall not, in any year, exceed six-tenths of

one per cent of the total asset value of the fund as of the

beginning of the calendar year. The administration of the

Pennsylvania Municipal Retirement System shall be audited

annually and a report of this audit shall be made annually to

the General Assembly.

The secretary of the board shall submit a proposed budget for

the following fiscal year to the Senate and House Local

Government Committees no later than November 1 of the year

preceding that for which the budget is being prepared. The

respective committees shall meet and review such budget

document. If the committees take no action within sixty days of

said November 1, the budget for the following calendar year

shall be deemed approved.

Section 7.  Section 114 of the act is amended to read:

Section 114.  Monthly Payments.--[Any] (a)  (1)  Except as

provided under clause (2), any retirement allowance created

under the provisions of this act shall be paid in equal monthly

installments and shall not be increased, decreased, revoked or

repealed, except where specifically otherwise provided by this

act.

(2)  Notwithstanding clause (1), if the annuitant is a DROP

participant, the equal monthly installment shall be deposited in

the subsidiary DROP participant account and paid out in

accordance with the DROP plan.

(b)  The annual retirement benefit payable to a member shall

not exceed the annual dollar limitation under section 415(b)(1)

(A) of the Internal Revenue Code (26 U.S.C. § 415(b)(1)(A)), as

may be adjusted under section 415(d) of the Internal Revenue

Code (26 U.S.C. § 415(d)). If an adjustment is required due to

the Internal Revenue Code, regulations or other publications

issued by the Internal Revenue Service, the adjustment shall

only apply to the dollar limitation specified in this section.

Section 8.  Section 115 of the act, repealed in part April

28, 1978 (P.L.202, No.53), is amended to read:

Section 115.  Exemption of Retirement Allowance.--(a)  The

retirement allowance and the contributions of members to the

fund, all contributions returned to contributors under the

provisions of this act and the moneys in the fund created by

this act, shall be exempt from any State or municipal tax and

shall be unassignable except to a beneficiary.

(b)  Rights under this act shall be subject to all of the

following:

(1)  Attachment in favor of an alternate payee as set forth

in an approved domestic relations order.

(2)  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 clause or under any

other provision of law may not be applied to increase the

benefits that any member would otherwise receive under this act.

(c)  Notwithstanding any other provision of this section, 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

utilizing a direct rollover.

(d)  For purposes of this section, the following words shall

have the following meanings:

"Distributee."  A member, a member's surviving spouse or a

member's former spouse who is an alternate payee under an

approved domestic relations order.

"Eligible retirement plan."  (1)  Except as provided under

clause (2), the term shall have the meaning given to it in

section 402(c)(8)(B) of the Internal Revenue Code (26 U.S.C. §

402(c)(8)(B)).

(2)  The term shall include a qualified trust in section

402(c)(8)(B)(iii) of the Internal Revenue Code only if the

qualified trust accepts the distributee's eligible rollover

distribution. If the eligible rollover distribution is made to a

nonspousal beneficiary, an eligible retirement plan shall be

deemed an "individual retirement account" or an "individual

retirement annuity" as defined in section 408(a) and (b) of the

Internal Revenue Code (26 U.S.C. § 408(a) and (b)).

"Eligible rollover distribution."  The term shall have the

meaning given to it in section 402(f)(2)(A) of the Internal

Revenue Code (26 U.S.C. § 402(f)(2)(A)).

Section 9.  The act is amended by adding sections to read:

Section 118.  Approval of Domestic Relations Orders.--(a)  A

domestic relations order shall be certified as an approved

domestic relations order by the secretary of the board or the

secretary's designated representative only if the order meets

all of the following conditions:

(1)  Requires the system to provide a type or form of benefit

or an option already provided under this act.

(2)  Requires the system to provide no more than the total

amount of benefits that the member would otherwise receive,

determined on the basis of actuarial value, unless increased

benefits are paid to the member or, if the order provides, to

the 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 alternate 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 act upon retirement.

(5)  Specifies the name and last known mailing address 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 act.

(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.

(b)  The following apply:

(1)  Upon receipt of a proposed domestic relations order, the

secretary of the board or the secretary's designated

representative shall determine whether the proposed order shall

be deemed an approved domestic relations order and shall notify

the member and each alternate payee of the determination.

(2)  Notwithstanding any other provision of law, the

exclusive remedy of any member or alternate payee aggrieved by a

decision of the secretary of the board or the secretary's

designated representative shall be the right to an adjudication

by the board under 2 Pa.C.S. Ch. 5 Subch. A (relating to

practice and procedure of Commonwealth agencies) with appeal to

the Commonwealth Court under 2 Pa.C.S. Ch. 7 Subch. A (relating

to judicial review of Commonwealth agency action) and 42 Pa.C.S.

§ 763(a)(1) (relating to direct appeals from government

agencies).

(c)  The following apply:

(1)  The requirements for approval under subsection (a) shall

not apply to any domestic relations order which is an "order of

support" under 23 Pa.C.S. § 4302 (relating to definitions) or an

order for the enforcement of arrearages under 23 Pa.C.S. § 3703

(relating to enforcement of arrearages).

(2)  Orders under clause (1) shall be approved to the extent

that they do not attach money in excess of the limits on wage

attachments as established by the Federal or State law.

(d)  Only the requirements of this section and regulations

promulgated under this act shall be used to govern the approval

or disapproval of a domestic relations order. If the secretary

of the board or the secretary's designated representative acts

in accordance with this act and regulations promulgated under

this act in approving or disapproving a domestic relations

order, the obligations of the system with respect to the

approval or disapproval shall be discharged.

Section 119.  Amendment of Approved Domestic Relations

Orders.--(a)  If an alternate payee of an approved domestic

relations order predeceases the member and there are benefits

payable to the alternate payee, the court shall order the

present value of the benefits paid to the alternate payee's

estate or to a substitute person approved by the court.

(b)  If a court amends an approved domestic relations order,

the amended order must be submitted for recertification as an

approved domestic relations order as provided in this act.

Section 120.  Irrevocable Beneficiary.--Notwithstanding any

other provision of this act, a domestic relations order may

provide for an irrevocable beneficiary. A domestic relations

order requiring the nomination of an irrevocable beneficiary

shall be deemed to be one that requires a member to nominate an

alternate payee as a beneficiary and that prohibits the removal

or change of that beneficiary without approval of a court of

competent jurisdiction, except by operation of law. A domestic

relations order subject to this section may be certified as an

approved domestic relations order by the secretary of the board

or the secretary's designated representative after the member

makes the nomination, in which case the irrevocable beneficiary

ordered by the court may not be changed by the member without

approval of the court.

Section 121.  Irrevocable Survivor Annuitant.--

Notwithstanding any other provision of this act, a domestic

relations order 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. A domestic relations

order subject to this section may be certified as an approved

domestic relations order by the secretary of the board or the

secretary's designated representative, in which case the

irrevocable survivor annuitant ordered by the court may not be

changed by the member without approval of the court. A person

ineligible to be designated as a survivor annuitant may not be

designated an irrevocable survivor annuitant.

Section 10.  Section 207(c) of the act, amended November 29,

2004 (P.L.1331, No.169), is amended and the section is amended

by adding a subsection to read:

Section 207.  Withdrawal; Return to Service; Death in

Service.--* * *

(c)  (1)  Should a person who has been retired on a

retirement under this act, return to employment on a regular

full-time basis in the same municipality, his retirement

allowance shall cease, and in the case of an annuity, other than

a disability annuity, the present value of such annuity shall be

frozen as of the date such annuity ceases. Upon subsequent

discontinuance of service, such member, other than a former

disability annuitant, shall be entitled to an annuity which is

actuarially equivalent to the sum of the present value of the

annuity previously being paid and the present value of the

annuity earned by further service and further deductions added

upon reemployment.

(2)  For the purposes of this section if a person is

reemployed [on a temporary, seasonal or part-time basis and his

gross post-retirement earnings from such reemployment during the

calendar year are less than five thousand dollars ($5,000) or

such other maximum as the board may establish, he shall not be

deemed reemployed, but if and when his gross post-retirement

earnings exceed five thousand dollars ($5,000) or such other

maximum as the board may establish in any calendar year he shall

not be entitled to receive his retirement allowance for that

month or any subsequent month in the calendar year in which he

continues in service.] following commencement of his retirement

allowance, he shall not be entitled to receive his retirement

allowance for that month or any subsequent month in which he

continues in service.

(3)  Notwithstanding clause (2), if the person is otherwise

eligible to receive an in-service distribution of his retirement

benefit by attainment of normal retirement age as defined in

section 411(a)(8) of the Internal Revenue Code (26 U.S.C. §

411(a)(8)), operation of section 401(a)(36) of the Internal

Revenue Code (26 U.S.C. § 401(a)(36)) or operation of any other

provision as may be adopted by the board and consistent with the

tax-qualification provisions of the Internal Revenue Code, the

person's retirement allowance shall continue to be paid through

the period of reemployment.

(4)  The municipality is required to notify the board

immediately of the reemployment status of any retired former

employe and file separate monthly reports of his gross earnings

as prescribed by the board.

* * *

(e)  If a member dies while performing qualified military

service, as defined in section 414(u)(5) of the Internal Revenue

Code (26 U.S.C. § 414(u)(5)), the survivors of the member shall

be entitled to receive any additional benefits, other than

benefit accruals relating to the period of qualified military

service, as though the member had returned to service and then

terminated employment on account of death.

Section 11.  Section 211 of the act, amended June 10, 1982

(P.L.446, No.131), is amended to read:

Section 211.  Options on Superannuation or Early

Retirement.--(a)  At the time of his superannuation or early

retirement, a contributor may elect to receive his benefits in a

retirement allowance payable throughout his life, which shall be

known as a single life annuity. In the event of the death of an

annuitant who has elected to receive the maximum single life

annuity before he has received in annuity payments the full

amount of the total accumulated deductions standing to his

credit on the effective date of retirement, the balance shall be

paid to his designated beneficiary, or instead, he may elect to

receive the equivalent actuarial value at that time of his

retirement allowance in a lesser allowance, payable throughout

life with provisions that:

(1)  Option 1.  If he shall die before receiving in payments

the present value of his retirement allowance as it was at the

time of his retirement, the balance, if less than five thousand

dollars ($5,000), shall be paid in a lump sum to his legal

representative, or to or in trust for his beneficiary. If the

balance is five thousand dollars ($5,000) or more, the

beneficiary may elect by application duly acknowledged and filed

with the board to receive payment of such balance according to

any one of the following provisions: (i) a lump sum payment;

(ii) an annuity having a present value equal to the balance

payable; (iii) a lump sum payment and an annuity. Such annuity

shall be of equivalent actuarial value to the balance payable

less the amount of the lump sum payment specified by the

beneficiary.

(2)  Option 2.  Upon his death, his retirement allowance

shall be continued throughout the life of and paid to his

survivor annuitant, if then living.

(3)  Option 3.  Upon his death, one-half of his retirement

allowance shall be continued throughout the life of and paid to

his survivor annuitant, if then living.

(b)  A member or beneficiary shall not be entitled to a form

of benefit which commences or is payable over a period which

fails to satisfy the required distributions of section 401(a)(9)

of the Internal Revenue Code (26 U.S.C. § 401(a)(9)).

Section 12.  Section 213 of the act is amended by adding a

subsection to read:

Section 213.  Vesting.--* * *

(e)  Upon the termination of the retirement plan, all

members, regardless of credited service, shall be deemed fully

vested in their accrued benefit to the extent the benefits

provided under the plan are funded as of the date of

termination.

Section 13.  Section 308 of the act, amended May 17, 1980

(P.L.135, No.50) and June 10, 1982 (P.L.446, No.131), is amended

to read:

Section 308.  Withdrawal; Return to Service; Death in

Service.--(a)  Should a contributor, before reaching

superannuation retirement age, for any reason cease to be a

municipal fireman or a municipal policeman, he shall be paid by

the board the full amount of the accumulated deductions standing

to his credit in the member's account, unless he is entitled to

vesting rights or to a retirement allowance for retirement not

voluntarily, and elects to exercise such vesting rights or take

such retirement allowance. Should such former contributor

thereafter return to the service of the same municipality and

restore to the fund, in such manner as may be agreed upon by

such person and the board, his withdrawn accumulated deductions

as they were at the time of his separation from service, his

annuity rights as they existed at the time of separation from

service shall be restored and his obligations as a member shall

begin again.

(b)  Should a contributor, having attained or passed

superannuation age, elect, upon leaving the service of the

municipality, not to claim the retirement allowance to which he

is entitled, he shall, upon written application, be paid by the

board the full amount of the accumulated deductions standing to

his credit in the member's account, and the balance in the

member's excess investment account.

(c)  (1)  Should a person who has been retired on a

retirement allowance under this act, return to employment on a

regular full-time basis in the same municipality, his retirement

allowance shall cease, and in the case of an annuity, other than

a disability annuity, the present value of such annuity shall be

frozen as of the date such annuity ceases. Upon subsequent

discontinuance of service, such member, other than a former

disability annuitant, shall be entitled to an annuity which is

actuarially equivalent to the sum of the present value of the

annuity previously being paid and the present value of the

annuity earned by further service and further deductions added

upon reemployment.

(2)  For the purposes of this section if a person is

reemployed [on a temporary or seasonal basis and his gross post-

retirement earnings from such reemployment during the calendar

year are less than five thousand dollars ($5,000) or such other

maximum as the board may establish, he shall not be deemed

reemployed, but if and when his gross post-retirement earnings

exceed five thousand dollars ($5,000) or such other maximum as

the board may establish in any calendar year he shall not be

entitled to receive his retirement allowance for that month or

any subsequent month in the calendar year in which he continues

in service.] following commencement of his retirement allowance

in a capacity other than as a DROP participant, the person shall

not be entitled to receive his retirement allowance for that

month or any subsequent month in which he continues in service.

(3)  Notwithstanding clause (2), if the person is otherwise

eligible to receive an in-service distribution of his retirement

benefit by attainment of normal retirement age as defined in

section 411(a)(8) of the Internal Revenue Code (26 U.S.C. §

411(a)(8)), operation of section 401(a)(36) of the Internal

Revenue Code (26 U.S.C. § 401(a)(36)) or operation of any other

provision as may be adopted by the board and consistent with the

tax-qualification provisions of the Internal Revenue Code, the

person's retirement allowance shall continue to be paid through

the period of reemployment. The municipality is required to

notify the board immediately of the reemployment status of any

retired former employe and file separate monthly reports of his

gross earnings as prescribed by the board.

(d)  Should a contributor die while in service, prior to

becoming eligible for a retirement allowance, his accumulated

deductions shall be paid to his estate, or to such person, if

living, as he shall have designated, in writing, filed with the

board as his beneficiary. In case any contributor has failed to

designate a beneficiary, or if the named beneficiary has

predeceased the member and no successor beneficiary has been

named, and upon the death in service shall have less than one

hundred dollars ($100) in accumulated deductions standing to his

credit, the board may, if letters testamentary or of

administration have not been taken out on his estate within six

months after his death, pay such accumulated deductions on the

claim of the undertaker, or to such person or municipality which

shall have paid the claim of the undertaker.

(e)  If a member dies while performing qualified military

service, as defined in section 414(u)(5) of the Internal Revenue

Code (26 U.S.C. § 414(u)(5)), the survivors of the member shall

be entitled to receive any additional benefits, other than

benefit accruals relating to the period of qualified military

service, as though the member had returned to service and then

terminated employment on account of death.

Section 14.  Section 312 of the act, amended June 10, 1982

(P.L.446, No.131), is amended to read:

Section 312.  Options on Superannuation or Early

Retirement.--(a)  At the time of his superannuation or early

retirement, a contributor may elect to receive his benefits in a

retirement allowance payable throughout his life, which shall be

known as a single life annuity. In the event of the death of an

annuitant who has elected to receive the maximum single life

annuity before he has received in annuity payments the full

amount of the total accumulated deductions standing to his

credit on the effective date of retirement, the balance shall be

paid to his designated beneficiary, or instead, he may elect, to

receive the actuarial equivalent value at that time of his

retirement allowance in a lesser allowance, payable throughout

life with provisions that:

(1)  Option 1.  If he shall die before receiving in payments

the present value of his retirement allowance as it was at the

time of his retirement, the balance, if less than five thousand

dollars ($5,000) shall be paid in a lump sum to his legal

representative, or to or in trust for his beneficiary. If the

balance is five thousand dollars ($5,000) or more, the

beneficiary may elect by application duly acknowledged and filed

with the board to receive payment of such balance according to

any of the following provisions: (i) a lump sum payment, (ii) an

annuity having a present value equal to the balance payable,

(iii) a lump sum payment and an annuity. Such annuity shall be

of equivalent actuarial value to the balance payable less the

amount of the lump sum payment specified by the beneficiary.

(2)  Option 2.  Upon his death his retirement allowance shall

be continued throughout the life of and paid to his survivor

annuitant, if then living.

(3)  Option 3.  Upon his death, one-half of his retirement

allowance shall be continued throughout the life of and paid to

his survivor annuitant, if then living.

(b)  A member or beneficiary shall not be entitled to a form

of benefit which commences or is payable over a period which

fails to satisfy the required distributions of section 401(a)(9)

of the Internal Revenue Code (26 U.S.C. § 401(a)(9)).

Section 15.  Section 314 of the act is amended by adding a

subsection to read:

Section 314.  Vesting.--* * *

(e)  Upon the termination of the retirement plan, all

members, regardless of credited service, shall be deemed fully

vested in their accrued benefit to the extent the benefits

provided under the plan are funded as of the date of

termination.

Section 16.  Section 403(8) and (14) of the act, amended May

17, 1980 (P.L.135, No.50), are amended to read:

Section 403.  Contract Provisions.--Any contract for an

optional retirement plan entered into between a municipality and

the board shall not provide for any benefits in excess of or

minimum member's contribution rates less than those available to

that municipality for that class of employes under any existing

law pertaining to the establishment of a retirement or pension

system, except to the extent that excess investment earnings are

allocated to provide for additional pension benefits or member

accruals as otherwise provided in this law.

The contract shall specifically state the following terms and

conditions:

* * *

(8)  A description of any optional methods of payment of

retirement allowances available to a member, including the

availability of the DROP.

* * *

(14)  Any other information which might have a bearing on the

costs or benefits of the retirement plan which might be required

by the board in the administration of the plan, including

whether the municipality will permit an eligible retired public

safety officer to direct that a portion of his annuity be used

to pay qualified accident, health or long-term care insurance

premiums as remitted under section 402(l) of the Internal

Revenue Code (26 U.S.C. § 402(l)).

Section 17.  Section 406(c) of the act, amended November 29,

2004 (P.L.1331, No.169), is amended and the section is amended

by adding a subsection to read:

Section 406.  Withdrawal; Return to Service; Death in

Service.--* * *

(c)  (1)  Should a person who has been retired on a

retirement allowance under this act and who is not a DROP

participant, return to employment on a regular full-time basis

in the same municipality, his retirement allowance shall cease,

and in the case of an annuity, other than a disability annuity,

the present value of such annuity shall be frozen as of the date

such annuity ceases. Upon subsequent discontinuance of service,

such member, other than a former disability annuitant, shall be

entitled to an annuity which is actuarially equivalent to the

sum of the present value of the annuity previously being paid

and the present value of the annuity earned by further service

and further deductions added upon reemployment.

(2)  For the purposes of this section if a person [is

reemployed on a temporary, seasonal or part-time basis and his

gross post-retirement earnings from such reemployment during the

calendar year are less than five thousand dollars ($5,000) or

such other maximum as the board may establish, he shall not be

deemed reemployed, but if and when his gross post-retirement

earnings exceed five thousand dollars ($5,000) or such other

maximum as the board may establish in any calendar year he shall

not be entitled to receive his retirement allowance for that

month or any subsequent month in the calendar year in which he

continues in service.], other than a DROP participant, is

reemployed following commencement of his retirement allowance,

the person shall not be entitled to receive the person's

retirement allowance for that month or any subsequent month in

which he continues in service.

(3)  Notwithstanding clause (2), if the person is otherwise

eligible to receive an in-service distribution of his retirement

benefit by attainment of normal retirement age as defined in

section 411(a)(8) of the Internal Revenue Code (26 U.S.C. §

411(a)(8)), operation of section 401(a)(36) of the Internal

Revenue Code (26 U.S.C. § 401(a)(36)) or operation of any other

provision as may be adopted by the board and consistent with the

tax-qualification provisions of the Internal Revenue Code, the

person's retirement allowance shall continue to be paid through

the period of reemployment. The municipality is required to

notify the board immediately of the reemployment status of any

retired former employe and file separate monthly reports of his

gross earnings as prescribed by the board.

* * *

(f)  If a member dies while performing qualified military

service, as defined in section 414(u)(5) of the Internal Revenue

Code (26 U.S.C. § 414(u)(5)), the survivors of the member shall

be entitled to receive any additional benefits, other than

benefit accruals relating to the period of qualified military

service, as though the member had returned to service and then

terminated employment on account of death.

Section 18.  Section 409 of the act, amended June 10, 1982

(P.L.446, No.131), is amended to read: 

Section 409.  Options on Superannuation or Early

Retirement.--(a)  At the time of his superannuation or early

retirement, a contributor may elect to receive his benefits in a

retirement allowance payable throughout his life, which shall be

known as a single life annuity. In the event of the death of an

annuitant who has elected to receive the maximum single life

annuity before he has received in annuity payments the full

amount of the total accumulated deductions standing to his

credit on the effective date of retirement, the balance shall be

paid to his designated beneficiary, or instead, he may elect to

receive the actuarial equivalent at that time of his retirement

allowance in a lesser allowance, payable throughout life with

provisions that:

(1)  Option 1.  If he shall die before receiving in payments

the present value of his retirement allowance as it was at the

time of his retirement, the balance, if less than five thousand

dollars ($5,000), shall be paid in a lump sum to his legal

representative, or to or in trust for his beneficiary. If the

balance is five thousand dollars ($5,000) or more, the

beneficiary may elect by application duly acknowledged and filed

with the board to receive payment of such balance according to

any one of the following provisions: (i) a lump sum payment,

(ii) an annuity having a present value equal to the balance

payable, (iii) a lump sum payment and an annuity. Such annuity

shall be of equivalent actuarial value to the balance payable

less the amount of the lump sum payment specified by the

beneficiary.

(2)  Option 2.  Upon his death, his retirement allowance

shall be continued throughout the life of and paid to his

survivor annuitant, if then living.

(3)  Option 3.  Upon his death, one-half of his retirement

allowance shall be continued throughout the life of and paid to

his survivor annuitant, if then living.

(4)  Option 4.  Any other optional form of payment contained

in the contract.

(b)  A member or beneficiary shall not be entitled to a form

of benefit which commences or is payable over a period which

fails to satisfy the required distribution provisions of section

401(a)(9) of the Internal Revenue Code (26 U.S.C. § 401(a)(9)),

including the incidental benefit distribution requirements.

Section 19.  Section 410 of the act, amended January 4, 1978

(P.L.1, No.1), is amended to read:

Section 410.  Vesting.--(a)  Provisions for vesting may be

included in the contract between the municipality and the board.

When such provision is made it shall mean that a contributor who

terminates his employment with the municipality after a

stipulated age or length of service, or both, may, if he so

elects in writing, leave his contributions, plus interest, as

credited to his account, in the fund, and, upon reaching

superannuation retirement age, receive a superannuation

retirement allowance and accumulated deductions would include

interest from date of termination until the earlier of the date

of commencement of the annuity or the date of payment of member

contributions.

(b)  Upon the termination of the retirement plan, all

members, regardless of credited service, shall be deemed fully

vested in their accrued benefit to the extent the benefits

provided under the plan are funded as of the date of

termination.

Section 20.  Section 412 of the act, amended May 17, 1980,

P.L.135, No.50), is amended to read:

Section 412.  Withdrawal Provisions.--A municipality which

has joined the retirement system created or continued under this

Article IV may, for good and stated cause, file an application

with the board for permission to withdraw from the system if it

meets all of the following requirements:

(1)  The municipality has been enrolled in the system for a

period of at least five years.

(2)  The municipality has met all of its financial

obligations to the system.

(3)  The legislative body of the municipality has passed an

ordinance or resolution signifying its intention to withdraw

from the system.

(4)  The municipality has certified to the board that an

affirmative vote approving withdrawal from the system had been

obtained from at least seventy-five per cent of all of the

municipal employes affected by the ordinance or resolution.

The board shall within ninety days of its receipt, take

action on an application filed by a municipality for permission

to withdraw from the system. If the application is approved the

withdrawing municipality shall be entitled to receive a net

refund of the amounts then standing to the credit of the

municipality in the member's account, the member's excess

investment account, the municipal account, the subsidiary DROP

participant reserve account and the retired member's reserve

accounts of the system. In no event shall the total amount of

the net refund to the municipality exceed the pro rata interest

of the withdrawing municipality in the net assets of the entire

fund based on the market value of the investments of the fund as

of the date of receipt of the application for permission to

withdraw. The liability for the continuation of retirement or

disability allowances being paid from the fund shall attach

against the withdrawing municipality and be paid from funds

transferred to a retirement system established subsequent to its

withdrawal from the system or from moneys appropriated annually

from tax revenues sufficient to pay the same. If the board

disapproves the application of the municipality for permission

to withdraw from the system the board shall promptly notify the

municipality of its decision and advise the municipality of the

board's reason or reasons for disapproval. The board shall

establish rules and regulations, in accordance with the

provisions of clause (10) of section 104 of this act, governing

the details of the procedures to be followed in the withdrawal

of municipalities from the system.

Section 21.  This act shall take effect immediately.