SENATE BILL 1071 as amended by nso! - The amendment the language of Senate Bill 1082, PN 1460 with 3 changes 1. Elimination pet that reduce the employer contribution rate collars for SERS and PSERS for the 2016-17 fiscal year. ’ : 2, Elimination of the provision which suspends the applicability of the actuarial note requirement of the Public Employee Retirement Commission Act to the bill and its amendments. ; 3. Elimination provisions which makes Protecting Pennsylvania's Investments Act in applicable to the DC plan, A. SYNOPSIS: © Establishes a hybrid defined contribution (DC) /defined benefit (DB) retirement benefit plan for future state and school employees; The plan applies to state employees first hired on or after January 1, 2018 and school employees first hired on or after July 1, 2017; and © Applies various retirement benefit changes to current state and school members for benefits earned prospectively on or after the above mentioned dates. B. BILL SUMMARY: The proposal amends the State Employees” Retirement Code and the Public School Employees’ Retirement Code to establish a hybrid DC/DB plan, applicable to future state and school employees who begin service as follows: 7/1/2017 for PSERS members © 1/1/1018 for SERS members. Asa side by side hybrid, this plan provides for both employee and employer contributions to the DC and DB plans from day 1. Future hazardous duty employees, listed are exempt from mandatory participation in the hybrid plan and will haFeatures of the hybrid plan include: 1B Component PSERS employee contribution is 4% SERS employee contribution is 3% Final average salary (FAS) for PSERS and SERS is 5 highest years Vesting for PSERS is 5 years; vesting for SERS is10 years oe Shared risk/shared gain employee contributions, which are calculated every 3 years bas on a 10-year history of investment returns. For each 1% return realized above/below assumed rate of retum, contribution will be decreased increased by 5%, up to max of 2 percentage points. © Lump sum withdrawals will be permitted in an actuarially neutral manner. ‘© The benefit accrual rate/multiplier is 1% (benefit formula will be 1% x FAS x years of service) PSERS — Employee contribution = 3.5%; employer contribution = 2.5% SERS — Employee contribution of 3.25%; employer contribution = 2.5% Immediate vesting of employee contributions and earnings. 3-year “cliff vesting” of employer contributions. Employer contributions and earnings vest 100% upon accrual of 3 years of service. ‘* Voluntary contributions permitted, including roll overs, trustee-to trustee transfers and after tax salary deductions. Elected Officers ¢ Current elected officers, who are members of SERS and who are reelected to a term that begins after 12/31/17, will go into the hybrid plan for future service. Future elected officers, who are first elected to a term of office that begins after 12/31/17, will be placed in the hybrid plan (some elected officers are optional members and may choose no benefits or the hybrid plan under this bill). e Anelected officer is: © An individual who is elected or re-elected to a term of office that begins after 12/31/17, as a statewide office-holder or member of the legislature. © An individual who is of office that begins after 12/31/17 as a . z ly held the office to which the of SERS before 1/1/18 will havea id plan for their future service, before on for use by the Republican Members and stro ‘of the Pennsylvania House of Represenarivsistory. For each 1% Shared risk/shared gain. Calculated every 3 years based on ioe pi return realized aboverbelow assumed rate of return, contribution ecreased/increased by .5%, up to max of 2 percentage points: Actuarially Neutral Option 4— Pre-Act 120 Members i Bi aa © Applicable to SERS and PSERS members for service earned/ contributions made 6/30/16 re imi a pre-Act 120 members to take out lump sum, DOES NOT eliminate the ability of pre~ nb 1k opie ‘© Makes the portion of the Option 4 lump sum withdray h Tata future service actuarially neutral. Interest applied to reduce annuity will be assumed. of return instead of 4% under current law. Actuarially Neutral Option 4— Post Act 120 Members © These members will gain the ability to withdraw the lump sum © Actuarial neutrality applied to all service/contributions. Shared Gain -- Post- Act 120 Members Only @ Post-Act 120 members have shared risk. The bill grants shared gain as well. Anti-Spiking Provisions/Prospective Service — Pre/Post-Act 120 Members of SERS © 3 highest years without overtime or 5 highest with overtime, whichever is highest. ‘Applicable only to the portion of benefits earned prospectively. «Applies to pre and post Act 120 employees, except for Troopers covered by DiLauro award (with, l-year highest salary applied to benefit calculation). The bill establishes parameters for school district administration of 403(b) savings plans for school employees. The financial institution/organization that administers the PSERS DC plan may also offer a 403(b) plan to school employees. However, the institution or organization must offer the DC plan and the 403(b) plan under separate contracts. Also the bill requires a school district to contract with at least four other financial institutions or organizations to offer 403(b) plans to employees. A 403(b) plan is a type of retirement savings plan that may be provided to public school employees. ‘The bill establishes a Pub on an vestment Review Commission for each system. ‘The commissions regarding investment performance and mn will include 5 members appointed by the Minority Leader of the Senate, and the Governor. Each ‘Versus passive investment strategies and the PSERS Board will serve Assembly and the AttorneyEffective date: y Provisions of the bill making legal counsel independent of OGC, the General Assembly and the Attorney General ~ 365 days. ‘© Remainder of the bill ~ Immediately le 24 Part IV) established PSERS as a lan, PSERS currently provides a DB 1 employers in the Commonwealth. ‘The Public School Employees’ Retirement Code (Titl governmental, cost-sharing, multi-employer pension p retirement plan to employees of approximately 773 school established SERS as a governmental, cost- ‘The State Employees’ Retirement Code (Title 71) ‘ly provides a DB retirement plan to sharing, multi-employer pension plan. SERS current! ‘employees of the Commonwealth of Pennsylvania. Title 51 (Military Affairs), Chapter 73 provides for military leaves of absence. Section 7306(a) establishes that members of certain retirement systems may continue to make payments toward retirement benefits during a military leave of absence. USERRA (38 U.S.C. Ch. 43) establishes special employment and benefit rights to individuals who leave employment to perform qualified military service. Section 401(a) of the IRC sets forth requirements for qualification for qualified pension, profit- sharing and stock bonus plans. Section 403(b) of the IRC sets forth requirements relating to retirement savings plans for certain public school employees and employees of nonprofits. SB/db House of |