PROPOSED RULEMAKING
PUBLIC SCHOOL EMPLOYEES' RETIREMENT BOARD
[22 PA. CODE CH. 213]
Contributions and Benefits
[31 Pa.B. 5711] The Public School Employees' Retirement Board (Board) proposes to amend Chapter 213 (relating to contributions and benefits). The amendments are being proposed to delete the restrictions for purchasing retirement credit thereby allowing the costs of purchase to be deducted from the actuarial value of the retirement account.
This proposal is being made to conform the Board's regulations with the policy adopted by the Board at its December 2, 1998, meeting allowing actuarial debt reduction for purchases of service.
A. Effective Date
These amendments will go into effect upon publication in the Pennsylvania Bulletin as a final-form rulemaking.
B. Contact Person
For further information contact Frank Ryder, Director of Government Relations, Public School Employees' Retirement System, 5 North Fifth Street, P. O. Box 125, Harrisburg, PA 17108, (717) 720-4733; or Charles K. Serine, Deputy Chief Counsel, Public School Employees' Retirement System, 5 North Fifth Street, P. O. Box 125, Harrisburg, PA 17108, (717) 720-4679. Information regarding submitting comments on this proposal appears in Section H of this Preamble.
C. Statutory Authority
This proposed rulemaking is being made under the authority of the Public School Employees' Retirement Code, 24 Pa.C.S. §§ 8502(h) and 8507(d) (code).
D. Background and Purpose
The Board is responsible for implementing the purchase of service provisions of the code, and a component of that purchase program is a method of paying for the purchase by eligible members, that is, their contributions. Although the code authorizes the contributions to be made in any manner agreed upon by the Board and member, the current regulations limit payment methods. Deletion of these provisions will restore the Board's statutory authority to authorize the actuarial debiting of the member's account as an agreed upon way to make these contributions.
The purpose of these proposed amendments is to permit the member and Board to agree upon how member contributions for the purchase of service can be made. Members would still have the option of paying by lump sum or payroll deduction but also would have the option to authorize an actuarial reduction in the value of their account to pay for the requested purchase. This would substantially reduce or eliminate out-of-pocket costs for members to avail themselves of service purchases authorized by the code. As noted, by policy of the Board, the Public School Employees' Retirement System (PSERS) currently permits the actuarial reduction of school member accounts for service purchases. These regulatory repeals will conform the regulations to the current administrative policy. The State Employees' Retirement System is proposing a similar amendment of its regulations that will allow purchases of service to be paid by actuarial debt of State employees' accounts. This amendment will harmonize the regulations of the PSERS and State Employees Retirement Systems, especially with regard to multiple service members.
E. Benefits, Costs and Compliance
Executive Order 1996-1 requires a cost/benefit analysis of the proposed amendments.
Benefits
This proposed rulemaking would benefit school employees eligible for service purchases under the code. By reducing the potential out-of-pocket costs to members with an offsetting actuarial reduction in the value of their accounts, easier access to statutorily authorized service purchases would ensue without any loss in the fiscal integrity of the PSERS. Customer service would be improved together with a corresponding reduction in bookkeeping and recordkeeping to the extent that payroll deductions would be reduced.
Costs
There are nominal additional costs to the Commonwealth, its citizens or school employees associated with this proposal. There will be additional cost savings for both school employers and PSERS associated with this proposal.
Compliance Costs
The proposed amendments are not expected to impose additional compliance costs on school employees or employers.
F. Sunset Review
A sunset date for these regulations has not been assigned by the Board.
G. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 2, 2001, the Board submitted a copy of these proposed amendments to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House Education Committee and the Senate Finance Committee. In addition to submitting the proposed amendments, the Board has provided IRRC and the Committees with a detailed regulatory analysis form prepared by the PSERS in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, if IRRC has objections to any portion of the proposed amendments, it will notify the Board within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria which have not been met by the portion of the proposed amendments to which an objection has been made. The Regulatory Review Act specifies detailed procedures for review by the General Assembly and the Governor of objections raised by IRRC prior to final publication of the amendments by the Board.
H. Public Comments
Written Comments. Interested persons are invited to submit comments, suggestions or objections regarding the proposed amendments to the Public School Employees' Retirement System, 5 North Fifth Street, P. O. Box 125, Harrisburg, PA 17108-0125. Comments submitted by facsimile will not be accepted. Comments, suggestions or objections must be received by the Board by November 13, 2001. Interested persons may also submit a summary of their comments to the Board. The summary may not exceed 1 page in length and must be received by November 2, 2001. The one-page summary will be provided to each member of the Board in the agenda packet distributed prior to the meeting at which the final-form regulations will be considered.
Electronic Comments. Comments may also be submitted electronically to the Board at fryder@state.pa.us and must also be received by the Board by November 13, 2001. A subject heading of the proposal and a return name and address must be included in each transmission. If an acknowledgment of electronic comments is not received by the sender within 2 working days, the comments should be transmitted by mail to ensure receipt.
DALE H. EVERHART,
SecretaryFiscal Note: 43-8. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 22. EDUCATION
PART XIII. PUBLIC SCHOOL EMPLOYEES'
RETIREMENT BOARD
CHAPTER 213. CONTRIBUTIONS AND BENEFITS
GENERAL PROVISIONS § 213.3. Eligibility points for retention and reinstatement of service credits.
* * * * * (c) In all instances when creditable school or nonschool service may be purchased, an active member, having elected to purchase the service, is not permitted to cancel the purchase [once payment has been made by lump sum, or once the member has agreed, in writing, to payroll deductions upon the terms and conditions as provided in this part].
* * * * *
CONTRIBUTIONS § 213.23. Member contributions for creditable school service.
* * * * * (d) [The payment for the purchase of all credit authorized by this chapter, except that for sabbatical leave and activated military service leave, shall be payable in a lump sum within 90 days after certification of the amount due or, in the case of an active member, may be authorized through payroll deductions over a period of years not in excess of 6 years, if statutory interest at 4% annually is charged through the repayment period. The amount certified by the Board for the purchase of this credit shall be in accordance with methods approved by the actuary.
(e)] * * *
§ 213.24. Contributions for the purchase of credit for creditable school and nonschool service.
* * * * * (b) Contributions for purchase of nonintervening military service. The amount due for the purchase of nonintervening military service shall be calculated as follows: The average of the first 3 years' salaries subsequent to the military service, multiplied by the sum of the member's basic contribution rate and the normal contribution rate as determined by section 8328 of the Retirement Code (relating to actuarial cost method), relating to Commonwealth and district shares, and multiplied by the number of years or fractional years of military service. [The amount due for the purchase of the military service, as calculated under this subsection, may be paid in a lump sum within 90 days after certification of the amount due, or in the case of an active member, may be amortized through payroll deductions over a period of years not in excess of 5 years without interest.] All amounts certified by the Board for the purchase of the service shall be in accordance with methods approved by the actuary. Nonintervening military service may not be purchased unless the active member has completed at least 3 years of subsequent credited school service as a Class T-C member.
(c) Contributions for purchase of intervening military service. An active member eligible to purchase credit for intervening military service shall pay the amount due in accordance with the following formula: The member's basic contribution rate at the time of entry into the active military service multiplied by the member's then compensation and by years of the military service together with statutory interest during all periods of subsequent school and State service to the date of purchase, if all the amounts due shall be in accordance with methods certified and approved by the actuary. [The amounts due for the purchase of the service may be paid under one of the following methods:
(1) Regular monthly payments submitted through the school district based on the compensation of the member which the member would have received at the time of entry into active military service without statutory interest since the payments are made on a current contributing basis.
(2) A lump sum payment within 90 days of the date of the amount certified to be due and owing.
(3) Through amortized salary deductions over a period not to exceed 5 years.]
(d) Contributions for purchase of other creditable nonschool service. An active member shall pay the amount due for creditable nonschool service in accordance with the following formula: The member's basic contribution rate plus the normal contribution rate, applied to the member's first year salary of credited school service subsequent to the creditable nonschool service sought to be purchased, multiplied by the number of years or fractional parts of a year of the service purchased, together with statutory interest during all subsequent years of school or State service to the date of purchase. [The active member may pay the amount due in a lump sum payment within 90 days after the date of certification by the Board of the amount due or through salary deductions amortized over a 1, 2, but not more than 3-year period, if the statutory interest is charged through the repayment period, and if the amounts due are in accordance with methods certified and approved by the actuary.] This formula for purchase does not apply in the case of purchase of creditable nonschool service rendered to a county board of school directors. In this event, the member shall only pay the amount due based on the member's basic contribution rate exclusive of the normal contribution rate.
* * * * * § 213.25. Incomplete payments.
* * * * * [(c) Payments under certain conditions. If a member agrees to make payments for purchase of certain service, as provided in sections 8323 and 8324 of the Retirement Code (relating to member contributions for creditable school service; and contributions for purchase of credit for creditable nonschool service), and dies in school service, or terminates school service before any payments are made, the request for purchase of the service shall be canceled, unless payment is made in a lump sum payment, within 30 days after the event, by the member or anyone acting on his behalf.]
[(d)] (c) * * *
[(e)] (d) * * *
[Pa.B. Doc. No. 01-1836. Filed for public inspection October 12, 2001, 9:00 a.m.]
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