PROPOSED RULEMAKING
STATE EMPLOYEES' RETIREMENT BOARD
[4 PA. CODE CHS. 243 AND 245]
Retirement Contributions
[31 Pa.B. 1587] The State Employees' Retirement Board (Board) proposes to amend §§ 243.6, 245.4, 245.5 and 245.6. The proposed 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 was adopted by the Board at its meeting on October 25, 2000.
A. Effective Date
These amendments will go into effect upon publication in the Pennsylvania Bulletin as final-form rulemaking.
B. Contact Person
For further information contact Sean Sanderson, Director of Communications, State Employees' Retirement System, 30 North Third Street, P. O. Box 1147, Harrisburg, PA, (717) 237-0261, or Brian E. McDonough, Deputy Chief Counsel, State Employees' Retirement System, 30 North Third Street, P. O. Box 1147, Harrisburg, PA, 17108-1147, (717) 237-0229. 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 71 Pa.C.S. § 5907(d) and (h) (relating to State Employees' Retirement Code) (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 that 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 regulations 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 the proposed repeal of these restrictions is to permit the member and the Board to agree upon how member contributions for the purchase of service can be made. Members would still have the options 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. A sister agency, the Public School Employees' Retirement System (Retirement System), currently permits the actuarial reduction of school member accounts for service purchases. These regulatory repeals would enable the Board to offer similar opportunities to State employees.
E. Benefits, Costs and Compliance
Executive Order 1996-1 requires a cost/benefit analysis of these proposed amendments.
Benefits
These proposed amendments would benefit State 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 Retirement System. 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 no additional costs to the Commonwealth, its citizens or State employees associated with these amendments.
Compliance Costs
The proposed amendments are not expected to impose any additional compliance costs on State employees.
F. Sunset Review
Not applicable.
G. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 12, 2001, the Board submitted a copy of these proposed amendments to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House State Government 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 Board 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 these proposed amendments to Sean Sanderson, Director of Communications, State Employees' Retirement System, P. O. Box 1147, Harrisburg, PA 17108-1147 (express mail: 30 North Third Street, 5th Floor, Harrisburg, PA 17108-1147). Comments submitted by facsimile will not be accepted. Comments, suggestions or objections must be received by the Board within 30 days of publication in the Pennsylvania Bulletin.
Electronic Comments--Comments may be submitted electronically to the Board at ssanderson@state.pa.us and must also be received by the Board within 30 days of publication in the Pennsylvania Bulletin. 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 retransmitted to ensure receipt.
NICHOLAS J. MAIALE,
ChairpersonFiscal Note: 31-1. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 4. ADMINISTRATION
PART X. STATE EMPLOYEES' RETIREMENT BOARD
CHAPTER 243. MEMBERSHIP, CREDITED SERVICE, CLASSES OF SERVICE AND ELIGIBILITY FOR BENEFITS § 243.6. Creditable nonstate service.
* * * * * [(g) Creditable State and nonstate service--noncancellable purchase of. In all instances where creditable State or nonstate service may be purchased, any active member, by application, electing to purchase the service may not be permitted to cancel the purchase thereof once payment has been made by lump sum or the member has agreed, in writing, to payroll deductions upon such terms and conditions as provided in this part.]
CHAPTER 245. CONTRIBUTIONS § 245.4. Member contributions for the purchase of credit for previous State service or to become a full coverage member.
[(a)] * * *
* * * * * [(b) Method of payment. The amount payable for the purchase of previous State service or to become a full coverage member shall be paid in a lump sum within 30 days of certification of the amount due or, in the case of an active member, may be paid through payroll deductions over a 1, 2, but not more than 3-year period, provided statutory interest at 4% annually is charged through the repayment period.]
§ 245.5. [Contributions for the purchase of credit for creditable nonstate service] (Reserved).
[(a) The payment for the purchase of nonintervening military service (not to exceed 5 years) or of total intervening military service, shall be made in a lump sum within 30 days after billing or, in the case of an active member, may be paid through payroll deductions over a 1, 2, but not more than, 3-year period, provided statutory interest at 4% annually is charged through the repayment period.
(b) The payment for the purchase of creditable nonstate service, other than military and magisterial service, shall be made in a lump sum within 30 days of billing; or in the case of an active member, may be paid through payroll deductions over a 1, 2, but not more than, 3-year period, provided statutory interest at 4% annually is charged through the repayment period.]
§ 245.6. Incomplete payments.
* * * * * [(c) Incomplete payments under certain conditions. In the event a member agrees to make payments for purchase of certain service, as provided in sections 5504 and 5505 of the code (relating to member contributions for the purchase of credit for previous State services or to become a full coverage member; and contributions for the purchase of credit for creditable nonstate service), and dies in State service, or terminates State service before any payments are made, then the request for purchase of such service shall be cancelled, unless payment is made in a lump sum within 30 days after such event by the member or anyone acting on his behalf. In the event a member applies for the purchase of service and dies prior to a billing for such service being made, then his legally constituted representative may purchase such service by payment of a lump sum within 30 days after billing.]
[Pa.B. Doc. No. 01-503. Filed for public inspection March 23, 2001, 9:00 a.m.]
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