PROPOSED RULEMAKING
STATE EMPLOYEES' RETIREMENT BOARD
[4 PA. CODE CHS. 243 AND 249]
Optional Alternate Retirement Plans
[33 Pa.B. 892] The State Employees' Retirement Board (Board) proposes to amend Chapters 243 and 249 (relating to membership, credited service, classes of service and eligibility for benefits; and administration, funds, accounts, general provisions) to read as set forth in Annex A. The rulemaking is being proposed to delete the transitional provisions for electing to participate in an optional alternate retirement program or plan contained in §§ 243.3 and 249.58 (relating to optional alternate retirement program). The transitional provisions are no longer needed and, read broadly, may conflict with current 71 Pa.C.S. (relating to State Employees' Retirement Code) (Retirement Code) provisions, because the Retirement Code does not allow current members to opt out of the system.
A. Effective Date
The proposed rulemaking will go into effect upon publication in the Pennsylvania Bulletin as a 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 17108, (717) 787-9657; or M. Catherine Nolan, Assistant Counsel, State Employees' Retirement System, 30 North Third Street, P. O. Box 1147, Harrisburg, PA 17108, (717) 783-7317.
C. Statutory Authority
This proposed rulemaking is being made under the authority of 71 Pa.C.S. § 5902(h) (relating to administrative duties of the board).
D. Background and Purpose
When the Retirement Code was amended in 1974, the Retirement Code, for the first time, permitted certain school employees to choose an alternate retirement plan. The Retirement Code applies to new employees. The Board promulgated §§ 243.3 and 249.58 to implement this Retirement Code provision. Sections 243.3 and 249.58, among other things, contained transitional provisions, granting to existing employees an opportunity to elect an alternate retirement plan. Section 249.58 provides that vested members make an election on or before November 1, 1975. Active members who had not vested as of November 1, 1975, had 60 days from becoming eligible to vest to so elect. The transitional provisions of §§ 243.3 and 249.58 were added because the existing employees never had the opportunity to select an alternate plan. At the time of enactment of §§ 243.3 and 249.58, the only alternate plan allowed was Teachers Insurance and Annuity Association-College Retirement Equities Fund.
The act of June 22, 2001 (P. L. 530, No. 35) allowed the State System of Higher Education (SSHE) to add insurance companies or mutual funds as additional alternate plans for its employees. Sections 243.3 and 249.58, as written, could be interpreted to allow existing employees, who already had a choice under the Retirement Code to elect an alternate retirement plan, to make an additional election and to opt out of the State Employees Retirement System (SERS) each time a new alternate plan is approved by SSHE. The Board, however, has always interpreted §§ 243.3 and 249.58 as providing a one-time opportunity for these employees, not a continual choice each time a new alternate plan is approved by the employer. Deleting the language clarifies the intent of the Board and eliminates a potential conflict between §§ 243.3 and 249.58 and the Retirement Code, because the Retirement Code does not allow current members to opt out of the system.
The Public School Employees' Retirement System (PSERS) is proposing a similar revision of its regulations that parallels § 249.58. This amendment will harmonize the regulations of SERS and PSERS with regard to election of alternate retirement plans. SSHE supports the proposed amendment of these provisions.
E. Benefits, Costs and Compliance
Benefits
The proposed rulemaking removes expired transitional provisions, clarifies the Board's intent regarding the election of alternate retirement plans and eliminates a potential conflict between the Retirement Code and §§ 243.3 and 249.58.
Costs
The proposed rulemaking would formalize the Board's long-standing interpretation that the transitional provisions of §§ 243.3 and 249.58 have expired. The proposed rulemaking, therefore, maintains the status quo and has no associated cost.
Compliance Costs
The proposed rulemaking will not impose any additional compliance costs on State employees or employers.
F. Sunset Review
Not applicable.
G. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on February 3, 2003, the Board submitted a copy of this proposed rulemaking 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 rulemaking, the Board has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by SERS. 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 rulemaking, it will notify the Board within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria that have not been met by the portion of the proposed rulemaking to which an objection is made. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of objections raised.
H. Public Comments
Written Comments. Interested persons are invited to submit comments, suggestions or objections regarding the proposed rulemaking to the State Employees' Retirement System, 30 North Third Street, P. O. Box 1147, Harrisburg, PA 17108. Comments submitted by facsimile will not be accepted. Comments, suggestions or objections must be received by the Board by March 17, 2003 (within 30 days of publication in the Pennsylvania Bulletin). Interested persons may also submit a summary of their comments to the Board. The summary may not exceed one page in length and must be received by March 7, 2003 (within 20 days following publication in the Pennsylvania Bulletin). 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 rulemaking will be considered.
JOHN BROSIUS,
SecretaryFiscal Note: 31-2. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 4. ADMINISTRATION
PART X. STATE [EMPLOYES'] EMPLOYEES' RETIREMENT BOARD
CHAPTER 243. MEMBERSHIP, CREDITED SERVICE, CLASSES OF SERVICE AND ELIGIBILITY FOR BENEFITS § 243.3. Optional alternate retirement program.
School [employes] employees, limited to certain designated [employes] employees and officers of The Pennsylvania State University, Indiana University of Pennsylvania, the State System of Higher Education and the Department of Education, shall be permitted to join an optional alternate retirement program in lieu of membership in the system. The program shall be an independent retirement program approved by the employing agency head, provided that the employer is not contributing at a rate greater than that provided in section 5508(b) of the code (relating to actuarial cost method). [Eligible employes, who are members of this System on the effective date of the code, shall have the right to elect to join an alternate retirement program and irrevocably relinquish membership in this System, under conditions to be contained in an agreement to be later approved by the respective employing agencies and the Board and to be published as an appendix to this part.]
CHAPTER 249. ADMINISTRATION, FUNDS, ACCOUNTS, GENERAL PROVISIONS
Subchapter E. GENERAL PROVISIONS § 249.58. Optional Alternate Retirement Program.
Pursuant to section 5301 of the code (relating to mandatory and optional membership), certain school [employes] employees may elect not to join the System [or to depart from it] in favor of an optional alternate retirement program approved by the employer. [Such section also requires that such a program be approved by the Secretary of Education or the governing body of certain State institutions, including Pennsylvania State University, as the case may be.] As a consequence, the following [rules and regulations] paragraphs are adopted by the Board to establish guidelines and procedures, insofar as the Board is authorized to so do, with respect to implementing such a program for certain school [employes] employees:
(1) [Section 5301(a)(12) of the code authorizes the governing body of the institution, or the Secretary of Education, where he has jurisdiction, to designate who shall be eligible to participate in the optional retirement program. They shall be responsible for the establishment of and the provisions of the program.
(2) Employes, including those employed on the effective date of the establishment of an optional alternate retirement program, who are eligible for membership therein, and who are active members of this System, shall have the option of continuing their active membership or of joining the optional alternate retirement program provided they shall make such election on or before November 1, 1975.] Every [employe] employee, who [subsequently becomes] is eligible for membership in the optional alternate retirement program, shall make such election within 30 days of the first date of active employment. All [employes] employees not exercising the option to join the optional alternate retirement program as aforesaid shall be deemed to have chosen to commence [or continue] active membership in the System, unless he shall have elected membership in the Public School [Employes'] Employees' Retirement System, as provided by law.
[(3) Where an eligible employe, who is an active member of this System, elects to participate in the optional alternate retirement program in accordance with the provisions of paragraph (2), he may elect to withdraw his accumulated deductions and accumulated social security integration deductions from the fund as of the date of such election; or, if such employe is eligible for vesting, he may elect to leave his accumulated deductions and accumulated social security integration deductions credited to his account in the fund and receive a retirement allowance upon separation from Commonwealth employment; or, at his option, upon attainment of superannuation retirement age, if later. Such retirement allowance shall be based upon his credited service and final average salary while a contributing member to this System only.
(4) Notwithstanding any provisions in this section to the contrary, an eligible employe employed on the effective date of the establishment of the optional alternate retirement program, who is eligible for membership therein, who is an active member of this System, and who is not vested, shall have the option of joining the optional alternate retirement program within 60 days of the date upon which he becomes eligible for vesting in accordance with the applicable provisions of the code, in which case he may vest in this System and join the optional alternate retirement program under the same conditions as provided in paragraph (3).]
[(5) Where] (2) When an eligible [employe elects] employee elected to participate in the optional alternate retirement program in accordance with the provisions of paragraph (2) as it existed on ________ (Editor's Note: The blank refers to a date 1 day before the effective date of adoption of this proposal.) or paragraph (4) as it existed on ________ (Editor's Note: The blank refers to a date 1 day before the effective date of adoption of this proposal.) or elects to participate in the optional alternate retirement program in accordance with paragraph (2), the election shall be final and binding so long as [he shall remain] the employee remains eligible to remain in the optional alternate retirement program. If [such an employe] the employee later becomes employed by the Commonwealth in a capacity which does not qualify him for membership in the optional alternate retirement program, [he] the employee shall, upon meeting the qualifications for membership in this System, [resume making] make contributions to the fund or reinstate [his] former credited service, for which contributions had been withdrawn, as the case may be, in accordance with the applicable provisions of the code. [In no case shall service,] Service salary, or other compensation paid to an [employe] employee while a member of the optional alternate retirement program will not be credited toward membership in or retirement benefit from this System.
[(6) In the case of eligible employes who elect to join the optional alternate retirement program, the employer's contribution to the optional alternate retirement program on behalf of such employes shall be at the same rate as the employe normal contribution rate to the fund as determined in accordance with the provisions of section 5508(b) of the code (relating to actuarial cost method).
(7)] (3) * * *
[Pa.B. Doc. No. 03-268. Filed for public inspection February 14, 2003, 9:00 a.m.]
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