PRINTER'S NO. 3525
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2507
Session of
2024
INTRODUCED BY SCHLEGEL, DIAMOND, M. JONES, T. JONES AND
ZIMMERMAN, JULY 23, 2024
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JULY 23, 2024
AN ACT
Amending the act of August 31, 1971 (P.L.398, No.96), entitled
"An act providing for the creation, maintenance and operation
of a county employes' retirement system, and imposing certain
charges on counties and providing penalties," providing for
County Employees' Defined Contribution Plan.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of August 31, 1971 (P.L.398, No.96),
known as the County Pension Law, is amended by adding a section
to read:
Section 30.1. County Employees' Defined Contribution Plan.--
(a) The County Employees' Defined Contribution Plan is
established. The board shall administer and manage the plan
which shall be a defined contribution plan exclusively for the
benefit of those county employes who participate in the plan and
their beneficiaries within the meaning of and in conformity with
IRC § 401(a). The board shall determine the terms and provisions
of the plan not inconsistent with this act, the IRC or other
applicable law and shall provide for the plan's administration.
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(b) The County Employees' Defined Contribution Trust is
established as part of the plan. The trust shall be comprised of
the individual investment accounts and all assets and money in
those accounts, and any assets and money held by the board as
part of the plan that are not allocated to individual investment
accounts. The members of the board shall be the trustees of the
trust, which shall be administered exclusively for the benefit
of those county employes who participate in the plan and their
beneficiaries within the meaning of and in conformity with IRC §
401(a). The board shall determine the terms and provisions of
the trust not inconsistent with this act, the IRC or other
applicable law and shall provide for the investment and
administration of the trust.
(c) All assets and income in the plan that have been or
shall be withheld or contributed by the participants, the county
and other employers in accordance with this act shall be held in
trust in any funding vehicle permitted by the applicable
provisions of the IRC for the exclusive benefit of the
participants and their beneficiaries until such time as the
funds are distributed to the participants or their beneficiaries
in accordance with the terms of the plan document. The assets of
the plan held in trust for the exclusive benefit of the
participants and their beneficiaries may be used for the payment
of the fees, costs and expenses related to the administration
and investment of the plan and the trust.
(d) The board shall specify the terms and provisions of the
plan and trust in a document containing the terms and conditions
of the plan and in a trust declaration that shall be published
in the county records. Any amendment to the plan and trust
declaration also shall be published.
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(e) The board shall establish in the trust an individual
investment account for each participant in the plan. All
contributions by a participant or an employer for or on behalf
of a participant shall be credited to the participant's
individual investment account, together with all interest and
investment earnings and losses. Investment and administrative
fees, costs and expenses shall be charged to the participants'
individual investment accounts except as otherwise provided
under this act or as the county otherwise provides by
appropriations from the county general fund. Employer defined
contributions shall be recorded and accounted for separately
from participant contributions, but all interest, investment
earnings and losses, and investment and administrative fees,
costs and expenses shall be allocated proportionately.
(f) (1) A participant shall make mandatory pickup
participant contributions through payroll deductions to the
participant's individual investment account equal to a rate as
determined by the board. The employer shall cause those
contributions for current service to be made and deducted from
each payroll or on such schedule as established by the board.
(2) A participant may make voluntary contributions through
payroll deductions, through direct trustee-to-trustee transfers,
or through transfers of money received in an eligible rollover
into the trust to the extent allowed by IRC § 402. The rollovers
shall be made in a form and manner as determined by the board,
shall be credited to the participant's individual investment
account and shall be separately accounted for by the board.
(3) No contributions may be allowed that would cause a
violation of the limitations related to contributions applicable
to governmental plans contained in IRC § 415 or in other
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provisions of law. In the event that any disallowed
contributions are made, any participant contributions in excess
of the limitations and investment earnings on those
contributions, but minus investment fees and administrative
charges, shall be refunded to the participant by the board.
(g) (1) The contributions to the trust required to be made
under subsection (f)(1) with respect to county service rendered
by an active participant shall be picked up by the county and
shall be treated as the employer's contribution for purposes of
IRC § 414(h). After the effective date of this subsection, an
employer employing a participant in the plan shall pick up the
required mandatory participant contributions by a reduction in
the compensation of the participant.
(2) For all other purposes under this act and otherwise,
mandatory pickup participant contributions shall be treated as
contributions made by a participant in the same manner and to
the same extent as if the contributions were made directly by
the participant and not picked up.
(h) (1) The county of an active participant shall make
employer defined contributions for service of an active
participant that shall be credited to the active participant's
individual investment account. Employer defined contributions
shall be recorded and accounted for separately from participant
contributions.
(2) No contributions may be allowed that would cause a
violation of the limitations related to contributions applicable
to governmental plans contained in IRC § 415 or in other
provisions of law. In the event that any disallowed
contributions are made, any employer defined contributions in
excess of the limitations and investment earnings on the
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contributions, but minus investment fees and administrative
charges, shall be refunded to the employer by the board.
(i) (1) A participant who terminates county service shall
be eligible to withdraw the vested accumulated total defined
contributions standing to the participant's credit in the
participant's individual investment account or a lesser amount
as the participant may request. Payment shall be made in a lump
sum unless the board has established other forms of distribution
in the plan document. A participant who withdraws the
participant's vested accumulated total defined contributions
shall no longer be a participant in the plan, notwithstanding
that the former county employe may continue to be a member of
the system or may have contracted to receive an annuity or other
form of payment from a provider retained by the board for such
purposes.
(2) All payments under this subsection shall start and be
made in compliance with the minimum distribution requirements
and incidental death benefit rules of IRC § 401(a)(9). The board
shall take any action and make any distributions it may
determine are necessary to comply with those requirements.
(3) (Reserved).
(4) A county employe must be terminated from all positions
that result in either membership in the system or participation
in the plan to be eligible to receive a distribution. No
distribution shall be allowed that would be an in-service
distribution prohibited by the IRC.
(5) Loans or other distributions, including hardship or
unforeseeable emergency distributions, from the plan to county
employes who have not terminated county service are not
permitted, except as required by law.
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(6) A participant who terminates county service and whose
vested accumulated total defined contributions are below the
threshold established by law as of the date of termination of
service may be paid the vested accumulated total defined
contributions in a lump sum as provided in IRC § 401(a)(31).
(7) Except as prohibited by the IRC or as otherwise provided
in this act, a participant who is eligible and elects to receive
a distribution or vested accumulated employer defined
contributions may purchase an annuity with that distribution
from an annuity provider contracted by the board under
subsection (j)(3) and under such conditions as provided in the
plan document. The conditions may include that the board is
authorized to make the distribution directly to the annuity
provider.
(j) (1) In the event of the death of an active participant
or inactive participant, the board shall pay to the
participant's beneficiary the vested balance in the
participant's individual investment account in a lump sum or in
such other manner as the board may establish in the plan
document.
(2) In the event of the death of a participant receiving
distributions, the board shall pay to the participant's
beneficiary the vested balance in the participant's individual
investment account in a lump sum or in such other manner as the
board may establish in the plan document or, if the board has
established alternative methods of distribution in the plan
document under which the participant was receiving
distributions, to the participant's beneficiary or successor
payee, as the case may be, as provided in the plan document.
(3) The board shall contract with financial institutions,
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insurance companies or other types of third-party providers to
allow a participant, beneficiary or successor payee who receives
a lump sum distribution to receive payments and death benefits
in a form and manner as provided by the contract. To the extent
commercially available, any annuity option shall include an
interest rate of at least two and one-half per cent compounded
annually.
(k) Subject to any applicable forfeiture and attachment
provisions of law, a participant shall be vested immediately
with respect to all mandatory pickup participant contributions
and voluntary contributions paid by or on behalf of the
participant to the trust in addition to interest and investment
gains or losses on the participant contributions but minus
investment fees and administrative charges.
(l) (1) The board may perform an annual or more frequent
review of any qualified fund manager for the purpose of assuring
that the fund manager continues to meet all standards and
criteria established.
(2) The board may allow for eligible rollovers and direct
trustee-to-trustee transfers into the trust from qualified plans
of other employers, regardless of whether the employers are
private employers or public employers.
(3) The board may allow an inactive participant to maintain
the participant's individual investment account within the plan.
(4) The board shall administer or ensure the administration
of the plan in compliance with the qualifications and other
rules of the IRC.
(5) The board may establish procedures to provide for the
lawful payment of benefits, including, but not limited to,
alternate payees as provided by this act or other law.
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(6) The board shall determine, after reviewing applicable
law, what constitutes a termination of county service.
(7) The board may establish procedures for distributions of
small accounts as required or permitted by the IRC.
(8) The board may establish procedures in the plan document
or promulgate rules and regulations as it deems necessary for
the administration and management of the plan, including, but
not limited to, establishing:
(i) Procedures for eligible participants to change voluntary
contribution amounts or their investment choices on a periodic
basis or make other elections regarding their participation in
the plan.
(ii) Procedures for deducting mandatory pickup participant
contributions and voluntary contributions from a participant's
compensation.
(iii) Procedures for rollovers and trustee-to-trustee
transfers allowed under the IRC and permitted as part of the
plan.
(iv) Standards and criteria for disclosing to the
participants the anticipated and actual income attributable to
amounts invested, property rights and all fees, costs and
expenses to be made against amounts deferred to cover the fees,
costs and expenses of administering and managing the plan or
trust.
(v) Procedures, standards and criteria for the making of
distributions from the plan upon termination from employment or
death or in other circumstances consistent with the purpose of
the plan.
(9) The board may waive any reporting or information
requirement contained in this act if the board determines that
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the information is not needed for the administration of the
plan.
(10) The board may contract any services and duties in lieu
of staff, except final adjudications and as prohibited by law.
Any duties or responsibilities of the board not required by law
to be performed by the board can be delegated to a third-party
provider subject to appeal to the board.
(11) The board may provide that any duties of the employer
or information provided by the participant to the employer be
performed or received directly by the board.
(12) The board shall ensure that participants are provided
with educational materials about investment options and choices.
(m) The board, the Commonwealth, an employer or other
political subdivision shall not be responsible for any
investment or other loss incurred under the plan or for the
failure of any investment to earn any specific or expected
return or to earn as much as any other investment opportunity or
to cost less than any other investment opportunity, whether or
not the other opportunity was offered to participants in the
plan.
(n) (1) All contributions, interest and investment earnings
shall be invested based on a participant's investment allocation
choices, provided that the board may provide for a default
investment option. All investment allocation choices shall be
credited proportionally between participant contributions and
employer defined contributions. Each participant shall be
credited individually with the amount of contributions, interest
and investment earnings.
(2) Investment of contributions by any corporation,
institution, insurance company, custodial bank or other entity
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that the board has approved shall not be unreasonably delayed,
and in no case may the investment of contributions be delayed
more than thirty days from the date of payroll deduction or the
date voluntary contributions are made to the date that funds are
invested. Any interest earned on the funds pending investment
shall be used to pay administrative costs and fees that would
otherwise be required to be borne by participants who are then
participating in the plan or paid by appropriations from the
county general fund.
(o) All fees, costs and expenses of establishing and
administering the plan and the trust and investing the assets of
the trust shall be borne by the participants and paid from
assessments against the balances of the individual investment
accounts as established by the board, except that the fees,
costs and expenses of establishing and administering the plan
and the trust shall be paid by the county through annual
appropriations.
(p) (1) All payments under this section shall start and be
made in compliance with the required beginning date, minimum
distribution requirements and incidental death benefit rules of
IRC § 401(a).
(2) (i) Except as provided under subparagraph (ii) and
notwithstanding a provision of this act, a contribution or
benefit related to the plan may not exceed any limitation under
IRC § 415 with respect to a governmental plan which is in effect
on the date the contribution or benefit payment takes effect.
(ii) An increase in a limitation under IRC § 415 shall apply
to all participants on and after the effective date of this
subparagraph.
(iii) An increase in benefits on or after the effective date
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of this subparagraph for a participant in the plan shall be
authorized and apply to the fullest extent allowed by law.
(q) As used in this section, the following words and phrases
shall have the meanings given to them in this subsection unless
the context clearly indicates otherwise:
"Governmental plan" has the same meaning as the term has in
IRC § 414(d).
"IRC" means the Internal Revenue Code of 1986 (Public Law 99-
514, 26 U.S.C. § 1 et seq.).
"Participant" means a county employe.
"Plan" means the County Employees' Defined Contribution Plan
established under subsection (a).
"Trust" means the County Employees' Defined Contribution
Trust established under subsection (b).
"USERRA" means the Uniformed Services Employment and
Reemployment Rights Act, 38 U.S.C. Ch. 43 (relating to
employment and reemployment rights of members of the uniformed
services).
"USERRA leave" means any period of time for service in the
uniformed services as defined in 38 U.S.C. Ch. 43 by a county
employe or former county employe who terminated county service
to perform the service in the uniformed services, if the current
or former county employe is entitled to reemployment rights
under 38 U.S.C. Ch. 43 with respect to the uniformed service.
Section 2. This act shall take effect in 60 days.
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