8328 - Actuarial cost method.
§ 8328. Actuarial cost method. (a) Employer contribution rate on behalf of active members.--The amount of the total employer contributions on behalf of all active members shall be computed by the actuary as a percentage of the total compensation of all active members during the period for which the amount is determined and shall be so certified by the board. The total contribution rate on behalf of all active members shall consist of the normal contribution rate as defined in subsection (b), the accrued liability contribution rate as defined in subsection (c) and the supplemental annuity contribution rate as defined in subsection (d). Beginning July 1, 2004, the total contribution rate shall be modified by the experience adjustment factors as calculated in subsection (e) but in no case shall it be less than 4% plus the premium assistance contribution rate. (b) Normal contribution rate.--The normal contribution rate shall be determined after each actuarial valuation. Until all accrued liability contributions have been completed, the normal contribution rate shall be determined, on the basis of an annual interest rate and such mortality and other tables as shall be adopted by the board in accordance with generally accepted actuarial principles, as a level percentage of the compensation of the average new active member, which percentage, if contributed on the basis of his prospective compensation through the entire period of active school service, would be sufficient to fund the liability for any prospective benefit payable to him, in excess of that portion funded by his prospective member contributions, except for the supplemental benefits provided in sections 8348 (relating to supplemental annuities), 8348.1 (relating to additional supplemental annuities), 8348.2 (relating to further additional supplemental annuities), 8348.3 (relating to supplemental annuities commencing 1994), 8348.4 (relating to special supplemental postretirement adjustment), 8348.5 (relating to supplemental annuities commencing 1998), 8348.6 (relating to supplemental annuities commencing 2002) and 8348.7 (relating to supplemental annuities commencing 2003). (c) Accrued liability contribution rate.-- (1) For the fiscal year beginning July 1, 2002, the accrued liability contribution rate shall be computed as the rate of total compensation of all active members which shall be certified by the actuary as sufficient to fund over a period of ten years from July 1, 2002, the present value of the liabilities for all prospective benefits of active members, except for the supplemental benefits provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7, in excess of the total assets in the fund (calculated by recognizing the actuarially expected investment return immediately and recognizing the difference between the actual investment return and the actuarially expected investment return over a five-year period), excluding the balance in the annuity reserve account, and of the present value of normal contributions and of member contributions payable with respect to all active members on July 1, 2002, during the remainder of their active service. (2) Thereafter, the amount of each annual accrued liability contribution shall be equal to the amount of such contribution for the fiscal year, beginning July 1, 2002, except that, if the accrued liability is increased by legislation enacted subsequent to June 30, 2002, but before July 1, 2003, such additional liability shall be funded over a period of ten years from the first day of July, coincident with or next following the effective date of the increase. The amount of each annual accrued liability contribution for such additional legislative liabilities shall be equal to the amount of such contribution for the first annual payment. (3) Notwithstanding any other provision of law, beginning July 1, 2004, the outstanding balance of the increase in accrued liability due to the change in benefits enacted in 2001 and the outstanding balance of the net actuarial loss incurred in fiscal year 2000-2001 shall be amortized in equal dollar annual contributions over a period that ends 30 years after July 1, 2002, and the outstanding balance of the net actuarial loss incurred in fiscal year 2001-2002 shall be amortized in equal dollar annual contributions over a period that ends 30 years after July 1, 2003. For fiscal years beginning on or after July 1, 2004, if the accrued liability is increased by legislation enacted subsequent to June 30, 2003, such additional liability shall be funded in equal dollar annual contributions over a period of ten years from the first day of July coincident with or next following the effective date of the increase. (d) Supplemental annuity contribution rate.--Contributions from the Commonwealth and other employers required to provide for the payment of the supplemental annuities provided for in sections 8348, 8348.1, 8348.2, 8348.4 and 8348.5 shall be paid over a period of ten years from July 1, 2002. The funding for the supplemental annuities commencing 2002 provided for in section 8348.6 shall be as provided in section 8348.6(f). The funding for the supplemental annuities commencing 2003 provided for in section 8348.7 shall be as provided in section 8348.7(f). The amount of each annual supplemental annuities contribution shall be equal to the amount of such contribution for the fiscal year beginning July 1, 2002. In the event that supplemental annuities are increased by legislation enacted subsequent to June 30, 2002, the additional liability for the increased benefits to be amortized shall be funded in equal dollar annual installments over a period of ten years. (e) Experience adjustment factor.-- (1) For each year after the establishment of the accrued liability contribution rate for the fiscal year beginning July 1, 2002, any increase or decrease in the unfunded accrued liability, excluding the gains or losses on the assets of the health insurance account, due to actual experience differing from assumed experience, changes in actuarial assumptions, changes in the terms and conditions of the benefits provided by the system by judicial, administrative or other processes other than legislation, including, but not limited to, reinterpretation of the provisions of this part, shall be amortized in equal dollar annual contributions over a period of ten years beginning with the July 1 second succeeding the actuarial valuation. (2) Notwithstanding the provisions of paragraph (1), for each year after the establishment of the accrued liability contribution rate for the fiscal year beginning July 1, 2003, any increase or decrease in the unfunded accrued liability, excluding the gains or losses on the assets of the health insurance account, due to actual experience differing from assumed experience, changes in actuarial assumptions, changes in the terms and conditions of the benefits provided by the system by judicial, administrative or other processes other than legislation, including, but not limited to, reinterpretation of the provisions of this part, shall be amortized in equal dollar annual contributions over a period of 30 years beginning with the July 1 second succeeding the actuarial valuation determining said increases and decreases. (f) Premium assistance contribution rate.--For each fiscal year beginning with July 1, 1991, the total contribution rate as calculated according to this section shall be increased annually in the full amount certified by the board as necessary to fund the premium assistance program in accordance with section 8509 (relating to health insurance premium assistance program), notwithstanding any other provisions of this section. (Dec. 18, 1979, P.L.566, No.130, eff. imd.; June 29, 1984, P.L.450, No.95, eff. imd.; Oct. 21, 1988, P.L.844, No.112, eff. Jan. 1, 1989; Aug. 5, 1991, P.L.183, No.23, eff. imd.; Apr. 29, 1994, P.L.159, No.29, eff. 60 days; May 17, 2001, P.L.26, No.9, eff. July 1, 2001; Apr. 23, 2002, P.L.272, No.38, eff. imd.; Dec. 10, 2003, P.L.228, No.40, eff. imd.) 2003 Amendment. Act 40 amended subsecs. (a), (c) and (e). 2002 Amendment. See section 20 of Act 38 in the appendix to this title for special provisions relating to calculation of actuarial value. Cross References. Section 8328 is referred to in sections 8323, 8324, 8326, 8327, 8346, 8502, 8509, 8525, 8526, 8535 of this title.