5508 - Actuarial cost method.
§ 5508. Actuarial cost method. (a) Employer contribution rate on behalf of active members.--The amount of the Commonwealth and other 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 employer contribution rate on behalf of all active members shall consist of the employer normal contribution rate, as defined in subsection (b), and the accrued liability contribution rate as defined in subsection (c). The total employer contribution rate shall be modified by the experience adjustment factor as calculated in subsection (f) but in no case shall it be less than zero. The total employer contribution rate shall be modified by the experience adjustment factor as calculated in subsection (f), but in no case shall it be less than: (1) 2% for the fiscal year beginning July 1, 2004; (2) 3% for the fiscal year beginning July 1, 2005; and (3) 4% for the fiscal year beginning July 1, 2006, and thereafter. (b) Employer normal contribution rate.--The employer normal contribution rate shall be determined after each actuarial valuation 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. The employer normal contribution rate shall be determined 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 his entire period of active State service, would be sufficient to fund the liability for any prospective benefit payable to him, except for the supplemental benefits provided for in sections 5708 (relating to supplemental annuities), 5708.1 (relating to additional supplemental annuities), 5708.2 (relating to further additional supplemental annuities), 5708.3 (relating to supplemental annuities commencing 1994), 5708.4 (relating to special supplemental postretirement adjustment), 5708.5 (relating to supplemental annuities commencing 1998), 5708.6 (relating to supplemental annuities commencing 2002), 5708.7 (relating to supplemental annuities commencing 2003) and 5708.8 (relating to special supplemental postretirement adjustment of 2002), in excess of that portion funded by his prospective member contributions. (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, except for the supplemental benefits as provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4, 5708.5, 5708.6, 5708.7 and 5708.8, in excess of the total assets in the fund (calculated recognizing all investment gains and losses over a five-year period), excluding the balance in the supplemental annuity account, and the present value of employer normal contributions and of member contributions payable with respect to all active members on December 31, 2001, and excluding contributions to be transferred by county retirement systems or pension plans pursuant to section 5507(c) (relating to contributions by the Commonwealth and other employers). 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. (2) 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 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 calendar year 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) Special provisions on calculating contributions.--In calculating the contributions required by subsections (a), (b) and (c), the active members of Class C shall be considered to be members of Class A. In addition, the actuary shall determine the Commonwealth or other employer contributions required for active members of Class C and officers of the Pennsylvania State Police and enforcement officers and investigators of the Pennsylvania Liquor Control Board who are members of Class A to finance their benefits in excess of those to which other members of Class A are entitled. Such additional contributions shall be determined separately for officers and employees of the Pennsylvania State Police and for enforcement officers and investigators of the Pennsylvania Liquor Control Board. Such contributions payable on behalf of officers and employees of the Pennsylvania State Police shall include the amounts received by the system under the provisions of the act of May 12, 1943 (P.L.259, No.120), referred to as the Foreign Casualty Insurance Premium Tax Allocation Law, and on behalf of enforcement officers or investigators of the Pennsylvania Liquor Control Board, the amounts received by the system under the provisions of the act of April 12, 1951 (P.L.90, No.21), known as the Liquor Code. (e) Supplemental annuity contribution rate.--Contributions from the Commonwealth required to provide for the payment of supplemental annuities as provided in sections 5708, 5708.1, 5708.2, 5708.3, 5708.4 and 5708.5 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 5708.6 shall be as provided in section 5708.6(f). The funding for the supplemental annuities commencing 2003 provided for in section 5708.7 shall be as provided in section 5708.7(f). The funding for the special supplemental postretirement adjustment of 2002 under section 5708.8 shall be as provided in section 5708.8(g). 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 increase in benefits shall be funded in equal dollar annual installments over a period of ten years from the July first, coincident with or next following the effective date of such legislation. (f) 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 liability, including liability for supplemental annuities, 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 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 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 succeeding the actuarial valuation determining said increases and decreases. (g) Determination of liability for special vestee.-- Notwithstanding any other provision of this part or other law, the total additional accrued actuarial liability resulting from eligibility of special vestees for benefits upon the attainment of superannuation age shall be determined by the actuary as part of the first annual valuation made after June 30, 1997. The resulting additional accrued actuarial liability shall be paid by The Pennsylvania State University to the board in one lump sum payment within 90 days of the board's certification of the amount to The Pennsylvania State University. (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; June 25, 1997, P.L.369, No.41, eff. imd.; May 17, 2001, P.L.26, No.9, eff. July 1, 2002; Apr. 23, 2002, P.L.272, No.38, eff. imd.; Dec. 10, 2003, P.L.228, No.40, eff. imd.; June 27, 2007, P.L.32, No.8, eff. imd.) 2007 Amendment. Act 8 amended subsec. (a). See section 2 of Act 8 in the appendix to this title for special provisions relating to recertification of employer contribution rates. 2003 Amendment. Act 40 amended subsecs. (a), (c) and (f). 1997 Amendment. See section 6 of Act 41 in the appendix to this title for special provisions relating to limitation of special vestee status. Cross References. Section 5508 is referred to in sections 5301, 5303.2, 5505.1, 5507, 5706, 5902 of this title.