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Actuarial cost method - 71 Pa. Cons. Stat. § 5508

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     § 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.

Last modified: November 27, 2007