§ 8328. Actuarial cost method.
(a) Employer contribution rate.--The amount of the total employer contributions 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 shall be the sum of the final contribution rate as computed in subsection (h) plus the premium assistance contribution rate as computed in subsection (f). The actuarially required contribution rate 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 actuarially required contribution rate shall be modified by the experience adjustment factors as calculated in subsection (e).
(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, excluding the shared-risk contributions.
(c) Accrued liability contribution rate.--
(1) For the fiscal years beginning July 1, 2002, and ending June 30, 2011, 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 (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), 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) For the fiscal years beginning July 1, 2003, and ending June 30, 2011, 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, and ending June 30, 2011, 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.
(4) For the fiscal year beginning July 1, 2011, 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 as a level percentage of compensation over a period of 24 years from July 1, 2011, the present value of the liabilities for all prospective benefits calculated as of June 30, 2010, including the supplemental benefits as provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7, in excess of the actuarially calculated assets in the fund (calculated recognizing all realized and unrealized investment gains and losses each year in level annual installments over a ten-year period). In the event that the accrued liability is increased by legislation enacted subsequent to June 30, 2010, such additional liability shall be funded as a level percentage of compensation over a period of ten years from the July 1 second succeeding the date such legislation is enacted.
(d) Supplemental annuity contribution rate.--
(1) For the period of July 1, 2002, to June 30, 2011, 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.
(2) For fiscal years beginning July 1, 2011, contributions from the Commonwealth and other employers whose employees are members of the system required to provide for the payment of supplemental annuities as provided in sections 8348, 8348.1, 8348.2, 8348.3, 8348.4, 8348.5, 8348.6 and 8348.7 shall be paid as part of the accrued liability contribution rate as provided for in subsection (c)(4), and there shall not be a separate supplemental annuity contribution rate attributable to those supplemental annuities. In the event that supplemental annuities are increased by legislation enacted subsequent to June 30, 2010, the additional liability for the increase in benefits shall be funded as a level percentage of compensation over a period of ten years from the July 1 second succeeding the date such legislation is enacted.
(e) Experience adjustment factor.--
(1) For each year after the establishment of the accrued liability contribution rate for the fiscal year beginning July 1, 2011, 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 contributions caused by the final contribution rate being different from the actuarially required contribution rate, active members making shared-risk contributions or 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 as a level percentage of compensation over a period of 24 years beginning with the July 1 second succeeding the actuarial valuation determining said increases or decreases.
(2) (Reserved).
(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.
(g) Temporary application of collared contribution rate.--
(1) The collared contribution rate for each year shall be determined by comparing the actuarially required contribution rate, calculated without regard for the costs added by legislation, to the prior year's final contribution rate.
(2) If, for any of the fiscal years beginning July 1, 2011, July 1, 2012, and on or after July 1, 2013, the actuarially required contribution rate, calculated without regard for the costs added by legislation, is more than 3%, 3.5% and 4.5%, respectively, of the total compensation of all active members greater than the prior year's final contribution rate, then the collared contribution rate shall be applied and be equal to the prior year's final contribution rate increased by 3%, 3.5% and 4.5%, respectively, of total compensation of all active members. Otherwise, and for all other fiscal years, the collared contribution rate shall not be applicable. In no case shall the collared contribution rate be less than 4% of the total compensation of all active members.
(h) Final contribution rate.--
(1) For the fiscal year beginning July 1, 2010, the final contribution rate is 5% of the total compensation of all active members. For each subsequent fiscal year for which the collared contribution rate is applicable, the final contribution rate shall be the collared contribution rate as calculated in subsection (g), plus the costs added by legislation.
(2) For all other fiscal years, the final contribution rate shall be the actuarially required contribution rate, provided that the final contribution rate shall not be less than the normal contribution rate as provided in subsection
(b).
(i) Definitions.--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: "Actuarially required contribution rate." The sum of the following:
(1) the normal contribution rate as calculated in subsection (b);
(2) the accrued liability contribution rate as calculated in subsection (c);
(3) the supplemental annuity contribution rate as calculated in subsection (d);
(4) the experience adjustment factor as calculated in subsection (e); and
(5) any costs added by legislation enacted prior to the last actuarial valuation. "Costs added by legislation." The sum, if positive, of all changes in the actuarially required contribution rate resulting from legislation enacted in the year since the last actuarial valuation and not included in the determination of the prior year's final contribution rate, computed as the rate of total compensation of all active members certified by the actuary as sufficient to make the employer normal contributions and sufficient to amortize legislatively created changes in the unfunded actuarial liability as a level percentage of compensation over a period of ten years from the July 1 second succeeding the date of enactment. (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.; Nov. 23, 2010, P.L.1269, No.120, eff. July 1, 2011)
2010 Amendment. Act 120 amended the entire section. See section 21 of Act 120 in the appendix to this title for special provisions relating to changes in accrued liability of Public School Employees' Retirement System.
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 8321, 8323, 8324, 8326, 8327, 8346, 8348.1, 8348.2, 8348.3, 8348.5, 8348.6, 8348.7, 8502, 8509, 8525, 8526, 8535 of this title.
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