Pennsylvania Act 1997-61 — MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY ACT - AMEND

Act text

MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY ACT - AMEND
                  Act of Dec. 19, 1997, P.L. 611, No. 61              Cl. 72
                             Session of 1997
                               No. 1997-61

     HB 21

                                  AN ACT

     Amending the act of December 18, 1984 (P.L.1005, No.205),
        entitled "An act mandating actuarial funding standards for
        all municipal pension systems; establishing a recovery
        program for municipal pension systems determined to be
        financially distressed; providing for the distribution of the
        tax on the premiums of foreign fire insurance companies; and
        making repeals," further providing for contents of actuarial
        valuation report.

        The General Assembly of the Commonwealth of Pennsylvania
     hereby enacts as follows:

        Section 1.  Section 202(b)(4) of the act of December 18, 1984
     (P.L.1005, No.205), known as the Municipal Pension Plan Funding
     Standard and Recovery Act, amended February 14, 1986 (P.L.23,
     No.9), is amended to read:
      Section 202.  Contents of actuarial valuation report.
        * * *
        (b)  Contents of actuarial exhibits; defined benefit plans
     self-insured in whole or in part.--For any pension plan which is
     a defined benefit plan and which is self-insured in whole or in
     part, all applicable actuarial exhibits shall be prepared in
     accordance with the entry age normal actuarial cost method with
     entry age established as the actual entry age for all plan
     members unless the municipality applies for and is granted
     authorization by the commission to use an alternative actuarial
     cost method. Authorization shall be granted if the municipality
     demonstrates on an individual pension plan basis that there are
     compelling reasons of an actuarial nature for the use of an
     alternative actuarial cost method. The commission shall issue
     rules and regulations specifying the criteria which the
     commission will use to determine the question of the existence
     of compelling reasons for the use of an alternative actuarial
     cost method, the documentation which a municipality seeking the
     authorization will be required to supply and the acceptable
     alternative actuarial cost methods which the commission may
     authorize. The actuarial cost method shall be used to value all
     aspects of the benefit plan or plans of the pension plan unless
     the municipality applies for and is granted authorization by the
     commission to use approximation techniques other than the
     actuarial cost method for aspects of the benefit plan or plans
     of the pension plan other than the retirement benefit.
     Authorization shall be granted if the municipality demonstrates
     on an individual pension plan basis that there are compelling
     reasons of an actuarial nature for the use of these
     approximation techniques. The commission shall issue rules and
     regulations specifying the criteria which the commission will
     use to determine the question of the existence of compelling
     reasons for the use of approximation techniques, the
     documentation which a municipality seeking the authorization
     will be required to supply and the acceptable approximation
     technique which the commission may authorize. The actuarial
     exhibits shall use actuarial assumptions which are, in the
     judgment of the actuary and the governing body of the plan, the
     best available estimate of future occurrences in the case of
     each assumption. With respect to economic actuarial assumptions,
     the assumptions shall either be within the range specified in
     rules and regulations issued by the commission or documentation
     explaining and justifying the choice of assumptions outside the
     range shall accompany the report. The actuarial exhibits shall
     measure all aspects of the benefit plan or plans of the pension
     plan in accordance with modifications in the benefit plan or
     plans, if any, and salaries which as of the valuation date are
     known or can reasonably be expected to be in force during the
     ensuing plan year. The actuarial valuation report shall contain
     the following actuarial exhibits:
            * * *
            (4)  An exhibit of any additional funding costs
        associated with the amortization of any unfunded actuarial
        accrued liability of the pension plan, indicating for each
        increment of unfunded actuarial accrued liability specified
        in paragraph (3), the level annual dollar contribution
        required to pay an amount equal to the actuarial assumption
        as to investment earnings applied to the principal amount of
        the remaining balance of the increment of unfunded actuarial
        accrued liability and to retire by the applicable
        amortization target date specified in this paragraph the
        principal amount of the remaining balance of the increment of
        unfunded actuarial accrued liability. The amortization target
        date applicable for each type of increment of unfunded
        actuarial accrued liability shall be as follows:
                (i)  (A)  In the case of a pension plan established
                on or prior to January 1, 1985 for the unfunded
                actuarial accrued liability in existence as of the
                beginning of the plan year occurring in calendar year
                1985, at the end of the plan year occurring in
                calendar year 2015; or
                    (B)  In the case of a pension plan established
                after January 1, 1985, for the unfunded actuarial
                accrued liability then or subsequently determined to
                be or to have been in existence as of the date of the
                establishment of the plan, at the end of the plan
                year occurring 30 years after the calendar year in
                which the pension plan was established.
                (ii)  Increment or decrement of net unfunded
            actuarial accrued liability attributable to a change in
            actuarial assumptions, at the end of the plan year
            occurring 20 years after the calendar year in which
            actuarial assumption modification was effective.
                (iii)  Increment of net unfunded actuarial accrued
            liability attributable to a modification in the benefit
            plan applicable to active members, at the end of the plan
            year occurring 20 years after the calendar year in which
            the benefit plan modification was effective.
                (iv)  Increment of unfunded actuarial accrued
            liability attributable to a modification in the benefit
            plan applicable to retired members and other benefit
            recipients, at the end of the plan year occurring 10
            years after the calendar year in which the benefit plan
            modification was effective.
                (v)  Increment or decrement of net unfunded actuarial
            accrued liability attributable to an actuarial experience
            loss or gain, at the end of plan year occurring 15 years
            after the calendar year in which the actuarial experience
            loss or gain was recognized.
        With respect to any applicable pension plan other than a plan
        which comprises all or part of a moderately distressed or a
        severely distressed municipal pension system, if the
        remaining average period between the current average attained
        age of active members as of the valuation date and the later
        of their earliest average normal retirement age or their
        average assumed retirement age is less than the applicable
        period or periods ending with the amortization target date or
        dates specified in subparagraph (i), (ii), (iii) or (v), the
        appropriate amortization target date for the applicable
        subparagraph determined with reference to the longest
        applicable remaining average period rounded to the next
        largest whole number shall be used. With respect to any plan
        year beginning after December 31, 1997, if, as of the
        beginning of the plan year, the ratio of the actuarial value
        of assets to the actuarial accrued liability exceeds 0.70 and
        the governing body of the municipality has passed a
        resolution to irrevocably commit the municipality to apply
        the limit on the additional funding costs, as provided
        herein, in the preparation of the current and all future
        exhibits under this paragraph, then the sum of the additional
        funding costs for subparagraphs (i), (ii), (iii), (iv) and
        (v) above shall not exceed the amount required to amortize
        the remaining unfunded actuarial accrued liability as of the
        beginning of the plan year over 10 years in level annual
        dollar contributions. The exhibit shall indicate the total
        dollar amount of additional funding costs associated with the
        amortization of any unfunded actuarial accrued liability of
        the pension plan applicable for that plan year and any
        subsequent plan year occurring prior to the preparation of
        the next required actuarial valuation report, which shall be
        the total of the additional funding costs associated with the
        amortization of each increment of unfunded actuarial accrued
        liability. The exhibit shall also indicate the plan year in
        which any unfunded actuarial accrued liability of the pension
        plan would be fully amortized if the total annual additional
        funding cost calculated pursuant to this paragraph were met
        continuously without increase or decrease in amount until the
        total unfunded actuarial accrued liability currently existing
        was fully amortized. In calculating the additional funding
        costs associated with the amortization of any unfunded
        actuarial accrued liability of the pension plan in any plan
        year, any amortization contribution made in the interval
        since the last actuarial valuation report shall be allocated
        to each type of increment of unfunded actuarial accrued
        liability in proportion to the remaining dollar amount of
        each type.
            * * *
        Section 2.  This act shall apply to actuarial exhibits of
     additional funding costs associated with the amortization of any
     unfunded actuarial accrued liability prepared for plan years
     beginning after December 31, 1997.
        Section 3.  This act shall take effect immediately.

     APPROVED--The 19th day of December, A. D. 1997.

     THOMAS J. RIDGE