PENNSYLVANIA LEGISLATION

02/01

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Police Officer Retirement Systems

Legislation

Under sections 4301 through 4308 of Act 317 of 1931, known as The Third Class City Code (53 P.S. §§ 39301-39308), a city of the third class must establish, by ordinance, a retirement system for its police officers.

Administration and Financing

The retirement system and police pension trust fund are under the direction and control of the city council, and council may designate city officers, citizens, or corporations located in the city to have custody and manage the pension trust fund.  Any compensation paid to a corporate custodian is paid from the city's general fund.  The main sources of revenue for the fund are contributions by police officers, contributions by the city, General Municipal Pension System State Aid, and earnings from the investment of the fund assets.

Membership

All members of the city police force must be members of the retirement system.

City Contributions

The city annually must contribute an amount at least equal to the minimum city obligation under the Municipal Pension Plan Funding Standard and Recovery Act.

Member Contributions

A police officer monthly pays into the pension trust fund an amount of up to four percent of pay.  An officer or the city may contribute an additional amount of up to one percent of pay to provide for survivors' benefits.  An officer also makes a service increment contribution of not more than one dollar a month until reaching age 65.

Superannuation Retirement

A police officer may retire after 20 years of service on superannuation retirement.  The ordinance does not have to prescribe a minimum age, but if one is prescribed, it must be age 50.  A retiree's retirement pay is computed at one-half the final rate of pay or one-half of the monthly average pay of the police officer during the five highest years; whichever is greater.

Service Increment

The city also must pay a retiree a service increment of 1/40 of the retirement pay for each year of service, in excess of 20 years, before the retiree reaches age 65.  This service increment cannot be for than $100 per month.

Death Benefits

The city must pay a pension to the surviving spouse of a superannuation retiree, or of a member who dies or is killed in service, during that surviving spouse's lifetime or as long as the spouse does not remarry.  If the surviving spouse dies, the pension is paid to any child until the child is age 18.  The survivors' benefit is 50 percent of the pension the retiree was receiving, or the member would have been receiving, had the member been retired at the time of death.  At the city's option, the survivor's benefit may be doubled.

If a police officer with less than ten years service dies due to injuries not in the line of duty, the officer's survivors may be entitled to a pension of 25 percent of the annual pay of the officer.  If a police officer with ten or more years service dies before being eligible for superannuation retirement, the officer's survivors may be entitled to a pension of 50 percent of the annual pay of the officer.

Disability Benefits

If a police officer with less than ten years service becomes totally disabled due to injuries not in the line of duty, the officer may be entitled to a pension of 25 percent of the officer's annual pay.  If a police officer with ten or more years service is totally disabled, the officer may be entitled to a pension of 50 percent of the officer's annual pay.  If a police officer becomes totally disabled due to injuries sustained in the line of duty, the officer is deemed to be fully vested, regardless of the actual number of years of service, and is eligible for immediate retirement benefits.  A disability pension continues for the retiree's lifetime and may be paid to the disability retiree's surviving spouse during that surviving spouse's lifetime.  If the surviving spouse dies, the pension may be paid to any child until the child is age 18.

Cost of Living Increase

At any time, a city may increase the retirement pay of retirees.  The increase must be in conformity with a uniform scale and be based on the increase in the cost of living.  The total retirement pay after the cost-of-living increase cannot be more than one half of  the current salary being paid police officers of the highest pay grade.

Vesting

In the ordinance that creates the police pension plan, the city may provide for a vesting benefit.  This vesting benefit provides that if a police officer who has completed 12 years of full-time service ceases to be a full-time police officer of the city before reaching the required superannuation retirement age and service, the officer is entitled to vest that officer's retirement system benefits by filing a written notice of intention to vest with the management board of the system.  When the vestee reaches what would have been the superannuation retirement date,  had the vestee continued in full-time police service with the city, the retirement system pays the vestee a partial superannuation retirement allowance.  The partial superannuation allowance is proportional to the number of years actually worked, as compared to the superannuation retirement years, and is calculated using the monthly average salary during the appropriate period prior to termination of employment.

Other Features

Other features of a police retirement system in a city of the third class are:

• Receipt, with the approval of city council, of credit for up to five years of nonintervening military service, if the police officer arranges to pay both the member's contributions and the city's contributions for the period of military service,

• Provisions for the refund of contributions paid into the pension trust fund, without interest, to a member or the member's survivors, or estate, in cases where an officer discontinues employment or dies without being eligible to receive a pension,

• Provisions for the restoration of retirement system rights of a former member who returns to the police force and restores the accumulated contributions.

Firefighter Retirement Systems

Legislation

Under article 43(b), relating to a retirement system for firefighters, of Act 317 of 1931, known as The Third Class City Code (53 P.S. §§ 39320-39327), a city of the third class must provide annuity contracts or establish, by ordinance, a retirement system for it's firefighters.

Administration and Financing

The firefighters' pension trust fund is under the direction of a board of managers consisting of the mayor, the director of accounts and finance, the director of the department in charge of the fire department (or the director of public safety where the mayor is the director of the department in charge of the fire department), the city controller, the chief of the bureau of fire (ex officio), and two members chosen by the system members.  The main sources of revenue for the fund are contributions by firefighters, by the city, General Municipal Pension System State Aid, and earnings from the investment of the fund assets.

Membership

A full-time paid firefighter must be a member of the retirement system.

City Contributions

The city annually must contribute an amount at least equal to the minimum city obligation under the Municipal Pension Plan Funding Standard and Recovery Act.

Member Contributions

A firefighter monthly pays into the pension trust fund an amount of up to four percent of pay.  If deemed necessary by the city council, the firefighter may contribute an additional amount of up to one-percent of pay to provide for survivor benefits.  A firefighter also makes a service increment contribution of not more than one dollar a month until reaching age 65.

Superannuation Retirement

A firefighter may retire after 20 years of service on superannuation retirement.  The ordinance does not have to prescribe a minimum age, but if one is prescribed, it must be age 50.  A retiree's retirement pay is computed at one-half the final rate of pay or one-half of the monthly average pay of the firefighter during the five highest years; whichever is greater.

Service Increment

The city also must pay a retiree a service increment of 1/40 of the retirement pay for each year of service in excess of 20 years before the retiree reaches age 65.  This service increment cannot be more than $100 per month.

Death Benefits

The surviving spouse or child under age 18 of a retiree, or a member who dies while still in service, is entitled to receive the pension payment the retiree was receiving or the member would have been receiving had the member been retired at the time of death.  The pension is payable during the lifetime of the surviving spouse.  If the surviving spouse dies, the pension is payable to a child under age 18.

Disability Benefits

By regulation, the board of managers fixes the amount and commencement of the payment of disability pensions for permanent injuries incurred in the fire service.  The regulations cannot take into consideration the amount and duration of workers' compensation allowed by law.

Cost-of-Living Increases

At any time, a city may increase the retirement pay of retirees.  The increase must be in conformity with a uniform scale and be based on the increase in the cost of living.  The total retirement pay after the cost-of-living increase cannot be more than one-half of the current salary being paid firefighters of the highest pay grade.

Other Features

Other features of the firefighters retirement system under The Third Class City Code are:

• Provisions for the forfeiture of retirement system rights upon conviction of a felony or misdemeanor, becoming a habitual drunkard, or failing to comply with a regulation of the board of managers,

• Receipt, with the approval of the city council, of credit for up to five years of nonintervening military service if the firefighter arranges to pay both the firefighter's contributions and the city's contributions for the period of military service,

• Provisions for the refund of monies paid into the pension trust fund, without interest, to a firefighter or to the firefighter's survivors, or estate, in cases where a firefighter discontinues employment or dies without being eligible to receive a pension,

• Provisions for the restoration of retirement system rights of a former member who returns to the city's fire service and restores accumulated contributions.

Non-Uniformed Employee Retirement Systems Under The Third Class City Code

Legislation

Under Article 43(c), relating to a retirement system for nonuniformed employees, of Act 317 of 1931, known as The Third Class City Code (53 P.S. §§ 39340-39353), a city of the third class may establish a retirement system for elected and appointed city employees other than police officers and city paid firefighters.

Administration and Financing

The retirement system is administered by the pension board consisting of the mayor, the city controller, the director of finance, and two employees chosen by employees contributing to the system.  If members of council are members of the system, a member of council, chosen by council, also is a member of the board.

The pension trust fund is under the direction of the board.  The main sources of revenue for the fund are contributions by the employees, by the city, General Municipal Pension System State Aid, and earnings from the investment of the fund assets.

Membership

In a city that creates a retirement system under this article, the retirement benefit applies to an individual employed in any capacity by the city with the exception of police officers, city paid firefighters, and per diem laborers.

An individual holding a position as a laborer at per diem wages is not required to contribute toward the retirement system but may elect to do so and become entitled to the retirement benefit.

An individual regularly employed as a driver of firefighting apparatus or ambulances by a volunteer fire company that renders services recognized and accepted by the city, may become a member if the employing fire company makes the employer's contributions to the system.

Employer Contributions

The employer annually must contribute an amount at least equal to the minimum city obligation under the Municipal Pension Funding Standard and Recovery Act.

Member Contributions

A member without social security coverage (single coverage member) monthly pays two percent of pay into the pension trust fund.  If deemed necessary by the city council to provide for survivor's benefits, a member monthly pays an additional amount of up to one percent of pay into the fund.

A member with social security coverage (joint coverage member) monthly pays three and one-half percent of pay, on which social security contributions are payable and, five percent of any pay in excess of that on which social security allowances are payable.

Superannuation Retirement

A member may retire at age 60 after 20 years of service.  The annual retirement pay is computed as 50 percent of the highest annual salary or wages during any five years of employment with the city and is paid semimonthly.

After the age at which social security benefits become payable, the retirement pay of a retiree, who was a joint coverage member, is reduced by 40 percent of the primary social security benefit payable to the retiree except that the total sum, including social security benefits, received by the retiree cannot be less than the retirement pay the retiree would receive in the absence of social security coverage.

The board may authorize a joint coverage member to elect to receive retirement pay without the social security reduction.  A member electing this option is required to make a lump sum payment or installment payments equal to the amount that would have been paid into the retirement system, if member contributions had been made on that portion of the member's salary or wages on which social security contributions are payable, at the same rate made on the portion of the member's salary or wages in excess of the amount on which social security contributions are payable.  A member electing this option before retirement also must pay the system contributions on the member's entire salary or wages at the rate required on salaries or wages in excess of the amount on which social security contributions are payable.

Early Retirement

A member with at least 20 years of service, but younger than 60 who is dismissed, voluntarily retires, or is in any manner deprived of city employment may continue to make monthly payments into the pension trust fund and be entitled to receive retirement pay upon reaching the age of 60.

Disability Retirement

A member with at least ten years of service, but younger that 60 who becomes totally and permanently disabled, is entitled to retirement pay.  The disability must be certified by three practicing physicians designated by the board.

Death Benefits

The city council may elect, by ordinance, to make payments to the surviving spouse of a retiree, or of a member who dies or is killed in service, during that surviving spouse's lifetime, or as long as the spouse does not remarry.  The surviving spouse's benefit is 50 percent of the pension the retiree was receiving or the member would have been receiving had the member been retired at the time of death.

Other Features

Other features of a nonuniformed employees retirement system under The Third Class City Code are:

• Provisions for the refund of monies paid into the pension trust fund, without interest, to a member or the member's survivors, or estate, in cases where a member discontinues employment or dies without being eligible to receive a pension,

• Provisions for the restoration of retirement system rights of a former member who returns to city employment and restores the accumulated deductions,

• Provisions against beneficiaries being employed by the city, except in an elective office, and provisions for the benefit to cease during the elected term of a beneficiary.

Nonuniformed Employees Retirement Systems Under The Optional Retirement System Law for Third Class Cities

Legislation

Under the provisions of Act 362 of 1945, relating to an optional retirement system for nonuniformed employees (53 P.S. §§ 39371-39384), a city of the third class may establish a retirement system for its officers and employees independently of any existing retirement system in the city.

Administration and Financing

The retirement system is administered by the Officers and Employees Retirement Board consisting of  the mayor, the city controller, the director of finance, and two employees chosen by employees contributing to the system and a retiree chosen by the retiree association.  If members of council participate in the retirement system and are members of the system, a member of council chosen by council also is a member of the board.

The pension trust fund is under the direction of the board.  The main sources of revenue for the fund are contributions by employees, contributions by the city, General Municipal Pension System State Aid, and earnings from the investment of the fund assets.

Membership

In a city that creates a retirement system under the statute, the retirement benefit applies to an individual employed by the city, with certain exceptions.

An individual holding a position as a laborer, at per diem wages, is not required to contribute toward the retirement system but may elect to do so and become entitled to the retirement benefit.

Where the city already has a retirement system, when a retirement system is created under this statute, the members of the existing system may vote whether to be covered by the new system.  If 75% of the members of the existing system approve, the existing system's assets and liabilities are transferred to the new system.  If the members do not accept the new system, the former retirement system remains in effect for its members, and an individual covered by the preexisting retirement system remains a member of the old retirement system and does not become a member of the new one.

City Contributions

The city annually must contribute an amount at least equal to the minimum city obligation under the Municipal Pension Funding Standard and Recovery Act.

Member Contributions

A member without social security coverage (single coverage member) monthly pays three-percent of pay into the pension trust fund.  If deemed necessary by the city council to provide for survivor's benefits, a member monthly pays an additional amount of up to one percent of pay into the fund.  If authorized by the city council, a member may contribute an additional one-half percent in order to be eligible for a service increment.

A member with social security coverage (joint coverage member) monthly pays three and one-half percent of pay on which social security contributions are payable and five-percent of any pay in excess of that on which social security allowances are payable.

Where a retiree who made contributions to the retirement system for a total of less than 20 years retires and receives retirement pay from the system, the retiree must pay the system three percent of that retiree's retirement pay until a total of 20 years of contributions have been made.

Superannuation Retirement

A member may retire at age 60 after 20 years of service.  The annual retirement pay is computed as 50 percent of the highest average annual salary, or wages, during any five years of employment with the city or 50 percent of the annual salary that would be determined by the rate of monthly pay at the date of retirement; whichever is higher.

The provisions relating to the retirement pay for a joint coverage member are the same as for a nonuniformed retirement system under The Third Class City Code, including the option to buy out of the 40 percent social security offset.

Early Retirement

A member who is involuntarily retired after 12 or more years of service is entitled to receive, beginning at age 60 (or, immediately, if the involuntary retirement occurs after age 60), a portion of a full pension based on the ratio that the member's period of service up to the date of termination bears to the full 20 year period of service.  A member who is involuntarily retired after 20 or more years of service is entitled to receive a full pension after age 55 if the member continues paying contributions to the retirement system until the member is 55 at the same rate the member was paying when the member was involuntarily retired.

A member who retires voluntarily, after at least 20 years of service but before reaching age 60, is entitled to a full pension at age 60, if the member continues to pay into the retirement system until the member is age 55.

Cost-of-Living Adjustment

Upon the recommendation of the retirement board, after receiving an actuarial cost estimate, the city council, subject to the approval of the mayor, may increase retirees' retirement pay based upon the increase in the Consumer Price Index for all urban consumers.

Disability Benefits

A member who becomes permanently disabled with at least 15 years of service, but before reaching age 55, is entitled to a pension during the disability.  The disability must be certified by three physicians designated by the board.

Death Benefits

The city council may elect, by ordinance, to make payments to the surviving spouse of a retiree, or of a member who dies or is killed in service, during that surviving spouse's lifetime or as long as the spouse does not remarry.  The surviving spouse's benefit is 50 percent of the pension the retiree was receiving or the member would have been receiving had the member been retired at the time of death.

Service Increments

The city council may authorize, by ordinance, the payment to a retiree of an optional service increment of 1/40 of the retirement pay for each year of service in excess of 20 years until the retiree reaches age 65.  A member who wishes to become entitled to the service increment must make, in addition to the regular member's contribution, a service increment contribution equal to one-half percent of salary.  The service increment contribution is not paid after the member reaches age 65.

Vesting

In the ordinance that creates the optional retirement plan for nonuniformed employees, the city may provide for a vesting benefit.  This vesting benefit provides that, if a nonuniformed employee who has completed 12 years of full-time service ceases to be a full-time nonuniformed employee of the city before reaching the required superannuation retirement age and service, the employee is entitled to vest that employee's retirement system benefits by filing a written notice of intent to vest with the retirement board of the system.  When the vestee reaches what would have been the superannuation retirement date, had the vestee continued in full-time nonuniformed service with the city, the retirement system pays the vestee a partial superannuation retirement pay.  The partial superannuation retirement pay is proportional to the number of years actually worked, as compared to the superannuation retirement years, and is calculated using the monthly average salary during the appropriate period prior to termination of employment.

Other Features

Other features of this statute are:

• Provisions for the refund of contributions paid into the pension trust fund, without interest, to a member who ceases to be employed by the city before becoming entitled to any benefits,

• Provisions for the restoration of retirement system rights of a former member who reenters the service of the city and restores withdrawn contributions,

• Receipt of credit for up to six years of honorable intervening military service; if the member pays an amount equal to three-percent of the member's last monthly pay prior to entering military service for each month the member was on active duty with the armed forces.

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COUNTY PENSION LAW

Legislation

Under the provisions of Act 96 of 1971, known as the County Pension law (16 P.S. §§ 11652-11682), every county of the second class A through eighth class must establish a county employee retirement system.

Administration and Financing

A county retirement system is established by a resolution of the county commissioners.  The retirement system is administered by a county retirement board consisting of the three county commissioners, the county controller (or, if the county does not have an elected controller, the chief clerk), and the county treasurer.

The administrative expenses of the system are paid by the county under appropriations made on the basis of estimates submitted by the county retirement board and may be paid from the county pension trust fund unless the consulting actuary determines that the payment will impair the actuarial soundness of the fund.  The board is authorized to appoint a consulting actuary and is required to keep the data necessary for actuarial valuation purposes.  The consulting actuary must periodically make an actuarial investigation into the mortality and service experience of the contributors to and beneficiaries of the retirement system, adopt for the retirement system one or more mortality tables, and annually certify to the county retirement board the amount of the appropriation the county needs to make to fund its share of the retirement system's reserves.

The monies from county appropriations, contributions made by the members, pickup contributions made by the county on behalf of county employees, and the investment income on these are accounted for through the county pension trust fund, the assets of which are held in the custody of the county treasurer.

The county retirement board has full power to manage and invest the assets of the retirement system.  The board may, if it desires, contract with a regulated insurance company, bank, savings and loan association, trust company, investment advisor, or the Pennsylvania Municipal Retirement System to be a deposit administrator and to perform some or all of the duties of the board including administering the retirement system in its entirety.

Membership

A county officer may and any other county employee expected to work 1,000 or more hours a year must be a member of the county employee retirement system.

County Contributions

The retirement system consulting actuary determines the amount to be contributed by the county for the current service of members.

Member Contributions

A member of the retirement system must contribute to the pension trust fund a percentage of that individual's salary based on the following schedule:

• Class 1/120 - 5% 

• Class 1/100 - 6%

• Class 1/80 - 7%

• Class 1/70 - 8%

• Class 1/60 - 9%

The county may contribute these amounts on behalf of its active members.  These contributions are called "pickup contributions".  They are treated as the county's contribution in determining tax treatment under the Internal Revenue Code of 1986, but for all other purposes are treated as contributions made by a member in the same way as other employee contributions.  Where the county makes these pickup contributions, it reduces the compensation of the member by an equal amount.

A member may elect to contribute an additional amount of up to ten percent more than the required percentage.  At any time, the county retirement board may authorize a member to transfer from the 1/120 or 1/100 class to the 1/80, 1/70, or 1/60 class.  At any time, the board also may authorize a member to elect to reduce the member contribution to one of the lower classes without affecting the calculation of the county annuity portion of the member's retirement allowance.

Superannuation Retirement

The superannuation retirement age is 60 or, if a member has completed 20 years of total service, 55.  A contributor who reaches superannuation retirement age is entitled to a retirement allowance for life upon retirement.

The retirement allowance is made up of two annuities:  (1) a member's annuity and (2) a county annuity.  The member's annuity is a defined contribution plan annuity that is the actuarial equivalent of the balance in that member's annuity reserve account.  The county annuity is a defined benefit plan annuity that is equal to 1/120 of that member's final salary multiplied by the period of total service for which the member contributed at the 1/120 rate, 1/100 of that member's final salary multiplied by the period of total service for which the member contributed at the 1/100 rate, and so on.  Final salary is defined as the average annual salary for the three highest years of county service.  For a member who has served less than five years, the final salary is calculated by dividing the total salary received by the number of years served.

Voluntary and Involuntary Early Retirement

A member who is involuntarily discontinued from service (including an elected county officer who completes a term of office and discontinues service) after having completed eight years of total service, or is voluntarily discontinued from service after having completed 20 years of total service, but before reaching superannuation retirement, may elect either to withdraw the balance in that member's annuity reserve account or to receive a retirement allowance.  A member who separates from county service, after completing eight or more years of credited service, has the right to leave accumulated deductions credited to the member's account in the pension trust fund and upon reaching superannuation retirement age to receive a superannuation retirement allowance.  This is called vesting.  In these cases, the retirement allowance is the county annuity that is the actuarial equivalent of a county annuity, beginning at superannuation retirement age, but based on the period of service up to the date of voluntary discontinuance of service plus a member's annuity calculated in the usual way.

Payment Choices

At the time of superannuation retirement, voluntary early retirement, or involuntary early retirement, a retiree may elect to receive a retirement allowance payable for life or to receive the actuarial equivalent of both the member's and county annuities in a smaller retirement allowance payable for life under one of three options.

• Option 1 - If the retiree dies before receiving, in payments, the present value of the member's annuity and county annuity as it was at the time of the retiree's retirement, the county retirement system pays the balance to the retiree's legal representative or named beneficiary.

• Option 2 - When the retiree dies, the county retirement system continues to pay the retirement allowance throughout the life of a beneficiary named by the retiree at the time of retirement.

• Option 3 - When the retiree dies, the county retirement system continues to pay one-half of the retirement allowance throughout the life of a beneficiary named by the retiree at the time of retirement.

If the county retirement board contracts with an insurance company to be the deposit administrator, the insurance company may provide additional options to members or their beneficiaries.

Total Disability Retirement

If a member becomes disabled while in county service, has at least five years service, has not reached superannuation retirement age, and is unable to continue as a county employee as shown by a  medical examination, the member is paid a retirement allowance totaling 25 percent of the member's final salary consisting of both the county annuity and the member's annuity.

Death Benefits

A member who is entitled to a retirement allowance and dies while in county service without filing an application for retirement or withdrawing contributions to a pension trust fund is considered to have elected Option 1 as of the time of death.

A contributor who has reached superannuation retirement age, or who has been involuntarily retired after completing ten years of total service, may file an application for retirement requesting that the retirement become effective as of date of the death under Option 1 or Option 2, naming a beneficiary under the option.

Other Features

Other features of the County Pension Law are:

• Provisions for the payment of accumulated deductions to a contributor or the contributor's estate or designated beneficiary in cases where a contributor terminates service or dies before qualifying for a retirement allowance,

• Provisions relating to the reemployment of a retired member,

• Provisions governing admission of a county officer to the retirement system after the beginning of that officer's term of office,

• Provisions for the restoration of annuity rights of a former contributor who returns to county service and restores that contributor's withdrawn accumulated deductions to the retirement trust fund,

• Receipt of credit for both intervening and nonintervening military service with payment by the county of both employee and employer contributions for the period of intervening military service,

• Provisions for the granting and periodic review of cost-of-living increase allowances,

• Provisions for withdrawal of accumulated member contributions together with accumulated interest at the time of retirement.

COUNTY ACTUARIAL VALUATION REPORTING

Act 293 of 1972

Under Act 293 of 1972 (53 P.S. §§ 730.1-730.5), every county must file an actuarial valuation report with the Public Employee Retirement Commission every two years for each of its employee retirement systems.  The Commission specifies the actuarial, demographic, and financial data required in the report.  The act does not require any particular actuarial cost method, economic actuarial assumptions, or minimum funding standard.

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DISQUALIFICATION AND FORFEITURE OF BENEFITS

Under Act 140 of 1978, known as the Public Employee Pension Forfeiture Act (43 P.S. §§ 1311-1315), a public official or public employee who is convicted or pleads guilty or no defense to any crime related to public office or public employment is disqualified to receive a retirement or other benefit or payment of any kind except a return without interest of the contributions paid into a retirement system.  In addition, the appropriate retirement system board is authorized to retain that individual member's contributions and interest for the purpose of paying any fine imposed upon that member or for the repayment of any money misappropriated by the member.

Retirement system benefits are forfeited upon entry of a plea of guilty or no defense or upon initial conviction.  Payments or partial payments are prohibited while an appeal is pending.  In cases where a verdict of not guilty is rendered or the indictment or criminal information is finally dismissed, the public official or public employee is reinstated as a member of the retirement system and is entitled to all benefits including those accruing during the period of forfeiture.  A retirement system required to withhold benefits from an individual under the Public Employee Pension Forfeiture Act cannot be required to pay interest on these amounts to that individual even though, on appeal, an appellate court holds the act to have been unconstitutionally applied to that individual.

CRIMES RELATED TO PUBLIC OFFICE OR PUBLIC EMPLOYMENT

Among the violations of the Crimes Code that are "crimes related to public office or employment" when committed by a public official or employee through that individual's public position or when that individual's public employment places the individual in a position to commit the crime are:  theft by deception, theft by extortion, theft of services, theft by failure to make required disposition of funds received, forgery, tampering with records or identification, misapplication of entrusted property and property of government or financial institutions, bribery in official and political matters, threats and other improper influence in official and political matters, perjury, false swearing, unsworn falsification to authorities, false reports to law enforcement authorities tampering with witnesses and informants, retaliation against witness or informant, taking a bribe as a witness or informant, tampering or fabricating physical evidence, tampering with public records or information, obstructing administration of law or other governmental function, official oppression, and speculating or wagering on official action or information.  A criminal offense under the personal income tax chapter of the Tax Reform Code of 1971 is also such a crime as is a criminal offense under federal law substantially the same as one of these listed crimes.

RESTITUTION FOR MONETARY LOSS

In any case where a public official or employee who is a member of a retirement system funded by public money is convicted or pleads guilty or no defense, in a court of record to a crime related public office or public employment, the court is required to order that individual to make complete and full restitution to the Commonwealth or political subdivision of any monetary loss incurred as a result of the criminal offense.  In cases where the court fails to order this restitution, a political subdivision is required to petition the court pronouncing sentence for an order establishing the amount of restitution due.  If that court does not have authority to order restitution, the political subdivision must bring the action for restitution in the Commonwealth Court of Pennsylvania.

Whenever the court orders restitution or establishes the amount of restitution due after petition, all sums then credited to the convicted individual member's account or payable to that individual, including the contributions, must be available to satisfy the restitution order.  Any provisions of law exempting the retirement pay amounts or benefits of any public official or public employee from garnishment or attachment are superseded by the provisions of the Public Employee Pension Forfeiture Act requiring these amounts to be available to satisfy restitution orders.  The retirement system board, administrator of the retirement system, or employer of the convicted individual is required, upon being served with a copy of the court's order, to pay over all retirement pay, contributions, or other benefit amounts to the extent necessary to satisfy the order of restitution.

PROSPECTIVE EFFECTIVENESS

From July 8, 1989, public officials and public employees are placed on notice that unfaithful service jeopardizes their retirement rights.  Where the offense for which the individual was convicted took place before July 8, 1978, and that individual's rights to a public employee retirement system benefit had vested before July 8, 1978, that individual is not disqualified to receive that benefit nor does that individual forfeit that benefit.  The Act applies to all members of public employee retirement systems, however, even those who became members before 1978, if they have been reelected, reappointed, promoted, or changed job classification since then.

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ACCRUED BENEFIT OR ACCUMULATED PLAN BENEFIT - the amount of an individual's benefit (whether or not vested) as of a specific date determined in accordance with the terms of the pension plan and based on compensation (if applicable) and service to that date.

ACCRUED LIABILITY, ACTUARIAL ACCRUED LIABILITY, ACTUARIAL LIABILITY, OR ACTUARIAL RESERVE - that portion, as determined by a particular cost method, of the ACTUARIAL PRESENT VALUE of pension plan benefits and expenses which is not provided for by future NORMAL COSTS.

ACTUARIAL ASSUMPTIONS - factors which actuaries use in estimating future events affecting pension costs; for example, mortality rates, employee turnover, compensation levels, and investment earnings.

ACTUARY - a person professionally trained in the technical aspects of pensions, insurance, and related fields.  The actuary estimates how much money must be contributed to a pension plan in order to provide future benefits.

ACTUARIAL COST METHOD OR FUND METHOD - a procedure for determining the ACTUARIAL PRESENT VALUE of pension plan benefits and expenses and for allocating such value to time periods, usually in the form of a NORMAL COST and an ACCRUED LIABILITY.

ACTUARIAL PRESENT VALUE - the value of all plan benefits and expenses payable at various times, determined as of a given date by a particular set of actuarial assumptions.

ACTUARIAL VALUATION - the document presenting the actuary's estimate of the present value of benefits to be paid under a pension plan and the calculation of the amounts of employer contributions or accounting charges for pension cost.  This is sometimes called actuarial study or actuarial report.

ALLOCATED FUNDS - that portion of pension plan assets used to pay premiums on insurance or annuity contracts for an employee.  The insurer, in turn, assumes a legally enforceable obligation to pay all benefits as required by the terms of the contract and the insured has the right to receive the benefits.

ANNUITY - a contract that provides an income for a specified period of time, such as a number of years or for life.  Annuity programs are usually made monthly.  This term is often used synonymously with "pension", but annuity generally refers to an insurance contract and a pension may be insured or uninsured.

APPROVED ACTUARY - a person who has at least five years of actuarial experience with public pension plans and who is either enrolled as a member of the American Academy of Actuaries or enrolled as an actuary pursuant to the Federal Retirement Income Security Act of 1974.

BOOK-ENTRY FORM - a security purchased without an engraved certificate issued as evidence of purchase.  The purchaser receives a receipt as proof of ownership, while the issuer records a book-entry account.

DEFINED BENEFIT PLAN - a pension plan whose retirement benefit levels are based on salary and/or service, rather than extent of past funding on behalf of the individual.  Costs are then determined actuarially.

DEFINED CONTRIBUTION PLAN - a plan that defines the method of determining the employer's contributions to the plan, while benefits will be predicated on the amounts accumulated by the contributions.

FIDUCIARY - a person who has a duty to transact business or handle money, not for his own benefit but for the benefit of another.  A fiduciary relationship imposes a duty to act in good faith and candor, and with a special regard to the interests of the person who places his trust and confidence in the fiduciary.

FIDUCIARY CAPACITY - one is said to act in a "fiduciary capacity" when the business which he transacts or the money or property which he handles is not his own or for his own benefit, but for the benefit of another person, as to whom he stands in a relation implying and necessitating great confidence and trust on the one part and a high degree of good faith on the other part.  The term is not restricted to technical or express trust, but also includes a public officer.  A fiduciary relationship exists where there is special confidence reposed in one whose equity and good conscience is bound to act in good faith and with due regard to interest of one reposing the confidence.

FISCAL YEAR (PERIOD) - any 12 month accounting period adopted by a plan for reporting purposes.

GROUP ANNUITY CONTRACT - a contract issued by a life insurance company that may be used as the funding instrument for benefits to be made in accordance with a pension plan.  A single master contract provides that the group of persons participating in the plan will receive annuities during retirement.  Individual certificates stating coverage may be issued to members of the group.

INTERNAL CONTROL - those measures employed by the organization to safeguard assets, check the accuracy and reliability of accounting data, promote operational efficiency, and encourage adherence to established policies.

LOADING FEE - that part of an insurance premium which insurance companies charge as a cost for handling the policy as distinguished from providing benefit payments.  The following items are generally considered as expenses for producing an insurance policy:  (a) cost of obtaining new business; (b) cost of collections of renewal premiums; (c) settlement expenses; and (d) general expenses (salaries, clerical expenses, rent, etc.).

NORMAL COST - that portion of the ACTUARIAL PRESENT VALUE of pension plan benefits and expenses which is allocated to the valuation year by the ACTUARIAL COST METHOD.

OFFSET - the integration of social security benefits with pension plan benefits, resulting in a decrease in benefits paid by the plan to the retiree.

PENSION ANNUITY PLAN - a retirement plan without defined benefits or defined contributions in which pensions are provided solely through the purchase of pension annuity contracts in accordance with the provisions of act 120.

PENSION FUND - the assets accumulated for the purpose of delivering pension plan guarantees.

SPLIT FUNDING - the use of two or more funding agencies for the same pension plan.  An arrangement whereby a portion of the contributions to the pension plan is paid to an insurance company and the remainder of the contributions invested through a corporate trustee or a group of individuals.

UNFUNDED ACCRUED LIABILITY - the excess of the ACCRUED LIABILITY over the actuarial value of the pension plan's assets.

UNALLOCATED FUNDS - all pension plan assets which have not been used to purchase insurance or annuity contracts or otherwise earmarked to provide benefits for individual plan members.

VESTING - a provision that a pension participant will, after meeting certain requirements, retain a right to all or part of the accrued benefits, even though the employee may leave the job before retirement.

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