Bill Text: PA SB565 | 2009-2010 | Regular Session | Introduced

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Bill Title: Providing for the establishment of investment trusts for certain postemployment benefits offered by certain governmental entities; and imposing powers and duties on the Board of Finance and Revenue.

Spectrum: Partisan Bill (Republican 6-0)

Status: (Introduced - Dead) 2009-03-04 - Referred to FINANCE [SB565 Detail]

Download: Pennsylvania-2009-SB565-Introduced.html

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PRINTER'S NO. 576
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 565 Session of2009
INTRODUCED BY BROWNE, ORIE, EARLL, FOLMER, M. WHITE AND EICHELBERGER, MARCH 4, 2009
REFERRED TO FINANCE, MARCH 4, 2009
AN ACT
Providing for the establishment of investment trusts for certain
postemployment benefits offered by certain governmental
entities; and imposing powers and duties on the Board of
Finance and Revenue.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Other
Postemployment Benefit Trust Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Annual required contribution" or "ARC." A dollar amount
determined annually by adding:
(1) the normal cost, using the entry age normal cost
method; and
(2) the portion of the unfunded actuarial accrued
liability to be amortized in the current period, where the
unfunded actuarial accrued liability is amortized over a
period of time not to exceed the working lifetime of the work
force.
"Board." The Board of Finance and Revenue.
"Commonwealth agency." The Governor and any department,
board, commission, authority and any other officer and agency of
the Commonwealth. The term includes any court or other officer
or agency of the unified judicial system, the General Assembly
and its officers and agencies and any independent agency and
State-affiliated entity.
"Entity." Any of the following:
(1) A Commonwealth agency.
(2) A political subdivision.
(3) A trust.
"Entry age normal cost method." An actuarial cost method
designed to fund a member's total plan benefit over the course
of the member's career and that is designed to produce stable
employer contributions in amounts that increase at the same rate
as the employer's payroll.
"GASB Statement 43." Statement 43, or its successor, issued
by the Governmental Accounting Standards Board.
"GASB Statement 45." Statement 45, or its successor, issued
by the Governmental Accounting Standards Board.
"Governing body." The governing body of a political
subdivision.
"Independent agency." A board, commission and other agency
and officer of the Commonwealth that is not subject to the
policy supervision and control of the Governor. The term does
not include any State-affiliated entity, any court or other
officer or agency of the unified judicial system, the General
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Assembly and its officers and agencies, any State-related
institution, political subdivision or any local, regional or
metropolitan transportation authority.
"Other postemployment benefits" or "postemployment benefits."
Benefits, other than pension benefits, paid on behalf of former
employees or the former employees' beneficiaries after
separation from service, including, but not limited to, medical,
prescription drugs, dental, vision, hearing, Medicare Part B or
Part D premiums, life insurance, long-term care and long-term
disability.
"State-affiliated entity." A Commonwealth authority or a
Commonwealth entity. The term includes, but is not limited to,
the Pennsylvania Turnpike Commission, the Pennsylvania Housing
Finance Agency, the Pennsylvania Municipal Retirement System,
the Pennsylvania Infrastructure Investment Authority, the State
Public School Building Authority, the Pennsylvania Higher
Educational Facilities Authority, any State-related institution
and the State System of Higher Education. The term does not
include any court or other officer or agency of the unified
judicial system, the General Assembly and its officers and
agencies, political subdivision or any local, regional or
metropolitan transportation authority.
"State-related institution." The Pennsylvania State
University, the University of Pittsburgh, Lincoln University or
Temple University.
"Trust." Any of the following:
(1) the State Employees' Retirement System;
(2) the Pennsylvania Employee Benefit Trust Fund;
(3) a voluntary employee benefit association; or
(4) any other trust maintained for employees of a
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Commonwealth agency or political subdivision.
"Working lifetime." The period between the computed average
age of the active work force and the average expected retirement
age of this same active work force based upon the most recent
actuarial valuation report.
Section 3. Funding of other postemployment benefits.
(a) General rule.--An entity that provides other
postemployment benefits shall fund them only in accordance with
this act and by utilizing the entry age normal cost method and
annual required contributions. The issuance of bonds or any
other means to finance these liabilities with new debt is
prohibited.
(b) Initial contributions.--
(1) A Commonwealth agency subject to subsection (a)
shall make the initial contribution into the trust fund
established under section 4 on or before June 30, 2009.
(2) A political subdivision or trust subject to
subsection (a) shall make the initial contribution into the
investment trust established under section 4 within the first
year that the political subdivision is subject to GASB
Statement 43 or GASB Statement 45, as applicable.
Section 4. Establishment of investment trust.
(a) General rule.--Each entity that provides other
postemployment benefits shall establish an investment trust for
the purpose of prefunding other postemployment benefits accrued
by employees of the Commonwealth agency or political subdivision
to be paid as they come due in accordance with the arrangements
between the entity, as the case may be, the plan members and
their beneficiaries. This authorization shall be subject to the
following conditions:
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(1) The entity must establish a written plan of the
postemployment benefits provided.
(2) The entity or an investment committee of the entity
must adopt in writing an investment policy authorizing how
assets in the trust may be invested.
(3) The trust must conform to all applicable laws, rules
and regulations of the Internal Revenue Service, if any.
(4) The trust document, the written plan of benefits and
the investment policy, as well as any other information or
documentation as determined by the board, must be submitted
by the entity for approval.
(b) Pooling structure.--Commonwealth agencies and political
subdivisions may enter into governmental cooperation agreements
to pool their funding obligations for other postemployment
benefits, provided that the pool is a trust that satisfies the
requirements of this act.
(c) Existing trusts.--An entity that on the effective date
of this section has an investment trust that includes funding
for other postemployment benefits may continue to operate the
trust for the postemployment benefits provided that there is a
separate accounting that complies with the provisions of this
act.
Section 5. Trust conditions.
(a) General rule.--The assets of a trust established under
this act shall be irrevocable and shall be preserved, invested
and expended solely pursuant to and for the purposes of this act
and shall not be loaned or otherwise transferred or used for any
other purpose. The assets of the trust shall be expended solely
to:
(1) Make payments for other postemployment benefits
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pursuant to and in accordance with the terms of the
respective postemployment benefit plan.
(2) Pay the cost of administering the trust.
(b) Powers and duties.--A trust so created shall have the
powers, privileges and immunities of a corporation, and all of
its business shall be transacted, all of its funds invested and
all of its cash and securities and other property held in trust
for the purpose for which received.
(c) Protection of trust.--Notwithstanding any law to the
contrary, all assets, income and distributions of the trust
shall be protected against the claims of creditors of the
Commonwealth agency, political subdivision, plan administrators
and plan participants, and shall not be subject to execution,
attachment, garnishment, the operation of bankruptcy, the
insolvency laws or other process whatsoever, nor shall any
assignment thereof be enforceable in any court.
Section 6. Powers and duties.
In addition to the powers granted by any other provisions of
this act, an entity that establishes a trust under this act
shall have the powers necessary or convenient to carry out the
purposes and provisions of this act and the purposes and
objectives of the trust, including the following:
(1) Invest any funds of the trust in any instrument,
obligation, security or property that constitutes legal
investments as provided in the investment policy adopted by
the trust, subject, however, to the exercise of that degree
of judgment, skill and care, under the circumstances then
prevailing which persons of prudence, discretion and
intelligence, who are familiar with such matters, exercise in
the management of their own affairs not in regard to
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speculation, but in regard to the permanent disposition of
the funds, considering the probable income to be derived
therefrom, as well as the probable safety of their capital.
(2) Contract for the provision of all or any part of the
services necessary for the management and operation of the
trust.
(3) Contract with financial consultants, auditors and
other consultants as necessary to carry out its
responsibilities under this act.
(4) Contract with an actuary in determining the level of
funding necessary by the entity to fund the other
postemployment benefits offered by the entity.
(5) Prepare annual financial reports, including
financial statements, following the close of each fiscal year
relative to the activities of the trust. Such statements and
reports shall contain such information as shall be prescribed
by the board and be prepared in accordance with the
Governmental Accounting Standards Board.
(6) Upon the request of the Board of Finance and
Revenue, file the annual report and financial statements with
the board. The report and statements shall be filed with the
board within 90 calendar days from the date of the request,
unless the board extends such time in writing.
Section 7. Audit.
The annual report, including financial statements, all books,
accounts and financial records of any trust created under this
act, shall be subject to audit by the Auditor General. Any
entity maintaining a trust under this act may, with the prior
approval of the Auditor General, engage licensed independent
public accountants to perform the audits. The audit contract
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between the entity and the independent public accountant shall
be on contract forms prescribed by the Auditor General. The
entity shall reimburse the costs of audits prepared by the
Auditor General and the payment of fees for audits prepared by
licensed independent public accountants.
Section 8. Publication of actuarial report.
An entity subject to the provisions of section 3 shall
publish the actuarial report required by GASB Statement 43 or
GASB Statement 45, as applicable, in an unabridged format on the
entity's Internet website prior to the end of each fiscal year
and shall make written copies of the actuarial report available
to the public upon request.
Section 9. Construction.
Nothing in this act shall be construed to define or otherwise
grant any rights or privileges to other postemployment benefits.
Such rights and privileges, if any, shall be governed by the
terms of the respective postemployment benefit plan.
Section 20. Effective date.
This act shall take effect in 60 days.
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