2023 Pennsylvania Consolidated & Unconsolidated Statutes › Title 71 - STATE GOVERNMENT › Chapter 55 - Contributions › Section 5505 - Contributions for the purchase of credit for creditable nonstate service

§ 5505. Contributions for the purchase of credit for creditable nonstate service.
(a) Source of contributions.--
The total contributions to purchase credit for creditable nonstate service of an active member or eligible school employee shall be paid either by the member, the member's previous employer, or by some agreed upon combination of the member, his previous employer, and, if specifically provided, the Commonwealth.
(b) Nonintervening military service.--
(1) The amount due for the purchase of credit for military service other than intervening military service shall be determined by applying the member's basic contribution rate, the additional contribution rate plus the Commonwealth normal contribution rate for active members at the time of entry, subsequent to such military service, of the member into State service to his average annual rate of compensation as a member of the system over the first three years of such subsequent State service and multiplying the result by the number of years and fractional part of a year of creditable nonintervening military service being purchased together with statutory interest during all periods of subsequent State and school service to date of purchase. Upon application for credit for such service, payment shall be made in a lump sum within 30 days or in the case of an active member or eligible school employee who is an active member of the Public School Employees' Retirement System it may be amortized with statutory interest through salary deductions to the system in amounts agreed upon by the member and the board. The salary deduction amortization plans agreed to by members and the board may include a deferral of payment amounts and statutory interest until the termination of school service or State service as the board in its sole discretion decides to allow. The board may limit salary deduction amortization plans to such terms as the board in its sole discretion determines. In the case of an eligible school employee who is an active member of the Public School Employees' Retirement System, the agreed upon salary deductions shall be remitted to the Public School Employees' Retirement Board, which shall certify and transfer to the board the amounts paid. Application may be filed for all such military service credit upon completion of three years of subsequent State service as a member of the system and shall be credited as Class A service except as provided in section 5304(a) (relating to creditable nonstate service).
(1.1) In the case of an active member who is purchasing the military service as Class A-3 service, for purposes of paragraph (1), the Commonwealth normal contribution rate for active members at the time of entry, subsequent to the military service, shall be determined using only the average new Class A-3 member.
(1.2) In the case of an active member who is purchasing the military service as Class A-5 service, for purposes of paragraph (1), the Commonwealth normal contribution rate for active members at the time of entry, subsequent to the military service, shall be determined using only the average new Class A-5 member, and the member's basic contribution rate shall be multiplied by the class of service multiplier used to calculate regular member contributions for Class A-5 service.
(1.3) In the case of an active member who is purchasing the military service as Class A-6 service, for purposes of paragraph (1), the Commonwealth normal contribution rate for active members at the time of entry, subsequent to the military service, shall be determined using only the average new Class A-6 member, and the member's basic contribution rate shall be multiplied by the class of service multiplier used to calculate regular member contributions for Class A-6 service.
(2) Applicants may purchase credit as follows:
(i) one purchase of the total amount of creditable nonintervening military service; or
(ii) one purchase per 12-month period of a portion of creditable nonintervening military service.
The amount of each purchase shall be not less than one year of creditable nonintervening military service.
(c) Intervening military service.--
Contributions on account of credit for intervening military service shall be determined by the member's regular contribution rate, shared-risk contribution rate, Social Security integration contribution rate, the additional contribution rate which shall be applied only to those members who began service on or after the effective date of this amendatory act and compensation as a member of the system at the time of entry of the member into active military service, together with statutory interest during all periods of subsequent State and school service to date of purchase. Upon application for such credit the amount due shall be certified in the case of each member by the board in accordance with methods approved by the actuary, and contributions may be made by:
(1) regular monthly payments during active military service; or
(2) a lump sum payment within 30 days of certification; or
(3) salary deductions to the system in amounts agreed upon by the member or eligible school employee who is an active member of the Public School Employees' Retirement System and the board.
The salary deduction amortization plans agreed to by members and the board may include a deferral of payment amounts and statutory interest until the termination of school service or State service as the board in its sole discretion decides to allow. The board may limit salary deduction amortization plans to such terms as the board in its sole discretion determines. In the case of an eligible school employee who is an active member of the Public School Employees' Retirement System, the agreed upon salary deductions shall be remitted to the Public School Employees' Retirement Board, which shall certify and transfer to the board the amounts paid.
(d) Nonmilitary and nonmagisterial service.--
Contributions on account of credit for creditable nonstate service other than military and magisterial service by State employees who first become members of the system before January 1, 2011, or before December 1, 2010, as a member of the General Assembly shall be determined by applying the member's basic contribution rate, the additional contribution rate plus the Commonwealth normal contribution rate for active members at the time of entry subsequent to such creditable nonstate service of the member into State service to his compensation as a member of the system at the time of entry into State service and multiplying the result by the number of years and fractional part of a year of creditable nonstate service being purchased together with statutory interest during all periods of subsequent State and school service to the date of purchase. Upon application for credit for such service payment shall be made in a lump sum within 30 days or in the case of an active member or eligible school employee who is an active member of the Public School Employees' Retirement System it may be amortized with statutory interest through salary deductions to the system in amounts agreed upon by the member and the board. The salary deduction amortization plans agreed to by members and the board may include a deferral of payment amounts and statutory interest until the termination of school service or State service as the board in its sole discretion decides to allow. The board may limit salary deduction amortization plans to such terms as the board in its sole discretion determines. In the case of an eligible school employee who is an active member of the Public School Employees' Retirement System, the agreed upon salary deduction shall be remitted to the Public School Employees' Retirement Board, which shall certify and transfer to the board the amounts paid.
(e) Philadelphia magisterial service.--
Contributions on account of credit for service as a magistrate of the City of Philadelphia shall be determined by the board to be equal to the amount he would have paid as employee contributions together with statutory interest to date of purchase had he been a State employee during his period of service as a magistrate of the City of Philadelphia. The amount so determined by the State Employees' Retirement Board to be paid into the State Employees' Retirement System shall be the obligation of the judge who requested credit for previous service as a magistrate of the City of Philadelphia; in no event shall such amount be an obligation of the City of Philadelphia or the City of Philadelphia retirement system.
(f) Temporary Federal service.--
Contributions on account of credit for service as a temporary Federal employee assigned to an air quality control complement for the Department of Environmental Resources during the period of 1970 through 1975, as authorized in section 5304(c)(5) (relating to creditable nonstate service), shall be equal to the full actuarial cost of the increased benefit obtained by virtue of the purchase. The increased benefit attributable to the purchased service shall be the difference between:
(1) the annual amount of a standard single life annuity, beginning at the earliest possible superannuation age, calculated assuming no future salary increases, assuming credit for the service to be purchased; and
(2) the annual amount of a standard single life annuity, calculated on the same basis, but excluding credit for the service to be purchased.
The earliest possible superannuation age shall be the age at which the member becomes first eligible for superannuation retirement assuming continued full-time service and credit for the amount of service which the member has elected to purchase, or the current attained age of the member, whichever is later. The full actuarial cost of the increased benefit attributable to the purchased service shall be the actuarial present value of a deferred annuity equal to the amount of the increased benefit determined above, beginning at the earliest possible superannuation age and payable for life, calculated using a preretirement interest assumption of 1.5%, a postretirement interest assumption of 4%, no preretirement mortality assumption and standard postretirement mortality assumptions. The purchase payment shall be made in lump sum by the member within 30 days of certification by the board of the required purchase amount or may be amortized through salary deductions in amounts agreed upon by the member and the board with interest payable on the unpaid balance at the rate applicable to the most recently issued 30-year bonds of the United States Treasury Department.
(g) Justice of the peace service.--
Contributions on account of credit for service as a justice of the peace shall be determined by the board to be equal to the amount he would have paid as employee contributions together with statutory interest to date of purchase had he been a State employee during his period of service as a justice of the peace for the Commonwealth plus the amount determined by applying the Commonwealth normal contribution rate for active members at the beginning of the district justice system as of January 1970 to the starting salary of the district justice for the magisterial district in which the member was elected dating from the beginning of the district justice system as of January 1970 and multiplying the result by the number of years and fractional part of a year of creditable service being purchased together with statutory interest from entry into State service as a district justice to the date of purchase. The amount so determined by board to be paid into the system shall be the obligation of the justice who requested credit for previous service as a justice of the peace for the Commonwealth prior to 1970. A justice of the peace desiring to purchase his or her service time prior to 1970 shall have been elected or appointed a district justice any time during or after 1970. The class of service credit a member shall receive upon entry into the system shall be determined by the time of his entry into the district justice system. It shall be incumbent upon the district justice to certify to the board with a copy of his commission or commissions the amount of time that he served the Commonwealth as a justice of the peace. The salary dollar amount that shall be used in the formula for determining the member's contributions shall be equal to the starting salary of the district justice for the magisterial district in which he was elected, dating from the beginning of the district justice system as of January 1970. In no event shall such an amount be the obligation of the Commonwealth or the county in which the justice served.
(h) County service.--
For purposes of this section, Class G, Class H, Class I, Class J, Class K, Class L, Class M and Class N service shall be disregarded in determining when a member enters State service or the period of subsequent State service.
(i) Purchases of nonstate service credit by State employees who first became members of the system on or after December 1, 2010.--
(1) Contributions on account of credit for creditable nonstate service other than intervening military service, nonintervening military service and magisterial service by State employees who first become members of the system on or after January 1, 2011, or on or after December 1, 2010, as a member of the General Assembly shall be equal to the full actuarial cost of the increased benefit obtained by virtue of such service.
(2) The full actuarial cost of the increased benefit attributable to the purchased nonstate service credit shall be the difference between:
(i) the present value of a standard single life annuity, beginning at the earliest possible superannuation age assuming Class A-3 service credit for the nonstate service to be purchased by an active member of Class A-3 or Class A-4 and assuming Class A-5 service credit for the nonstate service to be purchased by an active member of Class A-5 and assuming Class A-6 service credit for the nonstate service to be purchased by an active member of Class A-6; and
(ii) the present value of a standard single life annuity, beginning at the earliest possible superannuation age, excluding the nonstate service credit to be purchased.
(3) The full actuarial cost under paragraph (2) shall be calculated using future salary increases, mortality tables, interest rates and other actuarial assumptions as adopted by the board with the advice of the actuary. The earliest possible superannuation age shall be the current attained age of the member if the member has attained superannuation age for his current class of service or, if the member has not attained superannuation age, the age upon which the member would attain superannuation age as a member in the current class of service assuming continued full-time State service through the attainment of superannuation age and credit for the amount of service which the member has elected to purchase.
(4) The payment for credit purchased under this subsection shall be certified in each case by the board in accordance with methods approved by the actuary and shall be paid in a lump sum within 30 days or in the case of an active member or eligible school employee who is an active member of the Public School Employees' Retirement System may be amortized with statutory interest through salary deductions to the system in amounts agreed upon by the member and the board. The salary deduction amortization plans agreed to by members and the board may include a deferral of payment amounts and interest until the termination of school service or State service as the board in its sole discretion decides to allow. The board may limit the salary deduction amortization plans to such terms as the board in its sole discretion determines. In the case of an eligible school employee who is an active member of the Public School Employees' Retirement System, the agreed upon salary deductions shall be remitted to the Public School Employees' Retirement Board, which shall certify and transfer to the board the amounts paid.
(j) Disallowed contributions.--
No payments for service shall be allowed for which the required contributions would cause a violation of the limitation related to contributions applicable to governmental plans contained in IRC § 415. In the event that any service credit based on such disallowed contributions is granted after the effective date of this subsection, then such service credit shall be canceled and benefits calculated without regard to such service or contributions and any member contributions in excess of the limitations and statutory interest credited on those contributions shall be refunded to the member by the board.
(k) Inapplicability of election and adjustments.--
If a member is purchasing creditable nonstate service, the regular member contribution rate used to determine the contributions necessary to purchase such credit shall be determined without regard to any adjustments applicable under section 5501.1(c) (relating to shared-risk member contributions and shared-gain adjustments to regular member contributions).
(Oct. 7, 1975, P.L.348, No.101, eff. imd.; July 22, 1983, P.L.104, No.31, eff. imd.; June 13, 1985, P.L.40, No.19, 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 22, 1999, P.L.75, No.12, eff. imd.; May 17, 2001, P.L.26, No.9, eff. July 1, 2001; Nov. 23, 2010, P.L.1269, No.120, eff. imd.; Oct. 24, 2012, P.L.1436, No.181, eff. Dec. 31, 2012; Dec. 28, 2015, P.L.529, No.93, eff. imd.; June 12, 2017, P.L.11, No.5, eff. imd.)
2017 Amendment.
Act 5 amended subsecs. (b), (c), (d) and (i)(2) and (4) and added subsec. (k).
2015 Amendment.
Act 93 added subsec. (j).
2012
Amendment
.
Act 181 amended subsecs. (b) and (i).
1999 Amendment.
See section 26 of Act 12 in the appendix to this title for special provisions relating to Federal, State and local tax laws.
1983 Amendment.
See section 10 of Act 31 in the appendix to this title for special provisions relating to waiver of actuarial note requirement for retirement bills.
References in Text.
The Department of Environmental Resources, referred to in subsec. (f), was abolished by Act 18 of 1995. Its functions were transferred to the Department of Conservation and Natural Resources and the Department of Environmental Protection.
Cross References.
Section 5505 is referred to in sections 5303, 5304, 5903, 5904, 5933 of this title.