24 Pa.C.S. Ch. 84

in effect

24 Pa.C.S. § 8401 Establishment.

(a) School Employees' Defined Contribution Plan.--The School Employees' Defined Contribution Plan is established. The board shall administer and manage the plan, which shall be a defined contribution plan exclusively for the benefit of those school employees who participate in the plan and their beneficiaries within the meaning of and in conformity with IRC § 401(a). The board shall determine the terms and provisions of the plan not inconsistent with this part, the IRC and other applicable law and shall provide for the plan's administration. (b) School Employees' Defined Contribution Trust.--The School Employees' Defined Contribution Trust is established as part of the plan in accordance with this part. The trust shall be comprised of the individual investment accounts, all assets and moneys in those accounts and any assets and moneys held by the board as part of the plan that are not allocated to the individual investment accounts. The members of the board shall be the trustees of the trust, which shall be administered exclusively for the benefit of those school employees who participate in the plan and their beneficiaries within the meaning of and in conformity with IRC § 401(a). The board shall determine the terms and provisions of the trust not inconsistent with this part, the IRC and other applicable law and shall provide for the investment and administration of the trust. (c) Assets held in trust.--All assets and income in the plan that have been or shall be withheld or contributed by the participants, the Commonwealth and employers in accordance with this part shall be held in trust in any funding vehicle permitted by the applicable provisions of the IRC for the exclusive benefit of the plan's participants and their beneficiaries until such time as the funds are distributed to the participants or their beneficiaries in accordance with the terms of the plan document. The assets of the plan held in trust for the exclusive benefit of the participants and their beneficiaries may be used for the payment of the fees, costs and expenses related to the administration and investment of the plan and the trust. (d) Name for transacting business.--By the name of "The School Employees' Defined Contribution Plan," all of the business of the plan shall be transacted, the trust invested, all requisitions for money drawn and payments made and all of its cash and securities and other property shall be held, except that, any other law to the contrary notwithstanding, the board may establish a nominee registration procedure for the purpose of registering securities to facilitate the purchase, sale or other disposition of securities under the provisions of this part.

24 Pa.C.S. § 8402 Plan document.

The board shall set forth the terms and provisions of the plan and trust in a document containing the terms and conditions of the plan and in a trust declaration. The creation of the document containing the terms and conditions of the plan and the trust declaration and the establishment of the terms and provisions of the plan and the trust need not be promulgated by regulation or formal rulemaking and shall not be subject to the act of July 31, 1968 (P.L.769, No.240), referred to as the Commonwealth Documents Law. A reference in this part or other law to the plan shall include the plan document unless the context clearly indicates otherwise. Cross References. Section 8402 is referred to in section 8102 of this title.

24 Pa.C.S. § 8403 Individual investment accounts.

The board: (1) Shall establish in the trust an individual investment account for each participant in the plan. All contributions by a participant or an employer for or on behalf of a participant shall be credited to the participant's individual investment account, together with all interest and investment earnings and losses. Investment and administrative fees, costs and expenses shall be charged to the participants' individual investment accounts. (2) Shall separately track participant contributions, including investment gains and losses, and employer contributions, including investment gains and losses, but all interest, investment gains and losses and administrative fees, costs and expenses shall be allocated proportionately. (3) May contract with financial institutions, insurance companies or other types of third-party providers and other vendors to allow participants to deposit participant contributions into the individual investment accounts in a form and manner as provided by the contract.

24 Pa.C.S. § 8404 Participant contributions.

(a) Mandatory contributions.--A participant shall make mandatory pickup participant contributions through payroll deductions to the participant's individual investment account for school service required to be credited in the plan. The employer shall cause those contributions for service required to be credited in the plan to be made and deducted from each payroll or on such schedule as established by the board. (b) Voluntary contributions.--A participant may make voluntary contributions through payroll deductions, through direct trustee-to-trustee transfers or through transfers of money received in an eligible rollover into the trust to the extent allowed by IRC § 402. Rollovers shall be made in a form and manner as determined by the board, shall be credited to the participant's individual investment account and shall be separately accounted for by the board. (c) Prohibition on contributions.--No contributions shall be allowed that would cause a violation of the limitations related to contributions applicable to governmental plans contained in IRC § 415 or in other provisions of law. In the event that any disallowed contributions are made, any participant contributions in excess of the limitations and investment earnings on those contributions, minus investment fees and charges, shall be refunded to the participant by the board. Cross References. Section 8404 is referred to in section 8405 of this title.

24 Pa.C.S. § 8405 Mandatory pickup participant contributions.

(a) Treatment for purposes of IRC § 414(h).--The contributions to the trust required to be made under section 8404(a) (relating to participant contributions) with respect to school service rendered by an active participant shall be picked up by the employer and shall be treated as the employer's contribution for purposes of IRC § 414(h). After the effective date of this section, an employer employing a participant in the plan shall pick up the required mandatory participant contributions by a reduction in the compensation of the participant. (b) Treatment for other purposes.--For all other purposes under this part and otherwise, mandatory pickup participant contributions shall be treated as contributions made by a participant in the same manner and to the same extent as if the contributions were made directly by the participant and not picked up.

24 Pa.C.S. § 8406 Employer defined contributions.

(a) Contributions for service.--The employer of a participant shall make employer defined contributions for service of an active participant that shall be credited to the active participant's individual investment account. Employer defined contributions must be recorded and accounted for separately from participant contributions. (b) Contributions resulting from participants reemployed from USERRA leave.--When a school employee reemployed from USERRA leave makes the mandatory pickup participant contributions permitted to be made for the USERRA leave, the employer by whom the school employee is employed at the time the participant contributions are made shall make whatever employer defined contributions would have been made under this section had the employee making the participant contributions after being reemployed from USERRA leave continued to be employed in the employee's school position instead of performing USERRA leave. The employer defined contributions shall be placed in the participant's individual investment account as otherwise provided by this part. (c) Limitations on contributions.--No contributions shall be allowed that would cause a violation of the limitations related to contributions applicable to governmental plans contained in IRC § 415 or in other provisions of law. In the event that any disallowed contributions are made, any employer defined contributions in excess of the limitations and investment earnings thereon shall be refunded to the employer by the board.

24 Pa.C.S. § 8407 Eligibility for benefits.

(a) Termination of service.--A participant who terminates school service shall be eligible to withdraw the vested accumulated total defined contributions standing to the participant's credit in the participant's individual investment account or a lesser amount as the participant may request. Payment shall be made in a lump sum unless the board has established other forms of distribution in the plan document. A participant who withdraws the vested accumulated total defined contributions shall no longer be a participant in the plan, notwithstanding that the former school employee may continue to be a member of the system with Class T-G or Class T-H service credit, or may contract to receive an annuity or other form of payment from a provider retained by the board for such purposes. (b) Required distributions.--All payments under this section shall start and be made in compliance with the minimum distribution requirements and incidental death benefit rules of IRC § 401(a)(9). The board shall take any action and make any distributions it may determine are necessary to comply with those requirements. (c) Prohibited distributions.--A school employee must be terminated from all positions that result in either membership in the system or participation in the plan to be eligible to receive a distribution. (d) Loans.--Loans or other distributions, including hardship or unforeseeable emergency distributions, from the plan to school employees who have not terminated school service are not permitted, except as required by law. (e) Small individual investment accounts.--A participant who terminates school service and whose vested accumulated total defined contributions are below the threshold established by law as of the date of termination of service may be paid the vested accumulated total defined contributions in a lump sum as provided in IRC § 401(a)(31).

24 Pa.C.S. § 8408 Death benefits.

(a) General rule.--In the event of the death of an active participant or inactive participant, the board shall pay to the participant's beneficiary the vested balance in the participant's individual investment account in a lump sum or in such other manner as the board may establish in the plan document. (b) Death of participant receiving distributions.--In the event of the death of a participant receiving distributions, the board shall pay to the participant's beneficiary the vested balance in the participant's individual investment account in a lump sum or in such other manner as the board may establish in the plan document or, if the board has established alternative methods of distribution in the plan document under which the participant was receiving distributions, to the participant's beneficiary or successor payee as provided in the plan document. (c) Contracts.--The board may contract with financial institutions, insurance companies or other types of third-party providers to allow participants and their beneficiaries who receive a lump sum distribution to receive payments and death benefits in a form and manner as provided by the contract. Cross References. Section 8408 is referred to in section 8507 of this title.

24 Pa.C.S. § 8409 Vesting.

(a) Participant and voluntary contributions.--Subject to the forfeiture and attachment provisions of section 8533 (relating to taxation, attachment and assignment of funds) or otherwise as provided by law, a participant shall be immediately vested with respect to all mandatory pickup participant contributions and voluntary contributions paid by or on behalf of the participant to the trust plus interest and investment gains or losses on the participant contributions but minus investment fees and administrative charges. (b) Employer defined contributions.-- (1) Subject to the forfeiture and attachment provisions of section 8533 or otherwise as provided by law, a participant shall be vested with respect to employer defined contributions paid to the participant's individual investment account in the trust plus interest and investment gains or losses on the employer defined contributions but minus investment fees and administrative charges according to the following schedule: (i) until such time as the participant has earned three eligibility points as a participant in the plan, 0%; or (ii) at and after the attainment of three eligibility points as a participant in the plan, 100%. (2) For purposes of this subsection, all eligibility points credited to a member of the system in any class of service shall be used for determining vested status in the plan even if the employee was not a participant in the plan at the time the eligibility points were earned. (3) Nonvested employer defined contributions, including interest and investment gains and losses that are forfeited by a participant, shall be retained by the board and used for the payment of expenses of the plan. (c) USERRA leave and eligibility points.--A participant in the plan who is reemployed from USERRA leave or who dies while performing USERRA leave shall receive eligibility points under this section for the school service that would have been performed had the member not performed USERRA leave. (July 2, 2019, P.L.434, No.72, eff. 60 days) 2019 Amendment. Act 72 amended subsec. (b)(3). See section 6.2 of Act 72 in the appendix to this title for special provisions relating to severability. Cross References. Section 8409 is referred to in section 8102 of this title.

24 Pa.C.S. § 8410 Termination of distributions.

(a) Return to school service.-- (1) A participant receiving distributions or an inactive participant who returns to school service shall cease receiving distributions and shall not be eligible to receive distributions until the participant subsequently terminates school service, without regard to whether the participant is a mandatory, optional or prohibited member of the system or participant in the plan. (2) This subsection shall not apply to a distribution that the participant has received or used to purchase an annuity from a provider contracted by the board. (b) Return of benefits paid during USERRA leave.-- (1) If a former school employee is reemployed from USERRA leave and received any payments or annuity from the plan during the USERRA leave, the employee shall return to the board the amount so received plus interest as provided in the plan document. (2) The amount payable 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 participant, may be amortized with interest as provided in the plan document through salary deductions to the trust in amounts agreed upon by the active participant and the board, but not longer than a period that starts with the date of reemployment and continuing for up to three times the length of the active participant's immediate past period of USERRA leave. The repayment period shall not exceed five years.

24 Pa.C.S. § 8411 Powers and duties of board.

The board, in addition to its powers and duties set forth in Chapter 85 (relating to administration and miscellaneous provisions), shall have the following powers and duties to establish the plan and trust and to administer the provisions of this part: (1) The board may commingle or pool assets with the assets of other persons or entities. (2) The board shall pay all administrative fees, costs and expenses of managing, investing and administering the plan, the trust and the individual investment accounts from the balance of such individual investment accounts, except as otherwise provided in this part or as the General Assembly otherwise provides through appropriations from the General Fund. (3) The board may establish investment guidelines and limits on the types of investments that participants may make, consistent with the board's fiduciary obligations. (4) The board shall have the power to change the terms of the plan as may be necessary to maintain the tax-qualified status of the plan. (5) The board may establish a process for election to participate in the plan by those school employees for whom participation is not mandatory. (6) The board may perform an annual or more frequent review of any qualified fund manager for the purpose of assuring it continues to meet all standards and criteria established. (7) The board may allow for eligible rollovers and direct trustee-to-trustee transfers into the trust from qualified plans of other employers, regardless of whether the employers are private employers or public employers. (8) The board may allow an inactive participant to maintain the participant's individual investment account within the plan. (9) The board shall administer or ensure the administration of the plan in compliance with the qualification and other rules of the IRC. (10) The board may establish procedures to provide for the lawful payment of benefits. (11) The board shall determine what constitutes a termination of school service. (12) The board may establish procedures for distributions of small accounts as required or permitted by the IRC. (13) The board may establish procedures in the plan document or to promulgate rules and regulations as it deems necessary for the administration and management of the plan, including, but not limited to, establishing: (i) Procedures by which eligible participants may change voluntary contribution amounts or their investment choices on a periodic basis or make other elections regarding their participation in the plan. (ii) Procedures for deducting mandatory pickup participant contributions and voluntary contributions from a participant's compensation. (iii) Procedures for rollovers and trustee-to-trustee transfers allowed under the IRC and permitted by the board as part of the plan. (iv) Standards and criteria for providing not less than ten options which are offered by three or more providers of investment options to eligible individuals regarding investments of amounts deferred under the plan. The standards and criteria must provide for a variety of investment options and shall be reviewed in accordance with criteria established by the board. (v) Standards and criteria for disclosing to the participants the anticipated and actual income attributable to amounts invested, property rights and all fees, costs and expenses to be made against amounts deferred to cover the costs and expenses of administering and managing the plan or trust. (vi) Procedures, standards and criteria for the making of distributions from the plan upon termination from employment, one of which shall include an option for an annuity with a minimum interest rate of 2.5% to the extent commercially available, or death or in other circumstances consistent with the purpose of the plan. (14) The board may waive any reporting or information requirement contained in this part if the board determines that the information is not needed for the administration of the plan. (15) The board may contract any services and duties in lieu of staff except final adjudications and as prohibited by law. Any duties or responsibilities of the board not required by law to be performed by the board may be delegated to a third-party provider subject to appeal to the board. (16) The board may provide that any duties of the employer or information provided by the participant to the employer be performed or received directly by the board. (17) The board shall ensure that participants are provided with educational materials about investment options and choices. (18) The provisions and restrictions of the act of July 2, 2010 (P.L.266, No.44), known as the Protecting Pennsylvania's Investments Act, shall not apply to the participants' individual investment accounts or the moneys and investments therein, but the board is authorized to offer to the plan participants investment vehicles that would be permitted under the Protecting Pennsylvania's Investments Act. Cross References. Section 8411 is referred to in section 8411.1 of this title.

24 Pa.C.S. § 8411.1 Relation of administrators of School Employees' Defined Contribution Plan to providers of 403(b) plans.

(a) General rule.--A financial institution or pension management organization entering into a written agreement under section 8411 (relating to powers and duties of board) may offer or provide services to any plan established or maintained by a school district under IRC § 403(b) or 457 if the written agreement for the administration of the School Employees' Defined Contribution Plan is not combined with any other written agreement for the administration of a school district's 403(b) plan or 457 plan. Each school district that provides a 403(b) plan shall make available, in the manner provided by subsection (c), to participants, multiple financial institutions or pension management organizations that have not entered into a written agreement to section 8411 and which provide services to the school district's 403(b) plan or 457 plan. (b) Plan transparency and administration.--A financial institution or pension management organization providing services for any plan established or maintained by a school district under IRC § 403(b) or 457 shall: (1) enter into an agreement with the school district or the school district's independent compliance administrator that shall require the financial institution or pension management organization to provide in an electronic format all data necessary for the administration of the 403(b) plan or 457 plan as determined by the school district or the school district's compliance administrator; and (2) provide all data required by the school district or a school district's compliance administrator to facilitate disclosure of all fees, charges, expenses, commissions, compensation and payments to third parties related to investments offered under the 403(b) plan or 457 plan. (c) Provider selection.--A school district that establishes or maintains a plan under IRC § 403(b) or 457 shall select a minimum of four financial institutions or pension management organizations, in addition to the financial institution or pension management organization that entered into an agreement under section 8411, to provide services to the 403(b) plan or 457 plan. If fewer than four such additional financial institutions or pension management organizations are determined to be available or able to meet the requirements established in this section, then the school district shall select the number of available providers able to meet the school district's requirements. A financial institution or pension management organization shall be designated a 403(b) plan or 457 plan provider if the financial institution or pension management organization enters into an agreement in accordance with subsection (b).

24 Pa.C.S. § 8412 Responsibility for investment loss.

The Commonwealth, the board, an employer or a school entity or other political subdivision shall not be responsible for any investment loss incurred under the plan or for the failure of any investment to earn any specific or expected return or to earn as much as any other investment opportunity or to cost less than any other investment opportunity, whether or not such other opportunity was offered to participants in the plan.

24 Pa.C.S. § 8413 Investments based on participant's investment allocation choices.

(a) Investment by participant.--All contributions, interest and investment earnings shall be invested based on a participant's investment allocation choices, provided that the board may provide for a default investment option. All investment allocation choices shall be credited proportionally between contributions from the participant and employer defined contributions. Each participant shall be credited individually with the amount of contributions, interest and investment earnings. (b) Investment of contributions made by entities other than Commonwealth.--Investment of contributions by any corporation, institution, insurance company, custodial bank or other entity that the board has approved shall not be unreasonably delayed, and in no case shall the investment of contributions be delayed more than 30 days from the date of payroll deduction or voluntary contributions are made to the date that funds are invested. Any interest earned on the funds pending investment shall be used to pay administrative costs and fees that would otherwise be required to be borne by participants who are then participating in the plan or that are funded by contributions from the employers. Cross References. Section 8413 is referred to in section 8502 of this title.

24 Pa.C.S. § 8414 Expenses.

All expenses, fees and costs of administering the plan and the trust and investing the assets of the trust shall be borne by the participants and paid from assessments against the balances of the individual investment accounts as established by the board, except that the expenses, fees and costs of establishing and administering the plan and trust shall be paid by the Commonwealth through annual appropriations.

24 Pa.C.S. § 8415 Tax qualification.

(a) Required distributions.--All payments under this chapter shall start and be made in compliance with the minimum distribution requirements and incidental death benefit rules of IRC § 401(a). (b) Limitations.--The following shall apply: (1) (i) Except as provided under subparagraph (ii) and notwithstanding a provision of this part, a contribution or benefit related to the plan may not exceed a limitation under IRC § 415 with respect to a governmental plan that is in effect on the date the contribution or benefit payment takes effect. (ii) An increase in a limitation under IRC § 415 shall apply to the participants on or after the effective date of this section. (iii) For the purposes of this paragraph, the term "governmental plan" shall have the same meaning as in IRC § 414(d). (2) (i) Except as provided under subparagraph (ii), an amendment of this part on or after the effective date of this section that increases contributions or benefits for active participants, inactive participants or participants receiving distributions may not be deemed to provide for a contribution or benefit in excess of a limitation, adjusted on or after the effective date of this section, under IRC § 415 unless specifically provided by legislation. (ii) Notwithstanding subparagraph (i), an increase in benefits on or after the effective date of this section for a participant in the plan shall be authorized and apply to the fullest extent allowed by law.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.palegis.us/statutes/consolidated/view-statute?txtType=HTM&ttl=24Fetched: 10/16/2026