Section 895.901 - Modification of actuarial funding standard(a)Modification of actuarial funding standard.--The actuarial reporting and funding requirements established under Chapters 2, 3 and 6 are modified by this section for a municipality. The amortization contribution established for each pension fund under this section shall be an integral component of the aggregate amortization contribution requirements determined under section 302(b)(3). A municipality determining amortization contributions under this section shall continue to determine the total financial requirements of its pension funds under section 302. If a municipality is delinquent in satisfying the total financial requirements of its pension funds, it shall be subject to the penalty and enforcement provisions specified in sections 302(e), 306 and 307.(b)Calculation of unfunded actuarial accrued liability.--A municipality shall determine the unfunded actuarial accrued liability for each of its pension funds as of January 1, 1998. The calculation of the unfunded actuarial accrued liability shall be made and certified by an approved actuary under section 202(b)(3) using the actuarial assumptions employed in preparation of the January 1, 1997, actuarial valuation report required under section 201 except that the actuarial value of assets calculated under section 202(e)(1) shall reflect as assets the value of all deposits to the pension fund made within the plan year commencing January 1, 1998, that were comprised of the proceeds from pension bonds.(c)Required amortization contributions.--Commencing in the plan year beginning January 1, 1998, a municipality shall make annual level dollar amortization contributions to each of its pension funds that are sufficient to fully amortize the unfunded actuarial accrued liabilities over the following 40 years. The annual level dollar amortization contribution for each pension fund shall be calculated by an approved actuary assuming 10% investment earnings on the amortization contributions throughout the 40-year period. The level dollar amortization contribution for a pension fund is subject to the limit on the additional funding costs in section 202(b)(4).(d)Determination and amortization of actuarial gain or loss.--(1) For each pension fund subject to the provisions of this section, the municipality shall establish and maintain a comparative interest rate amortization tabulation for the duration of the 40-year amortization period. The tabulation shall reflect the calculation of a balance as of the end of each plan year that shall be calculated as the sum of the previous year's balance and the amortization contribution determined under this section plus interest on that sum to the end of the plan year assuming a 10% rate of return. The tabulation shall also reflect an annual interest adjustment for each year calculated as the amount of the interest credited in the determination of the balance less the amount of the interest that would have been credited if the balance had been calculated using the actual rate of return for the applicable plan year rather than the assumed 10% rate of return. The actual rate of return used to calculate the annual interest adjustment shall be the rate of return realized on the market value of the pension fund's assets during the applicable plan year.(2) In each actuarial valuation report prepared under Chapter 2 that reflects an amortization contribution determined under this section, the annual interest adjustment calculated under this subsection shall be treated as an actuarial gain or loss and amortized under section 202(b)(4).(e)Effect of future pension bonds.--If an unfunded actuarial accrued liability being funded with amortization contributions determined under this section is reduced through the deposit of pension bonds proceeds, the remaining balance of the unfunded actuarial accrued liability calculated under this section shall be reduced proportionately as specified in section 202(b)(4) and an approved actuary shall recalculate the annual level dollar amortization contribution required to fully amortize the remaining balance of the unfunded actuarial accrued liability over the remaining years of the amortization period assuming a 10% rate of return on the amortization contributions. The recalculated unfunded actuarial accrued liability and the recalculated amortization contribution shall be reflected in the actuarial valuation report and the comparative interest rate amortization tabulation prepared as of the beginning of the plan year following the deposit of the pension bond proceeds.(f)Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection: "Amortization contribution." That portion of the pension plan contribution which is designed to pay interest on and to amortize the unfunded actuarial accrued liability.
"Municipality." A home rule municipality formerly classified as a city of the second class that issues pension bonds and deposits the proceeds in a pension fund within the plan year commencing January 1, 1998, and increases the ratio of the actuarial value of assets to the actuarial accrued liability of its pension funds by more than 0.25.
"Pension bonds." Bonds or notes issued by a municipality under 53 Pa.C.S. Pt. VII Subpt. B (relating to indebtedness and borrowing) to finance reduction of the unfunded actuarial accrued liability of one or more pension funds.
1984, Dec. 18, P.L. 1005, No. 205, § 901, added 1998, June 18, P.L. 626, No. 82, § 4, imd. effective.