HB 418 — An Act amending the act of August 31, 1971 (P.L.398, No.96), known as the County Pension Law, providing for County Employees' Defined Contribution Plan.

PRINTER'S NO.   393

                        THE GENERAL ASSEMBLY OF PENNSYLVANIA



                            HOUSE BILL
                            No. 418
                                                  Session of
                                                    2025

     INTRODUCED BY SCHLEGEL, ROAE, COOPER, KEPHART AND ZIMMERMAN,
        JANUARY 30, 2025

     REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JANUARY 30, 2025


                                       AN ACT
 1   Amending the act of August 31, 1971 (P.L.398, No.96), entitled
 2      "An act providing for the creation, maintenance and operation
 3      of a county employes' retirement system, and imposing certain
 4      charges on counties and providing penalties," providing for
 5      County Employees' Defined Contribution Plan.
 6      The General Assembly of the Commonwealth of Pennsylvania
 7   hereby enacts as follows:
 8         Section 1.    The act of August 31, 1971 (P.L.398, No.96),
 9   known as the County Pension Law, is amended by adding a section
10   to read:
11         Section 30.1.    County Employees' Defined Contribution Plan.--
12   (a)    The County Employees' Defined Contribution Plan is
13   established. The board shall administer and manage the plan
14   which shall be a defined contribution plan exclusively for the
15   benefit of those county employes who participate in the plan and
16   their beneficiaries within the meaning of and in conformity with
17   IRC § 401(a). The board shall determine the terms and provisions
18   of the plan not inconsistent with this act, the IRC or other
19   applicable law and shall provide for the plan's administration.
 1      (b)   The County Employees' Defined Contribution Trust is
 2   established as part of the plan. The trust shall be comprised of
 3   the individual investment accounts and all assets and money in
 4   those accounts, and any assets and money held by the board as
 5   part of the plan that are not allocated to individual investment
 6   accounts. The members of the board shall be the trustees of the
 7   trust, which shall be administered exclusively for the benefit
 8   of those county employes who participate in the plan and their
 9   beneficiaries within the meaning of and in conformity with IRC §
10   401(a). The board shall determine the terms and provisions of
11   the trust not inconsistent with this act, the IRC or other
12   applicable law and shall provide for the investment and
13   administration of the trust.
14      (c)   All assets and income in the plan that have been or
15   shall be withheld or contributed by the participants, the county
16   and other employers in accordance with this act shall be held in
17   trust in any funding vehicle permitted by the applicable
18   provisions of the IRC for the exclusive benefit of the
19   participants and their beneficiaries until such time as the
20   funds are distributed to the participants or their beneficiaries
21   in accordance with the terms of the plan document. The assets of
22   the plan held in trust for the exclusive benefit of the
23   participants and their beneficiaries may be used for the payment
24   of the fees, costs and expenses related to the administration
25   and investment of the plan and the trust.
26      (d)   The board shall specify the terms and provisions of the
27   plan and trust in a document containing the terms and conditions
28   of the plan and in a trust declaration that shall be published
29   in the county records. Any amendment to the plan and trust
30   declaration also shall be published.

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 1      (e)   The board shall establish in the trust an individual
 2   investment account for each participant in the plan. All
 3   contributions by a participant or an employer for or on behalf
 4   of a participant shall be credited to the participant's
 5   individual investment account, together with all interest and
 6   investment earnings and losses. Investment and administrative
 7   fees, costs and expenses shall be charged to the participants'
 8   individual investment accounts except as otherwise provided
 9   under this act or as the county otherwise provides by
10   appropriations from the county general fund. Employer defined
11   contributions shall be recorded and accounted for separately
12   from participant contributions, but all interest, investment
13   earnings and losses, and investment and administrative fees,
14   costs and expenses shall be allocated proportionately.
15      (f)   (1)   A participant shall make mandatory pickup
16   participant contributions through payroll deductions to the
17   participant's individual investment account equal to a rate as
18   determined by the board. The employer shall cause those
19   contributions for current service to be made and deducted from
20   each payroll or on such schedule as established by the board.
21      (2)   A participant may make voluntary contributions through
22   payroll deductions, through direct trustee-to-trustee transfers,
23   or through transfers of money received in an eligible rollover
24   into the trust to the extent allowed by IRC § 402. The rollovers
25   shall be made in a form and manner as determined by the board,
26   shall be credited to the participant's individual investment
27   account and shall be separately accounted for by the board.
28      (3)   No contributions may be allowed that would cause a
29   violation of the limitations related to contributions applicable
30   to governmental plans contained in IRC § 415 or in other

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 1   provisions of law. In the event that any disallowed
 2   contributions are made, any participant contributions in excess
 3   of the limitations and investment earnings on those
 4   contributions, but minus investment fees and administrative
 5   charges, shall be refunded to the participant by the board.
 6      (g)   (1)   The contributions to the trust required to be made
 7   under subsection (f)(1) with respect to county service rendered
 8   by an active participant shall be picked up by the county and
 9   shall be treated as the employer's contribution for purposes of
10   IRC § 414(h). After the effective date of this subsection, an
11   employer employing a participant in the plan shall pick up the
12   required mandatory participant contributions by a reduction in
13   the compensation of the participant.
14      (2)   For all other purposes under this act and otherwise,
15   mandatory pickup participant contributions shall be treated as
16   contributions made by a participant in the same manner and to
17   the same extent as if the contributions were made directly by
18   the participant and not picked up.
19      (h)   (1)   The county of an active participant shall make
20   employer defined contributions for service of an active
21   participant that shall be credited to the active participant's
22   individual investment account. Employer defined contributions
23   shall be recorded and accounted for separately from participant
24   contributions.
25      (2)   No contributions may be allowed that would cause a
26   violation of the limitations related to contributions applicable
27   to governmental plans contained in IRC § 415 or in other
28   provisions of law. In the event that any disallowed
29   contributions are made, any employer defined contributions in
30   excess of the limitations and investment earnings on the

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 1   contributions, but minus investment fees and administrative
 2   charges, shall be refunded to the employer by the board.
 3      (i)   (1)   A participant who terminates county service shall
 4   be eligible to withdraw the vested accumulated total defined
 5   contributions standing to the participant's credit in the
 6   participant's individual investment account or a lesser amount
 7   as the participant may request. Payment shall be made in a lump
 8   sum unless the board has established other forms of distribution
 9   in the plan document. A participant who withdraws the
10   participant's vested accumulated total defined contributions
11   shall no longer be a participant in the plan, notwithstanding
12   that the former county employe may continue to be a member of
13   the system or may have contracted to receive an annuity or other
14   form of payment from a provider retained by the board for those
15   purposes.
16      (2)   All payments under this subsection shall start and be
17   made in compliance with the minimum distribution requirements
18   and incidental death benefit rules of IRC § 401(a)(9). The board
19   shall take any action and make any distributions it may
20   determine are necessary to comply with those requirements.
21      (3)   (Reserved).
22      (4)   A county employe must be terminated from all positions
23   that result in either membership in the system or participation
24   in the plan to be eligible to receive a distribution. No
25   distribution shall be allowed that would be an in-service
26   distribution prohibited by the IRC.
27      (5)   Loans or other distributions, including hardship or
28   unforeseeable emergency distributions, from the plan to county
29   employes who have not terminated county service are not
30   permitted, except as required by law.

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 1      (6)   A participant who terminates county service and whose
 2   vested accumulated total defined contributions are below the
 3   threshold established by law as of the date of termination of
 4   service may be paid the vested accumulated total defined
 5   contributions in a lump sum under IRC § 401(a)(31).
 6      (7)   Except as prohibited by the IRC or as otherwise provided
 7   in this act, a participant who is eligible and elects to receive
 8   a distribution or vested accumulated employer defined
 9   contributions may purchase an annuity with that distribution
10   from an annuity provider contracted by the board under
11   subsection (j)(3) and under any conditions in the plan document.
12   The conditions may include that the board is authorized to make
13   the distribution directly to the annuity provider.
14      (j)   (1)   In the event of the death of an active participant
15   or inactive participant, the board shall pay to the
16   participant's beneficiary the vested balance in the
17   participant's individual investment account in a lump sum or in
18   another manner as the board may establish in the plan document.
19      (2)   In the event of the death of a participant receiving
20   distributions, the board shall pay to the participant's
21   beneficiary the vested balance in the participant's individual
22   investment account in a lump sum or in another manner as the
23   board may establish in the plan document or, if the board has
24   established alternative methods of distribution in the plan
25   document under which the participant was receiving
26   distributions, to the participant's beneficiary or successor
27   payee, as the case may be, under the plan document.
28      (3)   The board shall contract with financial institutions,
29   insurance companies or other types of third-party providers to
30   allow a participant, beneficiary or successor payee who receives

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 1   a lump sum distribution to receive payments and death benefits
 2   in a form and manner as provided by the contract. To the extent
 3   commercially available, any annuity option shall include an
 4   interest rate of at least two and one-half per cent compounded
 5   annually.
 6      (k)   Subject to any applicable forfeiture and attachment
 7   provisions of law, a participant shall be vested immediately
 8   with respect to all mandatory pickup participant contributions
 9   and voluntary contributions paid by or on behalf of the
10   participant to the trust in addition to interest and investment
11   gains or losses on the participant contributions but minus
12   investment fees and administrative charges.
13      (l)   (1)   The board may perform an annual or more frequent
14   review of any qualified fund manager for the purpose of assuring
15   that the fund manager continues to meet all standards and
16   criteria established.
17      (2)   The board may allow for eligible rollovers and direct
18   trustee-to-trustee transfers into the trust from qualified plans
19   of other employers, regardless of whether the employers are
20   private employers or public employers.
21      (3)   The board may allow an inactive participant to maintain
22   the participant's individual investment account within the plan.
23      (4)   The board shall administer or ensure the administration
24   of the plan in compliance with the qualifications and other
25   rules of the IRC.
26      (5)   The board may establish procedures to provide for the
27   lawful payment of benefits, including alternate payees under
28   this act or other law.
29      (6)   The board shall determine, after reviewing applicable
30   law, what constitutes a termination of county service.

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 1      (7)    The board may establish procedures for distributions of
 2   small accounts as required or permitted by the IRC.
 3      (8)    The board may establish procedures in the plan document
 4   or adopt and promulgate rules and regulations as it deems
 5   necessary for the administration and management of the plan,
 6   including establishing:
 7      (i)    Procedures for eligible participants to change voluntary
 8   contribution amounts or investment choices on a periodic basis
 9   or make other elections regarding participation in the plan.
10      (ii)     Procedures for deducting mandatory pickup participant
11   contributions and voluntary contributions from a participant's
12   compensation.
13      (iii)     Procedures for rollovers and trustee-to-trustee
14   transfers allowed under the IRC and permitted as part of the
15   plan.
16      (iv)     Standards and criteria for disclosing to the
17   participants the anticipated and actual income attributable to
18   amounts invested, property rights and all fees, costs and
19   expenses to be made against amounts deferred to cover the fees,
20   costs and expenses of administering and managing the plan or
21   trust.
22      (v)    Procedures, standards and criteria for the making of
23   distributions from the plan upon termination from employment or
24   death or in other circumstances consistent with the purpose of
25   the plan.
26      (9)    The board may waive any reporting or information
27   requirement contained in this act if the board determines that
28   the information is not needed for the administration of the
29   plan.
30      (10)     The board may contract any services and duties in lieu

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 1   of staff, except final adjudications and as prohibited by law. A
 2   duty or responsibility of the board not required by law to be
 3   performed by the board may be delegated to a third-party
 4   provider subject to appeal to the board.
 5      (11)    The board may provide that any duties of the employer
 6   or information provided by the participant to the employer be
 7   performed or received directly by the board.
 8      (12)    The board shall ensure that participants are provided
 9   with educational materials about investment options and choices.
10      (m)    The board, the Commonwealth, an employer or other
11   political subdivision shall not be responsible for any
12   investment or other loss incurred under the plan or for the
13   failure of any investment to earn any specific or expected
14   return or to earn as much as any other investment opportunity or
15   to cost less than any other investment opportunity, whether or
16   not the other opportunity was offered to participants in the
17   plan.
18      (n)    (1)   All contributions, interest and investment earnings
19   shall be invested based on a participant's investment allocation
20   choices, if the board may provide for a default investment
21   option. All investment allocation choices shall be credited
22   proportionally between participant contributions and employer
23   defined contributions. Each participant shall be credited
24   individually with the amount of contributions, interest and
25   investment earnings.
26      (2)    Investment of contributions by any corporation,
27   institution, insurance company, custodial bank or other entity
28   that the board has approved shall not be unreasonably delayed,
29   and in no case may the investment of contributions be delayed
30   more than thirty days from the date of payroll deduction or the

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 1   date voluntary contributions are made to the date that funds are
 2   invested. Any interest earned on the funds pending investment
 3   shall be used to pay administrative costs and fees that would
 4   otherwise be required to be borne by participants who are then
 5   participating in the plan or paid by appropriations from the
 6   county general fund.
 7      (o)    All fees, costs and expenses of establishing and
 8   administering the plan and the trust and investing the assets of
 9   the trust shall be borne by the participants and paid from
10   assessments against the balances of the individual investment
11   accounts as established by the board, except that the fees,
12   costs and expenses of establishing and administering the plan
13   and the trust shall be paid by the county through annual
14   appropriations.
15      (p)    (1)   All payments under this section shall start and be
16   made in compliance with the required beginning date, minimum
17   distribution requirements and incidental death benefit rules of
18   IRC § 401(a).
19      (2)    (i)   Except as provided under subparagraph (ii), a
20   contribution or benefit related to the plan may not exceed any
21   limitation under IRC § 415 with respect to a governmental plan
22   which is in effect on the date the contribution or benefit
23   payment takes effect.
24      (ii)    An increase in a limitation under IRC § 415 shall apply
25   to all participants on and after the effective date of this
26   subparagraph.
27      (iii)    An increase in benefits on or after the effective date
28   of this subparagraph for a participant in the plan shall be
29   authorized and apply to the fullest extent allowed by law.
30      (q)    As used in this section, the following words and phrases

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 1   shall have the meanings given to them in this subsection unless
 2   the context clearly indicates otherwise:
 3      "Governmental plan" has the same meaning as the term has in
 4   IRC § 414(d).
 5      "IRC" means the Internal Revenue Code of 1986 (26 U.S.C. § 1
 6   et seq.).
 7      "Participant" means a county employe.
 8      "Plan" means the County Employees' Defined Contribution Plan
 9   established under subsection (a).
10      "Trust" means the County Employees' Defined Contribution
11   Trust established under subsection (b).
12      Section 2.   This act shall take effect in 60 days.




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