(a) General rule.--

(1) If the annuitant returns to State service or enters or has entered school service and elects multiple service membership, any annuity payable to him under this part shall cease effective upon the date of his return to State service or entering school service without regard to whether he is a mandatory, optional or prohibited member of the system or participant in the plan or, if a multiple service member, whether he is a mandatory, optional or prohibited member or participant of the Public School Employees' Retirement System or School Employees' Defined Contribution Plan; and, in the case of an annuity other than a disability annuity the present value of such annuity, adjusted for full coverage in the case of a joint coverage member who makes the appropriate back contributions for full coverage, shall be frozen as of the date such annuity ceases. An annuitant who is credited with an additional 10% of Class A and Class C service as provided in section 5302(c) (relating to credited State service) and who returns to State service shall forfeit such credited service and shall have his frozen present value adjusted as if his 10% retirement incentive had not been applied to his account. In the event that the cost-of-living increase enacted December 18, 1979 occurred during the period of such State or school employment, the frozen present value shall be increased, on or after the member attains superannuation age, by the percent applicable had he not returned to service.

(2) This subsection shall not apply in the case of any annuitant who:

(i) may render services to the Commonwealth in the capacity of an independent contractor; or

(ii) is over normal retirement age or who has been an annuitant for more than one year and who may render service to the Commonwealth:

(A) as a member of an independent board or commission or as a member of a departmental administrative or advisory board or commission when such members of independent or departmental boards or commissions are compensated on a per diem basis for not more than 150 days per calendar year; or

(B) as a member of an independent board or commission requiring appointment by the Governor, with advice and consent of the Senate, where the annual salary payable to the member does not exceed $35,000 and where the member has been an annuitant for at least six months immediately preceding the appointment.

(a.1) Return to State service during emergency.--When, in the judgment of the employer, an emergency creates an increase in the work load such that there is serious impairment of service to the public, an annuitant who is over normal retirement age or who has been an annuitant for more than one year may be returned to State service for a period not to exceed 95 days in any calendar year without loss of his annuity. In computing the number of days an annuitant has returned to State service, any amount of time less than one-half of a day shall be counted as one-half of a day. For agencies, boards and commissions under the Governor's jurisdiction, the approval of the Governor that an emergency exists shall be required before an annuitant may be returned to State service.

(a.2) Return of benefits.--In the event an annuitant whose annuity from the system ceases pursuant to this section receives any annuity payment, including a lump sum payment pursuant to section 5705 (relating to member's options) on or after the date of his return to State service or entering school service, the annuitant shall return to the board the amount so received from the system plus statutory interest. 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 member or 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 the member 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 a 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.

(a.3) Return of benefits paid during USERRA leave.--In the event that a former State employee is reemployed from USERRA leave who had received any payments or annuity from the system during the USERRA leave, the employee shall return to the board the amount so received plus statutory interest. 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 member may be amortized with statutory interest through salary deductions in amounts agreed upon by the member 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 member's immediate past period of USERRA leave, with the repayment period not to exceed five years or such longer time as may be agreed to between the board and the member.

(a.4) Return to service as a senior judge or senior magisterial district judge.--Notwithstanding the provisions of the act of September 30, 1983 (P.L.160, No.39), known as the Public Official Compensation Law, 42 Pa.C.S. (relating to judiciary and judicial procedure) or any other provision of law or rule of court providing for or allowing a member of the judiciary to return to service as a senior judge, senior justice, senior magisterial district judge or in any administrative, fact finding, adjudicative, appellate or other capacity with any court or tribunal or in any other capacity for which compensation is received and to receive such compensation, whether paid on a per diem, hourly, salaried or other basis, in addition to any annuity payable under this part, any such member of the judiciary who returns to State service shall be subject to the provision of this section and section 5301 (relating to mandatory and optional membership) unless that member of the judiciary is over normal retirement age or has been an annuitant for more than one year.

(a.5) No contributions or credited service.--The service of an annuitant whose annuity does not cease upon his return to State or school service shall not be subject to member contributions or eligible for qualification as creditable State service and shall not be eligible for participation in the plan, mandatory pickup participant contributions, voluntary contributions or employer defined contributions.

(b) Subsequent discontinuance of service.--Upon subsequent discontinuance of service, such terminating State employee other than a former annuitant who had the effect of his frozen present value eliminated in accordance with subsection (c) or a former disability annuitant shall be entitled to an annuity which is actuarially equivalent to the present value as determined under subsection (a) to which shall be added, if the service after reemployment was as a member of the system, the present value of a maximum single life annuity based on years of service credited subsequent to reentry in the system and his final average salary computed by reference to his compensation as a member of the system or as a member of the Public School Employees' Retirement System during his entire period of State and school service.

(c) Elimination of the effect of frozen present value.--

(1) An annuitant who returns to State service as an active member of the system and earns three eligibility points as a member of the system by performing credited State service following the most recent period of receipt of an annuity under this part, or an annuitant who enters school service other than as a Class DC participant and:

(i) is a multiple service member; or

(ii) who elects multiple service membership, and

earns three eligibility points by performing credited State service as a member of the system or credited school service following the most recent period of receipt of an annuity under this part, and who had the present value of his annuity frozen in accordance with subsection (a), shall qualify to have the effect of the frozen present value resulting from all previous periods of retirement eliminated, provided that all lump sum payments under Option 4 or under section 5705(a.1) and annuity payments payable during previous periods of retirement plus interest as set forth in paragraph (3) shall be returned to the fund in the form of an actuarial adjustment to his subsequent benefits or in such form as the board may otherwise direct.

(2) Upon subsequent discontinuance of service and the filing of an application for an annuity, a former annuitant who qualifies to have the effect of a frozen present value eliminated under this subsection shall be entitled to receive the higher of either:

(i) an annuity (prior to optional modification) calculated as if the freezing of the former annuitant's account pursuant to subsection (a) had not occurred, adjusted by crediting Class A State service as Class AA service as provided for in section 5306(a.1) (relating to classes of service) and further adjusted according to paragraph (3), provided that a former annuitant of the system or a former annuitant of the Public School Employees' Retirement System who retired under a provision of law granting additional service credit if termination of State or school service or retirement occurred during a specific period of time shall not be permitted to retain the additional service credit under the prior law when the annuity is computed for his most recent retirement; or

(ii) an annuity (prior to optional modification) calculated as if the former annuitant did not qualify to have the effect of the frozen present value eliminated,

unless the former annuitant notifies the board in writing by the later of the date the application for annuity is filed or the effective date of retirement that the former annuitant wishes to receive the lower annuity.

(3) In addition to any other adjustment to the present value of the maximum single life annuity that a member may be entitled to receive that occurs as a result of any other provision of law, the present value of the maximum single life annuity shall be reduced by all amounts paid or payable to him during all previous periods of retirement plus interest on these amounts until the date of subsequent retirement. The interest for each year shall be calculated based upon the annual interest rate adopted for that fiscal year by the board for the calculation of the normal contribution rate pursuant to section 5508(b) (relating to actuarial cost method).

(Oct. 7, 1975, P.L.348, No.101, eff. imd.; July 12, 1981, P.L.261, No.87, eff. imd.; Mar. 4, 1982, P.L.141, No.45, eff. imd.; Aug. 5, 1991, P.L.183, No.23, eff. imd.; Apr. 29, 1994, P.L.159, No.29; Dec. 20, 1995, P.L.689, No.77, eff. 60 days; May 17, 2001, P.L.26, No.9, eff. July 1, 2001; Apr. 23, 2002, P.L.272, No.38, 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. (a), (a.2), (a.5), (b) and (c)(1).

2015 Amendment. Act 93 amended subsecs. (a) and (a.1) and added subsecs. (a.4) and (a.5). See section 30 of Act 93 in the appendix to this title for special provisions relating to applicability of law.

2012 Amendment. Act 181 added subsec. (a.3).

2001 Amendment. Act 9 amended subsecs. (a), (a.1) and (c) and added subsec. (a.2). See section 22(b) of Act 9 in the appendix to this title for special provisions relating to calculation of return to service days.

1995 Amendment. Section 15(7) of Act 77 provided that the amendment shall be retroactive to July 1, 1994, and provided that no annuities or other benefits greater than those payable shall be payable to the beneficiary or survivor annuitant of a deceased member of the State Employees' Retirement System if the death of the member is on or before 60 days after the enactment of Act 77. See section 13(c) of Act 77 in the appendix to this title for special provisions relating to applicability of provisions relating to termination of annuities.

1994 Amendment. Act 29 amended the entire section, effective January 1, 1995, as to subsec. (a), 60 days as to subsec. (a.1) and July 1, 1994, as to subsecs. (b) and (c). See section 24 of Act 29 in the appendix to this title for special provisions relating to effective date and funding of accrued liability.

Applicability of Provisions. Section 4(2) of Act 31 of 1974 provided that the provisions of section 5706(b), relating to the calculation of annuities of annuitants who return to State service and subsequently retire, shall not apply to former annuitants who are active members of the system on the effective date of the act.

Cross References. Section 5706 is referred to in sections 5301, 5303, 5902, 5906 of this title.