Current through Register Vol. 54, No.43, October 26, 2024
Section 271.387 - Trust fund; management-municipalities and municipal authorities(a) The trustee shall invest and reinvest the principal and income of the trust fund and keep the fund invested as a single fund, without distinction between principal and income. In investing, reinvesting, exchanging, selling and otherwise managing the trust fund, the trustee shall discharge its duties solely in the interest of third-party claimants and with care to avoid loss or diminution of the trust fund capital. The trustee shall manage the trust fund with that degree of judgment, skill and care under the circumstances then prevailing which persons of prudence, discretion and intelligence, who are familiar with these matters, exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of funds, considering the probable income to be derived therefrom as well as the probable safety of their capital.(b) For the purposes of investing or reinvesting the moneys in the trust fund, the trustee is authorized to: (1) Purchase direct obligations of the United States Government, the Commonwealth, its municipalities, municipal authorities or school districts, the Pennsylvania Turnpike Commission, the General State Authority and the State Public School Building Authority.(2) Invest in time or demand deposits of the trustee, to the extent insured by an agency of the Federal or a State government.(3) Purchase shares in an investment company registered under the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1-80 a-64).(4) Purchase of prime commercial paper. Commercial paper is defined as unsecured promissory notes issued at a discount from par or on an interest bearing bond by an industrial, common carrier, public utility, finance company, real estate investment trust, commercial bank holding company or corporations whose credit shall have been approved by Moody's Investors Service Incorporated or their successors. The trustee may not purchase commercial paper under this provision unless the commercial paper proposed to be purchased is rated Prime-1 or Prime 1-LOC or Prime-2 by Moody's Investors Service Incorporated, A-1 or A-2 by Standard and Poor's Corporation or Fitch 1 by Fitch Investors Services, Incorporated.(5) Hold cash awaiting investment or distribution for a reasonable period of time without liability for the payment of interest thereon.(6) Transfer assets of the trust fund to a common, commingled or collective trust fund which may be created by the trustee.(c) The trustee shall annually, at least 30 days prior to the anniversary date of the establishment of the trust, furnish to the operator and the Department a statement confirming the value of the trust fund. The trustee shall value securities in the trust fund at the lesser of market or face value as of no more than 60 days prior to the anniversary date of the establishment of the trust fund. If the results of the valuation require additional capital to be paid into the trust fund so that the principal amount of $2 million may be maintained, the trustee shall require the operator, in writing, to make the payment by the anniversary date of the establishment of the trust fund. The trustee shall notify the Department, in writing, at the expiration of 30 days after the anniversary date, if no payments are received from the operator.(d) The trustee may resign or the operator may replace the trustee, but the resignation or replacement may not be effective until the successor trustee has been appointed and the successor trustee has been approved by the Department and has accepted the appointment. In the event of resignation of the trustee and the operator or the Department failed to act, the trustee may apply to a court of competent jurisdiction for instructions.(e) An operator may from time to time request and receive, on the written order of the Department, funds of the trust fund which are in excess of the principal amount required to be maintained in the trust fund. The Department will, in evaluating the request, consider the claims experience of the operator, the earnings and disbursement experience of the trust fund, losses and the need to maintain in the trust fund an amount in excess of the principal amount in order to meet third-party claims. The trustee may not disburse funds under this section without the written authorization of the Department. Nothing in this subsection relieves the operator of its duty to maintain at all times in the trust fund the principal amount required by this section.(f) Under subsection (c), if the trustee notifies the Department that the operator has failed to make payments the trustee requested to maintain the principal amount of the trust fund, the Department will notify the operator that it will pay the trustee the amount required to maintain the principal amount of the trust fund within 15 days of the notification. If the operator fails or refuses to pay at the expiration of the 15 day period, the Department will proceed to collect the payment due in any manner provided by law.The provisions of this §271.387 adopted September 13, 1991, effective 9/14/1991, 21 Pa.B. 4179. This section cited in 25 Pa. Code § 271.382 (relating to forms of financial assurances-municipalities and municipal authorities).