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The Pennsylvania Code website reflects the Pennsylvania Code changes effective through 54 Pa.B. 2336 (April 27, 2024).

25 Pa. Code § 271.396. Trust fund management—persons other than municipalities and municipal authorities.

§ 271.396. Trust fund management—persons other than municipalities and municipal authorities.

 (a)  The trustee may 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 judgement, skill and care under the circumstances then prevailing which persons of prudence, discretion and intelligence, who are familiar with such 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 purposes of investing or reinvesting the moneys in the trust fund, the trustee is authorized to do the following:

   (1)  Purchase direct obligations of the United States Government, the Commonwealth, its municipalities, municipal authorities or school districts, the 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—80a-64).

   (4)  Purchase 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)  Purchase repurchase agreements with respect to direct obligation of the United States or its agencies or instrumentalities backed by the full faith and credit of the United States and obligations of an agency or instrumentality of the United States if entered into with a bank, trust company or a broker or dealer—as defined by section 3 of the Securities Exchange Act of 1934 (15 U.S.C.A. §  78c.) The broker or dealer shall be a dealer in government bonds who reports to, trades with, is recognized as a primary dealer by a Federal reserve bank and is a member of the Securities Investors Protection Corporation. Obligations that are the subject of repurchase agreements under this subsection shall meet the following criteria:

     (i)   The obligations that are the subject of the repurchase agreement shall be either delivered to the trustee or supported by a safekeeping receipt issued by a depository satisfactory to the trustee.

     (ii)   The repurchase agreement shall provide that the value of the underlying obligation shall be maintained at a current market value, calculated no less frequently than monthly, of not less than the purchase price of the obligation.

     (iii)   The trustee has been granted a prior perfected security interest in the obligation.

     (iv)   The obligation shall be free and clear of adverse third-party claims.

   (6)  Hold cash awaiting investment or distribution for a reasonable period of time.

   (7)  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 request the operator, in writing, to make 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 will 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. If the trustee resigns and the operator or the Department fails to act, the trustee may apply to a court of competent jurisdiction for instructions.

 (e)  An operator may from time to time request of the Department 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 a 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 to meet third-party claims. The trustee may not disburse funds under this subsection without the written authorization of the Department. Nothing in this subsection relieves the operator of its duty to maintain in the trust fund the principal amount required by this section.

 (f)  Under subsection (d), if the trustee notifies the Department that the operator has failed to make payments as the trustee requested to maintain the principal amount of the trust fund, the Department will notify the operator that it shall 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, and the trustee may, proceed to collect the payment due in a manner provided by law.


   The provisions of this §  271.396 adopted September 13, 1991, effective September 14, 1991, 21 Pa.B. 4179.

Cross References

   This section cited in 25 Pa. Code §  271.391 (relating to forms of financial assurances—persons other than municipalities and municipal authorities).

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