Engrossed Version
Senate Bill 264 History
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ENGROSSED
Senate Bill No. 264
(By Senators Foster and Dempsey)
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[Introduced February 23, 2005; referred to the Committee
on Pensions; and then to the Committee on Finance.]
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A BILL to amend and reenact §18-7B-2, §18-7B-7, §18-7B-9,
§18-7B-11, §18-7B-12a and §18-7B-16 of the Code of West
Virginia, 1931, as amended; and to amend said code by adding
thereto a new section, designated §18-7B-20, all relating to
amending certain definitions; changing permanent total
disability requirements for new hires, clarifying
participation requirement; providing employer deadlines for
deposit of contributions; establishing when payments are to be
made into and out of the suspension account; adding the
Internal Revenue Service provisions concerning incidental
death benefits; clarifying that all years of employee service
will be counted for vesting purposes; prohibiting involuntary
cash-outs effective the thirtieth day of June, two thousand
five; and technical corrections.
Be it enacted by the Legislature of West Virginia:
That §18-7B-2, §18-7B-7, §18-7B-9, §18-7B-11, §18-7B-12a and §18-7B-16 of the Code of West Virginia, 1931, as amended, be
amended and reenacted; and that said code be amended by adding
thereto a new section, designated §18-7B-20, all to read as
follows:
ARTICLE 7B. TEACHERS DEFINED CONTRIBUTION RETIREMENT SYSTEM.
§18-7B-2. Definitions.
As used in this article, unless the context clearly require
a different meaning:
(1) "Defined contribution system" or "system" means the
Teachers Defined Contribution Retirement System created and
established by this article;
(2) "Existing retirement system" means the State Teachers
Retirement System established in article seven-a of this chapter;
(3) "Existing employer" means any employer who employed or
employs a member of the existing retirement system;
(4) "Consolidated board" or "board" means the Consolidated
Public Retirement Board created and established pursuant to article
ten-d, chapter five of this code;
(5) "Member" or "employee" means the following persons, if
regularly employed for full-time service: (A) Any person employed
for instructional service in the public schools of West Virginia;
(B) principals; (C) public school librarians; (D) superintendents
of schools and assistant county superintendents of schools; (E) any
county school attendance director holding a West Virginia teacher's certificate; (F) the executive secretary of the retirement board;
(g) (F) members of the research, extension, administrative or
library staffs of the public schools; (h) (G) the State
Superintendent of Schools, heads and assistant heads of the
divisions under his or her supervision or any other employee under
the State Superintendent performing services of an educational
nature; (i) (H) employees of the State Board of Education who are
performing services of an educational nature; (j) (I) any person
employed in a nonteaching capacity by the State Board of Education,
any county board of education or the State Department of Education
or the teachers retirement board, if that person was formerly
employed as a teacher in the public schools; (k) (J) all classroom
teachers, principals and educational administrators in schools
under the supervision of the Division of Corrections and the
Department of Health and Human Resources; (l) (K) any person who is
regularly employed for full-time service by any county board of
education or the State Board of Education or the teachers
retirement board; and (m) (L) the administrative staff of the
public schools including deans of instruction, deans of men and
deans of women, and financial and administrative secretaries;
(6) "Regularly employed for full-time service" means
employment in a regular position or job throughout the employment
term regardless of the number of hours worked or the method of pay;
(7) "Year of employment service" means employment for at least ten months, a month being defined as twenty employment days:
Provided, That no more than one year of service may be accumulated
in any twelve-month period;
(8) "Employer" means the agency of and within the state which
has employed or employs a member;
(9) "Compensation" means the full compensation actually
received by members for service whether or not a part of the
compensation is received from other funds, federal or otherwise,
than those provided by the state or its subdivisions;
(10) "Public schools" means all publicly supported schools,
including normal schools, colleges and universities in this state;
(11) "Member contribution" means an amount reduced from the
employee's regular pay periods and deposited into the member's
individual annuity account within the defined contribution
retirement system;
(12) "Employer contribution" means an amount deposited into
the member's individual annuity account on a periodic basis
coinciding with the employee's regular pay period by an employer
from its own funds;
(13) "Annuity account" or "annuity" means an account
established for each member to record the deposit of member
contributions and employer contributions and interest, dividends or
other accumulations credited on behalf of the member;
(14) "Retirement" means a member's withdrawal from the active employment of a participating employer and completion of all
conditions precedent to retirement;
(15) "Permanent, total disability" means a mental or physical
incapacity requiring the absence from employment service for at
least six months: Provided, That the incapacity is shown by an
examination by a physician or physicians selected by the board:
Provided, however, That for employees hired on or after the first
day of July, two thousand five, permanent, total disability means
an inability to engage in substantial gainful activity by reason of
any medically determinable physical or mental impairment that can
be expected to result in death, or has lasted or can be expected to
last for a continuous period of not less than twelve months and the
incapacity is so severe that the member is likely to be permanently
unable to perform the duties of the position the member occupied
immediately prior to his or her disabling injury or illness.
(16) "Plan year" means the twelve-month period commencing on
the first day of July of any designated year and ending on the
following thirtieth day of June;
(17) "Required beginning date" means the first day of April of
the calendar year following the later of: (a) The calendar year in
which the member attains age seventy-one and one-half; or (b) the
calendar year in which the member retires or otherwise ceases
employment with a participating employer; and
(18) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it has been amended.
§18-7B-7. Participation in Teachers Defined Contribution
Retirement System; limiting participation in
existing teachers retirement system.
(a) Beginning the first day of July, one thousand nine hundred
ninety-one, and except as provided for in this section, the
Teachers Defined Contribution Retirement System shall be the single
retirement program for all new employees whose employment commences
on or after that date and all new employees shall be required to
participate. No additional new employees except as may be provided
for in this section may be admitted to the existing teachers
retirement system.
(b) Members of the existing teachers retirement system whose
employment continues beyond the first day of July, one thousand
nine hundred ninety-one, and those whose employment was terminated
after the thirtieth day of June, one thousand nine hundred
ninety-one, under a reduction in force are not affected by
subsection (a) of this section and shall continue to contribute to
and participate in the existing teachers retirement system without
a change in plan provisions or benefits.
(c) Any person who was previously a member of the teachers
retirement system and who left participating employment before the
creation of the defined contribution system on the first day of
July, one thousand nine hundred ninety-one, and who later returned to participating employment after the effective date of this
section has the right to elect to return to the existing teachers
retirement system or to elect to participate in the defined
contribution system. The election shall be made at the time of his
or her reemployment, is irrevocable and shall be made upon forms
approved by and filed with the West Virginia Consolidated Public
Retirement Board.
(d) Any person who was, prior to the first day of July, one
thousand nine hundred ninety-one, a member of the existing teachers
retirement system who left participating employment before the
creation of the Teachers' Defined Contribution Retirement System on
the first day of July, one thousand nine hundred ninety-one, and
who later returned to participating employment after that date and
who was precluded from returning to the existing teachers
retirement system as a result of prior provisions of this section
may elect, pursuant to the provisions of this section, readmission
to the existing teachers retirement system: Provided, That persons
who are eligible to, and who make the election to, terminate their
participation in the defined contribution system and to return to
participation in the existing teachers retirement system as
provided for in this section shall make the election, on a form
approved by and filed with the West Virginia Consolidated Public
Retirement Board on or before the thirtieth day of June, two
thousand two: Provided, however, That as a condition of the right of readmission to the existing teachers retirement system, persons
a person making the election provided for in this section whose
defined contribution account had not, prior to such election, been
divided by a qualified domestic relations order shall pay an
additional contribution to the existing teachers retirement system
equal to one and one-half percent of his or her annual gross
compensation earned for each year during which he or she
participated in the defined contribution system and shall consent
and agree to the transfer of his or her total account balance in
the defined contribution system as of the most recent plan
valuation immediately preceding his or her transfer to the existing
teachers retirement system. For persons a person
making the
election provided for in this section whose defined contribution
account had, prior to such the
election, previously been divided by
a qualified domestic relations order, the cost to such
person to
transfer to the existing teachers retirement system shall be
actuarially determined by the Consolidated Public Retirement Board.
Upon verification of that person's eligibility to return to
participation in the existing teachers retirement system and the
tender and transfer of funds as provided for in this subsection,
persons a person
making this election shall receive service credit
for the time the member participated in the defined contribution
system as if his or her participation had been in the existing
teachers retirement system: Provided further, That the right to terminate participation in the defined contribution system and to
resume participation in the existing teachers retirement system as
provided for in this section is irrevocable and shall not apply to
any person who, while members a member of the teachers retirement
system, voluntarily elected to terminate his or her membership in
the teachers retirement system and to become a participant in the
defined contribution system pursuant to section eight of this
article.
(e) Any employee whose employment with an employer was
suspended or terminated while he or she served as an officer with
a statewide professional teaching association is eligible for
readmission to the existing retirement system in which he or she
was a member.
(f) An employee whose employment with an employer or an
existing employer is suspended as a result of an approved leave of
absence, approved maternity or paternity break in service or any
other approved break in service authorized by the Board is eligible
for readmission to the existing retirement system in which he or
she was a member.
(g) In all cases in which a question exists as to the right of
an employee to readmission to membership in the existing teachers
retirement system, the Consolidated Public Retirement Board shall
decide the question.
(h) Any individual who is not a "member" or "employee" as defined by section two of this article and any individual who is a
leased employee is not eligible to participate in the Teachers
Defined Contribution Retirement System. For purposes of this
section, a "leased" employee means any individual who performs
services as an independent contractor or pursuant to an agreement
with an employee leasing organization or other similar
organization. In all cases in which a question exists as to
whether an individual is eligible for membership in this system,
the Consolidated Public Retirement Board shall decide the question.
§18-7B-9. Members' contributions; annuity account established.
(a) Each employee who is a member of the defined contribution
system shall contribute four and one-half percent of his or her
gross compensation by salary reduction. Such The salary reductions
shall be made by the employer at the normal payroll intervals and
shall be paid to the Teachers Defined Contribution Retirement
System within fifteen days of the end of the pay period. These
payments shall be remitted within five working days to the private
pension, insurance, annuity, mutual fund or other qualified company
or companies designated by the Board to administer the day-to-day
operations of the system.
(b) All member contributions shall be immediately deposited to
an account or accounts established in the name of the member and
held in trust for the benefit of the member. An account agreement
shall be issued to each member setting forth the terms and conditions under which contributions are received and the
investment and retirement options available to the member. The
Board shall promulgate by the thirtieth day of June, one thousand
nine hundred ninety-one propose for legislative approval, pursuant
to section six of this article, rules defining the minimum
requirements for the investment and retirement options to be
provided to the members.
The consolidated public employees retirement board shall study
the feasibility of employees making personal contributions to the
defined contribution system in addition to those required by this
section and the impact of the United States Internal Revenue Code
of one thousand nine hundred eighty-six, as amended, upon such
contributions. The results of said study and recommendations for
legislation to authorize such additional payments shall be
presented to the committee on pensions and retirement of each house
of the Legislature on or before the first day of October, one
thousand nine hundred ninety-six.
(c) Such rules Legislative rule, to the extent not
inconsistent with the applicable provisions of the Internal Revenue
Code of the United States, shall provide for varied retirement
options including, but not limited to:
(1) Lump sum or periodic payment distributions;
(2) Joint and survivor annuities;
(3) Other annuity forms in the discretion of the Board;(4) Variable annuities which gradually increase monthly
retirement payments: Provided, That said increased payments are
funded solely by the existing current value of the member's account
at the time the member's retirement payments commencement commence
and not, to any extent, in a manner which would require additional
employer or employee contributions to any member's account after
retirement or after the cessation of employment; and
(5) The instances in which, if any, distributions or loans can
be made to members from their annuity account balances prior to
having attained the age of fifty-five.
§18-7B-11. Termination of membership.
(a) Any member whose employment with a participating employer
terminates after the completion of six complete years of employment
service shall be eligible to terminate his or her annuity account
and receive a distribution from the member's annuity account, in an
amount equal to the member's contribution plus one third of the
employer contributions and any earnings thereon. Any member whose
employment with a participating employer terminates after the
completion of nine complete years of employment service shall be
eligible to terminate his or her annuity account and receive a
distribution from the member's annuity account, in an amount equal
to the member's contribution plus two thirds of the employer's
contributions and any earnings thereon. Any member whose
employment with a participating employer terminates after the completion of twelve complete years of employment service shall be
eligible to terminate his or her annuity account and receive a
distribution of all funds contributed and accumulated in his or her
annuity account. Any member whose employment with a participating
employer terminates prior to the completion of six complete years
of employment service shall be eligible to terminate his or her
annuity account and receive a distribution from the member's
annuity account, in an amount equal to the member's contribution
plus any earnings thereon: Provided, That on the death or
permanent, total disability of any member, that member shall be
eligible to terminate his or her annuity account and receive all
funds contributed to or accumulated in his or her annuity account.
(b) (1) Upon termination of employment, regardless of whether
the member has taken a distribution of all or a portion of his or
her vested account, the The remaining balance, if any, in the
member's employer account after the distribution that is not vested
shall be remitted and paid into a suspension account, hereby
created, to be administered by the Board. The Board shall
promulgate propose for legislative approval rules regarding the
distribution of any balance in the special account created by this
section: Provided, That any funds in the account shall be used
solely for the purpose of reducing employer contributions in future
years.
(2) Any account balances remitted to the suspension account herein shall be maintained by the Board in said the suspension
account in the name of the terminated employee for a period of five
years following initial remittance to the suspension account the
member's termination of employment. For each said terminated
employee at the culmination of the aforesaid five-year period, the
Board shall certify in writing to each contributing employer the
amount of the account balances balance plus earnings thereon
attributable to each separate contributing employers employer's
previously terminated employees' accounts which have employee's
account which has been irrevocably forfeited due to the elapse of
a five-year period since termination pursuant to section sixteen of
this article.
(c)
Upon certification to the several contributing employers
of the aggregate account balances plus earnings thereon which have
been irrevocably forfeited pursuant to this section, the several
contributing employers shall be permitted in the next succeeding
fiscal year or years to reduce their total aggregate contribution
requirements pursuant to section seventeen of this article for the
then current fiscal year by an amount equal to the aggregate
amounts irrevocably forfeited and certified as such to each
contributing employer: Provided, That should the participating
employer no longer be contributing to the defined contribution
system, any funds in the account shall be paid directly to the
employer.
(d) Upon the utilization use of the amounts irrevocably
forfeited to any contributing employer as a reduction in the then
current fiscal year contribution obligation and upon notification
provided by the several contributing employers to the Board of
their intention to utilize use irrevocably forfeited amounts, the
Board shall direct the distribution of said the irrevocably
forfeited amounts from the suspension account to be deposited on
behalf of the contributing employer to the member annuity accounts
of its then current employees pursuant to section seventeen of this
article: Provided, That notwithstanding any provision of this
article to the contrary, when a member is or has been elected to
serve as a member of the Legislature and the proper discharge of
his or her duties of public office require requires that member to
be absent from his or her teaching, nonteaching or administrative
duties, the time served in discharge of his or her duties of the
legislative office are credited as time served for purposes of
computing service credit, regardless when this time was served:
Provided, however, That the Board may not require any additional
contributions from that member in order for the Board to credit him
or her with the contributing service credit earned while
discharging official legislative duties: Provided further, That
nothing herein may be construed to relieve the employer from making
the employer contribution at the member's regular salary rate or
rate of pay from that employer on the contributing service credit earned while the member is discharging his or her official
legislative duties. These employer payments shall commence as of
the first day of July, two thousand three: And provided further,
That any member to which the provisions of this subsection apply
may elect to pay to the Board an amount equal to what his or her
contribution would have been for those periods of time he or she
was serving in the Legislature
.
§18-7B-12a. Federal minimum required distributions.
The requirements of this section apply to any distribution of
a member's or beneficiary's interest and take precedence over any
inconsistent provisions of this defined contribution system. This
section applies to plan years beginning after the thirty-first day
of December, one thousand nine hundred eighty-six. Notwithstanding
anything in this system to the contrary, the payment of benefits
under this article shall be determined and made in accordance with
Section 401 (a) (9) of the Internal Revenue Code and the
regulations thereunder, including, without limitation, the
incidental death benefit provisions of Section 401 (a) (9)(G) of
the Internal Revenue Code and the regulations thereunder. For this
purpose, the following provisions apply:
(a) The payment of benefits under the defined contribution
system to any member shall be distributed to him or her not later
than the required beginning date, or be distributed to him or her
commencing not later than the required beginning date, in accordance with regulations prescribed under Section 401 (a) (9) of
the Internal Revenue Code, over the life of the member or over the
lives of the member and his or her beneficiary or over a period not
extending beyond the life expectancy of the member and his or her
beneficiary.
(b) If a member dies after distribution to him or her has
commenced pursuant to this section but before his or her entire
interest in the system has been distributed, then the remaining
portion of that interest shall be distributed at least as rapidly
as under the method of distribution being used at the date of his
or her death.
(c) If a member dies before distribution to him or her has
commenced, then his or her entire interest in the system shall be
distributed by the thirty-first day of December of the calendar
year containing the fifth anniversary of the member's death, except
as follows:
(1) If a member's interest is payable to a beneficiary,
distributions may be made over the life of that beneficiary or over
a period certain not greater than the life expectancy of the
beneficiary commencing on or before the thirty-first day of
December of the calendar year immediately following the calendar
year in which the participant died; or
(2) If the member's beneficiary is the surviving spouse, the
date distributions are required to begin shall be no later than the later of:
(A) The thirty-first day of December of the calendar year in
which the member would have attained age seventy and one-half; or
(B) The earlier of: (i) The thirty-first day of December of
the calendar year in which the member died; or (ii) the thirty-
first day of December of the calendar year following the calendar
year in which the spouse died.
(d) For purposes of this section, any amount paid to a child
of a member will be treated as if it had been paid to the surviving
spouse of the member if such remaining amount becomes payable to
the surviving spouse when the child reaches the age of majority.
§18-7B-16. Years of employment service.
(a) A member of the defined contribution system who terminates
employment with a participating employer and does not remove any
funds from his or her annuity vested employee and employer account,
or who removes the funds and repays them within five years after
termination, and becomes reemployed with a participating employer
within five years shall retain his or her previous years of
employment service for purposes of the provisions of section eleven
of this article. does not forfeit any amounts placed into the
suspension account pursuant to section eleven of this article and
they shall be returned to his or her employer account.
(b) All years of employment service shall be counted for
vesting purposes under section eleven of this article.
§18-7B-20. Prohibition of involuntary cash-outs.
Notwithstanding any provision of this section or of any
legislative rule contained in series three, involuntary cash-outs
to members may not be made after the thirtieth day of June, two
thousand five.