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Senate Bill 4010 History
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ENROLLED
Senate Bill No. 4010
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Passed September 13, 2005; in effect from passage.]
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AN ACT to amend and reenact §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5,
§18-7C-6, §18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11,
§18-7C-12 and §18-7C-13 of the Code of West Virginia, 1931, as
amended, all relating to the proposed merger of the Teachers'
Defined Contribution Retirement System with the State Teachers
Retirement System; amending certain definitions; removing the
requirement that the state deposit money to cover any
additional unfunded liability before the merger; clarifying
credit receipt and asset calculations for transfer; clarifying
when certain contributions shall be paid; clarifying loan
eligibility; establishing date on which money must be in a
member's account to be eligible to vote in the merger
election; requiring payment of contribution for full service
credit; adding the Board's ability to do all things necessary
to maintain the current retirement system during any
transition period; clarifying provisions regarding validity of election result; clarifying that the member may select either
periodic payments or lump sum distribution of the member's
total vested account at the date of merger if certain
conditions are met; and technical corrections.
Be it enacted by the Legislature of West Virginia:
That §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6,
§18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12 and
§18-7C-13 of the Code of West Virginia, 1931, as amended, be
amended and reenacted, all to read as follows:
ARTICLE 7C. MERGER OF TEACHERS' DEFINED CONTRIBUTION RETIREMENT
SYSTEM WITH STATE TEACHERS RETIREMENT SYSTEM.
§18-7C-2. Legislative findings and purpose.
(a) The Legislature declares that the State of West Virginia
and its citizens have always believed in a strong public education
system. The Constitution of this state mandates a thorough and
efficient public education system. The Legislature notes that the
quality of our state's education system is dependent, inter alia,
upon the motivation and quality of its teachers and educational
service personnel.
(b) The Legislature finds and declares that the State of West
Virginia is privileged to be the home of some of the best teachers
and education service personnel in this nation and that our
teachers and education service personnel are dedicated and hard-
working individuals. The Legislature further finds and declares
that our teachers and education service personnel deserve a retirement program whereby they know in advance what their
retirement benefit will be, a defined benefit retirement program
where our teachers and service personnel will not have to bear the
risk of investment performance to receive their full retirement
benefit. The Legislature notes that uncertainty exists in the
investment markets, especially in the post-September eleventh era,
and that placing this risk and uncertainty upon the state in the
form of a defined benefit plan will protect and ensure a meaningful
retirement benefit for our teachers and educational service
personnel.
(c) The Legislature declares that it is in the best interests
of the teachers and public education in this state, and conducive
to the fiscal solvency of the State Teachers Retirement System,
that the Teachers' Defined Contribution Retirement System be merged
with the State Teachers Retirement System.
(d) The Legislature also finds that a fiscally sound
retirement program with an ascertainable benefit aids in the
retention and recruitment of teachers and school service personnel
and that the provisions of this article are designed to accomplish
the goals set forth in this section.
(e) The Legislature has studied this matter diligently and in
making the determination to merge the two plans has availed itself
of an actuarial study of the proposed merger by the actuary of the
Consolidated Public Retirement Board and has engaged the service of
two independent actuaries.
(f) The Legislature further finds and declares that members of
a defined contribution system who must bear the attendant market
risk and performance of their investments are truly being provided
a significant and greater benefit where the defined contribution
system is replaced with a defined benefit system in which the
employer bears the risk of market fluctuations and investment
performance, especially where those members decide through an
election process whether to trade the defined contribution system
for a defined benefit system.
§18-7C-3. Definitions.
As used in this article, unless the context clearly requires
a different meaning:
(1) "Assets" means all member contributions and employer
contributions made on the member's behalf to the Defined
Contribution Retirement System and earnings thereon, less any
applicable fees as approved by the board: Provided, That if a
member has withdrawn or cashed out any amounts, the amounts must
have been repaid.
(2) "Board" means the Consolidated Public Retirement Board
established in article ten-d, chapter five of this code, and its
employees.
(3) "Date of merger" means, in the event of a positive vote on
the merger, the first day of July, two thousand six.
(4) "Defined Contribution Retirement System" means the
Teachers' Defined Contribution Retirement System established in article seven-b of this chapter.
(5) "Salary" means:
(A) For a member contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year, the
actual salary earned for the two thousand five fiscal year divided
by the employment service earned in the two thousand five fiscal
year.
(B) For a member not contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year, the
contract salary on the date of rehire.
(6)"State Teachers Retirement System" means the State Teachers
Retirement System established in article seven-a of this chapter.
§18-7C-4. Merger.
(a) Subject to the provisions of subsection (b) of this
section, on the first day of July, two thousand six, the Defined
Contribution Retirement System shall be merged and consolidated
with the State Teachers Retirement System pursuant to the
provisions of this article.
(b) If a majority of the eligible voting members of the
Teachers' Defined Contribution Retirement System do not elect in
favor of the merger, then all of the provisions of this article are
void and of no force and effect and the Defined Contribution
Retirement System continues as the retirement system for all
members in that system as of the thirtieth day of June, two
thousand six.
§18-7C-5. Notice, education, record-keeping requirements.
(a) Commencing not later than the first day of August, two
thousand five, the Consolidated Public Retirement Board shall begin
an educational program with respect to the merger of the Defined
Contribution Retirement System with the State Teachers Retirement
System.
(1) This educational program shall address, at a minimum:
(A) The law providing for the merger;
(B) The mechanics of the merger;
(C) The election process;
(D) Relevant dates and time periods;
(E) The benefits, potential advantages and potential
disadvantages if members fail or refuse to approve the merger and
thereby elect to remain in the Defined Contribution Retirement
System;
(F) The benefits, potential advantages and potential
disadvantages of becoming a member of the State Teachers Retirement
System;
(G) Potential state and federal tax implications in general
attendant to the various options available to the members; and
(H) Any other pertinent information considered relevant by the
board.
(2) The board shall disseminate the information through:
(A) Its website;
(B) Computer programs;
(C) Written or electronic materials, or both, delivered to
each member;
(D) Classes or seminars, if in the best judgment of the board
classes or seminars are required to provide the necessary education
for a member to make an informed decision with respect to the
election;
(E) At the discretion of the board, through a program of
individual counseling which is optional on the part of the member;
and
(F) Through any other educational program considered necessary
by the board.
(b) The board shall provide each member with a copy of the
written or electronic educational materials and with a copy of the
notice of the election.
(1) The notice shall provide full and appropriate disclosure
regarding the merger and the election process, including the date
of the election.
(2) The board also shall cause notice of the election to be
published in at least ten newspapers of general circulation in this
state. This notice shall be:
(A) By Class III legal advertisement published in accordance
with the provisions of article three, chapter fifty-nine of this
code; and
(B) Published not later than thirty days prior to the
beginning of the election period and not sooner than sixty days prior to the beginning of the election period pursuant to section
eight of this article.
(c) It is the responsibility of each member of the Defined
Contribution Retirement System to keep the board informed of his or
her current address. A member who does not is considered to have
waived his or her right to receive any information from the board
with respect to the purposes of this article.
(d) Once the board has complied with the provisions of this
section, each member of the Defined Contribution Retirement System
is considered to have actual notice of the election and all matters
pertinent to the election.
§18-7C-6. Conversion of assets from Defined Contribution
Retirement System to State Teachers Retirement
System; contributions; loans.
(a) If a majority of members voting elect to merge the Defined
Contribution Retirement System into the State Teachers Retirement
System:
(1) The consolidation and merger is governed by the provisions
of this article;
(2) The Defined Contribution Retirement System does not exist
after the thirtieth day of June, two thousand six; and
(3) All members of that system become members of the State
Teachers Retirement System as provided in this article.
(b) Following the election, if the vote is in favor of the
merger, the board shall transfer all properties held in the Defined Contribution Retirement System's Trust Fund to the State Teachers
Retirement System.
(c) To receive full credit in the State Teachers Retirement
System for service in the Defined Contribution Retirement System
for which assets are transferred, members shall pay into the State
Teachers Retirement System a one and one-half percent contribution.
This contribution shall be calculated as one and one-half percent
of the member's estimated total earnings for which assets are
transferred. Except as otherwise provided in this section, each
member shall pay the contribution required no later than the
thirtieth day of June, two thousand seven.
(1) For a member contributing to the Defined Contribution
Retirement System at any time during the two thousand five fiscal
year and commencing membership in the State Teachers Retirement
System on the first day of July, two thousand six:
(A) The estimated total earnings shall be calculated based on
the member's salary and the member's age nearest birthday on the
thirtieth day of June, two thousand five;
(B) This calculation shall apply both an annual backward
salary scale from that date for prior years' salaries and a forward
salary scale for the salary for the two thousand six fiscal year.
(2) For a member not contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year:
(A) The estimated total earnings shall be calculated based on
the member's salary and the member's age nearest birthday on the member's date of rehire.
(B) This calculation shall apply a backward salary scale from
the member's date of rehire for prior years' salaries.
(3) The calculations in subdivisions (1) and (2) of this
subsection are based upon the salary scale assumption applied in
the West Virginia Teachers Retirement System Actuarial Valuation as
of the first day of July, two thousand four, prepared for the
Consolidated Public Retirement Board. This salary scale shall be
applied regardless of breaks in service.
(d) The board shall make available to each member a loan for
the purpose of paying all or part of the one and one-half percent
contribution required in this section. The loan shall be offered
in accordance with the provisions of section thirty-four, article
seven-a of this chapter.
(1) Notwithstanding any provision of this code, rule or policy
of the board to the contrary, the interest rate on any such loan
may not exceed seven and one-half percent per annum. The amount
total borrowed may not exceed twelve thousand dollars.
(2) In the event a loan made pursuant to this section is used
to pay the one and one-half percent, the board shall make any
necessary adjustments at the time the loan is made.
(3) Subject to the provisions of subdivision (4) of this
section, the board shall make this loan available for members until
the thirtieth day of June, two thousand seven.
(4) Upon returning to employment, a member who has left employment but not withdrawn his or her funds shall pay the one and
one-half percent contribution within one year of being rehired.
The member is eligible for one year following the date of rehire to
obtain a loan for paying the contribution
.
(e) The board shall develop and institute a payroll deduction
program for repayment of the loan established in this section.
(f) If the merger and consolidation is duly elected:
(1) As of the first day of July, two thousand six, the
members' contribution rate becomes six percent of his or her salary
or wages; and
(2) All members who make a contribution into the State
Teachers Retirement System on or after the first day of July, two
thousand six, are governed by the provisions of article seven-a of
this chapter, subject to the provisions of this article.
(g) Subject to the provisions of subdivision (1) of this
subsection, if a member has withdrawn or cashed out part of his or
her assets, that member will not receive credit for those moneys
cashed out or withdrawn. The board shall make a determination as
to the amount of credit a member loses based on the periods of time
and the amounts he or she has withdrawn or cashed out, which shall
be expressed as a loss of service credit.
(1) A member may repay those amounts he or she previously
cashed out or withdrew, along with interest as determined by the
board, and receive the same credit as if the withdrawal or cash-out
never occurred. Such a member also shall pay the one and one-half percent contribution to receive full credit for the cashed-out or
withdrawn amounts being repaid to the State Teachers Retirement
System.
(2) The loan provided in this section is not available to
members to repay previously cashed out or withdrawn moneys.
(3) If the repayment occurs five or more years following the
cash-out or withdrawal, the member also shall repay any forfeited
employer contribution account balance along with interest
determined by the board.
(h) Notwithstanding any provision of subsection (g) to the
contrary, if a member has cashed out or withdrawn any of his or her
assets after the last day of June, two thousand one, and that
member chooses to repurchase that service after the thirtieth day
of June, two thousand six, the member shall repay the previously
distributed amounts and any applicable interest to the State
Teachers Retirement System.
(i) Any service in the State Teachers Retirement System a
member has before the date of the merger is not affected by the
provisions of this article.
§18-7C-7. Service credit in State Teachers Retirement System
following merger; adjustments.
(a) Any member transferring all of his or her assets from the
Defined Contribution Retirement System to the State Teachers
Retirement System pursuant to the provisions of this article and
who has not made any withdrawals or cash-outs from his or her assets is entitled to service credit in the State Teachers
Retirement System for each year or part of a year, as governed by
the provisions of article seven-a of this chapter, the member
worked and contributed to the Defined Contribution Retirement
System.
(b) Any member who has made withdrawals or cash outs will
receive service credit based upon the amounts transferred. The
board shall make the appropriate adjustment to the service credit
the member will receive.
(c) Any member's Defined Contribution Retirement System
service credit will be reduced by twenty-five percent if the member
does not pay the one and one-half percent contribution required by
this article upon transfer to the State Teachers Retirement System.
§18-7C-8. Election; board may contract for professional services.
(a) The board shall arrange for and hold an election for the
members of the Defined Contribution Retirement System who are
eligible to vote, pursuant to the provisions of subsection (d) of
this section, on the issue of merging and consolidating the Defined
Contribution Retirement System into the State Teachers Retirement
System.
(b) If a majority of the eligible voters casting ballots in
the election votes in the affirmative on the issue:
(1) All members of the Defined Contribution Retirement System
will transfer, or have transferred, all assets held by them or on
their behalf in the Defined Contribution Retirement System to the State Teachers Retirement System;
(2) On the date of the merger each member becomes a member and
is entitled to the benefits of the State Teachers Retirement
System; and
(3) Each member is governed by the provisions of the State
Teachers Retirement System subject to the provisions of this
article.
(c) If fewer than one half of the members eligible to vote of
the Defined Contribution Plan cast ballots in the election, the
election is not valid and binding.
(d) Any person who has one dollar or more in assets in the
Defined Contribution Retirement System on the last day of December,
two thousand five, may and is eligible to vote in the election.
(e) Notwithstanding any other provision of this code to the
contrary, the board may do all things necessary and convenient to
maintain the Defined Contribution Retirement System
and the State
Teachers Retirement System
during the transitional period and may
retain the services of the professionals it considers necessary to
do so. The board may also retain the services of the professionals
it deems necessary to:
(1) Assist in the preparation of educational materials for
members of the Defined Contribution Retirement System who are
eligible to vote on the merger to inform these members of their
options in the election;
(2) Assist in the educational process of the members who are eligible to vote on the merger;
(3) Assist in the election process and the election; and
(4) Ensure compliance with all relevant state and federal
laws.
(f) Due to the time constraints inherent in the merger process
set forth in this article in specific, and due to the nature of the
professional services required by the Consolidated Public
Retirement Board in general, the provisions of article three,
chapter five-a of this code, relating to the Division of Purchasing
of the Department of Administration do not apply to any contracts
for any actuarial services, investment services, legal services or
other professional services authorized under the provisions of this
article.
(g) The election may be held through certified mail or in any
other method the board determines is in the best interest of the
members. Each ballot shall contain the following language, in bold
fifteen-point type: "By casting this ballot I am making an
educated, informed and voluntary choice as to my retirement and the
retirement system of which I wish to be a member. I am also
certifying that I understand the consequences of my vote in this
election." Each ballot shall be signed by the member voting. The
board shall retain the ballots in a permanent file. Any unsigned
ballot is void.
(h) The election period shall begin not later than the first
day of March, two thousand six. The board shall ascertain the results of the election not later than the last day of March, two
thousand six. The board shall certify the results of the election
to the Governor, the Legislature and the members not later than the
fifth day of April, two thousand six.
(i) The election period terminates and votes may not be cast
or counted after the twelfth day of March, two thousand six, unless
the election is conducted through the United States mail. If
conducted through the mail, any ballot postmarked later than the
twelfth day of March, two thousand six, is void and may not be
counted.
(j) The board shall take all necessary steps to see that the
merger does not affect the qualified status with the Internal
Revenue Service of either retirement plan.
§18-7C-9. Election considered final.
(a) The election is considered final and each member, whether
he or she voted or failed to vote, is bound by the results of the
election. Every member is considered to have made an informed,
educated, knowing and voluntary decision and choice with respect to
the election. Those members who failed or refused to vote are also
considered to have made an informed, educated, knowing and
voluntary decision and choice with respect to the election and
voting and are bound by the results of the election as if he or she
had voted in the election.
(b) Only one election may be held pursuant to the provisions
of this article.
§18-7C-10. Qualified domestic relations orders.
Any member having a qualified domestic relations order against
his or her defined contribution account is allowed to repurchase
service in the State Teachers Retirement System. The member shall
repay any moneys previously distributed to the alternate payee
along with the interest as set by the board. The member shall
repay by the last day of June, two thousand twelve. The provisions
of this section are void and of no effect if the members fail to
elect to merge and consolidate the Defined Contribution Retirement
System with the State Teachers Retirement System.
§18-7C-11. Vesting.
Any member who works one hour or more after the date of merger
occurs is subject to the vesting schedule set forth in article
seven-a of this chapter: Provided, That if a member is vested under
the Defined Contribution Retirement System and his or her last
contribution was not made to the State Teachers Retirement System,
that member is subject to the vesting schedule set forth in article
seven-b of this chapter.
§18-7C-12. Minimum guarantees.
(a) Any member of the Defined Contribution Retirement System
who has made a contribution to the State Teachers Retirement System
after the date of merger is guaranteed a minimum benefit equal to
his or her member contributions plus the vested portion of employer
contributions made on his or her behalf to the Defined Contribution
Retirement System as of the thirtieth day of June, two thousand six, plus any earnings thereon, as stated by the board or the
board's professional contractor.
(b) A member of the Defined Contribution Retirement System who
has made contributions to the State Teachers Retirement System
after the thirtieth day of June, two thousand six, where the
Defined Contribution Retirement System has been merged into the
State Teachers Retirement System, upon eligibility to receive a
distribution under article seven-a of this chapter, shall have at
a minimum the following three options:
(1) The right to receive an annuity from the State Teachers
Retirement System based upon the provisions of article seven-a of
this chapter;
(2) The right to withdraw from the State Teachers Retirement
System and receive his or her member accumulated contributions in
the State Teachers Retirement System, plus regular interest
thereon, as set forth in article seven-a of this chapter; or
(3) The right to withdraw and receive his or her member
contributions plus the vested portion of employer contributions
made on his or her behalf to the Defined Contribution Retirement
System, plus any earnings thereon as of the date of the merger, as
determined by the board or its professional third-party benefits
administrator pursuant to the vesting provisions of section twelve
of this article. This amount may be distributed in a lump sum or
in periodic payments as elected by the member.
(c) Any member of the Defined Contribution Retirement System who makes no contribution to the State Teachers Retirement System
following approval of the merger and following the date of merger
is guaranteed the receipt of the amount in his or her total vested
account in the Defined Contribution Retirement System on the date
of merger, plus interest thereon, at four percent accruing from the
date of merger. This amount may be distributed in a lump sum or in
periodic payments as elected by the member.
§18-7C-13. Due process and right to appeal.
Any person aggrieved by any determination made by the board
following the election, if the result of the election is in favor
of merger and consolidation, may petition the board and receive an
administrative hearing on the matter in dispute. The
administrative decision may be appealed to a circuit court.
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