ENROLLED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 227
(Senators Foster, Deem, Hunter and Plymale, original sponsors)
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[Passed March 8, 2008; in effect ninety days from passage.]
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AN ACT to amend and reenact §18-7A-3, §18-7A-13, §18-7A-14,
§18-7A-28c and §18-7A-34 of the Code of West Virginia, 1931,
as amended, all relating to the State Teachers' Retirement
System; defining terms; clarifying when membership ceases in
the State Teachers' Retirement System; providing for
correction of errors; permitting rollovers of any dollar
amount; and permitting subsequent loans to members.
Be it enacted by the Legislature of West Virginia:
That §18-7A-3, §18-7A-13, §18-7A-14, §18-7A-28c and §18-7A-34
of the Code of West Virginia, 1931, as amended, be amended and
reenacted, all to read as follows:
ARTICLE 7A. STATE TEACHERS' RETIREMENT SYSTEM.
§18-7A-3. Definitions.
As used in this article, unless the context clearly requires
a different meaning:
(1) "Accumulated contributions" means all deposits and all
deductions from the gross salary of a contributor plus regular
interest.
(2) "Accumulated net benefit" means the aggregate amount of
all benefits paid to or on behalf of a retired member.
(3) "Annuities" means the annual retirement payments for life
granted beneficiaries in accordance with this article.
(4) "Average final salary" means the average of the five
highest fiscal year salaries earned as a member within the last
fifteen fiscal years of total service credit, including military
service as provided in this article, or if total service is less
than fifteen years, the average annual salary for the period on
which contributions were made.
(5) "Beneficiary" means the recipient of annuity payments made
under the retirement system.
(6) "Contributor" means a member of the retirement system who
has an account in the Teachers' Retirement System Fund.
(7) "Deposit" means a voluntary payment to his or her account
by a member.
(8) "Employer" means the agency of and within the state which
has employed or employs a member.
(9) "Employer error" means an inadvertent omission,
misrepresentation or violation of relevant provisions of the West
Virginia Code or of the West Virginia Code of State Rules or the relevant provisions of both the West Virginia Code and the West
Virginia Code of State Rules by the participating public employer
that has resulted in an underpayment or overpayment of required
contributions. A deliberate act contrary to the provisions of this
section by a participating public employer does not constitute
employer error.
(10) "Employment term" means employment for at least ten
months, a month being defined as twenty employment days.
(11) "Gross salary" means the fixed annual or periodic cash
wages paid by a participating public employer to a member for
performing duties for the participating public employer for which
the member was hired. Gross salary also includes retroactive
payments made to a member to correct a clerical error, or made
pursuant to a court order or final order of an administrative
agency charged with enforcing federal or state law pertaining to
the member's rights to employment or wages, with all retroactive
salary payments to be allocated to and considered paid in the
periods in which the work was or would have been done. Gross
salary does not include lump sum payments for bonuses, early
retirement incentives, severance pay or any other fringe benefit of
any kind including, but not limited to, transportation allowances,
automobiles or automobile allowances, or lump sum payments for
unused, accrued leave of any type or character.
(12) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it has been amended.
(13) "Member" means any person who has accumulated
contributions standing to his or her credit in the Teachers'
Retirement System.
(14) "Members of the administrative staff of the public
schools" means deans of instruction, deans of men, deans of women
and financial and administrative secretaries.
(15) "Members of the extension staff of the public schools"
means every agricultural agent, boys' and girls' club agent and
every member of the agricultural extension staff whose work is not
primarily stenographic, clerical or secretarial.
(16) "New entrant" means a teacher who is not a present
teacher.
(17) "Nonteaching member" means any person, except a teacher
member, who is regularly employed for full-time service by: (a) Any
county board of education; (b) the State Board of Education; or (c)
the Higher Education Policy Commission, the West Virginia Council
for Community and Technical College Education or a governing board,
as defined in section two, article one, chapter eighteen-b of this
code:
Provided, That any person whose employment with the Higher
Education Policy Commission, the West Virginia Council for
Community and Technical College Education or a governing board
commences on or after the first day of July, one thousand nine
hundred ninety-one, is not considered a nonteaching member.
(18) "Plan year" means the twelve-month period commencing on
the first day of July and ending the following thirtieth day of
June of any designated year.
(19) "Present member" means a present teacher who is a member
of the retirement system.
(20) "Present teacher" means any person who was a teacher
within the thirty-five years beginning the first day of July, one
thousand nine hundred thirty-four, and whose membership in the
retirement system is currently active.
(21) "Prior service" means all service as a teacher completed
prior to the first day of July, one thousand nine hundred
forty-one, and all service of a present member who was employed as
a teacher, and did not contribute to a retirement account because
he or she was legally ineligible for membership during the service.
(22) "Public schools" means all publicly supported schools,
including colleges and universities in this state.
(23) "Refund beneficiary" means the estate of a deceased
contributor or a person he or she has nominated as beneficiary of
his or her contributions by written designation duly executed and
filed with the retirement board.
(24) "Refund interest" means interest compounded, according to
the formula established in legislative rules, series seven of the
Consolidated Public Retirement Board, 162 CSR 7.
(25) "Regular interest" means interest at four percent
compounded annually, or a higher earnable rate if set forth in the
formula established in legislative rules, series seven of the
Consolidated Public Retirement Board, 162 CSR 7.
(26) "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.
(27)"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 and one-half years; or (b) the
calendar year in which the member retires or ceases covered
employment under the system after having attained the age of
seventy and one-half years.
(28) "Retirement system" means the State Teachers' Retirement
System established by this article.
(29) "Teacher member" 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) members of the research, extension, administrative
or library staffs of the public schools; (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; (h) employees of the State Board of Education who are
performing services of an educational nature; (i) any person
employed in a nonteaching capacity by the State Board of Education,
any county board of education, the State Department of Education or
the Teachers' Retirement Board, if that person was formerly
employed as a teacher in the public schools; (j) all classroom
teachers, principals and educational administrators in schools
under the supervision of the Division of Corrections, the Division
of Health or the Division of Human Services; and (k) an employee of
the State Board of School Finance, if that person was formerly
employed as a teacher in the public schools; and (l) any person
designated as a 21st Century Learner Fellow pursuant to section
eleven, article three, chapter eighteen-a of this code who elects
to remain a member of the Teachers' Retirement System provided in
this article.
(30) "Total service" means all service as a teacher while a
member of the retirement system since last becoming a member and,
in addition thereto, credit for prior service, if any.
Age in excess of seventy years shall be considered to be
seventy years.
§18-7A-13. Membership in retirement system; cessation of
membership; reinstatement of withdrawn service.
The membership of the retirement system shall consist of the
following:
(a) New entrants, whose membership in the system is compulsory
upon employment as teachers and nonteachers.
(b) The membership of the retirement system shall not include
any person who is an active member of or who has been retired by
the West Virginia Public Employees Retirement System, the Judges'
Retirement System, or the retirement system of the West Virginia
State Police or the supplemental retirement system as provided in
section four-a, article twenty-three of this chapter. The
membership of any person in the retirement system ceases:
(1) Upon the withdrawal of accumulated contributions after the
cessation of service; or (2) upon the effective retirement date; or
(3) at death.
(c) Any former member of the retirement system who has
withdrawn accumulated contributions but subsequently reenters the
retirement system may repay to the retirement fund the amount
withdrawn, plus interest at a rate set by the board, compounded
annually from the date of withdrawal to the date of repayment:
Provided, That no repayment may be made until the former member has
completed two years of contributory service after reentry; and the
member shall be accorded all the rights to prior service and
experience as were held at the time of withdrawal of the
accumulated contributions:
Provided, however, That no withdrawn service may be reinstated that has been transferred to another
retirement system from which the member is currently or will in the
future draw benefits based on the same service. The interest paid
shall be deposited in the reserve fund.
(d) No member is eligible for prior service credit unless he
or she is eligible for prior service pension, as prescribed by
section twenty-two of this article; however, a new entrant who
becomes a present teacher as provided in this subdivision shall be
considered eligible for prior service pension upon retirement.
(e) Any individual who is a leased employee is not eligible to
participate in the system. For purposes of this system, 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. If a question
arises regarding the status of an individual as a leased employee,
the board has final power to decide the question.
§18-7A-14. Contributions by members; contributions by employers;
correction of errors.
(a) At the end of each month, every member of the retirement
system shall contribute six percent of that member's monthly gross
salary to the retirement board:
Provided, That any member employed
by a state institution of higher education shall contribute on the
member's full earnable compensation, unless otherwise provided in
section fourteen-a of this article. The sums are due the Teachers' Retirement System at the end of each calendar month in arrears and
shall be paid not later than fifteen days following the end of the
calendar month. Each remittance shall be accompanied by a detailed
summary of the sums withheld from the compensation of each member
for that month on forms, either paper or electronic, provided by
the Teachers' Retirement System for that purpose.
(b) Annually, the contributions of each member shall be
credited to the member's account in the Teachers' Retirement System
Fund. The contributions shall be deducted from the salaries of the
members as prescribed in this section, and every member shall be
considered to have given consent to the deductions. No deductions,
however, shall be made from the earnable compensation of any member
who retired because of age or service, and then resumed service
unless as provided in section thirteen-a of this article.
(c) The aggregate of employer contributions, due and payable
under this article, shall equal annually the total deductions from
the gross salary of members required by this section. Beginning on
the first day of July, one thousand nine hundred ninety-nine, and
thereafter, the rate shall be fifteen percent:
Provided, That the
rate shall be seven and one-half percent for any individual who
becomes a member of the Teachers' Retirement System for the first
time on or after the first day of July, two thousand five, or any
individual who becomes a member of the Teachers' Retirement System
as a result of the merger contemplated in article seven-c of this chapter.
(d) Payment by an employer to a member of the sum specified in
the employment contract minus the amount of the employee's
deductions shall be considered to be a full discharge of the
employer's contractual obligation as to earnable compensation.
(e) Each contributor shall file with the retirement board or
with the employer to be forwarded to the retirement board an
enrollment form showing the contributor's date of birth and other
data needed by the retirement board.
(f) If any change or employer error in the records of any
participating public employer or the retirement system results in
any person receiving from the system more or less than he or she
would have been entitled to receive had the records been correct,
the board shall correct the error and, as far as is practicable,
shall adjust the payment of the benefit in a manner that the
actuarial equivalent of the benefit to which the person was
correctly entitled is paid. Any employer error resulting in an
underpayment to the retirement system may be corrected by the
employee remitting the required employee contribution and the
participating public employer remitting the required employer
contribution. Interest shall accumulate in accordance with
Legislative Rule Retirement Board Reinstatement Interest 162 CSR 7,
and any accumulating interest owed on the employee and employer
contributions resulting from the employer error are the responsibility of the participating public employer. The
participating public employer may remit total payment and the
employee reimburse the participating public employer through
payroll deduction over a period equivalent to the time period
during which the employer error occurred.
§18-7A-28c. Direct rollovers.
(a) This section applies to distributions made on or after the
first day of January, one thousand nine hundred ninety-three.
Notwithstanding any provision of this article to the contrary that
would otherwise limit a distributee's election under this system,
a distributee may elect, at the time and in the manner prescribed
by the board, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified
by the distributee in a direct rollover. For purposes of this
section, the following definitions apply:
(1) "Eligible rollover distribution" means any distribution of
all or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include any
of the following: (i) Any distribution that is one of a series of
substantially equal periodic payments not less frequently than
annually made for the life or life expectancy of the distributee or
the joint lives or the joint life expectancies of the distributee
and the distributee's designated beneficiary, or for a specified
period of ten years or more; (ii) any distribution to the extent the distribution is required under Section 401(a)(9) of the
Internal Revenue Code; (iii) the portion of any distribution that
is not includable in gross income determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities; and (iv) any hardship distribution described in Section
401(k)(2)(B)(i)(iv) of the Internal Revenue Code. For
distributions after the thirty-first day of December, two thousand
one, a portion of a distribution shall not fail to be an eligible
rollover distribution merely because the portion consists of after-
tax employee contributions which are not includable in gross
income. However, this portion may be paid only to an individual
retirement account or annuity described in Section 408(a) or (b) of
the Internal Revenue Code, or to a qualified defined contribution
plan described in Section 401(a) or 403(a) of the Internal Revenue
Code that agrees to separately account for amounts transferred,
including separately accounting for the portion of the distribution
which is includable in gross income and the portion of the
distribution which is not includable.
(2) "Eligible retirement plan" means an individual retirement
account described in Section 408(a) of the Internal Revenue Code,
an individual retirement annuity described in Section 408(b) of the
Internal Revenue Code, an annuity plan described in Section 403(a)
of the Internal Revenue Code, or a qualified plan described in
Section 401(a) of the Internal Revenue Code, that accepts the distributee's eligible rollover distribution:
Provided, That in the
case of an eligible rollover distribution to the surviving spouse,
an eligible retirement plan is an individual retirement account or
individual retirement annuity. For distributions after the
thirty-first day of December, two thousand one, an eligible
retirement plan also means an annuity contract described in Section
403(b) of the Internal Revenue Code and an eligible plan under
Section 457(b) of the Internal Revenue Code which is maintained by
a state, political subdivision of a state, or any agency or
instrumentality of a state or political subdivision of a state and
which agrees to separately account for amounts transferred into the
plan from this system.
(3) "Distributee" means an employee or former employee. In
addition, the employee's or former employee's surviving spouse and
the employee's or former employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Internal Revenue Code, as
applicable to governmental plans, are distributees with regard to
the interest of the spouse or former spouse.
(4) "Direct rollover" means a payment by the system to the
eligible retirement plan.
(b) Nothing in this section may be construed as permitting
rollovers into this system or any other retirement system
administered by the board.
§18-7A-34. Loans to members.
(a) An actively contributing member of the retirement system
upon written application may borrow from his or her individual
account in the Teachers' Retirement System Fund, subject to these
restrictions:
(1) Loans shall be made in multiples of ten dollars, the
minimal loan being one hundred dollars and the maximum being eight
thousand dollars:
Provided, That the maximum amount of any loan
when added to the outstanding balance of all other loans shall not
exceed the lesser of the following: (A) Eight thousand dollars
reduced by the excess (if any) of the highest outstanding balance
of loans during the one-year period ending on the day before the
date on which the loan is made, over the outstanding balance of
loans to the member on the date on which the loan is made; or (B)
fifty percent of the member's contributions to his or her
individual account in the Teachers' Accumulations Fund:
Provided,
however, That if the total amount of loaned money outstanding
exceeds forty million dollars, the maximum shall not exceed three
thousand dollars until the retirement board determines that loans
outstanding have been reduced to an extent that additional loan
amounts are again authorized.
(2) Interest charged on the amount of the loan shall be six
percent per annum, or a higher rate set by the board:
Provided,
That interest charged shall be commercially reasonable in accordance with the provisions of Section 72(p)(2) of the Internal
Revenue Code, and the federal regulations issued thereunder. If
repayable in installments, the interest shall not exceed the annual
rate established upon the principal amount of the loan, for the
entire period of the loan, and the charge shall be added to the
principal amount of the loan. The minimal interest charge shall be
for six months.
(3) A member is not eligible for more than one outstanding
loan at any time. Upon full payment of a loan, a member may apply
for a subsequent loan after sixty days beginning the first day of
the month following receipt of final payment.
(4) If a refund is payable to the borrower or his or her
beneficiary before he or she repays the loan with interest, the
balance due with interest to date shall be deducted from the
refund.
(5) From his or her monthly salary as a teacher or a
nonteacher the member shall pay the loan and interest by deductions
which will pay the loan and interest in substantially level
payments in not more than sixty nor less than six months. Upon
notice of loan granted and payment due, the employer is responsible
for making the salary deductions and reporting them to the
retirement board. At the option of the board, loan deductions may
be collected as prescribed in this section for the collection of
members' contribution, or may be collected through issuance of a warrant by the employer. If the borrower is no longer employed as
a teacher or nonteaching member, the borrower shall make monthly
loan payments directly to the Consolidated Public Retirement Board
and the board must accept the payments.
(6) The entire unpaid balance of any loan, and interest due
thereon, shall, at the option of the board, become due and payable
without further notice or demand upon the occurrence with respect
to the borrowing member of any of the following events of default:
(A) Any payment of principal and accrued interest on a loan remains
unpaid after it becomes due and payable under the terms of the loan
or after the grace period established in the discretion of the
board; (B) the borrowing member attempts to make an assignment for
the benefit of creditors of his or her refund or benefit under the
retirement system; or (C) any other event of default set forth in
rules promulgated by the board in accordance with the authority
granted pursuant to section one, article ten-d, chapter five of
this code:
Provided, That any refund or offset of an unpaid loan
balance shall be made only at the time the member is entitled to
receive a distribution under the retirement system.
(7) Loans shall be evidenced by such form of obligations and
shall be made upon any additional terms as to default, prepayment,
security, and otherwise determined by the retirement board.
(8) Notwithstanding anything in this section to the contrary,
the loan program authorized by this section shall comply with the provisions of Section 72(p)(2) and Section 401 of the Internal
Revenue Code, and the federal regulations issued thereunder, and
accordingly, the retirement board is authorized to: (A) Apply and
construe the provisions of this section and administer the plan
loan program in such a manner as to comply with the provisions of
Section 72(p)(2) and Section 401 of the Internal Revenue Code and
the federal regulations issued thereunder; (B) adopt plan loan
policies or procedures consistent with these federal law
provisions; and (C) take the actions it considers necessary or
appropriate to administer the plan loan program created under this
section in accordance with these federal law provisions. The
retirement board may also in connection with the plan loan program
take any actions that may at any time be required by the Internal
Revenue Service regarding compliance with the requirements of
Section 72(p)(2) or Section 401 of the Internal Revenue Code, and
the federal regulations issued thereunder, notwithstanding any
provision in this article to the contrary.
(b) Notwithstanding anything in this article to the contrary,
the loan program authorized by this section shall not be available
to any teacher or nonteacher who becomes a member of the Teachers'
Retirement System on or after the first day of July, two thousand
five:
Provided, That a member is eligible for loan under subsection
(c), section six, article seven-c of this chapter to pay all or
part of the one and one-half percent contribution for service in the defined contribution plan.