ENGROSSED
COMMITTEE SUBSTITUTE
FOR
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 81
(By Senators Tomblin, Mr. President, and Boley;
By Request of the Executive)
____________
[Originating in the Committee on Finance;
reported February 16, 1996.]
____________
A BILL to repeal sections six, nine, nine-a, nine-b, nine-d, nine-f
and eleven, article six, chapter twelve of the code of West
Virginia, one thousand nine hundred thirty-one, as amended; to
amend and reenact section one, article ten-d, chapter five of
said code; to amend and reenact section thirteen, article one,
chapter twelve of said code; to amend and reenact sections
two, three, five, eight, ten, twelve, thirteen and fifteen,
article six of said chapter; to further amend said article by adding thereto a new section, designated section nine-g; and
to amend chapter forty-four of said code by adding thereto a
new article, designated article six-b, all relating to
transferring the consolidated pension fund and workers'
compensation and pneumoconiosis funds from the board of
investments to the newly created West Virginia trust fund for
the purpose of investment; creation of consolidated retirement
board and its duties; transferring public retirement plans'
employee and employer contributions except defined
contribution and voluntary deferred compensation funds by the
consolidated retirement board; payment for services relating
to banking services and to the pursuit of claims against third
party investment losses; the board of investments; defining
terms; board composition and reappointment of members; powers
of the board; removal of authority to invest public retirement
funds; management of consolidated fund; purchase of loans from
the consolidated public retirement fund; restrictions on
investments; establishment of policy guidelines and setting a
standard of care; removing requirement for a continuous
postaudit; requiring monthly itemized statements; West
Virginia trust fund; how article cited; legislative findings
and purpose and disclaimer of state ownership; workers' compensation and pneumoconiosis funds declared to be trust
funds; defining terms; West Virginia trust fund created; body
corporate; board created; nomination and appointment of
trustees; qualifications, terms of appointment and
compensation; operational, annual and other meetings;
designation of representatives and committees; management and
control of the fund; officers; staff; surety bonds for
trustees; limits on personal liability of trustees and
employees; corporate powers; annual audits; reports and
information to constitutional and legislative officers,
council of finance and administration, and consolidated public
retirement board; statements and reports open for inspection;
fees for service; transfers to the trust; requiring a trust
indenture and setting forth required provisions of the trust
indenture and powers of the trustees; reservation of rights
and powers by the Legislature; setting a standard of care on
investments; and limitations on investments.
Be it enacted by the Legislature of West Virginia:
That sections six, nine, nine-a, nine-b, nine-d, nine-f and
eleven, article six, chapter twelve of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, be repealed; that
section one, article ten-d, chapter five of said code be amended and reenacted; that section thirteen, article one, chapter twelve
of said code be amended and reenacted; that sections two, three,
five, eight, ten, twelve, thirteen and fifteen, article six of said
chapter be amended and reenacted; that said article be further
amended by adding thereto a new section, designated section nine-g;
and that chapter forty-four of said code be amended by adding
thereto a new article, designated article six-b, all to read as
follows:
CHAPTER 5. GENERAL POWERS AND AUTHORITY OF THE
GOVERNOR, SECRETARY OF STATE AND ATTORNEY GENERAL;
BOARD OF PUBLIC WORKS; MISCELLANEOUS AGENCIES,
COMMISSIONS, OFFICES, PROGRAMS, ETC.
ARTICLE 10D. CONSOLIDATED PUBLIC RETIREMENT BOARD.
§5-10D-1. Consolidated public retirement board created;
transition; members; vacancies.
(a) There is hereby created a consolidated public retirement
board to administer all public retirement plans in this state. It
shall administer the public employees' retirement system
established in article ten of this chapter; the teachers retirement
system established in article seven-a, chapter eighteen of this
code; the teachers' defined contribution retirement system created
by article seven-b, chapter eighteen of this code; the death,
disability and retirement fund of the department of public safety created by article two, chapter fifteen of this code; and the
judges' retirement system created under article nine, chapter
fifty-one of this code.
(b) The consolidated public retirement board shall begin
administration of the systems listed in subsection (a) of this
section on the first day of July, one thousand nine hundred
ninety-one:
Provided, That the board shall begin administration of
the teachers' defined contribution retirement system established in
article seven-b, chapter eighteen of this code on the first day of
January, one thousand nine hundred ninety-one. Prior to that date
the existing entities which administer the system shall cooperate
with the board in the orderly transition of all duties,
responsibilities, records and other materials in their possession.
(c) The membership of the consolidated public retirement board
consists of:
(1) The governor or his or her designee;
(2) The state treasurer or his or her designee;
(3) The state auditor or his or her designee;
(4) The secretary of the department of administration or his
or her designee;
(5) Four residents of the state, who are not members,
retirants or beneficiaries of any of the public retirement systems, to be appointed by the governor, with the advice and consent of the
Senate; and
(6) A member, annuitant or retirant of the public employees'
retirement system who is or was a state employee; a member,
annuitant or retirant of the public employees' retirement system
who is not or was not a state employee; a member, annuitant or
retirant of the teachers retirement system; a member, annuitant or
retirant of the department of public safety death, disability and
retirement fund; and a member, annuitant or retirant of the
teachers' defined contribution retirement system, all to be
appointed by the governor, with the advice and consent of the
Senate.
(d) The appointed members of the board shall serve five-year
terms.
Of the members initially appointed, three shall be
appointed for two-year terms; three shall be appointed for three-
year terms; and three shall be appointed for five-year terms.
Thereafter, all members shall serve full five-year terms. A member
appointed pursuant to subdivision (5), subsection (c) of this
section ceases to be a member of the board if he or she ceases to
be a member of the represented system. If a vacancy occurs in the
appointed membership, the governor, within sixty days, shall fill
the vacancy by appointment for the unexpired term. No more than five appointees shall be of the same political party.
(e) The consolidated public retirement board shall have all
the powers, duties, responsibilities and liabilities of the public
employees' retirement system established pursuant to article ten of
this chapter; the teachers retirement system established pursuant
to article seven-a, chapter eighteen of this code; the teachers'
defined contribution system established pursuant to article
seven-b, chapter eighteen of this code; the death, disability and
retirement fund of the department of public safety created pursuant
to article two, chapter fifteen of this code; and the judges'
retirement system created pursuant to article nine, chapter
fifty-one of this code and their appropriate governing boards. The
consolidated public retirement board may
promulgate propose for
promulgation all rules necessary to effectuate its powers, duties
and responsibilities
pursuant to article three, chapter twenty-
nine-a of this code:
Provided, That the board may adopt any or all
of the rules, previously promulgated, of a retirement system which
it administers.
(f) Effective on the first day of July, one thousand nine
hundred ninety-six, the consolidated public retirement board shall,
within two business days of receipt, transfer all funds received by
the consolidated public retirement board for the benefit of the retirement systems within the consolidated pension plan as defined
in section three-c, article six-b, chapter forty-four of this code,
including, but not limited to, all employer and employee
contributions, to the West Virginia trust fund: Provided, That the
employer and employee contributions of the teachers' defined
contribution system, and voluntary deferred compensation funds
invested by the West Virginia consolidated public retirement board
pursuant to section five, article ten-b, of this chapter, shall not
be transferred to the West Virginia trust fund.
(g) The consolidated public retirement board shall be a
trustee for all public retirement plans, except with regard to the
investment of funds: Provided, That the consolidated public
retirement board shall be a trustee with regard to the investments
of the teachers' defined contribution system, and voluntary
deferred compensation funds invested pursuant to section five,
article ten-b, of this chapter.
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.
ARTICLE 1. STATE DEPOSITORIES.
§12-1-13. Payment of banking services and litigation costs for
prior investment losses.
(a) The board of investments is authorized to pay for banking
services, and services ancillary thereto, by either a compensating balance in a
noninterest bearing noninterest-bearing account
maintained at the financial institution providing the services or
with a state warrant as described in section one, article five of
this chapter.
(b) The board of investments is authorized to pay for the
investigation and pursuit of claims against third parties for the
investment losses incurred during the period beginning on the first
day of August, one thousand nine hundred eighty-four, and ending on
the thirty-first day of August, one thousand nine hundred eighty-
nine. The payment may be in the form of a state warrant.
(c) If payment is made by a state warrant, the board of
investments is authorized to establish within the consolidated fund
an investment pool which will generate sufficient income to pay for
all banking service
s provided to the state
and to pay for the
investigation and pursuit of the prior investment loss claims. All
income earned by the investment pool shall be paid into a special
account of the state board of investments to be known as the
banking services account and shall be used solely for the purpose
of paying for all banking services and services ancillary
thereto
to the banking services provided to the state
and for the
investigation and pursuit of the prior investment loss claims.
ARTICLE 6. WEST VIRGINIA STATE BOARD OF INVESTMENTS.
§12-6-2. Definitions.
As used in this article, unless a different meaning clearly
appears from the context:
(1) "Board" means the West Virginia state board of
investments;
(2) "Consolidated fund" means the investment fund managed by
the board and established pursuant to subsection (
b a), section
eight of this article;
(3) "Consolidated pension fund" means the investment fund
managed by the board and established pursuant to subsection (a),
section eight of this article;
(4) "Local government account" means the account within the
consolidated fund established pursuant to subsection (b), section
eight of this article;
(
5)(
3) "Local government funds" means the moneys of a
political subdivision, including policemen's pension and relief
funds, firemen's pension and relief funds and volunteer fire
departments, transferred to the board for deposit
in the local
government account;
(6) "Pension funds" means and includes the worker's
compensation fund; the state teachers retirement system funds; the
death, disability and retirement fund for members of the department of public safety; the public employees' retirement system funds;
the judges retirement fund; and such other retirement or pension
funds and systems as may be hereafter established on behalf of
public employees of the state or of its political subdivisions and
administered by the state; or pension funds established on behalf
of public employees of its political subdivisions and administered
by the political subdivisions;
(
7)(
4) "Political subdivision" means and includes a county,
municipality or any agency, authority, board,
county board of
education, commission or instrumentality of a county or
municipality and regional councils created pursuant to the
provisions of section five, article twenty-five, chapter eight of
this code;
(
8)(
5) "Securities" means all bonds, notes, debentures or
other evidences of indebtedness
, and corporate stock;
(9) "State account" means the account within the consolidated
fund established pursuant to subsection (b), section eight of this
article; and
(
10)(
6) "State funds" means all moneys of the state which may
be lawfully invested except
(a) the pension fund (as defined in
subdivision (6) of this section) and (b) the "school fund"
established by section four, article XII of the state constitution
; and
(7) "West Virginia trust fund" means the entity created by the
provisions of article six-b, chapter forty-four of this code.
§12-6-3. State board of investments continued; body corporate;
members; appointment of certain members; qualifications and
term of office.
(a) The state board of investments is hereby continued as a
body corporate of the state authorized to exercise all of the
powers and functions granted to it pursuant to this article. There
shall be seven members of the state board of investments. The
governor, or his
or her designee, state treasurer and state auditor
shall be
the members of the board. There shall be four members
appointed by the governor:
Provided, That no more than three such
appointed members may belong to the same political party.
(b) The members appointed by the governor shall be appointed
from a list of twelve persons submitted jointly by the governor,
the state treasurer and the state auditor. No more than two names
submitted by the governor may be appointed as members to the board.
Of the members appointed by the governor, two shall be members of
the financial community, one shall be a certified public accountant
and one shall be an attorney with experience in finance and
investment matters. Appointments shall be made by the governor with the advice and consent of the Senate.
(c) Appointed members shall serve for a term of six years and
may be reappointed at the expiration of their terms. In the event
of a vacancy among appointed members, an appointment shall be made
to fill the unexpired term.
Upon the expiration of terms on the
thirtieth day of April, two thousand one, the governor shall
appoint or reappoint one member to a three-year term; one to a
four-year term; one to a five-year term; and one to a six -year
term. Thereafter, all terms shall be six years.
(d) Appointed members of the board shall serve without
compensation, but
shall be are entitled to their reasonable and
necessary expenses actually incurred in discharging their duties
under this article.
§12-6-5. Powers of the board.
The board may exercise all powers necessary or appropriate to
carry out and effectuate its corporate purposes. The board may:
(1) Adopt and use a common seal and alter the same at
pleasure;
(2) Sue and be sued;
(3) Enter into contracts and execute and deliver instruments;
(4) Acquire (by purchase, gift or otherwise), hold, use and
dispose of real and personal property, deeds, mortgages and other instruments;
(5) Promulgate and enforce bylaws and rules for the management
and conduct of its affairs;
(6) Retain and employ legal, accounting, financial and
investment advisors and consultants;
(7) Acquire (by purchase, gift or otherwise), hold, exchange,
pledge, lend and sell or otherwise dispose of securities and invest
funds in interest earning deposits;
(8) Maintain accounts with banks, securities dealers and
financial institutions both within and outside this state;
(9) Engage in financial transactions whereby securities are
purchased by the board under an agreement providing for the resale
of
such the securities to the original seller at a stated price;
(10) Engage in financial transactions whereby securities held
by the board are sold under an agreement providing for the
repurchase of
such the securities by the board at a stated price;
(11) Consolidate and manage moneys, securities and other
assets of the
pension funds and other funds and accounts of the
state and the moneys of political subdivisions which may be made
available to it under the provisions of this article;
(12) Enter into agreements with political subdivisions of the
state whereby moneys of
such the political subdivisions are invested on their behalf by the board;
(13) Charge and collect administrative fees from political
subdivisions for its services;
(14) Exercise all powers generally granted to and exercised by
the holders of investment securities with respect to management
thereof of the investment securities;
(15) Contract with one or more banking institutions in or
outside the state for the custody, safekeeping and management of
securities held by the board; and
(16) Develop and implement a centralized receipts processing
center.
§12-6-8. Investment funds established; management thereof.
(a) There is hereby established a special investment fund to
be managed by the board and designated as the "consolidated pension
fund" for the common investment of pension funds. All
administrators, custodians or trustees of the various pension funds
are hereby authorized to make moneys available to the board for
investment. Pension funds received by the board shall be deposited
in the consolidated pension fund. Any security deposited by the
various pension funds shall be valued at the prevailing market
price on the day of deposit.
(
b)(
a) There is hereby
also established a special investment fund to be managed by the board and designated as the "consolidated
fund".
The consolidated fund shall consist of a special account
for the common investment of state funds designated as the "state
account" and a special account for the common investment of local
government funds designated as the "local government account."
Moneys in both accounts may be combined for the common investment
of the consolidated fund on an equitable basis.
(
c)(
b) Each board, commission, department, official or agency
charged with the administration of state funds is hereby authorized
to make moneys available to the board for investment.
State funds
received by the board shall be deposited in the state account.
(
d)(
c) Each political subdivision of this
State state through
its treasurer or equivalent financial officer is hereby authorized
to enter into agreements with the board for the investment of
moneys of
such the political subdivision
: Provided, That it first
be determined by the treasurer for such political subdivision that
the available interest rate offered by an acceptable depository in
such treasurer's county be less than the interest rate, net of
administrative fees referred to in article six, chapter twelve of
this code, offered it through the state board of investments. Local
government funds received by the board pursuant to such agreements
shall be deposited in the local government account. Any political subdivision may enter into an agreement with any state agency from
which it receives funds to allow
such the funds to be transferred
to their investment account with the state board of investments.
(e) Each county board of education through its treasurer is
hereby authorized to enter into agreements with the board of
investments for the investment of moneys of such county board of
education: Provided, however, That it first be determined by the
treasurer for such county board of education that the available
interest rate offered by an acceptable depository in such
treasurer's county be less than the interest rate, net of
administrative fees referred to in article six, chapter twelve of
this code, offered it through the state board of investments.
(
f)(
d) Moneys held in the various funds and accounts
administered by the board shall be invested as permitted in section
nine twelve of this article and subject to the restrictions
contained in section ten of this article. The board shall maintain
records of the deposits and withdrawals of each participant and the
performance of the various funds and accounts. The board shall
also establish such rules and regulations for the administration of
the various funds and accounts established by this section as it
shall deem considers necessary for the administration
thereof of
the funds and accounts, including, but not limited to: (1) The specification of minimum amounts which may be deposited in any fund
or account and minimum periods of time for which deposits will be
retained;
and (2) creation of reserves for losses
; (3) provision
for payment of expenses from earnings; and (4) distribution of the
earnings in excess of such expenses or allocation of losses to the
several participants in an equitable manner:
Provided, That in the
event any moneys made available to the board may not lawfully be
combined for investment or deposited in the consolidated funds
established by this section, the board may create special accounts
and may administer and invest
such those moneys in accordance with
the restrictions specially applicable
thereto to those moneys.
(g) The board shall at all times maintain and have available
for public inspection a report containing monthly balances in the
treasury, which said balances shall include, but not be limited to,
the following:
(a) Total local government account balance.
(b) General revenue surplus balance.
(c) General revenue surplus appropriation account balance.
(d) State general revenue reappropriated account balance.
(e) State general revenue current account balance.
(f) Total state account balance.
(g) Total general revenue.
(h) Total of state account balance which is invested longer
than overnight.
(i) Total of state account balance which is invested
overnight.
The board shall not be required to make such information
available until January 1, 1984: Provided, That the board shall
have such reports available on a daily basis for each day the
Legislature is in session.
§12-6-9g. Transfer of loans to consolidated fund.
The Legislature hereby finds and declares that with the
establishment of the West Virginia trust fund as provided in
article six-b, chapter forty-four of this code, and the transfer of
the retirement systems' and workers' compensation and
pneumoconiosis funds' investments to the West Virginia trust fund,
those mortgage and economic development loans which the board
determines cannot be actively traded and which are currently held
by the retirement systems and workers' compensation and
pneumoconiosis funds should remain as investments of the state.
Effective on the thirtieth day of June, one thousand nine
hundred ninety-six, the board of investments is hereby directed to
purchase the workers' compensation loan pool, public employees'
retirement system loan pool and teachers retirement loan pool. The amount to be paid shall be the loans current amortized cost value
plus any accrued interest as of the purchase date. The purchased
loans shall then be recorded in the consolidated fund's state loan
pool.
§12-6-10. Restrictions on investments.
Notwithstanding any other provision in this code, Moneys
moneys on deposit in the consolidated fund
and the consolidated
pension fund shall be invested as permitted by section
nine twelve
of this article subject to the restrictions and conditions
contained in this section:
(1) At no time shall more than seventy-five percent of the
portfolio of either consolidated fund be invested in
securities
described in subdivision (g) of said section nine any bond, note,
debenture, commercial paper or other evidence of indebtedness of
any private corporation or association. Any such security, at the
time of its acquisition, shall be investment grade paper;
(2) At no time shall more than twenty percent of the portfolio
of either fund be invested in securities described in said
subdivision (g) which mature within one year from the date of
issuance thereof;
(
3)(
2) At no time shall more than
three five percent of the
portfolio of either consolidated fund be invested in securities issued by a single private corporation or association;
and
(3) At no time shall less than fifteen percent of the
consolidated fund be invested in any direct obligation of or
obligation guaranteed as to the payment of both principal and
interest by the United States of America.
(4) At no time shall more than twenty percent of the portfolio
of the consolidated pension fund be invested in securities
described in subdivision (j) of section nine of this article; and
(5) At no time may any of the consolidated fund be invested in
securities described in subdivision (j) of section nine of this
article.
For the purpose of making the computations required by this
section, securities shall be valued in accordance with generally
accepted accounting principles.
§12-6-12. Investment policy;
duties of board and state treasurer;
standard of care.
The board shall establish policy guidelines for the investment
of moneys on deposit in each of the funds managed by the board
based on the needs of the participants in the various funds:
Provided, That the board shall review
such the investments at least
every three months and may require the purchase or sale of any
investments. In order to effectuate its investment policies, the board
may shall require from each participant a schedule, on an
annual or more frequent basis, of anticipated deposits and
withdrawals.
The office of the state treasurer shall administer the
investment of each of such funds subject at all times to the policy
guidelines established by the board.
Any investment made under this article shall be made with the
exercise of that degree of judgment and care, under circumstances
then prevailing, which men of experience, prudence, discretion and
intelligence exercise in the management of their own affairs, not
for speculation but for investment, considering the probable safety
of their capital as well as the probable income to be derived.
Any investments made under this article shall be made with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. Fiduciaries
shall diversify plan investments so as to minimize the risk of
large losses, unless under the circumstances it is clearly prudent
not to do so.
§12-6-13. Board as sole agency for investments; exceptions.
All duties vested by law in any agency, commission, official or other board of the state relating to the investment of moneys,
and the acquisition, sale, exchange or disposal of securities or
any other investment are hereby transferred to the board
:
Provided, That the West Virginia trust fund,
and the board shall be
is the sole
agency entity for the investment of
the consolidated
pension
plan fund
s and state funds in accordance with article six-
b, chapter forty-four of this code:
Provided, however, That
neither this section nor any other section of this article
shall
apply applies to the "board of the school fund" and the "school
fund" established by section 4, article XII of the state
constitution:
Provided however further, That funds under the
control of the municipal bond commission may, in the discretion of
the commission, be made available to the board for investment
to be
invested by the commission as provided in article three, chapter
thirteen of this code.
§12-6-15. Audits.
There shall be a continuous postaudit conducted by the
legislative auditor of the investment transactions of the board,
and a copy thereof for the preceding calendar year shall be
furnished to each member of the Legislature on or before the first
day of February of each year. The board shall
further cause to be
conducted
a quarterly internal audit, by the state treasurer's staff using generally accepted government auditing standards, of
all investment transactions of the board and an annual external
audit, by a nationally recognized accounting firm in conjunction
with the annual federal audit, of all investment transactions of
the board:
Provided, That the board shall on a monthly basis
provide to each
political subdivision, state agency and any other
entity investing moneys in the consolidated fund
or consolidated
pension fund an itemized
account statement reflecting the portfolio
value of the investments of each said political subdivision, state
agency and any other entity of the agency's or the entity's account
in the consolidated fund.
or consolidated pension fund The board
shall further provide a monthly statement reflecting the interest
earned by each said political subdivision, state agency or other
investing entity and the method by which said interest has been
calculated. The statement shall include the beginning balance,
contributions, withdrawals, income distributed, change in value and
ending balance.
CHAPTER 44. ADMINISTRATION OF ESTATES AND TRUSTS.
ARTICLE 6B. WEST VIRGINIA TRUST FUND.
§44-6B-1. How article cited.
This article shall be known and may be cited as the "West
Virginia Trust Fund Act".
§44-6B-2. Legislative findings and purpose.
(a) The Legislature hereby finds and declares that all the
public employees covered by the public employees' retirement
system, the teachers retirement system, the West Virginia state
police retirement system, the death disability and retirement fund
of the department of public safety and the judges' retirement
system should benefit from a prudent and conscientious staff of
financial professionals dedicated to the administration, investment
and management of those employees' and employer's financial
contributions and that an independent trust fund board and staff
should be immune to changing political climates and should provide
a stable and continuous source of professional financial investment
and management.
(b) The Legislature hereby finds and declares further that
prudent investment provides diversification and beneficial return
not only for public employees but for all citizens of the state and
that in order to have access to this sound fiscal policy, public
employee and employer contributions are declared to be an
irrevocable trust, available for no use or purpose other than for
the benefit of those public employees.
(c) The Legislature hereby finds and declares further that the
state and other public employers that made or make contributions to the West Virginia irrevocable trust fund have no proprietary
interest in the fund or in the contributions made to the fund by
them and that the state and other public employers disclaim any
right to reclaim those contributions and waive any right of
reclamation they may have in the fund:
Provided, That the
provisions of this subsection do not prohibit alterations or
refunds of employer contributions in the event of erroneous
payment.
(d) The Legislature hereby finds and declares further that the
workers' compensation funds and coalworkers' pneumoconiosis fund
are trust funds to be used exclusively for those workers, miners
and their beneficiaries who have sacrificed their health in the
performance of their jobs, and further finds that the assets
available to pay awarded benefits should be prudently invested so
that awards may be paid.
(e) The Legislature hereby finds and declares further that a
not-for-profit, nonstock corporate structure with appropriate
governance shall be the best means of assuring prudent financial
management of this nonstate trust fund under rapidly changing
market conditions and regulations.
(f) The Legislature hereby finds and declares further that in
accomplishing this purpose, the West Virginia trust fund, hereafter created and established by section four of this article, is acting
in all respects for the benefit of the state's public employees and
ultimately the citizens of the state, and the West Virginia trust
fund is empowered by this article to act as trustee for the
irrevocable trust created by this article, and the interests of
citizens of the state shall be best met by carrying out the
provisions of this trust.
(g) The Legislature hereby finds and declares further that the
standard of care and prudence applied to trustees and the conduct
of the affairs of the irrevocable trust created by this article is
intended to be that applied to the administration of private
pension plans as described in federal statutory law and by the
common law of the United States.
§44-6B-3. Definitions.
As used in this article unless a different meaning clearly
appears from the context:
(a) "Beneficiaries" means those individuals entitled to
benefits from the consolidated pension plan;
(b) "Board" means the governing body for the West Virginia
trust fund;
(c) "Consolidated pension plan" means the public employees'
retirement system established in article ten, chapter five of this code, the teachers retirement system established in article seven-
a, chapter eighteen of this code, the West Virginia state police
retirement system established in article two-a, chapter fifteen of
this code, the death, disability and retirement fund of the
department of public safety established in article two, chapter
fifteen of this code, the judges' retirement system established in
article nine, chapter fifty-one of this code, the workers'
compensation fund established in article three, chapter twenty-
three and the coalworkers' pneumoconiosis plan established in
article four-b, chapter twenty-three of this code;
(d) "Participant plan" means any component system, plan or
fund of the consolidated pension plan within the definition set
forth in subdivision (c) of this section;
(e) "Political subdivision" means and includes a county,
municipality or any agency, authority, board, county board of
education, commission or instrumentality of a county or
municipality and regional councils created pursuant to the
provisions of section five, article twenty-five, chapter eight of
this code;
(f) "State" means the state of West Virginia;
(g) "Trust fund" means the West Virginia trust fund; and
(h) "Trustee" means any member serving on the West Virginia trust fund board:
Provided, That in section ten of this article
wherein the terms of the trust indenture are set forth, "trustee"
means the West Virginia trust fund.
§44-6B-4. West Virginia trust fund created; body corporate; board
created; trustees; nomination and appointment of trustees,
qualifications and terms of appointment; annual and other
meetings; designation of representatives and committees; board
meetings with committees regarding investment policy statement
required.
(a) There is hereby created the West Virginia trust fund. The
fund is created as a public body corporate and established to
provide prudent fiscal administration, investment and management
for the pension funds and workers' compensation and pneumoconiosis
funds formerly invested by this state. The corporation shall be
organized as a nonprofit, nonstock corporation under the general
corporation laws of the state.
(b) The trust fund shall be governed by a board of trustees,
consisting of seven members:
(1) Four members shall be appointed by the governor from a
list of twelve persons having experience in pension management,
institutional management or financial markets. The list of twelve
shall consist of four groups of three nominations, and no more than
two of the three nominations in each group may be from the same political party, which appointments shall be subject to the advice
and consent of the Senate. The president of the Senate, speaker of
the House of Delegates, state auditor and state treasurer each
shall submit one group of three nominations to the governor, who
shall appoint one member from each group of three, which
appointments shall be subject to the advice and consent of the
Senate.
(2) The remaining three members shall be appointed from the
general public by the governor, which appointments shall be subject
to the advice and consent of the Senate. Of the members of the
general public appointed by the governor, one shall be an attorney
experienced in finance and investment matters, one shall be a
certified public accountant and one shall be experienced in pension
management, institutional management or financial markets.
(3) The governor shall make appointments to the trust fund
board within sixty days of the effective date of this act.
Nominations for the appointments shall be submitted to the governor
within thirty days of the effective date of this act.
(c) Two members shall serve for a term of three years, two
members for a term of four years and three members for a term of
five years respectively as the governor shall designate.
Thereafter, at the end of each term, the governor may reappoint or appoint a successor following the same procedure as specified in
subsection (b) of this section, who shall serve for five-year
terms. No more than four of the trustees may belong to the same
political party.
(d) In the event of a vacancy among the trustees, an
appointment shall be made by the governor to fill the unexpired
term. The governor shall fill the vacancy, by appointment from a
new list of nominees, following the same procedure established in
subsection (b) of this section.
(e) The governor may remove any trustee in case of gross
negligence or misfeasance and may declare that position vacant and
may appoint a person for the vacancy as provided in subsection (d)
of this section.
(f) Trustees shall receive compensation in the amount of five
thousand dollars per year and additional compensation in the amount
of five hundred dollars per meeting attended by the trustee in
excess of the four quarterly meetings required by this section. In
addition, trustees shall receive reasonable and necessary expenses
actually incurred in discharging trustee duties pursuant to this
article.
(g) The board shall meet quarterly and may include in its
bylaws procedures for the calling and holding of additional meetings. For any quarterly or additional meeting in which the
board shall review or modify its securities list or its investment
objectives pursuant to subsections (f) and (g), section twelve of
this article, the board shall give ten days' notice in writing to
the designated representative of each participant plan selected
pursuant to subdivision (1), subsection (j) of this section, and
the meeting shall be open to the members and beneficiaries of the
participant plans for that portion of the meeting in which the
board undertakes the review or modification.
(h) The West Virginia trust fund board shall meet prior to
the first day of July, one thousand nine hundred ninety-six, to
organize and structure its operations.
(i) The board shall hold an annual meeting within forty-five
days after the issuance of the year-end financial report. The
annual meeting may also serve as a quarterly meeting. The annual
meeting shall be open to the public, and the board shall receive
oral and written comments from representatives, members and
beneficiaries of the participant plans and from other citizens of
the state. At the annual meeting, the board shall adopt a fee
schedule and a budget reflecting fee structures for the year.
(j) Pursuant to subsection (k) of this section, the board
shall meet with committees representing the participant plans to discuss the board's drafting, reviewing or modifying the written
investment policy of the trust with respect to that committee's
participant plan pursuant to section twelve of this article.
Representatives and committees shall be designated as follows:
(1) On or before the first day of May, one thousand nine
hundred ninety-six, the West Virginia consolidated public
retirement board shall promulgate procedural rules by which each
pension system named in subdivisions c-one through c-five of
subsection two, section ten of this article, shall designate an
individual representative of each said pension system, and the West
Virginia workers' compensation commission shall promulgate
procedural rules by which the pneumoconiosis fund and the workers'
compensation fund named in subdivisions (6) and (7) of said
subsection shall designate an individual representative of each
said fund.
(2) On or before the first day of June, one thousand nine
hundred ninety-six, and on or before the same date each year
thereafter, the consolidated public retirement board shall submit
in writing to the West Virginia trust fund board the names of the
said five designated representatives, and the workers' compensation
commission shall so submit the names of the said two
representatives.
(3) Each designated representative shall provide to the West
Virginia trust fund board his or her current address, updated each
year on or before the first day of July, to which address the board
shall provide notice of meetings of the board pursuant to
subsection (g) of this section.
(4) Each designated representative shall submit in writing to
the board on or before the first day of July, one thousand nine
hundred ninety-six, and on or before the same date each year
thereafter, the names of no more than three persons comprising a
committee representing the beneficiaries of that representative's
participant plan.
(k) At its initial meeting, and thereafter at its annual
meeting, the board shall meet with each of the seven committees,
formed pursuant to subsection (j) of this section, for the purpose
of receiving input from the committees regarding the board's
drafting, reviewing or modifying its written investment policy
statement for the trust. In developing the trust investment policy
statement, the trustees shall receive each committee's stated
objectives and policies regarding the risk tolerances and return
expectations of each participant plan, with attention to the
factors enumerated in subsection (g), section twelve of this
article, in order to provide for the continuing financial security of the trust and its participant plans. The board may meet with
the said committees or any of them at its quarterly and additional
meetings for the same purpose.
§44-6B-5. Management and control of fund; officers; staff; surety
bonds for trustees.
(a) The management and control of the fund shall be vested
solely in the board of trustees in accordance with the provisions
of this article.
(b) The board of trustees shall elect a chairman to serve for
a term of two years. The election shall be held at the board's
first meeting after the effective date of this act. Effective with
any vacancy in the chairmanship, the board shall elect a chairman
to a new two-year term. Annually, beginning with the first
meeting, the trustees shall elect a secretary, who need not be a
member of the board, to keep a record of the proceedings of the
board.
(c) The trustees shall appoint a chief executive officer of
the trust fund and shall fix his or her duties and compensation.
The chief executive officer shall have five years' experience in
investment management with public or private funds within the ten
years next preceding the date of appointment. The chief executive
officer additionally shall have academic degrees, professional designations and other investment management or investment
oversight or institutional investment experience in such
combination as the trustees consider necessary to carry out the
responsibilities of the chief executive officer position as defined
by the trustees.
(d) The trustees shall retain an internal auditor to report
directly to the trustees and shall fix his or her compensation.
The internal auditor shall be a certified public accountant with at
least three years' experience as an auditor. The internal auditor
shall develop an internal audit plan, with board approval, for the
testing of procedures and the security of transactions.
(e) Each trustee shall give a separate fidelity bond from a
surety company qualified to do business within this state in a
penalty amount of one million dollars for the faithful performance
of his or her duties as a trustee. The board shall purchase a
blanket bond for the faithful performance of its duties in the
amount of ten million dollars which is in addition to the one
million dollar individual bond required of each trustee by the
provisions of this section. The board may require a fidelity bond
from a surety company qualified to do business in this state for
any person who has charge of, or access to, any securities, funds
or other moneys held by the board, and the amount of the fidelity bond shall be fixed by the board. The premiums payable on all
fidelity bonds shall be an expense of the board.
(f) The trustees and employees of the West Virginia trust fund
are not liable personally, either jointly or severally, for any
debt or obligation created by the West Virginia trust fund:
Provided, That the trustees and employees of the West Virginia
trust fund are liable for acts of misfeasance or gross negligence.
§44-6B-6. Corporate powers.
The fund may exercise all powers necessary or appropriate to
carry out and effectuate its corporate purposes. The fund may:
(1) Adopt and use a common seal and alter the same at
pleasure;
(2) Sue;
(3) Enter into contracts and execute and deliver instruments;
(4) Acquire (by purchase, gift or otherwise), hold, use and
dispose of real and personal property, deeds, mortgages and other
instruments;
(5) Promulgate and enforce bylaws and rules for the management
and conduct of its affairs;
(6) Retain and employ legal, accounting, financial and
investment advisors, managers and consultants;
(7) Acquire (by purchase, gift or otherwise), hold, exchange, pledge, lend and sell or otherwise dispose of securities and invest
funds;
(8) Maintain accounts with banks, securities dealers and
financial institutions both within and outside this state;
(9) Consolidate and manage moneys, securities and other assets
of the pension plans and other funds and accounts of the state and
the moneys of political subdivisions which may be made available to
it under the provisions of this article;
(10) Enter into agreements with political subdivisions of the
state whereby moneys of the political subdivisions are invested on
their behalf by the fund;
(11) Charge and collect administrative investment and
management fees for its services;
(12) Exercise all powers generally granted to and exercised by
the holders of investment securities with respect to management of
the securities;
(13) Make, and from time to time, amend and repeal bylaws,
regulations and procedures not inconsistent with the provisions of
this article;
(14) Hire its own employees, consultants, managers and
advisors as it considers necessary, and fix their compensation and
prescribe their duties;
(15) Develop, implement and maintain its own banking accounts,
investments and employee benefit plans;
(16) Borrow or open lines of credit; and
(17) Do all such things necessary to implement and operate the
trust fund and carry out the intent of this article.
§44-6B-7. Annual audits; reports and information to constitutional
and legislative officers, council of finance and
administration and consolidated public retirement board;
statements and reports open for inspection.
(a) The trust fund shall cause an annual financial and
compliance audit to be made by a certified public accounting firm
having a minimum staff of ten certified public accountants and
being a member of the American institute of certified public
accountants, and, if doing business in West Virginia, being a
member of the West Virginia society of certified public
accountants. The financial and compliance audit shall be made of
the trust fund's books, accounts and records, with respect to its
receipts, disbursements, investments, contracts and all other
matters relating to its financial operations. Copies of the audit
report shall be furnished to the governor, state treasurer, state
auditor, president of the Senate, speaker of the House of
Delegates, council of finance and administration and consolidated public retirement board.
(b) The trust fund shall produce monthly financial statements
and deliver them to each member of the board.
(c) The trust fund shall deliver in each quarter to the
council of finance and administration and the consolidated public
retirement board a report detailing the investment performance of
the retirement plans.
(d) The trust fund shall cause an annual performance audit to
be made by a nationally recognized fiduciary service and shall
furnish copies of the audit report to the governor, state
treasurer, state auditor, president of the Senate, speaker of the
House of Delegates, council of finance and administration and
consolidated public retirement board.
(e) The trust fund shall provide any other information
requested in writing by the council of finance and administration.
(f) All statements and reports required in this section shall
be available for inspection by the members and beneficiaries and
designated representatives of the participant plans.
§44-6B-8. Fees for service.
The trust fund shall charge fees, as adopted at the annual
meeting, for the reasonable and necessary expenses incurred by the
trust fund in rendering services to the participant plans. The fees shall be subtracted from the total return of the trust fund,
and the net return shall be credited to the participant plans. All
fees which are dedicated or identified or readily identifiable to
an individual participant plan shall be charged against that plan,
and all other fees shall be charged as a percentage of assets under
management. At its annual meeting, the board shall adopt a fee
schedule and a budget reflecting fee structures
.
§44-6B-9. Transfers to the trust.
(a) The West Virginia state board of investments shall
transfer to the West Virginia trust fund the computers, and other
necessary items of equipment associated with each position at the
board of investments whose responsibilities and obligations shall
as of the effective date of this section be performed by the West
Virginia trust fund.
(b) Any state employee who terminates his or her state
employment and becomes employed by the West Virginia trust fund may
at his or her option defer retirement within the public employees'
retirement system pursuant to section twenty-one, article ten,
chapter five of this code, or, may elect to transfer to the West
Virginia trust fund his or her employee contributions, with accrued
interest, and, if vested, his or her employer contributions, with
accrued interest. The West Virginia consolidated public retirement board shall transfer to the West Virginia trust fund the said
contributions and accrued interest of terminating employees who so
elect. The trust fund shall establish a private, nonstate
retirement plan for the West Virginia trust fund employees, and the
said transferred employee and employer contributions and interest
shall be deposited to the private retirement plan.
(c) Upon the effective date of this article, no more than five
hundred thousand dollars of those funds remaining in the special
revenue accounts known as the "loss legal expense fund" and the
"security lending fund" and further known as WVFIMS accounts 8563
and 8565 shall be transferred to the West Virginia trust fund board
for its use in the beginning operations of the trust fund.
§44-6B-10. Trust indenture.
The governor, on behalf of the state, shall enter into a trust
indenture with the West Virginia trust fund as trustee, effective
on the first day of July, one thousand nine hundred ninety-six.
The trust indenture shall contain the following provisions:
(a) Simultaneously with the execution of the trust indenture,
the state shall have delivered to the trustee all the assets of the
consolidated pension fund with any other property that may be
transferred hereafter to the trustee by the state, or by any other
person or entity, which shall be used as provided in the trust indenture and which constitutes the trust estate. The trustee
shall acknowledge receipt of the assets and agree to hold the
assets, and any other property that later may be added to the
trust, and to perform the duties of trustee, according to the terms
and conditions set forth in this trust indenture and in the
provisions of this article.
(b) The Legislature hereby reserves the following rights and
powers:
(1) The right by supplemental agreement to amend, modify or
alter the terms of this trust without consent of the trustee, or
any beneficiary; and
(2) The right to request and receive additional information
from the trustee at any time.
(c) The state directs the trustee to establish a trust for the
participant plans specified by the state with the earnings and
losses accounted for and charged individually to each participant
plan, including, but not limited to, the following:
(1) The public employees' retirement system;
(2) The teachers retirement system;
(3) The West Virginia state police retirement system;
(4) The death, disability and retirement fund of the
department of public safety;
(5) The judges' retirement system;
(6) The pneumoconiosis fund; and
(7) The workers' compensation fund.
(d) In the administration of the trust created by the trust
indenture, the trustee has the following powers:
(1) To purchase, retain, hold, transfer and exchange, and to
sell, at public or private sale, the whole or any part of the trust
estate upon such terms and conditions as it considers advisable;
(2) To invest and reinvest the trust estate or any part
thereof, in any kind of property, real or personal, including, but
not limited to, mortgage or mortgage participations, common stocks,
preferred stocks, common trust funds, bonds, notes or other
securities, notwithstanding the provisions of articles five and six
of this chapter;
(3) To carry the securities and other property held under the
trust indenture either in the name of the trustee or in the name of
its nominee;
(4) To vote, in person or by proxy, all securities held under
the trust indenture, to join in or to dissent from and oppose the
reorganization, recapitalization, consolidation, merger,
liquidation or sale of corporations or property; to exchange
securities for other securities issued in connection with or resulting from any such transaction; to pay any assessment or
expense which the trustee considers advisable for the protection of
its interest as holder of any such securities; to deposit
securities in any voting trust or with any protective or like
committee, or with a trustee depository; to exercise any option
appurtenant to any securities for the conversion of any securities
into other securities; and to exercise or sell any rights issued
upon or with respect to the securities of any corporation, all upon
terms the trustee considers advisable;
(5) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the trustee or other
trust estate;
(6) To employ and pay from the trust estate legal and
investment counsel, brokers and such other assistants and agents as
the trustee considers advisable; and
(7) To develop, implement and modify asset allocation plans
for each participant plan, which asset allocation plans shall be
implemented within the management and investment of the trust fund.
(e) All trust income shall be free from anticipation,
alienation, assignment or pledge by, and free from attachment,
execution, appropriation or control by or on behalf of, any and all
creditors of any beneficiary by any proceeding at law, in equity, in bankruptcy or insolvency.
(f) The trustee may receive any other property, real or
personal, tangible or intangible, of any kind whatsoever, that may
be granted, conveyed, assigned, transferred, devised, bequeathed or
made payable to it by the state, or by any other person or entity,
for the purposes of the trust created by the trust indenture, and
all such properties shall be held, managed, invested and
administered by the trustee as provided in the trust indenture and
in this article.
(g) The trustee shall promptly cause to be paid to the state
the amounts certified by the governor as necessary for the monthly
payment of benefits to the beneficiaries of the trust.
(h) The trustees shall render an annual accounting to the
state not more than one hundred twenty days following the close of
the fiscal year of the trust.
(i) The trust created by this article is not invalid by reason
of any existing law or rule against perpetuities or against
accumulations or against restraints upon the power of alienation,
but the trust may continue for such time as necessary to accomplish
the purposes for which it is established.
(j) If any provision of the trust indenture is void, invalid
or unenforceable, the remaining provisions are nevertheless valid and shall be carried into effect.
§44-6B-11. Standard of care.
Any investments made under this article shall be made with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
(a) Trustees shall discharge their duties for the exclusive
purpose of providing benefits to participants and their
beneficiaries;
(b) Trustees shall diversify fund investments so as to
minimize the risk of large losses unless, under the circumstances,
it is clearly prudent not to do so;
(c) Trustees shall defray reasonable expenses of investing and
operating the fund; and
(d) Trustees shall discharge their duties in accordance with
the documents and instruments governing the plan insofar as such
documents and instruments are consistent with the provisions of
this article.
§44-6B-12. Limitations on investments.
The trust fund shall limit its asset allocation and types of
securities to the following:
(a) Through the first day of July, one thousand nine hundred
ninety-seven, the trust fund shall hold in equity investments no
more than twenty percent of its total portfolio and no more than
twenty percent of the assets of any individual participant plan;
after the first day of July, one thousand nine hundred and ninety-
seven, and through the first day of July, two thousand, the trust
fund shall hold in equity investments no more than forty percent of
its total portfolio and no more than forty percent of the assets of
any individual participant plan; after the first day of July, two
thousand, the trust fund shall hold in equity investments no more
than sixty percent of its total portfolio and no more than sixty
percent of the assets of any individual participant plan.
(b) The trust fund shall hold in international securities no
more than twenty percent of its portfolio and no more than twenty
percent of the assets of any individual participant plan.
(c) The trust fund may not at the time of purchase hold more
than five percent of its equity portfolio in the equity securities
of any single company or association:
Provided, That if a company
or association has a market weighting of greater than five percent
in the standard & poor's 500 index of companies, the trust fund may
hold securities of that equity equal to its market weighting.
(d) The trust fund may not hold more than twenty percent of its portfolio in commercial paper, which at the time of its
acquisition, is in one of the two highest rating categories by an
agency nationally known for rating commercial paper.
(e) At no time shall the trust fund hold more than seventy-
five percent of its portfolio in corporate debt, which corporate
debt security at the time of its acquisition is rated in one of the
four highest rating categories by a nationally recognized rating
agency.
(f) No security may be purchased by the trust fund unless the
type of security is on a list approved by the trust fund board.
The board may modify the said securities list at any time, and must
give notice of that action pursuant to subsection (g), section four
of this article, and must review the said list at its annual
meeting.
(g) The board, at the annual meeting provided for in
subsection (i), section four of this article, shall review,
establish and modify, if necessary, the investment objectives of
the individual participant plans of the trust, as incorporated in
the investment policy statement of the trust, so as to provide for
the financial security of the trust fund, giving consideration to
the following:
(1) Preservation of capital;
(2) Diversification;
(3) Risk tolerance;
(4) Rate of return;
(5) Stability;
(6) Turnover;
(7) Liquidity; and
(8) Reasonable cost of fees.