COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 596
(By Senators Edgell and Bailey)
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[Originating in the Committee on Pensions;
reported February 24, 2003.]
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A BILL to amend sections twenty and twenty-six-a, article
twenty-two, chapter eight of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, all relating to
municipal policemen's and firemen's pension and relief funds;
funding options; providing that a municipality may elect
normal cost funding following election to fund at one hundred
seven percent of prior years' funding; conditions; and
providing that where a municipal policemen's and firemen's
pension and relief fund is funded less than twenty-five
percent, the fund's board of trustees shall mandate an
increase in member's contribution not to exceed eight and one-
half percent.
Be it enacted by the Legislature of West Virginia:
That sections twenty and twenty-six-a, article twenty-two,
chapter eight of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to
read as follows:
ARTICLE 22. RETIREMENT BENEFITS GENERALLY; POLICEMEN'S PENSION
AND RELIEF FUND; FIREMEN'S PENSION AND RELIEF
FUND; PENSION PLANS FOR EMPLOYEES OF WATERWORKS
SYSTEM, SEWERAGE SYSTEM OR COMBINED WATERWORKS AND
SEWERAGE SYSTEM.
§8-22-20. Minimum standards for actuarial soundness.
The board of trustees for each pension and relief fund shall
have regularly scheduled actuarial valuation reports prepared by a
qualified actuary. All of the following standards must be met:
(a) An actuarial valuation report shall be prepared at least
once every three years commencing with the later of: (1) The first
day of July, one thousand nine hundred eighty-three; or (2) three
years following the most recently prepared actuarial valuation
report:
Provided, That this most recently prepared actuarial
valuation report meets all of the standards of this section.
(b) The actuarial valuation report shall consist of, but is
not limited to, the following disclosures: (1) The financial
objective of the fund and how the objective is to be attained; (2)
the progress being made toward realization of the financial
objective; (3) recent changes in the nature of the fund, benefits
provided, or actuarial assumptions or methods; (4) the frequency of
actuarial valuation reports and the date of the most recent
actuarial valuation report; (5) the method used to value fund assets; (6) the extent to which the qualified actuary relies on the
data provided and whether the data was certified by the fund's
auditor or examined by the qualified actuary for reasonableness;
(7) a description and explanation of the actuarial assumptions and
methods; and (8) any other information the qualified actuary feels
is necessary or would be useful in fully and fairly disclosing the
actuarial condition of the fund.
(c) (1) After the thirtieth day of June, one thousand nine
hundred ninety-one, and thereafter, the financial objective of each
municipality shall not be less than to contribute to the fund
annually an amount which, together with the contributions from the
members and the allocable portion of the state premium tax fund for
municipal pension and relief funds established under section
fourteen-d, article three, chapter thirty-three of this code and
other income sources as authorized by law, will be sufficient to
meet the normal cost of the fund and amortize any actuarial
deficiency over a period of not more than forty years:
Provided,
That in the fiscal year ending the thirtieth day of June, one
thousand nine hundred ninety-one, the municipality may elect to
make its annual contribution to the fund utilizing an alternative
contribution in an amount not less than: (i) One hundred seven
percent of the amount contributed for the fiscal year ending the
thirtieth day of June, one thousand nine hundred ninety; or (ii) an
amount equal to the average of the contribution payments made in
the five highest fiscal years beginning with the 1984 fiscal year
whichever is greater:
Provided, however, That contribution payments in subsequent fiscal years under this alternative
contribution method may not be less than one hundred seven percent
of the amount contributed in the prior fiscal year:
Provided
further, That prior to utilizing this alternative contribution
methodology the actuary of the fund shall certify in writing that
the fund is projected to be solvent under the alternative
contribution method for the next consecutive fifteen-year period.
For purposes of determining this minimum financial objective: (1)
The value of the fund's assets shall be determined on the basis of
any reasonable actuarial method of valuation which takes into
account fair market value; and (2) all costs, deficiencies, rate of
interest, and other factors under the fund shall be determined on
the basis of actuarial assumptions and methods which, in aggregate,
are reasonable (taking into account the experience of the fund and
reasonable expectations) and which, in combination, offer the
qualified actuary's best estimate of anticipated experience under
the fund:
Provided, that after the first day of September two
thousand three, this section in no way prohibits a municipality
from electing to revert back to the standard method of funding to
contribute to the fund annually an amount which, together with the
contributions from the members and the allocable portion of the
state premium tax fund for municipal pension and relief funds
established under section fourteen-d, article three, chapter
thirty-three of this code and other income sources as authorized by
law, will be sufficient to meet the normal cost of the fund and
amortize any actuarial deficiency over a period of not more than forty years from the first day of July nineteen hundred ninety-one.
(2) No municipality may anticipate or use in any manner any
state funds accruing to the police or firemen's pension fund to
offset the minimum required funding amount for any fiscal year.
(3) Notwithstanding any other provision of this section or
article to the contrary, each municipality shall contribute
annually to the fund an amount which may not be less than the
normal cost, as determined by the actuarial report.
(d) For purposes of this section the term "qualified actuary"
means only an actuary who is a member of the society of actuaries
or the American academy of actuaries. The qualified actuary shall
be designated a fiduciary and shall discharge his or her duties
with respect to a fund solely in the interest of the members and
member's beneficiaries of that fund. In order for the standards of
this section to be met, the qualified actuary shall certify that
the actuarial valuation report is complete and accurate and that in
his or her opinion the technique and assumptions used are
reasonable and meet the requirements of this section of this
article.
(e) The cost of the preparation of the actuarial valuation
report shall be paid by the fund.
(f) Notwithstanding any other provision of this section, for
the fiscal year ending the thirtieth day of June, one thousand nine
hundred ninety-one, the municipality may calculate its annual
contribution based upon the provisions of the supplemental benefit
provided in this article enacted during the one thousand nine hundred ninety-one regular session of the Legislature.
§8-22-26a. Supplemental pension benefits entitlement; benefit
payable; application of section; construction.
(a) Except as otherwise provided in this section, all
retirees, surviving beneficiaries, disability pensioners or future
retirees shall receive as a supplemental pension benefit an
annualized monthly amount commencing on the first day of July,
based on a percentage increase equal to any increase in the
consumer price index as calculated by the United States Department
of Labor, Bureau of Statistics, for the preceding year:
Provided,
That the supplemental pension benefit specified herein shall not
exceed four percent per year:
Provided, however, That no retiree
shall be eligible for the supplemental pension benefit specified
herein until the first day of July after the expiration of two
years from the date of retirement of said retiree:
Provided
further, That persons retiring prior to the effective date of this
section shall receive the supplemental benefit provided in this
section immediately upon retirement and shall not be subject to the
two year delay:
And provided further, That the supplemental
benefit shall only be calculated on the allowable amount, which is
the first fifteen thousand dollars of the total annual benefit
paid. If at any time, after the supplemental benefit becomes
applicable, the total accumulated percentage increase in benefit on
the allowable amount becomes less than seventy-five percent of the
total accumulated percentage increase in the consumer price index over that same period of time, the four percent limitation shall be
inapplicable until such time as the supplemental benefit paid
equals seventy-five percent of the accumulated increase in the
consumer price index. The supplemental pension benefit payable
under the provisions of this section shall be paid in equal monthly
installments.
(b) Upon commencement of the payment of death benefits
pursuant to section twenty-six of this article, there shall be
calculated on the allowable amount, which is the first fifteen
thousand dollars of the annual allowable benefit under said section
twenty-six, the supplemental benefit provided in subsection (a) of
this section using the date that the retirement benefit provided
for pursuant to section twenty-five of this article began as the
base year. The amount of the death benefit provided pursuant to
section twenty-six of this article shall be calculated without
regard to any supplemental benefit previously paid under this
section. After the initial calculation made pursuant to this
subsection the beneficiary of the benefits provided for pursuant to
section twenty-six, shall, after reindexation, thereafter receive
the supplemental benefit provided
for in subsection (a)
of this
section.
(c) Persons becoming disabled and eligible for a benefit under
subsection (d), section twenty-four of this article after the first
day of January, one thousand nine hundred ninety-one, shall receive
as an annualized monthly supplemental benefit commencing on each
July the first
day of July an amount based on a percentage increase equal to any increase in the consumer price index as calculated by
the United States Department of Labor, Bureau of Statistics, for
the preceding year:
Provided, That the supplemental pension
benefit shall not exceed four percent per year:
Provided, however,
That the benefit provided herein shall not commence until the first
day of July in the second year after what would have been the
earliest service retirement date pursuant to section twenty-five of
this article for the person receiving the disability benefit:
Provided further, That for persons becoming eligible for a benefit
under subsection (d), article twenty-four of this section who were
not employed in the preceding year and file a copy of his or her
income tax return by the fifteenth of April each year, evidencing
said lack of employment, the benefit provided herein shall commence
on the first day of July in the second year after the date of
disablement:
And provided further, That the supplemental benefit
shall only be calculated on the allowable amount, which is the
first fifteen thousand dollars of the total annual benefit paid.
If at any time after the commencement of the payment of the
supplemental benefit provided under this subsection the total
accumulated percentage increase in benefit on the allowable amount
becomes less than seventy-five percent of the total accumulated
increase in the consumer price index for that same period of time,
the four percent limitation shall be inapplicable until such time
as the supplemental benefit paid equals seventy-five percent of the
accumulated increase in the consumer price index.
(d) Persons receiving a disability pension pursuant to section twenty-four of this article prior to the first day of January, one
thousand nine hundred ninety-one, shall receive commencing each
July first, as an annualized monthly supplemental benefit an amount
based on a percentage increase equal to any increase in the
consumer price index as calculated by the United States Department
of Labor, Bureau of Statistics, for the preceding year:
Provided,
That the supplemental benefit provided herein shall not exceed two
percent per year:
Provided, however, That beginning the first day
of July two years after what would have been the earliest service
retirement date pursuant to section twenty-five of this article the
supplemental benefit provided herein shall not exceed four percent
per year. The amount of supplemental benefit provided in this
subsection shall not exceed four percent beginning the first day of
July in any twelve-month period for any pensioner who files a
certified copy of his or her tax return evidencing that said
pensioner was unemployed in the preceding year and received no
earned income. The tax return shall be filed by the fifteenth of
April in any such year. If at any time after the first day of July
in the second year from what would have been the earliest service
retirement date pursuant to section twenty-five of this article the
total accumulated percentage increase in the supplemental benefit
provided pursuant to this subsection on the allowable amount
becomes less than the seventy-five percent of the total accumulated
percentage increase in the consumer price index over that same
period of time, the maximum percentage shall be inapplicable until
such time as the percentage increase in the supplemental benefit paid equals seventy-five percent of the accumulated increase in the
consumer price index. The supplemental benefit provided in this
subsection shall only be calculated on the allowable amount, which
is the first fifteen thousand dollars of the annual benefit paid.
(e) Any supplemental benefits paid during a period of
nonentitlement may be withheld out of subsequent regular monthly
pension benefits.
(f) During the fiscal year ending on the thirtieth day of
June, one thousand nine hundred ninety-six, and each year
thereafter, each municipal policemen's and firemen's pension fund
shall be reviewed by a qualified actuary who shall make a
determination as to its actuarial soundness. Based upon the
actuary's determination of the actuarial soundness of the fund, the
actuary shall certify to the board of trustees of the fund the
amount of increase in supplemental benefits, if any, which may be
paid, and which will preserve the minimum standards for actuarial
soundness of the fund, as set forth in section twenty of this
article. The board of trustees shall increase supplemental
benefits by an amount which is equal to the actuary's certified
recommendation, up to the four percent limit contained in this
section or the increase in the consumer price index, whichever is
less.
If the actuary determines that it is necessary to preserve
the actuarial soundness of the fund, The board of trustees of the
fund shall increase the percentage of the members' contribution
from seven percent
to the amount certified by the actuary not to
exceed eight and one-half percent,
to preserve the actuarial soundness of the fund if the fund is less than twenty-five percent
funded as reported by the West Virginia state treasurer's
policemen's and firemen's pensions funds summary report for the
previous year, but only for so long as is necessary to achieve the
minimum standards for actuarial soundness required by section
twenty of this article. In any year in which there is no
supplemental benefit paid, such year shall not be included in the
reindexation calculation provided pursuant to this section.
(g) This section shall be construed liberally to effectuate
the purpose of establishing minimum pension benefits under this
article for members and surviving spouses.
NOTE: The purpose of this bill is to improve the actuarial
soundness of municipal police and fire pensions. The bill allows
a municipality to revert to normal cost funding if the municipality
can amortize any actuarial deficiency over a forty-year time
period. The bill also requires municipal plans which are funded
less than twenty-five cents on the dollar to increase member
contribution to eight and one-half percent.
Strike-throughs indicate language which would be stricken from
the present law; and underscoring indicates new language which
would be added.
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