Senate Bill No. 81
(By Senators Tomblin (Mr. President) and Boley)
(By Request of the Executive)
____________
[Introduced January 17, 1996; referred to the Committee on
Pensions; and then to the Committee on Finance.]
____________
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 from the board of investments to the newly
created West Virginia trust fund; consolidated public
retirement board transferring public retirement plans'
employee and employer contributions; payment for services
relating to the pursuit of claims against third party
investment losses; board of investments; definitions; board
composition; removal of authority to invest public
retirement funds; management of consolidated fund; purchase
of loans from the consolidated public retirement fund;
restrictions on investments; standard of care; exceptions to
the board of investments; audits; how article cited;
legislative findings and purpose; definitions; West Virginia
trust fund created; body corporate; board created; trustees;
appointment of certain trustees, qualifications and terms of
appointment; management and control of fund; officers;
staff; surety bonds for trustees; corporate powers; annual
audit; reports and information to council of finance and
administration; fees for service; transfers to the trust;
trust indenture; standard of care; 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one thousand nine hundred thirty-one, as amended, be repealed;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,
COMMISSION, 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, chapter five of this code; 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;
(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, chapter five of this code; 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 all rules necessary to effectuate its
powers, duties and responsibilities:
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 transfer all employer and employee contributions received
by the board, within two business days, to the West Virginia
trust fund: Provided, That the employer and employee
contributions of the teachers' defined contribution system 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.
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.
ARTICLE 1. STATE DEPOSITORIES.
§12-1-13. Payment of banking services; investment losses.
The board of investments is authorized to pay for banking services, and services ancillary thereto, by either a
compensating balance in a 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.
Additionally, 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. Such payment may be in the
form of a state warrant.
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. 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, provided to the state.
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 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:
Provided, That 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 for a four year term; one for a five year
term; and one to a six year term. Thereafter, all terms shall be
for six years.
(d) Appointed members of the board shall serve without
compensation, but shall be 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 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 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 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;
(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 through its
treasurer or equivalent financial officer is hereby authorized to
enter into agreements with the board for the investment of moneys
of such 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 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 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 necessary for the administration thereof,
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 moneys in accordance
with the restrictions specially applicable thereto.
(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 trust funds' investments to said
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 trust 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 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: Provided, That any such
security is, at the time of its acquisition, 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 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
must 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 the sole
agency entity for the investment of
consolidated
pension
and trust funds
and state funds:
Provided, however, That
neither this section nor any other section of this article shall
apply 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 their
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. Such statement shall include their
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
experience has demonstrated 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 other use or purposes 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 the state and other public employers
disclaim any right to reclaim those contributions and waive any
right or 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
benefits they have earned should be prudently invested so that
benefits may always 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 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 hereafter created and established is empowered, hereby, 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.
§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) "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;
(d) "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;
(e) "State" means the state of West Virginia; and
(f) "Trust fund" means the West Virginia trust fund; and
(g) "Trustee" means those members serving on the West
Virginia trust fund board.
§44-6B-4. West Virginia trust fund created; body corporate; board created; trustees; appointment of certain
trustees, qualifications and terms of appointment.
(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 plans of 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. Four members shall be appointed by
the governor from a list of twelve names submitted jointly by the
president of the Senate, speaker of the House, the state auditor
and state treasurer. Those nominated by the president, speaker,
state auditor and state treasurer shall have experience in
pension management, institutional management or financial
markets.
The remaining three members shall be appointed from the
general public by the governor. 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.
(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:
Provided, That 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:
Provided, That the governor shall fill the vacancy, by
appointment from a new list of nominees, following the same
procedure by which the vacating trustee had been appointed.
(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 such vacancy as provided in other
cases of vacancy.
(f) The trustees shall serve without compensation, but shall
be entitled to their reasonable and necessary expenses actually incurred in discharging their duties under this article.
(g) The board shall meet quarterly and may include in its
bylaws procedures for the calling and holding of additional
meetings.
(h) The board shall hold an annual meeting within forty-five
days after the issuance of the year end financial report which
may also serve as a quarterly meeting. The meeting shall be open
to the public, and the board, at this meeting, shall adopt a fee
schedule for the year. Additionally, at that annual meeting, the
board shall receive oral and written comments from consolidated
pension plan participants and beneficiaries or other citizens of
the state.
§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, such election to be held at the board's
first meeting after the effective date of this article.
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 fund.
(c) The trustees shall appoint a chief executive officer of
the trust fund and shall fix his or her duties and compensation:
Provided, That the chief executive officer shall have at least
five years experience in investment management with public or
private funds having at least one billion dollars in assets, said
experience to have occurred within the seven years next preceding
the date of appointment of the chief executive officer.
(d) The trustees shall retain an internal auditor to report
directly to the trustees and shall fix his or her compensation:
Provided, That 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 member of the board 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 member of the board. The
board will purchase a blanket bond for the faithful performance
of its duties in the amount of ten million dollars which shall be
in addition to the one million dollar individual bond required of
each member 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 such 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 shall not be liable personally, either jointly or severable,
for any debt or obligation created by the West Virginia trust
fund:
Provided, That the trustees and employees of the West
Virginia trust fund shall be 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 such 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 thereof;
(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 deems fit, 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 audit; reports and information to council of
finance and administration.
The trust fund shall cause an annual audit to be made by a national independent certified public accounting firm of its
books, accounts, and records, with respect to its receipts,
disbursements, investments, contracts and all other matters
relating to its financial operations. The firm performing such
audit shall furnish copies of the audit report to the council of
finance and administration. The firm performing such audit shall
also furnish copies of the audit report to the governor, state
treasurer, state auditor, the president of the Senate and the
speaker of the House.
The trust fund shall produce monthly financial statements
and deliver them to each member of the board. Additionally, 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. Also, upon request the trust fund shall
provide any other information requested by the council of finance
and administration. All such reports shall be available for
inspection by the beneficiaries.
§44-6B-8. Fees for service.
The trust fund shall charge a fee, as adopted at the annual
meeting, for the services provided by the trust fund to the participants. The fees charged shall be for the reasonable and
necessary expenses of the trust fund. The fee shall be based
upon the assets under management. The fee shall be subtracted
from the total return of the trust fund with the net return being
credited to the trust fund participants.
§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) The West Virginia consolidated retirement board shall
transfer the employee contributions, with applicable interest,
made by state employees who shall terminate their state
employment and be employed by the West Virginia trust fund, and
the employer contributions and applicable interest earned by
those employees who are vested in the public employees retirement
plan. Those funds shall be used to establish a nonstate
supported retirement plan for the West Virginia trust fund
employees; and
(c) Effective upon passage, those funds remaining in the
expired special revenue account known as the "loss expense
account" and further known as WVFIMS accounts 8563 and 8565 shall
be available for transfer to the West Virginia trust fund board
for its use in the beginning operations of the trust fund. 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. The governor shall make appointments
to the trust fund board within sixty days of the date of passage
of this act. Nominations shall be submitted to the governor
within thirty days of the date of passage of this act.
§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 to
be effective on the first day of July, one thousand nine hundred
ninety-six, which 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 which shall be used as provided therein and shall constitute the trust estate. The trustee acknowledges
receipt of the assets and agrees to hold the same, and any other
property that later may be added to this trust, and to perform
the duties of trustee, according to the terms and conditions
hereinafter stated.
(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 additional information from the
trustee at any time.
(c) The state directs the trustee to establish a trust for
the pension plans specified by the state with the earnings
accounted for individually to each participating 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 funds.
(d) In the administration of the trust created hereby, the
trustee shall have 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 to it may seem
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 article five
and six, chapter forty-four of this code;
(3) To carry the securities and other property held
hereunder 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
hereunder, 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 may deem 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 thereof into
other securities; and to exercise or sell any rights issued upon
or with respect to the securities of any corporation, all upon
such terms as said trustee shall deem 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 may deem advisable; and
(7) To lend money to, and borrow money for the credit of,
the trust estate, and, for such purposes, to execute plain or
collateral notes or other written instruments evidencing any
obligation so incurred, as to secure the payment thereof by a pledge or mortgage of any part of the properties comprising the
trust estate:
Provided, That in order to execute this power, the
board shall require a unanimous vote.
(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, for the purposes of the trust hereby created, and all
such properties shall be held, managed, invested and administered
by the trustee as herein provided.
(g) The trustee 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.
(h) 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 such trust may continue for such time as
necessary to accomplish the purposes for which it is established.
(i) If any provision of this instrument is void, invalid or
unenforceable, the remaining provisions shall nevertheless be
valid and 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) At no time shall the trust fund hold more than sixty
percent of its portfolio in equity investments, nor shall the
equity holdings of any one consolidated pension plan participant
exceed sixty percent;
(b) At no time shall the trust fund hold more than twenty-
five percent of its portfolio in foreign securities;
(c) The trust fund may not hold more than seven percent of
its portfolio in any single company or association;
(d) The trust fund may not hold more than twenty percent of
its portfolio in commercial paper, which at the time of its
acquisition, shall be 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, and that such
security at the time of its acquisition be 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:
Provided, That the board may modify the list at any time:
Provided, however, That the list is to be reviewed at the board's
annual meeting; and
(g) The board, at the annual meeting provided for in
subsection (h), section four of this article, shall review,
establish and modify, if necessary, the investment objectives 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) Rate of return;
(4) Stability;
(5) Turnover;
(6) Liquidity; and
(7) Speculation.
NOTE: The purpose of this bill is to create an independent nonprofit corporation called the West Virginia trust fund to
invest and manage the state's consolidated pension fund. The
trust fund would hold assets in trust for the benefit of the
participants. The trust fund would have the ability to diversity
the investments of the public employees retirement system,
teachers' retirement systems, West Virginia state police
retirement system, the death, disability and retirement fund of
the department of public safety, the judges retirement system,
the pneumoconiosis fund and the workers' compensation funds
between debt and equity securities, following the prudent person
guideline.
The trust fund board would be comprised of seven individuals
appointed by the governor, meeting various qualifications. Four
of the individuals must be selected from lists submitted to the
governor from the Senate president, speaker of the House, auditor
and treasurer. The trust fund is required to retain an internal
auditor and contract for an annual audit to be submitted to the
council of finance and administration, the governor, auditor,
treasurer, speaker of the House, and president of the Senate.
Monthly financial reports are to be made to the trust fund board
and investment performance reports are made quarterly to the
council of finance and administration and the consolidated public
retirement board. The trust fund shall hold an annual meeting to
establish investment objectives, adopt a fee for the year and
hear comments from participants and interested citizens of the
state.
The board of investments would no longer be involved in
handling the consolidated pension fund and consequently all
language pertaining to the board of investments' responsibilities
in this respect is removed from article six, chapter twelve of
the code. The board of investments also will operate under the
prudent person standard and one of the limitations on investment
of corporate bonds has been raised from three percent to five
percent.
The bill also requires the West Virginia consolidated public
retirement board to transfer all employees' and employer
contributions to the West Virginia trust fund, within two
business days of collection, for investment. Also the consolidated public retirement board may not be a trustee with
regard to the investment of funds except for the teachers'
defined contribution system.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
§12-6-6, 9, 9a, 9b, 9d, 9f and 11 have been repealed and are
therefore not included in the bill.
§12-6-9g and §44-6B are new; therefore, strike-throughs and
underscoring have been omitted.
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