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 all rules
propose rules for promulgation necessary to effectuate its powers,
duties and responsibilities
in accordance with 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, including 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.
(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 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) 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. 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 services provided to the state
and to pay for
the investigation and pursuit of 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 and
for the investigation and pursuit of claims, 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
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:
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 to
a four-year term; one to 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 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 trust funds' investments to the 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
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:
and the
board Provided, That the West Virginia trust fund, shall be the
sole
agency entity for the investment of
pension fund and state funds consolidated pension plan funds in accordance with article
six-a, 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 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. The
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
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 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 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 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 under the provisions of 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 of this code 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 subsection (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" or "trustees" means one or all of the members
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, the term "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.
(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 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. The president of the
Senate, the speaker of the House of Delegates, the state auditor
and the state treasurer each shall submit one group of three
nominations to the governor, who shall appoint one member from each
group of three.
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) 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
effective date of this article. Nominations for the appointments
shall be submitted to the governor within thirty days of the
effective date of this article.
(d) 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.
(e) 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 (a) of this section.
(f) 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 (e)
of this section.
(g) 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.
(h) 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, and the
meeting shall be open to the beneficiaries of the participant plans
for that portion of the meeting in which the board undertakes the review or modification.
(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) Committees shall be formed for the purpose of meeting
with the board to discuss the drafting, reviewing or modifying the
written investment policy of the trust by the board with respect to
that committee's participant plan pursuant to section twelve of
this article. For the purpose of communicating with the board in
this respect, 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 the
public employees' retirement system, the teachers retirement
system, the West Virginia state police retirement system, the
death, disability and retirement fund of the division of public safety and the judges' retirement system shall each designate an
individual representative of their pension system, and the West
Virginia workers' compensation commission shall promulgate
procedural rules by which the pneumoconiosis fund and the workers'
compensation fund shall designate an individual representative of
each 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 governor the names of the five designated
representatives, and the workers' compensation commission shall
submit the names of the 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 permit the board to
provide notice of meetings of the board to the representatives
pursuant to subsection (g), section ten of this article.
(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.
§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 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 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
within the next preceding ten years in investment management with
public or private funds. Additionally, the chief executive officer
shall have such academic degrees, professional designations, and
other investment management or investment oversight or
institutional investment experience in a combination the trustees consider necessary and appropriate 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 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 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
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 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 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 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 investment 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 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.
The trust fund shall cause an annual financial and compliance
audit to be made by a certified public accounting firm which has a
minimum staff of ten certified public accountants and is a member
of the American institute of certified public accountants, and, if
doing business in West Virginia, is 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. The firm performing the audit shall furnish
copies of the audit report to the governor, the state treasurer,
the state auditor, the president of the Senate, the speaker of the
House of Delegates, the council of finance and administration and
the consolidated public retirement board.
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. The trust fund shall provide any other information
requested in writing by the council of finance and administration.
The trust fund shall cause an annual performance audit to be
made by a nationally recognized fiduciary service. The trust fund
shall furnish copies of the audit report to the governor, the state
treasurer, the state auditor, the president of the Senate, the
speaker of the House of Delegates, the council of finance and
administration and the consolidated public retirement board.
All statements and reports required under this section shall
be available for inspection by the members and beneficiaries 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 the contributions and accrued interest to the
West Virginia trust fund of terminating employees who elect to
transfer their funds. The trust fund shall establish a private, nonstate retirement plan for the West Virginia trust fund
employees, and the 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 which shall
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 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 stated in
the trust indenture and 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 the 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 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 to it may consider
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 participation, common stocks,
preferred stocks, common trust funds, bonds, notes or other
securities, notwithstanding the provisions of articles five and
six, chapter forty-four of this code;
(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 transaction; to pay any assessment or expense
which the trustee may consider advisable for the protection of its
interest as holder of any 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 such terms
as 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. The 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, for the
purposes of the trust created by the trust indenture, and all
properties shall be held, managed, invested and administered by the
trustee as provided in the trust indenture and in this article.
(g) The trustees 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 the
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 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 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 securities list at any time, and must give
notice of that action pursuant to subsection (h), section four of
this article, and must review the list at its annual meeting.
(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 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.
(h) 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), section four of this article,
for the purpose of receiving input from the committees regarding
the board's drafting, reviewing or modifying of 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) of this
section, in order to provide for the continuing financial security
of the trust and its participant plans. The board may meet with
the committees or any of them at its quarterly and additional
meetings for the same purpose.
_____________
(NOTE: The purpose of this bill is to create an independent
nonprofit corporation called the West Virginia trust fund to invest
and manage funds now held in the consolidated pension fund and in
the workers' compensation and pneumoconiosis funds. The trust fund
would hold assets in trust for the benefit of the participant
plans. The trust fund would have the ability to diversify 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 president of the Senate, speaker of the House,
auditor and treasurer. The trust fund is required to retain an
internal auditor and contract for an annual financial and
compliance audit and a performance audit, both to be submitted to
the governor, auditor, treasurer, president of the Senate, speaker
of the House, council of finance and administration, and
consolidated public retirement board. Monthly financial reports
are to be made to the trust fund board and quarterly investment
performance reports are to be made 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
representatives, members, and beneficiaries of the participant
plans and from 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 and
the voluntary deferred compensation plan.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§12-6-9g and §44-6B are new; therefore, strike-throughs and
underscoring have been omitted.)