Engrossed Version
House Bill 4545 History
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ENGROSSED
H. B. 4545
(By Delegates Campbell, Craig, Williams,
Browning,
Hall and Duke)
(Originating in the Committee on Pensions and Retirement)
[February 19, 2004]
A BILL to
amend the code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §18-7B-7a; and to
amend said code by adding thereto a new article, designated
§18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6,
§18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12,
§18-7C-13 and 18-7C-14, all relating to the merger and
consolidation of the teachers' defined contribution retirement
system and the state teachers retirement system generally;
closing the teachers' defined contribution retirement system
to newly hired personnel; providing that certain persons
rehired are to become members of the last plan contributed to;
setting forth short title; providing legislative findings and
purpose; providing definitions; providing for merger and
consolidation of the teachers' defined contribution retirement
system and the state teachers retirement system upon election; providing responsibilities of the consolidated public
retirement board; setting forth dates and time periods for
transition and election; requiring that increase of or new
benefits to the teachers retirement system be amortized over
a seven-year time period; providing for education about
election and merger for members; requiring legal notice to
members; providing for transfer of assets from the teachers'
defined contribution retirement system to the state teachers
retirement system upon favorable vote for consolidation and
merger; providing that the teachers' defined contribution
retirement system shall not exist upon favorable vote for
consolidation and merger; setting forth terms of merger and
consolidation of the teachers' defined contribution retirement
system and the state teachers retirement system; providing for
service credit in the state teachers retirement; requiring
members of teachers' defined contribution plan to pay
additional amount to receive credit upon merger; providing
options and loans for members moving to the remaining plan;
providing service credit for transferring member; addressing
withdrawals and cash outs; providing for election on the
question of merger and consolidation of the teachers' defined
contribution retirement system and the state teachers
retirement system; setting forth requirements of election;
allowing consolidated public retirement board to contract directly for professional services for purposes of performing
its responsibilities related to the merger and consolidation
and conducting the election; permitting only one election;
addressing qualified domestic relations orders; providing for
vesting of members and minimum guarantees of benefits for
them; providing for due process and right to appeal; and
providing for nonseverability of the new article.
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended
by adding thereto a new section, designated §18-7B-7a; and that
said code be amended by adding thereto a new article, designated
§18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6, §18-7C-
7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12, §18-7C-13
and §18-7C-14, all to read as follows:
ARTICLE 7B. TEACHERS' DEFINED CONTRIBUTION RETIREMENT SYSTEM.
§18-7B-7a. Plan closed to persons employed for the first time
after June, 2004; former employees.
The retirement system created and established in this article
shall be closed and no new members accepted therein after the
thirtieth day of June, two thousand four. Notwithstanding the
provisions of sections seven and eight of this article, all persons
who are regularly employed for full-time service as a member or
employee whose initial employment commences after the thirtieth day
of June, two thousand four, shall become members of the state teachers' retirement system created and established in article
seven-a of this chapter: Provided, That any person rehired after
the thirtieth day of June, two thousand four, shall become a member
of the teachers' defined contribution retirement system created and
established in this article, or of the teachers retirement system
created and established in article seven-a of this chapter,
depending upon the system to which he or she last contributed while
he or she was employed with an employer mandating membership and
contributions to one of those plans: Provided, however, That if,
and only if, the teachers' defined contribution retirement system
is merged and consolidated with the teachers retirement system
pursuant to the provisions of article seven-c of this chapter, then
all employees shall become a member of the teachers retirement
system as of the first day of July, two thousand five, as provided
in article seven-c of this chapter.
ARTICLE 7C. MERGER OF TEACHERS' DEFINED CONTRIBUTION RETIREMENT
SYSTEM WITH STATE TEACHERS RETIREMENT SYSTEM.
§18-7C-1. Short title.
This article may be cited as the "Teachers' Retirement Equity
Act".
§18-7C-2. Legislative findings and purpose.
The Legislature declares that the State of West Virginia and
its citizens have always believed in a strong public education
system, with our own constitution mandating a thorough and efficient public education system. The Legislature notes that the
quality of our State's education system is dependent, inter alia,
upon the motivation and quality of its teachers and educational
service personnel.
The Legislature finds and declares that the State of West
Virginia is privileged to be the home of some of the best teachers
and service personnel in this nation, and that our teachers and
service personnel are dedicated and hard working individuals. The
Legislature further finds and declares that our teachers and
service personnel should have a retirement program whereby they
know in advance what their retirement benefit will be, a defined
benefit retirement program where our teachers and service personnel
will not have to bear the risk of investment performance to receive
their full retirement benefit. The Legislature notes that
uncertainty exists in the investment markets, especially in the
post September eleven era, and that placing this risk and
uncertainty upon the state in the form of a defined benefit plan
will protect and ensure a retirement benefit for our teachers and
educational service personnel.
The Legislature declares that it is in the best interests of
the teachers and public education in this state and conducive to
the fiscal solvency of the teachers retirement system that the
teachers' defined contribution retirement system be merged with the
state teachers retirement system.
The Legislature also finds that a fiscally sound retirement
program with an ascertainable benefit aids in the retention and
recruitment of teachers and school service personnel, and that the
provisions of this article are designed to accomplish the goals set
forth in this section.
The Legislature has studied this matter diligently and in
making the determination to merge the two plans has availed itself
of an actuarial study of the proposed merger by the actuary of the
consolidated public retirement board as well as engaging the
service of two independent actuaries.
§18-7C-3. Definitions.
As used in this article, unless the context clearly requires
a different meaning:
(1) "Defined contribution system" means the teachers' defined
contribution system created and established in article seven-b of
this chapter.
(2) "Existing retirement system" or "state teachers retirement
system" means the state teachers retirement system created and
established in article seven-a of this chapter.
(3) "Board" means the consolidated public retirement board
created and established in article ten-d, chapter five of this code
and its employees.
(4) "Member" means and includes any person who has at least
one dollar in the defined contribution system.
(5) "Assets" or "all assets" means all member contributions,
employer contributions and interest or asset appreciation in a
member's defined contribution account, less any applicable fees as
approved by the board.
(6) "Salary" or "annual salary" means the annual contract
salary for those persons working in accordance with an employment
contract and in any other event as an annualized amount determined
by multiplying a person's hourly rate of pay by two thousand eighty
hours.
(7) "Date of merger" means, in the event of a positive vote on
the merger, the first day of July, two thousand five.
§18-7C-4. Merger.
On the first day of July, two thousand five, the teachers'
defined contribution retirement system created and established in
this article shall be merged and consolidated with the teachers
retirement system created and established in article seven-a of
this chapter, pursuant to the provisions of this article: Provided,
That if the majority of the voting members of the teachers' defined
contribution retirement system do not elect in favor of the merger,
then the provisions of this article are void and of no force and
effect, and the defined contribution system created and established
in article seven-b of this chapter shall continue as the retirement
system for all members in that system as of the thirtieth day of
June, two thousand five and for those persons rehired who were paying into the defined contribution system at the time of his or
her last employment.
If the merger provided for in this article occurs, should any
future increase of existing benefits or the creation of new
benefits under the teachers retirement system, other than an
increase in benefits or new benefits effected by operation of law
in effect on the effective date of this article, cause any
additional unfunded actuarial accrued liability in the state
teachers retirement pension system (calculated in an actuarially
sound manner) during any fiscal year, such additional unfunded
actuarial accrued liability of that pension system shall be fully
amortized over no more than the seven consecutive fiscal years
following the date the increase in benefits or new benefits become
effective.
§18-7C-5. Notice, education, record keeping requirements.
(a) Commencing not later than the first day of August, two
thousand four, the consolidated public retirement board shall begin
an educational program with respect to the merger of the defined
contribution plan with the state teachers retirement system. This
education program shall address, at a minimum, the law providing
for the merger, the mechanics of the merger, the election process,
relevant dates and time periods, the benefits, potential advantages
and potential disadvantages if members elect to remain in the
defined contribution system, the benefits, potential advantages and potential disadvantages of becoming members of the teachers
retirement system, potential state and federal tax implications in
general attendant to the various options available to the members
and any other pertinent information deemed relevant by the board.
The board shall provide this information through its website, by
written materials, electronic materials or both written and
electronic materials delivered to each member and by classes or
seminars, if, in the best judgment of the board, the classes and
seminars are necessary. The board shall also provide this
information through computer programs, or, at the discretion of the
board through a program of individual counseling which is optional
on the part of the member, and through any other educational
program or programs deemed necessary by the board.
(b) The board shall provide each member with a copy of the
written or electronic educational materials and with a copy of the
notice of the election. The notice shall provide full and
appropriate disclosure of the merger and the election process,
including the date of the election. The board shall also cause
notice of the election to be published in at least ten newspapers
of general circulation in this state. This notice shall be by
Class III legal advertisement published in accordance with the
provisions of article three, chapter fifty-nine of this code. The
board shall cause this notice to be published not later than thirty
days prior to the beginning of the election period and not sooner than sixty days prior to the beginning of the election period.
(c) It is the responsibility of each member of the defined
contribution plan to keep the board informed of his or her current
address. If a member does not keep the board informed of his or
her current address, he or she is deemed to have waived his or her
right to receive any information from the board.
(d) Once the board has complied with the provisions of this
section, every member of the defined contribution plan is deemed to
have actual notice of the election and all matters pertinent
thereto.
§18-7C-6. Conversion of assets from defined contribution system
to state teachers retirement system.
(a) If a majority of members voting elect to merge the defined
contribution system into the state teachers retirement system, the
consolidation and merger shall be governed by the provisions of
this article, the defined contribution retirement system shall not
exist after the thirtieth day of June, two thousand five, and all
members thereof shall become members of the state teachers
retirement system as provided herein.
(b) Following the election in favor of the merger, the board
shall transfer all assets in the defined contribution account into
the state teachers retirement system and members have the option to
pay into the state teachers retirement system a one and one-half of
one percent contribution for service in the defined contribution plan being recognized in the state teachers retirement system.
This contribution shall be calculated based on the member's salary
as of the thirtieth day of June, two thousand four, and the members
attained age on that date, applying an annual backward salary scale
projection from that date for prior years based upon the salary
scale assumption applied in the actuarial valuation dated the first
day of July, two thousand three, for the teachers retirement system
and a one year forward salary scale projection for the year ending
on the thirtieth day of June, two thousand five. Members have
until the first day of July, two thousand six, to pay this amount.
If a member makes no payment whatsoever toward this amount by the
first day of July, two thousand six, the member is deemed to have
forever waived his or her right to pay this amount and to have made
an irrevocable election not to pay this amount. In this instance,
the board shall make the appropriate actuarial adjustment to that
member's annuity.
(c) The board shall make available to the members a loan in
accordance with the provisions of section thirty-four, article
seven-a of this chapter to be used by the members to pay all or a
part of the one and one-half percent amount established in this
section. Notwithstanding any provision of this code, any rule or
any policy of the board to the contrary, the interest rate on any
loan used to pay the one and one-half percent amount may not exceed
seven and one-half percent per annum and the amount borrowed may not exceed twelve thousand dollars. In the event a plan loan is
used to pay the one and one-half percent, the board shall make any
actuarial adjustments at the time the loan is made. The board
shall make this plan loan available for members until the thirtieth
day of June, two thousand six.
(d) The board shall include a payroll deduction program for
the repayment of the plan loan established in this section.
(e) If the merger and consolidation is elected by a majority
of those person voting, as of the first day of July, two thousand
five, the members' contribution rate shall become six percent of
his or her salary or wages and the retirement members who make a
contribution into the state teachers retirement system on or after
the first day of July, two thousand five, shall be governed by the
provisions of article seven-a of this chapter subject to the
provisions of this article.
(f) In the event a member has withdrawn or cashed out part of
his or her defined contribution plan, that member will not be given
credit for those moneys cashed out or withdrawn. The board shall
make an actuarial determination as to the amount of credit a member
loses on the amounts he or she has withdrawn or cashed out which
actuarial adjustment shall be expressed as a loss of service
credit: Provided, That a member may repay those amounts he or she
cashed out or withdrew, along with interest determined by the board
and receive the same credit as if the withdrawal or cash out never occurred if this repayment is completed within five years following
the date of the cash out or withdrawal: Provided, however, That
these amounts shall be fully repaid no later than the thirtieth day
of June, two thousand five. If the repayment is five or more years
following the cash out or withdrawal, then he or she must repay any
forfeited employer contribution account balance along with interest
determined by the board in addition to the cash out or withdrawn
amount: Provided further, That these amounts shall be fully repaid
not later than the thirtieth day of June, two thousand five.
(g) Where the member has cashed out of his or her teacher
defined contribution plan account balance after the last day of
June, two thousand, and that member wishes to repurchase defined
contribution plan service after the thirtieth day of June, two
thousand five, then the member must repay the teachers retirement
plan within five years of the date of cash out.
(h) Any prior service in the state teachers retirement system
a member may have is not affected by the provisions of this
article.
§18-7C-7. Service credit in state teachers retirement system
following merger.
Any member transferring all of his or her assets from the
defined contribution system to the state teachers retirement system
pursuant to the provisions of this article, and who has not made
any withdrawals from his or her defined contribution plan, is entitled to service credit in the state teachers retirement system
for each year, or part thereof, as governed by the provisions of
article seven-a of this chapter, the member worked and contributed
to the defined contribution plan. Any member who has made
withdrawals or cash outs will receive service credit based upon the
amounts transferred and the board shall make the appropriate
actuarial determination of the service credit the member will
receive.
§18-7C-8. Election; board may contract for professional services.
(a) The board shall arrange for and hold an election for the
members of the defined contribution plan on the issue of merging
and consolidating the defined contribution plan into the state
teachers retirement plan with the result being that, if a majority
of the members casting ballots vote in the positive on the issue,
all members of the defined contribution plan will transfer, or have
transferred, all assets held by them or on their behalf in the
defined contribution plan to and become members of, and entitled to
the benefits of the state teachers retirement system and be
governed by the provisions of the state teachers retirement system
subject to the provisions of this article: Provided, That at least
one-half of the members of the defined contribution plan must vote
on the question in order for the election to be valid and binding.
(b) Any person who has one dollar or more in a defined
contribution account created and established pursuant to article seven-b of this chapter, is allowed to vote on the question of the
merger.
(c) The board may retain the services of the professionals it
deems necessary to: (1) Assist in the preparation of educational
materials for members of the defined contribution plan to inform
these members of their options in the election; (2) assist in the
educational process of the members; (3) assist in the election
process and the election; and (4) ensure compliance with all
relevant state and federal laws.
(d) Due to the time constraints inherent in the merger process
set forth in this article in specific, and to the nature of the
professional services required by the consolidated public
retirement board in general, the provisions of article three,
chapter five-a of this code relating to the division of purchasing
of the department of administration do not apply to any contracts
for any actuarial services, investment services, legal services or
other professional services authorized under the provisions of this
article.
(e) The election provided for in this section may be held
through certified mail or in any other way the board determines is
in the best interest of the members. Each ballot shall contain the
following language, in bold fifteen point type: "By casting this
ballot I am making an educated, informed and voluntary choice as to
my retirement and the retirement system of which I wish to be a member. I am also certifying that I understand the consequences of
my vote in this election." Each ballot shall be signed by the
member voting. The board shall retain the ballots in a permanent
file.
(f) The election period shall begin not later than the first
day of March, two thousand five and the board shall ascertain the
results of the election not later than the last day of March, two
thousand five. The board shall certify the results of the election
to the governor, to the Legislature and to the members not later
than the fifth day of April, two thousand five.
(g) The election period shall terminate and no votes may be
cast or counted after the twelfth day of March, two thousand five,
except that if the election is conducted through the United States
mails, the ballot shall be postmarked not later than the twelfth
day of March, two thousand five, in order to be counted.
(h) The board shall take all necessary steps to see that the
merger does not affect the qualified status with the Internal
Revenue Service of either retirement plan.
§18-7C-9. Election deemed final.
(a) The election is deemed final and each member, whether he
or she votes, or fails to vote, shall thereafter be bound by the
results of the election. Every member is deemed to have made an
informed, educated, knowing and voluntary decision and choice with
respect to the election. Those members who fail or refuse to vote are also deemed to have made an informed, educated, knowing and
voluntary decision and choice with respect to the election and with
respect to voting and shall be bound by the results of the election
as if he or she voted in the same.
(b) Only one election may be held pursuant to the provisions
of this article on the issue of merging and consolidating the
defined contribution plan with the state teachers retirement plan.
§18-7C-10. Qualified domestic relations orders.
Any member having a qualified domestic relations order against
his or her defined contribution account is allowed to repurchase
service in the state teachers retirement system by repaying any
moneys distributed to the alternate payee along with the interest
as set by the board: Provided, That a member shall repay any
amounts under this section by the last day of June, two thousand
eleven. The provisions of this section are void and of no effect
if the members of the defined contribution plan fail to elect to
merge and consolidate the defined contribution plan with the state
teachers retirement system.
§18-7C-11. Vesting.
Any member who works one hour or more after the date of merger
provided for in this article occurs is subject to the vesting
schedule set forth in article seven-a of this chapter: Provided,
That if a member is vested under the defined contribution plan and
his or her last contribution was not made to the state teachers retirement system, that member is subject to the vesting schedule
set forth in article seven-b of this chapter.
§18-7C-12. Minimum guarantees.
(a) Any member of the defined contribution plan who has made
a contribution to the state teachers retirement system after the
date of merger is guaranteed a minimum benefit equal to his or her
contributions to the defined contribution plan as of the thirtieth
day of June, two thousand five, plus his or her vested employer
account balance as of that date, as stated by the board or the
boards professional contractor.
(b) A member of the defined contribution plan who has made
contributions to the state teachers retirement system after the
thirtieth day of June, two thousand five, where that plan has been
merged into the state teachers retirement system pursuant to the
provisions of this article shall have, upon eligibility to receive
a distribution under article seven-a of this chapter, at a minimum,
the following three options: (1) The right to receive an annuity
from the state teachers retirement system created and established
in article seven-a of this chapter based upon the benefit and
vesting provisions of that article; (2) the right to withdraw from
the state teachers retirement plan and receive his or her member
accumulated contributions plus regular interest thereon as set
forth in article seven-a of this chapter; or (3) the right to
withdraw and receive his or her original vested defined contribution account balance as of the date of the merger as
determined by the board or its professional third party benefits
administrator pursuant to the vesting provisions of section twelve
of this article.
(c) Any member of the teachers' defined contribution system
who makes no contribution to the state teachers retirement system
following approval of the merger and following the date of merger
is guaranteed the receipt of the amount in his or her total vested
account in the defined contribution plan on the date of merger plus
interest thereon at four percent accruing from the date of merger.
§18-7C-13. Due process and right to appeal.
Any person aggrieved by any actuarial determination made by
the board following the election, if the result of the election is
in favor of merger and consolidation, may petition the board and
receive an administrative hearing on the matter in dispute. The
administrative decision may be appealed to a circuit court.
§18-7C-14. Nonseverability.
If any provision of this article is held unconstitutional or
void, the remaining provisions of this article shall be void and of
no effect and, to this end, the provisions of this article are
hereby declared to be nonseverable.