Senate Bill No. 602
(By Senator Plymale and Fanning)
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[Introduced February 21, 2000; referred to the Committee
on Pensions; and then to the Committee on Finance.]
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A BILL to amend and reenact section eight, article one, chapter
twelve of the code of West Virginia, one thousand nine hundred
thirty-one, as amended; and to amend and reenact sections
one-a, two, three, four, five, six, eight, nine, nine-a,
eleven, twelve and twenty, article six of said chapter, all
relating to the West Virginia investment management board;
correcting and clarifying inconsistencies; deleting outdated
conflict of interest provision regarding board members and
state depositories; allowing for the common investment of
pension, workers' compensation and other assets in board-
created investment vehicles; changing date of annual meeting;
providing for staggered terms of board members; amending
statutory trust language to conform with trust indenture; clarifying that all assets invested by the board are to be
assessed appropriate fees; and eliminating certain
restrictions on investments.
Be it enacted by the Legislature of West Virginia:
That section eight, article one, chapter twelve of the code of
West Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted; and that sections one-a, two, three, four,
five, six, eight, nine, nine-a, eleven, twelve and twenty, article
six of said chapter be amended and reenacted, all to read as
follows:
ARTICLE 1. STATE DEPOSITORIES.
§12-1-8. Conflict of interest.
No depository in this state may serve or be eligible for
designation as a state depository if any member of the West
Virginia investment management board, or employee of the
treasurer's office, or a spouse or minor child of that member or
employee, is an officer, director or employee thereof, or owns
greater than two percent of the depository either in his or their
own name or beneficially, or an interest in such depository. A
member of the board or An employee of the treasurer's office shall
disclose the circumstance, if any, in the sworn statement required
under the provisions of section one, article one, chapter six-b of this code.
ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.
§12-6-1a. Legislative findings.
(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
division 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 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 finds and declares that teachers and other
public employees throughout the state are experiencing economic
difficulty and that in order to reduce this economic hardship on
these dedicated public employees, and to help foster sound
financial practices, the West Virginia investment management board
is given the authority to develop, implement and maintain an
efficient and modern system for the investment and management of the state's money. The Legislature further finds that in order to
implement these sound fiscal policies, the West Virginia investment
management board shall operate as an independent board with its own
full-time staff of financial professionals immune to changing
political climates, in order to provide a stable and continuous
source of professional financial management.
(c) 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 to the consolidated pension plan 401(a) plans are
declared to be made to an irrevocable trust on behalf of each such
plan, available for no use or purpose other than for the benefit of
those public employees.
(d) The Legislature hereby finds and declares further that the
workers' compensation funds and coal-workers' pneumoconiosis fund
are trust funds to be used exclusively for those workers, miners
and their beneficiaries who have sacrificed their health in the
performance of their jobs, and further finds that the assets
available to pay awarded benefits should be prudently invested so
that awards may be paid.
(e) The Legislature hereby finds and declares further that an
independent public body corporate with appropriate governance shall
be the best means of assuring prudent financial management of these
funds under rapidly changing market conditions and regulations.
(f) The Legislature hereby finds and declares further that in
accomplishing this purpose, the West Virginia investment management
board, 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
investment management board is empowered by this article to act as
trustee for an of the
irrevocable trust
(g) The Legislature hereby finds and declares further that the
standard of care and prudence applied to trustees, the conduct of
the affairs of the irrevocable trust trusts created by this article
and the investment of other state funds is intended to be that
applied to the investment of funds as described in the "uniform
prudent investor act" codified as article six-c of this chapter
forty-four and as described in section eleven of this article.
(h) The Legislature further finds and declares that the West
Virginia supreme court of appeals declared the "West Virginia
Trust Fund Act" unconstitutional in its decision rendered on the twenty-eighth day of March, one thousand nine hundred ninety-seven,
to the extent that it authorized investments in corporate stock but
the court also recognized that there were other permissible
constitutional purposes of the "West Virginia Trust Fund Act," and
that it is the role of the Legislature to determine those purposes
consistent with the court's decision and the constitution of West
Virginia.
(i) The Legislature hereby further finds and declares that it
is in the best interests of the state and its citizens to create
a new investment management board in order to: (1) Be in full
compliance with the provisions of the constitution of West
Virginia; and (2) protect all existing legal and equitable rights
of persons who have entered into contractual relationships with the
West Virginia board of investments and the West Virginia trust
fund.
§12-6-2. Definitions.
As used in this article unless a different meaning clearly
appears from the context:
(1) "Beneficiaries" means those individuals entitled to
benefits from the consolidated pension plan;
(2) "Board" means the governing body for the West Virginia
investment management board, and any reference elsewhere in this code to board of investments or West Virginia trust fund means the
board as defined herein;
(3) "Consolidated fund" means the investment fund managed by
the board and established pursuant to subsection (a), section eight
of this article;
(4) "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 state police 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, the wildlife endowment fund established in article two-b,
chapter twenty of this code, and the coal-workers' pneumoconiosis
plan established in article four-b, chapter twenty-three of this
code;
(4) "401(a) plan" means a plan which is described in section
401(a) of the Internal Revenue Code of 1986, as amended;
(5) "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;
(6) "Participant plan" means any component system, plan or
fund identified in subsection (a) of section nine-a of this
article; of the consolidated pension plan within the definition set
forth in subdivision (4) of this section
(7) "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) "Trustee" means any member serving on the West Virginia
investment management board: Provided, That in section nine-a of
this article wherein the terms of the trust indenture are set
forth, "trustee" means the West Virginia investment management
board;
(9) "Securities" means all bonds, notes, debentures or other
evidences of indebtedness, and other lawful investment instruments;
and
(10) "State funds" means all moneys of the state which may be lawfully invested except the "school fund" established by section
four, article XII of the state constitution.
§12-6-3. West Virginia investment management board created; body
corporate; board created; trustees; nomination and
appointment of trustees, qualifications and terms of
appointment, advice and consent; annual and other
meetings; designation of representatives and
committees; board meetings with committees regarding
investment policy statement required; open meetings,
qualifications.
(a) There is hereby created the West Virginia investment
management board. The board is created as a public body corporate
and established to provide prudent fiscal administration,
investment and management for the pension funds, workers'
compensation and coal-workers' pneumoconiosis funds and other state
funds.
(b) The board shall be governed by a board of trustees,
consisting of thirteen members:
(1) Nominations made to the West Virginia trust fund board and
the West Virginia board of investments shall remain in effect and
are hereby specifically reauthorized and those members shall be
members of the investment management board and shall serve out the remainder of their respective terms subject to the advice and
consent of the Senate: Provided, That prior appointments which
have been confirmed by the Senate are hereby specifically
reauthorized without further action of the Senate.
(2) Any appointment is effective immediately upon appointment
by the governor with respect to voting, constituting a quorum,
receiving compensation and expenses, and all other rights and
privileges of the trustee position. All appointees must have
experience in pension management, institutional management or
financial markets, and one trustee must be an attorney experienced
in finance and investment matters, and one trustee must be a
certified public accountant.
(3) The governor, the state auditor and the state treasurer or
their designees shall serve as members of the board. They shall
serve by virtue of their office and are not entitled to
compensation under the provisions of this article. The governor,
the auditor and the treasurer or their designees shall be subject
to all duties, responsibilities and requirements of the provisions
of this article, including, but not limited to, the provisions of
subsections (e) and (f), section four of this article.
(c)At the end of each trustee's term, the governor may
reappoint or appoint a successor who shall serve for six-year terms: Provided, That for all terms ending in the year two
thousand one, two appointments shall be for a two-year term; two
shall be for a three-year term; one shall be for a four-year term;
and two shall be for a six-year term. All subsequent appointments
shall be for six-year terms. No more than six of the ten appointed
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.
(e) The governor may remove any trustee, other than trustees
who serve by virtue of their elective office, in case of gross
negligence or misfeasance and may declare that position vacant and
may appoint a person for the vacancy as provided in subsection (d)
of this section.
(f) Each trustee, other than those enumerated in subsection
(b), subdivision (3) of this section, shall be entitled to receive,
and, at the trustee's option, the board shall pay to the trustee,
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, all trustees shall
receive reasonable and necessary expenses actually incurred in discharging trustee duties pursuant to this article.
(g) The board shall meet quarterly and may include in its
bylaws procedures for the calling and holding of additional
meetings. For any quarterly or additional meeting in which the
board shall review or modify its securities list or its investment
objectives pursuant to subsection (f), section twelve of this
article, the board shall give ten days notice in writing to the
designated representative of each participant plan selected
pursuant to subdivision (1), subsection (i) of this section, and
the meeting shall be open to the members and beneficiaries of the
participant plans for that portion of the meeting in which the
board undertakes the review or modification.
(h) The board shall hold an annual meeting within forty-five
days after the issuance of the year-end financial report prior to
the start of the fiscal year. 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.
(i) Pursuant to subsection (j) of this section, the board shall meet with committees representing the participant plans to
discuss the board's drafting, reviewing or modifying the written
investment policy of the trust with respect to that committee's
participant plan pursuant to section twelve of this article.
Representatives and committees shall be designated as follows:
(1) The West Virginia consolidated public retirement board
shall promulgate procedural rules by which each pension system
named in paragraphs (1) through (6), inclusive, subsection (c),
section nine-a of this article, 401(a) plan for which the board is
trustee
shall designate an individual representative of each said
pension system 401(a) plan, 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 said fund.
(2) On or before the first day of June of each year, the
consolidated public retirement board shall submit in writing to the
board the names of the six designated representatives, and the
workers' compensation commission shall so submit the names of the
two representatives.
(3) Each designated representative shall provide to the board
his or her current address, updated each year on or before the
first day of July, to which address the board shall provide notice of meetings of the board pursuant to subsection (g) of this
section.
(4) Each designated representative shall submit in writing to
the board on or before the first day of July of each year, the
names of no more than three persons comprising a committee
representing the beneficiaries of that representative's participant
plan.
(j) At its annual meeting, the board shall meet with each of
the seven committees, formed pursuant to subdivision (1),
subsection (i) of this section, for the purpose of receiving input
from the committees regarding the board's drafting, reviewing or
modifying its written investment policy statement for investment of
the consolidated pension plan funds. In developing the investment
policy statement, the trustees shall receive each committee's
stated objectives and policies regarding the risk tolerances and
return expectations of each participant plan, with attention to the
factors enumerated in subsection (g), section twelve of this
article, in order to provide for the continuing financial security
of the trust trusts and the participant plans. The board may meet
with the committees or any of them at its quarterly and additional
meetings for the same purpose.
(k) All meetings of the board shall be open to the representatives of the participant plans as appointed pursuant to
subdivision (1), subsection (i) of this section. The
representatives shall be subject to any rules, bylaws, guidelines,
requirements and standards promulgated by the board. The
representatives shall observe standards of decorum established by
the board. The representatives shall be subject to the same code
of conduct applicable to the trustees and shall be subject to all
board rules and bylaws. The representatives shall also be subject
to any requirements of confidentiality applicable to the trustees.
Each representative shall be liable for any act which he or she
undertakes which violates any rule, bylaw or statute governing
ethical standards, confidentiality or other standard of conduct
imposed upon the trustees or the representatives. Any meeting of
the board may be closed, upon adoption of a motion by any trustee,
when necessary to preserve the attorney-client privilege, to
protect the privacy interests of individuals, to review personnel
matters or to maintain confidentiality when confidentiality is in
the best interest of the beneficiaries of the trust trusts.
§12-6-4. Management and control of fund; officers; staff;
fiduciary or surety bonds for trustees; liability of
trustees.
(a) The management and control of the board shall be vested solely in the trustees in accordance with the provisions of this
article.
(b) The governor shall be the chairman of the board and the
trustees shall elect a vice chairman who may not be a
constitutional officer or his or her designee to serve for a term
of two years. Effective with any vacancy in the vice chairmanship,
the board shall elect a vice chairman to a new two-year term. The
vice-chairman shall preside at all meetings in the absence of the
chairman. Annually, 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 board and shall fix his or her duties and compensation. The
chief executive officer shall have five years experience in
investment management with public or private funds within the ten
years next preceding the date of appointment. The chief executive
officer additionally shall have academic degrees, professional
designations and other investment management or investment
oversight or institutional investment experience in such
combination as the trustees consider necessary to carry out the
responsibilities of the chief executive officer position as defined
by the trustees.
(d) The trustees shall retain an internal auditor to report
directly to the trustees and shall fix his or her compensation. The
internal auditor shall be a certified public accountant with at
least three years experience as an auditor. The internal auditor
shall develop an internal audit plan, with board approval, for the
testing of procedures and the security of transactions.
(e) Each trustee shall give a separate fiduciary or surety
bond from a surety company qualified to do business within this
state in a penalty amount of one million dollars for the faithful
performance of his or her duties as a trustee of the fund
participant plans.
The board shall purchase a blanket bond for the
faithful performance of its duties, in the amount of fifty million
dollars or in an amount equivalent to one percent of the assets
under management, whichever is greater. The amount of the blanket
bond shall be in addition to the one million dollar individual bond
required of each trustee by the provisions of this section. The
board may require a fiduciary or surety 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 fiduciary or surety bond shall
be fixed by the board. The premiums payable on all fiduciary or
surety bonds shall be an expense of the board.
(f) The trustees and employees of the board are not liable
personally, either jointly or severally, for any debt or obligation
created by the board: Provided, That the trustees and employees of
the board are liable for acts of misfeasance or gross negligence.
(g) The board shall be exempt from the provisions of sections
seven and eleven, article three, chapter twelve of this code and
article three, chapter five-a of said code: Provided, That the
trustees and employees of the board shall be subject to purchasing
policies and procedures which shall be promulgated by the board.
The purchasing policies and procedures may be promulgated as
emergency rules pursuant to section fifteen, article three, chapter
twenty-nine-a of this code.
(h) Any employee of the West Virginia trust fund who
previously was an employee of another state agency may return to
the public employees retirement system pursuant to section
eighteen, article ten, chapter five of this code, and may elect to
either: (1) Transfer to the public employee retirement system his
or her employee contributions, with accrued interest, and, if
vested, his or her employer contributions, with accrued interest
and retain as credited state service all time served as an employee
of the West Virginia trust fund; or (2) retain all employee
contributions with accrued interest and, if vested, his or her employer contributions with interest, and forfeit all service
credit for the time served as an employee of the West Virginia
trust fund.
§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) Notwithstanding any other provision of law, 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 and in any other lawful
investments;
(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 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 the securities by the board at a stated price;
(11) Consolidate and manage moneys, securities and other
assets of the 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 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 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;
(16) Make, and from time to time, amend and repeal bylaws,
regulations and procedures not inconsistent with the provisions of
this article;
(17) Hire its own employees, consultants, managers and
advisors as it considers necessary and fix their compensation and
prescribe their duties;
(18) Develop, implement and maintain its own banking accounts
and investments;
(19) Do all things necessary to implement and operate the
board and carry out the intent of this article;
(20) Require the state auditor and treasurer to transmit state
funds on a daily basis for investment: Provided, That money held
for meeting the daily obligations of state government need not be
transferred;
(21) Upon request of the treasurer, transmit funds for deposit
in the state treasury to meet the daily obligations of state
government; and
(22) Establish one or more investment funds for the purpose of
investing the funds for which it is trustee, custodian or otherwise
authorized to invest pursuant to this article. Interests in each
fund shall be designated as units and the board shall adopt appropriate accounting procedures in connection with each fund so
that a unit's value can be determined as appropriate. The
securities in each investment fund shall be the property of the
board and each fund shall be considered an investment pool or fund
and may not be considered a trust nor shall the securities of the
various investment funds be considered held in trust. However,
units in an investment fund issued to or sold to the board and the
proceeds from the sale or redemption of any such unit may be held
by the board in its role as trustee of the participant plans.
(23) Notwithstanding any other provision of the this code to
the contrary, conduct investment transactions, including purchases,
sales, redemptions and income collections which transactions shall
not be treated by the auditor as recordable transactions on the
state's accounting system.
§12-6-6. Annual audits; reports and information to constitutional
and legislative officers, council of finance and
administration, consolidated public retirement board,
workers' compensation fund and coal-workers'
pneumoconiosis fund; statements and reports open for
inspection.
(a) The board shall cause an annual financial and compliance
audit of the consolidated pension fund assets managed by the board to be made by a certified public accounting firm having a minimum
staff of ten certified public accountants and being a member of the
American institute of certified public accountants, and, if doing
business in West Virginia, being a member of the West Virginia
society of certified public accountants. The financial and
compliance audit shall be made of the board's books, accounts and
records, with respect to its receipts, disbursements, investments,
contracts and all other matters relating to its financial
operations. Copies of the audit report shall be furnished to the
governor, state treasurer, state auditor, president of the Senate,
speaker of the House of Delegates, council of finance and
administration and consolidated public retirement board.
(b) The board shall produce monthly financial statements for
the consolidated pension fund and the consolidated fund participant
plans and cause them to be delivered to each member of the board
and the executive secretary of the consolidated public retirement
board as established in sections one and two, article ten-d,
chapter five of this code and to the commissioner of the bureau of
employment programs as administrator of the workers' compensation
fund and coal-workers' pneumoconiosis fund, as established in
section one, article one, chapter twenty-three of this code, and
section one, article three of said chapter and section seven, article four-b of said chapter.
(c) The board shall deliver in each quarter to the council of
finance and administration and the consolidated public retirement
board a report detailing the investment performance of the
retirement plans.
(d) The board shall cause an annual audit of the reported
returns of the consolidated pension fund participant plans to be
made by an investment consulting or a certified public accounting
firm meeting the criteria set out in subsection (a) of this
section. The board shall furnish copies of the audit report to the
governor, state treasurer, state auditor, president of the Senate,
speaker of the House of Delegates, council of finance and
administration and consolidated public retirement board.
(e) The board shall provide any other information requested in
writing by the council of finance and administration.
(f) All statements and reports with respect to participant
plans required in this section shall be available for inspection by
the members and beneficiaries and designated representatives of the
participant plans.
§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 fund".
(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.
(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 the political subdivision. Any political subdivision may enter
into an agreement with any state agency from which it receives
funds to allow the funds to be transferred to their investment
account with the investment management board.
(d) Moneys held in the various funds and accounts administered
by the board shall be invested as permitted in section twelve of by
this article. and subject to the restrictions contained in that
section The treasurer shall maintain records of the deposits and
withdrawals of each participant and the performance of the various
funds and accounts. The board shall report the earnings on the
various funds under management to the treasurer at such times as
determined by the treasurer. The board shall also establish rules
for the administration of the various funds and accounts
established by this section as it considers necessary for the
administration 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: 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 those
moneys in accordance with the restrictions specially applicable to
those moneys: Provided, however, the consolidated fund and the
moneys of the consolidated pension plan shall not be combined or
deposited to a single account or fund That in the case of money
transferred to the board as trustee, the board shall hold in one or
more separate trusts the assets of each 401(a) plan for which the
board is trustee and the trusts may not hold the assets of any
other fund transferred to the board under this article or
otherwise. However, this prohibition does not prevent the board as
trustee of a 401(a) plan from investing the 401(a) plan's assets in
any of its investment funds even though the board may also invest
non-401(a) plan moneys in those investment funds.
§12-6-9. Fees for service.
The board shall charge fees, as adopted at the annual meeting,
for the reasonable and necessary expenses incurred by the
investment management board in rendering services to the participant plans and the consolidated fund all entities depositing
assets with the board for investment. The fees shall be subtracted
from the total return of the board, and the net return shall be
credited to each of the participant plans and the consolidated fund
entities depositing assets with the board for investment. All fees
which are dedicated or identified or readily identifiable to an
individual participant plan or the consolidated fund entity shall
be charged against that plan or fund to that entity, 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.
§12-6-9a. Trust indenture.
On the effective date of this section, all assets of the
irrevocable trust entered into by the governor on the first day of
July, one thousand nine hundred ninety-six, with the West Virginia
trust fund, inc., acting as the trustee shall constitute the corpus
of an irrevocable trust with the board as its trustee: Provided,
That the trust shall continue to be subject to the following
provisions:
(a) The board shall continue to hold each participant plan
specified by this article in a separate trust with the earnings and
losses accounted for and charged individually to each participant plan and trust. Participant plans, each held in a separate trust,
shall include, but not be 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 division
of public safety;
(5) The judges' retirement system;
(6) The deputy sheriff retirement system;
(7) The pneumoconiosis fund; and
(8) The workers' compensation fund.
(a) (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 the trusts without consent of the
trustee, or any beneficiary,
except that no amendment to a trust
which holds any 401(c) moneys may be made which allows at any time
prior to the satisfaction of all liabilities with respect to
employees and their beneficiaries under the trust for any part of
the corpus or income (other than that part as is required to pay
taxes and administration expenses) to be used for, or diverted to,
purposes other than for the exclusive benefit of the employees or their beneficiaries;
and
(2) The right to request and receive additional information
from the trustee at any time.
(b) The trustee shall establish a trust for the participant
plans specified by this article 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 deputy sheriff retirement system;
(7) The pneumoconiosis fund; and
(8) The workers' compensation fund.
(c) In the administration of the trust trusts created by the
trust indenture this article, the trustee has the following powers:
(1) To purchase, retain, hold, transfer and exchange, and to
sell, at public or private sale, the whole or any part of the trust
estate upon such terms and conditions as it considers advisable;
(2) To invest and reinvest the trust estate or any part thereof, in any kind of property, real or personal, including, but
not limited to, mortgage or mortgage participations, common stocks,
preferred stocks, common trust funds, bonds, notes or other
securities, notwithstanding the provisions of articles five and
six, chapter forty-four of this code: Provided, That
notwithstanding the provisions of this article to the contrary,
the board shall not become a stockholder or owner of any company or
association for any purpose whatsoever unless and until the
provisions of section six, article X of the constitution of West
Virginia are amended to permit those investments;
(3) To carry the securities and other property held under the
trust indenture in trust 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 in trust, 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 considers advisable for the protection of its
interest as holder of any such securities; to deposit securities in
any voting trust or with any protective or like committee, or with a trustee depository; to exercise any option appurtenant to any
securities for the conversion of any securities into other
securities; and to exercise or sell any rights issued upon or with
respect to the securities of any corporation, all upon terms the
trustee considers advisable;
(5) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the trustee or other
trust estate;
(6) To employ and pay from the trust, estate legal and
investment counsel, brokers and such other assistants and agents as
the trustee considers advisable; and
(7) To develop, implement and modify an asset allocation plan
for each participant plan. The asset allocation plans shall be
implemented within the management and investment of the individual
trust fund.
(d) 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.
(e) Notwithstanding any other provision of this article, no
part of the corpus or income (within the taxable year or thereafter) may be used a trust, which holds any 401(a) plan's
moneys
for, or diverted to, purposes other than the exclusive
benefit of the employees and their beneficiaries at anytime prior
to the satisfaction of all liabilities with respect to the
employees and beneficiaries of the related 401(a) plan.
(e) (f) The trustee may receive any other property, real or
personal, tangible or intangible, of any kind whatsoever, that may
be granted, conveyed, assigned, transferred, devised, bequeathed or
made payable to it by the state, or by any other person or entity,
for the purposes of the trust created by the trust indenture, and
all such properties shall be held, managed, invested and
administered by the trustee as provided in the trust indenture this
article and in the "West Virginia Investment Management Act."
(f) (g) The trustee shall promptly cause to be paid to the
state from the applicable trust the amounts certified by the
governor as necessary for the monthly payment of benefits to the
beneficiaries of the such trust.
(g) (h) The trustee shall render an annual accounting to the
governor not more than one hundred twenty days following the close
of the fiscal year of the each trust.
(h) (i) The trust will shall not be 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 each trust shall continue for such time as necessary to
accomplish the purposes for which it is established.
(i) (j) If any provision of the trust indenture this section
is void, invalid or unenforceable, the remaining provisions are
nevertheless valid and shall be carried into effect.
§12-6-11. Standard of care.
Any investments made under this article shall be made in
accordance with the provisions of the "Uniform Prudent Investor
Act" codified as article six-c of this chapter forty-four and shall
be further subject to the following requirements:
(a) Trustees shall discharge their duties with respect to the
consolidated pension plan participant plans for the exclusive
purpose of providing benefits to participants and their
beneficiaries;
(b) Trustees shall diversify fund investment 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 funds under management; and
(d) Trustees shall discharge their duties in accordance with
the documents and instruments governing the trust fund trusts or other funds under management insofar as such documents and
instruments are consistent with the provisions of this article.
§12-6-12. Investment objectives.
(a) The board shall not become a stockholder or owner of any
company or association for any purpose whatsoever unless and until
the provisions of section six, article X of the constitution of
West Virginia are amended to provide for those investments. If at
some time, after the effective date of this section, the provisions
of section six, article X of the constitution of West Virginia are
amended to allow the state to become a stockholder in a
corporation, the board shall limit its asset allocation and types
of securities to the following:
(1) For the first twelve months following authorization of the
state to become a stockholder or owner of any corporation, the
board 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 or the consolidated fund;
during the thirteenth through and including the twenty-fourth month
following the authorization, the board 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 or the consolidated fund; and thereafter, the board 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 or the consolidated fund.
(2) The board shall hold in international securities no more
than twenty percent of the consolidated fund or the trust fund and
no more than twenty percent of the assets of any individual
participant plan or the consolidated fund.
(3) The board may not at the time of purchase hold more than
five percent of the trust fund or consolidated fund 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
board may hold securities of that equity equal to its market
weighting.
(b) The board shall at all times limit its asset allocation
and types of securities to the following:
(1) The board may not hold more than twenty percent of the
trust fund in commercial paper. Any commercial paper 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.
(2) At no time shall the board hold more than seventy-five percent of the trust fund or consolidated fund in corporate debt.
Any corporate debt security at the time of its acquisition shall be
rated in one of the four highest rating categories by a nationally
recognized rating agency.
(3) No security may be purchased by the board unless the type
of security is on a list approved by the board. The board may
modify the securities list at any time, and must give notice of
that action pursuant to subsection (g), section three of this
article, and must review the list at its annual meeting.
(c) The board, at the annual meeting provided for in
subsection (h), section three of this article, shall review,
establish and modify, if necessary, the investment objectives of
the individual participant plans, as incorporated in the investment
policy statements of the respective trusts so as to provide for the
financial security of the trust funds 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.
§ 12-6-20. Termination of board.
Pursuant to the provisions of article ten, chapter four of
this code, the West Virginia investment management board shall
continue to exist until the first day of July, two thousand two
thousand two.
NOTE: The purpose of this bill is to correct and clarify
inconsistencies relating to the West Virginia investment management
board; it deletes outdated conflict of interest provision regarding
board members and state depositories; it defines "401(a) plan";
allows for the common investment of pension, workers' compensation
and other assets in board created investment vehicles; permits
establishment of one or more investment funds; changes date of
annual meeting; provides for staggered terms of board members;
amends statutory trust language to conform with trust indenture;
clarifies that all assets invested by the board are to be assessed
appropriate fees; and eliminates certain restrictions on
investments.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
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