H. B. 2776
(By Delegates Campbell, J. Smith, Keener,
Browning, Hubbard, Hall and Harrison)
[Introduced March 7, 2001; Referred to the
Committee on Pensions and Retirement then
Finance.]
A BILL to amend and reenact section twenty-three, article fourteen-
d, chapter seven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended; and to amend and reenact
section thirty-four, article seven-a, chapter eighteen of said
code; all relating to plan loan programs for the deputy
sheriff's retirement system and the teachers retirement
system; incorporating federal tax law provisions; and
authorizing the consolidated public retirement board to issue
loans and administer the loan programs in compliance with
federal law, including the adoption of policies and procedures
and taking any action necessary or appropriate to comply with
federal tax law or otherwise required by the Internal Revenue
Service.
Be it enacted by the Legislature of West Virginia:
That section twenty-three, article fourteen-d, chapter seven
of the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted; and that section thirty-four, article seven-a, chapter eighteen of said code, be amended and
reenacted; all to read as follows:
CHAPTER 7. COUNTY COMMISSIONS AND OFFICERS.
ARTICLE 14D. WEST VIRGINIA DEPUTY SHERIFF RETIREMENT SYSTEM ACT.
§7-14D-23. Loans to Members.
(a) A member who is not yet receiving disability or retirement
income benefits from the plan may borrow from the plan no more than
one time in any year an amount up to one half of his or her
accumulated contributions, but not less than five hundred dollars
nor more than eight thousand dollars: Provided, That the maximum
amount of any loan when added to the outstanding balance of all
other loans shall not exceed the lesser of the following: (1) Fifty
thousand dollars reduced by the excess (if any) of the highest
outstanding balance of loans to the member
on during the one-year
period ending on the day before the date on which the loan is made
,
over the outstanding balance of loans to the member on the day on
which the loan is made; or (2) fifty percent of his or her
accumulated contributions. No loan may be made from the plan if
the board determines that the loans constitute more than fifteen
percent of the amortized cost value of the assets of the plan as of
the last day of the preceding plan year. The board may discontinue
the loans any time it determines that cash flow problems might
develop as a result of the loans. Each loan shall be repaid
through monthly installments over periods of six through sixty months and carry interest on the unpaid balance and an annual
effective interest rate that is two hundred basis points higher
than the most recent rate of interest used by the board for
determining actuarial contributions levels
: Provided, That interest
charged shall be commercially reasonable in accordance with the
provisions of section 72(p)(2) of the Internal Revenue Code and
federal regulations issued thereunder. Monthly loan payments shall
be calculated to be as nearly equal as possible with all but the
final payment being an equal amount. An eligible member may make
additional loan payments or pay off the entire loan balance at any
time without incurring any interest penalty. At the member's
option, the monthly loan payment may include a level premium
sufficient to provide declining term insurance with the plan as
beneficiary to repay the loan in full upon the member's death. If
a member declines the insurance and dies before the loan is repaid,
the unpaid balance of the loan shall be deducted from the lump sum
insurance benefits payable under section twenty-one of this
article.
(b) A member with an unpaid loan balance who wishes to retire
may have the loan repaid in full by accepting retirement income
payments reduced by deducting from the actuarial reserve for the
accrued benefit the amount of the unpaid balance and then
converting the remaining of the reserve to a monthly pension
payable in the form of the annuity desired by the member.
(c)The entire unpaid balance of any loan, and interest due
thereon, shall at the option of the retirement board become due and
payable without further notice or demand upon the occurrence with
respect to the borrowing member of any of the following events of
default: (1) Any payment of principal and accrued interest on a
loan remains unpaid after the same become due and payable under the
terms of the loan or after such grace period as may be established
in the discretion of the retirement board; (2) the borrowing member
attempts to make an assignment for the benefit of creditors of his
or her benefit under the retirement system; or (3) any other event
of default set forth in rules promulgated by the board pursuant to
the authority granted in section one, article ten-d, chapter five
of this code
: Provided, That any offset of such unpaid loan balance
shall be made only at such time as the member is entitled to
receive a distribution under the plan.
(d) Loans shall be evidenced by such form of obligations and
shall be made upon such additional terms as to default, prepayment,
security, and otherwise as the retirement board may determine.
(e)Notwithstanding anything herein to the contrary, the loan
program authorized by this section shall comply with the provisions
of section 72(p)(2) and section 401 of the Internal Revenue Code
and the federal regulations issued thereunder. The retirement
board is authorized to: (a) apply and construe the provisions of
this section and administer the plan loan program in such a manner as to comply with the provisions of sections 72(p)(2) and section
401 of the Internal Revenue Code; (b) adopt plan loan policies or
procedures consistent with these federal law provisions; and (c)
take such actions as it deems necessary or appropriate to
administer the plan loan program created hereunder in accordance
with these federal law provisions. The retirement board is further
authorized in connection with the plan loan program to take any
actions that may at any time be required by the Internal Revenue
Service regarding compliance with the requirements of section
72(p)(2) or section 401 of the Internal Revenue Code,
notwithstanding any provision in this article to the contrary.
CHAPTER 18. EDUCATION.
ARTICLE 7A. STATE TEACHERS RETIREMENT SYSTEM.
§18-7A-34. Loans to members.
A member of the retirement system upon written application may
borrow from his or her individual account in the teachers
accumulation fund, subject to these restrictions:
(1)Loans shall be made in multiples of ten dollars, the
minimal loan being one hundred dollars and the maximum being eight
thousand dollars: Provided, That the maximum amount of any loan
when added to the outstanding balance of all other loans shall not
exceed the lesser of the following: (a) fifty thousand dollars
reduced by the excess (if any) of the highest outstanding balance
of loans during the one-year period ending on the day before the date on which the loan is made, over the outstanding balance of
loans to the member on the date on which the loan is made; or (b)
fifty percent of the member's contributions to his or her
individual account in the teachers accumulations fund: Provided,
however, That if the total amount of loaned money outstanding
exceeds forty million dollars, the maximum shall not exceed three
thousand dollars until the teachers retirement board determines
that loans outstanding have been reduced to an extent that
additional loan amounts are again authorized.
(2)Interest charged on the amount of the loan shall be six
percent per annum, or a higher rate as set by the teachers
retirement board: Provided, That interest charged shall be
commercially reasonable in accordance with the provisions of
section 72(p)(2) of the Internal Revenue Code, and the federal
regulations issued thereunder. If repayable in installments, the
interest shall not exceed the annual rate so established upon the
principal amount of the loan, for the entire period of the loan,
and such charge shall be added to the principal amount of the loan.
The minimal interest charge shall be for six months.
(3)No member shall be eligible for more than one loan in any
one year.
(4)If a refund or benefit is payable to the borrower or his
or her beneficiary before he or she repays the loan with interest,
the balance due with interest to date shall be deducted from such benefit or refund.
(5)From his or her monthly salary as a teacher the member
shall pay the loan and interest by deductions which will pay the
loan and interest in substantially level payments in not more than
sixty nor less than six months. Upon notice of loan granted and
payment due, the employer shall be responsible for making such
salary deductions and reporting them to the retirement board. At
the option of the retirement board, loan deductions may be
collected as prescribed herein for the collection of members'
contribution, or may be collected through issuance of warrant by
employer. If the borrower decides to make loan payments while not
paid for service as a teacher, the retirement board must accept
such payments.
(6)The entire unpaid balance of any loan, and interest due
thereon, shall, at the option of the retirement board, become due
and payable without further notice or demand upon the occurrence
with respect to the borrowing member of any of the following events
of default: (A) Any payment of principal and accrued interest on a
loan remains unpaid after the same becomes due and payable under
the terms of the loan or after such grace period as may be
established in the discretion of the retirement board; (B) the
borrowing member attempts to make an assignment for the benefit of
creditors of his or her refund or benefit under the retirement
system; or (C) any other event of default set forth in rules promulgated by the retirement board in accordance with the
authority granted pursuant to section one, article ten-d, chapter
five of this code: Provided, That any refund or offset of an unpaid
loan balance shall be made only at the time the member is entitled
to receive a distribution under the retirement system.
(7)Loans shall be evidenced by such form of obligations and
shall be made upon such additional terms as to default, prepayment,
security, and otherwise as the retirement board may determine.
(8)Notwithstanding anything herein to the contrary, the loan
program authorized by this section shall comply with the provisions
of section 72(p)(2) and section 401 of the Internal Revenue Code,
and the federal regulations issued thereunder, and accordingly, the
retirement board is authorized to: (a) apply and construe the
provisions of this section and administer the plan loan program in
such a manner as to comply with the provisions of section 72(p)(2)
and section 401 of the Internal Revenue Code and the federal
regulations issued thereunder; (b) adopt plan loan policies or
procedures consistent with these federal law provisions; and (c)
take such actions as it deems necessary or appropriate to
administer the plan loan program created hereunder in accordance
with these federal law provisions. The retirement board is further
authorized in connection with the plan loan program to take any
actions that may at any time be required by the Internal Revenue
Service regarding compliance with the requirements of section 72(p)(2) or section 401 of the Internal Revenue Code, and the
federal regulations issued thereunder, notwithstanding any
provision in this article to the contrary.
Note:The purpose of this bill is to amend the plan loan
provisions of the Deputy Sheriff's Retirement System and of the
Teachers Retirement System to require compliance with federal law
provisions regarding the taxation of plan loans, to authorize the
consolidated public retirement board to adopt plan loan policies
and procedures and to administer these plan loan programs in such
a manner as to comply with applicable requirements of Sections
72(p)(2) and 401 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
Email
Webmaster | © 2024 West Virginia Legislature **
