H. B.3007
(By Mr. Speaker, Mr. Kiss, and Delegates
Stalnaker, Browning, Williams, Boggs and R. M. Thompson)
[Introduced March 11, 2005; referred to the
Committee on Pensions and Retirement then Finance.]
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, 2005; 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 five.
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 an
employee whose initial employment commences after the thirtieth day
of June, two thousand five, shall become a member 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 five, 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 which system he or she last contributed to 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 be 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. Our own Constitution mandates 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 education service personnel in this nation, and that our
teachers and education service personnel are dedicated and hard
working individuals. The Legislature further finds and declares
that our teachers and education service personnel deserve 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 eleventh era,
and that placing this risk and uncertainty upon the state in the
form of a defined benefit plan will protect and ensure a meaningful
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.
The Legislature further finds and declares that where the
members of a defined contribution system, and attendant market risk
are being provided a significant and greater benefit where the
defined contribution system is replaced with a defined benefit
system in which the employer bears the risk of market fluctuations,
especially where those members decide through an election process
whether to trade the defined contribution system for a defined
benefit system.
§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 six.
§18-7C-4. Merger.
On the first day of July, two thousand six, 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 all of 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 six, and for
those persons rehired who were contributing 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 any legislative enactment which provides for the
increase in benefits or which provides for new benefits becomes
effective.
§18-7C-5. Notice, education, record keeping requirements.
(a) Commencing not later than the first day of August, two
thousand five, 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 fail or refuse to approve
the merger and thereby elect to remain in the defined contribution
system, the benefits, potential advantages and potential
disadvantages of becoming a member 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 required to provide the necessary education for
members to make an informed decision with respect to the election.
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 by 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 regarding the merger and of 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 with respect to the
purposes of this article.
(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 six, and all
members thereof shall become members of the State Teachers
Retirement System as provided herein.
(b) Following the election, if a majority of the members vote
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 five, and the members attained age on that date,
applying both 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 six. Members have until the
first day of July, two thousand seven, to pay this amount. If a
member makes no payment whatsoever toward this amount by the first
day of July, two thousand seven, the member is deemed to have
forever waived his or her right to pay this amount and is deemed 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 total borrowed
for this section 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 necessary 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 seven.
(d) The Board shall develop and institute 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 persons voting, as of the first day of July, two thousand
six, the members' contribution rate shall become six percent of his
or her salary or wages and all members who make a contribution into
the State Teachers Retirement System on or after the first day of
July, two thousand six, 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
previously 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 six. 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 repaying 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 six.
(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 and the appropriate actuarial adjustment
to 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 they shall become members of and
be 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 due 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. Any unsigned ballot is void.
(f) The election period shall begin not later than the first day of April, two thousand six, and the Board shall ascertain the
results of the election not later than the last day of April, two
thousand six. The Board shall certify the results of the election
to the Governor, to the Legislature and to the members not later
than the fifteenth day of May, two thousand six.
(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 previously 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 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
Board's 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 the defined
contribution 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.
NOTE: The purpose of this bill is to merge and consolidate
the Teachers' Defined Contribution Retirement System and the State
Teachers Retirement System.
§18-7B-7a, §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 are new; therefore,
strike-throughs and underscoring have been omitted.