ENGROSSED
Senate Bill No. 4010
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
____________
[Introduced September 7, 2005; referred to the Committee on
Pensions; and then to the Committee on Finance.]
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A BILL to amend and reenact §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 and §18-7C-13 of the Code of West Virginia, 1931, as
amended, all relating to the proposed merger of the Teachers'
Defined Contribution Retirement System with the State Teachers
Retirement System; amending certain definitions; clarifying
credit receipt and asset calculations for transfer; clarifying
when certain contributions shall be paid; clarifying loan
eligibility; establishing date on which money must be in a
member's account to be eligible to vote in the merger
election; requiring payment of contribution for full service
credit; adding the Board's ability to do all things necessary
to maintain the current retirement system during any
transition period; clarifying that the member may select
either periodic payments or lump sum distribution of the member's total vested account at the date of merger if certain
conditions are met; and technical corrections.
Be it enacted by the Legislature of West Virginia:
That §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 and
§18-7C-13 of the Code of West Virginia, 1931, as amended, be
amended and reenacted, all to read as follows:
ARTICLE 7C. MERGER OF TEACHERS' DEFINED CONTRIBUTION RETIREMENT
SYSTEM WITH STATE TEACHERS RETIREMENT SYSTEM.
§18-7C-2. Legislative findings and purpose.
(a) The Legislature declares that the State of West Virginia
and its citizens have always believed in a strong public education
system. The Constitution of this state 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.
(b) 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.
(c) 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
State Teachers Retirement System that
the Teachers' Defined Contribution Retirement System be merged with
the State Teachers Retirement System.
(d) 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.
(e) 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 and has
engaged the service of two independent actuaries.
(f) The Legislature further finds and declares that members of
a defined contribution system who must bear the attendant market risk and performance of their investments are truly 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 and investment
performance, 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.
(1) "Assets" means all member contributions and employer
contributions made on the member's behalf to the Defined
Contribution Retirement System and earnings thereon, less any
applicable fees as approved by the Board: Provided, That if a
member has withdrawn or cashed out any amounts, the amounts must
have been repaid.
(2) "Board" means the Consolidated Public Retirement Board
created and established in article ten-d, chapter five of this code
and its employees.
(3) "Date of merger" means, in the event of a positive vote on
the merger, the first day of July, two thousand six.
(4) "Defined Contribution Retirement System" means the
Teachers' Defined Contribution Retirement System created and
established in article seven-b of this chapter.
(5) "Salary" means:
(a) For a member contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year, the
actual salary earned for the two thousand five fiscal year divided by the employment service earned in the two thousand five fiscal
year.
(b) For a member not contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year, the
contract salary on the date of rehire.
(6) "State Teachers Retirement System" means the State
Teachers Retirement System created and established in article
seven-a of this chapter.
§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
seven-b of this chapter shall be merged and
consolidated with the
State 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
Retirement 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:
Provided, however, That prior to the
merger and consolidation the state shall deposit into the
State
Teachers Retirement System the amount necessary to cover any
additional unfunded actuarial accrued liability which results to
the that system on the date that the assets and liabilities of the
Teachers Defined Contribution Retirement System are merged into the
State Teachers Retirement System as certified by the Consolidated
Public Retirement Board.
§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 Retirement System 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
Retirement System, the benefits,
potential advantages and potential disadvantages of becoming a
member of the
State 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 considered 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 through any
other educational program or programs considered 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 Retirement System 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 considered 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 each member of the Defined Contribution
Plan
Retirement System is considered to have actual notice of the
election and all matters pertinent to the election.
§18-7C-6. Conversion of assets from Defined Contribution
Retirement System to State Teachers Retirement
System; contributions; loans.
(a) If a majority of members voting elect to merge the Defined
Contribution
Retirement 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 of that system shall become members
of the State Teachers Retirement System as provided in this
article.
(b) Following the election, if the vote is in favor of the
merger, the Board shall transfer
all assets everything in
defined
contribution account into the Defined Contribution Retirement
System's Trust Fund to 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 four,
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
(c) To receive full credit in the State Teachers Retirement
System for service in the Defined Contribution Retirement System
for which assets are transferred, members shall pay into the State
Teachers Retirement System a one and one-half percent contribution.
This contribution shall be calculated as one and one-half percent
of the member's estimated total earnings for which assets are
transferred. Except as otherwise provided in this section, each
member shall pay the contribution required no later than the
thirtieth day of June, two thousand seven.
(1) For a member contributing to the Defined Contribution
Retirement System at any time during the two thousand five fiscal
year and commencing membership in the State Teachers Retirement
System on the first day of July, two thousand six, the estimated
total earnings shall be calculated based on the member's salary and
the member's age nearest birthday on the thirtieth day of June, two
thousand five, applying both an annual backward salary scale from
that date for prior years' salaries and a forward salary scale for
the salary for the two thousand six fiscal year based upon the
salary scale assumption applied in the West Virginia Teachers Retirement System Actuarial Valuation as of the first day of July,
two thousand four, prepared for the Consolidated Public Retirement
Board: Provided, That the salary scale shall be applied regardless
of breaks in service.
(2) For a member not contributing to the Defined Contribution
Retirement System during the two thousand five fiscal year, the
estimated total earnings shall be calculated based on the member's
salary and the member's age nearest birthday on the member's date
of rehire, applying a backward salary scale from the member's date
of rehire for prior years' salaries based upon the salary scale
assumption applied in the West Virginia Teachers Retirement System
Actuarial Valuation as of the first day of July, two thousand four,
prepared for the Consolidated Public Retirement Board: Provided,
That the salary scale shall be applied regardless of breaks in
service.
(c) (d) The Board shall make available to
the members each
member a loan in accordance with the provisions of section
thirty-four, article seven-a of this chapter
to which may be used
by
the members each member to pay all or a part of
the his or her
one and one half
of one percent
amount contribution 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
established in this section used to pay the one and one
half
of one percent
amount contribution may not exceed seven and
one half
of one percent per annum and the amount total borrowed for this section may not exceed twelve thousand dollars. In the event
a
plan loan
established in this section is used to pay the one and
one half
of one percent
contribution, the Board shall make any
necessary
actuarial adjustments at the time the loan is made. The
Board shall make this
plan loan
established in this section
available for members until the thirtieth day of June, two thousand
seven:
Provided, That a member who has left employment but has not
withdrawn his or her funds, upon returning to employment, shall pay
the one and one-half percent contribution required in this section
within one year of being rehired, and, for one year following the
date of rehire, is eligible to obtain a loan, as established in
this section, for the purpose of paying the required contribution.
(d) (e) The Board shall develop and institute a payroll
deduction program for the repayment of the
plan loan established in
this section.
(e) (f) 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) (g) In the event a member has withdrawn or cashed out part
of his or her
defined contribution plan assets, that member will not be given credit for those moneys cashed out or withdrawn. The
Board shall make
an actuarial a determination as to the amount of
credit a member loses
based on
the times and the amounts he or she
has withdrawn or cashed out, which 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:
Provided, however, That if
a member repays the amounts he or she previously cashed out or
withdrew, the member shall also be required to pay the one and
one-half percent contribution to receive full credit for the
cashed-out or withdrawn amounts being repaid in the State Teachers
Retirement System. The loan provided in this section shall not be
available to members to repay previously cashed out or withdrawn
moneys. If the repayment is five or more years following the cash-
out or withdrawal, then he or she
must shall also repay any
forfeited employer contribution account balance along with interest
determined by the Board in addition to repaying the
cash cashed-out
or withdrawn amount.
(g) (h) Where the If a member has cashed out
or withdrawn any
of his or her
teacher defined contribution plan account balance
assets after the last day of June, two thousand one, and that
member wishes to repurchase
defined contribution plan that service
after the thirtieth day of June, two thousand six,
then the member
shall repay the
teachers retirement plan State Teachers Retirement System.
(h) (i) Any
prior service in the State Teachers Retirement
System a member may have
before the date of the merger is not
affected by the provisions of this article.
§18-7C-7. Service credit in State Teachers Retirement System
following merger; adjustments.
Any member transferring all of his or her assets from the
Defined Contribution
Retirement System to the State Teachers
Retirement System pursuant to the provisions of this article and
who has not made any withdrawals
or cash-outs from his or her
defined contribution plan assets, is entitled to service credit in
the State Teachers Retirement System for each year or part of a
year, as governed by the provisions of article seven-a of this
chapter, the member worked and contributed to the Defined
Contribution
Plan Retirement System: Provided, That if a member
does not pay the one and one-half percent contribution required by
section six of this article, the member's Defined Contribution
Retirement System service credit shall be reduced by twenty-five
percent upon transfer to the State Teachers Retirement System. 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 Defined Contribution
Retirement System who are eligible to vote on the merger on the
issue of merging and consolidating the Defined Contribution
Plan
Retirement System into the State Teachers Retirement
Plan System
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 Retirement System will transfer, or have
transferred, all assets held by them or on their behalf in the
Defined Contribution Plan
Retirement System to, and
on the date of
the merger they shall become members of and
be become 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
if at
least one half of the members of the Defined Contribution
Plan
Retirement System must do not vote on the question
in order for the
election
is not to be valid and binding.
(b) Any person who has one dollar or more in
the defined
contribution account created and established pursuant to article
seven-b of this chapter assets in the Defined Contribution
Retirement System on the last day of December, two thousand five,
may
and is eligible to vote on the question of the merger.
(c)
The Notwithstanding any other provisions of this code to
the contrary, the Board
may do all things necessary and convenient
to maintain the current retirement systems during the transitional
period and may retain the services of the professionals it considers necessary to
do so. The Board may also 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 Retirement System who are eligible to vote on the merger to
inform these members of their options in the election; (2) assist
in the educational process of the members
who are eligible to vote
on the merger; (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 March, two thousand six, and the Board shall ascertain the
results of the election not later than the last day of March, 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 fifth day of April, 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 six,
except that if the election is conducted through the United States
mail, the ballot shall be postmarked not later than the twelfth day
of March, two thousand six, 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 considered final.
(a) The election is considered 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 considered 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 considered 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 election.
(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 Retirement System with the State Teachers
Retirement
Plan System.
§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
twelve. The provisions of this section are void and of no effect
if the members of the Defined Contribution
Plan Retirement System
fail to elect to merge and consolidate the Defined Contribution
Plan
Retirement System 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 Retirement
System 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 Retirement
System 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
member contributions
plus the vested portion of
employer contributions made on his or her behalf to the Defined
Contribution
Plan Retirement System as of the thirtieth day of June,
two thousand six,
plus his or her vested employer account balance
as of that date plus any earnings thereon, as stated by the Board
or the Board's professional contractor.
(b) A member of the Defined Contribution
Plan Retirement System
who has made contributions to the State Teachers Retirement System
after the thirtieth day of June, two thousand six, where the Defined
Contribution
Plan Retirement System 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 System and receive his or her member
accumulated contributions
in the State Teachers Retirement System
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 member contributions plus the vested portion of
employer contributions made on his or her behalf to the Defined
Contribution Retirement System plus any earnings thereon 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:
Provided, That this
amount may be distributed in a lump sum or in periodic payments as
elected by the member.
(c) Any member of the Teachers Defined Contribution
Retirement
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 Retirement System
on the date of merger plus interest thereon at four percent accruing
from the date of merger:
Provided, That this amount may be
distributed in a lump sum or in periodic payments as elected by the
member.
§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.
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