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Engrossed Version Senate Bill 4010 History

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ENGROSSED

Senate Bill No. 4010

(By Senators Tomblin, Mr. President, and Sprouse,

By Request of the Executive)

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[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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