Senate Bill No. 277

(By Senator Blatnik)

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[Introduced February 1, 1996; referred to the Committee on Government Organization; then to the Committee on Pensions; and then to the Committee on Finance.]
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A BILL to amend chapter eight of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new article, designated article twenty-two-a, relating to creating the policemen's and firemen's defined contribution retirement system; providing a short title; definitions; providing that the system is a body corporate; administration of the retirement system; powers and duties of the consolidated retirement board; participation in the defined contribution retirement system; members' contributions; employers' contributions; annuity account; and providing that the right to benefits are not subject to levy or attachment.

Be it enacted by the Legislature of West Virginia:
That chapter eight of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article twenty-two-a, to read as follows:
ARTICLE 22A. POLICEMEN'S AND FIREMEN'S DEFINED CONTRIBUTION

RETIREMENT SYSTEM.
§8-22A-1. Short title.

This article shall be known and may be cited as the "Policemen's and Firemen's Retirement Reform Act."
§8-22A-2. Definitions.

As used in this article, unless the context clearly requires a different meaning:
(1) "Defined contribution system" or "system" means the policemen's and firemen's defined contribution retirement system created and established by this article;
(2) "Existing retirement system" means the policemen's and firemen's retirement system established in article twenty-two of this chapter;
(3) "Existing employer" means any employer who employed or employs a member of the existing retirement system;
(4) "Consolidated board" or "board" means the consolidated public retirement board created and established pursuant to article ten-d, chapter five of this code;
(5) "Member" or "employee" means the following persons, if regularly employed for full-time service: Any person employed as a paid police officer or paid fire department of a paid police department or paid fire department in a Class I or Class II city; (6) "Regularly employed for full-time service" means employment in a regular position or job throughout the employment term regardless of the number of hours worked or the method of pay;
(7) "Year of employment service" means employment for at least ten months, a month being defined as twenty employment days: Provided, That no more than one year of service may be accumulated in any twelve-month period;
(8) "Employer" means the agency of and within the state which has employed or employs a member;
(9) "Compensation" means the full compensation actually received by members for service whether or not a part of such compensation is received from other funds, federal or otherwise, than those provided by the state or its subdivisions;
(10) "Member contribution" means an amount reduced from the employee's regular pay periods, and deposited into the member's individual annuity account within the defined contribution retirement system;
(11) "Employer contribution" means an amount deposited into the member's individual annuity account on a periodic basis coinciding with the employee's regular pay period by an employer from its own funds;
(12) "Annuity account" or "annuity" means an account established for each member to record the deposit of member contributions and employer contributions and interest, dividends or other accumulations credited on behalf of the member;
(13) "Retirement" means a member's withdrawal from the active employment of a participating employer and completion of all conditions precedent to retirement;
(14) "Permanent, total disability" means a mental or physical incapacity requiring the absence from employment service for at least six months: Provided, That the incapacity is shown by an examination by a physician or physicians selected by the board.
§8-22A-3. Defined contribution retirement system created and established; body corporate.

The policemen's and firemen's defined contribution retirement system is hereby created and established to provide for the secure, fair and orderly retirement of the policemen and firemen of the state. The defined contribution retirement system shall constitute a body corporate and all business of the system shall be transacted in the name of the policemen's and firemen's defined contribution retirement system.
§8-22A-4. Article to be liberally construed; purpose.
The provisions of this article shall be liberally construed so as to provide a general annuity based retirement system for policemen and firemen in this state. The purpose of this article is to provide a defined contribution retirement program which is fully funded on a current basis from employer and employee contribution.
§8-22-5. Administration of the policemen's and firemen's defined contribution retirement system.

The consolidated public retirement board created pursuant to article ten-d, chapter five of this code shall administer the policemen's and firemen's defined contribution retirement system. The board may sue and be sued, contract and be contracted with and conduct all the business of the defined contribution system in the name of the policemen's and firemen's defined contribution retirement system.
§8-22A-6. Powers and duties of the consolidated board in the administration of the defined contribution system.

The board has all powers necessary to effectuate the purposes of this article. The board shall contract with a private pension, insurance, annuity, mutual fund or other qualified company or companies to administer the day-to-day operations of the system. In selecting the company or companies the board shall take into account as its highest duty, the proper safeguard and protection of the member and employer contributions and the interest dividends, or other return thereon. The board shall promulgate rules regarding the proper investment of funds notwithstanding the provisions of article six, chapter twelve of this code.
§8-22A-7. Participation in policemen's and firemen's defined contribution retirement system; limiting
participation in existing policemen's and firemen's retirement systems.
Beginning the first day of July, one thousand nine hundred ninety-six, the policemen's and firemen's defined contribution retirement system shall be the single retirement program for all new employees whose employment commences on or after that date. No additional new employees except as may be provided herein may be admitted to the existing retirement system. Members of the existing retirement system whose employment continues beyond the first day of July, one thousand nine hundred ninety-six, are not affected by this article and shall continue to contribute and participate in the existing system without change in provisions or benefits.
Any employee whose employment terminates after the thirtieth day of June, one thousand nine hundred ninety-six, who is later reemployed by an employer shall be eligible for membership only in the policemen's and firemen's defined contribution system: Provided, That if the reemployment with an existing employer occurs not more than six months after the employee's previous employment, he or she shall be entitled to readmission to the existing retirement system in which he or she was originally a member: Provided, however, That if the employee has five or more years of credited service in the existing retirement system, he or she shall be entitled to readmission into the existing retirement system in which he or she was originally a member so long as he or she has not withdrawn his or her contributions from the existing retirement system: Provided further, That if the employee has withdrawn his or her contribution from the existing retirement system, then readmission shall not be permitted and the employee will be entitled only to the defined contribution system.
An employee whose employment with an employer was suspended or terminated while he or she served as an officer with a statewide professional law-enforcement association is eligible for readmission to the existing retirement system in which he or she was a member. Any employee reemployed with an employer on or after the first day of July, one thousand nine hundred ninety- six, who had five or more years credited service in the policemen's and firemen's defined benefit retirement system may elect readmission to the policemen's and firemen's defined benefit retirement system in which he or she was originally a member. Any employee reemployed between the first day of July, one thousand nine hundred ninety-six, and the first day of July, two thousand one, and who was required to participate in the policemen's and firemen's defined contribution system but now elects, pursuant to the provisions of this section, readmission to the policemen's and firemen's defined benefit retirement system shall pay an additional contribution to the policemen's and firemen's defined benefit retirement system equal to one and one-half percent of his or her annual gross compensation earned for each year he or she participated in the policemen's and firemen's defined contribution system and shall transfer all member and employer contributions and investment earnings therefrom from the policemen's and firemen's defined contribution system to the policemen's and firemen's defined benefit retirement system and shall receive service credit for the time the member participated in the defined contribution system as if that participation had been in the policemen's and firemen's defined benefit retirement system. Any member making an election under the provisions of this section to reenter the policemen's and firemen's defined benefit retirement system who is currently a member of the defined contribution retirement system must do so on or before the first day of January, two thousand one. Any other member reemployed must make the election as to the retirement system that he or she will be a member of at the time he or she is reemployed.
An employee whose employment with an employer or an existing employer is suspended as a result of an approved leave of absence, approved maternity or paternity break in service, or any other approved break in service authorized by the board, is eligible for readmission to the existing retirement system in which he or she was a member.
In all cases where a question exists as to readmission to membership in the existing retirement system, the board shall decide the question.
§8-22A-8. Voluntary participation in system.
Any employee who is a member of the existing retirement system may, upon written election, voluntarily elect membership in the defined contribution system, on a prospective basis, on or after the first day of July, one thousand nine hundred ninety-six. All benefits earned by any employee making such voluntary election under the existing retirement system prior to such a voluntary election shall be frozen and made available to that employee upon retirement as provided by the existing retirement system. A member of the existing retirement system who has less than five years of contributing service in the existing retirement system may elect to withdraw his or her contribution plus interest thereon as if such member is terminating employment and upon withdrawal shall deposit such funds in the defined contribution system: Provided, That such member's years of contributing service in the existing system shall be applied toward the years of employment service required under section eleven of this article: Provided, however, That this election shall be allowed on a retroactive basis to the first day of July, one thousand nine hundred ninety-six. For the purposes of this section, "frozen" means that the member's salary, years of service and any other factor to determine benefits shall be calculated as of the date that the member elected membership in the defined contribution system and after that date no increase in salary, years of service or any other factor may be used to increase the retirement benefit above that which it would be if a person retired upon the date that the election is made. After having made such election, the employee may not change such election or again become a member of the existing retirement system.
§8-22A-9. Members' contributions; annuity account established.
Each employee who is a member of the defined contribution system shall contribute four and one-half percent of his or her gross compensation by salary reduction. Such salary reductions shall be made by the employer at the normal payroll intervals and shall be remitted within five working days to the private pension, insurance, annuity, mutual fund, or other qualified company or companies designated by the board to administer the day-to-day operations of the system.
All member contributions shall be immediately deposited to an account or accounts established in the name of the member and held in trust for the benefit of the member. An account agreement shall be issued to each member setting forth the terms and conditions under which contributions are received, and the investment and retirement options available to the member. The board shall promulgate by the thirtieth day of June, one thousand nine hundred ninety-six, pursuant to section six of this article, rules defining the minimum requirements for the investment and retirement options to be provided to the members.
The consolidated public employees retirement board shall study the feasibility of employees making personal contributions to the defined contribution system in addition to those required by this section and the impact of the United States Internal Revenue Code of 1986, as amended, upon such contributions. The results of said study and recommendations for legislation to authorize such additional payments shall be presented to the committee on pensions and retirement of each house of the Legislature on or before the first day of October, two thousand one.
Such rules, to the extent not inconsistent with the applicable provisions of the Internal Revenue Code of the United States, shall provide for varied retirement options including, but not limited to:
(1) Lump sum distributions;
(2) Joint and survivor annuities;
(3) Other annuity forms in the discretion of the board;
(4) Variable annuities which gradually increase monthly retirement payments: Provided, That said increased payments are funded solely by the existing current value of the member's account at the time of the member's retirement payments commencement and not, to any extent, in a manner which would require additional employer or employee contributions to any member's account after retirement or after the cessation of employment; and
(5) The instances in which, if any, distributions or loans can be made to members from their annuity account balances prior to having attained the age of fifty-five.
§8-22A-10. Employer contributions.

Each participating employer shall annually make a contribution equal to seven and one-half percent of each member's gross compensation. The pro rata share of this amount shall be paid upon each date that a member contribution is made and shall be remitted as provided for in section nine of this article for credit to the member's annuity account. Each participating employer has a fiduciary duty to its employees to ensure that the employer contributions are timely made. In the case of an officer or employee of the state, any unpaid contribution shall be a state debt, contracted as a result of a casual deficit in state revenues, to be accorded preferred status over other expenditures.
In the event that any payment is not timely made, the participating employer shall immediately give to the employee and the state auditor notice in writing of the nonpayment, in the form and accompanied by the documentation as may be required by the auditor. Notice to the auditor shall operate in the manner of a requisition, and the auditor shall transmit a warrant to the treasurer. At the time as funds are available in the appropriate account, the treasurer shall pay the employer contribution, together with appropriate daily interest.
§8-22A-11. Termination of membership.

Any member whose employment with a participating employer terminates after the completion of six complete years of employment service shall be eligible to terminate his or her annuity account and receive a distribution from the member's annuity account, in an amount equal to the member's contribution plus one third of the employer contributions and any earnings thereon. Any member whose employment with a participating employer terminates after the completion of nine complete years of employment service shall be eligible to terminate his or her annuity account and receive a distribution from the member's annuity account, in an amount equal to the member's contribution plus two thirds of the employer's contributions and any earnings thereon. Any member whose employment with a participating employer terminates after the completion of twelve complete years of employment service shall be eligible to terminate his or her annuity account and receive a distribution of all funds contributed and accumulated in his or her annuity account. Any member whose employment with a participating employer terminates prior to the completion of six complete years of employment service shall be eligible to terminate his or her annuity account and receive a distribution from the member's annuity account, in an amount equal to the member's contribution plus any earnings thereon: Provided, That on the death or permanent, total disability of any member, that member shall be eligible to terminate his or her annuity account and receive all funds contributed to or accumulated in his or her annuity account.
The remaining balance, if any, in the member's account after the distribution shall be remitted and paid into a suspension account, hereby created, to be administered by the board. The board shall promulgate rules regarding the distribution of any balance in the special account created by this section: Provided, That any funds in the account shall be used solely for the purpose of reducing employer contributions in future years.
Any account balances remitted to the suspension account herein shall be maintained by the board in said suspension account in the name of the terminated employee for a period of five years following initial remittance to the suspension account. For each said terminated employee at the culmination of the aforesaid five-year period, the board shall certify in writing to each contributing employer the amount of the account balances plus earnings thereon attributable to each separate contributing employers previously terminated employees' accounts which have been irrevocably forfeited due to the elapse of a five-year period since termination pursuant to section sixteen of this article.
Upon certification to the several contributing employers of the aggregate account balances plus earnings thereon which have been irrevocably forfeited pursuant to this section, the several contributing employers shall be permitted in the next succeeding fiscal year or years to reduce their total aggregate contribution requirements pursuant to section seventeen of this article, for the then current fiscal year by an amount equal to the aggregate amounts irrevocably forfeited and certified as such to each contributing employer.
Upon the utilization of the amounts irrevocably forfeited to any contributing employer as a reduction in the then current fiscal year contribution obligation and upon notification provided by the several contributing employers to the board of their intention to utilize irrevocably forfeited amounts, the board shall direct the distribution of said irrevocably forfeited amounts from the suspension account to be deposited on behalf of the contributing employer to the member annuity accounts of its then current employees pursuant to section seventeen of this article.
§8-22A-12. Retirement, commencement of annuity payments.
At any time after an employee reaches the age of fifty-five years, he or she may elect to take retirement by notifying the board or its designee in writing of such intention not less than sixty days prior to the effective date of retirement. Retirement payments shall commence within thirty days of the retirement date under such payment option or options as may be provided by the board and elected by the employee.
§8-22A-13. Amount of annuity payments.

(a) The amount of annuity payments a retired member shall receive shall be based solely upon the balance in the member's annuity account at the date of retirement, the retirement option selected, or in the event of an annuity option being selected, the actuarial life expectancy of the member, and any other factors as normally govern annuity payments.
(b) The board, or its designee, is authorized upon retirement of a member, with the approval of that member, to purchase an annuity with the balance of the member's account. Upon delivery of the annuity to the member upon his or her retirement, the member shall execute a release surrendering any claim the member may have against the retirement trust.
§8-22A-14. Supplemental annuity contracts.

The board shall authorize the private pension, insurance, annuity, mutual fund or other qualified company or companies with whom it contracts to make available to members such supplemental annuity options, disability and other insurance or benefits as the board deems appropriate: Provided, That such supplemental annuities, insurance and benefits shall be funded solely from employee contributions.
§8-22A-15. Account statements.

The board shall prepare or cause to be prepared, on an annual basis, an account statement for each members' annuity account. The statement shall include, but not be limited to, a statement of the current market value of the members' account. The board shall prescribe the form and content of the account statement not inconsistent with the provisions of this section.
§8-22A-16. Years of employment service.

A member of the defined contribution system who terminates employment with a participating employer and does not remove any funds from his or her annuity account and becomes reemployed with a participating employer within five years shall retain his or her previous years of employment service for purposes of the provisions of section eleven of this article.
§8-22A-17. Deposits to the members' annuity accounts.

Beginning on the first day of July, one thousand nine hundred ninety-six and thereafter, each Class I and Class II city with a paid police department and paid fire department shall deposit in the member's annuity account created pursuant to section nine of this article an amount equal to seven and one- half percent of all compensation paid to members of the defined contribution system.
§8-22A-18. Right to benefits not subject to execution, etc.

The right of any person to a benefit provided for in this article shall not be subjected to execution, attachment, garnishment, the operation of bankruptcy or insolvency laws, or other process whatsoever, nor shall any assignment thereof be enforceable in any court.



NOTE: The purpose of this bill is to provide a defined contribution system for the unfunded policemen's and firemen's retirement systems now existing. Any person employed by a paid police department or paid fire department after July 1, 1996, shall be members of the defined contribution retirement system.

Article 22A is new; therefore, strike-throughs and underscoring have been omitted.