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.