H. B. 4751
(By Mr. Speaker, Mr. Kiss(By Request),
and Delegate Jenkins)
[Introduced February 25, 2000; referred to the
Committee on Finance.]
A BILL to amend and reenact sections eleven, twenty-two and
twenty-two-a, article twenty-two, chapter eight of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; to amend and reenact section eight, article one,
chapter twelve of said code; and to amend and reenact sections
one-a, two, three, four, five, six, eight, nine, nine-a,
eleven, twelve and twenty, article six of said chapter, all
relating to the board of investment and its investment
management; providing that notwithstanding certain limitations
the board of trustees of a municipality may invest a portion
or all of pension funds under its control with the West
Virginia investment management board; removing the prohibition
on the basis of conflict of interest that no depository may
serve or be eligible for designation as a state depository if
any member of the West Virginia investment management board is an officer, director or employee of the treasurer's office,
etc; modifying legislative findings to declare public employee
and employer contributions made to 401(a) plans are made to an
irrevocable trust on behalf of each plan; changing definition
of "participant plan"; providing sequencing of terms of
appointees to board of trustees of the West Virginia
investment management board who ascend to their positions in
two thousand one; providing the board holds an annual meeting
prior to the fiscal year; making clarifying and stylistic
changes; providing that the board has authority to establish
one or more investment funds; providing that the interests
each fund established is designated as "units" for purposes of
accounting and valuation; providing that the securities in
each investment fund are considered the property of the board
as an investment pool and are not to be considered as being
held in trust; providing that units in an investment fund
issued to or sold by the board and the proceeds from the sale
or redemption of a unit may be held by the board in trust;
requiring an annual audit of participant plans; providing that
moneys intended as "401(a) trusts" transferred to the board
shall be held in separate trusts and that these trusts shall
not hold assets of any other fund transferred to the board
under the provisions of the subject article or otherwise, but
providing that this prohibition does not prevent the board from investing in any of its investment funds even though the
board may also invest non-401(a) trust moneys in the
investment funds; providing the board shall hold participant
plans in separate trusts; designating participant plans
subject to the article; reservation of certain rights and
powers by the Legislature; designating certain powers of the
trustee; exempting trust income from claims of creditors;
prohibiting corpus or income of trusts to be used for anything
other than benefit of beneficiary; requiring trustee to pay
amount certified by governor as necessary to provide for
monthly payments of benefits; requiring trustee to render an
annual report to the governor; providing no trust may be
construed invalid by operation of the rule against
perpetuities; and, providing the board shall continue to exist
until the first day of July two thousand two.
Be it enacted by the Legislature of West Virginia:
That sections eleven, twenty-two and twenty-two-a, article
twenty-two, chapter eight of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended and
reenacted; that section eight, article one, chapter twelve of said
code be amended and reenacted; and that sections one-a, two, three,
four, five, six, eight, nine, nine-a, eleven, twelve and twenty of
said article be amended and reenacted, all to read as follows:
CHAPTER 8. MUNICIPAL CORPORATIONS.
ARTICLE 22. RETIREMENT BENEFITS GENERALLY; POLICEMEN'S PENSION AND
RELIEF FUND; FIREMEN'S PENSION AND RELIEF FUND;
PENSION PLANS FOR EMPLOYEES OF WATERWORKS SYSTEM,
SEWERAGE SYSTEM OR COMBINED WATERWORKS AND SEWERAGE
SYSTEM.
§8-22-11. Investment of funds.
The board shall keep as an available sum for the purpose of
making retirement, disability and death payments and administration
expense an amount estimated to meet such payments for a period not
to exceed ninety days. The board in acquiring, investing,
reinvesting, exchanging, retaining, selling and managing property
for the benefit of the fund shall exercise judgment and care which
persons of experience, prudence, discretion and intelligence
exercise in the management of financial affairs, considering the
probable income as well as the probable security of the investment
and with regard to the permanent disposition of the fund. Within
the limitations of the foregoing standard, the board is authorized
in its sole discretion to invest and reinvest any funds received
by it in the following:
(1) Any direct obligation of, or obligation guaranteed as to
the payment of both principal and interest by, the United States of
America;
(2) Any evidence of indebtedness issued by any United States government agency guaranteed as to the payment of both principal
and interest, directly or indirectly, by the United States of
America including, but not limited to, the following: Government
national mortgage association, federal land banks, federal home
loan banks, federal intermediate credit banks, banks for
cooperatives, Tennessee valley authority, United States postal
service, farmers home administration, export-import bank, federal
financing bank, federal home loan mortgage corporation, student
loan marketing association and federal farm credit banks;
(3) Any evidence of indebtedness issued by the federal
national mortgage association to the extent such indebtedness is
guaranteed by the government national mortgage association;
(4) Any evidence of indebtedness that is secured by a first
lien deed of trust or mortgage upon real property situate within
this state, if the payment thereof is substantially insured or
guaranteed by the United States of America or any agency thereof;
(5) Direct and general obligations of this state;
(6) Any undivided interest in a trust, the corpus of which is
restricted to mortgages on real property and, unless all of such
the property is situate within the state and insured, such the
rust
at the time of the acquisition of such the
undivided interest, is
rated in one of the three highest rating grades by an agency which
is nationally known in the field of rating pooled mortgage trusts;
(7) Any bond, note, debenture, commercial paper or other evidence of indebtedness of any private corporation or association:
Provided, That any such security is, at the time of its
acquisition, rated in one of the three highest rating grades by an
agency which is nationally known in the field of rating corporate
securities: Provided, however, That if any commercial paper or any
such security will mature within one year from the date of its
issuance, it shall, at the time of its acquisition, be rated in one
of the two highest rating grades by any such nationally known
agency and commercial paper or other evidence of indebtedness of
any private corporation or association shall be purchased only upon
the written recommendation from an investment advisor that has over
three hundred million dollars in other funds under its management;
(8) Negotiable certificates of deposit issued by any bank,
trust company, national banking association or savings institution
which mature in less than one year and are fully collateralized;
(9) Interest earning deposits including certificates of
deposit, with any duly designated state depository, which deposits
are fully secured by a collaterally secured bond as provided in
section four, article one, chapter twelve of this code; and
(10) Mutual funds registered with the securities and exchange
commission which have assets in excess of three hundred million
dollars. Notwithstanding the limitations set forth in sections one
through ten above and the limitations set forth in section eleven-a
of this article, the board may invest a portion or all of the fund with the West Virginia investment management board.
§8-22-22. Investment of funds; exercise of judgment in making
investments; actuarial studies required; annual report.
The board of trustees may invest a portion or all of the fund
assets in the state consolidated fund or the consolidated pension
fund with the West Virginia investment management board. The board
of trustees shall keep as an available sum for the purpose of
making regular retirement, disability retirement, death benefit,
payments and administrative expenses in an estimated amount not to
exceed payments for a period of ninety days. The board of
trustees, in acquiring, investing, reinvesting, exchanging,
retaining, selling and managing property for the benefit of the
fund shall exercise judgment and care under fiduciary duty which
persons of prudence, discretion, and intelligence exercise in the
management of their own affairs, not in regard to speculation, but
in regard to the permanent disposition of their funds, considering
the probable total return as well as the preservation of principal.
Within the limitations of the foregoing standard, the board of
trustees is authorized in its sole discretion to invest and
reinvest any funds received by it and not invested in the
consolidated fund or the consolidated pension fund with the West
Virginia management board in the following:
(a) Any direct obligation of, or obligation guaranteed as to
the payment of both principal and interest by, the United States of America;
(b) Any evidence of indebtedness issued by any United States
government agency guaranteed as to the payment of both principal
and interest, directly or indirectly, by the United States of
America including, but not limited to, the following: Government
national mortgage association, federal land banks, federal national
mortgage association, federal home loan banks, federal intermediate
credit banks, banks for cooperatives, Tennessee valley authority,
United States postal service, farmers home administration,
export-import bank, federal financing bank, federal home loan
mortgage corporation, student loan marketing association and
federal farm credit banks;
(c) Readily marketable (i.e. traded on a national securities
exchange) debt securities having a standard & poor rating of A (or
equivalent to Moody's rating) or higher, excluding municipal
securities;
(d) Any evidence of indebtedness that is secured by a first
lien deed of trust or mortgage upon real property situated within
this state, if the payment thereof is substantially insured or
guaranteed by the United States of America or any agency thereof;
(e) Repurchase agreements issued by any bank, trust company,
national banking association or savings institutions which mature
in less than one year and are fully collateralized, no reverse
repurchase agreements shall be allowed;
(f) Interest bearing deposits including certificates of
deposit and passbook savings accounts that are FDIC insured;
(g) Equity. -- Common stocks, securities convertible into
common stocks, or warrants and rights to purchase such securities:
Provided, That each shall be listed on the NYSE, ASE or are traded
on the National OTC Market and listed on the NASDAQ National
Market;
(h) The board of trustees of each fund may delegate investment
authority to equity mutual funds managers and/ or professional
registered investment advisors who are registered with the
Securities and Exchange Commission, in addition to being registered
with the Investment Advisors Act of 1940 and appropriate state
regulatory agencies, if applicable, who also manage assets in
excess of seventy-five million dollars.
§8-22-22a. Restrictions on investments.
Moneys invested as permitted by section twenty-two of this
article, but not with the West Virginia management board are
subject to the following restrictions and condition contained in
this section:
(a) Fixed income securities shall at no time exceed ten
percent of the total assets of the pension fund, which are issued
by one issuer, other than the United States government or agencies
thereof, whereas this limit shall may not apply;
(b) At no time shall the equity portion of the portfolio exceed fifty percent of the total portfolio. Furthermore, the
debit or equity securities of any one company or association shall
not exceed five percent with a maximum of fifteen percent in any
one industry;
(c) Notwithstanding any other provisions of this article, any
investments in equities under subsections (g) and (h), section
twenty-two of this article shall be subject to the following
additional guidelines:
(1) Equity mutual funds shall be no sales load (front or back)
and no contingent deferred sales charges shall be allowed. The
total annual operating expense ratio shall not exceed one and
three-quarter percent for any mutual fund;
(2) The stated investment policy requires one hundred percent
of the equities of the portfolio be that of securities which are
listed on the New York Stock Exchange, the American Stock Exchange,
or the NASDAQ National Market;
(3) Equity mutual funds may be only of the following fund
description stated purpose: Growth funds, growth and income funds,
equity income funds, index funds; utilities, funds, balanced funds
and flexible portfolio funds;
(4) The equity value of investments shall not exceed
twenty-five percent of the total portfolio for the first twelve
months from enactment of these articles; thereafter no more than
five percent of the total portfolio be invested in equity securities per calendar quarter up to the maximum of fifty percent.
(d) The board of trustees of each fund shall obtain an
independent performance evaluation of the funds at least annually
and such the evaluation shall consist of comparisons with other
funds having similar investment objectives for performance results
with appropriate market indices;
(e) Each entity conducting business for each pension fund,
shall fully disclose all fees and costs of transactions conducted
on a quarterly basis. Entities conducting business in mutual funds
for and on behalf of each pension fund, shall timely file revised
prospectus and normal quarterly and annual Securities Exchange
Commission reporting documents with the board of trustees of each
pension fund.
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.
ARTICLE 1. STATE DEPOSITORIES.
§12-1-8. Conflict of interest.
No depository in this state may serve or be eligible for
designation as a state depository if any member of the West
Virginia investment management board, or employee of the
treasurer's office, or a spouse or minor child of that member or
employee, is an officer, director or employee thereof, or owns
greater than two percent of the depository either in his or their
own name or beneficially, or an interest in such depository. A
member of the board or An employee of the treasurer's office shall disclose the circumstance, if any, in the sworn statement required
under the provisions of section one, article one, chapter six-b of
this code.
ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.
§12-6-1a. Legislative findings.
(a) The Legislature hereby finds and declares that all the
public employees covered by the public employees retirement system,
the teachers retirement system, the West Virginia state police
retirement system, the death, disability and retirement fund of the
division of public safety and the judges' retirement system should
benefit from a prudent and conscientious staff of financial
professionals dedicated to the administration, investment and
management of those employees' and employer's financial
contributions and that an independent board and staff should be
immune to changing political climates and should provide a stable
and continuous source of professional financial investment and
management.
(b) The Legislature finds and declares that teachers and other
public employees throughout the state are experiencing economic
difficulty and that in order to reduce this economic hardship on
these dedicated public employees, and to help foster sound
financial practices, the West Virginia investment management board
is given the authority to develop, implement and maintain an
efficient and modern system for the investment and management of the state's money. The Legislature further finds that in order to
implement these sound fiscal policies, the West Virginia investment
management board shall operate as an independent board with its own
full-time staff of financial professionals immune to changing
political climates, in order to provide a stable and continuous
source of professional financial management.
(c) The Legislature hereby finds and declares further that
experience has demonstrated that prudent investment provides
diversification and beneficial return not only for public employees
but for all citizens of the state and that in order to have access
to this sound fiscal policy, public employee and employer
contributions to the consolidated pension plan 401(a) plans are
declared to be made to an irrevocable trust on behalf of each plan,
available for no use or purpose other than for the benefit of those
public employees.
(d) The Legislature hereby finds and declares further that the
workers' compensation funds and coal-workers' pneumoconiosis fund
are trust funds to be used exclusively for those workers, miners
and their beneficiaries who have sacrificed their health in the
performance of their jobs, and further finds that the assets
available to pay awarded benefits should be prudently invested so
that awards may be paid.
(e) The Legislature hereby finds and declares further that an
independent public body corporate with appropriate governance shall be the best means of assuring prudent financial management of these
funds under rapidly changing market conditions and regulations.
(f) The Legislature hereby finds and declares further that in
accomplishing this purpose, the West Virginia investment management
board, created and established by this article, is acting in all
respects for the benefit of the state's public employees and
ultimately the citizens of the state, and the West Virginia
investment management board is empowered by this article to act as
trustee for an of the
irrevocable trust trusts created by this
article, and to manage and invest other state funds.
(g) The Legislature hereby finds and declares further that the
standard of care and prudence applied to trustees, the conduct of
the affairs of the irrevocable trust trusts created by this article
and the investment of other state funds is intended to be that
applied to the investment of funds as described in the "uniform
prudent investor act" codified as article six-c of this chapter
forty-four and as described in section eleven of this article.
(h) The Legislature further finds and declares that the West
Virginia supreme court of appeals declared the "West Virginia
Trust Fund Act" unconstitutional in its decision rendered on the
twenty-eighth day of March, one thousand nine hundred ninety-seven,
to the extent that it authorized investments in corporate stock but
the court also recognized that there were other permissible
constitutional purposes of the "West Virginia Trust Fund Act," and that it is the role of the Legislature to determine those purposes
consistent with the court's decision and the constitution of West
Virginia.
(i) The Legislature hereby further finds and declares that it
is in the best interests of the state and its citizens to create
a new investment management board in order to: (1) Be in full
compliance with the provisions of the constitution of West
Virginia; and (2) protect all existing legal and equitable rights
of persons who have entered into contractual relationships with the
West Virginia board of investments and the West Virginia trust
fund.
§12-6-2. Definitions.
As used in this article unless a different meaning clearly
appears from the context:
(1) "Beneficiaries" means those individuals entitled to
benefits from the consolidated pension plan;
(2) "Board" means the governing body for the West Virginia
investment management board, and any reference elsewhere in this
code to board of investments or West Virginia trust fund means the
board as defined herein;
(3) "Consolidated fund" means the investment fund managed by
the board and established pursuant to subsection (a), section eight
of this article;
(4) "Consolidated pension plan" means the public employees retirement system established in article ten, chapter five of this
code, the teachers retirement system established in article
seven-a, chapter eighteen of this code, the West Virginia state
police retirement system established in article two-a, chapter
fifteen of this code, the death, disability and retirement fund of
the state police established in article two, chapter fifteen of
this code, the judges' retirement system established in article
nine, chapter fifty-one of this code, the workers' compensation
fund established in article three, chapter twenty-three of this
code, the wildlife endowment fund established in article two-b,
chapter twenty of this code, and the coal-workers' pneumoconiosis
plan established in article four-b, chapter twenty-three of this
code "401(a) plan" means a plan which is described in 401(a) of
the Internal Revenue Code of 1986, as amended;
(5) "Local government funds" means the moneys of a political
subdivision, including policemen's pension and relief funds,
firemen's pension and relief funds and volunteer fire departments,
transferred to the board for deposit;
(6) "Participant plan" means any component system, plan or
fund of the consolidated pension plan within the definition set
forth in subdivision (4) of this section identified in
subsection
(a), section nine-a, article six, chapter twelve of this code;
(7) "Political subdivision" means and includes a county,
municipality or any agency, authority, board, county board of education, commission or instrumentality of a county or
municipality and regional councils created pursuant to the
provisions of section five, article twenty-five, chapter eight of
this code;
(8) "Trustee" means any member serving on the West Virginia
investment management board: Provided, That in section nine-a of
this article wherein the terms of the trust indenture are set
forth, "trustee" means the West Virginia investment management
board;
(9) "Securities" means all bonds, notes, debentures or other
evidences of indebtedness, and other lawful investment instruments;
and
(10) "State funds" means all moneys of the state which may be
lawfully invested except the "school fund" established by section
four, article XII of the state constitution.
§12-6-3. West Virginia investment management board created; body
corporate; board created; trustees; nomination and
appointment of trustees, qualifications and terms of
appointment, advice and consent; annual and other
meetings; designation of representatives and
committees; board meetings with committees regarding
investment policy statement required; open meetings,
qualifications.
(a) There is hereby created the West Virginia investment
management board. The board is created as a public body corporate
and established to provide prudent fiscal administration,
investment and management for the pension funds, workers'
compensation and coal-workers' pneumoconiosis funds and other state
funds.
(b) The board shall be governed by a board of trustees,
consisting of thirteen members:
(1) Nominations made to the West Virginia trust fund board and
the West Virginia board of investments shall remain in effect and
are hereby specifically reauthorized and those members shall be
members of the investment management board and shall serve out the
remainder of their respective terms subject to the advice and
consent of the Senate: Provided, That prior appointments which
have been confirmed by the Senate are hereby specifically
reauthorized without further action of the Senate.
(2) Any appointment is effective immediately upon appointment
by the governor with respect to voting, constituting a quorum,
receiving compensation and expenses, and all other rights and
privileges of the trustee position. All appointees must have
experience in pension management, institutional management or
financial markets, and one trustee must be an attorney experienced
in finance and investment matters, and one trustee must be a
certified public accountant.
(3) The governor, the state auditor and the state treasurer or
their designees shall serve as members of the board. They shall
serve by virtue of their office and are not entitled to
compensation under the provisions of this article. The governor,
the auditor and the treasurer or their designees shall be subject
to all duties, responsibilities and requirements of the provisions
of this article, including, but not limited to, the provisions of
subsections (e) and (f), section four of this article.
(c)At the end of each trustee's term, the governor may
reappoint or appoint a successor who shall serve for six-year
terms: Provided, That for all terms ending in the year two
thousand one, two appointments shall be for a two-year term; two
shall be for a three-year term; one shall be for a four-year term;
and two shall be for a six-year term. All subsequent appointments
shall be for six-year terms. No more than six of the ten
appointed trustees may belong to the same political party.
(d) In the event of a vacancy among the trustees, an
appointment shall be made by the governor to fill the unexpired
term.
(e) The governor may remove any trustee, other than trustees
who serve by virtue of their elective office, in case of gross
negligence or misfeasance and may declare that position vacant and
may appoint a person for the vacancy as provided in subsection (d)
of this section.
(f) Each trustee, other than those enumerated in subsection
(b), subdivision (3) of this section, shall be entitled to receive,
and, at the trustee's option, the board shall pay to the trustee,
compensation in the amount of five thousand dollars per year and
additional compensation in the amount of five hundred dollars per
meeting attended by the trustee in excess of the four quarterly
meetings required by this section. In addition, all trustees shall
receive reasonable and necessary expenses actually incurred in
discharging trustee duties pursuant to this article.
(g) The board shall meet quarterly and may include in its
bylaws procedures for the calling and holding of additional
meetings. For any quarterly or additional meeting in which the
board shall review or modify its securities list or its investment
objectives pursuant to subsection (f), section twelve of this
article, the board shall give ten days notice in writing to the
designated representative of each participant plan selected
pursuant to subdivision (1), subsection (i) of this section, and
the meeting shall be open to the members and beneficiaries of the
participant plans for that portion of the meeting in which the
board undertakes the review or modification.
(h) The board shall hold an annual meeting within forty-five
days after the issuance of the year-end financial report prior to
the start of the fiscal year.
The annual meeting may also serve as
a quarterly meeting. The annual meeting shall be open to the public, and the board shall receive oral and written comments from
representatives, members and beneficiaries of the participant plans
and from other citizens of the state. At the annual meeting, the
board shall adopt a fee schedule and a budget reflecting fee
structures for the year.
(i) Pursuant to subsection (j) of this section, the board
shall meet with committees representing the participant plans to
discuss the board's drafting, reviewing or modifying the written
investment policy of the trust with respect to that committee's
participant plan pursuant to section twelve of this article.
Representatives and committees shall be designated as follows:
(1) The West Virginia consolidated public retirement board
shall promulgate procedural rules by which each pension system
named in paragraphs (1) through (6), inclusive, subsection (c),
section nine-a of this article, 401(a) plan for which the board is
trustee, shall designate an individual representative of each said
pension system 401(a) plan, and the West Virginia workers'
compensation commission shall promulgate procedural rules by which
the pneumoconiosis fund and the workers' compensation fund shall
designate an individual representative of each said fund.
(2) On or before the first day of June of each year, the
consolidated public retirement board shall submit in writing to the
board the names of the six designated representatives, and the
workers' compensation commission shall so submit the names of the two representatives.
(3) Each designated representative shall provide to the board
his or her current address, updated each year on or before the
first day of July, to which address the board shall provide notice
of meetings of the board pursuant to subsection (g) of this
section.
(4) Each designated representative shall submit in writing to
the board on or before the first day of July of each year, the
names of no more than three persons comprising a committee
representing the beneficiaries of that representative's participant
plan.
(j) At its annual meeting, the board shall meet with each of
the seven committees, formed pursuant to subdivision (1),
subsection (i) of this section, for the purpose of receiving input
from the committees regarding the board's drafting, reviewing or
modifying its written investment policy statement for investment of
the consolidated pension plan funds. In developing the investment
policy statement, the trustees shall receive each committee's
stated objectives and policies regarding the risk tolerances and
return expectations of each participant plan, with attention to the
factors enumerated in subsection (g), section twelve of this
article, in order to provide for the continuing financial security
of the trust trusts and the participant plans. The board may meet
with the committees or any of them at its quarterly and additional meetings for the same purpose.
(k) All meetings of the board shall be open to the
representatives of the participant plans as appointed pursuant to
subdivision (1), subsection (i) of this section. The
representatives shall be subject to any rules, bylaws, guidelines,
requirements and standards promulgated by the board. The
representatives shall observe standards of decorum established by
the board. The representatives shall be subject to the same code
of conduct applicable to the trustees and shall be subject to all
board rules and bylaws. The representatives shall also be subject
to any requirements of confidentiality applicable to the trustees.
Each representative shall be liable for any act which he or she
undertakes which violates any rule, bylaw or statute governing
ethical standards, confidentiality or other standard of conduct
imposed upon the trustees or the representatives. Any meeting of
the board may be closed, upon adoption of a motion by any trustee,
when necessary to preserve the attorney-client privilege, to
protect the privacy interests of individuals, to review personnel
matters or to maintain confidentiality when confidentiality is in
the best interest of the beneficiaries of the trust trusts.
§12-6-4. Management and control of fund; officers; staff;
fiduciary or surety bonds for trustees; liability of
trustees.
(a) The management and control of the board shall be vested solely in the trustees in accordance with the provisions of this
article.
(b) The governor shall be the chairman of the board and the
trustees shall elect a vice chairman who may not be a
constitutional officer or his or her designee to serve for a term
of two years. Effective with any vacancy in the vice chairmanship,
the board shall elect a vice chairman to a new two-year term. The
vice-chairman shall preside at all meetings in the absence of the
chairman. Annually, the trustees shall elect a secretary, who need
not be a member of the board, to keep a record of the proceedings
of the board.
(c) The trustees shall appoint a chief executive officer of
the board and shall fix his or her duties and compensation. The
chief executive officer shall have five years experience in
investment management with public or private funds within the ten
years next preceding the date of appointment. The chief executive
officer additionally shall have academic degrees, professional
designations and other investment management or investment
oversight or institutional investment experience in such
combination as the trustees consider necessary to carry out the
responsibilities of the chief executive officer position as defined
by the trustees.
(d) The trustees shall retain an internal auditor to report
directly to the trustees and shall fix his or her compensation. The internal auditor shall be a certified public accountant with at
least three years experience as an auditor. The internal auditor
shall develop an internal audit plan, with board approval, for the
testing of procedures and the security of transactions.
(e) Each trustee shall give a separate fiduciary or surety
bond from a surety company qualified to do business within this
state in a penalty amount of one million dollars for the faithful
performance of his or her duties as a trustee of the fund
participant plans. The board shall purchase a blanket bond for
the faithful performance of its duties, in the amount of fifty
million dollars or in an amount equivalent to one percent of the
assets under management, whichever is greater. The amount of the
blanket bond shall be in addition to the one million dollar
individual bond required of each trustee by the provisions of this
section. The board may require a fiduciary or surety bond from a
surety company qualified to do business in this state for any
person who has charge of, or access to, any securities, funds or
other moneys held by the board, and the amount of the fiduciary or
surety bond shall be fixed by the board. The premiums payable on
all fiduciary or surety bonds shall be an expense of the board.
(f) The trustees and employees of the board are not liable
personally, either jointly or severally, for any debt or obligation
created by the board: Provided, That the trustees and employees of
the board are liable for acts of misfeasance or gross negligence.
(g) The board shall be exempt from the provisions of sections
seven and eleven, article three, chapter twelve of this code and
article three, chapter five-a of said code: Provided, That the
trustees and employees of the board shall be subject to purchasing
policies and procedures which shall be promulgated by the board.
The purchasing policies and procedures may be promulgated as
emergency rules pursuant to section fifteen, article three, chapter
twenty-nine-a of this code.
(h) Any employee of the West Virginia trust fund who
previously was an employee of another state agency may return to
the public employees retirement system pursuant to section
eighteen, article ten, chapter five of this code, and may elect to
either: (1) Transfer to the public employee retirement system his
or her employee contributions, with accrued interest, and, if
vested, his or her employer contributions, with accrued interest
and retain as credited state service all time served as an employee
of the West Virginia trust fund; or (2) retain all employee
contributions with accrued interest and, if vested, his or her
employer contributions with interest, and forfeit all service
credit for the time served as an employee of the West Virginia
trust fund.
§12-6-5. Powers of the board.
The board may exercise all powers necessary or appropriate to
carry out and effectuate its corporate purposes. The board may:
(1) Adopt and use a common seal and alter the same at
pleasure;
(2) Sue and be sued;
(3) Enter into contracts and execute and deliver instruments;
(4) Acquire (by purchase, gift or otherwise), hold, use and
dispose of real and personal property, deeds, mortgages and other
instruments;
(5) Promulgate and enforce bylaws and rules for the management
and conduct of its affairs;
(6) Notwithstanding any other provision of law, retain and
employ legal, accounting, financial and investment advisors and
consultants;
(7) Acquire (by purchase, gift or otherwise), hold, exchange,
pledge, lend and sell or otherwise dispose of securities and invest
funds in interest earning deposits and in any other lawful
investments;
(8) Maintain accounts with banks, securities dealers and
financial institutions both within and outside this state;
(9) Engage in financial transactions whereby securities are
purchased by the board under an agreement providing for the resale
of the securities to the original seller at a stated price;
(10) Engage in financial transactions whereby securities held
by the board are sold under an agreement providing for the
repurchase of the securities by the board at a stated price;
(11) Consolidate and manage moneys, securities and other
assets of the other funds and accounts of the state and the moneys
of political subdivisions which may be made available to it under
the provisions of this article;
(12) Enter into agreements with political subdivisions of the
state whereby moneys of the political subdivisions are invested on
their behalf by the board;
(13) Charge and collect administrative fees from political
subdivisions for its services;
(14) Exercise all powers generally granted to and exercised by
the holders of investment securities with respect to management of
the investment securities;
(15) Contract with one or more banking institutions in or
outside the state for the custody, safekeeping and management of
securities held by the board;
(16) Make, and from time to time, amend and repeal bylaws,
regulations and procedures not inconsistent with the provisions of
this article;
(17) Hire its own employees, consultants, managers and
advisors as it considers necessary and fix their compensation and
prescribe their duties;
(18) Develop, implement and maintain its own banking accounts
and investments;
(19) Do all things necessary to implement and operate the board and carry out the intent of this article;
(20) Require the state auditor and treasurer to transmit state
funds on a daily basis for investment: Provided, That money held
for meeting the daily obligations of state government need not be
transferred;
(21) Upon request of the treasurer, transmit funds for deposit
in the state treasury to meet the daily obligations of state
government; and
(22) Establish one or more investment funds for the purpose of
investing the funds for which it is trustee, custodian or otherwise
authorized to invest pursuant to this article. Interests in each
fund shall be designated as units and the board shall adopt
appropriate accounting procedures in connection with each fund so
that a unit's value can be determined as appropriate. The
securities in each investment fund shall be the property of the
board and each fund shall be considered an investment pool or fund
and may not be considered a trust nor shall the securities of the
various investment funds be considered held in trust. However,
units in an investment fund issued to or sold to the board and the
proceeds from the sale or redemption of any unit may be held by the
board in its role as trustee of the participant plans; and
(22)(23) Notwithstanding any other provision of the code to
the contrary, conduct investment transactions, including purchases,
sales, redemptions and income collections which transactions shall may not be treated by the auditor as recordable transactions on the
state's accounting system.
§12-6-6. Annual audits; reports and information to constitutional
and legislative officers, council of finance and
administration, consolidated public retirement board,
workers' compensation fund and coal-workers'
pneumoconiosis fund; statements and reports open for
inspection.
(a) The board shall cause an annual financial and compliance
audit of the consolidated pension fund assets managed by the board
to be made by a certified public accounting firm having a minimum
staff of ten certified public accountants and being a member of the
American institute of certified public accountants, and, if doing
business in West Virginia, being a member of the West Virginia
society of certified public accountants. The financial and
compliance audit shall be made of the board's books, accounts and
records, with respect to its receipts, disbursements, investments,
contracts and all other matters relating to its financial
operations. Copies of the audit report shall be furnished to the
governor, state treasurer, state auditor, president of the Senate,
speaker of the House of Delegates, council of finance and
administration and consolidated public retirement board.
(b) The board shall produce monthly financial statements for the consolidated pension fund and the consolidated fund participant
plans
and cause them to be delivered to each member of the board
and the executive secretary of the consolidated public retirement
board as established in sections one and two, article ten-d,
chapter five of this code and to the commissioner of the bureau of
employment programs as administrator of the workers' compensation
fund and coal-workers' pneumoconiosis fund, as established in
section one, article one, chapter twenty-three of this code, and
section one, article three of said chapter and section seven,
article four-b of said chapter.
(c) The board shall deliver in each quarter to the council of
finance and administration and the consolidated public retirement
board a report detailing the investment performance of the
retirement plans.
(d) The board shall cause an annual audit of the reported
returns of the consolidated pension fund participant plans
to be
made by an investment consulting or a certified public accounting
firm meeting the criteria set out in subsection (a) of this
section. The board shall furnish copies of the audit report to the
governor, state treasurer, state auditor, president of the Senate,
speaker of the House of Delegates, council of finance and
administration and consolidated public retirement board.
(e) The board shall provide any other information requested in
writing by the council of finance and administration.
(f) All statements and reports with respect to participant
plans required in this section shall be available for inspection by
the members and beneficiaries and designated representatives of the
participant plans.
§12-6-8. Investment funds established; management thereof.
(a) There is hereby established a special investment fund to
be managed by the board and designated as the "consolidated fund."
(b) Each board, commission, department, official or agency
charged with the administration of state funds is hereby authorized
to make moneys available to the board for investment.
(c) Each political subdivision of this state through its
treasurer or equivalent financial officer is hereby authorized to
enter into agreements with the board for the investment of moneys
of the political subdivision. Any political subdivision may enter
into an agreement with any state agency from which it receives
funds to allow the funds to be transferred to their investment
account with the investment management board.
(d) Moneys held in the various funds and accounts administered
by the board shall be invested as permitted in section twelve of
by
this article. and subject to the restrictions contained in that
section The treasurer shall maintain records of the deposits and
withdrawals of each participant and the performance of the various
funds and accounts. The board shall report the earnings on the
various funds under management to the treasurer at such times as determined by the treasurer. The board shall also establish rules
for the administration of the various funds and accounts
established by this section as it considers necessary for the
administration of the funds and accounts, including, but not
limited to: (1) The specification of minimum amounts which may be
deposited in any fund or account and minimum periods of time for
which deposits will be retained; and (2) creation of reserves for
losses: Provided, That in the event any moneys made available to
the board may not lawfully be combined for investment or deposited
in the consolidated funds established by this section, the board
may create special accounts and may administer and invest those
moneys in accordance with the restrictions specially applicable to
those moneys: Provided, however, That in the case of money
transferred to the board as trustee, the board shall hold in one or
more separate trusts, the assets of each 401(a) plan for where the
board is trustee and the trusts shall not hold the assets of any
other fund transferred to the board under this article or
otherwise. However, this prohibition shall not prevent the board
as trustee of a 401(a) plan from investing the 401(a) plan's assets
in any of its investment funds even though the board may also
invest non-401(a) plan moneys in the investment funds. Provided,
however, That the consolidated fund and the moneys of the
consolidated pension plan shall not be combined or deposited to a
single account or fund
§12-6-9. Fees for service.
The board shall charge fees, as adopted at the annual meeting,
for the reasonable and necessary expenses incurred by the
investment management board in rendering services to the
participant plans and the consolidated fund
participant plans and the consolidated fund
entities depositing assets with the board for investment. All fees
which are dedicated or identified or readily identifiable to an
individual participant plan or the consolidated fund entity
shall
be charged against that plan or fund
§12-6-9a. Trust indenture.
(a) The board shall continue to hold each participant plan
specified by this article in a separate trust with the earnings and
losses accounted for and charged individually to each participant
plan and trust. Participant plans, each held in a separate trust,
shall include, but not be limited to, the following:
(1) The public employees retirement system;
(2) The teachers retirement system;
(3) The West Virginia state police retirement system;
(4) The death, disability and retirement fund of the division
of public safety;
(5) The judges' retirement system;
(6) The deputy sheriff retirement system;
(7) The pneumoconiosis fund; and
(8) The workers' compensation fund.
(b) The Legislature hereby reserves the following rights and
powers:
(1) The right by supplemental agreement to amend, modify or
alter the terms of the trusts without consent of the trustee, or
any beneficiary except that no amendment to a trust which holds a
401(a) plan moneys shall be made which allows at any time prior to
the death of all the employees and their beneficiaries and the
satisfaction of all liabilities with respect to employees and their
beneficiaries under the trust for any part of the corpus or income
(other than such part as is required to pay taxes and
administration expenses)to be used for, or diverted to, purposes
other than for the exclusive benefit of the employees or their
beneficiaries;
(2) The right to request and receive additional information
from the trustee at any time.
(c) In the administration of the trusts created by this
article, the trustee has the following powers:
(1) To purchase, retain, hold, transfer and exchange, and to sell, at public or private sale, the whole or any part of the trust
estate upon the terms and conditions as it considers advisable;
(2) To invest and reinvest the trust estate or any part
thereof, in any kind of property, real or personal, including, but
not limited to, mortgage or mortgage participation, common stocks,
preferred stocks, common trust funds, investment funds established
by the board, bonds, notes or other securities, notwithstanding the
provisions of articles five and six, chapter forty-four of this
code;
(3) To carry the securities and other property held in trust
either in the name of the trustee or in the name of its nominee;
(4) To vote, in person or by proxy, all securities held in
trust, to join in or to dissent from and oppose the reorganization,
recapitalization, consolidation, merger, liquidation or sale of
corporations or property; to exchange securities for other
securities issued in connection with or resulting from any
transaction; to pay any assessment or expense which the trustee
considers advisable for the protection of its interest as holder of
any such securities; to deposit securities in any voting trust or
with any protective or like committee, or with a trustee
depository; to exercise any option appurtenant to any securities
for the conversion of any securities into other securities; and to
exercise or sell any rights issued upon or with respect to the
securities of any corporation, all upon terms the trustee considers advisable;
(5) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the trustee or other
trust estate;
(6) To employ and pay from the trust, legal and investment
counsel, brokers and any other assistants and agents as the trustee
considers advisable; and
(7) To develop, implement and modify an asset allocation plan
for each participant plan. The asset allocation plans shall be
implemented within the management and investment of the individual
trust.
(d) All trust income shall be free from anticipation,
alienation, assignment or pledge, by and free from attachment,
execution, appropriation or control by or on behalf of, any and all
creditors of any beneficiary by any proceeding at law in equity in
bankruptcy or insolvency.
(e) Notwithstanding any other provision of this article, in
the case of a trust which holds any 401(a) plan's money, it shall
be impossible at anytime prior to the death of all the employees
and their beneficiaries and the satisfaction of all liabilities
with respect to the employees and beneficiaries of the related
401(a) plan, for any part of the corpus or income to be (within the
taxable year or thereafter) used for, or diverted to, purposes
other than the exclusive benefit of the employees and their beneficiaries.
(f) The trustee may receive any other property, real or
personal, tangible or intangible, of any kind whatsoever, that may
be granted, conveyed, assigned, transferred, devised, bequeathed or
made payable to the participant plan, and all properties shall be
held, managed, invested and administered by the trustee as provided
in this article and in the "West Virginia Investment Management
Act."
(g) The trustee shall promptly cause to be paid to the state
from the applicable trust the amounts certified by the governor as
necessary for the monthly payment of benefits to the beneficiaries
of the trust.
(h) The trustee shall render an annual accounting to the
governor not more than one hundred twenty days following the close
of the fiscal year of each trust.
(i) No trust shall be invalid by reason of any existing law or
rule against perpetuities or against accumulations or against
restraints upon the power of alienation, but each trust shall
continue for such time as necessary to accomplish the purposes for
which it is established.
On the effective date of this section, all assets of the
irrevocable trust entered into by the governor on the first day of
July, one thousand nine hundred ninety-six, with the West Virginia
trust fund, inc., acting as the trustee shall constitute the corpus of an irrevocable trust with the board as its trustee: Provided,
That the trust shall continue to be subject to the following
provisions:
(a) The Legislature hereby reserves the following rights and
powers:
(1) The right by supplemental agreement to amend, modify or
alter the terms of this trust without consent of the trustee, or
any beneficiary; and
(2) The right to request and receive additional information
from the trustee at any time.
(b) The trustee shall establish a trust for the participant
plans specified by this article with the earnings and losses
accounted for and charged individually to each participant plan,
including, but not limited to, the following:
(1) The public employees retirement system;
(2) The teachers retirement system;
(3) The West Virginia state police retirement system;
(4) The death, disability and retirement fund of the
department of public safety;
(5) The judges' retirement system;
(6) The deputy sheriff retirement system;
(7) The pneumoconiosis fund; and
(8) The workers' compensation fund.
(c) In the administration of the trust created by the trust indenture, the trustee has the following powers:
(1) To purchase, retain, hold, transfer and exchange, and to
sell, at public or private sale, the whole or any part of the trust
estate upon such terms and conditions as it considers advisable;
(2) To invest and reinvest the trust estate or any part
thereof, in any kind of property, real or personal, including, but
not limited to, mortgage or mortgage participations, common stocks,
preferred stocks, common trust funds, bonds, notes or other
securities, notwithstanding the provisions of articles five and
six, chapter forty-four of this code: Provided, That
notwithstanding the provisions of this article to the contrary,
the board shall not become a stockholder or owner of any company or
association for any purpose whatsoever unless and until the
provisions of section six, article X of the constitution of West
Virginia are amended to permit those investments;
(3) To carry the securities and other property held under the
trust indenture either in the name of the trustee or in the name of
its nominee;
(4) To vote, in person or by proxy, all securities held under
the trust indenture, to join in or to dissent from and oppose
the reorganization, recapitalization, consolidation, merger,
liquidation or sale of corporations or property; to exchange
securities for other securities issued in connection with or
resulting from any transaction; to pay any assessment or expense which the trustee considers advisable for the protection of its
interest as holder of any such securities; to deposit securities in
any voting trust or with any protective or like committee, or with
a trustee depository; to exercise any option appurtenant to any
securities for the conversion of any securities into other
securities; and to exercise or sell any rights issued upon or with
respect to the securities of any corporation, all upon terms the
trustee considers advisable;
(5) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the trustee or other
trust estate;
(6) To employ and pay from the trust estate legal and
investment counsel, brokers and such other assistants and agents as
the trustee considers advisable; and
(7) To develop, implement and modify an asset allocation plan
for each participant plan. The asset allocation plans shall be
implemented within the management and investment of the trust fund.
(d) All trust income shall be free from anticipation,
alienation, assignment or pledge by, and free from attachment,
execution, appropriation or control by or on behalf of, any and all
creditors of any beneficiary by any proceeding at law, in equity,
in bankruptcy or insolvency.
(e) The trustee may receive any other property, real or
personal, tangible or intangible, of any kind whatsoever, that may be granted, conveyed, assigned, transferred, devised, bequeathed or
made payable to it by the state, or by any other person or entity,
for the purposes of the trust created by the trust indenture, and
all such properties shall be held, managed, invested and
administered by the trustee as provided in the trust indenture and
in the "West Virginia Investment Management Act".
(f) The trustee shall promptly cause to be paid to the state
the amounts certified by the governor as necessary for the monthly
payment of benefits to the beneficiaries of the trust.
(g) The trustee shall render an annual accounting to the
governor not more than one hundred twenty days following the close
of the fiscal year of the trust.
(h) The trust will not be invalid by reason of any existing
law or rule against perpetuities or against accumulations or
against restraints upon the power of alienation, but the trust may
continue for such time as necessary to accomplish the purposes for
which it is established.
(i) (j) If any provision of the trust indenture this section
is void, invalid or unenforceable, the remaining provisions are
nevertheless valid and shall be carried into effect.
§12-6-11. Standard of care.
Any investments made under this article shall be made in
accordance with the provisions of the "Uniform Prudent Investor
Act" codified as article six-c of this chapter forty-four and shall be further subject to the following requirements:
(a) Trustees shall discharge their duties with respect to the
consolidated pension plan participant plans for the exclusive
purpose of providing benefits to participants and their
beneficiaries;
(b) Trustees shall diversify fund investment so as to minimize
the risk of large losses unless, under the circumstances, it is
clearly prudent not to do so;
(c) Trustees shall defray reasonable expenses of investing and
operating the funds under management; and
(d) Trustees shall discharge their duties in accordance with
the documents and instruments governing the trust fund trusts or
other funds under management insofar as such the documents and
instruments are consistent with the provisions of this article.
§12-6-12. Limitations on investments.
(a) The board shall not become a stockholder or owner of any
company or association for any purpose whatsoever unless and until
the provisions of section six, article X of the constitution of
West Virginia are amended to provide for those investments. If at
some time, after the effective date of this section, the provisions
of section six, article X of the constitution of West Virginia are
amended to allow the state to become a stockholder in a
corporation, the board shall limit its asset allocation and types
of securities to the following:
(1) For the first twelve months following authorization of the
state to become a stockholder or owner of any corporation, the
board shall hold in equity investments no more than twenty percent
of its total portfolio and no more than twenty percent of the
assets of any individual participant plan or the consolidated fund;
during the thirteenth through and including the twenty-fourth month
following the authorization, the board shall hold in equity
investments no more than forty percent of its total portfolio and
no more than forty percent of the assets of any individual
participant plan or the consolidated fund; and thereafter, the
board shall hold in equity investments no more than sixty percent
of its total portfolio and no more than sixty percent of the assets
of any individual participant plan or the consolidated fund.
(2) The board shall hold in international securities no more
than twenty percent of the consolidated fund or the trust fund its
total portfolio
and no more than twenty percent of the assets of
any individual participant plan or the consolidated fund.
(3) The board may not at the time of purchase hold more than
five percent of the trust fund or consolidated fund in the equity
total portfolio
securities of any single company or association:
Provided, That if a company or association has a market weighting
of greater than five percent in the standard & poor's 500 index of
companies, the board may hold securities of that equity equal to
its market weighting.
(b) The board shall at all times limit its asset allocation
and types of securities to the following:
(1) The board may not hold more than twenty percent of the
trust fund total portfolio
in commercial paper. Any commercial
paper at the time of its acquisition shall be in one of the two
highest rating categories by an agency nationally known for rating
commercial paper.
(2) At no time shall the board hold more than seventy-five
percent of the trust fund or consolidated fund total portfolio
in
corporate debt. Any corporate debt security at the time of its
acquisition shall be rated in one of the four highest rating
categories by a nationally recognized rating agency.
(3) No security may be purchased by the board unless the type
of security is on a list approved by the board. The board may
modify the securities list at any time, and must give notice of
that action pursuant to subsection (g), section three of this
article, and must review the list at its annual meeting.
(c) The board, at the annual meeting provided for in
subsection (h), section three of this article, shall review,
establish and modify, if necessary, the investment objectives of
the individual participant plans, as incorporated in the investment
policy statements of the respective trusts so as to provide for the
financial security of the trust funds giving consideration to the
following:
(1) Preservation of capital;
(2) Diversification;
(3) Risk tolerance;
(4) Rate of return;
(5) Stability;
(6) Turnover;
(7) Liquidity;
(8) Reasonable cost of fees.
§12-6-20. Termination of board.
Pursuant to the provisions of article ten, chapter four of
this code, the West Virginia investment management board shall
continue to exist until the first day of July, two thousand two.
NOTE: The purposes of this bill are as follows: (1) It
provides that notwithstanding certain limitations the board of
trustees of a municipality may invest a portion or all of pension
funds under its control with the West Virginia Investment
Management board; (2) it removes the prohibition premised on
conflict of interest considerations, that no depository may serve
or be eligible for designation as a state depository if any member
of the West Virginia investment management board is an officer,
director or employee of the treasurer's office; (3) generally, the
bill addresses the state board of investment and it's investment
management; (4) it modifies legislative findings to declare public
employee and employer contributions made to 401(a) plans are made
to an irrevocable trust on behalf of each plan; (5) it changes the
definition of "participant plan"; (6) it provides for the
sequencing of terms of appointees to board of trustees of the West
Virginia investment management board who ascend to their positions
in two thousand one; (7) it provides the board holds an annual
meeting prior to the fiscal year; (8) it makes clarifying and
stylistic changes; (9) it provides that the board has authority to
establish one or more investment funds; (10) it provides that each fund established is designated as a "unit" for purposes of
accounting and valuation; (11) it provides that the securities in
each investment fund are deemed the property of the board as an
investment pool and are not to be considered as being held in
trust; (12) it provides that units in an investment fund issued to
or sold by the board and the proceeds from the sale or redemption
of a unit may be held by the board in trust; (13) it requires an
annual audit of participant plans; (14) it provides that moneys
intended as "401(a) trusts" transferred to the board shall be held
in separate trusts and that these trusts shall not hold assets of
any other fund transferred to the board under the provisions of the
subject article or otherwise, but also provides that this
prohibition does not prevent the board from investing in any of its
investment funds even though the board may also invest non-401(a)
trust moneys in the investment funds; (15) it provides the board
shall hold participant plans in separate trusts; (16) it designates
participant plans subject to the article; (17) it reserves certain
rights and powers of the Legislature; (18) it designates certain
powers of the trustee; (19) it exempts trust income from claims of
creditors; (20) it prohibits corpus or income of trust to be used
for anything other than benefit of beneficiary; (21) it requires
trustee to pay amount certified by governor as necessary to provide
for monthly payments of benefits; (22) it requires trustee to
render an annual report to the governor; (23) it provides that no
trust may be construed invalid by operation of the rule against
perpetuities; and (24) it provides the board shall continue to
exist until the first day of July two thousand two.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.