Senate Bill No. 15


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[Introduced February 14, 2001; referred to the Committee on Pensions; and then to the Committee on Finance.]

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A BILL to repeal section ten, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended; to amend and reenact sections eleven, twenty-two and twenty-two-a, article twenty-two, chapter eight of said code; 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funds under its control with the investment management board; correcting and clarifying inconsistencies; deleting outdated conflict of interest provision regarding board members and state depositories; allowing for the common investment of pension, workers' compensation and other assets in board-created investment vehicles; changing date of annual meeting; providing for staggered terms of board members; amending statutory trust language to conform with trust indenture; clarifying that all assets invested by the board are to be assessed appropriate fees; and eliminating certain restrictions on investments.

Be it enacted by the Legislature of West Virginia:
That section ten, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be repealed; that sections eleven, twenty-two and twenty-two-a, article twenty-two, chapter eight of said code be amended and reenacted; that section eight, article one,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, article six of said chapter 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 trust 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 and 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, of the depository, 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 two, 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 its' 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 the consolidated fund and the moneys of the consolidated pension plan shall not be combined or deposited to a single account or fund 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.
§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 all entities depositing assets with the board for investment. The fees shall be subtracted from the total return of the board, and the net return shall be credited to each of the 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 to that entity and all other fees shall be charged as a percentage of assets under management. At its annual meeting, the board shall adopt a fee schedule and a budget reflecting fee structures.
§12-6-9a. Trust indenture.
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 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.
(a) (b) 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 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; 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 trusts created by the trust indenture 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, 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 under the trust indenture 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 under the trust indenture 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, estate trusts, 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 trust fund 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.
(e) (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 it by the state, or by any other person or entity, for the purposes of the trust created by the trust indenture the applicable trust, and all such properties shall be held, managed, invested and administered by the trustee as provided in the trust indenture this article and in the "West Virginia investment management act".
(f) (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.
(g) (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 the each trust.
(h) (i) The No trust will not 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 the trust may each trust shall 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. Investment objectives.
(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 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 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 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 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 purpose of this bill is to provide for investment of municipal pension funds with the West Virginia Investment Management Board, to correct and clarify inconsistencies related to the board, to delete outdated provisions, to allow for the common investment of pension, workers' compensation and other assets in board-created investment vehicles, to change the date of the annual meeting and provide for staggered terms of board members, to amend statutory trust language to conform with trust indenture, to clarify assessment of appropriate fees, and to eliminate certain restrictions on investments.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.