ENGROSSED

H. B. 4545

(By Delegates Campbell, Craig, Williams,

Browning,

Hall and Duke)

(Originating in the Committee on Pensions and Retirement)


[February 19, 2004]
A BILL to amend the code of West Virginia, 1931, as amended, by adding thereto a new section, designated §18-7B-7a; and to amend said code by adding thereto a new article, designated §18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6, §18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12, §18-7C-13 and 18-7C-14, all relating to the merger and consolidation of the teachers' defined contribution retirement system and the state teachers retirement system generally; closing the teachers' defined contribution retirement system to newly hired personnel; providing that certain persons rehired are to become members of the last plan contributed to; setting forth short title; providing legislative findings and purpose; providing definitions; providing for merger and consolidation of the teachers' defined contribution retirement system and the state teachers retirement system upon election; providing responsibilities of the consolidated public retirement board; setting forth dates and time periods for transition and election; requiring that increase of or new benefits to the teachers retirement system be amortized over a seven-year time period; providing for education about election and merger for members; requiring legal notice to members; providing for transfer of assets from the teachers' defined contribution retirement system to the state teachers retirement system upon favorable vote for consolidation and merger; providing that the teachers' defined contribution retirement system shall not exist upon favorable vote for consolidation and merger; setting forth terms of merger and consolidation of the teachers' defined contribution retirement system and the state teachers retirement system; providing for service credit in the state teachers retirement; requiring members of teachers' defined contribution plan to pay additional amount to receive credit upon merger; providing options and loans for members moving to the remaining plan; providing service credit for transferring member; addressing withdrawals and cash outs; providing for election on the question of merger and consolidation of the teachers' defined contribution retirement system and the state teachers retirement system; setting forth requirements of election; allowing consolidated public retirement board to contract directly for professional services for purposes of performing its responsibilities related to the merger and consolidation and conducting the election; permitting only one election; addressing qualified domestic relations orders; providing for vesting of members and minimum guarantees of benefits for them; providing for due process and right to appeal; and providing for nonseverability of the new article.

Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated §18-7B-7a; and that said code be amended by adding thereto a new article, designated §18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6, §18-7C- 7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12, §18-7C-13 and §18-7C-14, all to read as follows:
ARTICLE 7B. TEACHERS' DEFINED CONTRIBUTION RETIREMENT SYSTEM.
§18-7B-7a. Plan closed to persons employed for the first time after June, 2004; former employees.

The retirement system created and established in this article shall be closed and no new members accepted therein after the thirtieth day of June, two thousand four. Notwithstanding the provisions of sections seven and eight of this article, all persons who are regularly employed for full-time service as a member or employee whose initial employment commences after the thirtieth day of June, two thousand four, shall become members of the state teachers' retirement system created and established in article seven-a of this chapter: Provided, That any person rehired after the thirtieth day of June, two thousand four, shall become a member of the teachers' defined contribution retirement system created and established in this article, or of the teachers retirement system created and established in article seven-a of this chapter, depending upon the system to which he or she last contributed while he or she was employed with an employer mandating membership and contributions to one of those plans: Provided, however, That if, and only if, the teachers' defined contribution retirement system is merged and consolidated with the teachers retirement system pursuant to the provisions of article seven-c of this chapter, then all employees shall become a member of the teachers retirement system as of the first day of July, two thousand five, as provided in article seven-c of this chapter.
ARTICLE 7C. MERGER OF TEACHERS' DEFINED CONTRIBUTION RETIREMENT SYSTEM WITH STATE TEACHERS RETIREMENT SYSTEM.
§18-7C-1. Short title.
This article may be cited as the "Teachers' Retirement Equity Act".
§18-7C-2. Legislative findings and purpose.
The Legislature declares that the State of West Virginia and its citizens have always believed in a strong public education system, with our own constitution mandating a thorough and efficient public education system. The Legislature notes that the quality of our State's education system is dependent, inter alia, upon the motivation and quality of its teachers and educational service personnel.
The Legislature finds and declares that the State of West Virginia is privileged to be the home of some of the best teachers and service personnel in this nation, and that our teachers and service personnel are dedicated and hard working individuals. The Legislature further finds and declares that our teachers and service personnel should have a retirement program whereby they know in advance what their retirement benefit will be, a defined benefit retirement program where our teachers and service personnel will not have to bear the risk of investment performance to receive their full retirement benefit. The Legislature notes that uncertainty exists in the investment markets, especially in the post September eleven era, and that placing this risk and uncertainty upon the state in the form of a defined benefit plan will protect and ensure a retirement benefit for our teachers and educational service personnel.
The Legislature declares that it is in the best interests of the teachers and public education in this state and conducive to the fiscal solvency of the teachers retirement system that the teachers' defined contribution retirement system be merged with the state teachers retirement system.
The Legislature also finds that a fiscally sound retirement program with an ascertainable benefit aids in the retention and recruitment of teachers and school service personnel, and that the provisions of this article are designed to accomplish the goals set forth in this section.
The Legislature has studied this matter diligently and in making the determination to merge the two plans has availed itself of an actuarial study of the proposed merger by the actuary of the consolidated public retirement board as well as engaging the service of two independent actuaries.
§18-7C-3. Definitions.
As used in this article, unless the context clearly requires a different meaning:
(1) "Defined contribution system" means the teachers' defined contribution system created and established in article seven-b of this chapter.
(2) "Existing retirement system" or "state teachers retirement system" means the state teachers retirement system created and established in article seven-a of this chapter.
(3) "Board" means the consolidated public retirement board created and established in article ten-d, chapter five of this code and its employees.
(4) "Member" means and includes any person who has at least one dollar in the defined contribution system.
(5) "Assets" or "all assets" means all member contributions, employer contributions and interest or asset appreciation in a member's defined contribution account, less any applicable fees as approved by the board.
(6) "Salary" or "annual salary" means the annual contract salary for those persons working in accordance with an employment contract and in any other event as an annualized amount determined by multiplying a person's hourly rate of pay by two thousand eighty hours.
(7) "Date of merger" means, in the event of a positive vote on the merger, the first day of July, two thousand five.
§18-7C-4. Merger.
On the first day of July, two thousand five, the teachers' defined contribution retirement system created and established in this article shall be merged and consolidated with the teachers retirement system created and established in article seven-a of this chapter, pursuant to the provisions of this article: Provided, That if the majority of the voting members of the teachers' defined contribution retirement system do not elect in favor of the merger, then the provisions of this article are void and of no force and effect, and the defined contribution system created and established in article seven-b of this chapter shall continue as the retirement system for all members in that system as of the thirtieth day of June, two thousand five and for those persons rehired who were paying into the defined contribution system at the time of his or her last employment.
If the merger provided for in this article occurs, should any future increase of existing benefits or the creation of new benefits under the teachers retirement system, other than an increase in benefits or new benefits effected by operation of law in effect on the effective date of this article, cause any additional unfunded actuarial accrued liability in the state teachers retirement pension system (calculated in an actuarially sound manner) during any fiscal year, such additional unfunded actuarial accrued liability of that pension system shall be fully amortized over no more than the seven consecutive fiscal years following the date the increase in benefits or new benefits become effective.
§18-7C-5. Notice, education, record keeping requirements.
(a) Commencing not later than the first day of August, two thousand four, the consolidated public retirement board shall begin an educational program with respect to the merger of the defined contribution plan with the state teachers retirement system. This education program shall address, at a minimum, the law providing for the merger, the mechanics of the merger, the election process, relevant dates and time periods, the benefits, potential advantages and potential disadvantages if members elect to remain in the defined contribution system, the benefits, potential advantages and potential disadvantages of becoming members of the teachers retirement system, potential state and federal tax implications in general attendant to the various options available to the members and any other pertinent information deemed relevant by the board. The board shall provide this information through its website, by written materials, electronic materials or both written and electronic materials delivered to each member and by classes or seminars, if, in the best judgment of the board, the classes and seminars are necessary. The board shall also provide this information through computer programs, or, at the discretion of the board through a program of individual counseling which is optional on the part of the member, and through any other educational program or programs deemed necessary by the board.
(b) The board shall provide each member with a copy of the written or electronic educational materials and with a copy of the notice of the election. The notice shall provide full and appropriate disclosure of the merger and the election process, including the date of the election. The board shall also cause notice of the election to be published in at least ten newspapers of general circulation in this state. This notice shall be by Class III legal advertisement published in accordance with the provisions of article three, chapter fifty-nine of this code. The board shall cause this notice to be published not later than thirty days prior to the beginning of the election period and not sooner than sixty days prior to the beginning of the election period.
(c) It is the responsibility of each member of the defined contribution plan to keep the board informed of his or her current address. If a member does not keep the board informed of his or her current address, he or she is deemed to have waived his or her right to receive any information from the board.
(d) Once the board has complied with the provisions of this section, every member of the defined contribution plan is deemed to have actual notice of the election and all matters pertinent thereto.
§18-7C-6. Conversion of assets from defined contribution system to state teachers retirement system.

(a) If a majority of members voting elect to merge the defined contribution system into the state teachers retirement system, the consolidation and merger shall be governed by the provisions of this article, the defined contribution retirement system shall not exist after the thirtieth day of June, two thousand five, and all members thereof shall become members of the state teachers retirement system as provided herein.
(b) Following the election in favor of the merger, the board shall transfer all assets in the defined contribution account into the state teachers retirement system and members have the option to pay into the state teachers retirement system a one and one-half of one percent contribution for service in the defined contribution plan being recognized in the state teachers retirement system. This contribution shall be calculated based on the member's salary as of the thirtieth day of June, two thousand four, and the members attained age on that date, applying an annual backward salary scale projection from that date for prior years based upon the salary scale assumption applied in the actuarial valuation dated the first day of July, two thousand three, for the teachers retirement system and a one year forward salary scale projection for the year ending on the thirtieth day of June, two thousand five. Members have until the first day of July, two thousand six, to pay this amount. If a member makes no payment whatsoever toward this amount by the first day of July, two thousand six, the member is deemed to have forever waived his or her right to pay this amount and to have made an irrevocable election not to pay this amount. In this instance, the board shall make the appropriate actuarial adjustment to that member's annuity.
(c) The board shall make available to the members a loan in accordance with the provisions of section thirty-four, article seven-a of this chapter to be used by the members to pay all or a part of the one and one-half percent amount established in this section. Notwithstanding any provision of this code, any rule or any policy of the board to the contrary, the interest rate on any loan used to pay the one and one-half percent amount may not exceed seven and one-half percent per annum and the amount borrowed may not exceed twelve thousand dollars. In the event a plan loan is used to pay the one and one-half percent, the board shall make any actuarial adjustments at the time the loan is made. The board shall make this plan loan available for members until the thirtieth day of June, two thousand six.
(d) The board shall include a payroll deduction program for the repayment of the plan loan established in this section.
(e) If the merger and consolidation is elected by a majority of those person voting, as of the first day of July, two thousand five, the members' contribution rate shall become six percent of his or her salary or wages and the retirement members who make a contribution into the state teachers retirement system on or after the first day of July, two thousand five, shall be governed by the provisions of article seven-a of this chapter subject to the provisions of this article.
(f) In the event a member has withdrawn or cashed out part of his or her defined contribution plan, that member will not be given credit for those moneys cashed out or withdrawn. The board shall make an actuarial determination as to the amount of credit a member loses on the amounts he or she has withdrawn or cashed out which actuarial adjustment shall be expressed as a loss of service credit: Provided, That a member may repay those amounts he or she cashed out or withdrew, along with interest determined by the board and receive the same credit as if the withdrawal or cash out never occurred if this repayment is completed within five years following the date of the cash out or withdrawal: Provided, however, That these amounts shall be fully repaid no later than the thirtieth day of June, two thousand five. If the repayment is five or more years following the cash out or withdrawal, then he or she must repay any forfeited employer contribution account balance along with interest determined by the board in addition to the cash out or withdrawn amount: Provided further, That these amounts shall be fully repaid not later than the thirtieth day of June, two thousand five.
(g) Where the member has cashed out of his or her teacher defined contribution plan account balance after the last day of June, two thousand, and that member wishes to repurchase defined contribution plan service after the thirtieth day of June, two thousand five, then the member must repay the teachers retirement plan within five years of the date of cash out.
(h) Any prior service in the state teachers retirement system a member may have is not affected by the provisions of this article.
§18-7C-7. Service credit in state teachers retirement system following merger.
Any member transferring all of his or her assets from the defined contribution system to the state teachers retirement system pursuant to the provisions of this article, and who has not made any withdrawals from his or her defined contribution plan, is entitled to service credit in the state teachers retirement system for each year, or part thereof, as governed by the provisions of article seven-a of this chapter, the member worked and contributed to the defined contribution plan. Any member who has made withdrawals or cash outs will receive service credit based upon the amounts transferred and the board shall make the appropriate actuarial determination of the service credit the member will receive.
§18-7C-8. Election; board may contract for professional services.
(a) The board shall arrange for and hold an election for the members of the defined contribution plan on the issue of merging and consolidating the defined contribution plan into the state teachers retirement plan with the result being that, if a majority of the members casting ballots vote in the positive on the issue, all members of the defined contribution plan will transfer, or have transferred, all assets held by them or on their behalf in the defined contribution plan to and become members of, and entitled to the benefits of the state teachers retirement system and be governed by the provisions of the state teachers retirement system subject to the provisions of this article: Provided, That at least one-half of the members of the defined contribution plan must vote on the question in order for the election to be valid and binding.
(b) Any person who has one dollar or more in a defined contribution account created and established pursuant to article seven-b of this chapter, is allowed to vote on the question of the merger.
(c) The board may retain the services of the professionals it deems necessary to: (1) Assist in the preparation of educational materials for members of the defined contribution plan to inform these members of their options in the election; (2) assist in the educational process of the members; (3) assist in the election process and the election; and (4) ensure compliance with all relevant state and federal laws.
(d) Due to the time constraints inherent in the merger process set forth in this article in specific, and to the nature of the professional services required by the consolidated public retirement board in general, the provisions of article three, chapter five-a of this code relating to the division of purchasing of the department of administration do not apply to any contracts for any actuarial services, investment services, legal services or other professional services authorized under the provisions of this article.
(e) The election provided for in this section may be held through certified mail or in any other way the board determines is in the best interest of the members. Each ballot shall contain the following language, in bold fifteen point type: "By casting this ballot I am making an educated, informed and voluntary choice as to my retirement and the retirement system of which I wish to be a member. I am also certifying that I understand the consequences of my vote in this election." Each ballot shall be signed by the member voting. The board shall retain the ballots in a permanent file.
(f) The election period shall begin not later than the first day of March, two thousand five and the board shall ascertain the results of the election not later than the last day of March, two thousand five. The board shall certify the results of the election to the governor, to the Legislature and to the members not later than the fifth day of April, two thousand five.
(g) The election period shall terminate and no votes may be cast or counted after the twelfth day of March, two thousand five, except that if the election is conducted through the United States mails, the ballot shall be postmarked not later than the twelfth day of March, two thousand five, in order to be counted.
(h) The board shall take all necessary steps to see that the merger does not affect the qualified status with the Internal Revenue Service of either retirement plan.
§18-7C-9. Election deemed final.
(a) The election is deemed final and each member, whether he or she votes, or fails to vote, shall thereafter be bound by the results of the election. Every member is deemed to have made an informed, educated, knowing and voluntary decision and choice with respect to the election. Those members who fail or refuse to vote are also deemed to have made an informed, educated, knowing and voluntary decision and choice with respect to the election and with respect to voting and shall be bound by the results of the election as if he or she voted in the same.
(b) Only one election may be held pursuant to the provisions of this article on the issue of merging and consolidating the defined contribution plan with the state teachers retirement plan.
§18-7C-10. Qualified domestic relations orders.
Any member having a qualified domestic relations order against his or her defined contribution account is allowed to repurchase service in the state teachers retirement system by repaying any moneys distributed to the alternate payee along with the interest as set by the board: Provided, That a member shall repay any amounts under this section by the last day of June, two thousand eleven. The provisions of this section are void and of no effect if the members of the defined contribution plan fail to elect to merge and consolidate the defined contribution plan with the state teachers retirement system.
§18-7C-11. Vesting.
Any member who works one hour or more after the date of merger provided for in this article occurs is subject to the vesting schedule set forth in article seven-a of this chapter: Provided, That if a member is vested under the defined contribution plan and his or her last contribution was not made to the state teachers retirement system, that member is subject to the vesting schedule set forth in article seven-b of this chapter.
§18-7C-12. Minimum guarantees.
(a) Any member of the defined contribution plan who has made a contribution to the state teachers retirement system after the date of merger is guaranteed a minimum benefit equal to his or her contributions to the defined contribution plan as of the thirtieth day of June, two thousand five, plus his or her vested employer account balance as of that date, as stated by the board or the boards professional contractor.
(b) A member of the defined contribution plan who has made contributions to the state teachers retirement system after the thirtieth day of June, two thousand five, where that plan has been merged into the state teachers retirement system pursuant to the provisions of this article shall have, upon eligibility to receive a distribution under article seven-a of this chapter, at a minimum, the following three options: (1) The right to receive an annuity from the state teachers retirement system created and established in article seven-a of this chapter based upon the benefit and vesting provisions of that article; (2) the right to withdraw from the state teachers retirement plan and receive his or her member accumulated contributions plus regular interest thereon as set forth in article seven-a of this chapter; or (3) the right to withdraw and receive his or her original vested defined contribution account balance as of the date of the merger as determined by the board or its professional third party benefits administrator pursuant to the vesting provisions of section twelve of this article.
(c) Any member of the teachers' defined contribution system who makes no contribution to the state teachers retirement system following approval of the merger and following the date of merger is guaranteed the receipt of the amount in his or her total vested account in the defined contribution plan on the date of merger plus interest thereon at four percent accruing from the date of merger.
§18-7C-13. Due process and right to appeal.
Any person aggrieved by any actuarial determination made by the board following the election, if the result of the election is in favor of merger and consolidation, may petition the board and receive an administrative hearing on the matter in dispute. The administrative decision may be appealed to a circuit court.
§18-7C-14. Nonseverability.
If any provision of this article is held unconstitutional or void, the remaining provisions of this article shall be void and of no effect and, to this end, the provisions of this article are hereby declared to be nonseverable.