COMMITTEE SUBSTITUTE

FOR

Senate Bill No. 511

(By Senators Foster, McCabe, Harrison, Sprouse and Barnes)

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[Originating in the Committee on Pensions;

reported February 16, 2006.]

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A BILL to amend and reenact §8-22-19 and §8-22-20 of the Code of West Virginia, 1931, as amended, all relating to municipal policemen's and firemen's pension and relief funds; authorizing a municipality which makes an excess alternate contribution at a certain level to a pension and relief fund to increase employee contributions to the fund by one percent; and permitting excess contributions to be excluded from calculation of the following year's minimum contribution.

Be it enacted by the Legislature of West Virginia:
That §8-22-19 and §8-22-20 of the Code of West Virginia, 1931, as amended, be amended and reenacted, all to read as follows:
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.

§8-22-19. Levy to maintain fund.
(a) (1) The provisions of this subsection shall remain in effect through the thirtieth day of June, one thousand nine hundred eighty-three.
(2) In every municipality in which there is a policemen's pension and relief fund or a firemen's pension and relief fund, or both, the same shall be maintained as follows: The governing body of the municipality shall levy annually and in the manner provided by law for other municipal levies, and include within the maximum levy or levies permitted by law, and if necessary in excess of any charter provision, a tax at such rate as will, after crediting the amount of the contributions received during such year from the members of the respective paid police department or paid fire department, provide funds equal to the sum of: (1) The full amount of estimated expenditures of the boards of trustees of the respective funds; and (2) an additional amount equal to ten percent of such the estimated expenditures, said ten percent amount to be taken, accumulated and invested, if possible, as surplus reserve: Provided, That in no event shall such the levy for each of the respective boards of trustees be less than one cent nor more than eight cents on each one hundred dollars of all real and personal property as listed for taxation in such the municipality: Provided, however, That in the event that the funds derived above are not sufficient to meet the annual expenditures and the surplus reserve funds for any fiscal year do not contain a sufficient balance to maintain full retirement benefits for that fiscal year, the municipality shall for only that fiscal year levy an amount not to exceed an additional two cents on each one hundred dollars of all real and personal property listed for taxation in such municipality: Provided further, That in the event that a municipality is required to levy an amount for any fiscal year in excess of eight cents on each one hundred dollars of all real and personal property as provided above, the municipality shall assess and collect for only that fiscal year from each member an additional amount of one percent of the actual salary or compensation for each one cent that the municipality has levied in excess of the eight cents which shall become a required part of the pension and relief fund to which the member belongs.
(3) The levies authorized under the provisions of this section, or any part of them, may by the governing body be laid in addition to all other municipal levies, and to that extent, beyond the limit of levy imposed by the charter of such the municipality; and such the levies shall supersede and if necessary exclude levies for other purposes if such priority or exclusion is necessary under limitations upon taxes or tax levies imposed by law.
(4) Such The public corporations are authorized to take by gift, grant, devise or bequest, any money or real or personal property, upon such terms as to the investment and expenditures thereof as may be fixed by the grantor or determined by said the trustees.
(5) In addition to all other sums provided for pensions in this section, it shall be the duty of every municipality in which any such policemen's pension and relief fund or firemen's pension and relief fund or funds have been or shall be established to assess and collect from each member of the paid police department or paid fire department or both each month, the sum of six percent of the actual salary or compensation of such the member; and the amount so collected shall become a regular part of the policemen's pension and relief fund, if collected from a policeman, and of the firemen's pension and relief fund, if collected from a fireman.
(b) (1) After the thirtieth day of June, one thousand nine hundred eighty-three: In order for a municipal policemen's or firemen's pension and relief fund to receive the allocable portion of moneys from the municipal pensions and protection fund established in section fourteen-d, article three, chapter thirty-three of this code, the governing body of the municipality shall levy annually and in the manner provided by law for other municipal levies, and include within the maximum levy or levies permitted by law, and if necessary in excess of any charter provision, a tax at such rate as will, after crediting: (A) The amount of the contributions received during such the year from the members of the respective paid police department or paid fire department; and (B) the allocable portion of the municipal pensions and protection fund established in section fourteen-d, article three, chapter thirty-three of this code provide funds equal to the amount necessary to meet the minimum standards for actuarial soundness as provided in section twenty of this article, said amount to be irrevocably contributed, accumulated and invested as fund assets described in sections twenty-one and twenty-two of this article. Such The municipality contributions shall be deposited as such fund assets on at least a quarterly basis and any revenues received from any source by a municipality which are specifically collected for the purpose of allocation for deposit into such the policemen's pension and relief fund or firemen's pension and relief fund shall be so deposited within thirty days of receipt by the municipality. Such Heretofore surplus reserves accumulated before the first day of July, one thousand nine hundred eighty-three, shall be irrevocably contributed, aggregated and invested as fund assets described in sections twenty-one and twenty-two of this article. Any actuarial deficiency arising under this section and section twenty of this article shall not be the obligation of the State of West Virginia.
(2) The levies authorized under the provisions of this section, or any part of them, may by the governing body be laid in addition to all other municipal levies, and to that extent, beyond the limit of levy imposed by the charter of such the municipality; and such the levies shall supersede and if necessary exclude levies for other purposes, where such other purposes have not already attained priority, and within the limitations upon taxes or tax levies imposed by the constitution and laws.
(3) Such The public corporations are authorized to take by gift, grant, devise or bequest, any money or real or personal property, upon such terms as to the investment and expenditures thereof as may be fixed by the grantor or determined by said the trustees.
(4) Notwithstanding provisions in section six of this article, in addition to all other sums provided for pensions in this section, it shall be is the duty of every municipality in which any such fund or funds have been or shall be established to assess and collect from each member of the paid police department or paid fire department or both each month, the sum of seven percent of the actual salary or compensation of such member; and the amount so collected shall become a regular part of the policemen's pension and relief fund, if collected from a policeman, and of the firemen's pension and relief fund, if collected from a fireman: Provided, That in any year in which a municipality elects an alternative contribution of at least one percent more than the municipality's required minimum under the alternate contribution plan authorized in subsection (c), section twenty of this article, the municipality may assess and collect from each member one percent of the year's salary, in addition to the member contribution required by this section and any increase in member contribution required to preserve the actuarial soundness of the fund as provided in subsection (f), section twenty-six-a of this article. Such Member contributions shall be deposited in such the pension and relief fund on at least a monthly basis.
(5) For the fiscal year beginning on the first day of July, one thousand nine hundred eighty-three and for each fiscal year thereafter, the State Treasurer shall retain the allocable portion of the Municipal Pensions and Protection Fund, established in section fourteen-d, article three, chapter thirty-three of this code, until such time as the treasurer of the municipality applies for such the allocable portion and certifies in writing to the State Auditor that:
(A) The municipality has irrevocably contributed the amount required under this section and section twenty of this article to such the pension and relief fund for the fiscal year; and
(B) The board of trustees of such the pension and relief fund has made a report to the governing body of the municipality on the condition of its fund with respect to the fiscal year.
(6) When the aforementioned application and certification are made the allocable portion of moneys from the Municipal Pensions and Protection Fund shall be paid to the corresponding policemen's or firemen's pension and relief fund.
(7) The State Auditor has the power and duty as he the Auditor deems necessary to perform or review audits on such the pension and relief funds or to employ an independent consulting actuary or accountant to determine the compliance of the aforementioned certification with the requirements of this section and section twenty of this article. The expense of such the audit or determination shall be paid from the portion of the municipal pensions and protection fund allocable to municipal policemen's and firemen's pension and relief funds. If such the allocable portion of the Municipal Pensions and Protection Fund is not paid to such the pension and relief fund within thirty-six months, such the portion is forfeited by such the pension and relief fund and is allocable to other eligible municipal policemen's and firemen's pension and relief funds in accordance with section fourteen-d, article three, chapter thirty-three of this code.
 §8-22-20. Minimum standards for actuarial soundness.
The board of trustees for each pension and relief fund shall have regularly scheduled actuarial valuation reports prepared by a qualified actuary. All of the following standards must be met:
(a) An actuarial valuation report shall be prepared at least once every three years commencing with the later of: (1) The first day of July, one thousand nine hundred eighty-three; or (2) three years following the most recently prepared actuarial valuation report: Provided, That this most recently prepared actuarial valuation report meets all of the standards of this section.
(b) The actuarial valuation report shall consist of, but is not limited to, the following disclosures: (1) The financial objective of the fund and how the objective is to be attained; (2) the progress being made toward realization of the financial objective; (3) recent changes in the nature of the fund, benefits provided, or actuarial assumptions or methods; (4) the frequency of actuarial valuation reports and the date of the most recent actuarial valuation report; (5) the method used to value fund assets; (6) the extent to which the qualified actuary relies on the data provided and whether the data was certified by the fund's Auditor or examined by the qualified actuary for reasonableness; (7) a description and explanation of the actuarial assumptions and methods; and (8) any other information the qualified actuary feels is necessary or would be useful in fully and fairly disclosing the actuarial condition of the fund.
(c) (1) After the thirtieth day of June, one thousand nine hundred ninety-one, and thereafter, the financial objective of each municipality shall not be less than to contribute to the fund annually an amount which, together with the contributions from the members and the allocable portion of the state premium tax fund Municipal Pensions and Protection Fund for municipal pension and relief funds established under section fourteen-d, article three, chapter thirty-three of this code and other income sources as authorized by law, will be sufficient to meet the normal cost of the fund and amortize any actuarial deficiency over a period of not more than forty years beginning from the first day of July, one thousand nine hundred ninety-one : Provided, That in the fiscal year ending the thirtieth day of June, one thousand nine hundred ninety-one, the municipality may elect to make its annual contribution to the fund utilizing using an alternative contribution in an amount not less than: (i) One hundred seven percent of the amount contributed for the fiscal year ending the thirtieth day of June, one thousand nine hundred ninety; or (ii) an amount equal to the average of the contribution payments made in the five highest fiscal years beginning with the 1984 fiscal year ending one thousand nine hundred eighty-four , whichever is greater: Provided, however, That contribution payments in subsequent fiscal years under this alternative contribution method may not be less than one hundred seven percent of the amount contributed in the prior fiscal year: Provided further, That in order to avoid penalties to and provide flexibility for a municipality which may make excess contributions while using the alternative contribution method, the municipality may exclude a contribution made in any one year in excess of the minimum required by this section when calculating the required minimum contribution for the following year: And provided further, That prior to utilizing using this alternative contribution methodology method the actuary of the fund shall certify in writing that the fund is projected to be solvent under the alternative contribution method for the next consecutive fifteen-year period. For purposes of determining this minimum financial objective: (i) The value of the fund's assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value; and (ii) all costs, deficiencies, rate of interest and other factors under the fund shall be determined on the basis of actuarial assumptions and methods which, in aggregate, are reasonable (taking into account the experience of the fund and reasonable expectations) and which, in combination, offer the qualified actuary's best estimate of anticipated experience under the fund: And provided further, That any municipality which elected the alternative funding method under this section and which has an unfunded actuarial liability of not more than twenty-five percent of fund assets, may, beginning the first day of September, two thousand three, elect to revert back to the standard funding method, which is to contribute to the fund annually an amount which is not less than an amount which, together with the contributions from the members and the allocable portion of the state premium tax fund Municipal Pensions and Protection Fund for municipal pension and relief funds established under section fourteen-d, article three, chapter thirty-three of this code and other income sources as authorized by law, will be sufficient to meet the normal cost of the fund and amortize any actuarial deficiency over a period of not more than forty years , beginning from the first day of July, one thousand nine hundred ninety-one.
(2) No municipality may anticipate or use in any manner any state funds accruing to the police or firemen's pension fund to offset the minimum required funding amount for any fiscal year.
(3) Notwithstanding any other provision of this section or article to the contrary, each municipality shall contribute annually to the fund an amount which may not be less than the normal cost, as determined by the actuarial report.
(d) For purposes of this section the term "qualified actuary" means only an actuary who is a member of the Society of Actuaries or the American Academy of Actuaries. The qualified actuary shall be designated a fiduciary and shall discharge his or her duties with respect to a fund solely in the interest of the members and member's beneficiaries of that fund. In order for the standards of this section to be met, the qualified actuary shall certify that the actuarial valuation report is complete and accurate and that in his or her opinion the technique and assumptions used are reasonable and meet the requirements of this section of this article.
(e) The cost of the preparation of the actuarial valuation report shall be paid by the fund.
(f) Notwithstanding any other provision of this section, for the fiscal year ending the thirtieth day of June, one thousand nine hundred ninety-one, the municipality may calculate its annual contribution based upon the provisions of the supplemental benefit provided for in this article enacted during the one thousand nine hundred ninety-one regular session of the Legislature.

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(NOTE: The purpose of this bill is to permit municipalities which make an alternative contribution to their policemen's or firemen's pension and relief funds of at least one percent more than the required minimum contribution, to increase employee contributions to the funds by one percent.

The bill also promotes flexibility in municipal contributions to the pension funds by excluding contributions made in any one year in excess of the minimum requirement from calculation of future minimum required contribution.

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