HB2771 H GO AM 2-20
Thompson 3192
The Committee on Government Organization moves to amend the
bill on page two, by striking out everything after the enacting
clause and inserting in lieu thereof the following:
"That §5-10D-3 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; that §12-6-1a, §12-6-2, §12-6-4, §12-6-5,
§12-6-9c, §12-6-12 and §12-6-14 of said code be amended and
reenacted; and that said code be amended by adding thereto a new
section, designated §12-6-18, all to read as follows:
"CHAPTER 5. GENERAL POWERS AND AUTHORITY OF THE GOVERNOR,
SECRETARY OF STATE AND ATTORNEY GENERAL; BOARD
OF PUBLIC WORKS; MISCELLANEOUS AGENCIES, COMMISSIONS,
OFFICES, PROGRAMS, ETC.
ARTICLE 10D. CONSOLIDATED PUBLIC RETIREMENT BOARD.
§5-10D-3. Board meetings; quorum; vote; proceedings; compensation.
(a) The board shall hold a meeting at least once each three
months, and shall designate the time and place of the meeting.
Seven voting trustees constitute a quorum at any meeting of the
board. Each member is entitled to one vote on each question before
the board. The board shall adopt its own rules of procedure and
shall keep a record of its proceedings. All meetings of the board
shall be public.
(b) The board shall hold a joint annual meeting with the
investment management board to comprehensively review portfolio
holdings and asset allocations, investment performance, portfolio
risk and risk tolerance, investment policy and strategy, stability, turnover, liquidity, investment management board's budget and
administrative expenses, investment management fees, plan actuarial
valuations, plan discount rates and other relevant matters. The
meeting shall be jointly organized by the staffs of both boards and
chaired by the Governor. The meeting shall be open to the public.
(c) The members shall serve as members without compensation
for their services as such: Provided, That each member shall be
reimbursed, upon approval of the board, for any necessary expenses
actually incurred by him or her in carrying out his or her duties.
No public employee member may suffer any loss of salary or wages on
account of his or her service as trustee.
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.
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, the Judges' Retirement System and the
Deputy Sheriffs Retirement System should benefit from a prudent and
conscientious staff of financial professionals dedicated to the
administration, investment and management of those employees and
employers 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 may
develop, implement and maintain an efficient and modern system for
the investment and management of the state's money, except those
moneys managed in accordance with article six-c of this chapter.
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 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 Old Fund 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 is
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 continued and reestablished 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 may act as trustee of the
irrevocable 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 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, chapter forty-four of this
code 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 continue and reestablish the 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 participant plans;
(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 in this subdivision;
(3) "Consolidated fund" means the investment fund managed by
the board and established pursuant to subsection (a), section eight
of this article;
(4) (3) "401(a) plan" means a plan which is described in
section 401(a) of the Internal Revenue Code of 1986, as amended,
and with respect to which the board has been designated to hold
assets of the plan in trust pursuant to the provisions of section
nine-a of this article;
(5) (4) "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) (5) "Participant plan" means any plan or fund subject now
or hereafter to subsection (a), section nine-a, article six of this
chapter;
(7) (6) "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) (7) "Trustee" means any member serving on the West
Virginia investment management board: Provided, That in section
nine-a of this article in which the terms of the trusts are set
forth, "trustee" means the West Virginia investment management
board;
(9) (8) "Securities" means bonds, notes, debentures or other
evidences of indebtedness and other lawful investment instruments
any and all forms and types of investments, financial instruments,
or financial transactions which may be deemed prudent for
investment by the board under the provisions of section eleven of
this article; and
(10) (9) "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.
§12-6-4. 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 a combination
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) The board shall procure and maintain in effect commercially customary property, liability, crime and other
insurance to cover risks of loss from its operations. The types
and amounts of such insurance coverages shall be determined by the
board from time to time, in its reasonable discretion, with
reference to the types and amounts of insurance coverages purchased
or maintained by other public institutions performing functions
similar to those performed by the board: Provided, That the board
shall purchase a blanket bond for the faithful performance of its
duties in the amount of at least ten million dollars. 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. 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 is in addition to the one million dollar
individual bond required of each trustee by the provisions of this
section. The board may require that appropriate types and amounts
of insurance be procured and maintained by, or 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 any such insurance or all fiduciary or surety
bonds that the board may require from time to time shall be an
expense of the board. In connection with the duties of the board
under this subsection, the board may establish, fund and maintain a self-insurance account. The amount of moneys, if any, which are
deposited and maintained in the self-insurance account from time to
time shall be determined by the board in consultation with one or
more qualified insurance or actuarial consultants, and all moneys
in any such self-insurance account may be used only for the purpose
of providing self-insurance, establishing reserves in connection
with insurance deductibles, self-insured retentions or self-
insurance, or helping to defray the costs of insurance procured
under this subsection, and for no other purpose.
(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 is 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 are 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 Employees 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,
consistent with the provisions of the Uniform Prudent Investor Act
(§44-6C), to carry out and effectuate its corporate purposes. The
board may: , including but not limited to the power to:
(1) Adopt and use a common seal and alter it 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,
rules and procedures not inconsistent consistent 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) Upon request of the State Treasurer, transmit funds for
deposit in the State Treasury to meet the daily obligations of
state government;
(21) 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
industry standard accounting procedures to determine each fund`s
unit value. The securities in each investment fund are the
property of the board and each fund shall be considered an
investment pool or fund and may not be considered a trust nor may
the securities of the various investment funds be considered held
in trust. However, units in an investment fund established by or
sold by 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) Notwithstanding any other provision of the code to the
contrary, conduct investment transactions, including purchases,
sales, redemptions and income collections, which shall not be
treated by the State Auditor as recordable transactions on the
state's accounting system.
§12-6-9c. Authorization of additional investments.
Notwithstanding the restrictions which may otherwise be
provided by law with respect to the investment of funds, the board,
all administrators, custodians or trustees of pension funds other
than the board, each political subdivision of this state and each county board of education is authorized to invest funds in the
securities of or any other interest in any investment company or
investment trust registered under the Investment Company Act of
1940, 15 U. S. C. §80a, the portfolio of which is limited: (i) To
obligations issued by or guaranteed as to the payment of both
principal and interest by the United States of America or its
agencies or instrumentalities; and (ii) to repurchase agreements
fully collateralized by obligations of the United States government
or its agencies or instrumentalities: Provided, That the
investment company or investment trust takes delivery of the
collateral either directly or through an authorized custodian:
Provided, however, That the investment company or investment trust
is rated within one of the top two rating categories of any
nationally recognized rating service such as Moody's or Standard &
Poor's.
§12-6-12.
Annual review of investment objectives; certain
investment information exempt from disclosure.
(a) The board shall hold in equity investments no more than
sixty percent of the assets managed by the board and no more than
sixty percent of the assets of any individual participant plan or
the consolidated fund.
(b) The board shall hold in international securities no more
than twenty percent of the assets managed by the board and no more
than twenty percent of the assets of any individual participant
plan or the consolidated fund.
(c) The board may not at the time of purchase hold more than
five percent of the assets managed by the board 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.
(d) 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
aggregate participant plan assets 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 assets managed by the board in corporate debt. Any
corporate debt security at the time of its acquisition shall be
rated in one of the six highest rating categories by a nationally
recognized rating agency; and
(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 shall give notice of
that action pursuant to subsection (g), section three of this
article and shall review the list at its annual meeting.
(e) Notwithstanding the investment limitations set forth in
this section, it is recognized that the assets managed by the
board, or the assets of the consolidated fund or participant plans,
whether considered in the aggregate or individually, may
temporarily exceed the investment limitations in this section due
to market appreciation, depreciation and rebalancing limitations. Accordingly, the limitations on investments set forth in this
section shall not be considered to have been violated if the board
rebalances the assets it manages or the assets of the consolidated
fund or participant plans, whichever is applicable, to comply with
the limitations set forth in this section at least once every six
months based upon the latest available market information and any
other reliable market data that the board considers advisable to
take into consideration.
(f) (a) 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; and
(8) Reasonable cost of fees.
(b) If the standard confidentiality agreements, policies or
procedures of any firm, company or organization through which the
board invests in securities prohibit, restrict or limit the
disclosure of information pertaining to such securities, such
information shall be exempt from disclosure, under the provisions of chapter twenty-nine-b of this code or otherwise, to the extent
of such prohibitions, restrictions or limitations.
§12-6-14. Reports of board.
(a) The board shall prepare annually, or more frequently if
deemed considered necessary by the board, a report of its
operations and the performance of the various funds administered by
it. The report shall include all operational costs, including but
not limited to investment advisor fees, transaction costs, custody
fees, and administrative salaries and costs.
(b) A copy thereof shall be furnished to the chief financial
officer of each participant,.
(c)
Within the first seven calendar days of each calendar
year, the board shall file the annual report with
the Joint
Committee on Government and Finance, with copies to the president
of the senate, speaker of the house, and legislative auditor,.
(d) and upon Upon request, the report shall be made available
to any legislative committee, any banking institution or state or
federal savings and loan association in this state, and any member
of the news media,. and such The report shall be kept available for
inspection by any citizen of this state.
(e) The Legislature may commission or direct such audits,
performance and consultant reviews and studies of the Investment
Management Board as it considers necessary.
§12-6-18. Liberal construction; determinations and interpretations
by board.
This article, being necessary for and to secure the public
health, safety, convenience and welfare of the citizens of this
state, shall be liberally construed to effect the public purposes of this article. The powers granted to the board in this article,
including without limitation those granted in section five of this
article, are intended to be broad and shall be construed broadly so
as to vest in the board the power and authority necessary or
appropriate to carry out and effectuate its corporate purposes in
the financial markets of the world, as the same may evolve from
time to time. The powers specifically enumerated in section five
of this article are representative and not restrictive, and in all
instances such powers are to be broadly construed so as to permit
the board to take all reasonable, necessary or appropriate actions
and to engage in all commercially customary investment transactions
and activities consistent with or necessary or appropriate to
achieve its corporate purposes, at all times in a fashion
consistent with the prudent investor standard."