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Introduced Version House Bill 4496 History

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hb4496 intr
H. B. 4496


(By Mr. Speaker, (Mr. Thompson) and Delegate Armstead)

[By Request of the Executive]

[Introduced February 11, 2008; referred to the

Committee on Pensions and Retirement then Finance.]



A BILL to repeal §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 of the Code of West Virginia, 1931, as amended; to amend and reenact §18-7A-14 of said code; and to amend said code by adding thereto a new article, designated §18-7D-1, §18-7D-2, §18-7D-3, §18-7D-4, §18-7D-5, §18-7D-6, §18-7D-7, §18-7D-8, §18-7D-9 §18-7D-10, and §18-7D-11, all relating to the State Teachers Retirement System and the Teachers Defined Contribution System generally; relating to the voluntary transfer of assets from the Teachers Defined Contribution Retirement System to the State Teachers Retirement System; providing legislative findings and purpose; providing definitions; providing for election on the question of actively contributing members of the Teachers Defined Contribution Retirement System voluntarily transferring assets to the State Teachers Retirement System; setting forth requirements of election; providing responsibilities of the Consolidated Public Retirement Board; setting forth dates and time periods for transition and election; providing for education about election and transfer; requiring legal notice to members; allowing Consolidated Public Retirement Board to contract directly for professional services for purposes of performing its responsibilities related to the voluntary transfer and conducting the election; permitting only one election; providing for voluntary transfer from the Teachers Defined Contribution Retirement System to the State Teachers Retirement System upon affirmative vote by seventy percent or more of the actively contributing members; providing for transfer of assets from the Teachers Defined Contribution Retirement System to the State Teachers Retirement System upon favorable vote; providing for service credit in the State Teachers Retirement System; permitting transferring members to pay an Actuarial Reserve in order to receive full credit upon transfer; addressing withdrawals and cash outs; addressing qualified domestic relations orders; providing for vesting of members and minimum guarantees of benefits for them; and providing for due process and right to appeal.

Be it enacted by the Legislature of West Virginia:
That §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 of the Code of West Virginia, 1931, as amended, be repealed; that §18-7A-14 of said code be amended and reenacted; and that said code be amended by adding thereto a new article, designated §18-7D-1, §18-7D-2, §18-7D-3, §18-7D-4, §18-7D- 5, §18-7D-6, §18-7D-7, §18-7D-8, §18-7D-9, §18-7D-10, and §18-7D- 11, all to read as follows:
ARTICLE 7A. STATE TEACHERS RETIREMENT SYSTEM.
§18-7A-14. Contributions by members; contributions by employers.

(a) At the end of each month every member of the retirement system shall contribute six percent of that member's monthly gross salary to the retirement board: Provided, That any member employed by a state institution of higher education shall contribute on the member's full earnable compensation, unless otherwise provided in section fourteen-a of this article. The sums are due the Teachers Retirement System at the end of each calendar month in arrears and shall be paid not later than fifteen days following the end of the calendar month. Each remittance shall be accompanied by a detailed summary of the sums withheld from the compensation of each member for that month on forms, either paper or electronic, provided by the Teachers Retirement System for that purpose.
(b) Annually, the contributions of each member shall be credited to the member's account in the Teachers Retirement System Fund. The contributions shall be deducted from the salaries of the members as prescribed in this section and every member shall be considered to have given consent to the deductions. No deductions, however, shall be made from the earnable compensation of any member who retired because of age or service and then resumed service unless as provided in section thirteen-a of this article.
(c) The aggregate of employer contributions, due and payable under this article, shall equal annually the total deductions from the gross salary of members required by this section. Beginning the first day of July, one thousand nine hundred ninety-four, the rate shall be seven and one-half percent; beginning on the first day of July, one thousand nine hundred ninety-five, the rate shall be nine percent; beginning on the first day of July, one thousand nine hundred ninety-six, the rate shall be ten and one-half percent; beginning on the first day of July, one thousand nine hundred ninety-seven, the rate shall be twelve percent; beginning on the first day of July, one thousand nine hundred ninety-eight, the rate shall be thirteen and one-half percent; and beginning on the first day of July, one thousand nine hundred ninety-nine and thereafter, the rate shall be fifteen percent: Provided, That the rate shall be seven and one-half percent for any individual who becomes a member of the Teachers Retirement System for the first time on or after the first day of July, two thousand five, or any individual who becomes a member of the Teachers Retirement System as a result of the merger voluntary transfer contemplated in article seven-c seven-d of this chapter.
(d) Payment by an employer to a member of the sum specified in the employment contract minus the amount of the employee's deductions shall be considered to be a full discharge of the employer's contractual obligation as to earnable compensation.
(e) Each contributor shall file with the retirement board or with the employer to be forwarded to the retirement board an enrollment form showing the contributor's date of birth and other data needed by the retirement board.
ARTICLE 7D. VOLUNTARY TRANSFER FROM TEACHERS' DEFINED CONTRIBUTION RETIREMENT SYSTEM TO STATE TEACHERS RETIREMENT SYSTEM.

§18-7D-1. Legislative findings and purpose.
(
a) The Legislature hereby finds and declares as follows:
(1) That the quality of our state's education system is largely dependent upon the quality of its teachers and educational service personnel;
(2) That many West Virginia teachers and education service personnel who currently are members of the Teachers' Defined Contribution Retirement System desire to join a defined benefit system, which relieves participants of bearing the risk of investment performance and offers the security of providing participants with advanced knowledge of their anticipated retirement benefit;
(3) That other members of the Teachers' Defined Contribution Retirement System remain comfortable with bearing the attendant market risks and performance of their investements associated with managing the individual retirement accounts of that system;
(4)
That it is in the best interests of the teachers and education service personnel in this state, as well as our system of public education as a whole, to permit members of the Teachers' Defined Contribution Retirement System to voluntarily elect membership in the State Teachers Retirement System pursuant to the provisions of this article; and (5) That the prudent and fiscally sound management of the State Teachers Retirement System necessitates that a sufficient number of members of the Teachers' Defined Contribution Retirement System elect to voluntarily transfer their assets to the State Teachers Retirement System in accordance with the provisions of this article.
§18-7D-2. Definitions.

As used in this article, unless the context clearly requires a different meaning:
(1) "Actuarial Reserve" means the Actuarial Reserve Lump Sum Value of the additional service credit being purchased by a member so electing in accordance with the provisions of section seven of this article.

(2) "Actuarial Reserve Adjusted Salary" means either:
(A) for a member with a full year service credit in the fiscal year ending the thirtieth day of June, two thousand seven, the member's two thousand seven fiscal year salary increased by seven percent;
(B) for a member with less than a full year service credit in the fiscal year ending the thirtieth day of June, two thousand seven, the member's two thousand seven fiscal year salary annualized to a full year based on the partial year service credit increased by seven percent; or
(C) for a member without service credit in the fiscal year ending the thirtieth day of June, two thousand seven, the member's annualized contract salary in effect on the thirty-first day of December, two thousand seven increased by seven percent.
(3) "Actuarial Reserve Benefit Date" means the first day of the month coincident with or next following the date at which the member attains the age of sixty, or the thirtieth day of June, two thousand nine, whichever is later.
(4) "Actuarial Reserve Benefit Date Factors" mean the actuarial lump sum value factors based on a life only annuity starting on the Actuarial Reserve Benefit Date applying the 1983 Group Annuity Mortality Tables on a seventy-five percent female and a twenty-five percent male blended Unisex basis and interest at seven and one-half percent.
(5) "Actuarial Reserve Discount Factor" means the annual discount factor applied for the period between the thirtieth day of June, two thousand nine and the Actuarial Reserve Benefit Date, if any. Such factor based on the State Teachers Retirement System actuarial valuation assumptions shall estimate the impact of mortality, disability, and economic factors for such discount period by application of a net four percent discount rate.
(6) "Actuarial Reserve Lump Sum Value" means a single sum amount calculated as: A benefit of two percent multiplied by the twenty-five percent of the Defined Contribution Retirement System service credit being purchased multiplied by the Actuarial Reserve Adjusted Salary; such benefit multiplied by the Actuarial Reserve Benefit Date Factors to determine the lump sum value multiplied by the Actuarial Reserve Discount Factor.
(7) "Assets" means all member contributions and employer contributions made on the member's behalf to the Defined Contribution Retirement System and earnings thereon, less any applicable fees as approved by the board: Provided, That if a member has withdrawn or cashed out any amounts, the amounts must have been repaid.
(8) "Board" means the Consolidated Public Retirement Board established in article ten-d, chapter five of this code, and its employees.

(9) "Date of transfer" means, in the event that seventy percent or more of the actively contributing members of the Defined Contribution Retirement System voluntarily elect to transfer their assets to the State Teachers Retirement System, the first day of July, two thousand eight.
(10) "Defined Contribution Retirement System" means the Teachers' Defined Contribution Retirement System established in article seven-b of this chapter.
(11) "Salary" means:
(A) For a member contributing to the Defined Contribution Retirement System during the two thousand seven fiscal year, the actual salary earned for the two thousand seven fiscal year divided by the employment service earned in the two thousand seven fiscal year.
(B) For a member not contributing to the Defined Contribution Retirement System during the two thousand seven fiscal year, the contract salary on the date of rehire.
(12) "State Teachers Retirement System" means the State Teachers Retirement System established in article seven-a of this chapter.
§18-7D-3. Election; board may contract for professional services.
(a) The board shall arrange for and hold an election for the actively contributing members of the Defined Contribution Retirement System who are eligible to vote, pursuant to the provisions of subsection (b) of this section, on the issue of voluntarily transferring their assets from the Defined Contribution Retirement System to the State Teachers Retirement System.
(b) Any person who was actively contributing to the Defined Contribution Retirement System on the last day of December, two thousand seven, shall be eligible to vote in the election.
(c) The board may retain the services of professionals it deems necessary to:
(1) Assist in the preparation of educational materials to inform actively contributing members of the Defined Contribution Retirement System of their options in the election;
(2) Assist in the educational process of the members who are eligible to vote on the voluntary transfer;
(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 election and transfer processes set forth in this article in specific, and due 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, shall not apply to any contracts for any actuarial services, investment services, legal services or other professional services and materials authorized under the provisions of this article.
(e) The election may be held through certified mail or in any other method 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. Any unsigned ballot is void.
(f) The election period shall begin not later than the first day of May, two thousand eight. The board shall ascertain the results of the election not later than the twenty-third day of May, two thousand eight. The board shall certify the results of the election to the members, the Governor, and the Legislature not later than the fifth day of June, two thousand eight.
(g) The election period terminates and votes may not be cast or counted after the twelfth day of May, two thousand eight, unless the election is conducted through the United States mail. If conducted through the mail, any ballot postmarked later than the twelfth day of May, two thousand eight, is void and may not be counted.
(h) Only one election may be held pursuant to the provisions of this article.
§18-7D-4. Notice, education, record-keeping requirements.
(a) Commencing upon the effective date of this article, the board shall begin an educational program regarding the voluntary transfer of assets from the Defined Contribution Retirement System to the State Teachers Retirement System.
(1) This educational program shall address, at a minimum:
(A) The law providing for the voluntary transfer;
(B) The mechanics of the voluntary transfer;
(C) The election process;
(D) Relevant dates and time periods;
(E) The benefits, potential advantages and potential disadvantages if less than seventy percent of actively contributing members approve the voluntary transfer and thereby elect to remain in the Defined Contribution Retirement System;
(F) The benefits, potential advantages and potential disadvantages of becoming a member of the State Teachers Retirement System;
(G) Potential state and federal tax implications attendant to the various options available to the members; and
(H) Any other pertinent information considered relevant by the board.
(2) The board shall disseminate the information through:
(A) Its website;
(B) Computer programs;
(C) Written or electronic materials, or both, delivered to each member;
(D) Classes or seminars, if in the best judgment of the board classes or seminars are required to provide the necessary education for a member to make an informed decision with respect to the election;
(E) At the discretion of the board, through a program of individual counseling which is optional on the part of the member; and
(F) Through any other educational program considered necessary by the board.
(b) The board shall provide each actively contributing member with a copy of the written or electronic educational materials and with a copy of the notice of the election.
(1) The notice shall provide full and appropriate disclosure regarding the voluntary transfer and the election process, including the date of the election.
(2) The board also shall cause notice of the election to be published in at least ten newspapers of general circulation in this state. This notice shall be:
(A) By Class III legal advertisement published in accordance with the provisions of article three, chapter fifty-nine of this code; and
(B) 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 pursuant to section three of this article.
(c) It is the responsibility of each member of the Defined Contribution Retirement System to keep the board informed of his or her current address. A member who does not is considered to have waived his or her right to receive any information from the board with respect to the purposes of this article.
(d) Once the board has complied with the provisions of this section, each actively contributing member of the Defined Contribution Retirement System is considered to have actual notice of the election and all matters pertinent to the election. §18-7D-5. Election results.
(a) If seventy percent or more of the actively contributing members vote in the affirmative on the issue:
(1) The board shall transfer all assets held by each member voting in the affirmative in the Defined Contribution Retirement System's Trust Fund to the State Teachers Retirement System; and
(2) Effective on the date of transfer, each transferring member shall become a member of and entitled to the benefits of the State Teachers Retirement System and shall thereafter be governed by the provisions of article seven-a of this chapter, subject to the provisions of this article.
(3) Any member who voted against the voluntary transfer or who failed to vote on the issue in the election held pursuant to section three of this article shall remain a member of the Defined Contribution Retirement System and shall continue to be governed by the provisions of article seven-b of this chapter. All assets held by each member voting against the voluntary transfer and each member failing to vote on the issue shall remain in the Defined Contribution Retirement System's Trust Fund.
(4) Notwithstanding any other provision of this code to the contrary, the board may do all things necessary and convenient to maintain the Defined Contribution Retirement System and the State Teachers Retirement System during the transitional period between the election and one year after the date of transfer and may retain the services of the professionals it considers necessary to do so. (b) The election is considered final and each member, whether he or she voted or failed to vote, is bound by the results of the election. Each member is considered to have made an informed, educated, knowing and voluntary decision and choice with respect to the election. Those members who failed or refused to vote are also considered to have made an informed, educated, knowing and voluntary decision and choice with respect to the election and voting and are bound by the results of the election as if he or she had voted in the election.
§18-7D-6. Service credit in State Teachers Retirement System following transfer; conversion of assets; adjustments.

(
a) Any member transferring all of his or her assets from the Defined Contribution Retirement System to the State Teachers Retirement System pursuant to the provisions of this article and who has not made any withdrawals or cash-outs from his or her assets is entitled to service credit in the State Teachers Retirement System in an amount equal to seventy-five percent of each year or part of a year, as governed by the provisions of article seven-a of this chapter, the member worked and contributed to the Defined Contribution Retirement System.
(b) Effective on the date of transfer, each transferring member's contribution rate becomes six percent of his or her salary or wages. Each transferring member who makes a contribution into the State Teachers Retirement System on or after the first day of July, two thousand eight, shall be governed by the provisions of article seven-a of this chapter, subject to the provisions of this article.
(c) If a member has withdrawn or cashed out all or part of his or her assets, that member will not receive credit for those moneys cashed out or withdrawn. The board shall make a determination as to the amount of credit a member loses based on the periods of time and the amounts he or she has withdrawn or cashed out, which shall be expressed as a loss of service credit: Provided, That a member may repay those amounts he or she previously cashed out or withdrew within twelve months of the member's reemployment or within twelve months of the date of transfer, whichever is later, along with interest as determined by the board, and receive the seventy-five percent service credit as if the withdrawal or cash-out never occurred: Provided, however, That if the repayment occurs five or more years following the cash-out or withdrawal, the member also shall repay any forfeited employer contribution account balance along with interest determined by the board: Provided further, That the member shall also have the option of paying the Actuarial Reserve for his or her remaining service in accordance with the provisions of section seven of this article to receive full credit for the cashed-out or withdrawn amounts being repaid.
(d) The board shall take all necessary steps to ensure that the voluntary transfer of assets authorized by this article does not affect the qualified status of either retirement plan with the Internal Revenue Service.
(e) Any service in the State Teachers Retirement System a member has before the date of transfer is not affected by the provisions of this article.
§18-7D-7. Optional contribution to receive full service credit.

(a) To receive full credit in the State Teachers Retirement System for service in the Defined Contribution Retirement System for which assets are transferred, transferring members shall have the option to pay into the State Teachers Retirement System the Actuarial Reserve, as defined in section two of this article. Each member shall pay the Actuarial Reserve no later than the thirtieth day of June, two thousand nine.
(b) Any member who elects not to pay the Actuarial Reserve upon transfer to the State Teachers Retirement System pursuant to this section shall have his or her Defined Contribution Retirement System service credit reduced by twenty-five percent in accordance with the provisions of section six of this article.
§18-7D-8. Qualified domestic relations orders.
Any transferring 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. The member shall repay any moneys previously distributed to the alternate payee along with the interest as set by the board: Provided, That no alternate payee of an actively contributing member may transfer to the State Teachers Retirement System. The member shall repay by the last day of June, two thousand twelve. The provisions of this section are void and of no effect if less than seventy percent of the members fail to elect to voluntarily transfer their assets from the Defined Contribution Retirement System to the State Teachers Retirement System.
§18-7D-9. Vesting.
If seventy percent or more of the actively contributing members vote to transfer their assets, then any such member who works one hour or more after the thirtieth day of June, two thousand eight, 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 Retirement System 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.
§18-7D-10. Minimum guarantees.
(a) Any member of the Defined Contribution Retirement System who has made a contribution to the State Teachers Retirement System after the thirtieth day of June, two thousand eight, is guaranteed a minimum benefit equal to his or her member contributions plus the vested portion of employer contributions made on his or her behalf to the Defined Contribution Retirement System, plus any earnings thereon, as of the thirtieth day of June, two thousand eight, as stated by the board.
(b) A member of the Defined Contribution Retirement System who has made contributions to the State Teachers Retirement System after the thirtieth day of June, two thousand eight, where such member has voluntarily transferred his or her assets to the State Teachers Retirement System, upon eligibility to receive a distribution under article seven-a of this chapter, shall have at a minimum the following three options:
(1) The right to receive an annuity from the State Teachers Retirement System based upon the provisions of article seven-a of this chapter;
(2) The right to withdraw from the State Teachers Retirement System and receive his or her member accumulated contributions in the State Teachers Retirement System, 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 member contributions plus the vested portion of employer contributions made on his or her behalf to the Defined Contribution Retirement System, plus any earnings thereon as of the date of the transfer, as determined by the board pursuant to the vesting provisions of article seven-a of this chapter. This amount shall be distributed in a lump sum.
(c) Any member of the Defined Contribution Retirement System who voluntarily transfers his or her assets and who makes no contribution to the State Teachers Retirement System after the thirtieth day of June, two thousand eight, is guaranteed the receipt of the amount in his or her total vested account in the Defined Contribution Retirement System on the date of transfer, plus interest thereon, at four percent accruing from the date of transfer. This amount shall be distributed in a lump sum.
§18-7D-11. Due process; right to appeal.
If seventy percent or more of the actively contributing members elect to voluntarily transfer their assets , any person aggrieved by any determination made by the board following the election, may petition the board and receive an administrative hearing on the matter in dispute. The administrative decision may be appealed to a circuit court.


NOTE: The purpose of this bill is to provide for the voluntary transfer of assets from the Teachers' Defined Contribution Retirement System ("TDC") to the State Teachers Retirement System ("TRS"); to provide an election on the question of actively contributing members of the TDC voluntarily transferring assets to the TRS; requiring seventy percent of actively contributing members of the TDC to vote in the affirmative; to permit the voluntary transfer of assets upon affirmative vote; providing for transferring members to receive service credit in TRS for an amount equal to seventy-five percent of the members' service credit to the TDC; and providing transferring members the option to receive full credit in TRS by paying the Actuarial Reserve.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added. Sections 18-7D-1, 18-7D-2, 18-7D-3, 18-7D-4, 18-7D-5, 18-7D-6, 18-7D-7, 18-7D-8, 18-7D-9, 18-7D-10, and 18-7D-11 are new, therefore strike-throughs and underscoring have been omitted.


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