Opinion ID: 1203735
Heading Depth: 1
Heading Rank: 4

Heading: investment of funds

Text: The Petitioner's final major concern is that the moneys from the various PERS funds have been invested improperly, placing the system's reserves at risk. When the PERS was initially formed, the Board of Public Works was charged with investing the System's funds [16] in any securities or investments in which the sinking funds of the state may be legally invested, or in any securities in which the deposits in savings banks may be invested. W.Va. Code § 5-10-38. Code § 5-10-38 is one of the terms of the contract between the State and the PERS participants. The State is severely limited in its power to unilaterally modify this term of the pension contract to the detriment of the PERS participants. See Allied Structural Steel, 438 U.S. 234, 98 S.Ct. at 2717; Wagoner v. Gainer, 167 W.Va. 139, 279 S.E.2d 636. But beyond the contractual limitations, the Respondent Board of Investments has the highest fiduciary duty to see to it that the PERS funds are placed in secure, not speculative, investments. The Respondent Board of Investments is charged by statute with investing [a]ll moneys of the retirement system not currently required for the payment of annuities or other benefits. W.Va. Code § 5-10-38. A fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation. Restatement (Second) of Torts § 874 comment a (1977). Thus, the Board of Investments has a fiduciary relation with the PERS trust and participants and must invest employee earned pension systems assets consistently with the highest standards of fiduciary duty. It must utilize competent, educated, and trained financial managers to seek and manage high quality investments and to avoid speculative commercial and industrial ventures and schemes. Guidance for proper pension fund investments may be drawn from Code § 5-10-38, which from the 1961 passage of the pension act has authorized that pension moneys may be invested as are the sinking funds of the State or as are the deposits of saving banks. Because of the fluidity and erosion of the regulation of banking practice, the savings bank standard is no longer a meaningful one by which to measure compliance with fiduciary duties, and we are left with the standards for the State's sinking fund, [17] which apparently remain consistent with the highest standards of fiduciary duty. W.Va.Code § 13-3-7 (1985 Replacement Vol.). The Respondents are mandated to remove pension funds from speculative to secure investments and to make future investments of the PERS funds consistently with the highest standards of fiduciary duty. The necessary accounting adjustments should be made immediately so that any current speculative or improper investments are transferred from the PERS investment pool [18] to another pool.