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

Heading: statutory structure

Text: The Public Employees Retirement System (PERS) was created by statute, W.Va.Code §§ 5-10-1 et seq. (1987 Replacement Vol.), in 1961 to provide an orderly general retirement system for public employees. A review of the statute reveals a classic example of a statutory trust. [A] trust is a legal relation between two or more persons by virtue of which one is bound to hold property to which he has the legal title, for the use or benefit of the other or others who have an equitable title or interest. It is a right, enforceable in equity, to the beneficial enjoyment of property, real or personal, of which the legal title is in another. The person so holding the legal title or interest is called the trustee, and the one having the equitable interest and entitled to the benefit is the beneficiary or cestui que trust. The person creating the trust is called the trustor or settlor. An essential feature of trusts is the division of the title to property, the vesting of the legal title in the trustee and of the equitable title or beneficial interest in the cestui que trust. R. Kimbrough, Summary of American Law, § 22:1 (1974). The body corporate of the public employees retirement system constitutes a trust. The terms of the trust contract are spelled out in the PERS statute. W.Va.Code § 5-10-1 et seq. Membership is mandatory for employees of participating public employers, W.Va.Code § 5-10-17(a) [3] . The members and their employers are the trustors or settlors, and the retirants, active and deferred, and their survivors are cestui que trust, entitled to the benefits of the trust. W.Va. Code §§ 5-10-20, 21, 22, 24, 25. [4] When a public employee renders services he earns the employers' matching contribution to the retirement trust fund, and his contributions and these earned employer contributions, plus the accrued interest from both, constitute the corpus of the pension trust, and the retirement entitlements earned are deferred compensation for these public employees, Wagoner v. Gainer, 167 W.Va. 139, 153-154, 279 S.E.2d 636, 645 (1981); see also Campbell v. Kelly, 157 W.Va. 453, 462, 473, 202 S.E.2d 369, 378, 381 (1974). The PERS Board of Trustees, currently made up of Respondents Gainer, Manchin, McCuskey, Fox, and Poundstone, has the responsibility of administering and managing the PERS, effectuating the statute. W.Va.Code § 5-10-5. The Trustees determine the amount of the mandatory contribution to be deducted from each employee's paycheck and paid to the PERS for the members' deposit fund (MDF). [5] W.Va. Code § 5-10-29. The Trustees are also involved in determining the amounts participating employers are required to contribute to the employers accumulation fund (EAF) in order to match the employees' contributions and ensure the actuarial soundness of the System, up to a statutory maximum of 10.5% of their payrolls. [6] W.Va.Code § 5-10-31. The statute additionally charges the Trustees to maintain, for financing and accounting purposes, a state division and a division for other public employers, each with the following five funds: (1) the MDF, (2) the EAF, (3) the retirement reserve fund, (4) the income fund, and (5) the expense fund. W.Va. Code § 5-10-28. By the very use of the term Trustee, as well as by the allocation of responsibilities to them, the Legislature has placed the Respondent Trustees in a fiduciary relationship with the PERS and its participants. Other courts examining the role of statutorily designated trustees judge their actions by the high standards to which fiduciaries are held. See, e.g., Withers v. Teachers' Retirement System, 447 F.Supp. 1248 (S.D.N.Y.1978), aff'd., 595 F.2d 1210 (1979); In re State Employees' Pension Plan, 364 A.2d 1228 (Del.1976); Weaver v. Evans, 80 Wash.2d 461, 495 P.2d 639 (1972) (en banc). We conclude that the Respondent Trustees have the highest fiduciary duty to maintain the terms of the PERS trust, as spelled out in the statute. The Board of Public Works was originally given the responsibility to invest available PERS funds as specified by Code § 5-10-38. This duty has since been assumed by the State Board of Investments, W.Va.Code § 12-6-13 (1985 Replacement Vol.), and its members, Governor Moore, Treasurer Manchin, and Auditor Gainer, are Respondents herein.