Opinion ID: 1204890
Heading Depth: 1
Heading Rank: 3

Heading: The West Virginia Trust Fund Act1996 [5]

Text: For many years both the legislative and executive branches of our state government have struggled with the funding of the State's several pension plans. The Legislature has, in good faith, labored long at funding these pension plans, as well as restructuring the Workers' Compensation Fund, so they will be viable and actuarially secure in the future. The West Virginia Trust Fund Act is a recent effort to advance the laudable goal of actuarially strengthening the State's pension and workers' compensation funds. The Act represents an attempt by the Legislature to reconcile the Legislature's wish to maximize investment return on certain funds with the restraints imposed by the Constitution. The Act attempts to eliminate or reduce to constitutional insignificance the state ownership of various state employee pension and workers' compensation funds. First, it creates a public, non-profit, non-stock corporation known as West Virginia Trust Fund, Inc., and an irrevocable trust to be managed by the new corporation as trustee. The Act then requires the state treasurer to pay over to Trust Fund, Inc., nearly $4 billion dollars. The Act declares that the State has no proprietary interest in these moneys. W.Va.Code, 44-6B-2. Lastly, Trust Fund, Inc., is required to prudently invest these assets, up to 60% of which may be in corporate equities. W.Va.Code, 44-6B-12. The key enabling statute is W.Va.Code, 44-6B-4, which creates the new public corporation, West Virginia Trust Fund, Inc. It provides that: There is hereby created the West Virginia trust fund. The fund is created as a public body corporate and established to provide prudent fiscal administration, investment and management for the pension funds and workers' compensation and pneumoconiosis funds formerly invested by this state. The corporation shall be organized as a nonprofit, nonstock corporation under the general corporation laws of the state. W.Va.Code, 44-6B-4(a). The goal of this new corporation is to act[] in all respects for the benefit of the state's public employees and ultimately the citizens of the state[.] W.Va.Code, 44-6B-2(f). It appears that Trust Fund, Inc., is to assume certain responsibilities and obligations formerly performed by the State Board of Investments. W.Va.Code, 44-6B-9(a). In creating Trust Fund, Inc., the Legislature declared that an independent trust fund board should provide a stable and continuous source of professional financial investment and management. W.Va.Code, 44-6B-2(a). The Legislature provided that public employee and employer contributions are declared to be an irrevocable trust, available for no use other than for the benefit of those public employees. W.Va.Code, 44-6B-2(b). Additionally, the state and other public employers that made or make pension fund contributions have no proprietary interest in the [West Virginia irrevocable trust] fund or in the contributions made to the fund by them and that the state and other public employers disclaim any right to reclaim those contributions and waive any right of reclamation they may have in the fund[.] W.Va. Code, 44-6B-2(c). However, the Legislature explicitly reserved the right to amend, modify or alter the terms of the trust without the consent of Trust Fund, Inc., or any beneficiary. W.Va.Code, 44-6B-10(b)(1). The Act sets out the powers of the new corporation. Trust Fund, Inc., is to have the ability to [a]cquire (by purchase, gift or otherwise), hold, exchange, pledge, lend and sell or otherwise dispose of securities and invest funds.... W.Va.Code, 44-6B-6(7). The corporation can [e]xercise all powers generally granted to and exercised by the holders of investment securities.... W.Va. Code, 44-6B-6(12). Up to sixty percent of the assets held by Trust Fund, Inc., may be placed in corporate stocks. W.Va.Code, 44-6B-12(a). However, the Act limits the types of stock which may be purchased; for instance, no more than five percent of the equity portfolio may be in any one company or association.... W.Va.Code, 44-6B-12(c). Trust Fund, Inc., is to establish and modify its investment objectives within specific legislative constraints. W.Va.Code, 44-6B-12(g). There is no provision in the Act for beneficiaries of the pension plans to direct where their money is being invested, nor for direction from employers and workers directly or indirectly affected by the investment of the workers' compensation and coal workers' pneumoconiosis funds. The Act also imposes duties on the corporation. Trust Fund, Inc., must perform annual financial and compliance audits. Copies of the audit report must be furnished to a host of constitutional and governmental officers, including the governor, state treasurer, state auditor, president of the Senate, speaker of the House of Delegates, the Council of Finance and Administration, and the Consolidated Public Retirement Board. W.Va.Code, 44-6B-7(a). The fund must also perform an annual performance audit, and forward copies to the same officers and agencies. W.Va. Code, 44-6B-7(d). Trust Fund, Inc., must also create monthly financial statements, and copies are to be provided to the executive secretary of the state Consolidated Public Retirement Board and the Commissioner of the Bureau of Employment Programs (as head of the Workers' Compensation Division and overseer of the coal workers' pneumoconiosis fund). W.Va.Code, 44-6B-7(b). Quarterly reports of investment performance are to be given to the Consolidated Public Retirement Board. The trust fund shall provide any other information requested in writing by the council of finance and administration. W.Va.Code, 44-6B-7(e) (emphasis added). The Legislature also has the right to request and receive additional information from the trustee at any time.  W.Va. Code, 44-6B-10(b)(2) (emphasis added). Trust Fund, Inc., is governed by a seven person board of trustees. Four trustees are appointed by the governor from lists submitted by the president of the Senate, the speaker of the House of Delegates, the auditor, and the treasurer. The remaining three trustees are appointed by the governor, with the advice and consent of the Senate. W.Va. Code, 44-6B-4(b). The Act limits the terms of each trustee to five years, and delimits their political affiliations (no more than four trustees may be from the same party). W.Va.Code, 44-6B-4(c). The Act allows the governor to unilaterally remove any trustee for gross negligence or misfeasance, and if he chooses, appoint new trustees to fill any vacancies. W.Va.Code, 44-6B-4(e). The Act also sets the salaries for the trustees. W.Va. Code, 44-6B-4(f). The Act establishes a committee system for input and monitoring which requires an individual from each state pension agency and from the workers' compensation and the coal workers' pneumoconiosis funds to be appointed as a representative to Trust Fund, Inc. Before drafting, reviewing or modifying its investment policies, the trustees must meet with representatives of each state pension plan. W.Va.Code, 44-6B-4(j). Meetings of the trustees are to be open to members and beneficiaries of each pension plan. Annual meetings of the trustees are to be held, and this meeting must be open to the public. At the annual meeting, the trustees shall accept written and oral comments from the general citizenry. W.Va.Code, 44-6B-4(i). West Virginia Trust Fund, Inc., is to initially consist of five state employee pension funds and two workers' compensation funds: (1) the Public Employees Retirement System, W.Va.Code, 5-10-1 to -54; (2) the Teachers Retirement System, W.Va.Code, 18-7A-1 to -36; (3) the West Virginia State Police Retirement System, W.Va.Code, 15-2A-1 to -19; (4) the Death, Disability, and Retirement Fund of the Department of Public Safety, W.Va.Code, 15-2-26 to -39; (5) the Judges Retirement System, W.Va.Code, 51-9-1 to -16; (6) the Workers' Compensation Fund, W.Va.Code, 23-3-1; and (7) the Coal Workers' Pneumoconiosis Fund, W.Va. Code, 23-4B-1 to -8a. On July 1, 1996, the Governor and State Treasurer were to have delivered the assets in these seven funds to the trustees and Trust Fund, Inc. W.Va.Code, 44-6B-10. Additionally, the West Virginia State Board of Investments (a government agency) must transfer certain state property (without any requirement of compensation) to Trust Fund, Inc. [C]omputers, and other necessary items of equipment were to be delivered to Trust Fund, Inc., to allow the new corporation to perform duties formerly performed by the Board of Investments. W.Va.Code, 44-6B-9(a).