Opinion ID: 1343017
Heading Depth: 1
Heading Rank: 2

Heading: historical overview of the state teacher retirement system

Text: The State Teacher Retirement System was created in 1941 by the West Virginia Legislature pursuant to W.Va.Code 18-7A-1 (1941) et seq. [3] By 1994, the membership of the West Virginia Teachers Retirement System was composed of 33,262 active members, 21,992 retirees and beneficiaries and 5,943 terminated members. [4] The Teacher Retirement System is divided and administered in five separate trust funds: (a) Teacher Accumulation Fund, [5] (b) Employers Accumulation Fund, [6] (c) Benefit Fund, [7] (d) Reserve Fund, [8] and (e) Expense Fund. [9] W.Va.Code 18-7A-18 (1993). The original intent of the Teachers Retirement System was that funds from the Teachers Accumulation Fund and matching Employers Accumulation Fund would not be dispersed until the person retires, dies or in the case of Teachers Accumulation Fund, a person withdrew their money. W.Va.Code 18-7A-18 (1955) and W.Va.Code 18-7A-23 (1986). However, in 1984, the legislature expressly authorized expenditure of teacher and employer monies to pay for current pension benefits. [10] W.Va.Code 18-7A-18(c) (1993) was amended to read: Any deficit occurring in the benefit fund which is not automatically met by payments to that fund, as provided for by this article, shall be met by additional transfers from the employers accumulation fund and, if necessary, by transfers from the teachers accumulation fund. As will be seen, this amendment to W.Va. Code 18-7A-18(c) (1993) established the environment permitting an unrestricted utilization of retirement funds and proved lethal to the financial health of the Teachers Retirement System. Between 1985 and 1988, the Governor did not request adequate appropriations and the legislature only appropriated funds in the amount that was requested by the Governor. In Fiscal Year (FY) 1985-86 the 6.0 percent matching contribution should have been $46,000,000, but only $40,500,000 was requested and appropriated. In FY 1986-87, $49,000,000 should have been appropriated and yet only $25,210,387 was appropriated. In FY 1987-88, $50,000,000 should have been appropriated and only $18,658,387 was appropriated and finally, in FY 1988-89, [11] $50,500,000 should have been appropriated and $23,241,000 was appropriated. [12] As a result of these inadequate appropriations and pursuant to the 1984 amendment in W.Va.Code 18-7A-18(c), the Teachers Retirement System drew funds from the Teachers Accumulation Fund and the Employers Accumulation Fund to supplement the Benefit Fund for immediate payment of current pension benefits, thereby eliminating any interest accrual on the Teachers Accumulation Fund and Employers Accumulation Fund. Additionally, the inadequate appropriation to the Teachers Retirement System was compounded in 1988 when the legislature permitted the transfer of monies from the Teachers Retirement System to the Public Employees Insurance Agency pursuant to House Bill (H.B.) 4167 [13] and Senate Bill (S.B.) 5, [14] which authorized payment of retiree health insurance premiums with funds from the Teachers Accumulation Fund and Employers Accumulation Fund. Accordingly, the net effect of these funding deficiencies and diversions was that as of July 1, 1994, the Teachers Retirement System had an unfunded accrued liability of $3.25 billion! [15]