2006 Legislation
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SENATE BILL NO. 1376 – PERSI bd members, indemnification

SENATE BILL NO. 1376

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S1376.......................................by COMMERCE AND HUMAN RESOURCES
PUBLIC EMPLOYEE RETIREMENT SYSTEM - Amends existing law relating to the
Public Employee Retirement System of Idaho (PERSI) to revise provisions
applicable to the defense and indemnification of retirement board members,
system staff and system mortgage and investment committee members.
                                                                        
02/10    Senate intro - 1st rdg - to printing
02/13    Rpt prt - to Com/HuRes

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1376
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE PUBLIC EMPLOYEE RETIREMENT SYSTEM; AMENDING  SECTION  59-1305,
  3        IDAHO  CODE, TO REVISE PROVISIONS APPLICABLE TO THE DEFENSE AND INDEMNIFI-
  4        CATION OF RETIREMENT BOARD MEMBERS, SYSTEM STAFF AND SYSTEM  MORTGAGE  AND
  5        INVESTMENT COMMITTEE MEMBERS; AND AMENDING SECTION 59-1308, IDAHO CODE, TO
  6        REVISE PROVISIONS APPLICABLE TO THE DEFENSE AND INDEMNIFICATION OF RETIRE-
  7        MENT BOARD MEMBERS AND SYSTEM STAFF.
                                                                        
  8    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  9        SECTION  1.  That  Section 59-1305, Idaho Code, be, and the same is hereby
 10    amended to read as follows:
                                                                        
 11        59-1305.  POWERS AND DUTIES OF BOARD --  INDEMNIFICATION.  (1)  The  board
 12    shall  have the power and duty, subject to the limitations of this chapter, of
 13    managing the system. It shall have the powers and privileges of a corporation,
 14    including the right to sue and be sued in its own name as such board.  Members
 15    of  the  retirement board, retirement system staff and retirement system mort-
 16    gage and investment committee members who shall, be found to be fiduciaries of
 17    the fund, jointly and individually, shall be provided a defense  and  indemni-
 18    fied from against all claims, demands, judgments, costs, charges and expenses,
 19    including  court  costs  and attorney's fees, and against all liability losses
 20    and damages of any nature whatsoever that retirement board members, retirement
 21    system staff or retirement system mortgage and  investment  committee  members
 22    shall or may at any time sustain by reason of any decision made that the board
 23    determines  arise  out  of and in the course and scope or performance of their
 24    official duties pursuant to the provisions of this section and functions,  but
 25    only  if  such  defense  and indemnity are not provided by chapter 9, title 6,
 26    Idaho Code, and the act or omission of the person was not intentional, willful
 27    or wanton misconduct, fraudulent, or a knowing violation of law.  Any  defense
 28    and  indemnity  provided  under this section shall be provided by the board as
 29    fiduciary of the trust and shall be an expense of the trust, and the board  is
 30    authorized  but  not  required  to  purchase insurance to protect against such
 31    risks notwithstanding any other provision of law. No contribution or  indemni-
 32    fication, or reimbursement for legal fees and expenses related to such defense
 33    or  indemnification,  shall  be sought from any person defended or indemnified
 34    under this section unless the court in which the underlying claim was  brought
 35    finds  that the act or omission of the person was outside the course and scope
 36    of his official duties and functions or was  intentional,  willful  or  wanton
 37    misconduct,  fraudulent,  or  a  knowing  violation  of  law. The venue of all
 38    actions in which the board is a party shall be Ada county, Idaho.
 39        (2)  The board shall appoint an executive director to serve at its discre-
 40    tion. The executive director shall be the secretary to the board, bonded as is
 41    required by the board and shall perform such duties as assigned by the  board.
 42    The executive director shall be authorized to designate a staff member as act-
 43    ing director or secretary in the director's absence.
                                                                        
                                           2
                                                                        
  1        (3)  The  board  shall  authorize  the creation of whatever staff it deems
  2    necessary for sound and economical administration of the system. The executive
  3    director shall hire the persons for the staff who shall hold their  respective
  4    positions subject to the rules of a merit system for state employees. The sal-
  5    aries  and  compensation of all persons employed for purposes of administering
  6    the system shall be fixed by the board and as otherwise provided by law.
  7        (4)  The board shall obtain all actuarial, audit, legal and  medical  ser-
  8    vices  it deems appropriate for the system. It shall cause a competent actuary
  9    who  is  a  member of the academy of actuaries and who is familiar with public
 10    systems of pensions to be retained on a consulting basis. The actuary shall be
 11    the technical advisor of the board on matters regarding the operation  of  the
 12    system.  During  the  first  year of operation of the system and at least once
 13    every four (4) years thereafter, the actuary shall make a  general  investiga-
 14    tion  of the suitability of the actuarial tables used by the system. The board
 15    shall adopt the actuarial tables and assumptions in use by the system and  may
 16    change  the same in its sole discretion at any time. The actuary shall make an
 17    annual valuation of the liabilities and reserves of the system, and an  annual
 18    determination of the amount of contributions required from the employers under
 19    this  chapter, and certify the results thereof to the board. The actuary shall
 20    also perform such other duties as may be assigned by the board. An independent
 21    financial audit shall be conducted annually  or  as  frequently  as  otherwise
 22    determined by the board.
 23        (5)  The  board  shall establish the system's office or offices to be used
 24    for the meetings of the board and for the general purposes of the  administra-
 25    tive personnel. The board shall provide for the installation of a complete and
 26    adequate  system  of  accounts and records for administering this chapter. All
 27    books and records shall be kept in the system's offices.
 28        (6)  If the board determines that it has previously overpaid or  underpaid
 29    benefits  provided  under this chapter or chapter 14, title 72, Idaho Code, it
 30    shall correct the prior error. In the event of prior underpayment,  the  board
 31    shall  forthwith  pay  the  amount  of  the underpayment together with regular
 32    interest thereon. In the event of prior  overpayment,  the  board  may  offset
 33    future  benefit  payments by the amount of the prior overpayment together with
 34    regular interest thereon. Any such decision to offset future benefit  payments
 35    shall  be  administratively  and  judicially reviewable as provided in section
 36    59-1314, Idaho Code. Nothing herein contained shall be construed to limit  the
 37    rights of a member or the board to pursue any other remedy provided by law.
                                                                        
 38        SECTION  2.  That  Section 59-1308, Idaho Code, be, and the same is hereby
 39    amended to read as follows:
                                                                        
 40        59-1308.  SUPPLEMENTAL BENEFIT PLAN -- CONTRIBUTIONS AND EXPENSES  OF  THE
 41    SUPPLEMENTAL  BENEFIT PLAN -- INDEMNIFICATION. (1) The state shall sponsor and
 42    the board shall administer one (1) or more supplemental benefit  plans  to  be
 43    used  for  allocation  of  extraordinary gains as provided in section 59-1309,
 44    Idaho Code, and for voluntary contributions of active members. The  supplemen-
 45    tal  plans  may  be  established  under  the qualified requirements of section
 46    401(a) of the Internal Revenue Service Code and with  the  qualified  cash  or
 47    deferred  arrangements  under  section  401(k) of the Internal Revenue Service
 48    Code or any other tax-deferred plan permitted by law,  as  determined  by  the
 49    retirement  board.  The board is authorized to secure such qualified staff and
 50    consultants as it determines necessary to establish and administer such plans.
 51    Employee and employer contributions shall be permitted according to the provi-
 52    sions of these plans as established by the board. For purposes of this section
 53    "employee" shall mean a participant as defined  in  the  supplemental  benefit
                                                                        
                                           3
                                                                        
  1    plan documents or board rules.
  2        (2)  The  board  is  authorized,  but  not required, to establish separate
  3    trust funds to hold the assets of the supplemental benefit plans created under
  4    this section. The investment  options  available  under  supplemental  benefit
  5    plans  shall  be determined by the board, and may include, but are not limited
  6    to, investment in all or part of the public employee retirement fund  and  use
  7    of private vendor options.
  8        (3)  Supplemental  benefit  plans shall be available to all active members
  9    and shall be in addition to any other retirement or tax-deferred  compensation
 10    system established by the employer. The board may provide educational opportu-
 11    nities related to supplemental benefit plans and retirement savings, as deter-
 12    mined by the board.
 13        (4)  Accounts  shall  be established in supplemental benefit plans for all
 14    active members eligible for an  extraordinary  gains  transfer  under  section
 15    59-1309,  Idaho  Code.  After the initial transfer of extraordinary gains, any
 16    active member may make additional voluntary contributions to his/her  account,
 17    subject to applicable limitations, by authorizing his/her employer to contrib-
 18    ute an amount by payroll deduction to the supplemental benefit plan in lieu of
 19    receiving  such  amount  as  salary. The amount of such contributions shall be
 20    subject to any limitations established by the board, state or federal law. The
 21    employer shall provide coordination of contributions between multiple plans to
 22    assure that contribution limits are not exceeded. Should  aggregate  contribu-
 23    tions  to  multiple plans exceed applicable limits, excess contributions shall
 24    be deemed to apply exclusively to plans not created by this  chapter.  In  the
 25    event  a  preexisting plan is used as a supplemental plan, voluntary contribu-
 26    tions may continue to be made to that plan despite the absence  of  extraordi-
 27    nary gains transfers.
 28        (5)  For  purposes of this section the employer is authorized to make such
 29    deductions from salary for any employee who has authorized such deductions  in
 30    writing.  The  employer  shall forward all contributions under this section to
 31    the board by the fifth working day after each payroll, in addition to  reports
 32    as  directed  by the board. Any costs incurred by the board, whether direct or
 33    indirect, due to an employer's failure to properly withhold,  transfer,  limit
 34    and  report  contributions,  shall  be  the responsibility of the employer and
 35    shall be immediately  due  and  payable  upon  notice  from  the  board.  This
 36    includes,  but is not limited to, costs associated with plan corrections. Such
 37    costs shall be treated as  delinquent  contributions  under  section  59-1325,
 38    Idaho Code.
 39        (6)  The board may enter into agreements with employers or require partic-
 40    ipation  to  implement the supplemental benefit plans and the board may desig-
 41    nate administrative agents to execute all necessary agreements  pertaining  to
 42    the supplemental benefit plans.
 43        (7)  All contributions received from participants in the supplemental ben-
 44    efit plans shall be deposited with a trustee designated by the board. All such
 45    funds  are hereby perpetually appropriated to the board, shall not be included
 46    in the department's budget, and may be invested or used to pay for  investment
 47    and  administrative  expenses of the supplemental benefit plans. Inactive mem-
 48    bers may be required to transfer supplemental benefit plan account balances as
 49    determined by the board.
 50        (8)  The board may establish rules to implement and administer  supplemen-
 51    tal benefit plans. Costs of administration shall be appropriated by the legis-
 52    lature  and  may  be paid from the interest earnings of the funds accrued as a
 53    result of the deposits or as an assessment against each account, to be decided
 54    by the board. Investment related expenses are exempt from appropriation.
 55        (9)  Contributions and investment earnings under the supplemental  benefit
                                                                        
                                           4
                                                                        
  1    plans  shall  be exempt from federal and state income taxes until the ultimate
  2    distribution of such contributions. Distributions of funds held in  supplemen-
  3    tal  benefit  plan  accounts are subject to federal law limitations. The board
  4    may provide for retirement disbursement options other than lump sum payments.
  5        (10) All additional contributions made by the employee under this section
  6    shall continue to be included as regular compensation for the purpose of  com-
  7    puting the employer and employee retirement contributions and pension benefits
  8    earned  by  an employee under this chapter, but such sum shall not be included
  9    in the computation of any income taxes withheld on  behalf  of  any  employee.
 10    However,  funds  accrued  in  a supplemental benefit plan account shall not be
 11    considered in determining any other benefits under this chapter.
 12        (11) The provisions of sections 59-1316 and 59-1317(1), (2) and (5), Idaho
 13    Code, shall also apply to the supplemental benefit plans  created  under  this
 14    section.  Should  a  court order that an assignment be made to a participant's
 15    spouse or former spouse of all or part of an account created under  this  sec-
 16    tion, the assignment shall be separate and distinct from any approved domestic
 17    retirement  order required by section 59-1317(4), Idaho Code. Requirements for
 18    assignments of supplemental accounts may be set forth in rule  or  other  plan
 19    documents.
 20        (12) Members  of  the  retirement  board or retirement system staff shall,
 21    jointly or individually, shall be provided  a  defense  and  indemnified  from
 22    against all claims, demands, judgments, costs, charges and expenses, including
 23    court  costs and attorney's fees, and against all liability losses and damages
 24    of any nature whatsoever that the retirement board or retirement system  staff
 25    shall or may at any time sustain by reason of any decision made arising out of
 26    and  in the course and scope or performance of their official duties and func-
 27    tions in administering any plans created pursuant to the  provisions  of  this
 28    section,  except  as may result from their willful and intentional malfeasance
 29    to the same extent as provided in section 59-1305(1), Idaho Code. The venue of
 30    all actions in which the retirement board or retirement staff is a party shall
 31    be in Ada county, Idaho.

Statement of Purpose / Fiscal Impact


                       STATEMENT OF PURPOSE

                            RS 15952C1

This bill amends Idaho Code  59-1305 to clarify that the indemnity
provided under this section to members of the Retirement Board,
retirement system staff and retirement system mortgage and investment
committee members, compliments coverage provided under the Idaho Tort
Claims Act by providing defense and indemnity for claims not otherwise
provided under the Idaho Tort Claims Act.

The amendments provide that immunity provided under this section also
includes a defense, and that it is the Board that determines whether a
defense and indemnity is appropriate under the section, acting as
fiduciaries of the trust. The amendments provide that defense and
indemnity under the section shall be an expense of the trust and that
the Board is authorized, but not required to purchase insurance to
protect against such risks.

The amendments provide that no contribution, indemnification or
reimbursement will be sought from any person defended or indemnified
under the section unless the court in which the underlying claim was
brought finds that the person acted outside the course and scope of his
duties or the wrongful conduct was intentional misconduct, willful,
wanton, fraudulent, or a knowing violation of law, consistent with the
practice under the Idaho Tort Claims Act.

The bill also amends Idaho Code  59-13 08 to provide the same defense
and indemnity protections to the Board and staff related to their
duties in administering any other plans created under that section,
including the PERSI 401(k) plan.



                            FISCAL NOTE

None.





CONTACT

Name:      Alan Winkle
Agency:    PERSI
Phone:     334-2455
        


STATEMENT OF PURPOSE/FISCAL NOTE                    S 1376