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S1411................................................by JUDICIARY AND RULES
PERSI BOARD MEMBERS - Amends existing law relating to the Public Employee
Retirement System to revise provisions applicable to the defense and
indemnification of retirement board members, system staff and retirement
system mortgage and investment committee members.
02/20 Senate intro - 1st rdg - to printing
02/21 Rpt prt - to Com/HuRes
03/01 Rpt out - rec d/p - to 2nd rdg
03/02 2nd rdg - to 3rd rdg
03/06 3rd rdg - PASSED - 33-0-2
AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
Langhorst, Little, Lodge, Marley, McGee, McKenzie, Pearce,
Richardson, Schroeder, Stegner, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Malepeai, Stennett
Floor Sponsor - Compton
Title apvd - to House
03/07 House intro - 1st rdg - to Com/HuRes
03/14 Rpt out - rec d/p - to 2nd rdg
03/15 2nd rdg - to 3rd rdg
03/23 3rd rdg - PASSED - 65-0-5
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bell,
Bilbao, Block, Boe, Bolz, Brackett, Bradford, Cannon, Chadderdon,
Clark, Collins, Deal, Edmunson, Ellsworth, Eskridge, Field(18),
Field(23), Garrett, Hart, Harwood, Henbest, Jaquet, Kemp, Lake,
LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller,
Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould,
Ring, Ringo, Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer,
Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24),
Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- Bedke, Black, Crow, Denney, Henderson
Floor Sponsor - Lake
Title apvd - to Senate
03/24 To enrol
03/27 Rpt enrol - Pres signed
03/28 Sp signed
03/29 To Governor
03/30 Governor signed
Session Law Chapter 268
Effective: 07/01/06
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature Second Regular Session - 2006
IN THE SENATE
SENATE BILL NO. 1411
BY JUDICIARY AND RULES 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 arise
23 out of and in the course and scope or performance of their official duties
24 pursuant to the provisions of this section and functions, but only if the
25 defense and indemnity for such person's wrongful act or omission are not pro-
26 vided by chapter 9, title 6, Idaho Code, and the wrongful act or omission of
27 the person was not intentional, willful or wanton misconduct, fraudulent, or a
28 knowing violation of law. The board may, as a fiduciary of the trust, deter-
29 mine to provide a defense and indemnity hereunder. The board may, as a fidu-
30 ciary of the trust, determine to refuse a defense, or disavow and refuse to
31 pay any judgment against a board member, retirement system staff, or retire-
32 ment system mortgage and investment committee member if it is determined that
33 such person was not within the course and scope of his official duties and
34 functions or his conduct was intentional misconduct, willful, wanton, fraudu-
35 lent, or a knowing violation of the law. Any defense and indemnity provided
36 under this section shall be an expense of the trust, and the board is autho-
37 rized but not required to purchase insurance to protect against such risks
38 notwithstanding any other provision of law. No contribution or indemnifica-
39 tion, or reimbursement for legal fees and expenses related to such defense or
40 indemnification, shall be sought from any person defended or indemnified under
41 this section unless the court in which the underlying claim was brought finds
42 that the act or omission of the person was outside the course and scope of his
43 official duties and functions or was intentional, willful or wanton miscon-
2
1 duct, fraudulent, or a knowing violation of law. Any action by the trust
2 against a board member, retirement system staff, or mortgage and investment
3 committee member, and any action by a person against the trust for contribu-
4 tion, indemnification or necessary legal fees and expenses shall be tried to
5 the court in the same civil lawsuit brought on the claim against the retire-
6 ment board member, retirement system staff, or retirement system mortgage and
7 investment committee member. The venue of all actions in which the board is a
8 party shall be Ada county, Idaho.
9 (2) The board shall appoint an executive director to serve at its discre-
10 tion. The executive director shall be the secretary to the board, bonded as is
11 required by the board and shall perform such duties as assigned by the board.
12 The executive director shall be authorized to designate a staff member as act-
13 ing director or secretary in the director's absence.
14 (3) The board shall authorize the creation of whatever staff it deems
15 necessary for sound and economical administration of the system. The executive
16 director shall hire the persons for the staff who shall hold their respective
17 positions subject to the rules of a merit system for state employees. The sal-
18 aries and compensation of all persons employed for purposes of administering
19 the system shall be fixed by the board and as otherwise provided by law.
20 (4) The board shall obtain all actuarial, audit, legal and medical ser-
21 vices it deems appropriate for the system. It shall cause a competent actuary
22 who is a member of the academy of actuaries and who is familiar with public
23 systems of pensions to be retained on a consulting basis. The actuary shall be
24 the technical advisor of the board on matters regarding the operation of the
25 system. During the first year of operation of the system and at least once
26 every four (4) years thereafter, the actuary shall make a general investiga-
27 tion of the suitability of the actuarial tables used by the system. The board
28 shall adopt the actuarial tables and assumptions in use by the system and may
29 change the same in its sole discretion at any time. The actuary shall make an
30 annual valuation of the liabilities and reserves of the system, and an annual
31 determination of the amount of contributions required from the employers under
32 this chapter, and certify the results thereof to the board. The actuary shall
33 also perform such other duties as may be assigned by the board. An independent
34 financial audit shall be conducted annually or as frequently as otherwise
35 determined by the board.
36 (5) The board shall establish the system's office or offices to be used
37 for the meetings of the board and for the general purposes of the administra-
38 tive personnel. The board shall provide for the installation of a complete and
39 adequate system of accounts and records for administering this chapter. All
40 books and records shall be kept in the system's offices.
41 (6) If the board determines that it has previously overpaid or underpaid
42 benefits provided under this chapter or chapter 14, title 72, Idaho Code, it
43 shall correct the prior error. In the event of prior underpayment, the board
44 shall forthwith pay the amount of the underpayment together with regular
45 interest thereon. In the event of prior overpayment, the board may offset
46 future benefit payments by the amount of the prior overpayment together with
47 regular interest thereon. Any such decision to offset future benefit payments
48 shall be administratively and judicially reviewable as provided in section
49 59-1314, Idaho Code. Nothing herein contained shall be construed to limit the
50 rights of a member or the board to pursue any other remedy provided by law.
51 SECTION 2. That Section 59-1308, Idaho Code, be, and the same is hereby
52 amended to read as follows:
53 59-1308. SUPPLEMENTAL BENEFIT PLAN -- CONTRIBUTIONS AND EXPENSES OF THE
3
1 SUPPLEMENTAL BENEFIT PLAN -- INDEMNIFICATION. (1) The state shall sponsor and
2 the board shall administer one (1) or more supplemental benefit plans to be
3 used for allocation of extraordinary gains as provided in section 59-1309,
4 Idaho Code, and for voluntary contributions of active members. The supplemen-
5 tal plans may be established under the qualified requirements of section
6 401(a) of the Internal Revenue Service Code and with the qualified cash or
7 deferred arrangements under section 401(k) of the Internal Revenue Service
8 Code or any other tax-deferred plan permitted by law, as determined by the
9 retirement board. The board is authorized to secure such qualified staff and
10 consultants as it determines necessary to establish and administer such plans.
11 Employee and employer contributions shall be permitted according to the provi-
12 sions of these plans as established by the board. For purposes of this section
13 "employee" shall mean a participant as defined in the supplemental benefit
14 plan documents or board rules.
15 (2) The board is authorized, but not required, to establish separate
16 trust funds to hold the assets of the supplemental benefit plans created under
17 this section. The investment options available under supplemental benefit
18 plans shall be determined by the board, and may include, but are not limited
19 to, investment in all or part of the public employee retirement fund and use
20 of private vendor options.
21 (3) Supplemental benefit plans shall be available to all active members
22 and shall be in addition to any other retirement or tax-deferred compensation
23 system established by the employer. The board may provide educational opportu-
24 nities related to supplemental benefit plans and retirement savings, as deter-
25 mined by the board.
26 (4) Accounts shall be established in supplemental benefit plans for all
27 active members eligible for an extraordinary gains transfer under section
28 59-1309, Idaho Code. After the initial transfer of extraordinary gains, any
29 active member may make additional voluntary contributions to his/her account,
30 subject to applicable limitations, by authorizing his/her employer to contrib-
31 ute an amount by payroll deduction to the supplemental benefit plan in lieu of
32 receiving such amount as salary. The amount of such contributions shall be
33 subject to any limitations established by the board, state or federal law. The
34 employer shall provide coordination of contributions between multiple plans to
35 assure that contribution limits are not exceeded. Should aggregate contribu-
36 tions to multiple plans exceed applicable limits, excess contributions shall
37 be deemed to apply exclusively to plans not created by this chapter. In the
38 event a preexisting plan is used as a supplemental plan, voluntary contribu-
39 tions may continue to be made to that plan despite the absence of extraordi-
40 nary gains transfers.
41 (5) For purposes of this section the employer is authorized to make such
42 deductions from salary for any employee who has authorized such deductions in
43 writing. The employer shall forward all contributions under this section to
44 the board by the fifth working day after each payroll, in addition to reports
45 as directed by the board. Any costs incurred by the board, whether direct or
46 indirect, due to an employer's failure to properly withhold, transfer, limit
47 and report contributions, shall be the responsibility of the employer and
48 shall be immediately due and payable upon notice from the board. This
49 includes, but is not limited to, costs associated with plan corrections. Such
50 costs shall be treated as delinquent contributions under section 59-1325,
51 Idaho Code.
52 (6) The board may enter into agreements with employers or require partic-
53 ipation to implement the supplemental benefit plans and the board may desig-
54 nate administrative agents to execute all necessary agreements pertaining to
55 the supplemental benefit plans.
4
1 (7) All contributions received from participants in the supplemental ben-
2 efit plans shall be deposited with a trustee designated by the board. All such
3 funds are hereby perpetually appropriated to the board, shall not be included
4 in the department's budget, and may be invested or used to pay for investment
5 and administrative expenses of the supplemental benefit plans. Inactive mem-
6 bers may be required to transfer supplemental benefit plan account balances as
7 determined by the board.
8 (8) The board may establish rules to implement and administer supplemen-
9 tal benefit plans. Costs of administration shall be appropriated by the legis-
10 lature and may be paid from the interest earnings of the funds accrued as a
11 result of the deposits or as an assessment against each account, to be decided
12 by the board. Investment related expenses are exempt from appropriation.
13 (9) Contributions and investment earnings under the supplemental benefit
14 plans shall be exempt from federal and state income taxes until the ultimate
15 distribution of such contributions. Distributions of funds held in supplemen-
16 tal benefit plan accounts are subject to federal law limitations. The board
17 may provide for retirement disbursement options other than lump sum payments.
18 (10) All additional contributions made by the employee under this section
19 shall continue to be included as regular compensation for the purpose of com-
20 puting the employer and employee retirement contributions and pension benefits
21 earned by an employee under this chapter, but such sum shall not be included
22 in the computation of any income taxes withheld on behalf of any employee.
23 However, funds accrued in a supplemental benefit plan account shall not be
24 considered in determining any other benefits under this chapter.
25 (11) The provisions of sections 59-1316 and 59-1317(1), (2) and (5), Idaho
26 Code, shall also apply to the supplemental benefit plans created under this
27 section. Should a court order that an assignment be made to a participant's
28 spouse or former spouse of all or part of an account created under this sec-
29 tion, the assignment shall be separate and distinct from any approved domestic
30 retirement order required by section 59-1317(4), Idaho Code. Requirements for
31 assignments of supplemental accounts may be set forth in rule or other plan
32 documents.
33 (12) Members of the retirement board or retirement system staff shall,
34 jointly or individually, shall be provided a defense and indemnified from
35 against all claims, demands, judgments, costs, charges and expenses, including
36 court costs and attorney's fees, and against all liability losses and damages
37 of any nature whatsoever that the retirement board or retirement system staff
38 shall or may at any time sustain by reason of any decision made arising out of
39 and in the course and scope or performance of their official duties and func-
40 tions in administering any plans created pursuant to the provisions of this
41 section, except as may result from their willful and intentional malfeasance
42 to the same extent as provided in section 59-1305(1), Idaho Code. The venue of
43 all actions in which the retirement board or retirement staff is a party shall
44 be in Ada county, Idaho.
STATEMENT OF PURPOSE
RS l6072Cl
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 1411