Print Friendly 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
]]]] 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.
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
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
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
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
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.
Name: Alan Winkle
STATEMENT OF PURPOSE/FISCAL NOTE S 1376