2006 Legislation
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SENATE BILL NO. 1411 – PERSI Bd members/indemnification

SENATE BILL NO. 1411

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Bill Status



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

Bill Text


                                                                        
                                                                        
  ]]]]              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 / Fiscal Impact


                       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