SB490: Bill Text

LRB-0874/1

RAC:lmk:jf

2005 - 2006 LEGISLATURE

2005 Senate BILL 490

December 27, 2005 - Introduced by Law Revision Committee. Referred to Joint Survey Committee on Retirement Systems.

SB490,2,2 An Act to renumber and amend 25.17 (1) (fm) and 40.02 (34); and to amend 25.14 (1) (a) 2., 25.17 (3) (a), 25.17 (3) (bh), 25.17 (4), 25.17 (6), 25.17 (14) (intro.), 25.17 (14) (g), 25.17 (15), 25.18 (1) (o), 25.18 (2) (e) 1., 25.187 (2) (c) 3. a., 40.02 (7), 40.02 (23) (a), 40.02 (23) (b), 40.02 (58), 40.03 (1) (h), 40.03 (1) (n), 40.04 (3) (intro.), 40.04 (3) (ab), 40.04 (3) (am) 1., 40.04 (3) (am) 2., 40.04 (3) (am) 3. (intro.), 40.04 (3) (am) 3. a., 40.04 (3) (am) 3. b., 40.04 (3) (am) 3. c., 40.04 (3) (b), 40.04 (3) (d), 40.04 (4) (a) 2., 40.04 (4) (a) 2g., 40.04 (4) (a) 2m., 40.04 (5) (b), 40.04 (7) (intro.), 40.04 (7) (a) (intro.), 40.04 (7) (a) 2., 40.05 (1) (a) 6., 40.05 (2) (g) 2., 40.06 (5), 40.08 (4), 40.23 (2m) (c), 40.27 (2) (intro.), 40.27 (2) (a), 40.27 (2) (b), 40.27 (2) (c), 40.28 (1) (intro.) and 40.28 (1) (b) of the statutes; relating to: changing the name of the fixed retirement investment trust to the core retirement investment trust (suggested as remedial legislation by the Department of Employee Trust Funds).

Analysis by the Legislative Reference Bureau

This bill changes the name of the fixed retirement investment trust to the core retirement investment trust.

For further information, see the Notes provided by the Law Revision Committee of the Joint Legislative Council in the bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

Law Revision Committee prefatory note: This bill is a remedial legislation proposal, requested by the Department of Employee Trust Funds and introduced by the Law Revision Committee under s. 13.83 (1) (c) 4., stats. After careful consideration of the various provisions of the bill, the Law Revision Committee has determined that this bill makes minor substantive changes in the statutes, and that these changes are desirable as a matter of public policy.

SB490, s. 1 Section 1. 25.14 (1) (a) 2. of the statutes is amended to read:

SB490,2,4 25.14 (1) (a) 2. The fixed core retirement investment trust.

SB490, s. 2 Section 2. 25.17 (1) (fm) of the statutes is renumbered 25.17 (1) (br) and amended to read:

SB490,2,7 25.17 (1) (br) Fixed core retirement investment trust (s. 40.04 (3));

SB490, s. 3 Section 3. 25.17 (3) (a) of the statutes is amended to read:

SB490,2,15 25.17 (3) (a) Invest the fixed core retirement investment trust, state life fund, veterans trust fund, and injured patients and families compensation fund in loans, securities, and any other investments authorized by s. 620.22, and in bonds or other evidences of indebtedness or preferred stock of companies engaged in the finance business whether as direct lenders or as holding companies owning subsidiaries engaged in the finance business. Investments permitted by sub. (4) are permitted investments under this subsection.

SB490, s. 4 Section 4. 25.17 (3) (bh) of the statutes is amended to read:

SB490,3,23 25.17 (3) (bh) Invest the fixed core retirement investment trust and state life fund in loans secured by mortgages upon unencumbered and improved real property in the United States or Canada when such real estate is leased to a corporation or limited liability company incorporated, organized, or existing under the laws of the United States or any state, district or territory thereof, or Canada or any province thereof, whose income available for fixed charges for the period of 5 fiscal years next preceding the date of the investment has averaged not less than 1.5 times its average annual fixed charges applicable to such period, if there is pledged and assigned, either absolutely or conditionally, as additional security for the loan either the lease or sufficient of the rentals payable thereunder to repay the principal and interest of the loan within the unexpired term of the lease. Real property and leasehold estates are not encumbered within the meaning of this section by reason of the existence of unpaid assessments and taxes not delinquent, mineral, oil or timber rights, easements or rights-of-way for public highways, private roads, railroads, telegraph, telephone, electric light and power lines, drains, sewers or other similar easements or rights-of-way, liens for service and maintenance of water rights when not delinquent, party wall agreements, building restrictions, or other restrictive covenants or conditions, with or without a reversionary clause, or leases under which rents or profits are reserved to the owner. The foregoing limitations and restrictions shall not apply to real estate loans which are insured under the national housing act by the federal housing administration or to real estate loans made under ch. 219, or insured under policies of insurance issued by responsible mortgage insurance companies.

SB490, s. 5 Section 5. 25.17 (4) of the statutes is amended to read:

SB490,4,8 25.17 (4) Invest the funds of the fixed core retirement investment trust in loans, securities, or investments in addition to those permitted by any other statute including investments in corporations or limited liability companies which are in the venture capital stage. The aggregate of the loans, securities, and investments made under this subsection shall not exceed 15% 15 percent of the admitted assets of that trust. Investments in corporations or limited liability companies which are in the venture capital stage shall not exceed 2% 2 percent of the admitted assets of that trust.

SB490, s. 6 Section 6. 25.17 (6) of the statutes is amended to read:

SB490,4,24 25.17 (6) Notwithstanding any other statute, transfers from the variable retirement investment trust to the fixed core retirement investment trust under s. 40.04 (7) may be made in cash or securities or both as determined by the board. The board shall determine market values for securities in the variable retirement investment trust as of the close of business on the last working day preceding a transfer. If securities are transferred, to the extent determined feasible by the board, a proportionate amount of all securities in even hundreds of shares of stock or even thousands of par value of bonds in the variable retirement investment trust shall be transferred. The board may hold or sell the transferred securities as it determines appropriate considering market and economic conditions. Any limitation on the percentage of assets in common stocks or in the stock of one company does not apply to the transferred securities, except the board shall, at such time as it determines that market, economic and other conditions are appropriate to the sale of the securities, sell sufficient transferred securities so as to comply with percentage of asset limitations.

SB490, s. 7 Section 7. 25.17 (14) (intro.) of the statutes is amended to read:

SB490,5,5 25.17 (14) (intro.) As of December 31 of each year, make and file with the department of employee trust funds a report of the value of the assets of the fixed core retirement investment trust and of the variable retirement investment trust, determined as of that date at market value for the variable retirement investment trust and on the following basis for the fixed core retirement investment trust:

SB490, s. 8 Section 8. 25.17 (14) (g) of the statutes is amended to read:

SB490,5,9 25.17 (14) (g) With respect to all securities under pars. (a) to (e), the amount of any income or any adjustment in income shall be transferred to the current income account of the fixed core retirement investment trust under s. 40.04 (3).

SB490, s. 9 Section 9. 25.17 (15) of the statutes is amended to read:

SB490,5,14 25.17 (15) For purposes of the power and authority of the board to make investments, the "admitted assets" of the fixed core retirement investment trust or the variable retirement investment trust shall be the total valuation of the assets of such trust as set forth in the last report made under sub. (14).

SB490, s. 10 Section 10. 25.18 (1) (o) of the statutes is amended to read:

SB490,5,19 25.18 (1) (o) Invest any of the assets of the permanent endowment fund in any investment that is an authorized investment for assets in the fixed core retirement investment trust under s. 25.17 (4) or assets in the variable retirement investment trust under s. 25.17 (5).

SB490, s. 11 Section 11. 25.18 (2) (e) 1. of the statutes, as affected by 2005 Wisconsin Act 25, is amended to read:

SB490,6,8 25.18 (2) (e) 1. Contract with and delegate to investment advisers the management and control over assets from any fund or trust delivered to such investment advisers for investment in real estate, mortgages, equities, and debt and pay such advisers fees from the current income of the fund or trust being invested. Subject to subd. 2., no more than 20 percent of the total assets of the fixed core retirement investment trust or 20 percent of the total assets of the variable retirement investment trust may be delivered to investment advisers to manage in accounts in which the board directly holds title to all securities purchased for the accounts. The board shall set performance standards for such investment advisers, monitor such investments to determine if performance standards are being met and if an investment adviser does not consistently meet the performance standards then terminate the contract with such investment adviser.

SB490, s. 12 Section 12. 25.187 (2) (c) 3. a. of the statutes is amended to read:

SB490,6,12 25.187 (2) (c) 3. a. Determine the total market value of the assets of the funds according to the methodology used to determine the market value of the fixed core retirement investment trust under s. 25.17 (14).

SB490, s. 13 Section 13. 40.02 (7) of the statutes is amended to read:

SB490,6,24 40.02 (7) "Assumed rate" means the probable average effective rate expected to be earned for the fixed core annuity division on a long-term basis. The assumed rate shall be a rate of 8% 8 percent and the actuarial assumption for across-the-board salary increases for the purpose of valuing the liabilities of the Wisconsin retirement system Retirement System shall be 3.4% 3.4 percent less than the assumed rate unless due to changed economic circumstances the actuary recommends and the board approves a different rate. The assumed rate for a calendar year shall be used for all calculations of required contributions and reserves for participants, except as provided in s. 40.04 (4) (a) 2., 2g., and 2m., and the amount of any lump sum benefit paid instead of an annuity, except it shall not be used for any purpose for which the assumed benefit rate is to be used under sub. (6).

SB490, s. 14 Section 14. 40.02 (23) (a) of the statutes is amended to read:

SB490,7,8 40.02 (23) (a) For the fixed core annuity division, the rate, disregarding fractions of less than one-tenth of one percent, determined by dividing the remaining fixed core annuity division investment earnings for the calendar year or part of the calendar year, after making provision for any necessary reserves and after deducting prorated interest and the administrative costs of the fixed core annuity division for the year, by the fixed core annuity division balance at the beginning of the calendar year as adjusted for benefit payments and refunds paid during the year excluding prorated interest.

SB490, s. 15 Section 15. 40.02 (23) (b) of the statutes is amended to read:

SB490,7,13 40.02 (23) (b) For the variable annuity division, the rate, disregarding fractions less than one percent, which will distribute the net gain or loss of the variable annuity division to the respective variable annuity balances and reserves using the same procedure as provided in par. (a) for the fixed core annuity division.

SB490, s. 16 Section 16. 40.02 (34) of the statutes is renumbered 40.02 (12r) and amended to read:

SB490,7,17 40.02 (12r) "Fixed Core annuity" means any annuity other than a variable annuity.

SB490, s. 17 Section 17. 40.02 (58) of the statutes is amended to read:

SB490,7,24 40.02 (58) "Variable annuity" means any annuity provided by the accumulations in the variable annuity division established under s. 40.04 (7) providing for the dollar amount of benefits or other contractual payments or values to vary so as to reflect differences which may arise between the total value of the annuity reserve for variable annuities and the reserve that would be required if the annuities were fixed core annuities.

SB490, s. 18 Section 18. 40.03 (1) (h) of the statutes is amended to read:

SB490,8,8 40.03 (1) (h) May accept any gift, grant, or bequest of any money or property of any kind, for the purposes designated by the grantor if the purpose is specified as providing cash benefits to some or all of the participants, insured employees, or annuitants of this fund or for reducing employer or employee costs; or, if no purposes are designated, then for the purpose of distribution to the several accounts and reserves of the Wisconsin retirement system Retirement System at the end of the year as if the money or property were investment earnings of the fixed core annuity division.

SB490, s. 19 Section 19. 40.03 (1) (n) of the statutes is amended to read:

SB490,8,16 40.03 (1) (n) May allow any separate retirement system for employees of one or more employers to deliver or send funds representing assets of that system to the department. If the department accepts delivery or transmission, the department shall purchase shares of the fixed core retirement investment trust or variable retirement investment trust or both with those funds, subject to rules under sub. (2) (q). Each retirement system shall pay as provided in s. 40.04 (2) for the costs of investing and administering any of its funds sent or delivered to the department.

SB490, s. 20 Section 20. 40.04 (3) (intro.) of the statutes is amended to read:

SB490,9,4 40.04 (3) (intro.) A fixed core retirement investment trust and a variable retirement investment trust shall be maintained within the fund under the jurisdiction and management of the investment board for the purpose of managing the investments of the retirement reserve accounts and of any other accounts of the fund as determined by the board, including the accounts of separate retirement systems. Within the fixed core retirement investment trust there shall be maintained a transaction amortization account and a market recognition account, and any other accounts as are established by the board or the investment board. A current income account shall be maintained in the variable retirement investment trust. All costs of owning, operating, protecting, and acquiring property in which either trust has an interest shall be charged to the current income or market recognition account of the trust having the interest in the property.

SB490, s. 21 Section 21. 40.04 (3) (ab) of the statutes is amended to read:

SB490,9,14 40.04 (3) (ab) Beginning on December 31, 2000, the balance of the transaction amortization account shall be determined and 20% 20 percent of the balance established on December 31, 2000, shall be distributed annually on December 31 to each participating account in the same ratio as each account's average daily balance within the fixed core retirement investment trust bears to the total average daily balance of all participating accounts in the trust until the balance of the transaction amortization account is entirely distributed. Notwithstanding sub. (3) (intro.), after the entire balance of the transaction amortization account has been distributed, the department shall close the account.

SB490, s. 22 Section 22. 40.04 (3) (am) 1. of the statutes is amended to read:

SB490,9,20 40.04 (3) (am) 1. Beginning on January 1, 2000, there shall be maintained within the fixed core retirement investment trust a market recognition account. The department shall establish and administer the market recognition account as recommended by the actuary or actuarial firm retained under s. 40.03 (1) (d) and as approved by the board.

SB490, s. 23 Section 23. 40.04 (3) (am) 2. of the statutes is amended to read:

SB490,9,24 40.04 (3) (am) 2. Annually, the total market value investment return earned by the fixed core retirement investment trust during the year shall be credited to the market recognition account.

SB490, s. 24 Section 24. 40.04 (3) (am) 3. (intro.) of the statutes is amended to read:

SB490,10,5 40.04 (3) (am) 3. (intro.) Annually, on December 31, the sum of all of the following shall be distributed from the market recognition account to each participating account in the fixed core retirement investment trust in the same ratio as each account's average daily balance bears to the total average daily balance of all participating accounts in the trust:

SB490, s. 25 Section 25. 40.04 (3) (am) 3. a. of the statutes is amended to read:

SB490,10,8 40.04 (3) (am) 3. a. The expected amount of investment return in the fixed core retirement investment trust during the year based on the assumed rate.

SB490, s. 26 Section 26. 40.04 (3) (am) 3. b. of the statutes is amended to read:

SB490,10,14 40.04 (3) (am) 3. b. An amount equal to 20% 20 percent of the difference between the total market value investment return earned by the fixed core retirement investment trust and the expected amount of investment return of the fixed core retirement investment trust during the year ending on December 31 based on the assumed rate.

SB490, s. 27 Section 27. 40.04 (3) (am) 3. c. of the statutes is amended to read:

SB490,10,22 40.04 (3) (am) 3. c. An amount equal to 20% 20 percent of the sum of the differences between the total market value investment return earned by the fixed core retirement investment trust and the expected amount of investment return of the fixed core retirement investment trust at the end of the 4 preceding years. For the purpose of making this calculation, the amount in the market recognition account at the end of each year that occurs before the year 2000 shall be assumed to be zero.

SB490, s. 28 Section 28. 40.04 (3) (b) of the statutes is amended to read:

SB490,11,7 40.04 (3) (b) The assets of the fixed core retirement investment trust shall be commingled and the assets of the variable retirement investment trust shall be commingled. No particular contributing benefit plan shall have any right in any specific item of cash, investment, or other property in either trust other than an undivided interest in the whole as provided in this paragraph. The department of administration shall maintain any records as may be required to account for each contributing account's share in the corresponding trust except that the employee accumulation reserve, the employer accumulation reserve and the annuity reserve shall be treated as a single account, except as provided in sub. (7).

SB490, s. 29 Section 29. 40.04 (3) (d) of the statutes is amended to read:

SB490,11,14 40.04 (3) (d) Notwithstanding par. (a), assets of the fixed core retirement investment trust which are authorized to be invested in common or preferred stock may, if authorized by rule, be invested as a part of the variable retirement investment trust with that portion of the annual distributions of net gains or losses to the fixed core retirement investment trust from the variable retirement investment trust being credited to the market recognition account.

SB490, s. 30 Section 30. 40.04 (4) (a) 2. of the statutes is amended to read:

SB490,12,2 40.04 (4) (a) 2. Credited as of each December 31 with interest on the prior year's closing balance at the effective rate on all employee required contribution accumulations in the variable annuity division, on all employee required contributions in the fixed core annuity division on December 31, 1984, on all employee required contributions in the fixed core annuity division of participants who are not participating employees after December 31, 1984, and on all employee and employer additional contribution accumulations and with interest on the prior year's closing balance at the assumed benefit rate on all employee required contribution accumulations in the fixed core annuity division for participants who are participating employees after December 31, 1984, but who terminated covered employment before December 30, 1999.

SB490, s. 31 Section 31. 40.04 (4) (a) 2g. of the statutes is amended to read: