LRB-2338/1
RAC:kjf:rs
2003 - 2004 LEGISLATURE
September 24, 2003 - Introduced by Senators Kanavas, Stepp, Leibham, Darling,
Reynolds, Zien, Welch, Lassa and Roessler, cosponsored by Representatives
Nischke, McCormick, Hahn, Ladwig, Musser, Montgomery, Towns, Owens,
Weber, Kreibich, Van Roy, Krawczyk, Olsen and Ott. Referred to Joint
Survey Committee on Retirement Systems.
SB260,1,9
1An Act to renumber 40.04 (7) (c);
to renumber and amend 25.17 (5);
to amend
225.17 (6), 25.17 (14) (intro.), 25.17 (15), 40.02 (34), 40.03 (1) (n), 40.04 (3) (intro.),
340.04 (3) (a), 40.04 (3) (b), 40.04 (3) (d), 40.04 (4) (a) 2., 40.04 (7) (intro.), 40.04
4(7) (a) (intro.), 40.23 (2m) (b) and 40.28 (1) (intro.); and
to create 25.14 (1) (a)
519., 25.17 (1) (xo), 25.17 (5) (c), 40.02 (23) (c), 40.02 (59), 40.04 (7) (c) 2., 40.04
6(7) (d), 40.23 (2m) (cm) and 40.285 of the statutes;
relating to: creating a
7venture capital investment trust in the public employee trust fund and
8permitting participating employees in the Wisconsin Retirement System to
9allocate retirement contributions in the venture capital investment trust.
Analysis by the Legislative Reference Bureau
Under current law, participants in the Wisconsin Retirement System (WRS),
depending on their date of initial employment under the WRS, are eligible to have
their retirement contributions segregated into a fixed annuity and a variable
annuity. Currently, a WRS participating employee may elect to have 50% of his or
her retirement contributions segregated into a variable annuity. Contributions
segregated for a fixed annuity are invested as part of the fixed retirement investment
trust and contributions segregated for a variable annuity are invested as part of the
variable retirement investment trust. Assets in both trusts are managed and
invested by the Investment Board. Assets in the variable retirement investment
trust are primarily invested in equity securities, while assets in the fixed retirement
investment trust are invested in a number of different investment vehicles. For a
WRS participant who has selected the variable annuity option, the value of his or her
initial WRS annuity will depend on the investment return on assets in the variable
retirement investment trust.
This bill creates a third option that WRS participants may select for their
retirement contributions. Under the bill, a WRS participating employee may elect
to have 10% of his or her retirement contributions segregated into a venture capital
annuity. Contributions segregated for a venture capital annuity are then invested
as part of the venture capital investment trust. Assets of the venture capital
investment trust are managed by the Investment Board and are required to be
invested primarily in equity securities of corporations that are in the venture capital
stage. A corporation is considered to be in the venture capital stage if it fulfills all
of the following requirements:
1. It has at least 50% of its property and at least 50% of its payroll in this state.
2. It has no more than 500 employees covered by Wisconsin unemployment
insurance.
3. It derives no more than 25% of its gross receipts from rents, interest,
dividends, and sales of intangible investment assets combined unless the
corporation derives less than $3,000 of that income and has not been incorporated
for more than two calendar years.
4. It has not issued stock that is listed on the New York Stock Exchange, the
American Stock Exchange, or the National Association of Securities Dealers
automated quotation system.
5. It has not liquidated its assets in whole or in part for tax purposes only in
order to fulfill certain tax requirements and then reorganized.
Under the bill, if a WRS participant has elected the variable annuity option and
the venture capital annuity option, the participant must allocate 40% of his or her
retirement contributions for a variable annuity and 10% of his or her retirement
contributions for a venture capital annuity; the remaining 50% of the participant's
retirement contributions must be allocated for a fixed annuity. If a WRS participant
has only elected the venture capital annuity option, the participant must allocate
10% of his or her retirement contributions for a venture capital annuity; the
remaining 90% of the participant's retirement contributions must be allocated for a
fixed annuity.
This bill will be referred to the Joint Survey Committee on Retirement Systems
for a detailed analysis, which will be printed as an appendix to this bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB260, s. 1
1Section
1. 25.14 (1) (a) 19. of the statutes is created to read:
SB260,3,22
25.14
(1) (a) 19. Venture capital investment trust.
SB260, s. 2
3Section
2. 25.17 (1) (xo) of the statutes is created to read:
SB260,3,44
25.17
(1) (xo) Venture capital investment trust (s. 40.04 (3)).
SB260, s. 3
5Section
3. 25.17 (5) of the statutes is renumbered 25.17 (5) (a) and amended
6to read:
SB260,3,127
25.17
(5) (a) The limitations upon the percentage of the assets of any fund that
8are imposed by sub. (4) or any other statute shall not be applicable to investments
9made by the board of funds in the variable retirement investment trust
and the
10venture capital investment trust created under s. 40.04 (3) and those investments
11shall be excluded in computing the assets to which the limitations imposed by sub.
12(4) apply.
SB260,3,23
13(b) Assets of the variable retirement investment trust shall be invested
14primarily in equity securities that shall include common stocks, real estate or other
15recognized forms of equities whether or not subject to indebtedness, including
16securities convertible into common stocks and securities of corporations in the
17venture capital stage. The board may, however, temporarily invest assets of the
18variable retirement investment trust in investments that are authorized under sub.
19(3), but the assets so temporarily invested shall be replaced by equity securities at
20the earliest time considered by the board to be practicable considering the then
21existing condition of the securities market and other influential factors. Investments
22in securities of corporations that are in the venture capital stage shall not exceed 2%
23of the admitted assets of the variable retirement investment trust.
SB260, s. 4
24Section
4. 25.17 (5) (c) of the statutes is created to read:
SB260,4,9
125.17
(5) (c) Assets of the venture capital investment trust shall be invested
2primarily in equity securities of corporations that are in the venture capital stage.
3The board may, however, temporarily invest assets of the venture capital investment
4trust in investments that are authorized under sub. (3), but the assets so temporarily
5invested shall be replaced by equity securities at the earliest time considered by the
6board to be practicable considering the then existing condition of the securities
7market and other influential factors. Under this paragraph, a corporation is
8considered to be in the venture capital stage if it fulfills all of the requirements
9specified in s. 71.01 (10) (a) to (e).
SB260, s. 5
10Section
5. 25.17 (6) of the statutes is amended to read:
SB260,5,211
25.17
(6) Notwithstanding any other statute, transfers from the variable
12retirement investment trust
and the venture capital investment trust to the fixed
13retirement investment trust under s. 40.04 (7) may be made in cash or securities or
14both as determined by the board. The board shall determine market values for
15securities in the variable retirement investment trust
and the venture capital
16investment trust as of the close of business on the last working day preceding a
17transfer. If securities are transferred, to the extent determined feasible by the board,
18a proportionate amount of all securities in even hundreds of shares of stock or even
19thousands of par value of bonds in the variable retirement investment trust
or the
20venture capital investment trust shall be transferred. The board may hold or sell the
21transferred securities as it determines appropriate considering market and
22economic conditions. Any limitation on the percentage of assets in common stocks
23or in the stock of one company does not apply to the transferred securities, except the
24board shall, at such time as it determines that market, economic and other conditions
1are appropriate to the sale of the securities, sell sufficient transferred securities so
2as to comply with percentage of asset limitations.
SB260, s. 6
3Section
6. 25.17 (14) (intro.) of the statutes is amended to read:
SB260,5,94
25.17
(14) (intro.) As of December 31 of each year, make and file with the
5department of employee trust funds a report of the value of the assets of the fixed
6retirement investment trust
and of, the variable retirement investment trust
, and
7the venture capital investment trust, determined as of that date at market value for
8the variable retirement investment trust
and the venture capital investment trust 9and on the following basis for the fixed retirement investment trust:
SB260, s. 7
10Section
7. 25.17 (15) of the statutes is amended to read:
SB260,5,1511
25.17
(15) For purposes of the power and authority of the board to make
12investments, the "admitted assets" of the fixed retirement investment trust
or, the
13variable retirement investment trust
, and the venture capital investment trust shall
14be the total valuation of the assets of
each such trust as set forth in the last report
15made under sub. (14).
SB260, s. 8
16Section
8. 40.02 (23) (c) of the statutes is created to read:
SB260,5,2117
40.02
(23) (c) For the venture capital annuity division, the rate, disregarding
18fractions less than one percent, which will distribute the net gain or loss of the
19venture capital annuity division to the respective venture capital annuity balances
20and reserves using the same procedure as provided in par. (a) for the fixed annuity
21division.
SB260, s. 9
22Section
9. 40.02 (34) of the statutes is amended to read:
SB260,5,2423
40.02
(34) "Fixed annuity" means any annuity other than a variable annuity
24or a venture capital annuity.
SB260, s. 10
25Section
10. 40.02 (59) of the statutes is created to read:
SB260,6,6
140.02
(59) "Venture capital annuity" means any annuity provided by the
2accumulations in the venture capital annuity division established under s. 40.04 (7)
3providing for the dollar amount of benefits or other contractual payments or values
4to vary so as to reflect differences which may arise between the total value of the
5annuity reserve for venture capital annuities and the reserve that would be required
6if the annuities were fixed annuities.
SB260, s. 11
7Section
11. 40.03 (1) (n) of the statutes is amended to read:
SB260,6,158
40.03
(1) (n) May allow any separate retirement system for employees of one
9or more employers to deliver or send funds representing assets of that system to the
10department. If the department accepts delivery or transmission, the department
11shall purchase shares of the fixed retirement investment trust
or, variable
12retirement investment trust
, or venture capital investment trust or
both any
13combination of the 3 trusts with those funds, subject to rules under sub. (2) (q). Each
14retirement system shall pay as provided in s. 40.04 (2) for the costs of investing and
15administering any of its funds sent or delivered to the department.
SB260, s. 12
16Section
12. 40.04 (3) (intro.) of the statutes is amended to read:
SB260,7,417
40.04
(3) (intro.) A fixed retirement investment trust
, a venture capital
18investment trust, and a variable retirement investment trust shall be maintained
19within the fund under the jurisdiction and management of the investment board for
20the purpose of managing the investments of the retirement reserve accounts and of
21any other accounts of the fund as determined by the board, including the accounts
22of separate retirement systems. Within the fixed retirement investment trust there
23shall be maintained a transaction amortization account and a market recognition
24account, and any other accounts as are established by the board or the investment
25board. A current income account shall be maintained in the
venture capital
1investment trust and variable retirement investment trust. All costs of owning,
2operating, protecting and acquiring property in which
either trust any of the 3 trusts 3has an interest shall be charged to the current income or market recognition account
4of the trust having the interest in the property.
SB260, s. 13
5Section
13. 40.04 (3) (a) of the statutes is amended to read:
SB260,7,156
40.04
(3) (a) The net gain or loss of the
venture capital investment trust and
7the variable retirement investment trust shall be distributed annually on December
831 to each participating account in the same ratio as each account's average daily
9balance within the respective trust bears to the total average daily balance of all
10participating accounts in the trust. The amount to be distributed shall be the excess
11of the increase within the period in the value of the assets of the trust resulting from
12income from the investments of the trust and from the sale or appreciation in value
13of any investment of the trust, over the decrease within the period in the value of the
14assets resulting from the sale or the depreciation in value of any investments of the
15trust.
SB260, s. 14
16Section
14. 40.04 (3) (b) of the statutes is amended to read:
SB260,8,217
40.04
(3) (b) The assets of the fixed retirement investment trust shall be
18commingled
and, the assets of the variable retirement investment trust shall be
19commingled
, and the assets of the venture capital investment trust shall be
20commingled. No particular contributing benefit plan shall have any right in any
21specific item of cash, investment or other property in either trust other than an
22undivided interest in the whole as provided in this paragraph. The department of
23administration shall maintain any records as may be required to account for each
24contributing account's share in the corresponding trust except that the employee
1accumulation reserve, the employer accumulation reserve and the annuity reserve
2shall be treated as a single account, except as provided in sub. (7).
SB260, s. 15
3Section
15. 40.04 (3) (d) of the statutes is amended to read:
SB260,8,104
40.04
(3) (d) Notwithstanding par. (a), assets of the fixed retirement
5investment trust which are authorized to be invested in common or preferred stock
6may, if authorized by rule, be invested as a part of the variable retirement investment
7trust
or the venture capital investment trust with that portion of the annual
8distributions of net gains or losses to the fixed retirement investment trust from the
9variable retirement investment trust
and the venture capital investment trust being
10credited to the market recognition account.
SB260, s. 16
11Section
16. 40.04 (4) (a) 2. of the statutes is amended to read:
SB260,8,2312
40.04
(4) (a) 2. Credited as of each December 31 with interest on the prior year's
13closing balance at the effective rate on all employee required contribution
14accumulations in the
venture capital annuity division and the variable annuity
15division, on all employee required contributions in the fixed annuity division on
16December 31, 1984, on all employee required contributions in the fixed annuity
17division of participants who are not participating employees after
18December 31, 1984, and on all employee and employer additional contribution
19accumulations and with interest on the prior year's closing balance at the assumed
20benefit rate on all employee required contribution accumulations in the fixed
21annuity division for participants who are participating employees after
22December 31, 1984, but who terminated covered employment before December 30,
231999.
SB260, s. 17
24Section
17. 40.04 (7) (intro.) of the statutes is amended to read:
SB260,9,5
140.04
(7) (intro.) The reserves established under subs. (4), (5)
, and (6) shall be
2divided both individually and for the purposes of sub. (3)
between among a fixed
3annuity division
, a venture capital annuity division, and a variable annuity division.
4All required and additional contributions shall be credited to the fixed annuity
5division except:
SB260, s. 18
6Section
18. 40.04 (7) (a) (intro.) of the statutes is amended to read:
SB260,9,257
40.04
(7) (a) (intro.) As otherwise elected by a participant prior to
8April 30, 1980, or on or after January 1, 2001. Any participant who was a
9participant prior to April 30, 1980, and whose accounts on January 1,
1982, include
10credits segregated for a variable annuity shall have his or her required and
11additional contributions made on or after January 1, 1982, credited to the variable
12annuity division in a manner consistent with the participant's election prior to
13April 30, 1980, unless prior to January 1, 1982, the participant terminated such
14election under s. 40.85, 1979 stats. Any participant who elects or has elected to have
15any of his or her credits segregated for a variable annuity on or after
16January 1, 2001, shall have 50% of his or her required and additional contributions
17made on or after the date of election credited to the variable annuity division
, except
18that if the participant has made an election under par. (d) the participant may only
19have 40% of the contributions credited to the variable annuity division. The
20department shall by rule provide that any participant who elects or has elected
21variable participation prior to April 30, 1980, or on or after January 1, 2001, may
22elect to cancel that variable participation as to future contributions. The
23department's rules shall permit a participant who elects or has elected to cancel
24variable participation as to future contributions, or an annuitant, to elect to transfer
25previous variable contribution accumulations to the fixed annuity division. A
1transfer of variable contribution accumulations under this paragraph shall result in
2the participant receiving the accrued gain or loss from the participant's variable
3participation. A participant may specify that election to cancel participation in the
4variable annuity division is conditional. If the participant so specifies the election
5is effective on the first date on which it may take effect on which the participant:
SB260, s. 19
6Section
19. 40.04 (7) (c) of the statutes is renumbered 40.04 (7) (c) 1.
SB260, s. 20
7Section
20. 40.04 (7) (c) 2. of the statutes is created to read:
SB260,10,138
40.04
(7) (c) 2. Any participant whose required contributions are segregated in
9any portion to provide for a venture capital annuity may direct that any part or all
10of subsequent additional contributions credited to the participant's account be
11segregated to provide for a venture capital annuity and may at any time by filing a
12form prescribed by the department change the portion being segregated for any
13future additional contributions.
SB260, s. 21
14Section
21. 40.04 (7) (d) of the statutes is created to read:
SB260,11,315
40.04
(7) (d) Beginning on January 1, 2004, a participant may elect to have 10%
16of his or her required and additional contributions made on or after the date of
17election credited to the venture capital annuity division. The department shall by
18rule provide that any participant may elect to cancel that venture capital
19participation as to future contributions. The department's rules shall permit a
20participant who elects or has elected venture capital participation to cancel venture
21capital participation as to future contributions or an annuitant to elect to transfer
22previous venture capital annuity contribution accumulations to the fixed annuity
23division. A transfer of venture capital contribution accumulations under this
24paragraph shall result in the participant receiving the accrued gain or loss from the
25participant's venture capital participation. A participant may specify that election
1to cancel participation in the venture capital annuity division is conditional. If the
2participant so specifies the election is effective on the first date on which it may take
3effect on which the participant is either:
SB260,11,74
1. An annuitant and the amount of the annuity the participant or member will
5receive if the election is made effective is greater than or equal to the amount of the
6annuity the participant or member would have received if the participant or member
7had not elected venture capital participation.
SB260,11,118
2. Not an annuitant and the accumulated amount which is to be transferred
9to the fixed annuity division is equal to or greater than the amount which would have
10accumulated if the segregated contributions had been originally credited to the fixed
11annuity division.
SB260, s. 22
12Section
22. 40.23 (2m) (b) of the statutes is amended to read:
SB260,12,213
40.23
(2m) (b) Except as provided in s. 40.26, subject to the limitations under
14section
415 of the Internal Revenue Code, the initial amount of the normal form
15annuity shall be an amount equal to 70%, or 65% for participants whose formula rate
16is determined under par. (e) 3. or 85% for participants whose formula rate is
17determined under par. (e) 4., of the participant's final average earnings plus the
18amount which can be provided under pars. (c)
and
to (d) or, if less, shall be in the
19monthly amount equal to the sum of the amounts determined under pars. (c)
, (d) and 20to (e) as modified by par. (f) and in accordance with the actuarial tables in effect on
21the annuity effective date. If the participant has creditable service under both par.
22(e) 4. and another category under par. (e), the percent applied under this paragraph
23shall be determined by multiplying the percent that each type of creditable service
24is of the participant's total creditable service by 85% and 65% or 70%, respectively,
25and adding the results, except that the resulting benefit may not be less than the
1amount of the normal form annuity that could be paid based solely on the creditable
2service under par. (e) 4.
SB260, s. 23
3Section
23. 40.23 (2m) (cm) of the statutes is created to read:
SB260,12,124
40.23
(2m) (cm) The annuity which can be provided from a sum equal to 200%
5of the excess of the participant's required contribution accumulation reserved for a
6venture capital annuity over the amount to which the contributions would have
7accumulated at the fixed annuity division effective rate if not so reserved. If the
8participant's required contribution accumulation reserved for a venture capital
9annuity is less than the amount to which the contributions would have accumulated
10at the fixed annuity division effective rate if not reserved, the annuity shall be
11reduced by the amount which could be provided by a sum equal to 200% of the
12deficiency.