SB159

ENGROSSED

By Senators Whatley and Dial

A BILL TO BE ENTITLED AN ACT

To create a separate fund in the State Treasury known as the Education Retirees' Trust Fund for Cost of Living Adjustments for the purpose of establishing a permanent trust and investment account for the funds and earnings received to provide education retirees with cost-of-living increase or one-time bonuses.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. The Legislature of Alabama has determined that it would be advisable for the state to create an irrevocable trust whereby the state may begin funding cost-of-living adjustments or one-time bonuses for Alabama retired education employees. Therefore, the Teachers’ Retirement System Board of Control is authorized and directed to create the irrevocable trust to be named the "Education Retirees' Trust Fund for Cost-of-Living Adjustments," which shall be created, funded, and administered in accordance with the provisions of this chapter.

Section 2. The name of this chapter is the Education Retirees' Trust Fund for Cost-of-Living Adjustments Funding Act of 2017.

Section 3. As used in this chapter, the following words and phrases shall have the following respective meanings:

(1) BOARD OF CONTROL. The Teachers’ Retirement System Board of Control.

(2) BENEFICIARY. Any person in receipt of a pension, annuity, a retirement allowance or other benefit provided by Chapter 25 of Title 16.

(3) EDUCATION RETIREES' TRUST FUND FOR COST-OF-LIVING ADJUSTMENTS. The Education Retirees' Trust Fund for Cost-of-Living Adjustments created by the Teachers’ Retirement System Board of Control pursuant to this chapter.

(4) FISCAL YEAR. The fiscal year of the state as may from time to time be provided by law.

(5) COST-OF-LIVING ADJUSTMENT BENEFITS. Cost-of-Living adjustments or one-time retiree bonus benefits granted by the Legislature to retirees and beneficiaries of the Teachers' Retirement System.

(6) PERMITTED INVESTMENTS. All assets and properties in which the Retirement Systems of Alabama may invest as permitted by law from time to time.

(7) RETIRED EMPLOYEE. A former employee who is a participant in either the Teachers’ Retirement System pursuant to Chapter 25 of Title 16, as amended from time to time, and satisfies the definitions of retirement and teacher, support personnel, or employee under Section 16-25-1, as amended from time to time.

(8) STATE. The State of Alabama.

(9) TEACHERS’ RETIREMENT SYSTEM BOARD OF CONTROL. The Teachers’ Retirement System Board of Control established by Section 16-25-2, or its successor or assign.

(10) TRUSTEE. A trustee of the trust.

(11) TRUST. The trust to be created by the State, on the one hand, as the grantor, and members of the Teachers’ Retirement System Board of Control, on the other hand, as trustees of the trust, pursuant to this chapter.

Section 4. The trust created pursuant to this chapter shall be evidenced by a written trust instrument, the terms and conditions of which shall be determined by the board creating such trust as long as such terms and conditions do not conflict with this chapter. The Trustees of the Education Retirees' Trust Fund for Cost-of-Living Adjustments shall be the members of the Teachers’ Retirement System Board of Control serving from time to time. The trust shall be managed and controlled by its trustees. The trustees shall serve without compensation for their service as trustees, but may be reimbursed from the trust for all reasonable and necessary expenses that they incur in connection with their services as trustees.

Section 5. (a) The trust shall be under the management and control of the trustees. All powers necessary or otherwise advisable for the management and control of the trust shall be vested solely in the trustees.

(b) The trustees shall have all of the powers necessary to carry out and effectuate the purposes and provisions of this chapter, all the power and authority granted under law to the board which created the trust, and all powers granted to trustees under Alabama law to the extent not in conflict with this chapter, including, without limiting the generality of the foregoing, the following powers:

(1) To adopt, alter, and repeal rules for the operation and conduct of the trust's affairs and business;

(2) To make, enter into, and execute contracts, agreements, and other instruments and to take such other actions as may be necessary or otherwise advisable for the management and operation of the respective trust, to accomplish any purpose for which the trust was created, or to exercise any power granted by this chapter;

(3) To enter into contracts with, to accept aid and grants from, to cooperate with, and to do any and all things that may be necessary or otherwise advisable in order to avail the trust of the aid and cooperation of the United States of America, the state, or any agency, instrumentality, or political subdivision of either thereof in furtherance of the purposes of this chapter;

(4) To appoint, employ, and contract with such employees, agents, advisors, and consultants, including, but not limited to, attorneys, accountants, actuaries, financial experts, and such other advisors, consultants, and agents as may, in the trustees' judgment, be necessary or otherwise advisable and to determine and pay, from the funds of the trust, the compensation of those persons; and

(5) To invest the funds of the trust in any permitted investment.

(c) The expenses of making and disposing of investments, such as brokerage commissions, legal expenses referable to a particular transaction, transfer taxes, and other customary transactional expenses with respect to a trust shall be payable out of the funds of such trust.

Section 6. a) The sources of funding to the Education Retirees' Trust Fund for Cost of Living Adjustments may be: (1) appropriations made by the Legislature; (2) investment income; (3) proceeds of any gifts, grants, or contributions; and (4) all other sources permitted by law.

(b) The agreements creating the trust shall be irrevocable and the assets of the trust shall not be expended or disbursed or loaned or transferred or used for any purpose other than to acquire permitted investments, pay administrative expenses, and provide cost-of-living adjustment benefits to or for retired employees and their beneficiaries. The Legislature shall have no authority or power to appropriate the assets of the trust.

(c) Upon certification from the Teachers' Retirement System's actuary that the assets of the trust are sufficient to fund a cost-of-living adjustment or one-time bonus as provided for by legislation granting such cost-of-living adjustment or one-time bonus, the trustees shall transfer the certified amount of assets to the Teacher's Retirement System to fund such cost-of-living adjustment or one-time bonus.

(d) Notwithstanding the above, as long as such amendment is consistent with the legislative intent of this chapter, the trustees of the trust shall have the authority to amend or modify the trust: (1) if, in the opinion of counsel for the trustees of the trust, it is necessary or otherwise advisable to obtain any material tax advantage or avoid any material adverse tax result; (2) if, in the opinion of the independent accountant for the trustees of the trust, it is necessary or otherwise advisable to cause the trust to be considered another post-employment benefits trust in accordance with generally accepted governmental accounting principles, as prescribed by the Governmental Accounting Standards Board or its successor; or (3) if, in response to a petition of the trustees of the trust requesting that the trust be amended, a court of competent jurisdiction determines that such amendment is necessary or otherwise advisable to accomplish one or more purposes of this chapter.

(e) All assets and income of the trust shall be exempt from taxation by the state or any political subdivision thereof. The assets of the trust will not be subject to the claims of creditors of the state, the board, trustees, plan administrators, employees, retired employees, or beneficiaries, and will not be subject to execution, attachment, garnishment, the operation of bankruptcy, the insolvency laws, or other process whatsoever, nor shall any assignment thereof be enforceable in any court.

(f) The trustees shall cause the annual financial statements of the trust to be prepared in accordance with generally accepted accounting principles and an audit by a qualified independent certified accounting firm to be conducted of those financial statements of the respective trust for each fiscal year in accordance with generally accepted auditing standards.

Section 7. It is the intent of the Legislature that the state and the board establish and the trustees operate the trust in compliance with the Internal Revenue Code of the United States of America in a manner which would allow the trust to maximize investment earnings while minimizing the costs to the state and its employees and other citizens of providing the cost-of-living adjustment benefits. It is also the intent of the Legislature that the trust be operated in a manner that satisfies the definition of other post-employment benefits trusts under generally accepted governmental accounting principles. The trust shall not be subject to any provision of a law of the state (or any subdivision thereof) which conflicts with that legislative intent or would prevent or unreasonably hinder the accomplishment of the purposes of this chapter.

Section 8. a) A trustee shall not be: (1) personally liable for any liability, loss, or expense suffered by the trust, unless such liability, loss, or expense arises out of or results from the willful misconduct or intentional wrongdoing of such trustee; (2) responsible for the adequacy of the trust to meet and discharge any obligation under the relevant pension plan; or (3) required to take action to enforce the payment of any contribution or appropriation to the trust.

(b) The trustees, their officers and employees shall be immune from suit to the same extent as the state, its agencies, officers, and employees.

(c) The trustees may be indemnified by the trust and from funds of the trust against costs, liabilities, losses, damages, and expenses, including their attorneys fees, as more fully provided in the respective trust agreements, unless such cost, liability, loss, damage, or expense arises out of or results from the willful misconduct or intentional wrongdoing of such trustee.

Section 9. Nothing in this chapter shall be construed to define or otherwise grant any right or privilege to cost-of-living adjustment benefits or other pension benefits to any person other than those cost-of-living adjustment benefits or other pension benefits, rights, and privileges previously or already granted to employees and retired employees and their beneficiaries by the Teachers' Retirement System pension plan. Such rights and privileges, if any, shall be governed by the terms of the pension plan, if any. This chapter is not intended to assure or deny any existing or future employee, retired employee, any of their beneficiaries, or any other person of any right of employment or entitlement to any cost-of-living adjustment benefit or limit or otherwise restrict the ability of the state to modify or eliminate any existing or future cost-of-living adjustment benefit.

Section 10. All personnel employed and vendors hired by contract with funds available to the trust and trustees under the provisions of subdivision (4) of subsection (b) of Section 36-36-5 shall reflect the racial and ethnic diversity of the state.

Section 11. This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law.

State Treasury

Education Retirees' Trust Fund for Cost-of-Living Allowances

Retirement

Teachers' Retirement System

Cost-of-Living Raise

Compensation