H.B. 381

1

POST-RETIREMENT BENEFITS TRUST FUND
2 2006 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: David Clark
5 Senate Sponsor: Beverly Ann Evans
6
7 LONG TITLE
8 General Description:
9 This bill establishes a trust fund to accumulate monies to pay post-retirement benefits.
10 Highlighted Provisions:
11 This bill:
12 . creates a trust fund to pay for post-retirement benefits;
13 . creates a board of trustees to act as the trustee of the trust; and
14 . establishes investment criteria for the state treasurer in investing the trust assets.
15 Monies Appropriated in this Bill:
16 None
17 Other Special Clauses:
18 This bill takes effect on July 1, 2006.
19 Utah Code Sections Affected:
20 AMENDS:
21 51-7-2, as last amended by Chapters 71 and 178, Laws of Utah 2005
22 ENACTS:
23 67-19d-101, Utah Code Annotated 1953
24 67-19d-102, Utah Code Annotated 1953
25 67-19d-201, Utah Code Annotated 1953
26 67-19d-202, Utah Code Annotated 1953
27 67-19d-301, Utah Code Annotated 1953

28 67-19d-302, Utah Code Annotated 1953
29
30 Be it enacted by the Legislature of the state of Utah:
31 Section 1. Section 51-7-2 is amended to read:
32 51-7-2. Exemptions from chapter.
33 The following funds are exempt from this chapter:
34 (1) funds invested in accordance with the participating employees' designation or
35 direction pursuant to a public employees' deferred compensation plan established and operated
36 in compliance with Section 457 of the Internal Revenue Code of 1954, as amended;
37 (2) funds of the Workers' Compensation Fund;
38 (3) funds of the Utah State Retirement Board;
39 (4) funds of the Utah Housing Corporation; [and]
40 (5) endowment funds of higher education institutions[.]; and
41 (6) the Post-Retirement Benefits Trust Fund.
42 Section 2. Section 67-19d-101 is enacted to read:
43 CHAPTER 19d. POST-RETIREMENT BENEFITS TRUST FUND ACT
44 Part 1. General Provisions
45 67-19d-101. Title.
46 This chapter is known as the "Post-Retirement Benefits Trust Fund Act."
47 Section 3. Section 67-19d-102 is enacted to read:
48 67-19d-102. Definitions.
49 As used in this chapter:
50 (1) "Board of trustees" or "board" means the board of trustees created in Section
51 67-19d-202 .
52 (2) "Income" means all revenues from investments made by the state treasurer of the
53 trust fund principal.
54 (3) "Trust fund" means the Post-Retirement Benefits Trust Fund created by Section
55 67-19d-201 .
56 Section 4. Section 67-19d-201 is enacted to read:
57 Part 2. Creation and Governance of the Post-Retirement Benefits Trust Fund
58 67-19d-201. Trust fund -- Creation -- Oversight.

59 (1) There is created a post-retirement benefits trust fund entitled the "Post-Retirement
60 Benefits Trust Fund."
61 (2) The fund consists of:
62 (a) revenue provided from an ongoing labor additive as defined in Subsection
63 67-19d-202 (2)(g);
64 (b) appropriations made to the fund by the Legislature, if any;
65 (c) income as defined in Section 67-19d-102 ; and
66 (d) other revenues received from other sources.
67 (3) The Division of Finance shall account for the receipt and expenditures of trust fund
68 monies.
69 (4) (a) The state treasurer shall invest trust fund monies by following the procedures
70 and requirements of Part 3, Trust Fund Investments.
71 (b) (i) The trust fund shall earn interest.
72 (ii) The state treasurer shall deposit all interest or other income earned from investment
73 of the trust fund back into the trust fund.
74 (5) The board of trustees created in Section 67-19d-202 may expend monies from the
75 trust fund for:
76 (a) the employer portion of the costs of the programs established in Sections 67-19-14
77 through 67-19-14.4 ; and
78 (b) reasonable administrative costs that the board of trustees incurs in performing their
79 duties as trustees of the trust fund.
80 (6) The board of trustees shall ensure that:
81 (a) monies deposited into the trust fund are irrevocable and are expended only for the
82 employer portion of the costs of post-retirement benefits;
83 (b) assets of the trust fund are dedicated to providing benefits to retirees and their
84 beneficiaries according to the terms of the post-retirement benefit plans established by statute;
85 and
86 (c) creditors of the board of trustees and of employers liable for the post-retirement
87 benefits may not seize, attach, or otherwise obtain assets of the trust fund.
88 Section 5. Section 67-19d-202 is enacted to read:
89 67-19d-202. Board of trustees of the Post-Retirement Benefits Trust Fund.

90 (1) (a) There is created a board of trustees of the Post-Retirement Benefits Trust Fund
91 composed of three members:
92 (i) the state treasurer;
93 (ii) the director of the Division of Finance; and
94 (iii) the director of the Governor's Office of Planning and Budget.
95 (b) The state treasurer is chair of the board.
96 (c) Three members of the board are a quorum.
97 (d) (i) State government officer and employee members who do not receive salary, per
98 diem, or expenses from their agency for their service may receive per diem and expenses
99 incurred in the performance of their official duties from the board at the rates established by the
100 Division of Finance under Sections 63A-3-106 and 63A-3-107 .
101 (ii) State government officer and employee members may decline to receive per diem
102 and expenses for their service.
103 (e) (i) Except as provided in Subsection (1)(e)(ii), the state treasurer shall staff the
104 board of trustees.
105 (ii) The Division of Finance shall provide accounting services for the trust fund.
106 (2) The board shall:
107 (a) on behalf of the state, act as trustee of the trust fund and exercise the state's
108 fiduciary responsibilities;
109 (b) meet at least twice per year;
110 (c) review and approve all policies, projections, rules, criteria, procedures, forms,
111 standards, performance goals, and actuarial reports;
112 (d) review and approve the trust fund budget;
113 (e) review financial records of the trust fund, including trust fund receipts,
114 expenditures, and investments;
115 (f) commission and obtain actuarial studies of the trust fund liabilities;
116 (g) establish labor additive rates to charge all federal, state, and other programs to
117 cover:
118 (i) the annual required contribution as determined by actuary; and
119 (ii) the administrative expenses of the trust fund; and
120 (h) do any other things necessary to perform the state of Utah's fiduciary obligations

121 under the trust fund.
122 (3) The attorney general shall:
123 (a) act as legal counsel and provide legal representation to the board of trustees; and
124 (b) attend, or direct an attorney from the Office of the Attorney General to attend, each
125 meeting of the board of trustees.
126 Section 6. Section 67-19d-301 is enacted to read:
127 Part 3. Trust Fund Investments
128 67-19d-301. Investment of Post-Retirement Benefits Trust Fund.
129 (1) The state treasurer shall:
130 (a) invest the assets of the Post-Retirement Benefits Trust Fund with the primary goal
131 of providing for the stability, income, and growth of the principal;
132 (b) in making investment decisions, consider:
133 (i) general economic conditions;
134 (ii) the possible effect of inflation or deflation;
135 (iii) the role that each investment or course of action plays within the overall trust
136 portfolio;
137 (iv) the expected total return from income and the appreciation of capital;
138 (v) other resources of the beneficiaries; and
139 (vi) needs for liquidity, regularity of income, and preservation or appreciation of
140 capital; and
141 (c) diversify the investments of the trust fund, unless the state treasurer reasonably
142 determines that the purposes of the trust fund are better served without diversifying.
143 (2) Nothing in this section requires a specific outcome in investing.
144 (3) The state treasurer may deduct any administrative costs incurred in managing trust
145 fund assets from earnings before distributing them.
146 (4) (a) The state treasurer may employ professional asset managers to assist in the
147 investment of assets of the trust fund.
148 (b) The treasurer may only provide compensation to asset managers from earnings
149 generated by the trust funds' investments.
150 Section 7. Section 67-19d-302 is enacted to read:
151 67-19d-302. State treasurer to follow "prudent investor" rule -- Standard of care.

152 (1) The state treasurer shall invest and manage the trust fund assets as a prudent
153 investor would, by:
154 (a) considering the purposes, terms, distribution requirements, and other circumstances
155 of the trust funds; and
156 (b) exercising reasonable care, skill, and caution in order to meet the standard of care
157 of a prudent investor.
158 (2) In determining whether or not the state treasurer has met the standard of care of a
159 prudent investor, the judge or finder of fact shall:
160 (a) consider the state treasurer's actions in light of the facts and circumstances existing
161 at the time of the investment decision or action, and not by hindsight; and
162 (b) evaluate the state treasurer's investment and management decisions respecting
163 individual assets:
164 (i) not in isolation, but in the context of a trust fund portfolio as a whole; and
165 (ii) as a part of an overall investment strategy that has risk and return objectives
166 reasonably suited to the trust fund.
167 Section 8. Effective date.
168 This bill takes effect on July 1, 2006.




Legislative Review Note
as of 2-7-06 6:48 AM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel