Chap. 325.—An ACT to establish a contributory retirement system for certain
State employees, and for public school teachers and certain other employees of
local public school boards; and to repeal Chapter 36 and Sections 787 to 805,
both inclusive, of the Code of Virginia, relating to the retirement of teachers.

H B 102]
Approved March 31, 1942

1. Be it enacted by the General Assembly of Virginia as follows:

Section 1. Definitions.—As used in this act unless a different mean-
ing is plainly required by the context,

(1) “Retirement system” means the Virginia Retirement System
provided for in section two;
(2) “Board” means the Board of Trustees as provided by section
three ;

(3) “Medical Board” means the board of physicians provided
for in section five; | |

(4) “Teacher” means any person who is regularly employed on
a salary basis as a professional or clerical employee of a county, city or
other local public school board; ,

(5) “State employee’? means any person who is regularly em-
ployed on a salary basis in the service of, and whose compensation 1s
payable, not oftener than semi-monthly, in whole or in part, by the Com-
monwealth or any department, institution or agency thereof, except
(1) an officer elected by popular vote or by the General Assembly or
either House thereof, (ii) a county or city treasurer, commissioner of
the revenue, Commonwealth’s attorney, clerk, sheriff, sergeant or con-
stable, and a deputy or employee of any such officer, and (111) any em-
ployee of a political subdivision of the Commonwealth ;

(6) “Employee” means any teacher or State employee;

(7) “Employer” means Commonwealth, in the case of a State
employee, or, in the case of a teacher, the local public school board by
which the salary is paid ;

(8) “Member” means any person included in the membership of
the retirement system as provided in section six; }

(9) “Service”? means service as an employee;

(10) “Prior service” means service as an employee rendered
prior to the date of establishment of the retirement system for which
credit is allowable under section seven, and any other employment oc-
curring prior to the date of establishment of the retirement system fo
which credit is allowable under section seven; :

(11) ‘Membership: service’ means service as an employee ren-
dered while a member of the retirement system;

(12) “Creditable service’? means prior service plus membership
service for which credit is allowable under section seven ;

(13) “Beneficiary” means any person entitled to receive an an-
nuity, retirement allowance, or other benefit as provided by this act;

(14) “Regular interest” means interest at such rate as is fixed
from time to time by the Board in accordance with section eighteen;

(15) “Accumulated contributions” means the sum of all amounts
deducted from the salary of a member, exclusive of contributions against
administrative expenses, and credited to his individual account in the
employee annuity savings fund, provided for in section thirteen, to-
gether with regular interest on such amounts;

(16) ‘“Earnable compensation” means the full compensation pay-
able to an employee working the full working time for his position, but
compensation of more than two thousand dollars per annum shall be con-
sidered as two thousand dollars per annum under this act, and, in cases
where compensation includes maintenance or other perquisites, the
Board shall fix the value of that part of the compensation not paid in
money ;
(17) “Average final compensation” means the average annual
earnable compensation of a member during his last five years of service,
or, if he should have less than five years of service, his average annual
earnable compensation during the entire period of his service;

(18) “Employee annuity” means annual payments for life derived
as provided in this act from the accumulated contributions of a member;

(19) “Employee annuity reserve” means the current value, com-
puted at regular interest upon the basis of such mortality tables as shall
be adopted by the Board, of all payments to be made on account of an
employee annuity, or benefit in lieu of an employee annuity ;

(20) “State annuity” means annual payments for life derived as
provided in this act from contributions made, and any other money pro-
vided, by the Commonwealth or any other contributor to the State an-
nuity accumulation fund; a

(21) “State annuity reserve” means the current value, computed
at regular interest upon the basis of such mortality tables as shall be
adopted by the Board, of all payments to be made on account of a State
annuity ;

(22) “Retirement allowance” means the employee annuity plus
the State annuity; and :

(23) “Actuarial equivalent” means a benefit of equal value when
computed at regular interest upon the basis of the mortality tables adop-
ted by the Board.

Section 2. System established—There is hereby established as of
the first day of July, nineteen hundred and forty-two, a retirement sys-
tem for teachers and State employees to be known as the “Virginia
Retirement System”, by and in which name it shall, pursuant to the
provisions of this act, transact all of its business, for which purpose it
shall constitute a body corporate. |

Section 3. Board of trustees—(a) The retirement system shall
be administered by a board of trustees to be known as the “Board of
Trustees of the Virginia Retirement System”’.

(b) The Board shall consist of the Comptroller, the State Treas-
urer, the Superintendent of Public Instruction, the Auditor of Public
Accounts and the State Tax Commissioner, and three members to be
appointed by the Governor, subject to confirmation by the General As-
sembly. Of the appointive members one shall be a teacher, one a State
employee and one neither a teacher nor a State employee. Each such
appointment shall be made for a term of four years, except an appoint-
ment to fill a vacancy which shall be for the unexpired term. The Gover-
nor may suspend or remove any appointive member at his pleasure.

(c) Members of the Board shall receive no salaries, as such, but
shall be reimbursed for the expenses incurred by them in the perform-
ance of their duties.

(d) The Governor shall, from time to time, designate the chair-
man of the Board. The Board shall elect one of its members vice-chair-
man, and shall appoint a secretary who may or may not be a member
of the Board. ,
(e) A majority of the members of the Board shall constitute a
uorum. —

({) The Board shall employ an actuary as its technical advisor,
and may employ such other persons and incur such expenditures as it
deems necessary for the efficient administration of this act. The com-
pensation of the actuary and of other employees shall be fixed by the
Board.

Section 4. Actuarial evaluation, et cetera——(a) As soon as may be
after its organization, the Board shall cause an investigation to be made
of the mortality, service and salary experience of teachers and of State
employees, respectively, on the basis of which it shall adopt such mor-
tality and service tables, for teachers and for State employees, as are
necessary for the administration of the retirement system. On the basis
of such tables the Board shall prescribe the rates of contribution payable
pursuant to the provisions of this act.

(b) At least once in each two-year period after the establishment
of the retirement system, the Board shall cause an actuarial investiga-
tion to be made of the mortality, service and salary experience of the
members and beneficiaries of the retirement system, and a valuation of
the various funds established by this act. Pursuant to such investigations
and valuations the board shall, from time to time, revise the mortality
and service tables and the rates of contribution prescribed pursuant
thereto.

(c) The Board shall cause an annual valuation to be made of the
assets and liabilities of the several funds of the retirement system and
shall prepare an annual statement of the amounts to be contributed to
the State annuity accumulation fund.

(d) The Board shall publish annually, as to the several funds
established by this act, the valuation of the assets and liabilities, a state-
ment of receipts and disbursements, and a statement of accumulated cash
and securities. | |

(e) The Board shall keep a record of all of its proceedings and
such record shall be open to inspection by the public.

Section 5. Medical Board—(a) The Board shall appoint a
Medical Board of three physicians not eligible to participate in the re-
tirement system. The initial terms of service of the first three physicians
appointed shall be two, three and four years, respectively, and thereafter
each such physician shall be appointed for a term of four years, except
that an appointment to fill a vacancy shall be for the unexpired term.
The Board may remove any member of the Medical Board at its pleasure.
The members of the Medical Board shall receive such compensation
as may be fixed by the Board. ,

(b) The Medical Board shall pass upon all medical examinations
required by this act, shall investigate all essential health and medical
statements and certificates by or on behalf of a member in connection
with disability retirement, and shall report in writing to the Board its
conclusions and recommendations upon all matters referred to it.

Section 6. Membership.—(a) Membership in the retirement sys-
tem shall consist of the following:
cH. 325]. ACTS OF ASSEMBLY 485

(1) All persons who become employees or who. re-enter service
after the date of the establishment of the system ; :

(2) All persons who are employees upon the date of the establish.
ment of the system; and

(3) All other persons who were teachers at any time Sordous the
school year immediately preceding the date of the establishment of the
system. .

No person shall be eligible for membership i in the retirement system,
however, at any time at which the employment 1 in which he is engaged is
included within the term “employment” as defined in Title II of the
Federal Social Security Act, as it may be amended from time to time,
for purposes of old-age and survivors insurance benefits. ,

(b) Any person who is an employee upon the date of the estab-
lishment of the retirement system, and any person who was a teacher at
any time during the school year immediately preceding such establish-
ment, within the period of one hundred and fifty days next succeeding
such establishment, and any person on leave from service at the time
of such establishment, within one hundred and fifty days next succeed-
ing the termination of such leave, may file with the Board, on forms
prescribed by it, a notice of his election not to be included in the member-
ship of the retirement system and a waiver of all present and prospective
benefits which would inure to him as a member, and in such case the
Board shall exclude him from membership. Any ‘employee so excluded,
however, may thereafter become a member by making application for
membership to the Board, in which case he shall be included in the mem-
bership, but no such employee shall receive prior service credit unless he
makes his application for membership within one hundred and fifty days
after the establishment of the system, or unless, in the case of a person
on leave from service at the time of establishment of the retirement sys-
tem, he makes his application for membership within one hundred and
fifty days after the termination of such leave. Provided, however, that a
person in the armed forces of the United States at the time this act goes
into effect shall have one hundred and fifty days from the time he re-
enters the service of the State in which to make application for member-
ship, provided he re-enters the service of the State within three years
from the date this act takes effect.

Any institution of higher education which, at the time of the estab-
lishment of the retirement system, has established, or which may there-
after establish, a retirement plan or arrangement covering in whole or in
part its employees engaged in the performance of teaching administrative
or research duties, is hereby authorized to make contributions for the
benefit of its employees who elect to continue or be under such plan or
arrangement and elect to participate in such plan or arrangement rather
than in the retirement system established by this act. Any present or
future employee of such institution shall have the option of electing to
participate in either the retirement system established by this act or the
plan or arrangement provided by the institution employing him. The
election herein provided shall, as to any future employee, be exercised
not later than thirty days from the time of entry upon the performance
of his duties. , , -

(c) The membership of any person in the retirement system shall
cease if he is continuously unemployed as a teacher or State employee for
a period of five years, or if in any ten-year period after he last became a
member he renders less than five years of service, or upon the with-
drawal by the member of his accumulated contributions, or upon retire-
ment, or upon death. ,

Section 7. Certain statements to be filed; creditable service—<(a)
Under such rules and regulations as are adopted by the Board, each em-
ployee upon becoming a member, or someone on his behalf, shall file with
the Board, in such form as the Board may prescribe, a statement of the
facts pertaining to his status as a member, which shall include a detailed
description of all service rendered as an employee, as that term is defined
in this act, and any other employment in which he has been engaged by
the Commonwealth, or by any department, institution or agency thereof,
prior to his becoming a member, if any prior service is claimed, and such
other information as the Board may require. Until such statement is
filed, no member or his beneficiary shall be eligible to receive any benefits
under this act.

+ (b) The Board shall determine by appropriate rules and regula-
tions how much service in any year is the equivalent of a year of service,
but in no case shall it allow credit for more than one year of service for
all service rendered in any period of twelve consecutive months.

(c) Subject to the above restrictions, and to such other rules and
regulations as are prescribed by the Board, the Board shall ascertain,
as soon as practicable after the said statement is filed, the amount of
prior service, if any, to which each member is entitled. If a member is an
employee who was in service on, or a person who was a teacher during
any part of the school year next preceding, or a person who was on leave
from service on, the date of establishment of the retirement system, and
if such employee or person, in the case of a person who has once elected
not to become a member, has filed his application for membership within
one hundred and fifty days after such date of establishment, or, in the
case of a person on leave from service on the said date of establishment,
within one hundred and fifty days after the termination of such leave, the
Board shall issue to such member a prior service certificate certifying the
length of service rendered by him. Any period or periods during which
any such member has been on leave from service shall not be counted
in his prior service credit. The Board may issue prior service certificates
to any other member who was an employee at any time during the three-
year period next preceding the date of establishment of the retirement
system and who re-enters service within the three-year period next fol-
lowing such establishment.

In addition to any prior service credit certified on his prior service
certificate for service rendered as an employee, as that term is defined
in this act, a member shall also be entitled to have certified on his prior
service certificate, as a part of his prior service credit, one year’s credit
for each year prior to the date of establishment of the retirement system
cH. 325] . ACTS OF ASSEMBLY 487

during which he was regularly and continuously employed by the Com-
monwealth, or by any department, institution or agency thereof, and not
compensated on a salary basis, regardless of the method upon which
he was compensated and of the intervals at which his compensation was
—

_(d) A prior service certificate shall be conclusive as to such prior
service credit unless and until it is modified by the Board upon applica-
tion made by the member to whom it is issued within one year after the
date of its issuance or of any such modification, or upon discovery by the
Board of material error or fraud.

(e) When membership ceases, such certificate shall become alt
Should the employee again become a member, such employee shall enter
the system as an employee not entitled to prior service credit, except
as otherwise provided in subsection (e) of section nine.

(f) Creditable service at retirement on which the retirement al-
lowance of a member shall be based shall consist of the membership
service rendered by him, since he last became a member, and also, if he
has a prior service certificate which is in full force and effect, the service
certified on his prior service certificate.

Section 8. Service retirement—(a) Any member in service may
retire upon written notification to the Board, made by the member or
by his employer, setting forth at what time, not less than thirty nor more
than ninety days subsequent to the filing of such notification, the retire-
ment is to become effective, provided that such member at the time so
specified for his retirement has attained sixty-five years of age, or, in the
case of a teacher in service prior to July first, nineteen hundred and
forty-two, has complied with the requirement for retirement set forth
in chapter thirty-six of the Code of Virginia as it existed immediately
prior to the passage of this act, notwithstanding that during such period
of notification he has separated from service.

(b) Any member who has attained seventy years of age before
the date of establishment of the retirement system, or who attains seventy
years of age on or after such date, shall be retired forthwith; provided
that, upon the request of his employer in the case of a teacher, or the
head of the department, institution or agency by which he is employed,
in the case of a State employee, he may remain in service not longer than
the last day of the fiscal year during which he attains seventy years of
age, or if he is a State officer appointed by the Governor he may, in the
discretion of the Governor, be retained in service during such period or
periods for which he may be appointed by the Governor. Notwithstand-
ing the foregoing provisions, however, until the conclusion of the war
in which the United States is engaged at the time of the enactment of this
act, upon the request of his employer, in the case of a teacher, or of the
head of the department, institution or agency by which he is employed,
in the case of a State employee, such member may remain in service for
such period or periods as may be determined by such employer or depart-
ment, institution or agency head, with the approval of the Board, if such
member is mentally and physically able to perform his duties efficiently,
but, upon conclusion of the said war, any member so remaining in serv-
ice shall be retired forthwith.
(c) Upon retirement as provided in this section a member shall
receive a service retirement allowance which shall consist of :

- . (1) An employee annuity which shall be the actuarial equivalent
of his accumulated contributions at the time of his retirement ;

(2) <A State annuity of one-one hundred sixtieth (1/ 160) of his
average final compensation multiplied by the number of his years of
membership service since he last became a member;

(3) If the member has a prior service certificate in full force and
effect, an additional State annuity of.one-one hundred sixtieth (1/160)
of his average final compensation multiplied by the number of years of
service certified on his prior service certificate; and

(4) In the case of a teacher, if the member has a prior service
certificate in full force and effect, an additional State annuity which
shall be the actuarial equivalent of the aggregate amount of all contribu-
tions made by him, or on his behalf, under the provisions of chapter
thirty-six of the Code of Virginia as it existed immediately prior to the
passage of this act, as though such aggregate amount had been paid into
the State annuity accumulation fund on the date of establishment of the
retirement system and credited to the individual account of such mem-
ber at regular interest.

If a teacher retires after thirty years of creditable service and prior
to his attaining age sixty-five, in lieu of the State annuity and the addi-
tional State annuities which he would have received pursuant to this
section had he remained in service until attaining sixty-five years of age,
he shall receive a State annuity which shall be the actuarial equivalent
of the said State annuity and additional State annuities computed on the
basis of his attained age at the time of his retirement. In any event,
however, ‘a teacher shall receive, upon retirement under any of the pro-
visions of this section, a total State annuity which shall be at least suffi-
cient to provide, together with his employee annuity, a service retire-
ment allowance equal to the pension which he would receive were he
pensioned under the provisions of chapter thirty-six of the Code of Vir-
ginia as it existed immediately prior to the passage of this act, subject
to the provisions of the following paragraph.

In no event shall the total State annuity, in the case of any em-
ployee who has a prior service certificate in full force and effect at the
time of his retirement, be more than sufficient to provide, together with
his employee annuity less any excess which he may have accumulated
pursuant to the provisions of section thirteen, subsection (h), a total
service retirement allowance of more than one-half of his average final
compensation.

Section 9. Disability retirement—(a) Any member in service
who has twenty or more years of creditable service may, upon the ap-
plication of his employer or upon his own application, be retired by the
Board not less than thirty nor more than ninety days next following the
date of filing such application, on a disability retirement allowance,
provided that the Medical Board after a medical examination of such
member shall certify that such member is mentally or physically in-
capacitated for the further performance of duty, that such incapacity
is likely to be permanent, and that such member should be retired. .
(b) Upon retirement on account of. disability, a member shall
receive a disability retirement allowance which shall consist of : mY

(1) An employee annuity which shall be the actuarial equivalent
of his accumulated contributions at the time of retirement; and

(2) <A state annuity which, together with his employee annuity,
shall provide a total disability retirement allowance equal to one-ninetieth
of his average final compensation multiplied by the number of years of
his membership service at retirement, plus one-one hundred eightieth
(1/180) of his average final compensation multiplied by the number of
years of service certified on his prior service certificate. If, however,
such disability retirement allowance does not exceed fifteen per centum
of his average final compensation, the State annuity shall be in an amount
sufficient to provide, together with his employee annuity, a total retire-
ment allowance of fifteen per centum of his average final compensa-
tion, provided that in case of a teacher the State annuity shall be in an
amount at least sufficient to provide, together with his employee annuity,
a disability retirement allowance equal to the pension which he would
receive were he retired for disability under the provisions of chapter
thirty-six of the Code of Virginia as it existed immediately prior to the
passage of this act. In no event, however, shall the disability retirement
allowance, in the case of any employee, exceed one-ninetieth of his aver-
age final compensation multiplied by the number of years of total service
with which the member would be credited were his service continued
to his minimum age for service retirement. _

(c) Once each year during the first five years following the retire-
ment of a member on a disability retirement allowance, and once in every
three-year period thereafter, the Board may, and on application of the
disability beneficiary shall, require any such beneficiary who has not yet
attained his minimum service retirement age to undergo a medical ex-
amination by the Medical Board or a physician or physicians designated
by the Medical Board, such examination to be made at the place of resi-
dence of said beneficiary or other place mutually agreed upon. Should a
disability beneficiary who has not yet attained his minimum service retire-
men age refuse to submit to any such medical examination, his retire-
ment allowance shall be discontinued until his withdrawal of such refusal,
and should such refusal continue for one year, all his rights in and to
his State annuity shall be forfeited.

(d) Whenever the Medical Board certifies to the Board that any
disability beneficiary is engaged in or is able to engage in gainful occupa-
tion or work paying more than the difference between his disability
retirement allowance and his average final compensation, the Board may
reduce the State annuity to an amount which, together with his employee
annuity and the amount earnable by him, equals the amount of his aver-
age final compensation. Should the earning capacity of any such bene-
ficiary later be changed, the Board may further modify the amount of
his State annuity, provided that the State annuity so modified shall not
exceed the amount of the State annuity originally granted, nor the
amount which when added to the amount earnable by the beneficiary to-
gether with his employee annuity, equals the amount of his average final
compensation. A beneficiary restored to active service, at a salary less
than the average final compensation upon the basis of which he was
retired, shall not become a member of the retirement system unless and
until such salary is increased to an amount equal to or greater than the
average final compensation upon the basis of which he was retired on
a disability allowance.

~ - (e) Should a disability beneficiary under his minimum service re-
tirement age be at any time in service at a salary equal to or greater
than his average final compensation upon the basis of which he was
retired, his disability retirement allowance shall cease and he shall again
become a member of the retirement system and shall contribute there-
after at the same rate at which he paid prior to such disability retirement.
Any prior service certificate on the basis of which his allowance was
computed at the time of his disability retirement shall be restored to full
force and effect, and, in addition, upon his subsequent retirement he shall
be ¢redited with all his membership service on the basis of which his
allowance was computed at the time of his original disability retirement,
but should he be restored to active service on or after the attainment of
fifty-five years of age, his State annuity upon subsequent retirement shall
not.exceed the sum of the State annuity which he was receiving 1m-
mediately prior to his last restoration to membership and the State an-
nuity that he would have received on account of his service since such
last. restoration had he first become a member at that time.

Section 9-a. State annuity to be reduced in certain cases.—In the
case of any State employee whose compensation is not paid exclusively
out of some fund or funds in the State treasury, and in the case of any
teacher whose compensation is paid in part out of any fund not derived
from local revenues or from appropriations out of some fund in the
State treasury, if any contributor to the State annuity accumulation fund,
other than the State, is in default in the payment of any contribution or
contributions payable by it to the State annuity accumulation fund, for
which payment provision is made in section fifteen, then the total State
annuity to which such employee would have been entitled on account of
either a service or disability retirement allowance in case there had been
no such default shall be reduced by that proportion which the amount of
the defaulted contribution or contributions bears to the total amount
of contributions paid and payable on account of such employee to the
State annuity accumulation fund.

- Section 10. Withdrawal before retirement ; death benefits —Should
a member cease to be an employee otherwise than by death or by retire-
ment under the provisions of this act, at any time after the expiration
of two years since he last became a member, he shall be paid, on demand
or within thirty days thereafter, the amount of his accumulated contribu-
tions. Should a member die at any time before retirement, the amount
of his accumulated contributions shall be paid to such beneficiary, if any,
as he shall have nominated by written designation signed and acknowl-
edged by such member before some person authorized to take acknowl-
edgments and filed with the Board, otherwise to his executors or ad-
ministrators. Any beneficiary so designated may be changed by the writ-
cH. 325] ACTS OF ASSEMBLY 491

ten designation, of some other beneficiary, signed, acknowledged and
filed as aforesaid. Any former member who dies within thirty days after
retirement shall be considered an active member at the time of his death,
and the benefits payable on his account shall be disposed of pursuant to
this section, notwithstanding that he may have received one or more
payments on a retirement allowance, in which case any sums so received
shall be deducted from the benefits payable under this section. © |

. Section 11. Optional benefits—-(a) Unless a member elects one
of the optional benefits as provided in subsection (b) of this section,
any service or disability retirement allowance to which he may become
entitled shall be paid in equal monthly instalments throughout the re
mainder of his life. "

(b) In lieu of the life annuity as provided in subsection (a), a
member may, at any time before the first payment on account of any
service or disability retirement allowance becomes normally due, elect to
receive on retirement the actuarial equivalent of his retirement allowance
in a reduced retirement allowance payable in equal monthly instalments
throughout the remainder of his life, with provision that the balance
shall be paid according to one of the following options: .

Option 1. If he dies before he has received in payments of his
employee annuity the amount of his accumulated contributions as they
were at the time of his retirement, such balance shall be paid to such
person, if any, as he shall nominate by written designation signed and
acknowledged by the member before some officer authorized to take
acknowledgments and filed with the Board, otherwise to his executors
or administrators ; and any beneficiary designated for the purpose of this
option may be changed, at any time, by the person designating him, and
the written designation, of some other beneficiary, signed, acknowledged
and filed as aforesaid, shall be sufficient to effect such change; or

Option 2. Upon his death this reduced retirement allowance shall
be continued throughout the life of and paid to such person as he shall
nominate by written designation signed and acknowledged as aforesaid
and filed with the Board at the time of his retirement ; or |

Option 3. Upon his death one-half of his reduced retirement al-
lowance shall be continued throughout the life of and paid to such person
as he shall nominate by written designation signed and acknowledged
as aforesaid and filed with the Board at the time of his retirement; or

Option 4. Some other benefit or benefits shall be paid either to
the member or to such person or persons as he shall nominate by written
designation signed and acknowledged as aforesaid and filed with the
Board at the time of his retirement, which other benefit or benefits, toge-
ther with the reduced retirement allowance, shall be of equivalent actu-
arial value to the retirement allowance of the member and shall be ap-
proved by the Board.

Section 12. Several funds established.—All of the assets of the re-
tirement system shall be credited, according to the purpose for which
they are held, to one of five funds, namely, the employee annuity savings
fund, the employee annuity reserve fund, the State annuity accumulation
fund, the State annuity reserve fund, and the expense fund.
Section 13.. Employee annuity savings fund; payroll deduction.—
(a) ‘The employee annuity savings fund shall be a fund in which shall
be accumulated contributions made from salaries of members under the
provisions of this section on account of employee annuities.

(b) Upon the basis of such tables, for teachers and for State em-
ployees, respectively, as the Board shall adopt and regular interest, the
Board shall cause to be determined, for each member, the proportion of
earnable compensation which, when deducted from each payment of his
prospective earnable annual compensation prior to his minimum service
retirement age and accumulated at regular interest until such age, upon
computation will provide at such age an annuity equal to one-one hundred
sixtieth (1/160) of his average final compensation multiplied by the
number of his years of membership service. To this proportion shall be
added not exceeding twenty-five ten-thousandths (25/10,000), as de-
termined by the Board, to cover the members’ contribution toward the
expense of administering the retirement system, and the sum of these
two items shall be the proportion of salary contributable by the member.
In the case of any member who has attained his minimum service retire-
ment age prior to becoming a member, the proportion of salary applicable
to such a member shall be the proportion computed for the age one year
younger than his minimum service retirement age.

- (c) The Board shall certify to the Comptroller in the case of all
State employees paid by warrants on the State Treasurer, or to the de-
partment, institution or agency by which the salary of any other State em-
ployee is paid, or to the employer in the case of teachers, the proportion
so computed of the earnable compensation of each member, and the Comp-
troller, department, institution, agency or employer, as the case may be,
shall cause to be deducted from the salary of each member on each and
every payroll for each and every payroll period the proportion of the
member’s earnable compensation so certified but in no case shall any
deduction be made for employee annuity purposes from the compensa-
tion of a member who has attained his minimum service retirement age
if such member elects not to contribute, nor shall any such deduction in
excess of five per centum of the member’s earnable compensation be made
if such member elects not to contribute more than five per centum thereof.

(d) Each deduction provided for in this section, exclusive of the
member’s contribution towards administrative expenses, which shall be
credited to the expense fund, shall be credited, together with regular
interest thereon, to the individual account of the member from whose
compensation the deduction was made.

(e) In determining the amount earnable by a member in a pay-
roll period, the Board may consider the rate of compensation payable
to such member on the first day of the payroll period as continuing
throughout such payroll period, and it may omit deduction from com-
pensation for any period less than a full payroll period if an employee
was not a member on the first day of the payroll period, and, to facilitate
the making of deductions, it may modify the deductions required as to
any member by an amount which shall not exceed one-tenth of one per
centum of the annual salary from which said deduction is to be made.
(ff) The deductions provided for herein shall be made notwith-
standing that the minimum compensation provided by law for any mem-
ber shall be reduced thereby. Every member shall be deemed to consent
and agree to the deductions made as provided herein; and payment of
salary or compensation less said deductions shall be a full and complete
discharge of all claims for services rendered by such person during the
period covered by such payment, except as to benefits provided by this
act.
(g) Notwithstanding any other provision of this section, no de-
duction shall be made from any member’s salary if the State’s contri-
bution to the State annuity accumulation fund on his account is in default.

(h) In addition to deductions from salary as hereinbefore re-
quired, any member may, subject to the approval of the Board, redeposit,
in the employee annuity savings fund, by a single payment or by an in-
creased rate of contribution, an amount equal to any amount which he
may have previously withdrawn therefrom as provided in this act, or
any part of any such amount; or any member may, subject to the ap-
proval of the Board, deposit in the employee annuity savings fund, by a
single payment or by an increased rate of contribution, amounts for the
purpose of an additional employee annuity, but such additional payments
shall not exceed the amounts computed to provide, with his prospective
retirement allowance, a total retirement allowance of one-half of his
prospective average final compensation at his minimum service retire-
ment age. Such additional amounts so deposited shall become a part of
his accumulated contributions, except that in the case of disability retire-
ment they shall be treated as excess contributions returnable to the mem-
ber in cash or-as an annuity of equivalent actuarial value and shall not
be considered in computing his State annuity. ,

(i) The accumulated contributions of a member returned to him
upon withdrawal, or paid in the event of his death to his désignated
beneficiary or to his executors or administrators, shall be paid from the
employee annuity savings fund. The accumulated contributions of each
member who ceases to be an employee within two years after he last
became a member shall be transferred, upon the termination of his mem-
bership, as provided in section five of this act, from the employee annuity
accumulation fund to the State annuity accumulation fund. :

j) Upon the retirement of a member, his accumulated contribu-
tion shall be transferred from the employee annuity savings fund to the
employee annuity reserve fund. |

Section 14. Employee annuity reserve fund.—The employee an-
nuity reserve fund shall be the fund in which shall be held the reserves
on all employee annuities in force, and from which shall be paid all em-
ployee annuities and all benefits in lieu of employee annuities. Should a
beneficiary retired on account of disability again become a member of the
retirement system, his employee annuity reserve shall be transferred from
the employee annuity reserve fund to the employee annuity savings fund
and credited to his individual account therein. |

Section 15. State annuity accumulation fund—(a) The State
annuity accumulation fund shall be the fund in which shall be accumu:
lated all reserves for payment of all State annuities and other benefits
payable from contributions made by the State, or by the State and any
other contributor or contributors other than employees, and from which
State annuities and benefits in lieu thereof shall be paid to or on account
of beneficiaries credited with prior service.

(b) On account of each member there shall be paid annually into
the State annuity accumulation fund by the State, or by the State and
some other contributor or contributors, as provided in the following sub-
section, on account of the preceding year, a certain percentage of his earn-
able compensation, to be known as the “normal contribution”, and an ad-
ditional percentage of his earnable compensation, to be known as the
“accrued liability contribution”. The rates per centum of earnable com-
pensation of such contributions shall be fixed on the basis of the liabili-
ties of the retirement system as shown by actuarial valuation, and shall
be determined separately for teachers and for State employees, respec-
tively. Until the first valuation, the normal contribution rate shall be two
and fifty-seven one hundredths per centum for teachers and one and
sixty-four one hundredths per centum for State employees, and the ac-
crued liability contribution rate shall be three per centum for teachers and
ninety-eight one hundredths per centum for State employees, of the an-
nual earnable compensation of each member.

(c) In the case of all teachers whose compensation is paid ex-
clusively out of funds derived from local revenues and appropriations
from the general fund of the State treasury, and in the case of all State
employees whose compensation is paid exclusively by the State out of the
general fund of the State treasury, the State shall be the sole contributor
to the State annuity accumulation fund, and all such contributions shall
be paid out of the general fund. In the case of any teacher whose compen-
sation is paid out of funds derived in whole or in part from any special
fund, or from a contributor other than the State or some political sub-
division thereof, then in any year, there shall be paid out of the general
fund only such proportion of the contributions to the State annuity ac-
cumulation fund on behalf of such employee as that part of such em-
ployee’s compensation paid out of local revenues and funds derived from
the general fund for that year bears to his total compensation for that
year, and the remainder of such contributions shall be paid out of such
special fund or by such other contributor in proportion to that part of the
employee’s compensation derived therefrom. In the case of a State em-
ployee whose compensation is paid in whole or in part out of any special
fund, or by any contributor other than the State, then contributions to the
State annuity accumulation fund on behalf of such employee in any year
shall be paid out of such special fund, or by such other contributor, in pro-
portion to that part of the employee’s compensation derived therefrom
for that year. The governing body of each county, city and town is hereby
authorized to make such appropriations from the funds of such county,
city or town as shall be necessary to pay its proportionate share of con-
tributions to the State annuity accumulation fund on account of every
State employee whose compensation is paid in part by such county, city
or town.
cH. 325] ACTS OF ASSEMBLY 495

(d) On the basis of regular interest and of such mortality and other
tables as shall be adopted by the Board, the Board shall, during the period
over which the accrued liability contribution is payable, immediately
after the making of each valuation required by this act to be made, cause
to be determined the uniform and constant percentage of the earnable
compensation of the average new entrant, which, if contributed on the
basis of his compensation throughout his entire period of service, would
be sufficient to provide for the payment of any State annuity payable by
the State on his account. The rate per centum so determined shall be
known as the “normal contribution” rate. After the accrued liability con-
tribution has ceased to be payable, the normal contribution rate shall be
the rate per centum of the earnable compensation of all members obtained
by deducting from the total liabilities of the State annuity accumulation
fund the amount of the funds in hand to the credit of that fund and di-
viding the remainder by one per centum of the present value of the pro-
spective future salaries of all members as computed on the basis of the
mortality and service tables adopted by the Board and on the basis of
regular interest. The normal rate of contribution shall be determined by
the Board after each valuation and shall continue in force until a new
valuation and certification is made.

(e) Immediately succeeding the first valuation, the Board shall
cause to be computed the rate per centum of the total annual earnable
compensation of all members which is equivalent to four per centum of
the amount of the total liability for State annuities on account of all mem-
bers and beneficiaries and not dischargeable by the present assets of the
State annuity accumulation fund and by the aforesaid normal contribu-
tion if made on account of such members during the remainder of their
active service. The rate per centum, originally so determined, shall be
known as the “accrued liability contribution”’ rate.

(f{) The Board shall certify to the Comptroller, and to each con-
tributor to the State annuity accumulation fund other than the State, the
normal rate of contribution and the accrued liability contribution rate,
and every change made therein from time to time.

(g) The total amount payable in each year into the State annuity
accumulation fund shall be not less than the sum of the rates per centum
known as the normal contribution rate and the accrued liability con-
tribution rate, multiplied by the total earnable compensation of all mem-
bers during the preceding year, provided that the amount of each annual
accrued liability contribution shall be at least three per centum greater
than the preceding annual accrued liability contribution, and provided that
the aggregate payment into the State annuity accumulation fund shall be
sufficient, when combined with the amount then held in the fund, to pro
vide the benefits payable from the fund during the current year. So

(h) The accrued liability contribution shall be discontinued as
soon as the accumulated reserve in the State annuity accumulation fund
shall equal the present value, as actuarially computed and approved by
the Board, of the total liability of such fund less the present value, com-
puted on the basis of the normal contribution rate then in force, of the
prospective normal contributions to be received on account of persons who
are at that time members.

(1) All State annuities and benefits in lieu thereof, including al-
lowances payable under Section twenty-three of this act, with the excep-
tion of those payable to members not entitled to prior service credit, shall
be paid from the State annuity accumulation fund, and sufficient funds to
cover expenses not covered by excess interest and members’ contribu-
tions against administrative expenses, may be transferred to the expense
fund from the State annuity accumulation fund. ,

(j) Upon the retirement of a member not entitled to credit for
prior service, an amount equal to his State annuity reserve shall be trans-
ferred from the State annuity accumulation fund to the State annuity re-
serve fund.

(k) The Board may in its discretion transfer to and from the
State annuity accumulation fund the amount of any surplus or deficit
which may develop in the reserve held in the employee annuity reserve
fund or the State annuity reserve fund, as shown by actuarial valuation.

Section 16. State annuity reserve fund.—The State annuity reserve
fund shall be the fund in which shall be held the reserves on all State
annuities granted to members not entitled to prior service credit and
from which shall be paid such State annuities and benefits in lieu thereof.
Should a beneficiary who has been retired on account of disability and who
was not entitled to prior service credit as a member, again become a
member of the retirement system, the State annuity reserve held on ac-
count of his State annuity shall be transferred from the State annuity
reserve fund to the State annuity accumulation fund. Should the State
annuity of such a disability beneficiary be reduced as a result of an in-
crease in his earning capacity, the amount of the annual reduction in his
State annuity shall be paid annually into the State annuity accumulation
fund during the period of such reduction.

Section 17. Expense fund——The expense fund shall be the fund
to which shall be credited excess interest earnings applied by the Board
towards administrative expenses and all monies contributed by employees
and by the State for the administrative expenses of the retirement system,
and from which the expense of the administration of the retirement sys-
tem shall be paid, exclusive of amounts payable as retirement allowances
and as other benefits provided in this act.

Section 17-a. Teacher and State employee funds to be segregated.
Notwithstanding any other provisions of this act, the Board shall cause
all moneys contributed pursuant to the provisions of this act by or on ac-
count of teachers to be kept, for all intents and purposes, in separate funds
and accounts from those contributed by or on account of State employees,
provided that all contributions on account of administrative expenses shall
be kept in one expense fund and shall not be so segregated. All moneys
transferred as State contributions to the expense fund, and all excess in-
terest earnings applied thereto by the Board, shall be transferred or ap-
plied, as the case may be, pro rata from the several funds credited re-
spectively to teachers and State employees in proportion to the respective
number of teacher members and State employee members of the retirement
system. | '

" The Board is directed to divide each of the funds established pur-
suant to the provisions of sections twelve, thirteen, fourteen, fifteen and
sixteen of this act into two separately segregated funds, to one of which
shall be credited all moneys contributed by or on account of teachers, or
derived from moneys so contributed, and to the other all moneys con-
tributed by or on account of State employees, or derived from moneys so
contributed. All payments of annuities, benefits in lieu of annuities, and
other payments made pursuant to this act to or on account of teachers
and State employees, respectively, shall be made out of the several funds
credited respectively to teachers and State employees. The Board shall
administer the provisions of sections twelve, thirteen, fourteen, fifteen
and sixteen of this act so as to accomplish the intent and purpose of this
section, and to that end the said sections, and every other related pro-
vision of this act, shall be construed as though explicit provision for such
purpose had been made in each and every such section and provision.

Section 18. Management of funds.—(a) The Board shall be the
trustee of the several funds created by this act and shall have full power to
invest and reinvest such funds, subject to the limitation that no invest-
ment shall be made except, upon the exercise of bona fide discretion, in
securities which, at the time of making the investment, are, by statute, per-
mitted for the investment of reserves of domestic life insurance com-
panies. Subject to such limitation, the Board shall have full power to hold,
purchase, sell, assign, transfer, or dispose of, any of the securities or in-
vestments in which any of the funds created herein have been invested,
as well as of the proceeds of such investments and any monies belonging
to said funds.

(b) The State treasurer shall be the custodian of the several trust
funds of the retirement system. All payments from said funds shall be
made by him on warrants of the Comptroller issued upon vouchers signed
by such person as is designated by the Board. A duly attested copy of a
resolution of the Board designating such person and bearing on its face
the specimen signature of such person shall be filed with the Comptroller
as his authority for issuing warrants upon such vouchers. No voucher
shall be drawn unless it has previously been authorized by resolution of
the Board.

(c) The Board annually shall allow to each fund of the retirement
system regular interest on the average amount credited for the preceding
year to each such fund, with the exception of the expense fund, from the
interest and dividends earned from investments. Any excess earnings over
the amount so credited may be used in reducing the amount of contribu-
tion required of the State during the ensuing years and for administrative
expenses. Any deficiency shall be charged to the State annuity accumula-
tion fund. |

(d) Regular interest shall mean such rate, compounded annually,
as shall be determined by the Board on the basis of the interest earnings
of the system for the preceding year and of the probable earnings to be
made, in the judgment of the Board, during the immediate future, such
rate to be limited to a minimum of two per centum and a maximum of
four per centum, but during the first year of operation of the retirement
system two per centum shall be treated as the regular interest rate.

(e) No member of the Board and no employee of the Board shall
have any interest, direct or indirect, in the gains or profits of any invest-
ment made by the Board, save in so far as any such member may be a
member or beneficiary of the retirement system, and no member of the
Board shall receive, directly or indirectly, any pay or emolument for his
services except as expressly provided in this act. No member of the
Board or employee thereof shall, directly or indirectly, for himself or as an
agent, in any manner use the funds or deposits of the retirement system,
except to make such payments therefrom as are authorized by the Board;
nor shall any member or employee of the Board become an endorser or
surety or in any manner an obligor for monies loaned by or borrowed
from the Board. ,

({) For the purpose of meeting disbursements for retirement al-
lowances and other payments, there may be kept available cash, not ex-
ceeding ten per centum of the total amount in the several funds of the re-
tirement system, on deposit to the credit of the State Treasurer in one or
more banks or trust companies, located in Virginia, organized under the
laws of Virginia or of the United States, and qualified as State deposi-
tories. |

Section 19. Collection of employee contributions—(a) The
Comptroller, in the case of all State employees paid by warrants on the
State Treasurer, or, in the case of any other State employee, the depart-
ment, institution or agency by which the salary is paid, or the employer
in the case of teachers, shall cause to be deducted from the salary of each
member for each and every payroll period subsequent to the date of estab-
lishment of the retirement system, the contribution payable by such
member as provided in this act.

(b) In the case of all employees paid directly out of the State
treasury, the Comptroller shall, at the end of each payroll period, trans-
fer to the credit of the employee annuity savings fund and the expense
fund, in proper proportions, from each fund in the State treasury out of
which the salary of any member is paid, an amount equal to the aggre-
gate amount of the deductions made for the preceding payroll period from
the salaries of all employees paid out of such fund in the State treasury.
The Comptroller shall forward a record of all such transfers to the Board.

In all other cases the employer, or the department, agency or insti-
tution, by which any employee’s compensation is paid, shall, at the end
of each payroll period, transmit to the State Treasurer its warrant for the
payment of an amount equal to the aggregate amount of the deductions
made for such payroll period from the salaries of all employees paid by
such employer, department, agency or institution, for the preceding pay-
roll period. The funds collected by the Treasurer on account of such war-
rants shall be credited to the employee annuity savings fund and the ex-
pense fund, in proper proportions. The Treasurer shall transmit to the
Comptroller and to the Board a record of all monies so collected. —
| (c) The Board may modify the method of collecting the contribu-
tions of members so that the employers, departments, institutions and
agencies required to remit to the State Treasurer as provided in subsec-
tion (b) of this section, may retain the amounts deducted by them from
employees’ salaries and have a corresponding amount deducted from
State funds otherwise payable to them. ,

Section 20. Collection of State contributions——(a) At least thirty
days prior to each regular session of the General Assembly, the Board
shall certify to the Governor the respective amounts which will become
due and payable to the retirement system from the several funds in the
State treasury during the biennium next following. The amounts so
ascertained shall be included in the appropriation bill which is submitted
to the General Assembly.

(b) The Board shall certify one-quarter of each amount so ascer-
tained for each year of the biennium to the Comptroller on or before the
first days of October, January, April and July ; whereupon the Comptrol-
ler shall transfer the amounts so certified from the several funds in the
State treasury to the State annuity accumulation fund.

Section 21. Collection of contributions to State annuity accumu-
lation fund from other contributors——On or before the first day of May
in the year nineteen hundred and forty-three, and in each year thereafter,
the Board shall certify to each contributor to the State annuity accumula-
tion fund other than the State, the amount which will become due from
such contributor on account of contributions to the State annuity ac-
cumulation fund during the fiscal year beginning July first of each such
year. In the year nineteen hundred and forty-two, such amounts due for
the fiscal year beginning July first of that year, shall be so certified as
soon as may be after the establishment of the retirement system. Every
such contributor shall make provision for the payment of such amounts,
which shall be paid in.equal quarterly installments by warrants of the
contributor transmitted and payable to the State Treasurer. All monies
collected on such warrants shall be credited to the State annuity accumu-
lation fund. The Treasurer shall transmit to the Comptroller and to the
Board a record of all monies so collected. |

Section 22. Duties. of department heads, etc—-The head of each
department, institution or agency of the State government, and each local
public school board, shall keep such records and from time to time shall
furnish such information as the Board may require in the discharge of its
duties. Upon employment of any employee to whom this act may apply,
he shall be informed by his appointing authority of his duties and obliga-
tions in connection with the retirement system as a condition of his em-
ployment. Every employee accepting employment shall be deemed to con-
sent and agree to any deductions from his compensation required by this
act and to all other provisions thereof.

Section 23. Benefits to teachers formerly retired.—All allowances
payable to former teachers retired under the provisions of chapter thirty-
six of the Code of Virginia, as it existed immediately prior to the passage
of this act, shall thereafter be continued. Such allowances shall be paid
from the State annuity accumulation fund. The appropriations made for
the payment of such allowances for the biennium beginning July first,
nineteen hundred and forty-two, shall be transferred and credited to the
State annuity accumulation fund. Any additional funds required to con-
tinue such allowances shall be provided by an increase in the accrued lia-
bility contribution otherwise payable to the State annuity accumulation
fund out of the general fund.

Section 24. Limitation on membership.—No provision of any other
statute which provides either entirely or partially at the expense of the
‘State for retirement benefits for employees, their widows, or other de-
pendents, shall apply to members or beneficiaries of the retirement sys-
tem, or to their widows, or other dependents. ,

Section 25. Protection against fraud——Any person who shall
knowingly make any false statement or shall falsify or permit to be
falsified any record or records of the retirement system in any attempt
to defraud such system as result of such act, shall be guilty of a misde-
meanor and upon conviction thereof shall be punished accordingly.

Section 26. Changes or errors in records.—Should any change or
error in records result in any member or beneficiary receiving from the
retirement system more or less than he would have been entitled to
receive had the records been correct, then on discovery of any such error
the Board shall correct the same, and as far as practicable shall adjust
the payments in such a manner that the actuarial equivalent of the bene-
fit to which such member or beneficiary was correctly entitled shall be
paid.

Section 27. Exemption of funds from taxation, execution and
assignment.—Employee annuities, State annuities and other benefits
accrued or accruing to any person under the provisions of this act, and
the accumulated contributions and cash securities in the funds created
under this act, are hereby exempted from any State, county, or municipal
tax, and shall not be subject to execution, attachment, garnishment or
any other process whatsoever, nor shall any assignment thereof be en-
forceable in any court.

Section 28. Short title—-The short title of this act is “Virginia
Retirement Act.”

Section 29. Provisions of act subject to amendment or repeal—
Every provision of this act shall be subject to amendment or repeal by
any future session of the General Assembly, provided that no such
amendment or repeal shall diminish or annul in any respect any right
acquired by a member or beneficiary under the provisions of this act in
or with respect to any fund derived from contributions made by members
of the retirement system after its date of establishment.

2. Be it further enacted, That chapter thirty-six and_ sections
seven hundred and eighty-seven to eight hundred and five, inclusive, of
the Code of Virginia, as amended, are repealed. __ !

3. Be it further enacted, That for the purpose of carrying out the
provisions of this act, all funds appropriated by the General Assembly of
nineteen hundred and forty-two in the general appropriation act for the
retirement of teachers and State employees shall be credited to the State
annuity accumulation fund and the State annuity reserve fund in such
CHS. 325, 326] ACTS OF ASSEMBLY 301

yroportions as shall be determined by the Board of Trustees of the Vir-
xinia Retirement System pursuant to the provisions of sections fifteen
and sixteen of this act. :

The Comptroller shall, from time to time during the biennium be-
sinning July first, nineteen hundred and forty-two, transfer from the
State annuity accumulation fund to the expense fund such funds as may
be necessary for the administrative expenses of the retirement system
over and above the amounts contributed by the members of the retirement
system for this purpose. a

On the last days of September, December, March and June, during
each year of the biennium beginning July first, nineteen hundred and
forty-two, the Comptroller shall transfer to the general fund, from each
special fund in the State treasury out of which any payments to the State
annuity accumulation fund are payable as provided in Section fifteen of
this act, such amount as shall have accrued on account of payments to the
State annuity accumulation fund from such special fund during the pre-
ceding quarter. | ee

All funds paid into the State treasury on account of contributions to
the State annuity accumulation fund by any contributor thereto other
than the State, as provided in sections fifteen and twenty-one of this act,
during the biennium beginning July first, nineteen hundred and forty-
two, shall be credited to the general fund of the State treasury.