June 17, 1999
Official Opinion 99-10
- To
- Director
Employees' Retirement System - Re
- The right to receive an actuarially reduced retirement allowance upon attaining twenty-five (25) years of service, provided for in O.C.G.A. § 47-2-120(e), is not a new "benefit" that has accrued and, therefore, is not proscribed by O.C.G.A. § 47-2-70(c).
This office is in receipt of your request for an opinion as to whether a member of the retirement system, who was not actively employed by a state agency in July of 1998, is entitled to retire based upon the adoption of O.C.G.A. § 47-2-120(e). This question arises out of a request by a former Attorney General to retire effective December 1, 1998.
Reviewing the relevant facts as I understand them, the former Attorney General resigned from his position and from state employment in May of 1997. At that time, the retirement system deemed him to be eligible to vest his right to a service retirement allowance under the provisions of O.C.G.A. § 47-2-122. As of the date of his resignation from state employment, he was credited with twenty-five (25) years of service based on his accumulation of service credits and the amount of forfeited leave certified by the Law Department pursuant to O.C.G.A. § 47-2-91. Although he is less than age sixty (60), he filed an application for retirement, to be effective December 1, 1998, based upon his 25 years of service, relying specifically on O.C.G.A. § 47-2-120(e).
Although first introduced in the 1997 session of the General Assembly, Subsection (e) of O.C.G.A. § 47-2-120 was passed and adopted in 1998, with a specific effective date of July 1, 1998. 1998 Ga. Laws 154, 155. Prior to its adoption, no member of the retirement system could retire prior to attaining age 60 unless he or she had at least thirty (30) years of creditable service. O.C.G.A. § 47-2-120(c). By adoption of the 1998 amendment, a member under age 60 may retire with 25 years of service although the retirement allowance to which the member is entitled is the reduced actuarial equivalent of what he or she would have received if he or she had accrued 30 years of service. Specifically, that Subsection provides as follows:
[i]n the case of any member who has at least 25 but less than 30 years of creditable service and who has not reached the age of 60 years upon retirement, the service allowance set forth in subsection (a) of this Code section shall be reduced by an actuarial equivalent . . .
O.C.G.A. § 47-2-120(e) (emphasis added).
Reviewing Subsection (e), there is nothing in its language which limits its application other than that it is available only to a “member.” O.C.G.A. § 47-2-120(e). Under the statute governing the Employees' Retirement System (ERS), an individual remains a member until he or she (1) retires; (2) withdraws contributions; or (3) “renders less than one year of service within a period of five consecutive years as a member.” O.C.G.A. § 47-2-70(c). Since the former Attorney General did not retire, withdraw contributions or render less than one year of service within a period of five consecutive years as a member, there is nothing in Subsection (e) which would preclude its use in this factual scenario.
The only provision which even arguably could have a preclusive effect is found elsewhere in the retirement code in the portion of Subsection (c) of O.C.G.A. § 47-2-70 which provides that “[n]o benefit under the retirement system shall accrue to a member’s account while he is not in service as an employee.” O.C.G.A. § 47-2-70(c) (emphasis added). In this case, the former Attorney General was not in service as an employee after May of 1997; and therefore, although a “member,” he was not in service as an “employee” upon the July 1, 1998, effective date of Subsection (e). The dispositive issue in this matter is whether the ability of an otherwise vested member, under age 60, to retire with 25 years of service is a “benefit” proscribed by this Subsection.
Frequently, in discussing entitlements of a member of the retirement system, the terms “benefits” and “rights” are used conjunctively, but distinctly. See, e.g., O.C.G.A. §§ 47-1-22, 47-1-22.1, 47-2-28. Because of their frequent conjunctive use, the terms are also often thought of as interchangeable. However, as used both in the statute and in court decisions about the retirement statutes, the term “benefit” more aptly describes member entitlements such as pensions, annuities, cost of living adjustments, refunds, and interest while the term “right” is more aptly restricted to those member entitlements that accrue as a result of participating in the retirement system while a statute is in force, which may include the right to a benefit.
There is no statutory definition of the term “benefit” in the ERS statute. However, the term can be found elsewhere in the definitional provisions of the ERS statute such that one can conclude that the term “benefit” is a pension, annuity, or retirement allowance. See O.C.G.A. § 47-2-1(7) (“’Beneficiary’ means any person in receipt of a pension, an annuity, a retirement allowance, or other benefit under this chapter.”) See also O.C.G.A. § 47-2-1(33) (“’Retirement allowance’ means the sum of the annuity and the pension, or any optional benefit payable in lieu thereof.”); O.C.G.A. § 47-2-30 (Cash deposits must be maintained to pay benefits – “pensions, annuities, and other payments.”); O.C.G.A. § 47-2-56 (“[T]he payment of all pensions, annuities, retirement allowances, refunds, and other benefits granted under this chapter shall be obligations of the pension accumulation fund.”). Similarly, the Code Section which specifically authorizes post-retirement benefit adjustments refers to making an adjustment to the monthly benefit amount of the retirement allowance. O.C.G.A. § 47-2-29. This office has also previously concluded that the term “benefit” used in Subsection (c) of O.C.G.A. § 47-2-70 included the contributions and interest that accrue to a member’s account. See 1971 Op. Att’y Gen. 71-26, p. 37 (“[C]ontributions and interest are all that accrue to a member’s account, . . . [therefore,] it necessarily follows that the word ‘benefit’ must be construed to mean ‘regular interest.’”)
On the other hand, it is well established that the courts of Georgia deem a member of the retirement system to be vested with any right that is created by a retirement statute if the member is contributing to the system when the statute is enacted, even if the statute is later repealed or amended. See Burks v. Board of Trustees of the Firemen’s Pension Fund, 214 Ga. 251, 253 (1958) (A pensioner’s rights vest as a matter of statutory contract “where contributions are required to the pension fund, and where services are rendered while the pension or retirement statute is in force.”). Accord Evans v. Employees' Retirement Sys., 264 Ga. 729 (1994); Parrish v. Employees' Retirement Sys., 260 Ga. 613 (1) (1990); Swann v. Board of Trustees of Joint Municipal Employees’ Benefit Sys., 257 Ga. 450 (1987); Withers v. Register, 246 Ga. 158 (1980). This vesting of statutory rights occurs even if at the time, the member is not eligible to draw a benefit. Webb v. Whitley, 114 Ga. App. 153, 157 (1966) (Retirement rights become “vested in the . . . [member] immediately upon any participation in active service while the [retirement] statute is in effect, irrespective of whether at the time in question the . . . [member] has completed a sufficient length of service then to be eligible for retirement as a matter of right.”). In fact, apparently relying on this distinction while not explicitly so stating, this office previously reviewed O.C.G.A. § 47-2-70(c) in the context of its application to retired members. In each of those opinions, the office concluded that the preclusion of this Section did not prevent a retired member from claiming entitlement to a right that had accrued prior to retirement even though it had the effect of changing a benefit. 1976 Op. Att’y Gen. 76-58 (retired member not prevented from claiming prior service credit which was available to him prior to retirement); 1977 Op. Att’y Gen. 77-38 (former member entitled to a recalculation of benefits for unclaimed military service). As discussed above, the former Attorney General was an active member of the system at the time the 25 year provision was enacted and was vested with the right to draw a benefit. See O.C.G.A. § 47-2-70(c).
Considering this distinction in the present context, it must be noted that while Subsection (e) allows a member, under age 60, to retire with 25 years of service, that Subsection also provides that the service retirement allowance to which a member is entitled at that time is a reduced actuarial equivalent of the service retirement allowance otherwise provided. Additionally, the Subsection provides that:
[s]uch reduced amount shall take into consideration the member’s age and number of years of creditable service at the time of retirement and shall be sufficient to permit retirement at such age or with such number of years of creditable service without creating any accrued liability against the retirement system. . . . Any member who retires [under this subsection] shall not become eligible for postretirement benefit adjustments until such time as the member reaches the age of 60 or would have obtained 30 years of creditable service, whichever occurs earlier.
O.C.G.A. § 47-2-120(e) (emphasis added).
When the General Assembly amended O.C.G.A. § 47-2-120, it specified in the preamble that it was amending the code section “relating to retirement allowances.” 1998 Ga. Laws 154. By using that language, one must conclude that the “benefit” that is provided for generally in the Code Section is a “retirement allowance.” The change effectuated by adding Subsection (e) is a change in the years of service requirement, from 30 to 25, to be eligible for receipt of a retirement allowance. The General Assembly has specifically provided that this change in the years of service requirement cannot create any accrued liability to the system above and beyond what was otherwise existent for eligibility generally to a service retirement allowance under O.C.G.A. § 47-2-120(a). There is no question that at the time of his leaving state employment, the former Attorney General was eligible to, and did, vest his right to a service retirement allowance. The passage of O.C.G.A. § 47-2-120(e) does not change his entitlement to a service retirement allowance -- it enables him to receive a reduced actuarial equivalent of the benefit with which he was already vested. Notably, “actuarial equivalent” is statutorily defined to be a “benefit of equal value.” O.C.G.A. § 47-2-1(2). Consequently, the ability to receive a service retirement allowance with 25 years of service is not a new “benefit” which “accrue[d]” and is therefore, not proscribed by O.C.G.A. § 47-2-70(c).
My conclusion that the General Assembly did not intend the change in the years of service for retirement eligibility provided for in Subsection (e) to be the type of benefit proscribed by O.C.G.A. § 47-2-70(c) is further supported by the fact that the General Assembly specifically provided that a person retiring under Subsection (e) “shall not become eligible for postretirement benefit adjustments until such time as the member reaches the age of 60 or would have obtained 30 years of creditable service, whichever occurs earlier.” Clearly, in that sentence the “benefit” to be adjusted is the retirement allowance itself. Again, this prohibition is intended to insure that changing the years of service eligibility from 30 to 25 does not have the effect of providing anything greater than the benefit the member is otherwise eligible for as a retirement allowance.
Finally, I am mindful of the well-established principle that retirement statutes are remedial in nature and therefore must be construed in favor of the member of the retirement system. Employees Retirement Sys. v. Baughman, 241 Ga. 339 (1978); Goodwin v. Employees Retirement Sys., 156 Ga. App. 558 (1980). Therefore, based on my analysis of the legislative and judicial usage of the term benefit and the specific language of Subsection (e), it is my official opinion that the right to receive an actuarially reduced retirement allowance upon attaining twenty-five (25) years of service, provided for in O.C.G.A. § 47-2-120(e), is not a “benefit” that is proscribed by O.C.G.A. § 47-2-70(c).
Prepared by:
SUSAN L. RUTHERFORD
Senior Assistant Attorney General