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TO BE PUBLISHED IN THE OFFICIAL REPORTS
 

OFFICE OF THE ATTORNEY GENERAL
 

State of California
 

JOHN K. VAN DE KAMP
 

Attorney General
 

: 

OPINION : No. 86-707 

: 

of : JANUARY 8, 1987 

: 

JOHN K. VAN DE KAMP : 

Attorney General : 

: 

CLAYTON P. ROCHE : 

Deputy Attorney General : 

: 

THE HONORABLE RICHARD J. MOORE, COUNTY COUNSEL, 

ALAMEDA COUNTY, has requested an opinion on the following question: 

May the increased benefits for retirees provided for in section 31681.52 of 

the Government Code, a provision of the County Employees Retirement Law of 1937, be 

funded from the Supplemental Retiree Benefits Reserve established pursuant to section 

31618 of the Government Code? 

CONCLUSION 

The increased benefits for retirees provided for in section 31681.52 of the 

Government Code may be funded from the Supplemental Retiree Benefits Reserve 

established pursuant to section 31618 of the Government Code. 

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ANALYSIS
 

Alameda County is one of 20 counties which have adopted the County 

Employees Retirement Law of 1937, Government Code section 31450 et seq.1 Under 

that law these 20 counties operate and fund independent retirement systems for 

employees in each county. 

In this request for our opinion we are asked whether a particular 

supplemental benefit for individuals who retired on or prior to June 30, 1971, and which 

may be provided to them at the option of the board of supervisors pursuant to section 

31681.52, may be funded from the Supplemental Retiree Benefits Reserve, a fund 

established pursuant to section 31618. Section 31618.52 provides a permanent increase 

in retirement benefits of between 2% and 10% in increments of 2% to retirees, dependent 

upon the year in which they retired. For retirees who retired on or prior to June 30, 1967, 

the increased benefit is 10%. For those who retired during the 12 months ending June 30, 

1971 the increase benefit is only 2%. 

In resolving this question we will examine the manner in which retirement 

benefits under the 1937 Act, both regular and supplemental, are financed both in counties 

which have adopted and which have not adopted the "alternative financial provisions" of 

sections 31610 through 31619 of the Government Code, which were added in 1983 as 

article 5.5 of the 1937 Act. Counties which have not adopted these provisions still 

operate under article 5. The Supplemented Retiree Benefits Reserve is a fund provided 

for under these new alternative financial provisions of article 5.5. 

The County Employees Retirement Law of 1937 provides retirement 

benefits for county employees (and participating special districts) which are funded by 

employee contributions, employer contributions, and earnings on monies contained in the 

retirement fund. (See generally, §§ 31453, 31580, 31581-31584, 31591-31592.3, 31610-

31619, 31620 et seq.) Regular retirement benefits are funded one-half by the employees' 

contributions and one-half by employers' contributions. In the aggregate they reflect the 

employees' annuity (see § 31457) and an equal employer-provided pension (see § 31471). 

(See also generally section 31673 et seq.). The regular retirement annuity may be the 

"actuarial equivalent" of the employees' contributions, or it alternatively may be a "fixedformula" retirement annuity, based upon a certain percentage of the employees final 

compensation. Alameda County operates under a "fixed- formula" retirement system. 

In addition to the regular retirement allowance, the 1937 Act provides for 

numerous supplemental benefits which are usually provided only if the board of 

Al section references are to the Government Code unless otherwise indicated. 

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supervisors so resolves. These supplemental benefits include those such as placed in 

issue herein, which provide for a permanent addition to previously retired members' 

retirement allowance.2 They also include permanent cost-of-living adjustments (art. 16.5, 

§ 31870 et seq.); retrospective cost-of-living adjustments (art. 16.6, § 31875 et seq.); nonpermanent supplemental cost-of-living adjustments (§ 31681.8); group life and medical 

insurance benefits, (§§ 31691-31692); and a small death benefit for retirees' beneficiaries 

(§§ 31789.1, 31789.2, 31789.12, 31789.13.) 

As noted, in 1983 the Legislature adopted "alternative financial provisions" 

for counties which have adopted the 1937 Act (Stats. 1983, ch. 886) which are 

themselves operative only if adopted by both the county board of retirement and the 

county board of supervisors. (§ 31610.) Thus, the Supplemental Retiree Benefits 

Reserve account is established only in counties which have adopted these new provisions. 

In order to understand the issue presented in this request, that is, the possible use of these 

reserves to fund the supplemental benefits provided for in section 31681.52, the financial 

provisions which these alternative provisions supplant or modify require discussion. The 

discussion will center upon the allocation of so-called "excess interest" earned on 

retirement fund investments, since that "excess interest" is used to fund the new 

Supplement Retiree Benefits Reserve. 

A. ARTICLE 5 COUNTIES 

Counties which have not adopted the alternative financial provisions of 

article 5.5 are governed by the financial provisions found in article 5 of the 1937 Act. 

Under the latter provisions, an article 5 county is directed to obtain at least every three 

years an actuarial evaluation of its retirement system. "Upon the basis of the 

investigation, valuation, and recommendation of the actuary, the board [of retirement] 

shall . . . recommend to the board of supervisors such changes in the rates of interest, in 

the rates of contributions of members, and in county and district appropriations as are 

necessary" to fund the system. "With respect to the rates of interest to be credited to 

members and to the county or district, the board may, in its sound discretion, recommend 

a rate which is higher or lower than the interest assumption rate established by the 

actuarial survey." (§ 31453, as incorporated by reference in § 31581, emphasis added.) 

Employer and employee contributions to a retirement system such as the 

1937 Act system are necessarily dependent upon and a function of accrued liabilities and 

Interestingly, section 31681.52, at issue herein, is only one of nine provisions for 

permanently increasing the retirement allowance of prior retirees by a fixed percentage or a fixed 

amount. (See §§ 31681.1-31681.54.) Additionally, section 31681.7 provides for a temporary 

increase in allowances. 

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3 

assumed income. Accordingly, if the board decides to credit the employer and employee 

contribution accounts with less than the actuarially assumed interest rate (the assumed 

projected earnings of the system's investments), contributions will have to be increased; 

and vice versa. If the governing board fails to credit contributions with the full interest, 

then such interest (after certain allocations to reserves) will be available for the payment 

of benefits from the "advance reserves." 

Sections 31592 and 31592.2 are the key provisions in this respect in article 

5 counties.3 Section 31592 provides that interest not credited to contributions (and 

reserves) shall remain in the retirement fund as a reserve for contingencies, except as 

provided in sections 31529.5 and 31592.2. Section 31592.2 then permits the 

establishment of a county "advance reserves" from excess interest "for the sole purpose 

of payment of the cost of the benefits described in" the 1937 Act. 

Section 31592 provides: 

"Earnings of the retirement fund during any year in excess of the total 

interest credited to contributions and reserves during such year shall remain in the 

fund as a reserve against deficiencies in interest earnings in other years, losses on 

investments and other contingencies, except as provided in Sections 31529.5 and 

31592.2." 

Section 31592.2 provides: 

"In any county, earnings of the retirement fund during any year in excess 

of the total interest credited to contributions and reserves during such year shall 

remain in the fund as a reserve against deficiencies in interest earnings in other 

years, losses on investments, and other contingencies, except that, when such 

surplus exceeds 1 percent of the total assets of the retirement system, the board 

may transfer all, or any part, of such surplus in excess of 1 percent of the said 

total assets into county advance reserves for the sole purpose of payment of the 

benefits described in this chapter. 

"Where the board of supervisors has provided for the payment of all, or a 

portion, of the premiums, dues, or other charges for health benefits, Medicare, or 

the payment of accrued sick leave at retirement to or for all, or a portion, of 

officers, employees, and retired employees and their dependents, from the county 

general fund or other sources, the board of retirement may authorize the payment 

of all, or a portion, of payments of the benefits described in this paragraph from 

the county advance reserves." Section 31529.5 merely provides for payment of 

certain attorneys fees. 

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Accordingly, it is seen that under the foregoing provisions of the 1937 Act 

an article 5 county could "divert" all or virtually all interest income from the retirement 

system accounts which generated that income, and then, after applying the requisite 

amount of income to insure the minimum 1% of assets for the reserve for contingencies, 

allocate all the remaining income to the advance reserves for the payment of benefits. 

In addition to those benefits set forth in paragraph two of section 31592.5, 

supra, at note 3, the 1937 Act in other provisions specifically permits or requires certain 

benefits to be financed from the advance reserves in an article 5 county (or from the new 

Supplemented Retiree Benefits Reserve in an article 5.5 county, to be discussed infra). 

These include some, but not all, of the supplemental benefits already alluded to above. 

With respect to the supplemental benefits which specifically mention the advance 

reserves as a source of funding, some benefits are vested and will require continued 

funding, whereas others are nonvested and may be withdrawn at any time by the board of 

supervisors. 

Thus, group insurance benefits for present or future retirees (or a like 

increase in benefits) may be provided and funded either from employer contributions or 

from the advance reserves in article 5 counties. (See §§ 31691, 31691.1.) These benefits 

are nonvested. (§ 31692.) Likewise, a small death benefit for the benefit of retirees' 

beneficiaries may be financed either from county contributions or from the advance 

reserve, or a combination of both in article 5 counties. (See §§ 31789.1, 31789.2, 

31789.12, 31789.13.)4 These particular death benefits provisions are to be adopted in 

article 5 counties only if it is determined in advance that they may be paid from the 

advance reserves. The code provisions are silent as to which these are to be considered 

as vested or nonvested. 

Of particular significance to our inquiry herein will be cost-of-living 

adjustments. This is so since the section 31681.52 benefits, though not so denominated, 

appear also to be in the nature of such benefits. Cost-of-living benefits are provided for 

generally in article 16.5 of the 1937 Act. Article 16.6 of the Act thereafter additionally 

provides for the adoption of retrospective cost-of-living adjustments. And finally, section 

31681.1 (contained in article 8, which article provides generally for retirement 

allowances) provides for special nonvested supplemental cost-of-living allowances. 

Accordingly, pursuant to article 16.5, cost-of- living adjustments to a 

maximum of 2, 3, 4 or 5 percent (depending upon the code section applicable to the 

Other sections may provide other death benefits at the option of the county which may 

specifically be required to be financed from county or district contributions. (E.g., §§ 31787.6, 

31789.) Other sections may be silent as to the funding source. (E.g., § 31787.5.) 

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county) may be granted based upon the consumer price index. These allowances are 

vested. With respect to financing, section 31873 provides that they shall be funded 

equally between the employer or the contributing employees or by the employer alone. 

However, section 31874 thereafter provides in part that: 

"No provision of this chapter shall prevent or be construed to 

prevent the use and expenditure of surplus described in section 31592.2 [the 

advance reserves] to fund any part or all of any increases in allowance 

otherwise permitted after this article or Article 16.6 (commencing with 

section 31875) or both this Article and Article 16.6 or any of the provisions 

of this article or Article 16.6 have been made applicable." 

Thus, article 5 counties may fund vested cost-of-living adjustments and vested 

retrospective cost-of-living adjustments provided in article 16.6 from the advance 

reserves. 

Finally, with respect to cost-of-living allowances, article 16.5 provides in 

section 31874.3 for supplemental cost-of-living increases similar to those provided for in 

section 31681.8, which also are not vested. This allowance must be paid in article 5 

counties from the advance reserves. With respect to the section 31681.8 supplemental 

allowance, the code provides that benefits may be provided only after advice of an 

actuary that it may be fully funded on a sound actuarial basis, including the use of funds 

provided in section 31592.2, or an increase in the employers contributions, or a 

combination of both. 

The foregoing discussion of supplemental benefits leaves us only with a 

discussion of the supplemental benefits such as are provided for in section 31681.52 of 

the 1937 Act. These benefits provide to prior retirees a permanent increase in their 

retirement allowance analogous to a retrospective cost-of-living adjustment. As already 

discussed above, section 31681.52 provides for an increased retirement allowance of 

between 2% to 10% for persons who retired on or prior to June 30, 1971. As to these and 

similar benefits provided for in the 1937 Act, with the exception of section 31681.7 

benefits (see § 1592.3), the act is silent as to a funding source. However, if adopted by 

the board of supervisors, the funding, of course, must come from somewhere. 

B. ARTICLE 5.5 COUNTIES 

With this background, we now proceed to article 5.5 of the 1937 Act, added 

in 1983 as sections 31510-31510.9 and renumbered in 1984 as sections 31610-31619. 

(See Stats. 1983, ch. 886; Stats. 1984, ch. 193.) 

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The legislative purpose of the addition of article 5.5 is set forth in section 1 

of chapter 886 as follows: 

"SECTION 1. It is the intent of the Legislature in enacting this act 

to provide alternative provisions to preserve the actuarial integrity of the 

county retirement systems created under the County Employees Retirement 

Law of 1937, to recognize the fiduciary role of the boards of each affected 

county retirement system, and to assist in the orderly and equitable 

disposition of the various county retirement system reserves against 

deficiencies. 

"In enacting this act, the Legislature provides for the augmented 

crediting of interest earnings to various employee, employer and retired 

member accounts in the retirement fund in an effort to assure that the 

accounts are in actuarially sound condition in relation to their current 

liabilities and existing statutory requirements regarding the funding of 

present unfunded actuarial obligations. 

"It is also the intent of the Legislature to not disrupt the 

supplemental benefits currently being provided to county retirees with 

funds from various retirement system reserves. In providing a limit on 

contingency reserve accounts created by the added Section 31510.6 of the 

Government Code, it is the intent of the Legislature that any funds currently 

in reserve against deficiencies accounts which exceed the maximum 

prescribed by this act, on the effective date of this act, be transferred to the 

Supplemental Retiree Benefits Reserve created by the amended Section 

31510.8 of the Government Code, to be disbursed at the discretion of the 

affected county board of retirement for the purpose of providing benefits to 

present and future retirees and beneficiaries." 

The basic change effected by chapter 5.5 was to require that income at the 

full actuarial rate be credited to accounts to pay existing liabilities rather than to reserve 

accounts which could be used to fund additional benefits. It is only that part of the 

income which exceeds the full actuarial rate which may be placed in reserve accounts 

under chapter 5.5. 

A brief outline of some of the more salient provisions of article 5.5 is as 

follows: 

1. Section 31453 setting forth the duties of the county to obtain an actuarial 

evaluation was rendered inoperative in article 5.5 counties. Likewise, the sections 

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providing for crediting of interest to various fund accounts, the establishment of a reserve 

for contingencies, and the establishment of county advance reserves were rendered 

inoperative in such counties. (§ 31510; now § 31610.) 

2. A section similar to section 31453 requiring an actuarial evaluation at 

least every three years was added for article 5.5 counties. The main difference is the 

addition of a proviso that the retirement board "[i]n making recommendations to the 

board of supervisors [as to changes in the rates of interest, member contribution rates, and 

requisite county and district appropriations] . . . shall act with the care, skill, prudence 

and diligence under the circumstances then prevailing that a prudent person acting in a 

like capacity and familiar with such matters would use in the conduct of an enterprise of a 

like character and with like aims." (§ 31510.1, now § 31611.) In short, a "prudent man" 

rule is set forth in article 5.5 for the board of retirement. 

3. Interest at the actuarial rate (defined in § 31510.2; now § 31612), or the 

highest interest possible if net earnings are lower, is to be credited semi-annually to all 

contributions, reserves and accounts in the retirement fund. (§ 31510.5; now § 31615.) 

4. Thereafter, net earnings are to be credited to the Contingency Reserve 

Account in an amount to insure that such account remains at no less than 1 percent and 

no more than 3 percent of the retirement system assets. This reserve is not available for 

the payment of benefits, but is a reserve against deficiencies in interest earnings, losses 

on investments and certain other contingencies. (§ 31510.6; now § 31616.) 

5. Thereafter, any remaining net earnings shall be used to pay cost-ofliving contributions under article 16.5 in counties which had, prior to January 1, 1983, an 

employer-employee agreement that a fixed part of such contributions should come from 

interest earnings (the "advance reserves"). (§ 31510.7; now § 31617.) 

6. Thereafter, pursuant to section 31618, 50 percent of the remaining net 

earnings are to be credited to a new Supplemental Retiree Benefits Reserve. This 

provision is the focus of this opinion request. Section 31510.8, now section 31618, 

provides (with numbering changes): 

"The board shall establish a Supplemental Retiree Benefit Reserve in 

the retirement system consisting of any amount previously in the reserve 

against deficiencies, which on the date of adoption of this article, exceeds 3 

percent of the assets of the retirement fund, or any lesser amount, as 

determined by the board. In no event, however, shall the balance of the 

Contingency Reserve Account be reduced below 1 percent of system assets 

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for this purpose. The Supplemental Retiree Benefit Reserve shall be used 

only for the benefit of retired members and beneficiaries. 

"Commencing on the date of adoption of this article, there shall be a 

semiannual transfer into this reserve of 50 percent of the balance of net 

earnings, as defined in Section 31613, after crediting all accounts pursuant 

to Section 31615, rebuilding the Contingency Reserve Account pursuant to 

Section 31616 and paying the part of the cost-of-living contributions 

pursuant to Section 31617, if applicable. 

"The distribution of the Supplemental Retiree Benefits Reserve shall 

be determined by the board." 

(Emphasis added.) "Board" as used in this section means board of retirement. (See 

§ 31459.) 

7. And finally, the remaining 50% of the net interest income is to be 

credited to the accounts in the retirement system in the same manner as in "3" supra, that 

is to all contributions, reserves and accounts. However, no further credit is to be made to 

the Contingency Reserve Account or the Supplemental Retiree Benefits Reserve. 

In addition to adding the provisions of article 5.5 to the 1937 Act, chapter 

886, Statutes of 1983, also amended sections 31681.8, 31691, 31691.1, 31789.1, 31789.2, 

31874 and 31874.3, the provisions relating to supplemental benefits which were 

discussed at length above. These sections were amended to provide that in counties 

which adopt article 5.5, that in lieu of utilizing the "advance reserves" to pay benefits 

where permitted or required, the new Supplemental Retiree Benefits Reserve should be 

used instead. For example, section 31681.8, relating to nonvested supplemental cost-ofliving adjustments, was amended to add the following: 

"Upon adoption by any county providing benefits pursuant to this 

section, of Article 5.5 (commencing with Section 31510) of this chapter, 

the board of retirement shall, instead, pay those benefits from the 

Supplemental Retiree Benefits Reserve established pursuant to section 

31510.8." 

And, for example, section 31874, found in article 16.5, relating to vested cost-of-living 

adjustments was amended to add: 

"Except in a county of the first class, upon adoption by a county 

providing increases in allowances pursuant to this article, of Article 5.5 

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(commencing with section 31510) of this chapter, only that portion of the 

increases in allowances which is paid from surplus earnings described in 

Section 31592.2 shall be paid, instead, from the Supplemental Retiree 

Benefits Reserve established pursuant to section 31510.8." 

In summary as to both article 5 counties and the new article 5.5 counties, it 

is seen that: 

1. The financial provisions of article 5 do not require the board of 

retirement to allocate any specific amount of interest income of the retirement funds to 

the employer, employee or reserve accounts other than that necessary to maintain the 

reserve for deficiencies at a 1 percent of assets level. Thus, large quantities of interest 

may be credited to the "advance reserves" account. That account is available for the 

payment of "benefits described in" the 1937 Act. Where interest in excess of the 

actuarial assumption rate is allocated to and utilized for the payment of those benefits, an 

increase in the contribution rates of employer and employees would be the natural result. 

Although the law specifically permits or specifically requires some 

supplemental benefits to be financed from the advance reserves, the law is silent as to the 

source of funding for the type of supplemental benefits at issue herein. Funding must be 

provided from some source, however, whether from contributions or the advance 

reserves. 

2. In contrast to article 5, under which the bulk of interest income may 

possibly be treated as "excess income" and made available for the immediate payment of 

new benefits, the "alternative financial provisions" of article 5.5 have as a declared 

legislative purpose to provide for the orderly and equitable distribution of earnings from 

the retirement system. Accordingly, article 5.5 requires that interest at the full actuarial 

rate be first credited to the retirement system accounts (contributions, reserve and other 

accounts) before there may be any further distribution of income. Thereafter interest is 

distributed sequentially to (1) a Contingency Reserve Account which is to be at least 1 

percent and no more than 3% of the system's assets; (2) then to fund cost-of-living 

increases which by contract were required to be financed from excess interest; (3) then 50 

percent of the remaining interest to the Supplemental Retiree Benefits Reserve for the 

benefit of retired members and; (4) then the remaining 50% to contribution and other 

remaining accounts of the retirement system. 

Additionally, article 5.5 in furtherance of its intent to recognize the 

fiduciary role of the bond of retirement, inserts into the law a "prudent man" rule with 

respect to the board's fiscal recommendations to the board of supervisors. 

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C. RESOLUTION OF THE QUESTION
 

Having outlined the basic financial provisions under which article 5 and 

article 5.5 counties operate, we now reach the issue presented. This is whether the 

increased benefits for retirees provided for in section 31681.52 may be funded in an 

article 5.5 county, such as Alameda County, from the Supplemental Retiree Benefits 

Reserve established pursuant to former section 31510.8, now section 31618. Section 

31681.52 provides in full: 

"Every retirement allowance or optional death allowance, including 

an allowance payable to a survivor of a member, payable to or on account 

of any member of this system or of a superseded system who has been or 

was retired for service is hereby increased as follows: 

Period during which retirement Percentage of increase in 

became effective monthly retirement 

allowance 

On or prior to June 30, 1967 . . . . . . . . . . . . . 10% 

12 months ended June 30, 1968 . . . . . . . . . . . 8% 

12 months ended June 30, 1969 . . . . . . . . . . . 6% 

12 months ended June 30, 1970 . . . . . . . . . . . 4% 

12 months ended June 30, 1971 . . . . . . . . . . . 2% 

"In no event shall any allowance be increased by an amount greater 

than seventy-five dollars ($75) a month. A member with credit for 10 or 

more years of service in the system shall receive not less than twenty-five 

dollars ($25) a month. 

"This section shall not be operative in any county until such time as 

the board of supervisors shall, by ordinance adopted by a majority vote, 

make the provisions of this section applicable in such county." 

As noted, this provision is one of a number of similar provisions in the 1937 Act which 

provide for a permanent increase in retirement allowances for prior retirees and as to 

which the act is silent as to a funding source. 

Returning to section 31618, the provision which establishes the 

Supplemental Retiree Benefits Reserve, we see that the section provides, inter alia, that: 

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1. "The Supplemental Retiree Benefit Reserve shall be used only for the 

benefit of retired members and beneficiaries." 

2. "The distribution of the Supplemental Retiree Benefits Reserve shall be 

determined by the Board [of retirement]." 

Accordingly, the clear and unambiguous language of section 31618 would 

appear to permit the board of retirement, in its discretion, to utilize the Supplemental 

Retiree Benefits Reserve for the section 31681.52 benefits. There is nothing in the 

language of section 31618 which would indicate a legislative intent to exclude such 

benefits from its scope: 

"In construing a statute 'we begin with the fundamental rule that a 

court "should ascertain the intent of the Legislature so as to effectuate the 

purpose of the law;"' (Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 

Cal.3d 222, 230 [110 Cal.Rptr. 144, 514 P.2d 1224]; Select Base Materials 

v. Board of Equal. (1959) 51 Cal.2d 640, 645 [335 P.2d 672].) 'An equally 

basic rule of statutory construction is, however, that courts are bound to 

give effect to statutes according to the usual, ordinary import of the 

language employed in framing them.' (Rich v. State Board of Optometry 

(1965) 235 Cal.App.2d 591, 604 [45 Cal.Rptr. 512]; Moyer v. Workmen's 

Comp. Appeals Bd., supra, 10 Cal.3d, at p. 230.) Although a court may 

properly rely on extrinsic aids, it should first turn to the words of the statute 

to determine the intent of the Legislature. (People v. Knowles (1950) 25 

Cal.2d 175, 182 [217 P.2d 1]; Tracy v. Municipal Court (1978) 22 Cal.3d 

760, 754 [150 Cal.Rptr. 785, 587 P.2d 227].) 'If the words of the statute are 

clear, the court should not add to or alter them to accomplish a purpose that 

does not appear on the face of the statute or from its legislative history.' 

(People v. Knowles, supra, 35 Cal.2d, at p. 183; Rich v. State Board of 

Optometry, supra, 235 Cal.App.2d, at p. 604.)" (California Teachers Assn. 

v. San Diego Community College District (1981) 28 Cal.3d 692, 698.) 

Several arguments, however, have been suggested as reasons for deviating 

from the plain wording of section 31618. The first arises from a letter from Senator 

Newton R. Russell, dated October 19, 1982 to "Interested parties who participated in 

systems created under the County Employees' Retirement Act of 1937." We are advised 

that this letter was a prelude to the introduction of the bill by Senator Russell which 

eventually became article 5.5. In that letter he stated, inter alia: 

". . . My goal has been, and still is, to allow affected counties to 

continue to provide the benefits they are now funding from 'reserves' to 

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current retirees, but not to expand those benefits from this funding source. 

It is my hope that the method of funding benefits to retirees will be 

eventually scaled down and ultimately eliminated by a more actuarially 

traditional source . . . ." 

Assuming that to fund the section 31681.52 benefits from the Supplemental Retiree 

Benefits Reserve would constitute such an expansion of the use of reserves, Senator 

Russell's letter still is not relevant to determining the intent of the Legislature as a whole. 

As stated in California Teachers' Assn. v. San Diego Community College Dist., supra, 28 

Cal.3d at pages 699-700; quoting from In re Marriage of Bouquet (1976) 16 Cal.3d 583, 

589-590: 

"The district contends that the use of Senator Rodda's statement 

would violate well-settled principles of statutory construction. We agree. 

'In construing a statute we do not consider the motives or understanding of 

individual legislators who cast their votes in favor of it [Citations.] Nor do 

we carve an exception to this principle because the legislator whose 

motives are proffered actually authored the bill in controversy [Citation]; 

no guarantee can issue that those who supported his proposal shared his 

views of its compass.' . . ." (Emphasis added; See also Flood v. Wyeth 

Laboratories, Inc. (1986) 183 Cal.App.3d 1272, 1280.) 

It is, however, urged that this same "philosophy" as set forth in Senator 

Russell's letter is found in the declaration of legislative intent set forth in section 1 of 

chapter 886, Statutes of 1983, which enacted, article 5.5, where the Legislature declared 

in part: 

"It is also the intent of the Legislature to not disrupt the 

supplemental benefits currently being provided to county retirees with 

funds from various retirement system reserves. . . ." 

This legislative purpose is, of course, manifest and carried out in the amendments to 

sections 31681.8, 31691, 31691.1, 31789.1, 31789.2, 31874 and 31874.3, discussed 

above. Thus, where these statutes permitted or required certain benefits to be funded 

from the advance reserves in article 5 counties, the Legislature amended the law to 

provide that they should thereafter be funded from the Supplemental Retiree Benefits 

Reserve in counties which adopted article 5.5. 

It is urged, however, that the benefits provided by these sections set the 

parameters for and accordingly limit the benefits which may be financed from the new 

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5 

reserves provided in section 31618 for retirees; that accordingly section 31618 reserve 

funds are not available for the 31816.52 benefits at issue herein. 

However, since the declared legislative intent has been adequately carried 

out through express amendments to the law, we do not believe we should infer an 

additional, unexpressed intent. In short, we do not believe that a possible "philosophy" to 

be gleaned from one statement in the declaration of legislative intent set forth above may 

be used to nullify the plain meaning of section 31618. We believe it would be a 

"quantum leap" to state that the amendment to the seven specific provisions in 1983 

constituted a limitation on an eighth provision, that is, section 31618. Had the 

Legislature intended such a limitation, it could have said so. 

Had existing law in 1983 limited the use of the advance reserves to the 

seven specific provisions amended in 1983, the "limitation argument" would have much 

greater force. However, there is no statutory law, case law or opinions of this office 

which provides such a limitation. Nor have we been supplied with or discovered any 

evidence that the Legislature understood that such a limitation existed when it enacted 

article 5.5. Nor does the language of the section which establishes the advance reserves 

indicate such a limitation when it states that the advance reserves are "for the sole 

purpose of payment of cost of the benefits described in" the 1937 Act. (§ 31592.2.) Nor 

do we have any evidence that the advance reserves was not used in some counties to fund 

benefits such as provided for in section 31618.52. Although Alameda County may not 

have done so, other 1937 Act counties may have.5 

Accordingly, since we do not know what other counties may have been doing in this 

regard, it is also difficult to adopt or agree with the argument that to fund section 31681.52 

benefits would constitute an expansion of benefits paid from reserves (See argument re Senator 

Russell's letter, discussed ante.) 

Furthermore, we have also examined the staff reports prepared for the various legislative 

committees as the bill which became article 5.5 proceeded through the Legislature in 1983. We 

found nothing therein which demonstrated an understanding by the Legislature that the advance 

reserves were limited to certain enumerated specific benefits. 

Significantly, the section 31681.52 benefits are really cost-of-living adjustments, but not 

so denominated. In both article 5 counties and article 5.5 counties it would appear that counties 

which have not already adopted the cost-of-living adjustment provisions may still do so. These 

may be financed from the advance reserves or the Supplemental Retiree Benefits Reserve even 

where such benefits are vested. 

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We, therefore, do not adopt this "limitation argument." In rejecting this 

argument we note that although section 31618 provides that the Supplemental Retiree 

Benefits Reserve "shall be used only for the benefit of retired members and beneficiaries" 

the statement of legislative intent does not restrict that benefit to future retirees. Section 

1 of the statute states that these benefits are "to be disbursed at the discretion of the 

affected county board of retirement for the purpose of providing benefits to present and 

future retirees and beneficiaries." (Emphasis added.) To grant prior ("present") retirees 

benefits such as provided for in section 31816.52 certainly would be in furtherance of 

such legislative purpose. 

In addition to the "limitation argument" rejected herein, it is urged that the 

Legislature could not have intended that section 31861.52 benefits could be funded from 

the Supplemental Retiree Benefits Reserve since such would also run counter to the 

legislative purpose in 1983 of improving the actuarial soundness of the 1937 Act 

retirement systems. This argument is that benefits such as section 31681.52 benefits, 

once granted, are permanent in nature. Accordingly, they should not be funded from an 

account such as the Supplemental Retiree Benefits Reserve, which is subject to the 

vagaries of the market place. In responding to this suggested argument, we reiterate 

below the statement of legislative purpose found in paragraph 2 of section 1 of the 

statute: 

"In enacting this act, the Legislature provides for the augmented 

crediting of interest earnings to various employee, employer and retired 

member accounts in the retirement fund in an effort to assure that the 

accounts are in actuarially sound condition in relation to their current 

liabilities and existing statutory requirements regarding the funding of 

present unfunded actuarial obligations." 

Again, it is seen that the argued for legislative purpose is adequately carried 

out through the express provisions of article 5.5, which provide for sequentially "the 

augmented crediting of interest to various employee, employer and retired member 

accounts." There is nothing in the statement of legislative purpose which states that only 

certain types of benefits may be paid to present retirees from the augmented account for 

retirees. It is to be emphasized that benefits such as section 31681.52 benefits are 

provided for by law and must be funded in some manner. As to current employees, the 

statutory scheme appears to contemplate that their contributions be used only for 

retirement benefits for the contributing employees. (See § 31620 et seq.) Accordingly, 

under such statutory scheme the only remaining choices for funding benefits such as the 

section 31681.52 benefits would be either from employer contributions or from reserves 

generated from interest income. 

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In our view, to fund these benefits from reserves with the concomitant 

decrease in employer contributions requirements is proper. This is evident from article 

XVI, section 17 of the California Constitution which provides that the investment of 

retirement funds to aid in reducing employer contributions is a legitimate fiduciary 

purpose. Thus article 16, section 17 provides in part: 

"Notwithstanding provisions to the contrary in this section and 

Section 6 of Article XVI, the Legislature may authorize the investment of 

moneys of any public pension or retirement system, subject to all of the 

following: 

"(a) The assets of a public pension or retirement system are trust 

funds and shall be held for the exclusive purposes of providing benefits to 

participants in the pension or retirement system and their beneficiaries and 

defraying reasonable expenses of administering the system. 

"(b) The fiduciary of the public pension or retirement system shall 

discharge his or her duties with respect to the system solely in the interest 

of, and for the exclusive purposes of providing benefits to, participants and 

their beneficiaries, minimizing employer contributions thereto, and 

defraying reasonable expenses of administering the system. . . ." (Emphasis 

added.) 

Insofar as it may be urged that to fund permanent benefits from the 

Supplemental Retiree Benefits Reserve is actuarially unsound, we offer in response that 

section 31611 requires a reevaluation of the actuarial soundness of the retirement system 

at least every three years. If the use of the Supplemental Retiree Benefits Reserve proves 

inadequate to fund section 31681.52 benefits, the board of retirement can recommend to 

the board of supervisors that the employer's contribution be increased to fund them. (Cf. 

§ 31681.8.) Again, however, we do not believe we can infer a limitation on the use of 

these reserves based upon the broad statement of legislative intent quoted above 

regarding the intent to augment reserve accounts, which intent is adequately carried out in 

the express provisions of law. 

Finally, it is urged that to fund section 31681.52 benefits from the 

Supplemental Retiree Benefits Reserve would be unfair to other current retirees who do 

not receive such benefits. However, we are cited to no law, nor are we aware of any law, 

which requires such reserve funds to be distributed on a "per capita" basis. The law in 

section 31618 merely provides that the Supplemental Retiree Benefits Reserve shall be 

used for the benefit of present and future retirees. By a parity of reasoning, it would also 

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seem unfair to provide any benefits even to all present retirees, since that would reduce 

the reserves for future retirees who should also have their "per capita" share of the fund. 

In summary, we conclude that the literal wording of section 31618 permits 

the increased benefits for retirees provided for in section 31681.52 to be funded from the 

Supplemental Retiree Benefits Reserve. We believe that it would be pure speculation to 

conclude that the Legislature intended to prohibit the use of that reserve for such benefits, 

leaving them to be funded solely from employer contributions. 

***** 

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