Honorable Everett L. Anschutz Executive Secretary Opinion No. M-979 Employees Retirement System

of Texas Capitol Station Austin, Texas 78711 Re: Whether Presidential Executive Order No. 11615, dated August 15, 1971, freezing prices, wages, etc., prohibits implementation ofS.B.

Dear Mr. Anschutz: 531, 62nd Leg., R.S., 1971, as it related to benefits and funding increases paid from and into the trust funds administered by the State Employees Retirement System of Texas. We acknowledge receipt ofyour opinion request inwhich you ask the following questions:

“1. Senate Bill 531, 62nd Legislature, Regular Session, provides for an increase inall retirement annuities, effective September 1, 1971, for persons previously retired andthose whbwill; retire thereafter. Does this Presidential Executive Order prohibit the implementation ofthese increases?

“2. We conclude from your Opinion M-919 that the amount available for participation ininsurance premiums for retirees is related tothe availability offunds for payment of such premiums for active employees. Such premiums for retired employees are made part of the benefit increases provided inSenate Bill 531, 62nd Legislature, Regular Session. Does the Presidential Order prohibit the payment of such premiums?

-4772-Honorable Everett L. Anschutz, page 2 (M-979)

“3. Senate Bill 531, 62nd Legislature, Regular Session, provides that both the employee contribution andthe State matching rate under the Retirement Act shall be increased to 6percent of compensation effective September 1, 1971. (The current rate is 5percent. ) Does this Presidential Executive Order prohibit implementation ofthe 6percent contribution andmatching rate?

“4. Senate Bill 531, 62nd Legislature, Regular Session, provides that certain previous State service which had been waived or with respect towhich contributions had been refunded may be established only upon payment of a 5percent penalty interest from date of waiver or refund. (The current penalty interest rate is 2 l/2 percent. ) Does this Presidential Executive Order prohibit implementation ofthe 5percent penalty interest rate? ” While it is the policy ofthis office notto pass upon questions arising under the federal law, particularly inthe absence of aruling or interpretation by the federal agency charged with its administration and enforcement, yet inthis instance you have secured afederal ruling and interpretation by the agency concerned andyou now await only the opinion ofthis office advising you as towhether inour opinion you may properly act inaccordance therewith. You have furnished us with acopy ofyour request for aruling from the Office ofEmergency Preparedness andalso acopy ofthe letter ruling addressed to you under date of October 12, 1971, from the Executive Office ofthe President, Office of Emergency Preparedness, Washington, D.C., from which we quote in part as follows: “Paragraph 501(d) of Economic Stabilization

Circular No. 2provides:

‘Previously planned increases inpension benefits for those retired before the freeze or those about to retire are allowed, but unplanned increases are not allowed. For example, a scheduled increase inpensions which is planned for October 15may also receive this increase. ’

-4773-Honorable Everett L. Anschuts, page 3 (M-979)

“Therefore, it appears from the information provided that the retirement annuity increases provided for inSenate Bill 531 may be paid both tothose who retired before the freeze andthose about to retire during the freeze.

“Paragraph 502(e) of Economic Stabilization Circular No. 3provides:

‘An increase inan employer’s contribution can be made to apension fund to finance abenefit increase which was granted andbecame effective before August 15. ’ “Paragraph 504(l) ofEconomic Stabilization Circular No. 15provides:

‘An employer may increase contributions to apension fund during the freeze, ifthat increase is used to fundbenefit increases that were effective or declared prior toAugust 15. This is true regardless ofwhen increased benefits are to go into effect. Employers may not increase pension contributions to finance benefit increases announced during the freeze.

‘Employers may p:ayincreased benefits schedules to go into effect during the freeze to all retired employees eligible to receive the increase, including employees who retire during the freeze. However, after August 15, employers may not make new benefits increases to go into effect during the freeze. ’

“In line with the above guidance from the Cost of Living Council, itappears that the freeze does not preclude the payment of increased contributions ofthe type you inquired about.

-4774-Honorable Everett L. Anschutz, page 4 (M-979)

“In response to your last question interest rates are not covered by the freeze. However, the President has requested that inthe spirit ofthe freeze, they not be increased. I’ We published Attorney General Opinion No. M-942 (1971), in which we concluded that President Nixon’s recent Executive Order provided for stabilization ofprices, rents, wages and salaries was valid and applicable tothe State ofTexas. Executive Orders are held to have the force and effect of statutes enacted by Congress. Farkas v. Texas Instruments, 375 F. 2d

### 629, 632, cert. den., 389 U.S. 977 (C.A. 5th, 1967. ) Likewise, the federal regulations and rulings ofthe federal agencies charged with enforcement ofthe law will be followed by our courts unless clearly wrong. 42 Am: Jur. 392, Statutes, Sec. 78, pp. 398-400, Sec. 79.

Your questions arise out ofthe definition in Paragraph 501(B) of the Wage andSalary Guidelines which states:

“For purposes ofthe regulation, wage, salary, or other form of compensation includes all forms of remuneration to an employee by an employer for personal services including, but not limited to, premium overtime rate payments, night shift, year-end, and other bonus payments, incentive payments, commissions, vacation andholiday payments, employer contributions to or payments of insurance or welfare benefits or pension funds or annuities; andpayments in kind. (Underlining for emphasis. ) The definition set forth inParagraph 501(B), as interpreted and clarified by the issuance of Economic Stabilization Circular No. ‘s 2, 3, and 15quoted above, is applicable toSenate Bill ,531, 62nd Legislature, Regular Session, 1971, andwe agree with such ruling or interpretation as above set out. You are advised, therefore, that all four ofyour questions should be answered inthe negative and that all provisions ofSenate Bill 531 related toyour questions may be fully implemented on and after the effective dates prescribed therein.

-4775-Honorable Everett L. Anschuts, page 5 (M-979)

SUMMARY The provisions ofSenate Bill 531, 62nd Legislature, Regular Session, 1971, as they relate tothe benefits and funding increases paid from andinto the trust funds administered by the State Employees Retirement System of Texas constitute a “Previously planned increases inpension benefits

. ”within the meaning of Economic Stabilization Circulars No. ‘s 2, 3, and 15, andtherefore, Senate Bill 531 may be fully implemented on and after the effective dates prescribed therein.

The increase in retirement annuities for retirees both before and after September 1, 1971, may be allowed, andthe payment of insurance premiums for retired employees is notprohibited. The Presidential Freeze Order does not prohibit state payment ofthe six percent contribution andmatching rate under the Retirement Act nor implementation ofthe five percent penalty interest rate increase as tothose claiming prior state service previously waived or for which contributions had been refunded.

ey General of Texas Prepared by Kerns Taylor Assistant Attorney General APPROVED: OPINION COMMITTEE W. E. Allen, Acting Chairman Rex White James McCoy Ray McGregor John Banks
-4776-’

.
Honorable Everett L. Anschutz, page 6 (M-979)

SAM MCDANIEL Staff Legal Assistant ALFRED WALKER
.’ Executive Assistant NOLA WHITE First Assistant

-4777-