# t?

f OFFICEOFTHEATTORNEYGENERALOFTEXAS AlJSTlN

Honorable John S. Rudd, JP., Acting Director Tecoher Retirement System of Texas Austin, Texas

Deer Sir: Opinion Bo. 

### O-4071 Rer Optional selection of service retirement benefit6 under Teacher Retirement Act.
We have reoeived your letter of recent data inwhich you aek the opinion of thla department as to the propor interpretation Of SUb6eotlOn,i',Section 

### 5,of the Teacher Retliwment Act 

### (Article 2922-1, Vernon16 Annotated Civil Statutes). Such Pl’OViEiOll IWAd in m3?t 66 fO11OUEl

"With theprovislon that no,optional aeleotlon Shall be 8ffeCtiV8 

### in oa6e 

### a beneficiary diea.vlthln thirty 

### (30)days after retirement, ma that such 8 beneficiary shall be considered a6 an 

### activemember at the time of death, until the first payment on account ofany eervlce benefit beCOme normally due, anymember may 

### eleot to reoeive his membership sn**nuity** 

### In anannuity payable throughout life, or 

### he may eleot to receive the actuarial 

### equivslent at thst , 

### time,**of**

### hi6membershipannuityinar8dUoedmember6hipannuitypayable throughout life vith theprovi6iOIl that; "Option (1) Upon hi6 death, his reduoed

### mmbership annuity ehall be COntinUed throughout the life of, and paid to, 6uoh ger6On a6he Sha11 nC66iiIat.e 

### by written deEi@XLtiOn duly acknowledged and 

### flledvith the State Board ofTrustees at the time of.his retirement; or "Option (2). Upon his death, one4alf ofhis ceducedmembership annuity shall be continued through the life of, and paid to, such person ashe shall nominate by written dealgnation duly aoknowledged and filed tith the State Board of Trustees at the time ofhis retirement: orHonorable John 9. Rudd, Jr., Pse 2

"Option 

### (3). Some other benefit or benefit.6 shall be paid either to themember, or to euch per6on or persona as he shall nominate, provided such other benefit or benefits, together with the reduced membership annuity, shall be certified by the actuary to be of equivalent actuarial value tohis membership annuity, and approved by the State Board of Trustees.'
Pou wish toknow whether thisprovieion me.snsthat in the event a retired member fsils to file a duly executed eleotlon

_ of themanner inwhich he de6iP66 his annuity to be paid by the time the flrat mohthly payment under suchmembership annuity 16 due, such beneficiary's membership annuity shall automatically become an annuity payable throughout life, and the beneflolary shall not thereafter have the right to elect any other option. If ue answer this question in thenegative, .youvant toknow vhether the Teacher Retirement Board **may**pa66 a regulation to the e6m8 affect.

**At** first glance Itwould appear that the retired member murrtWe s positive election before the first psyment beoomes due. But we do not believe that thiswas the legislative intent.

**A**reading of the provlelons of Article III, Seatlon 488, Constitution of Texas, and the entire Tesdher Retirement Act convinces un that the normal mode of payment of 6n annuity la to the teacher himself on amonthly basis. The object of the act, pri**marily** at least, is for thebenefit and protection of the teacher himself after his retirement. The optional provision6 deal with the payment of a reduced annuity to the retired member and ,to such other person as suchmember de6ignateE. **We**believe that then optional selections are the exceptions from the general rule that the annuity la payable to the retired member throughout hla life. We alao believe that the retired member by silence indicates his election to receive his annuity as one payable throughout hi6 life.
The language is that "until the first payent on sccount of any service benefit becomes normally due, themember may elect to receive his membership annuity in 6.nannuity payable throughout life, orhemey elect to receive the actuarial equivalent ofhis membership in a reduced membership annuity payable throughout life with one of the options. in equal monthly installments. The a:;;~, i~~gyy;;;, . Sec. 1, Subsets.Honorable John 3. Rudd, Jr. Page 

### 3

me tLme given by the statute to select an option if the retired member **desires** to do so la "until the first payment . . .becomea normally due." It laveil settled that an optionmuat be acceptedwithin the time specified or the aooeptance vi11 be Ineffective. In 10 Tex. Jur. 59, it is said?

"Time is generally regarded as being of the eseence of option contracts, **and** the option must be ac6epted.vlthl.nthe time preecribed unless a provielon limiting the timehas been valved." .Therefore,under the statute the selection of the option must be before the firat payment becomes nomally due.

It foflovs fromvhat vehave said thatvhere a beneflolary fulls to elect themuu~er invhloh he desires his annuity to be paid by the time his firstmonthly payment 18 due, hi8 Cmnu1t.gshall be psld 68 an 6nrnl1tgpayable throughout lire. While the language ueed Is certainly susceptible to the interpretatlon which ve have given, ve vould advise the Teacher Retirement Board t0pa88 a BSgLIlatlOIi tO'the z+aLue

effect a0 that til doubt vi>1 be eliminated.

Yours very truly