## TWEA%TOIZNE~GENERAL OF'TEXAS

AUSTIN. Trcx~s 78711

Sept. 23, 1977

Honorable E. J.Voorhis, Acting Director Opinion No. ~-1060
State Board of Insurance Re: Change of optional 1110 San Jacinto retirement program contracts Austin, Texas 78786 or carriers.
Dear Mr. Voorhis:
Your office has asked 'if.sections51.352 (6)and 57.358 of theTexas Education Code prevent optional retirement program (hereafter ORP) participants from using benefits accrued under an ORPcontract to.fund adifferent ORP contract offered by the same carrier or by adifferent one. ,~ It is the responsibility of the governing body of each Texas institution of higher education to administer an optional retirement program and toprovide for the purchase of annuity contracts from avariety of qualified carriers. Education Code ss 51.353; 51*354. Thepurpose is to provide retirement benef.its&toteachers and administrators at state supported institutions of higher education. Education Code S 51.351; Attorney General Opinion H-532 (1975).
Of the two Education Code sections,you cite, the first, section 51.352, reads:

In this subchapter:

. . . . (6)~'OptionalRetirement Program' .means the program under this Subchapter toprovide fixed or'variable retirement annuities which meet the requirements of

. . .:tcertain sections of the Internal Revenue Code of 19541, and the benefits of such annuities are to be available only upon termination of employment in the Texas public institutions of higher education, retirement, death or total disability of the participating faculty member.

p. 4352Honorable E. J.Voorhis -Page 2 (H-1060)

(Emphasisadded).
The other, section 51.358, reads:

Participation in theOptional Retirement Program shall terminate and the benefits of such annuities will be available only if theparticipant (1) Dies; (2) Terminates his employment due to total disability; (3) Accepts retirement; (4) Terminates employment in theTexas public institutions of higher education.

. . .Transfers between such institutions mentioned in this section and changes in carriers shall not constitute termination of employment. An institution of higher education shall accept the transfer of any participant's Optional Retirement Program. (Emphasisadded).
InAttorney General Opinion H-532 (1975)at 3,we said section 51.358 constitutes.an express limitation on the availability of benefits for ORP annuitants, and that such benefits "are unavailable so long as the faculty participant remains an employee in apublic institution of higher education." Further, we said: [Alparticipant in the ORS [Optional

Retirement System] has never had the right to surrender his annuity contract for cash or to receive a loan of all or any part of the accumulated contributions during the time he remained an~employee of apublic institution of higher education.

. . .While participants' rights under an ORP vest inone year, theses rights are to receive future benefits upon termination of,employment by a public institution of higher education. There isnowrightto those future benefits prior to termination.
Id. at 4. -

p. 4353Honorable E. J.Voorhis -page 3 (H-1060)

ment Systc~ Fort Worth 19531, Citing them, we sa Ouiranalysis inR-532 was strongly influenced byWoods v. Reillv, 218 S.W.Zd 437 (Tex.1949), and by Teacher Retireamv. Duckworth, 260 S.W.Zd 632 (Tex.Civ. App. --

binionadopted, 264 S.W.Zd 98 (Tex. 1954).

ctual retirement system annuities are tobe regarded as "paywithheld to induce

~continued faithful service," and that cash surrender or loan provisions which make contract benefits available to participants before retirement "are inconsistent with the Purpose underlying retirement systems, which is toprovide security upon retirement." H-532 (1975)at 4.
Your office suggests that the benefits of an ORP contract do not *become available" to the ORP participant iehehthe contributions and earnings accumulated pursuant to one institutionallyapproved ORP ctintractare transferred directly to another such institutionally-approved contracti You suggest that if the transfer is accomplished in amanner that prevents possible diversion or unauthorized use of the accumulated Oti assets, the basic purpose and pian of the retirement system cbntinues to be servedt a, pay 'continuestobewithheld to induce continued faithful service, and no benefits become avaiiabis to a participant inaway inconsistent with the provision of security upon retirement.
We agreti. Section 51i358~ocintefnplates that Ddrtibipants may change carriers or transfer programs from one institution to another. It

### d&%fully provides that such transactions "shall hOt ’&hBtitUte a termination of empioyment," the event which gives participants access to the benefits of their annuity contracts& Attorhey deheral Opinion R-532 dealt with one aspect of thatmatter when itobserved that a "participant may transfer programs and receive benefits from both." R-532 (1975)at 3. We recognized that aparticipant might discontinue mdking~contributions to one program and begin particieating inanother approved program; andwhere itshssetsiWere fiattransferred from the old program to,fdnd the new one, that the participant could do sowithout forfeiting future benefits under the old contract; See Ins. code art. 3*72, S 31~)(i)+

- InAttorney General Opinion R;.532we were.&& if the 12~ prohibited ORP contracts from containing provisiotisfor cash surrenders and contract loans to a still-employed participant and whether this prohibition would affect the transfer of a participant from one institution to another or frothone ORR to another, Our attention was given todetermining if the transaction would allow participants immediatei unfettered access to accrued contractual benefits. We did not address the legality of other arrangements which might bemade in such an event..

p. 4354Honorable E. J.Voorhis -PWe 4 (H-1060)

.<.In our opinion, neither Texas Education Code, section 51.352 (,6),~norsection 51.358 prohibits participants from transferring from one approved optional.retirement program to another, so long as the actions taken are notesubterfuges to obtain pre-termination access toORBbenefits or assets, and do not otherwise frustrate the law. We do not think the authorized transfer of ORB assets to a different, approved ORB gives them such access. Cf. Internal Revenue Ruling 73-124 (change of carriers isneit= a surrender of annuity nor a taxable event).
SUMMARY

Neither TexasBducation Code,~,section 51.352 (6).,,norsection 51.:358prohibits still-employed participants from transferring fromone approlied.op&tional re:' tirement program to another, so,long as the actions taken are not subterfuges to ~obtaiir

pre-termination access~to ORB benefits or assets,land-donot.otherwise frustrate the law. -Very truly yours,

AL.HILL Attorney General
~APPROVBD:

c. ROBERT,HBATH, Chairman, Opinion Committee jst

p. 4355 :':. of Texas