Court Opinion

ID: 4132320
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:25:21.30245+00
Date Added: 2024-06-11T14:33:53.879643
License: Public Domain

TWEA%TOIZNE~GENERAL
                   OF'TEXAS
                    AUSTIN.   Trcx~s   78711

                        Sept. 23, 1977

Honorable E. J. Voorhis,               Opinion No. ~-1060
  Acting Director
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.sections 51.352 (6) and 57.358
of the Texas Education Code prevent optional retirement pro-
gram (hereafter ORP) participants from using benefits accrued
under an ORPcontract  to.fund a different ORP contract offered
by the same carrier or by a different one. ,~

     It is the responsibility of the governing body of each
Texas institution of higher education to administer an optional
retirement program and to provide for the purchase of annuity
contracts from a variety of qualified carriers. Education Code
ss 51.353; 51*354. The purpose is to provide retirement bene-
f.its&to teachers and administrators at state supported institu-
tions 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) ~'Optional Retirement Program' .means
          the program under this Subchapter to pro-
          vide fixed or'variable retirement annuities
          which meet the requirements of . . . :tcer-
          tain sections of the Internal Revenue Code
          of 19541, and the benefits of such annuities
          are to be available only upon termina-
          tion of employment in the Texas public
          institutions of higher education, retire-
          ment, death or total disability of the
          participating faculty member.

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

(Emphasis added).

     The other, section 51.358, reads:

              Participation in the Optional Retirement
            Program shall terminate and the benefits
            of such annuities will be available only
            if the participant
            (1) Dies;
            (2) Terminates his employment due to
                 total disability;
            (3) Accepts retirement;
            (4) Terminates employment in the Texas
                 public institutions of higher edu-
                 cation. . . . 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.

(Emphasis added).

     In Attorney General Opinion H-532 (1975) at 3, we said
section 51.358 constitutes.an express limitation on the avail-
ability of benefits for ORP annuitants, and that such benefits
"are unavailable so long as the faculty participant remains an
employee in a public institution of higher education."  Further,
we said:

            [Al participant 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 a public institution of higher educa-
            tion. . . . While participants' rights
            under an ORP vest in one year, theses
            rights are to receive future benefits
            upon termination of,employment by a
            public institution of higher education.
            There is no wright to those future bene-
            fits prior to termination.

Id. at 4.
-

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

       Ouir analysis in R-532 was strongly influenced by Woods
  v. Reillv, 218 S.W.Zd 437 (Tex. 1949), and by Teacher Retire-
  ment Systc~
            am v. Duckworth, 260 S.W.Zd 632 (Tex. Civ. App. --
  Fort Worth 19531,    binion adopted, 264 S.W.Zd 98 (Tex. 1954).
  Citing them, we sa                ctual retirement system
  annuities are to be regarded as "pay withheld to induce
~ continued faithful service," and that cash surrender or loan
  provisions which make contract benefits available to parti-
  cipants before retirement "are inconsistent with the Purpose
  underlying retirement systems, which is to provide 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 ieheh the contri-
 butions and earnings accumulated pursuant to one institutionally-
 approved ORP ctintract are transferred directly to another
 such institutionally-approved contracti You suggest that if
 the transfer is accomplished in a manner 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 'continues to be withheld to induce con-
 tinued faithful service, and no benefits become avaiiabis to a
 participant in a way inconsistent with the provision of security
 upon retirement.

         We agreti. Section 51i358~ ocintefnplatesthat 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 con-
 tracts& Attorhey deheral Opinion R-532 dealt with one aspect
 of that matter when it observed that a "participant may transfer
 programs and receive benefits from both." R-532 (1975) at 3.
 We recognized that a participant might discontinue mdking~con-
 tributions to one program and begin particieating in another
 approved program; and where its hssetsiWere fiat transferred
 from the old program    to,fdnd the new one, that the participant
 could do so without forfeiting future benefits under the old
 contract; -   See Ins. code art. 3*72, S 31~) (i)+
      In Attorney General Opinion R;.532 we were.&&    if the 12~
 prohibited ORP contracts from containing provisiotis for 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 froth one ORR to
 another, Our attention was given to determining if the trans-
 action would allow participants immediatei unfettered access to
 accrued contractual benefits. We did not address the legality
 of other arrangements which might be made in such an event..

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

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

                          SUMMARY

             Neither Texas Bducation Code,~,section
             51.352 (6).,,nor section 51.:358 prohibits
             still-employed participants from trans-
             ferring fromone approlied.op&tionalre:'
             tirement program to another, so,long as
             the actions taken are not subterfuges to
             ~obtaiirpre-termination access~ to ORB
             benefits or assets, land-do not.otherwise
             frustrate the law.

                                -Very       truly yours,

                                         AL. HILL
                                    Attorney General of Texas

~APPROVBD:

 c. ROBERT,HBATH, Chairman,
 Opinion Committee

 jst

                             p. 4355 :':.