Court Opinion

ID: 4135768
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:06:00.942092+00
Date Added: 2024-06-11T14:35:14.198352
License: Public Domain

Mr. Frank M. Jackson
Executive Secretary
Teacher Retirement System of Texas
Austin, Texas
                            Opinion No; W~1211
                            Re:   Whether any of the agencies
                                  included inthe Teacher
                                  Retirement System have
                                  the power to contract for
                                  purchase of annuities
                                  for their employees under
                                  the provisions of Sec-
                                  tion 403 (b) of the
                                  Internal Revenue Code
Dear Mr. Jackson:                 and related questions.
          You have requested an opinion from.thls office
on the following questions:
          "Do any of the agencies included
     in the Teacher Retirement System have
     the power to contract for the purchase
     of annuities for their employees under
     the provisions of Section 403 (b) of
     the Internal Revenue Code?
         "In the event that your answer
    to this question Is in the affirmative,
    would the 6% contribution to the
    Teacher Retirement System be based on
    the salary including or excluding the
    deduction made for the purchase of
    such annuity?
          "In the event that your answer to
     the first question Is In the affirma-
     tive, would the retirement benefits
     paid by the Teacher Retirement System
     be based on the salary including or
     excluding the deductions made for the
     purchase of such annuity?"
          In regard to the questions posed, you mentioned
that the Teacher Retirement System includes the public
sChoo1s and institutions of higher education maintained
Honorable Frank M. Jackson, page 2 (WW-,121l)

by the State of Texas and its political subdivisions, the
Texas Education Agency, the Commission on Higher Education,
some of the employees of some of the eleemosynary insti-
tutions, and the administrative office of the Teacher
Retirement System itself. Your initial question deals
with whether these various governmental bodies or
agencies can contract for the purchase of annuities
for their employees under the provlslons of Section 403
(b) of the Internal Revenue Code, (U.S.C.A., Title 26,
par. 403 (b).
          Under such an arrangement the particular body
or agency, as the employer, would divert or deduct a
portion of the employee's salary to be used for the
purpose of purchasing or making premium payments upon
the employee's annuity. If the particular employer
 ualifled as an exempt organization under Section 501
9c) (3) of the Internal Revenue Code (U.S.A.C., Title
26, par. 501 (c) (3), the employee would be able to
avail himself of the benefits of a so-called "tax-
sheltered annuity", and could deduct the premium pay-
ments upon the annuity from his taxable income. Parti-
cipation in such a program on the part of the employee
would be voluntary.
          Section 1 (a) of Article 3.51 of the Insurance
Code, Vernon's Civil Statutes, provides that:
          "The State of Texas and each of
     Its political, governmental and
     administrative subdivisions, depart-
     ments, agencies, association of
     public employees, and the governing
     boards and authorities of each state
     university, college, common and indepen-
     dent school dlstri~ctsor of any other
     agency or subdivision of the public
     school system of the State of Texas
     ame authorized to procure contracts
     insuring their respective employees
         .under a policy or policies of
     iroup health, accident, accidental
     death and dismemberment, and hospital
     surgical, and/or medical expense
     insurance. . . .The employees con-
     tributions to the premiums for such
     insurance . . .may be deducted by the
     employer from the employees salaries
     when authorized in writing by the
Honorable Frank M. Jackson, page 3 (WW-,1211)

     respective employees SO to do.   . . ."
     ‘(Emphasisadded)
          Section 1 of Article 3.50 of the Insurance
Code, Vernon's Civil Statutes, provides that:
          "NO policy of group life insurance
     shall be delivered in this State unless
     it conforms to one of the following
     descriptions:
          II
           . . .
          "(3) A policy issued to an incor-
     porated city, town, or village, an
     independent Scholl district, State colleges
     or universities, any association of State
     employees, any association of State, County
     and City, town or village employees, and
     any association of any combination of State,
     County or City, town or village employees,
     and any Department of the State Government
     which employer or association shall be
     deemed the policy holder to Insure the
     employees , . . for the benefit of per-
     sons other than the policy holder subject
     to the following requirements:
          8,
           . . .
         "(b) The premium for the policy
    shall be paid by the policy holder wholly
    from funds contributed by the Insured
    employees . . . and provided further,
    that the employer may deduct from the
    employees' salaries the required con-
    tributions for the premiums when
    authorized In writing . . ." (Emphasis
    added)
          While Article 3.50 and Article 3.51 of the
Insurance Code would allow the agencies Included within
the Teacher Retirement System to contract for group
health, accident, accidental death and dismemberment,
and hospital, surgical, and/or medical expense
insurance and group life insurance for their employees,
there is a complete lack of statutory authority for these
governmental bodies or agencies to contract for the pur-
chase of annuities for their employees.
Honorable Frank M. Jackson, page 4 (WtJ-1211)

          In turn, the Instant arrangement for the
purchase of or premium payments upon such annuities
contemplates a deduction being made from the employee's
salary by the employer. While payroll deductions may
be made for various classes of employees of the State of
Texas and its political, governmental and administrative
subdivis:ons, departments and agencies, for certain
specified purposes (i.e. group life insurance, Article
3.50 of the Insurance Code, Vernon's Civil Statutes;
group health, acc-ident,accidental death or dlsmember-
ment, and hospital, surgical, and/or medical expense
insurance, Article 3.51 of the Insurance Code, Vernon's
Civil Statutes; purchase of United States Savings Bonds,
Article 6252-3, Vernon's Civil Statutes; teacher retire-
ment benefits, Article 2922-1, Vernon's Civil Statutes;
and state employees retirement benefits, Article 6228a,
Vernon's Civil Statutes), there is a complete lack of
statutory authority for the agencies included within
the Teacher Retirement System to make payroll deduc-
tions for the purpose of purchasing or making premium
payments upon annuities for the employees of such
agencies under the plan,proposed in the instant case.
          The Legislature of the State of Texas has
uniformly specified under what circumstances and con-
ditions the various state agencies and political sub-
divisions may enter Into contracts whereby its employees
may avail themselves of the benefits of certain insurance
and retirement ~programs. In turn, the Legislature of
the State of Texas has uniformly specified under what
circumstances and conditions the various state agencies
and political subdivisions may make payroll deductions
from their employees' salaries. It necessarily follows
that the authority of a state agency or political sub-
division to contract for annuity benefits for its
employees, as in the instant case, or to make payroll
deductions from the salaries of its employees partlci-
pating in such program must be based upon express
statutory authority.
          This position Is further borne out by the langurve
of the Supreme Court of Texas in Fort Worth Cavlary Club v.
Sheppard, 125 Tex. 339, 83 S.W.2d bb0 (19351, where it was
held that:
         "All public offices and officers are
    creatures of law. The powers and duties of
    public officers are defined and limited by
    law. Ey being defined and limited bp law,
Honorable Frank M: Jackson, page 5 (ww-1211)

     we mean the act of a public officer .mustbe
     expressly authorized by law, or implied
     therefrom . . .It follows from the above
     that public officers may make only such
     contracts for the government they represent
     as they are authorized by law to make."
See also State v. Ragland Clinic-Hospital, 138 Tex. 393,
159 S.W.2d 105 (1942).
          Also this office, In Attorney General's Opinion
No. WW-1107 (1961), held that even when an employee of
Dallas County requests and authorizes a payroll deduction
to be paid to the Dallas County Employees Credit Union
a   deduction cannot legally be made unless specifically
autihorizedby statute.
          As such statutory authority Is lacking in respect
to the program set forth herein, we are of the opinion that,
in the absence of statutory authority, the agencies included
within the Teacher Retirement System can not contract for
the nurchase of annuities for their employees under the
arrangement set forth herein. We are,of the further opinion
that, in the absence of statutory authority, the agencies
included within the Teacher Reflrement System can not make
payroll deductions from the employees' salaries for the
purpose of purchasing or making premium payments upon such
annuities under the proposed plan.
          Your Initial question being answered in the
negative precludes the necessity of commenting upon the
second and third questions posed.
                       SUMMARY
          The agencies included within the Teacher
     Retirement System cannot, in the absence of
     statutory authority, .contract for the purchase
     of annuities for their employees pursuant to
     the provisions of Section 403 (b) of the
     Internal Revenue Code.
                              Yours very truly,
                              WILL WILSON
                              Attornev General of Texas

P.H:kh                     By Pat Bailey
                              Assistant
Honorable Frank M. Jackson, page 6 (WW-1211)

APPROVED:
OPINION.COMMITTEE
W. V. Geppert, Chairman
Henry Braswell
Martin DeStefano
Coleman Gay
Iola Wilcox
REVIEWED FOR THE ATTORNEY GENERAL
BY: Houghton Bronwlee, Jr.