Opinion No. ( 2004 )

The Honorable Sandra Prater State Representative 9202 Sayles Road Jacksonville, AR 72076-8899

Dear Representative Prater:

You have requested my opinion on a matter concerning teacher retirement.

Your question is:

How does Act 1479 of 2003¹ affect an educator who taught in Arkansas for 24 years, was a member of the military and taught two years at a military base in the states, not overseas? Can that educator buy back two years of retirement?

RESPONSE

As an initial matter, I must point out that I am not authorized to render judgment on any particular individual's eligibility for retirement benefits or the amount of benefits to which any individual is entitled. The determination of any individual's eligibility and the computation of benefits available to any individual depends to a great extent upon the facts of each case and must be decided by the board of the retirement system. For this reason, I cannot opine definitively as to the eligibility of the teacher you have described. However, to the extent that you have asked for my interpretation of state law, I will address your question.

Members of the Arkansas Teacher Retirement System are permitted to buy back years of service under certain circumstances. These circumstances are:

• "Military service" (A.C.A. § 24-7-602)

• "Out-of-state service" (A.C.A. § 24-7-603)

• "Overseas service" (A.C.A. § 24-7-604)

• "Service in the General Assembly" (A.C.A. § 24-7-605)

• "Service for leave of absence to obtain advanced degree" (A.C.A. § 24-7-606)

• "Private school service" (A.C.A. § 24-7-607)

• "National Guard service" (A.C.A. § 24-7-610

• "Domestic federal service" (A.C.A. § 24-7-611)

The individual whom you have described may be eligible to purchase credited service under one or more of these provisions. However, the listed types of service are specifically defined in the cited statutes, and these statutes set forth the eligibility requirements for the purchase of these types of credited service. All of the definitions and requirements must be reviewed in light of all of the facts concerning the individual you have described in order to determine whether that individual is eligible to purchase any of those types of credited service.

You have specifically asked about "domestic federal service," created byAct 1479 of 2003, as applied to the individual you described.

It is my opinion that an educator such as the one you have described, assuming that he or she meets all other eligibility requirements and assuming that the service at the military base met the requirements of Act 1479, will be eligible to buy back the years of service rendered at a military base when Act 1479 is implemented.

Act 1479 of 2003 added a new section to the teacher retirement statutes. The new section states in full:

24-7-611. Domestic federal service.

(a) As used in this section, "domestic federal service" means service rendered as a teacher or administrator in any school or similar institution located on a military base or installation that is administered by the Department of Defense.

(b) From and after January 1, 2003, an active member shall be eligible, upon application, to purchase domestic federal service to be credited as service under this section under the following conditions:

(1) The domestic federal service credit to be granted shall be limited to service for which no benefit could be paid by a retirement system similar in purpose to the Arkansas Teacher Retirement System, except social security, if the member left on deposit his or her contributions to the other system, and it shall be limited to ten (10) years;

(2)(A) For each year of domestic federal service credit granted, the member shall pay to the system the employee and employer contributions based on the greater of:

(i) The annual salary received by the member for the member's first full year of credited service that precedes the fiscal year in which the service is purchased; or

(ii) The average of the three (3) highest salaries earned at the time of purchase; and

(iii) Interest from the end of that year of credited service to the date of payment in full.

(B) The contribution rate is the rate in effect at the time of purchase.

(C) If the payment for service under this section is not made in a single lump-sum payment, interest shall accrue from the date of the initial payment to the date of the payment in full.

(D) The payment is credited to the member's account in the members' deposit account and is in addition to regular member contributions;

(3) The domestic federal service shall not become credited service under this system until:

(A) The member payments specified in subdivision (b)(2) of this section have been paid in full; and

(B)(i) The member has established five (5) or more years of actual service exclusive of domestic federal service.

(ii) Should a member cease to be an active member before the domestic federal service has been established as system-credited service, the member payments contributed as specified in subdivision (b)(2) of this section shall be refundable, together with regular interest thereon;

(4) The benefit program to be applied to each year of service credit being granted shall be the benefit program in effect at the time of retirement; and

(5) The other rules and regulations consistent with this section as the Board of Trustees of the Arkansas Teacher Retirement System may from time to time adopt.

(c) An active member may purchase a fraction of a year of domestic federal service to be credited as service under this subchapter in the manner as provided for domestic federal service under subsection (b) of this section if the service meets the following requirements:

(1) The member has not less than thirty (30) days of domestic federal service in a fiscal year; and

(2) The fraction of a year of domestic federal service may be credited in keeping with policies as provided by § 24-7-601.

(d) However, the Board of Trustees of the Arkansas Teacher Retirement System shall not implement this section until the system has reduced its unfunded actuarial accrued liabilities being amortized over a period exceeding thirty (30) years to a level less than the standards prescribed for those public retirement systems under §§ 24-1-104 and 24-1-105.

A.C.A. § 24-7-611 (added by Acts 2003, No. 1479, § 1) (emphasis added).

The above quoted new provision clearly permits the buy-back, by eligible members, of qualifying years of domestic federal service, as that term is defined in the Act, rendered at a domestic military base. However, the Board of the Teacher Retirement System is explicitly prohibited from implementing the new provision "until the system has reduced its unfunded actuarial accrued liabilities being amortized over a period exceeding thirty (30) years to a level less than the standards prescribed for those public retirement systems under §§ 24-1-104 and 24-1-105." See Subsection (d), above. The question of whether this condition has been satisfied is a question of fact that the Board is in the best position to determine. Moreover, the Board's decision as to whether the condition has been satisfied will be upheld unless it is clearly wrong. Cave City NursingHome, Inc. v. Arkansas DHS, 351 Ark. 13, 89 S.W.3d 884 (2002) (applying rule of statutory construction that the manner in which a law has been interpreted by executive and administrative officers is to be given consideration and will not be disregarded unless it is clearly wrong).

Accordingly, I conclude that even if the teacher you have described is deemed to be eligible to buy back the two years of service rendered at a domestic military base, he or she cannot do so until the condition stated in Subsection (d) of the new provision has been satisfied, as determined by the Board.

It should be noted that the chapter of the Code in which all of the credited service provisions cited above are located also contains a generally-applicable provision that is similar to Subsection (d), above. That provision states:

(a) No benefit enhancement provided for by this act shall be implemented if it would cause the publicly supported retirement system's unfunded actuarial accrued liabilities to exceed a thirty-year amortization.

(b) No benefit enhancement provided for by this act shall be implemented by any publicly supported system which has unfunded actuarial accrued liabilities being amortized over a period exceeding thirty (30) years until the unfunded actuarial accrued liability is reduced to a level less than the standards prescribed by § 24-1-101 et seq.

A.C.A. § 24-7-608.

Thus, even if the individual you have described is eligible to purchase credited service other than "domestic federal service," the above quoted provision should be considered to determine whether the availability of that buy-back is subject to this condition.

Assistant Attorney General Suzanne Antley prepared the foregoing opinion, which I hereby approve.

Sincerely,

MIKE BEEBE Attorney General

¹ Your correspondence referred to "Act 1470 of 2003," but I believe that this was a typographical error. The Act you have described isAct 1479 of 2003.