The Honorable Jay Bradford State Senator P.O. Box 8367 Pine Bluff, AR 71611-8367
Dear Senator Bradford:
You have requested an Attorney General opinion in response to the following questions:
Are police officers who participate in the DROP program pursuant to A.C.A. § 24-11-434 considered to be retired during their DROP participation, even though they continue to contribute 6% of their salaries to the pension fund, just as they did before participating in DROP?
It is my opinion that police officers who participate in the DROP program pursuant to A.C.A. § 24-11-434 are considered to be retired during their DROP participation, even though they continue to contribute 6% of their salaries to the pension fund, just as they did before participating in DROP.
As you noted in your opinion request, my predecessor previously opined that DROP participants are to be considered retired both for purposes of board membership, see Op. Att'y Gen. No. 97-116 (pertaining to the DROP program for police officers), and for purposes of voting for board members, see Op. Att'y Gen. No. 97-007 (pertaining to the DROP program for fire fighters). I concur in that conclusion, and it applies to your question as well.
Your question appears to indicate a belief that the conclusions reached in Opinions Nos. 97-116 and 97-007 were contingent upon whether the DROP participants in question continued to contribute 6% of their salaries to the pension fund, as they had done prior to their participation in DROP. The conclusions in those opinions, as well as my conclusion herein, are not based upon whether the DROP participants in question continue to contribute a percentage of their salaries to the pension fund. Rather, these conclusions are based upon the fact that because the total package of contributions that are made on behalf of DROP participants differ from those made on behalf of active members, and because their status with regard to the pension fund differs from the status of active members, DROP participants are disposed to have a different level of interest in the pension fund than do active members. The interest of DROP participants in the pension fund is more like that of regular retired members than like that of active members.
Under the provisions of A.C.A. § 24-11-434, both employee and employer contributions are to continue to be made after the employee begins to participate in DROP. A.C.A. § 24-11-434(d)(1). Although the employee's contribution will continue to be paid in full into the pension fund (see Board Rule 10, Section 6 of the Arkansas Fire and Police Pension Review Board),1 the employer's contribution will be divided, with half being paid into the pension fund and half being paid into the officer's DROP account. Moreover, the retirement benefits that would have been payable if the officer had chosen regular retirement will be paid into the officer's DROP account.
This structure of contributions and payments to be made on behalf of DROP participants places DROP participants in a position that is more like that of regular retired members than like that of active members. More specifically, they have a specific present interest in payments that are currently being made out of the pension fund for their specific benefit. In contrast, active members have only a future, general interest in the soundness of the fund.
Therefore, although DROP participants do continue to make employee contributions from their salaries into the pension fund, their interest in the fund is nevertheless more like that of regular retired members than it is like that of active members. It is this factor that differentiates them from active members.
For this reason, I conclude that DROP participants should be considered to be retired, even though they continue to contribute 6% of their salaries to the pension fund, just as they did before participating in DROP.
Assistant Attorney General Suzanne Antley prepared the foregoing opinion, which I hereby approve.
Sincerely,
MARK PRYOR Attorney General
MP:SBA/cyh
1 Section 6 of Board Rule 10 states:
The member continues to make employee contributions during the DROP period. These employee contributions are credited to the pension plan and not to the individual's DROP account.