Ms. Cathryn E. Hinshaw, Executive Director Arkansas Local Police and Fire Retirement System Arkansas Local Fire and Police Pension Review Board 2020 West 3rd Street, Suite 300 Little Rock, AR 72205
Dear Ms. Hinshaw:
This is in response to your request for an opinion for an opinion on the operation of Act 839 and 217 of 1979 (codified at A.C.A.24-11-101 — 103 (Supp. 1987) and 24-11-427 (Supp. 1987), respectively), in conjunction with Act 878 of 1987 (now codified at A.C.A. 24-11-432 and 24-11-826 (Supp. 1987)). Specifically you have asked whether the seventy-five percent cap found in Act 878 represents an absolute cap for purposes of that section, or whether the seventy-five percent cap applies relative to any adopted increases in the basic fifty percent pension amount.
It is my opinion that under Act 878 of 1987, seventy-five percent is an absolute cap.
Act 878 is codified at 24-11-432 and 24-11-826 (Supp. 1987). Both sections provide in pertinent part:
(a) Beginning July 1, 1987, in addition to the monthly pension benefits as set forth in (this title), for those police officers hired prior to January 1, 1983, and who continue to work beyond their twenty-fifth year, the member shall receive at age sixty (60) years and thereafter a benefit in the amount equal to one and one-fourth percent (1.25%) of final salary attached to the rank which he may have held in the department preceding the date of retirement multiplied by the number of years of service in excess of twenty-five (25) years, up to a maximum total benefit of seventy-five percent (75%) of final salary.
Generally, the base pension for all members is fifty percent of salary, A.C.A. 24-11-425(f), unless the board of trustees of a pension fund opts to increase the base amount pursuant to24-11-427 or 24-11-102. Under previous law, the benefits could not be increased more than fifty percent of the base amount, meaning total benefits could not exceed seventy-five percent. See A.C.A. 24-11-102(b) (1987) and 24-11-427(d) (1987). These provisions were amended, however, by Act 279 of 1987, and now appear in the supplement to the 1987 Code at 24-11-102 and24-11-427. The new amendments repealed the 75% cap on base benefits.
With respect to those pension funds which have increased regular benefits to more than seventy-five percent of final salary, Act 878, which was adopted to create an incentive for police officers to work past their twenty-fifth year, does not operate to confer any additional benefit. The practical effect of Act 878, as can be seen by applying its formula, is to raise the benefits of twenty-six year veterans of the police force, who are enrolled in pension funds which grant less than seventy-five percent of salary, to seventy-five percent. Otherwise, Act 878 has no operation. Those twenty-six year veterans of police forces whose funds have increased the base rate to eighty-five percent, for example, will still receive eighty-five percent, but they will receive no additional benefits by virtue of Act 878.
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elana L. Cunningham.