The Honorable Randy Thurman State Representative P.O. Box 584 Heber Springs, Arkansas 72543
Dear Representative Thurman:
This is in response to your request for an opinion on the following question:
Are the legitimate contributions to approved tax sheltered annuities and cafeteria plans prohibited by statute from being used as reductions in salary in reference to eligibility to draw teacher retirement benefits?
It is my opinion that the answer to your question, as it is phrased above, is "yes". These amounts are "salary" for purposes of determining teacher retirement benefits. They are, by statute, not used to reduce salary for purposes of computing retirement benefits.
The relevant statutory provisions are A.C.A. 24-7-202 (14) and 21-5-903. The first provision is the definition of "salary" for teacher retirement purposes. The relevant language of the section provides:
In determining salary, no consideration shall be given to any nonrecurring single sum payment paid by an employer, any employer contributions to any employee benefit plan, except cafeteria plans as defined in 21-5-901, or any other unusual or nonrecurring remuneration. Money which is in lieu of remuneration and which is used by an employer to purchase a qualified tax-sheltered annuity or a life insurance policy for an employee shall be considered as salary for system purposes. [Emphasis added.]
As can be seen from the statute above, employer contributions for cafeteria plans and tax-sheltered annuities are to be treated as "salary" for system purposes. Additionally,21-5-903, relating specifically to cafeteria plans, provides:
The amount by which an eligible employee's salary is reduced pursuant to a salary reduction agreement shall continue to be included as compensation for the purposes of computing retirement benefits.
A "salary reduction agreement" is one made pursuant to a cafeteria plan. It is thus my opinion that the answer to your question is "yes".
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elan L. Cunningham.
Sincerely,
RON FIELDS Attorney General
RF:arb