Dear Mr. Smith:
You have requested an opinion of the Attorney General regarding the legal authority, vel non, of the Ward Two Water District of Livingston Parish ("District") participating in a Simplified Employees' Pension plan ("SEP") for its employees. You state that the District's employees are currently under a mandatory Social Security plan and wish to continue this participation. The District employees are not required to be, and in fact, are not, members of the Parochial Employees Retirement System.
The SEP plan is a recognized pension plan under Section 408(K) of the Internal Revenue Code. Pursuant to, and in accordance with this provision, the District proposes to put up a percentage of the gross wages of its employees, not to exceed 15%. This amount would be in addition to the annual salaries of its employees.
As you are aware, Article VII, Section 14(A) and (B) provide, in pertinent part, the following:
"Section 14(A). Prohibited uses. Except as otherwise provided by this constitution, the funds, credit, property, or things of value of the state or of any political subdivision shall not be loaned, pledged, or donated to or for any person, association, or corporation, public or private . . . .
(B) Authorized uses. Nothing in this Section shall prevent . . . (2) contributions of public funds to pension and insurance programs for the benefit of public employees;"
Clearly, Article VII, Section 14(B) authorizes contributions of public funds to pension programs for the benefit of public employees. As noted above, Section 408(K) recognizes the SEP as a valid pension plan. As such, contributions by the District in such a plan would not violate Article VII, Section 14.
Prior to formulating your SEP plan, we strongly recommend that you contact the Internal Revenue Service to verify the District's status as employer, as well as the employees who must be included as participants. Your inquiries should be directed to Bill Gibbs, (202) 622-6030.
Should you have any additional questions concerning this matter, please do not hesitate to contact us. With kindest regards, I am
Very truly yours,
RICHARD P. IEYOUB Attorney General
BY: ROBERT E. HARROUN, III Assistant Attorney General
RPI/Rob, III/cla