The Attorney General of Texas
September 22, 1980
MARK WHiTE
Attorney General
Honorable Kenneth II. Ashworth Opinion No. MW-244
Commissioner
Coordinating Board Re: Whether an optional retire-
Texas College and University System ment program annuity contract may
Austin, Texas 78711 provide for incidental, death benefits
Dear Mr. Ashworth:
You have skmitted the following question for an Attorney General
Opinion:
May an annuity contract which provides for
“incidental” death benefits (as defined by Internal
Revenue Ruling 70-581, the 100 to 1 rule) qualify for
the Optional Retirement Program as &fined in
section 51.352(6) of the Texas Education Code?
The Optional Retirement Program is established by section 51.353 of
the Education Code. “Optional Retirement ProgramV’Is defined by section
51.352(6) as:
the program under this Subchapter to provide fixed or
variable retirement annuities which meet the require-
ments of Sections 403(b) and 401(g) of the Internal
Revenue Code of 1954, as amended, and the benefits
of such annuities are to be available only upon
termination of employment in the Texas public
institutions of higher education, retirement, death or
total disability of the participating faculty member.
An annuity contract providing for “incidental” death benefits as
defined by Revenue Ruling 70-581 is an annuity contract for purposes of
section 403(b) of the Internal Revenue Code. Revenue Ruling 70-581 dealt
with a contract which provided for a life annuity at age 65 and a death
benefit if the person died before retirement equal to $1,000 for each $10 of
expected monthly annuity. The life insurance protection was deemed
incidental when the death benefit did not exceed the 100 to 1 ratio.
In cur opinion, an annuity contract which provides for an incidental
death benefit as defined by Revenue Ruling 70-581 qualifies for the Optional
Retirement Program as defined by section 51.352(6). It meets the
requirements of section 403(b) of the Internal Revenue Code. Section 401(g)
p. 770
Honorable Kenneth H. Ashworth - Page Two (NW-244)
of the code &fines “annuity” for the purposes of section 403 and other sections;
therefore the annuity under consideration neoessarily meets the requirements of
section 401(g). The benefits of the annuity are available on retirement or death. Thus,
we believe the annuity fulfills the requirements of section 51.352(6).
Attorney General Opinion M-595 (1970) construed an earlier version of section
51.352(b) as limited to retirement annuities and not including a life insurance feature.
The predecessor of present section 51.352(6) read as follows:
optional Retirement Program’ means the optional retire-
ment program created by this Act to provide fixed or variable
retirement annuties, including retirement unit annuity certifi-
cates of participaton for faculty members.
Acts 1967, 60th Leg., ch. 729, §2, at 1956. When Attorney General Opinion M-595 was
issued, the definition of “Optional Retirement Program” did not refer to section 403(b)
of the Internal Revenue Code. Nor did it state that annuity benefits might be
available on the participant’s death. We believe the 1973 amendments broadened the
definition of “Optional Retirement Program” so that it can now include the incidental
death benefit ou inquire about. Acts 1973, 63d Leg., ch. 52!, Sl, at 1308. The
construction o P the term “Optional Retirement Program” given m Attorney General
Opinion M-595 (1970) is not applicable to the amended definition.
SUMMARY
An annuity contract which provides for incidental death
benefits as &fined in Internal Revenue Ruling 70-581 qualifies
for the Optional Retirement Program as &fined in section
51.352(6) of the Education Code.
A
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
Prepared by Susan Garrison
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
C. Robert Heath, Chairman
Jon Bible
Susan Garrison
Rich Gilpin
Eva Loutzenhiser
Bruce Youngblwd
p. 771