TWEA%TOIZNE~GENERAL
OF'TEXAS
AUSTIN. Trcx~s 78711
Sept. 23, 1977
Honorable E. J. Voorhis, Opinion No. ~-1060
Acting Director
State Board of Insurance Re: Change of optional
1110 San Jacinto retirement program contracts
Austin, Texas 78786 or carriers.
Dear Mr. Voorhis:
Your office has asked 'if.sections 51.352 (6) and 57.358
of the Texas Education Code prevent optional retirement pro-
gram (hereafter ORP) participants from using benefits accrued
under an ORPcontract to.fund a different ORP contract offered
by the same carrier or by a different one. ,~
It is the responsibility of the governing body of each
Texas institution of higher education to administer an optional
retirement program and to provide for the purchase of annuity
contracts from a variety of qualified carriers. Education Code
ss 51.353; 51*354. The purpose is to provide retirement bene-
f.its&to teachers and administrators at state supported institu-
tions of higher education. Education Code S 51.351; Attorney
General Opinion H-532 (1975).
Of the two Education Code sections,you cite, the first,
section 51.352, reads:
In this subchapter:
. . . .
(6) ~'Optional Retirement Program' .means
the program under this Subchapter to pro-
vide fixed or'variable retirement annuities
which meet the requirements of . . . :tcer-
tain sections of the Internal Revenue Code
of 19541, and the benefits of such annuities
are to be available only upon termina-
tion of employment in the Texas public
institutions of higher education, retire-
ment, death or total disability of the
participating faculty member.
p. 4352
Honorable E. J. Voorhis - Page 2 (H-1060)
(Emphasis added).
The other, section 51.358, reads:
Participation in the Optional Retirement
Program shall terminate and the benefits
of such annuities will be available only
if the participant
(1) Dies;
(2) Terminates his employment due to
total disability;
(3) Accepts retirement;
(4) Terminates employment in the Texas
public institutions of higher edu-
cation. . . . Transfers between such
institutions mentioned in this section
and changes in carriers shall not
constitute termination of employment.
An institution of higher education
shall accept the transfer of any
participant's Optional Retirement
Program.
(Emphasis added).
In Attorney General Opinion H-532 (1975) at 3, we said
section 51.358 constitutes.an express limitation on the avail-
ability of benefits for ORP annuitants, and that such benefits
"are unavailable so long as the faculty participant remains an
employee in a public institution of higher education." Further,
we said:
[Al participant in the ORS [Optional
Retirement System] has never had the
right to surrender his annuity contract
for cash or to receive a loan of all or
any part of the accumulated contributions
during the time he remained an ~employee
of a public institution of higher educa-
tion. . . . While participants' rights
under an ORP vest in one year, theses
rights are to receive future benefits
upon termination of,employment by a
public institution of higher education.
There is no wright to those future bene-
fits prior to termination.
Id. at 4.
-
p. 4353
Honorable E. J. Voorhis - page 3 (H-1060)
Ouir analysis in R-532 was strongly influenced by Woods
v. Reillv, 218 S.W.Zd 437 (Tex. 1949), and by Teacher Retire-
ment Systc~
am v. Duckworth, 260 S.W.Zd 632 (Tex. Civ. App. --
Fort Worth 19531, binion adopted, 264 S.W.Zd 98 (Tex. 1954).
Citing them, we sa ctual retirement system
annuities are to be regarded as "pay withheld to induce
~ continued faithful service," and that cash surrender or loan
provisions which make contract benefits available to parti-
cipants before retirement "are inconsistent with the Purpose
underlying retirement systems, which is to provide security
upon retirement." H-532 (1975) at 4.
Your office suggests that the benefits of an ORP contract
do not *become available" to the ORP participant ieheh the contri-
butions and earnings accumulated pursuant to one institutionally-
approved ORP ctintract are transferred directly to another
such institutionally-approved contracti You suggest that if
the transfer is accomplished in a manner that prevents possible
diversion or unauthorized use of the accumulated Oti assets,
the basic purpose and pian of the retirement system cbntinues
to be servedt a, pay 'continues to be withheld to induce con-
tinued faithful service, and no benefits become avaiiabis to a
participant in a way inconsistent with the provision of security
upon retirement.
We agreti. Section 51i358~ ocintefnplatesthat Ddrtibipants
may change carriers or transfer programs from one institution
to another. It d&%fully provides that such transactions "shall
hOt’&hBtitUte a termination of empioyment," the event which
gives participants access to the benefits of their annuity con-
tracts& Attorhey deheral Opinion R-532 dealt with one aspect
of that matter when it observed that a "participant may transfer
programs and receive benefits from both." R-532 (1975) at 3.
We recognized that a participant might discontinue mdking~con-
tributions to one program and begin particieating in another
approved program; and where its hssetsiWere fiat transferred
from the old program to,fdnd the new one, that the participant
could do so without forfeiting future benefits under the old
contract; - See Ins. code art. 3*72, S 31~) (i)+
In Attorney General Opinion R;.532 we were.&& if the 12~
prohibited ORP contracts from containing provisiotis for cash
surrenders and contract loans to a still-employed participant
and whether this prohibition would affect the transfer of a
participant from one institution to another or froth one ORR to
another, Our attention was given to determining if the trans-
action would allow participants immediatei unfettered access to
accrued contractual benefits. We did not address the legality
of other arrangements which might be made in such an event..
p. 4354
Honorable E. J. Voorhis - PWe 4 (H-1060)
.<.In
our opinion, neither Texas Education Code, section
51.352 (,6),~nor section 51.358 prohibits participants from
transferring from one approved optional. retirement program to
another, so long as the actions taken are note subterfuges to
obtain pre-termination access to ORBbenefits or assets, and
do not otherwise frustrate the law. We do not think the autho-
rized transfer of ORB assets to a different, approved ORB gives
them such access. Cf. Internal Revenue Ruling 73-124 (change
of carriers is neit= a surrender of annuity nor a taxable
event).
SUMMARY
Neither Texas Bducation Code,~,section
51.352 (6).,,nor section 51.:358 prohibits
still-employed participants from trans-
ferring fromone approlied.op&tionalre:'
tirement program to another, so,long as
the actions taken are not subterfuges to
~obtaiirpre-termination access~ to ORB
benefits or assets, land-do not.otherwise
frustrate the law.
-Very truly yours,
AL. HILL
Attorney General of Texas
~APPROVBD:
c. ROBERT,HBATH, Chairman,
Opinion Committee
jst
p. 4355 :':.
Untitled Texas Attorney General Opinion
Combined Opinion