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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6373 June 17, 1986 RETIREMENT AND PENSIONS: Public School Employees Retirement System--application of 'grandfather section' to designation of dependent of member to receive retirement allowance and to the time for filing for a disability retirement allowance WORDS AND PHRASES 'Benefit' A person who was a nonvested member of the 1945 PA 136, c 1, retirement system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979 may, as a member of the Public School Employees Retirement Act of 1979 system, designate a beneficiary who is a dependent of the person who is currently a member of the Public School Employees Retirement Act system and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216), provided that the person acquires the requisite service credit before making the designation. A person who was a vested member of the 1945 PA 136, c 1, retirement system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979 may, as a member of the Public School Employees Retirement Act of 1979 system, designate a beneficiary who is a dependent of the member of the Public School Employees Retirement Act of 1979 system and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216). A person who was a nonvested member of the 1945 PA 136, c 1, retirement system and who retained membership in that system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979, despite the fact that public school employment was terminated, may, upon re-entering public school employment, joining the Public School Employees Retirement Act of 1979 system, and meeting the requisite service credit, select a beneficiary who is a dependent of the member and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216). The time period in which a member of the Public School Employees Retirement Act of 1979 system may apply for a disability retirement allowance for a disability arising under that Act is not a right or a benefit available under 1945 PA 136, c 1, to a vested member of the 1945 PA 136, c 1, system protected by MCL 38.1406; MSA 15.893(216). The time period in which a member of the Public School Employees Retirement Act of 1979 system may apply for a disability retirement allowance for a disability arising under that Act is not a right or a benefit available under 1945 PA 136, c 1, to either a nonvested, refunded former member or a vested, refunded former member of the 1945 PA 136, c 1, system protected by MCL 38.1406; MSA 15.893(216). Mr. Richard L. Beers Director Bureau of Retirement Systems Department of Management and Budget Stevens T. Mason Building Lansing, Michigan You have requested my opinion on several questions relating to the so-called 'grandfather section' contained in the Public School Employees Retirement Act of 1979, MCL 38.1406; MSA 15.893(216). The Public School Employees Retirement Act of 1979 repealed and replaced the provisions of 1945 PA 136. Each question is accompanied by a hypothetical example to illustrate the question posed. To facilitate analysis, each hypothetical example will contain the assumption that the applicant had been a member of the 1945 PA 136, c I, retirement system. Your first three questions and their respective hypothetical examples will be stated and considered together. 1. Do the protections contained in the grandfather section apply to a nonvested member who was included in the active employee membership under 1945 PA 136 on the date immediately preceding the effective date of 1980 PA 300? Hypothetical Example: Applicant Green initially became a member of the Chapter I Michigan Public School Employees' Retirement System in August, 1980. On January 1, 1981, applicant visited the retirement office to complete and file a nomination of beneficiary, designating a nephew, a dependent of Green and possessing an insurable interest in Green, as the primary beneficiary of monthly survivor benefits. May applicant Green nominate the nephew? 2. If a vested member on the date immediately preceding the effective date of 1980 PA 300 satisfied the requirements to exercise a right that existed under 1945 PA 136, but had not done so, and that right has been perpetuated in 1980 PA 300 but with more stringent conditions, and the vested member now chooses to exercise that right under 1980 PA 300, is he or she entitled to exercise the right pursuant to the provisions of 1945 PA 136? Hypothetical Example: Applicant Blue initially became a member of the Chapter I Michigan Public School Employee's Retirement System in September, 1965 and accrued 15 years of service prior to the passage of the Public School Employees Retirement Act of 1979 in October, 1980. On January 1, 1980, applicant Blue visited the retirement office to complete and file a nomination of beneficiary, designating a nephew, a dependent of Blue and possessing an insurable interest in Blue, as the primary beneficiary for the monthly survivor benefits. May applicant Blue nominate the nephew? 3. If a nonvested former member who was ineligible to exercise a right at the time he or she terminated employment under 1945 PA 136 again returns to employment but as a 1980 PA 300 member and has now satisfied the service requirements to exercise the right, is he or she entitled to exercise the right pursuant to the provisions of 1945 PA 136? Hypothetical Example: Applicant White initially became a member of the Chapter I Michigan Public School Employees' Retirement System in September, 1965 and accrued 15 years of service credit before terminating employment in June, 1980. Upon termination, applicant White applied for and received a refund of contributions, thereby forfeiting all rights attributable to the contributory service because of the refund; however, the 6 years of service credit for which the school district paid the employee's retirement contributions are not cancelled by virtue of a refund. Applicant White returned to membership in January, 1981, fulfilled the requirements to repay the refund, and did so on January 1, 1982. On January 1, 1982, applicant White visited the retirement office to complete and file a nomination of beneficiary designating a nephew, a dependent of White and possessing an insurable interest in White, as the primary beneficiary for monthly survivor benefits. May applicant White nominate the nephew? 1945 PA 136, c I, Sec. 20, permitted the selection by a member with 15 years of credited service of a dependent of the member with an insurable interest in the life of the member, to receive, upon the death of the member, a retirement allowance as provided therein. The Public School Employees Retirement Act of 1979, MCL 38.1389(3); MSA 15.893(199)(3), on the other hand, permits a member with 15 years of service credit to select a beneficiary, who is a dependent of the member, to receive a retirement allowance upon the death of the retired member, but the selection is restricted to the dependent spouse, brother, sister, parent, or child of the member. The 'grandfather section' to which all your questions relate is MCL 38.1406; MSA 15.893(216), which provides: 'All proceedings pending and all rights and liabilities existing, acquired, or incurred under former Act No. 136 of the Public Acts of 1945 at the time this act takes effect are saved. Those proceedings shall be consummated pursuant to the law in effect when the proceedings were commenced. Those rights and liabilities shall be preserved pursuant to the law in effect on the day immediately proceedings the effective date of this act. To the extent that either the kinds of benefits available under the applicable chapter of former Act No. 136 of the Public Acts of 1945 as in effect on the day immediately preceding the effective date of this act or the manner of calculating those benefits under former Act No. 136 of the Public Acts of 1945 results in a greater benefit of any kind than would otherwise be available under this act or include a benefit not otherwise available under this act, the determinations of those kinds of benefits available and the manner of calculating those benefits shall be made pursuant to former Act No. 136 of the Public Acts of 1945 for those members who participated in the retirement system as set forth in former Act No. 136 of the Public Acts of 1945 before the effective date of this act.' (Emphasis added.) The Public School Employees Act of 1979 does not define the term 'benefit.' In the absence of statutory definition, the term should be given its plain and ordinary meaning, Baker v General Motors Corp, 409 Mich 639, 665; 297 NW2d 387 (1980), including resort to the dictionary definition, State v Levenburg, 406 Mich 455, 465; 280 NW2d 810 (1979), Fenton Area Public Schools v Sorensen-Gross Construction Co, 124 Mich App 631, 639; 335 NW2d 221, lv den, 419 Mich 856 (1984). Webster's Third New International Dictionary defines 'benefit' as an advantage or good. OAG, 1981-1982, No 6096, p 724 (August 30, 1982), concluded that out-of-system service credits provided for in 1945 PA 136 were a benefit made available to members of the Public School Employees Retirement Act of 1979 system by virtue of MCL 38.1406; MSA 15.893(216), provided such members were previously members of the retirement systems established by 1945 PA 136. A death benefit payable to a beneficiary designated by a member of a public employees retirement system was held to be a benefit protected against impairment in Public Employees Federation, AFL-CIO v Cuomo, 62 NY2d 450; 467 NE2d 236 (1984). Similarly, in Snow v Abernathy, 331 So 2d 626 (Ala, 1976), the right of a member of a public retirement system to designate a beneficiary for the purpose of collecting a refund of contributions made by the member was a benefit protected against impairment by the state legislature even though the legislature may confer an additional benefit in the form of a death benefit upon the widow of the member. The designation by a member of a nephew, dependent upon the member and possessing an insurable interest in the life of the member, as a beneficiary for purposes of receiving a retirement allowance upon the death of the member is a benefit provided by 1945 PA 136, c I. It follows that the designation of a beneficiary by a member of a public retirement system for the purposes of receiving retirement benefits upon the death of the member is a benefit protected by MCL 38.1406; MSA 15.893(216). OAG, 1981-1982, No 6062, p 632 (April 27, 1982), construed the last sentence of MCL 38.1406; MSA 15.893(216), inasmuch as it speaks to benefits available to 'members,' to apply only to public school employees in service on or after October 31, 1980, the effective date of the Public School Employees Retirement Act of 1979. It is clear, however, that this form of benefit is not available to all members of the Public School Employees Retirement Act of 1979 system, since the last sentence of MCL 38.1406; MSA 15.893(216), restricts it to 'those members who participated in the retirement system as set forth in former Act No. 136 of the Public Acts of 1945 before the effective date of this act.' The Legislature has not defined the term 'participate' in the Public School Employees Retirement Act of 1979. The word 'is derived from two Latin words, 'pars,' part, and 'capio,' to take. It means to take part . . ..' Reardon v State, 4 Tex App 602, 611-612 (1878); Ledwith v Bankers Life Insurance Co, 156 Neb 107; 54 NW2d 409, 421 (1952). The legislative history of SB 104 enacted as the Public School Employees Retirement Act of 1979 may be examined to ascertain the legislative intent. Consumers Power Co v Big Prairie Twp, 81 Mich App 120, 156-157; 265 NW2d 182, lv den, 403 Mich 848 (1978). The bill analysis prepared by the House Legislative Analysis Section to SB 104, S-2, First Analysis (9-23-80), is instructive: 'The bill would: . . . contain a savings clause which would provide that all proceedings pending under the old act would be consummated under the law in effect when the proceedings were commenced and that all rights and liabilities acquired under the old act be preserved according to the law in effect the day before the new law takes effect. The clause also specifies that members could not have their benefits reduced by this bill. If more generous benefits were available to a member under the old act, then persons who were members under that act could receive them.' (Emphasis added.) Turning to your three hypothetical examples, Green was a member of the 1945 PA 136, c I, retirement system previous to membership in the Public School Employees Retirement Act of 1979 system, although the total credited service of Green is less than one year. Blue was a member of the 1945 PA 136, c I, system previous to membership in the Public School Retirement Act of 1979 system, with a total of credited service in excess of 15 years. White, on the other hand, terminated employment in June, 1980, prior to the effective date of the Public School Employees Retirement Act of 1979, and despite the accumulation of 15 years of credited service withdrew accumulated contributions and forfeited service credits earned therefor, but White's membership credited service earned from July 1, 1974 to June 30, 1980 were not forfeited. 1945 PA 136, c I, Sec. 22. By virtue of the retention of such membership service credits, White remained a member of the 1945 PA 136, c I, retirement system. Thus, Green, Blue, and White were previously members of the 1945 PA 136, c I, retirement system by virtue of their respective membership in that system at the time the Public School Employees Retirement Act of 1979 became effective. Green, Blue, and White are members of the Public School Employees Retirement Act of 1979 system. While both Blue and White had 15 years or more of credited service at the time each chose to designate a dependent nephew as a beneficiary, Green's total credited service was of less than a year's duration. It is, thus, necessary to compare the provision dealing with the selection by a member of a beneficiary, dependent upon the member, of 1945 PA 136, c I, and the Public School Employees Retirement Act of 1979 to ascertain whether the length of credited service of the member impacts the ability to designate a dependent beneficiary to receive a retirement allowance upon the death of the member under either statute. 1945 PA 136, c I, Sec. 20, permitted a member with 15 years of credited service to designate a person, dependent upon the member and with an insurable interest in the life of the member, as a beneficiary for the purpose of receiving a retirement allowance upon the death of the member. The Public School Employees Retirement Act of 1979, MCL 38.1389(3); MSA 15.893(199)(3), permits a member with 15 years of credited service (1) to designate a beneficiary dependent upon the member for the purpose of receiving a retirement allowance upon the death of the member, but a dependent nephew is not eligible to be selected as such a beneficiary. The benefit purported to be selected by Green, Blue, and White to provide a retirement allowance for a nephew 50% dependent upon the respective member payable upon the death of the member as provided in 1945 PA 136, c I, Sec. 20, could only be exercised thereunder by the respective member of that system after the member acquires 15 years of credited service. Both Blue and White have 15 years of credited service so that each may nominate a dependent nephew for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c I, by virtue of MCL 38.1406; MSA 15.893(216). Green, on the other hand, has less than a year's credited service so that the benefit of designating a dependent nephew would not be available until the accumulation of 15 years of credited service. What remains to be determined is whether Green may take advantage of that benefit by earning a total of 15 years of credited service. MCL 38.1406; MSA 15.893(216), speaks to benefits available under 1945 PA 136, c I, without precondition of acquiring a vested status under that statute. In the absence of such a precondition, it must be concluded that the Legislature intended that the benefit of selecting a dependent of the member with an insurable interest should be available to a member of the Public School Employees Retirement Act of 1979 retirement system, provided that the member was previously a member of the 1945 PA 136, c I, system, even though the member did not acquire a vested status under the latter Act. Thus, it may be concluded that the right to designate a beneficiary who is a dependent of a member and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member is a benefit available under 1945 PA 136, c I, Sec. 20, and is protected by the 'grandfather section' of the Public School Employees Retirement Act of 1979, MCL 38.1406; MSA 15.893(216). It may further be concluded that a member of the Public School Employees Retirement Act of 1979 system who was a member of the 1945 PA 136, c I, system at the time the Public School Employees Retirement Act of 1979 became effective may designate a person who is a dependent of the member and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member, provided that the member has accumulated a total of 15 years of credited service without regard to whether such a member had acquired a vested status under 1945 PA 136, c I. It is my opinion, in answer to your first question, that a person who was a nonvested member of the 1945 PA 136, c 1, retirement system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979 may, as a member of the Public School Employees Retirement Act of 1979 system, designate a beneficiary who is a dependent of the person who is currently a member of the Public School Employees Retirement Act system and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216), provided that the person acquires the requisite service credit before making the designation. It is my opinion, in answer to your second question, that a person who was a vested member of the 1945 PA 136, c 1, retirement system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979 may, as a member of the Public School Employees Retirement Act of 1979 system, designate a beneficiary who is a dependent of the member of the Public School Employees Retirement Act of 1979 system and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216). It is my opinion, in answer to your third question, that a person who was a nonvested member of the 1945 PA 136, c 1, retirement system and who retained membership in that system on the date immediately preceding the effective date of the Public School Employees Retirement Act of 1979, despite the fact that public school employment was terminated, may, upon re-entering public school employment, joining the Public School Employees Retirement Act of 1979 system, and meeting the requisite service credit, select a beneficiary who is a dependent of the member and who has an insurable interest in the life of the member for the purpose of receiving a retirement allowance upon the death of the member as a benefit available under 1945 PA 136, c 1, and protected by MCL 38.1406; MSA 15.893(216). Your fourth and fifth questions relate to disability retirement allowances and will be considered together. The questions and their respective hypothetical examples are: 4. Is a vested former member who terminated employment under 1945 PA 136 and who returns to employment as a 1980 PA 300 member, entitled to exercise a right that existed when he terminated pursuant to 1945 PA 136? Hypothetical Example. Applicant Brown initially became a member of the Chapter I Michigan Public School Employees' Retirement System in 1970 and accrued 9 years of credited service before terminating employment in June, 1980. Applicant Brown returned to employment in January, 1981 and accrued another year of service credit before becoming disabled. Applicant Brown had not cancelled his service by taking a refund, and, therefore, was eligible to make application for a disability retirement allowance. 1945 PA 136 provided for a 3-year period in which to apply for a disability retirement allowance. The Public School Employees Retirement Act of 1979 provides for a period of only one year within which to file such application. Which application period applies to applicant Brown? 5. Is either a nonvested refunded former member or vested refunded former member who terminated employment under 1945 PA 136 and who returns to employment under 1980 PA 300 and reinstates his or her forfeited service by repaying his or her refund, entitled to exercise a right pursuant to the provisions of 1945 PA 136? Hypothetical Example: Applicant Orange initially became a member of the Chapter I Michigan Public School Employees Retirement System in 1968 and accrued 10 years of credited service before terminating employment in June, 1978. Applicant Orange returned to employment in January, 1981 and accrued another year of service credit before becoming disabled. Applicant Orange had acquired a vested right for deferred benefits under 1945 PA 136 and had not cancelled those rights by receiving a refund of contributions. 1945 PA 136, as amended, provided for a 3-year period in which to apply for a disability retirement allowance. The Public School Employees Retirement Act of 1979 reduced the 3-year period to 1 year within which such application must be filed. Which application period applies to applicant Orange? 1945 PA 136, c I, Sec. provided that a member who has served as a public school employee for a period of 10 or more years and who is totally and permanently disabled may receive a disability retirement allowance. As provided in 1945 PA 136, c I, Sec. 16a, application for the disability retirement allowance shall be made within 36 months after the applicant ceases to be a public school employee. The Public School Employees Retirement Act of 1979, MCL 38.1386; MSA 15.893(196), authorizes a disability retirement allowance for a member found to be totally and permanently disabled for purposes of employment by the reporting unit, provided the member has at least 10 years of credited service and the 'member or reporting unit makes written application to the retirement board not more than 12 months after the date the member terminated public school employment.' Both 1945 PA 136, c I, and the Public School Employees Retirement Act of 1979 provide for a disability retirement allowance based upon 10 years of credited service. Thus, the benefit is the same under either statute. What is not the same is the period of time during which application may be filed to receive a disability retirement allowance. Under your hypothetical examples, both Brown and Orange became disabled subsequent to the effective date of the Public School Employees Retirement Act of 1979. Thus, neither Brown nor Orange had a right to receive a disability retirement allowance under 1945 PA 136, c I, protected by the first sentence of MCL 38.1406; MSA 15.893(216). The period of time during which Brown and Orange may apply for a disability retirement allowance is not a benefit under the third second sentence of MCL 38.1406; MSA 15.893(216). The three-year application period within which to file for a disability retirement allowance is not a contract right which is protected from impairment or modification by the Legislature. In Guardian Depositors Corp v Brown, 290 Mich 433, 439-440; 287 NW 798 (1939), the court quoted with approval the following ruling of the United States Supreme Court in Richmond Mortgage & Loan Corp v Wachovia Bank & Trust Co, 300 US 124, 128; 57 S Ct 338; 81 L Ed 552; 108 ALR 886 (1937): "The legislature may modify, limit or alter the remedy for enforcement of a contract without impairing its obligation, but in so doing it may not deny all remedy or so circumscribe the existing remedy with conditions and restrictions as seriously to impair the value of the right." It may be concluded that the time period within which a member of the Public School Employees Retirement Act of 1979 system may apply for a disability retirement allowance with respect to a disability arising after the effective date of the Public School Employees Retirement Act of 1979 is not a right or a benefit available under the 1945 PA 136, c I, retirement system protected by the 'grandfather clause,' MCL 38.1406; MSA 15.893(216). It is my opinion, in answer to your fourth question, that the time period in which a member of the Public School Employees Retirement Act of 1979 system may apply for a disability retirement allowance with respect to a disability arising under that Act is not a right or a benefit available under 1945 PA 136, c 1, to a vested member of the 1945 PA 136, c 1, system protected by MCL 38.1406; MSA 15.893(216). It is my opinion, in answer to your fifth question, that the time period in which a member of the Public School Employees Retirement Act of 1979 system may apply for a disability retirement allowance with respect to a disability arising under that Act is not a right or a benefit available under 1945 PA 136, c 1, to either a nonvested, refunded former member or a vested, refunded former member of the 1945 PA 136, c 1, system protected by MCL 38.1406; MSA 15.893(216). Frank J. Kelley Attorney General (1)
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