STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6678

March 27, 1991

RETIREMENT AND PENSIONS:

Municipal Employees Retirement Act--crediting of contributions which are less than a whole number percentage amount

Section 32(1) of the Municipal Employees Retirement Act of 1984 does not authorize or require the Municipal Employees' Retirement System to refuse to accept or credit employee contributions which are less than a whole number percentage amount; all such contributions of any percentage amount must be paid to MERS by the participating municipality or participating court and must be credited by MERS to accumulate in the employee's individual account.

Honorable Debbie Stabenow

State Senator

The Capitol

Lansing, Michigan

You have requested my opinion whether the Municipal Employees' Retirement System may refuse to accept or credit employee contributions which are less than a whole number percentage amount.

The Municipal Employees Retirement Act of 1984, MCL 38.1501 et seq; MSA 5.4001(1) et seq, provides in Sec. 32(1):

Prior to the enactment of amendatory 1990 PA 99, the second sentence of Sec. 32(1), which is the focus of your question, stated:

1984 PA 427, as amended by 1988 PA 500. The prior act, 1945 PA 135, MCL 38.601 et seq; MSA 5.4001 et seq, contained no provision analogous to the whole number percentage contribution range of zero to ten percent found in Sec. 32(1) of the present Act.

The Municipal Employees' Retirement System (MERS) advises that, since the enactment of Sec. 32(1) by 1984 PA 427, effective January 2, 1985, it has been the administrative practice to credit to the employee's individual retirement account only those employee contributions which are whole, full percentage, amounts. Thus, where an employer selects a 2% (of employee compensation) MERS contribution program for its employees, and the employer and the employee equally contribute 1%, the employee's individual account is credited with the employee's 1% contribution. ⁽¹⁾ The employer's 1% contribution, as part of the employer's actuarially determined aggregate contribution for all employees for the particular fiscal year, is credited to the employer's contribution reserve.

I am advised by the Manager of MERS that the provisions of a collective bargaining agreement commonly provide for a benefit and a contribution program, the cost of which program is comprised in part of an employee fractional percentage prescribed in the agreement. For example, to actuarially fund a 2% benefit program may require a total current fiscal year contribution of 1.65% with the employee's contribution specified in the agreement as .65%. In this case, the employer does not forward the fractional contribution and the employee's individual account is not credited by MERS with the .65% fractional employee contribution collected by the employer. However, the municipality is obligated contractually by Const 1963, art 9, Sec. 24, to provide the selected MERS benefit when it becomes due and payable. OAG, 1987-1988, No 6540, pp 397, 399 (September 22, 1988).

The adverse consequences of this practice are readily apparent. Under Sec. 4(2)(b) of the Act, a member's accumulated contributions may be withdrawn (thereby resulting in forfeiture of credited service) by the member, the member's designated beneficiary, or legal representative. Section 34 provides, in the case of a retirant's death where the aggregate pension paid by MERS does not exceed accumulated contributions, the remaining difference shall be paid to a designated individual, or the decedent's estate. Section 35 permits payment of accumulated contributions to a former member upon request, or upon death of a member or former member where no retirement allowance is payable, accumulated contributions are paid to the designated individual(s) or the decedent's estate. However, since fractional employee contributions are not forwarded by the employer to MERS, and not credited by MERS, such contributions are not "accumulated" and, therefore, available for withdrawal or payment as provided above.

The propriety of this practice must be determined under the Act. Consideration of related provisions of the Act in conjunction with Sec. 32(1) is most instructive. Under Sec. 41(1), a municipality which elects to participate in the retirement system created under the Act "shall specify ... the benefit programs and member contribution programs that shall apply to the employees of the municipality...." Under Sec. 42, the contribution requirements which must be met by the participating municipality in providing a selected benefit must be actuarially determined by the MERS actuary. The same procedure is applicable where a municipality desires to change benefit programs and member contribution programs for its employees. Section 43.

Section 45a of the Act declares:

The language of Sec. 46 of the Act is most illuminating:

Under Sec. 46, the employer municipality deducts from the employee's compensation the requisite member contribution. The municipality is to certify to MERS the employee's compensation, and under Sec. 46(3) "shall pay to the retirement system the aggregate amount of member contributions collected." MERS is required under Sec. 46(1) to establish the reserve for employee contributions, and within that account maintain one or more separate subaccounts for each employee member. Refunds and transfers of accumulated member contributions shall be made from the reserve for employee contributions. Finally, accumulated member contributions from the reserve shall be transferred to the reserve for retired benefit payments, upon the retirement or death of a member or vested former member, as further provided in Sec. 48. See, also, Secs. 44(2)(a) and 44a(2)(a), each identically providing that, upon termination of participation in MERS by the member municipality or member court, "[t]he balance standing to each person's credit in the reserve for employee contributions shall be distributed to the person...." Section 47 of the Act creates the reserve for employer contributions, which "is the account to which contributions by or on behalf of participating municipalities and participating courts shall be credited."

From review of the above, it is clear that employer and employee contributions are calculated to cover the actuarially determined cost of the benefit program provided to employee members under the Act. The benefits to be provided have an actuarially determined cost, and under the Act, the amount to be remitted to MERS is that of the actuarial valuation, no more, no less. I am advised by MERS that it is a rare case, indeed, where the actuarially determined cost for a benefit program will be a whole number percentage.

It is a settled principle that statutory provisions are to be construed collectively, and in a harmonious manner. Dussia v Monroe Co Employees Retirement System, 386 Mich 244, 248; 191 NW2d 307 (1971). Under the Act, it is inescapable that all member contributions, in whole or fractional percentages, shall be paid by the employer to MERS, and MERS is to credit the employee contribution to the individual employee account. Section 46(3) is clear and unambiguous in its command that a "participating municipality shall pay to the retirement system the aggregate amount of member contributions collected." The language found in Sec. 32(1) may not be read in isolation. Guitar v Bieniek, 402 Mich 152; 262 NW2d 9 (1978). Nor may the Act be interpreted in such a way that actual employee contributions are retained by the employer and neither remitted nor credited to the employee's account, as such a consequence is contradictory to the Act. See, e.g., King v Dir of Midland Co DSS, 783 MichApp 253, 258; 251 NW2d 270 (1977). Thus, when read in the context of these other provisions, it is clear that the restrictions contained in Sec. 32(1) apply only to the contribution plans available for selection by participating municipalities and participating costs. Section 32(1) does not in any manner affect the duty of such employers to forward all employee contributions to MERS, nor the duty of MERS to credit such contributions to an employee's account.

In addition, this office has been informed that many of the municipalities participating in MERS have arrived at the employer and employee contribution rates through collective bargaining agreements. To the extent that these agreements conflict with the provisions of the Municipal Employees Retirement Act of 1984, supra, including the authority of the Municipal Employees' Retirement Board to administer the retirement system, the agreements prevail. See OAG, 1983-1984, No 6244, p 363, 368-369 (August 31, 1984); OAG, 1987-1988, No 6540, p 397, 398 (September 22, 1988) and authorities cited therein. Thus, the collectively bargained employee contribution rates must be paid to MERS by the participating municipality and credited by MERS to accumulate in each employee's individual account.

It is my opinion, therefore, that Sec. 32(1) of the Municipal Employees Retirement Act of 1984, commencing January 2, 1985, does not authorize or require the Municipal Employees' Retirement System to refuse to accept or credit employee contributions which are less than a whole number percentage amount; all such contributions of any percentage amount must be paid to MERS by the participating municipality or participating court and must be credited by MERS to accumulate in the employee's individual account.

Frank J. Kelley

Attorney General