STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5586

October 19, 1979

RETIREMENT AND PENSIONS:

Purchase of military service credit

SCHOOLS AND SCHOOL DISTRICTS:

Purchase of military service credit pursuant to Public School Employees Retirement Act

PUBLIC SCHOOL EMPLOYEES RETIREMENT ACT:

Purchase of military service credit

WORDS AND PHRASES:

'Member of retirement system'; 'Retirant'

The amendment of the Public School Employees Retirement Act to permit 'a member of the retirement system' to purchase military service credit indicates a clear legislative intent to limit that right to 'members'. The amendment does not permit 'retirants' to purchase such military service credit.

The term 'member' is defined in the Act as a public school employee, whereas the term 'retirant' is defined as an employee who has retired.

A payment made by a member of the Public School Employees Retirement System prior to July 12, 1977 for the purchase of military service credit may not be recomputed comply with a subsequent change in the payment formula set forth in the statute.

Members of the Public School Employees Retirment System entitled to a deferred retirement allowance may not purchase military service credit authorized by 1945 PA 136, ch 1, Sec. 14(2) as last amended by 1977 PA 58 unless such member is a public school employee during the fiscal year in which he or she makes payment for the purchase of military service credit.

Mr. Norvel A. Hansen

Executive Director

Michigan Public School Employees Retirement System

Stevens T. Mason Building

Lansing, Michigan

You have requested my opinion on a number of questions which may be stated as follows:

Your question will be addressed and aswered seriatim.

1. 1945 PA 136, ch 1; MCLA 38.201 et seq; MSA 15.893(1) et seq, provides for a retirement system for certain public school employees as defined in 1945 PA 136, supra, Sec. 1(f). Section 1 also contains certain definitions as used in chapter 1 which are pertinent to your question. Two of the definitions are:

'e term 'public school employee' is defined in 1945 PA 136, ch 1, Sec. (f), supra, to mean an employee of a public school district, a community college district, certain public colleges and universitites, and certain persons holding teacher certificates.

While the term 'member' is also used in the legislative definition of the term 'retirant', the legislature, in amending 1945 PA 136, ch 1, Sec. 14, supra, by means of 1976 PA 357, was referring to employee/members and not to retirant members.

As originally enacted, 1945 PA 136 supra, Sec. 14, consisting of one section, provided for certain credit for military service on condition that the person seeking such credit was a member of the retirement system before entering the military service and such member returned to public school service within 24 months of his or her honorable discharge from active duty.

The Legislature amended 1945 PA 136, ch 1, Sec. 14, supra, by means of 1976 PA 357 to retain the section renumbered as subsection (1) as applicable to active military duty and add a subsection (2) thereto, to read as follows:

The amendatory subsection became effective on December 23, 1976.

In 1977 the Legislature again amended 1945 PA 136, ch 1, Sec. 14(2), supra, by means of 1977 PA 58, to read as follows:

The underscored language is new language added to the statute by 1977 PA 58. As amended, this subsection became effective on July 12, 1977.

The intent of the Legislature in the enactment of 1976 PA 357 to add a new subsection (2) to 1945 PA 136, ch 1, Sec. 14, supra, is plain from the clear language contained therein. Members of the retirement systems are permitted to purchase active military service credit even though entry was not made into military service directly from public school service upon payment of 5% of the member's full-time or equated full-time compensation for the fiscal year in which payment is made up to a maximum of five years of active military duty, providing the member has accumulated ten years of service and the military service is not also creditable under another public retirement system.

Thus, on and after December 23, 1976, members of the retirement system were able to purchase such military service credit upon meeting the requirements of the statute and upon payment of the requisite amount as provided therein. You advise that a number of members availed themselves of the right to purchase the military service credit and some of them proceeded to become retirants of the system after purchasing the military service credits authorized by 1945 PA 136, ch 1, Sec. 14(2), supra.

Thereafter, the Legislature, in its wisdom, amended 1945 PA 136, ch 1, Sec. 14(2), supra, to permit members, on or after June 1, 1976, to purchase such military service credit, but payment therefor was to be computed at the rate of 5% per year upon the basis of not less than the highest fiscal year compensation previously received by the member, but not more than the final average compensation of the member.

While the language employed by the Legislature in the amendatory 1977 PA 58 to 1945 PA 136, ch 1, Sec. 14(2), supra, is lacking in clarity, the intent of the Legislature is abundantly clear that military service credits were purchasable only by members of the retirement system. This same amendatory act also amended 1945 PA 136, ch 1, Sec. 1, supra, the definitional sections for chapter 1, but no changes were made by the Legislature to either the definition of the term 'member' or 'retirant' as used in chapter 1 of 1945 PA 136, supra.

Members of the retirement system meeting appropriate age and service requirements set forth in 1945 PA 136, supra, Sec. 15, may apply for and receive a retirement allowance under 1945 PA 136, supra, Sec. 15a or 15b, depending upon the plan of membership.

Upon receipt of such retirement allowance, by operation of law the member becomes a retirant. Thus, if the 'retirant' becomes re-employed by a tax supported school or public educational agency of this State, his retirement allowance is reduced by the amount that his earnings in a calendar year exceed the amount he is permitted to earn without reduction of benefits under the federal social security act, as amended, 42 USCA 301 et seq. If such a person works for more than five consecutive years, upon return of any annuity and pension payments made during the return to service after retirement, and upon payment of the required contributions into th retirement system, a retirement allowance may be recomputed in accordance with added credit and the final average compensation resulting from the added service as provided in 1945 PA 136, supra, Sec. 19. Supplement payments for retirants are also provided pursuant to 1945 PA 136, ch 1, supra, Sec. 27f, as added by 1976 PA 357.

In accordance with these provisions, any member of the retirement system who received a retirement allowance prior to July 12, 1977, the effective date of amendatory 1977 PA 58, ceased to be a member and became a retirant under 1945 PA 136, ch 1, supra.

It is true that the Legislature amended 1945 PA 136, ch 1, Sec. 14(2), supra, by means of 1977 PA 58 to permit members 'on or after June 1, 1976' to purchase military service credit. The legislative history of 1977 PA 57 reveals that this language was added as a floor amendment to Senate Bill 34 one second reading in the Senate at the same time as the Senate was amending certain other terms in the definitional section of chapter 1. 1 Senate Journal 1977, p 548. Thus, it must be concluded that the Legislature was aware of the difference in meaning of the terms 'member' and 'retirant'.

Legislation authorizing military service credits for members of a retirement system but not for retirees of the system does not violate the Equal Protection Clauses of the Michigan and the United States Constitutions. Hughes, et al v The Judges' Retirement Board of the State of Michigan, et al, ---- Mich ----; ----NW2d ----, (decided August 28, 1979).

The Legislature could, but did not, amend 1945 PA 136, ch 1, Sec. 14(2), supra, to permit the purchase of certain military service credit by retirants. Indeed, if the Legislature had substituted the term 'retirant' for the term 'member' in the statute, the imposition of the cutoff date of June 1, 1976 would create serious constitutional problems of denial of equal protection to those retirants who received their retirement allowance prior to June 1, 1976. See Hughes, et al v The Judges' Retirement Board of the State of Michigan, et al, supra.

It is my opinion, therefore, that retirees of the public school employees' retirement system established pursuant to 1945 PA 136, ch 1, supra, were not members of the system on July 12, 1977 and may not purchase military service credits permitted pursuant to Sec. 14(2) of the act, as amended by 1977 PA 58.

Your first question is answered in the negative.

2 and 3. Since the first question has been answered in the negative, no answer is required to questions 2 and 3.

4. Turning to your fourth question, you inquire whether retirants who purchased military service credits pursuant to 1945 PA 136, ch 1, Sec. 14(2), supra, prior to July 12, 1977 may be required to make additional payments for the purchase of military service credits as required by 1945 PA 136, ch 1, Sec. 14(2), as amended by 1977 PA 58, supra.

In accordance with the analysis of the controlling provisions of 1945 PA 136, ch 1, supra, discussed infra, it was concluded that 1945 PA 136, ch 1, Sec. 14(2), as last amended, supra, applied only to a member of the retirement system and the statute did not apply to a retirant drawing a retirement allowance from the retirement system.

A statute is construed to have prospective effect only, unless the Legislature manifests an intent to make it retrospective. Hughes, et al v The Judges' Retirement Board of the State of Michigan, et al, supra. When the Legislature last amended 1945 PA 136, ch 1, Sec. 14(2), supra, by means of 1977 PA 58 to insert the phrase 'on or after June 1, 1976', it did not thereby manifest any intent to make its terms applicable to a member retiring prior to July 12, 1977 who possessed the status of retirant on the date 1977 PA 58 became effective.

Therefore, it is my opinion that a member of the retirement system who purchased military service credits in accordance with 1945 136, Sec. 14(2), as amended by 1976 PA 357, and retired prior to July 12, 1977 is a retirant and his payment for the purchase of such military service credit may not be recomputed under 1945 PA 136, Sec. 14(2), as last amended by 1977 PA 58.

5. In your fifth question you ask whether the payment made by a member prior to July 12, 1977 for the purchase of military service credit authorized by 1945 PA 136, ch 1, Sec. 14(2), as amended by 1976 PA 357, must be recomputed to comply with the change in the payment formula set forth in 1945 PA 136, ch 1, Sec. 14(2), as last amended by 1977 PA 58, effective July 12, 1977, if the member has not retired.

The Legislature has not manifested its intent to make 1945 PA 136, ch 1, Sec. 14(2), as last amended by 1977 PA 58, supra, retrospective in effect to require members who purchased military in-service credits thereunder to make additional payments therefor. Hughes, et al v The Judges' Retirement Board of the State of Michigan, et al, supra. Moreover, Const 1963, art 9, Sec. 24, in pertinent part, provides:

When a member purchases prior military service credit authorized by 1945 PA 136, ch 1, Sec. 14(2), supra, and makes the appropriate payment therefor determined by the statute in existence at the time of his purchase, his right to the service credit becomes vested. If 1945 PA 136, ch 1, Sec. 14(2), as last amended by 1977 PA 58, is applied retroactively to such member, it would unconstitutionally diminish and impair the vested contractual right to such military service credit safeguarded by Const 1963, art 9, Sec. 24, supra. Murphy v Wayne County Employees Retirement Board of Trustees, 35 Mich App 480; 192 NW2d 568 (1971). It should be noted, however, that Const 1963, art 9, Sec. 24, supra, does not limit the authority of the Legislature to attach new conditions for earning financial benefits which have not yet accrued. Advisory Opinion re Constitutionality of 1972 PA 258, 389 Mich 659; 209 NW2d 200 (1973).

It is my opinion, therefore, in answer to your fifth question, that the payment made by a member prior to July 12, 1977 for the purchase of military service credit authorized by 1945 PA 136, ch 1, Sec. 14(2), as amended by 1976 PA 357, supra, may not be recomputed to comply with the change in the payment formulas set forth in the statute, as amended by 1977 PA 58, effective July 12, 1977.

6. Turning to your last question, you ask whether a member who was not in public school employment on December 23, 1976 and whose retirement allowance would be effective after July 12, 1977 may purchase such military service credit without first having to return to public school employment and establish a compensation base.

1945 PA 136, ch 1, Sec. 17 provides:

The intent of the Legislature in providing deferred retirement allowance for members of the retirement system who are not in public school employment as defined by the act on the date they apply for a retirement allowance is determined by the provisions found in 1945 PA 136, ch 1, Sec. 17, 'as that section was in force on the last day of his usable final average compensation period upon his application therefor filed with the retirement board. . . .'

A plain reading of 1945 PA 136, ch 1, Sec. 14(2), supra, as last amended by 1977 PA 58, supra, conditions a purchase of military service credit authorized thereunder by a public school employee upon payment of an amount equal to 5% 'of the employee's full-time or equated full-time compensation for the fiscal year in which payment is made multiplied by the years of service that the member elected to purchase up to the maximum.' Thus, the intent is clear that only members who are Michigan public school employees as defined in the act may purchase the military service credit authorized by the statute. It must follow that before a member entitled to a deferred retirement allowance under 1945 PA 136, ch 1, Sec. 17, supra, may apply for and receive the military service credit, he or she must have been a public school employee during the fiscal year in which payment is made for such military service credit.

It is my opinion, therefore, that members of the retirement system entitled to a deferred retirement allowance may not receive the military service credit authorized by 1945 PA 136, ch 1, Sec. 14(2), as last amended by 1977 PA 58, supra, unless such member is a public school employee as defined by the act during the fiscal year in which he or she makes payment for the purchase of such military service credit.

Frank J. Kelley