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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. 6096

August 30, 1982

RETIREMENT AND PENSIONS:

Public school employees retirement system--computation of benefits for persons who were members of predecessor systems

Out of system service credits for a person who is a member of the public school employees retirement system authorized by 1980 PA 300 may be computed under the more beneficial provisions of either chapter I or chapter II of 1945 PA 136, provided the person was previously a member of the retirement system established under the applicable chapter.

Determination of final average compensation for a person who is a member of the public school employees retirement system authorized by 1980 PA 300 may be computed under the more beneficial provisions of either chapter I or chapter II of 1945 PA 136, provided the person was previously a member of the retirement system established under the applicable chapter.

Mr. Norvel A. Hansen

Michigan Public School Employees' Retirement System

Department of Management and Budget

Stevens T. Mason Building

Lansing, Michigan

You have requested my opinion on two questions concerning the Public School Employees' Retirement Act, 1980 PA 300; MCLA 38.1301 et seq; MSA 15.893(111) et seq.

1980 PA 300, supra, repeals and recodifies the provisions of 1945 PA 136 which created and governed the two retirement systems for Michigan's public school employees. Your questions are related to the implementation of 1980 PA 300, supra, in light of the new act's 'grandfather section,' 1980 PA 300, supra, Sec. 106, 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 preceeding 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 preceeding 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.'

Your first question was presented as follows:

'Former Act 136, PA 1945, provided that a member could elect to purchase up to 15 years of out of system service. Section 1(m) of that act contains the following sentence, 'Out of system service shall not be creditable toward retirement under this chapter if the member is or will be receiving a retirement allowance from another governmental unit for the same years of service.' (Emphasis added) Section 69(4) of the new act provides, 'Out of system public education service shall not be creditable toward retirement under this act if the member is or will be receiving a pension or annuity for the same service from another retirement system.' (Emphasis added) The reason for the change in language in the latter provision was to prevent purchase if the member will be entitled to a retirement benefit on account of the same years of service wherein it is or will be paid by a private retirement plan, i.e., TIAA-CREF which is a private plan that is available at public institutions of higher education. The Retirement System has allowed higher education members having such service to purchase the service because the benefit will not be paid by a governmental unit.

At the present time the office has numerous applications pending from members employed in higher education who have service covered under TIAA-CREF in another state. The question thus arises: Is a current member who was a member covered under Act 136, PA 1945, now precluded from purchasing university employment which was covered under TIAA-CREF and for which the member will also be entitled to a separate retirement benefit? Or, do the provisions of the grandfather section apply?'

The Legislature has made it abundantly clear in 1980 PA 300, Sec. 106, supra, that all rights existing and acquired under 1945 PA 136 are saved. OAG, 1981-1982, No 6062, p 632 (April 27, 1982). On the other hand, there is nothing in 1980 PA 300, Sec. 106, supra, to even suggest that the Legislature extended the benefits of 1980 PA 300, supra, to members of the retirement system who had left public school service before the new act's effective date. OAG, 1981-1982, No 6062, supra.

It is a cardinal rule of statutory construction that the Legislature must be held to intend the meaning which it has plainly expressed and, in such cases, there is no room for construction or attempted interpretation to vary that meaning. Dussia v Monroe County Employees Retirement System, 386 Mich 244; 191 NW2d 307 (1971).

There is no doubt that public school employees' retirement system benefits based upon out of system service is a 'benefit' of the retirement system. See, Curtis v Michigan Public School Employees Retirement System, 10 Mich App 508; 159 NW2d 889 (1968). That being the case, the Legislature's language in the last sentence of 1980 PA 300, Sec. 106, supra, controls:

'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 preceeding 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.'

It is my opinion, therefore, that a member of the public school employees' retirement system, who previously participated in a retirement system established under the applicable chapter of 1945 PA 136, is entitled, pursuant to 1980 PA 300, Sec. 106, supra, to have out of system service credit calculated pursuant to the provision of the applicable chapter of 1945 PA 136.

Your second question is:

'Former Act 136, PA 1945, Section 27c, provides that if a member whose 5-year final average compensation period was interrupted by an unpaid leave-of-absence due to illness, or an educational leave, shall have his or her final average compensation computed by dividing by 4, in the case where an individual was off work for a full year. Act 300, PA 1980, is void of this provision but, instead, uses a new definition (Sec. 4(6) which provides that 'final average compensation means the average of the member's compensation earned within a 5-year period of consecutive credited service in which the compensation was highest.' Thus, if a member lost 1 year of wages during the middle of his or her final average compensation period, the Retirement System would go back and pick up the earnings in the 6th year and divide by 5. The application of the latter provision would result in a lower salary average than if the former provision was used. The question arises: Shall the Retirement System invoke the grandfather provision and use the former section for a member retiring in the future for any member who was a member under the former Act?'

This question relates to the method of calculating the retirement benefit for the public school employees retirement system. Simply stated, eligible retirement system members are entitled to a pension which equals the product of the member's years, and fraction of a year, of credited service multiplied by the sum of 1.5% of the member's final average compensation. 1980 PA 300, supra, Sec. 84. Thus, the calculation (or definition) of 'final average compensation' is a crucial determination in the overall calculation of a member's retirement benefit. To reiterate:

'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 preceeding 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.' 1980 PA 300, Sec. 106, supra.

In answer to your second question, it is my opinion, that 1980 PA 300, Sec. 106, supra, directs the retirement system board to use provisions of the applicable chapter of 1945 PA 136, supra, for determining final average compensation for a member who previously was a member of the retirement system established pursuant to 1945 PA 136, chapter I or chapter II, when that manner of calculating the retirement benefit would result in a greater benefit than would be available under 1980 PA 300. supra.

Frank J. Kelley

Attorney General


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