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
MIKE COX, ATTORNEY GENERAL
STATE OF MICHIGAN
RETIREMENT AND PENSIONS:
Determining "credited service in force" under the Reciprocal Retirement Act
The Reciprocal Retirement Act permits a city employee to use his years of service with a prior public employer to meet his present employer's retirement plan's service requirements, even if the employee has withdrawn his funds from the prior employer's retirement plan.
Opinion No. 7130
April 21, 2003
Honorable Mark Schauer
Lansing, MI 48913
You have asked whether the Reciprocal Retirement Act permits a city employee to use his years of service with a prior public employer to meet his present employer's retirement plan's service requirements, even if the employee has withdrawn his funds from the prior employer's retirement plan.
Information supplied with your request indicates that the employee in question worked 15 years for a Michigan county where he participated in a defined contribution retirement plan.1 Under the terms of the defined contribution plan, he was required to withdraw his funds within one year of leaving county employment, which he did. After leaving employment with the county, he became an employee of a city where he is a member of a defined benefit retirement plan. He has worked for the city since 1997 and presently is 60 years of age. An employee who is 60 years of age and has ten years of service may retire under the city's plan. Thus, the issue is whether the employee may use part of his county service to meet the city's 10-year service requirement for retirement.
The Reciprocal Retirement Act (Act), 1961 PA 88, as amended, MCL 38.1101 et seq, provides "for the preservation and continuity of retirement system service credits for public employees who transfer their employment between units of government." Section 3(1) of the Act allows a municipal unit to adopt the provisions of the Act for its employees. MCL 38.1103(1). Section 3(3) of the Act requires the governing body of a municipal unit to file a written certification with the Secretary of State if it has elected to come within the provisions of the Act. MCL 38.1103(3). According to the Secretary of State, the city has complied with section 3 of the Act and is, therefore, a "reciprocal unit," as defined in the Act. MCL 38.1102(d).
Section 5 of the Act provides that an employee may use prior service credit to meet the service requirements of a subsequent public employer, as follows:
A member of a reciprocal retirement system who has 30 months or more of credited service acquired as a member of the system and who has attained the age but has not met the service requirements for age and service retirement shall be entitled to use his or her credited service in force previously acquired as a member of governmental unit retirement systems in meeting the service requirements of the system from which he or she retires. . . . Except as provided in section 6, credited service acquired in a governmental unit in which the member was previously employed shall not be used in determining the amount of his or her retirement allowance payable by the reciprocal retirement system from which he or she retires unless otherwise provided by the retirement system. [MCL 38.1105. Emphasis added.]
Based upon the information provided with your request, the employee in question meets the required 30 months of credited service with the city and has attained age 60 but has not met the city's service requirements. The employee, however, may use service credit obtained while a member of the county retirement system if that service constitutes "credited service in force." MCL 38.1105.2 This quoted language is not defined in the Act, nor has any appellate court interpreted it.
The first task when interpreting a statute is to ascertain and give effect to the intent of the Legislature. When the language of the statute is clear and unambiguous, the plain language of the statute must be given effect. Paaso v Paaso, 170 Mich App 628, 635; 428 NW2d 724 (1988), lv den 431 Mich 1207 (1988). Every word in a statute must be given effect and any construction that would render any part of a statute surplusage or nugatory must be avoided. Altman v Meridian Twp, 439 Mich 623, 635; 487 NW 2d 155 (1992). When interpreting a statute, the entire Act must be read so that the meaning given to one section is consistent with the meaning given to other sections. Simmons v Marlette Bd of Education, 73 Mich App 1, 5; 250 NW2d 777 (1976). It is reasonable to conclude that words used in one place in a statute have the same meaning when used in another place in the same statute. Phipps v Campbell, Wyant & Cannon Foundry, 39 Mich App 199, 216; 197 NW2d 297 (1972).
The phrase "credited service in force" is also found in section 4 of the Act. MCL 38.1104. Section 4 provides for receiving a retirement allowance from a preceding employer:
A member of a reciprocal retirement system who leaves the employ of a reciprocal unit, designated as the preceding reciprocal unit, and enters the employ of another governmental unit, designated as the succeeding governmental unit, shall be entitled to a retirement allowance payable by the preceding reciprocal unit's retirement system subject to the following conditions:
a) The member has 30 months or more of credited service in force acquired in the employ of the preceding reciprocal unit.
b) The member does not withdraw his or her accumulated deposits from the preceding reciprocal unit's retirement system, or if the member has withdrawn the accumulated deposits, the member deposits with the preceding reciprocal unit the amount withdrawn together with interest compounded annually at the rate in effect for the preceding reciprocal unit; the deposit to be made within 5 years after the date the member becomes employed by the succeeding governmental unit.
c) The member enters the employ of each succeeding governmental unit within 15 years after the date of leaving the employ of each preceding governmental unit.
d) The member's credited service in force with the preceding reciprocal retirement systems plus the memberís credited service acquired in the employ of succeeding governmental units equals or exceeds the minimum credited service required for age and service retirement in the applicable preceding reciprocal retirement system.
e) The retirement allowance payable by any preceding reciprocal retirement system shall be determined at the time the member ceased to be a member of the preceding reciprocal retirement system, upon the basis of the retirement allowance formula of the preceding reciprocal retirement system, the member's credited service in force in the preceding reciprocal retirement system, and the member's final average salary at that time. [MCL 38.1104. Emphasis added.]
Thus, for a member to receive a retirement allowance from a preceding reciprocal employer under section 4, the employee must, among other things, 1) have 30 months or more of "credited service in force" with the preceding employer, 2) not have withdrawn his or her deposits from the preceding retirement system or must have repaid the funds timely with interest, and 3) have "credited service in force" with the preceding system plus the service acquired with his or her succeeding employer that meets the minimum credited service required for retirement in the preceding retirement system.
The meaning of "credited service in force" intended by the Legislature must be determined by reading sections 4 and 5 together to arrive at a consistent interpretation. Phipps, 39 Mich App at 216. One suggestion offered in the materials forwarded with your request is to construe the phrase to mean essentially "credited service with contributions still on deposit." This interpretation cannot be sustained, however, because it would render the language of section 4(b) mere surplusage. Altman, supra; People v Belanger, 120 Mich App 752; 327 NW2d 554 (1982). In other words, since section 4 (b) of the Act states as a condition of receiving a retirement allowance that an employee maintain his accumulated deposits with the preceding retirement system, the Legislature must not have intended "credited service in force" used elsewhere in the Act to have this same meaning. Thus, the phrase "credited service in force" as used in section 5 cannot mean that the member must not have withdrawn his retirement deposits with his former retirement system.
Moreover, the phrase "credited service in force" does not support a legislative intent that funds must remain on deposit in order for service to be in force. Where the Legislature intends such a meaning, it uses words to that effect. For example, section 55(1) of the Michigan Legislative Retirement System Act, MCL 28.1055 (1), does so in plain and unmistakable terms:
By accepting the refund [of plan contributions] a member who does not meet the requirement of section 23(1)(a) [for receiving a retirement allowance] upon leaving service or a deferred vested member forfeits all accrued rights and benefits in the retirement system and loses credit for all service rendered to the state for which credit is given under this act.3
It is my opinion, therefore, that the Reciprocal Retirement Act permits a city employee to use his years of service with a prior public employer to meet his present employer's retirement plan's service requirements, even if the employee has withdrawn his funds from the prior employer's retirement plan.
1A defined contribution plan often provides a set employer contribution for the employee's retirement account and an employer match-up to a set limit for employee contributions. The State Employees' Retirement Act, for example, provides an employer contribution equal to 4% of an employee's compensation and an employer match for employee contributions up to an additional 3% of compensation. MCL 38.63. Defined contribution plans are usually established as qualified 401(k) plans. In contrast, a defined benefit plan provides a fixed retirement allowance, usually paid monthly, based on the employee's age, compensation, and years of service.
2Counting the years of prior service with the reciprocal unit does not enhance the retirement allowance paid, rather it only serves to qualify the employee to receive the allowance paid by the subsequent employer.
3Thus, defined benefit plan Legislative Retirement System members who accept a refund of contributions no longer have credited service that could be transferred to a reciprocal retirement system. See Letter Opinion of the Attorney General to Senator Virgil C. Smith, Jr., dated May 26, 1989.