November 15, 1994
Deputy Commissioner of Benefit Services
Kentucky Retirement Systems
Perimeter Park West
1260 Louisville Road
Frankfort, Kentucky 40601
Re: Senate Bill 80
Dear Mr. Hanes:
You have requested our opinion on the application of Senate Bill 80, passed in the regular session of the 1994 General Assembly. You point out that the bill is internally inconsistent and cannot be construed with any degree of confidence by those charged with administering it.
We agree. After considerable study we cannot determine how the bill could be applied literally. We will offer what we believe is the only interpretation that can be justified from a legal standpoint and that accomplishes the apparent intent of the legislation.
Section 1 of Senate Bill 80 makes a technical amendment to KRS 61.615. The amendment to this section does nothing more than change the way the statute is divided into paragraphs. The substantive language of the statute remains unchanged. The difficulty with Senate Bill 80 arises from section 2 of the bill, which suspends a portion of the statute from operation for a specified period of time. Before we analyze section 2, which is the source of your confusion, it will be helpful to summarize the provisions of KRS 61.615.
What KRS 61.615 does
The following summary is provided simply to orient the reader to the manner in which the statute is organized. We have deliberately omitted reference to certain provisions that do not affect this examination.
KRS 61.615 is one of several statutes dealing with disability retirement. Other statutes, such as KRS 61.605 and 61.607, provide rules for the award of the disability retirement allowance; KRS 61.615 provides rules for the reduction of such an award. These rules are set out in the statutory subsections as follows:
1. The disability retirement allowance may be reduced if the recipient becomes employed.
2. The allowance may be reduced if the recipient is able to work and refuses to accept employment.
3. The retirement system has authority to determine the amount of the reduction.
4. If a recipient of a disability retirement allowance applies for early retirement, the following rules apply:
a. the recipient may not change the beneficiary or payment option;
b. the benefit shall be recomputed if the recipient has returned to employment;
c. the benefit is reduced in accordance with the statute on early retirement;
d. the benefit is further reduced by the actuarial value of the total amount of the disability retirement allowances [the recipient] has received";
e. the allowance may be reinstated after medical evaluation; and
f. at normal retirement age, the allowance is the higher of the disability allowance or the early retirement allowance.
5. The retirement allowance, and not the disability allowance, is paid after the recipient reaches the normal retirement date.
Again we emphasize that the foregoing summary is sufficient for the purposes of this opinion, but it does not accurately summarize all the terms of the statute.
What Senate Bill 80 does
Section 2 of the bill in question says:
Notwithstanding any provision to the contrary, subsections (4)(d) and (5) of Section 1 of this Act shall be suspended retroactively to July 15, 1988, and the suspension shall extend through December 31, 1994. Any disability retiree whose early retirement benefit was reduced by the actuarial value of the total amount of the disability retirement allowances received prior to reduction or discontinuance shall be paid the amount of the reduction between July 15, 1988 and December 31, 1988.
We see that there are two parts of the statute that are "suspended retroactively": paragraph 4(d) and subsection 5. There is no apparent problem with the suspension of paragraph 4(d); that paragraph, one will recall, states that when a disability recipient opts for early retirement, the allowance is reduced by "the actuarial value of the total amount of the disability retirement allowances." That last phrase refers to the add-on service credit, granted under KRS 61.605, whereby a disability retiree is credited for years of service in excess of the years that he has actually worked. This reduction of the disability allowance is suspended until December 31, 1994, and any reduction made since July 15, 1988, must be repaid to the disability recipient. During the blackout period established in Senate Bill 80, this reduction is not to be made (regardless of whether or not the recipient has retired during that period), and reductions made during the blackout period are to be undone. After the blackout period, the reduction is revived.
Some of the materials provided to us suggest that the suspension of the reduction would be permanent for certain retirees; that is, it is proposed that if a retiree has his allowance raised as a result of Senate Bill 80, the member would continue to receive the higher amount, even after the suspension period runs out on December 31, 1994. We do not agree. On January 1, 1995, subsection 4(d) will be back in effect and all members will be subject to the reduction that it mandates. In other words, the temporary suspension of paragraph 4(d) works a temporary benefit on certain members. If a member of this group reaches normal retirement age before December 31, 1994, the member will gain the benefit of KRS 61.615(4)(f) and will receive the higher of his disability allowance or his early retirement allowance, but that allowance must be recalculated on January 1, 1995, at which time his disability allowance is again subject to the reduction.
The situation resulting from the suspension of subsection 5 is even more difficult to understand. Subsection 5, it will be recalled, simply provides that any reduction or discontinuance of a disability benefit terminates upon the normal retirement date. We assume that the purpose of the provision is to grant disability retirees the same status they would have if they had reached the normal retirement date without drawing disability benefits; that is to say, when the normal retirement date is reached it does not matter whether the retiree had been receiving a disability allowance, for his status is the same as other retirees.
The suspension of subsection 5 is rather odd in the context of Senate Bill 80, because the gist of the bill is to effect a recalculation of certain early retirement benefits, and section 5 has nothing to do with early retirement. Subsection 5 (formerly KRS 61.615(4)) was enacted before disability retirees were given the option of early retirement. In fact, the subsection does not even mention early retirement. It is apparent that KRS 61.615(5) was intended to describe the allowance at full retirement age for disability retirees who have not opted for early retirement; it is another provision, KRS 61.615(4)(f), that was intended to describe the allowance at full retirement age for disability retirees who have chosen the early retirement option. Why subsection 5 was implicated in a bill dealing with early retirement eludes us.
The situation is particularly complex because, unlike the benefit reduction in paragraph 4(d), the terms of subsection 5 cannot be simply blacked out for a specified period of time. Subsection 5 benefits disability retirees by raising their benefits, upon reaching normal retirement age, to the full retirement amount. A retroactive suspension of subsection 5 would mean that some retirees may have received a greater allowance than they were entitled to; and although Senate Bill 80 states that those benefiting from the bill are to be paid a lump sum, it does not indicate what is to be done with members who are disadvantaged by the bill. It is unclear whether these disadvantaged members should have to repay the difference between their disability retirement and their full retirement, or whether the overpayment can be recouped through a reduction in current payments, or whether the amount recouped by the retirement system can later be recouped by the member at the end of the blackout period.
Despite considerable effort, we are unable to derive any meaning from the attempted retroactive suspension of KRS 61.615(5).
We therefore conclude that the practical effect of Senate Bill 80 is to work a suspension of paragraph 4(d) and nothing else; the attempted suspension of subsection 5 is meaningless.
We hope that this analysis will enable your agency to carry out its administrative duties under Senate Bill 80.
Ross T. Carter
Assistant Attorney General