June 25, 1980
Mr. Al A. Asher
Administrator
South Dakota Retirement System
Pierre, South Dakota 57501
Official Opinion No. 80-39
South Dakota Retirement System Credited Service: SDCL 3-12-47(17)(b)
Dear Mr. Asher:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
X was born June 30, 1932. He commenced employment with the State of South Dakota on July 1, 1956, and has been continuously employed by the State since that date.
On July 1, 1967, the Public Employees Retirement System Law became effective (SDCL 3-12, SL 1967, Ch. 303). SDCL 3-12-25 granted ten years of 'prior service' to each employee who was employed for ten or more continuous years immediately prior to July 1, 1967. In addition, SDCL 3-12-27 and 3-12-28 provide, in essence for vesting of retirement benefits after ten years of credited service.
The 1968 Legislature amended many of the provisions of Chapter 3-12. These amendments became effective on February 15, 1968, under an emergency clause. The 1968 version of Chapter 3-12 granted credit for all prior service up to a maximum of twenty years, but allowed no credit for service prior to age thirty (3‑12-2(12)). The 1968 version retained the ten year vesting provision (SDCL 3-12-28).
Based on the above facts, you have asked the following question:
QUESTION:
Under SDCL 3-12-47(17)(b), is X entitled to ten years of prior service as provided under the 1967 law, or five years of prior service as provided under the 1968 law?
The South Dakota Public Employees Retirement System was established on July 1, 1967 pursuant to SL 1967, Ch. 303. When the retirement system went into effect certain employees were granted 'credited service.'
SDCL 3-12-47(17)(b) now reads as follows:
(17) 'Credited service,'
(a) . . .
(b) Years of noncontributory service, or fractions thereof, credited prior to July 1, 1974, previously credited under the provisions of the retirement systems consolidated pursuant to § 3-12-46;
. . .
SL 1967, Ch. 303, § 6 provided as follows (SDCL 3-12-25):
No employee of the State of South Dakota or of a participating local district shall be credited with prior service unless he has been so employed for a period of not less than ten continuous years immediately prior to July 1, 1967. All such employees having been employed ten or more continuous years immediately prior to July 1, 1967, shall be credited with ten years prior service credit at a rate to be determined by the board of trustees but not in excess of five dollars per month per year of prior service.
SL 1967, Ch. 303, § 8, in relevant part, reads as follows (SDCL 3-12-28):
The following shall be the early retirement vesting schedule:
Years of Creditable Service Vested Interest
10 but less than 11 50%
. . .
Each additional year of credited service beyond ten years shall entitle the member to an additional five percent vested interest until such benefits become fully vested.
X was employed by the State of South Dakota for more than ten continuous years immediately prior to July 1, 1967. When SDCL 3-12-25 became effective on July 1, 1967, X was immediately entitled to ten years of credited service. That credited service gave X a vested right in 50% of the benefit which would become payable at a later date, pursuant to SDCL 3-12-28.
In Tait v. Freeman, 74 S.D. 620, 57 N.W.2d 520 (1953), the South Dakota Supreme Court recognized that a statutory retirement system was contractual in nature. The theory on which the court based its determination was that where, under the statutes forming the contract, a member acquired a vested right, future legislation could not operate to deprive him of that right. On the other hand, where the right was not vested, future legislation could eliminate that right.
Under the 1967 version of the Public Employees Retirement System, it is clear that X obtained a vested right. While there are many cases which hold that rights under statutory retirement systems are subject to change up to the point of retirement, the more modern view is that once such rights vest, future legislation cannot abrogate those rights. This view is in accordance with the opinion expressed by one of my predecessors in Official Opinion 69-38, 1969-70 A.G.R. 146. See also, Hickey v. Pittsburgh Pension Board, 378 Pa. 300, 106 A.2d 233 (1954), 52 A.L.R.2d 430; 52 A.L.R.2d 430; Anno., Vested Right of Pensioner to Pension 52 A.L.R.2d 437 and Later Case Service.
It is my opinion that the 1968 Amendments to SDCL 3-12 cannot operate to deprive X of a vested right. Under the facts stated above, X is entitled to ten years of prior service as provided in the 1967 version of the law.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
