September 30, 1986

Mr. Duane C. Anderson 
Office of City Attorney 
509 South Dakota Avenue 
Sioux Falls, South Dakota 57102

OFFICIAL OPINION NO. 86-39

Transfer of accumulated reserves of municipal employees pension plan to Regional Airport Authority

Dear Mr. Anderson:

You have requested an official opinion from this office based on the following factual situation:

FACTS: 

The City of Sioux Falls, pursuant to SDCL 50-6A-2, created the Sioux Falls Regional Airport Authority which is a separate public body, corporate and politic.  Several employees of the City of Sioux Falls whose pensions are presently not vested desire to transfer their employment to the Sioux Falls Regional Airport Authority. Those same employees, who also are not ready for retirement, desire that both the nonvested portion of the pension reserves contributed by the City plus interest and the portion of the pension reserves contributed by them plus interest be transferred by the Sioux Falls Employees Pension Board of Trustees to the Sioux Falls Regional Airport Authority or to another Pension Plan Board for their future benefit upon retirement.  These employees also understand that the Sioux Falls Regional Airport Authority will participate in the South Dakota Retirement System.  The actuaries for the Sioux Falls Employee Pension Board of Trustees think that a transfer of both the City and employee contributions may be made without endangering the City's Pension Plan.

Based on the above facts, you have asked the following question:

QUESTION: 

Does the Sioux Falls Employees Pension Board of Trustees have authority under SDCL ch, 9-16 to transfer the nonvested reserves plus interest contributed by the City and the reserves contributed by the employees plus interest to the Sioux Falls Regional Airport Authority or another duly constituted Pension Board?

SDCL 9-16-3 provides: 

The governing body of any city of the first class, after authorization as provided in §  9-16-1 or §  9-16-2, may adopt an ordinance establishing a retirement system covering employees, elective officers and appointive officers of the city.  The ordinance shall provide rules and regulations governing the operation of the retirement system; shall prescribe the membership of the retirement system; shall provide for the retirement of members; shall provide for the payment of annuities, pensions or retirement allowances or may provide for actuarial equivalents thereof in the event of retirement, disability, or death; shall create a board of trustees in whom is vested the responsibility for the management of the retirement system; shall provide for the financing of the retirement system by contributions; and shall provide for the investment of the moneys of the retirement system.

SDCL 9-16-26 provides: 

In the event any member leaves city service before a pension becomes  payable on account of his participation in the said pension fund, the total of his contributions to the said fund may be either retained by the said fund or returned to the said individual or his legal representative either with or without interest additions, as the city shall determine by ordinance.

SDCL 3-12-66 provides: 

No political subdivision or political corporation, including municipalities, counties and chartered governmental units, may establish any retirement plan unless such political subdivision or public corporation becomes a participating unit of the system created in this chapter.

ANSWER:

The answer to your stated question is controlled by the three statutes cited above.  First, there is no statutory authority for transfers of pension funds under SDCL 9-16.  Absent specific statutory authority, the City of Sioux Falls Pension Board has no authority to transfer any funds on behalf of the three employees who will soon become members of the Sioux Falls Regional Airport Authority.  A transfer to the City of Sioux Falls Regional Airport Authority for a new pension plan would also violate SDCL 3-12-66.  Second, the only way to remove pension funds for the nonvested employees is under SDCL 9-16-26.  It is my opinion that when the three City employees transfer  to the Sioux Falls Regional Airport Authority, their employment is terminated. As such, those employees would be entitled to a refund of members' contribution with or without interest as the City of Sioux Falls determined by the ordinance passed in accordance with SDCL 9-16-3.  SDCL 9-16-26, however, refunds only concern member contributions; the City's contributions, if any, must remain.

Respectfully submitted,

Mark V. Meierhenry
Attorney General