February 20, 1976

Mr. Ronald Reed, Secretary
Department of Education
  and Cultural Affairs
State Capitol Building 
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 76-24

Authority of State agency to make con­tributions on behalf of employees who were not permitted to establish credit for certain years during their employment

Dear Mr. Reed:

You have requested an opinion from this office based upon the following fact situation:

SDCL 3-12-83 provides that certain current contributing members of the system may purchase, or have made on their behalf, con­tributions for prior credited service. The Board of Regents has several employers who were not permitted to participate in the retirement system for certain periods of time. These employers now have money available with which to make contributions on behalf of those employees.

Based on the above facts your question is:

May an agency of the State make contributions on behalf of employees who were not permitted to establish credit for certain years during their employment?

SDCL 3-12-83 reads as follows:

A current contributing member of the system may receive credited service by election to make, or have made on his behalf, contribu­tions, based on his current compensation at twice the member rate, for each year of service for which tie receives credit, if:

(1) The current contributing member of the system could have established credit for any South Dakota public service by making contributions under this chapter or any prior law; or

(2) The current contributing member was not permitted to establish credit for any South Dakota public service.

The amount of accredited service and the rate of contribution shall be at class "A" rates unless the service for which credit is sought was rendered as a class "B" member in which case class "B" rates shall apply. In the event the member fails to make an election before July 1, 1976, his right to buy back such credited ser­vices will lapse.

The present South Dakota Public Employees' Retirement System is a system synthesized from numerous former public employee retirement systems. Because of this fact, and because the legislation in regard to these former systems was different for each system, the treatment of persons covered under those former systems was not always the same.

Under the old Public Employees' Retirement System, for example, which was in effect prior to July 1, 1974, there was a procedure whereby the Board of Trustees could determine the prior service credit allowable for their employees (SDCL 3-12-16) and, in addition, provided a procedure whereby a participating unit could enter the system, and after an actuarial study, make contributions on behalf of their employees in purchasing prior service credit.

SDCL 3-12-83 would appear to be a transition statute which would allow an agency under the system up to July 1, 1976, to cooperate with a current con­tributing member of the system and make contributions on his behalf for purposes of purchasing prior service credit. SDCL 3-12-83 provides the only method whereby prior service is credited on a free noncontributory basis. SDCL 3-12-83 does, however, authorize an agency to make contributions on behalf of a current contributing member of the system for purposes of receiving credit for prior service. Any such contribution, however, would be authorized only if the current contributing member would fit under either subdivision one or subdivision two of §3-12-83 and the agency making the contributions has funds which it can lawfully use for such a purpose.

Respectfully submitted,

WILLIAM J. JANKLOW
ATTORNEY GENERAL

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