June 4, 1976

Mr. Al A. Asher, Administrator
Division of Retirement and Insurance
Department of Labor
216 East Capitol Street
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 76-59

Is an employer permitted by the South Dakota Retirement System to purchase prior service credit for his employees on an installment basis?

Dear Mr. Asher:

You have requested an opinion from this office in regard to the following question:

Is an employer permitted by the South Dakota Retirement System to purchase prior service credit for his employees on an installment basis?

SDCL 3-12-83 provides:

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 he wishes to receive 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 credited 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 service will lapse.

SDCL 3-12-87 provides:

Payment of a deposit with the system for credited service pursuant to §§ 3-12-83 to 3-12-86, inclusive, shall be determined and due at the time the election is received by the system, but the member shall have the option to pay the amount due by periodic, level in­stallments over a period of up to ten years, the value of which, when discounted for interest at the current effective rate, are equal to the amount due at the date of the election. In the event the periodic payments are not completed or paid when due, the board shall have the authority to make an appropriate adjustment to the credited service, benefits payable under this chapter, or schedule of payments to allow for default.

Although SDCL 3-12-87 does not specifically provide for the political sub­divisions making such payments on behalf of an employee to make them on an installment basis, the concept of "installment payments" by a par­ticipating unit is not foreign to the system. (See SDCL 3-12-69.)

SDCL 3-12-83 recognizes that an employee may have contributions made on his behalf. If the political subdivision is making contributions on behalf of an employee under 3-12-83, it seems reasonable to argue that under 3-12-87 the member could choose to have the contributions being made on his behalf to be made on an installment basis as is allowed for his personal contribution under SDCL 3-12-87. Accordingly it is my opinion that a par­ticipating unit, with the employee’s consent, can contribute money to the system for purchase of prior service credit for the employee credit on an installment basis, according to the conditions of SDCL 3-12-87.

The statutes are not altogether specific and clear in this matter, but if possi­ble it is my opinion that the retirement system laws should be interpreted to achieve a flexiblity which is desirable for both the system and its members, yet is within the confines of what the law allows.

Respectfully submitted,

WILLIAM J. JANKLOW
ATTORNEY GENERAL

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