Request By:
Junetta Zakem, Secretary
Board of Trustees of the
Employees Retirement Fund
Finance Department
Fourth and York Streets
Newport, Kentucky 41071
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Martin Glazer, Assistant Attorney General
This is in reply to your letter of March 27, 1977 seeking an interpretation of the meaning of the term "average salary" as it is used in Newport Commissioners' Ordinance No. 1317. You cite the example of a member of the pension fund who retires after 18 years of service and ask whether the term means he would draw 45 percent of his average salary for his three highest years or would he draw 45 percent of the average salary of his 18 years of service.
The term "average salary" is defined in the Ordinance under Section 1 (12) as, "the highest average annual salary of the member for the three years of service wherein the member drew his highest annual salary. " Section 15 (1) provides:
"Upon total and permanent disability of a member as the result of any cause other than occupational disability, if a member rendered at least ten years of total service, he shall be entitled to a disability retirement annuity. The amount of such annuity shall be equal to two and one-half per cent of average salary for each full year of total service, subject to a minimum payment of twenty-five per cent of such average salary, and a maximum payment of sixty-five per cent of average salary. . . ."
Interpreting these two sections together, it appears to us that "average salary" would be determined by looking at the entire 18 years of service and picking the three highest years of payment, and then dividing those years by 3 to get the average annual salary. To determine the amount of annuity, you would need to multiply 2 1/2 percent times 18 years or 45 percent and then multiply 45 percent times the "average salary" (subject to minimum and maximum) . Example: Jones' three highest years of annual salary are $8,000 - $10,000 and $12,000. His average salary is $10,000 (8,000 plus 10,000 plus 12,000 divided by 3). He worked 18 full years. Two and one-half times 18 years equals 45 percent -- 45 percent times 10,000 equals $4,500. Jones is entitled to an annuity of $4,500 per year.
To interpret the Ordinance to require the payment of 45 percent of the average salary of all 18 years would nullify the definition of "average salary" as found in Section 1.