Request By:
Sam Boyd Neely, Sr., Esq.
City Attorney, City of Mayfield
211 East Broadway
Mayfield, Kentucky 42066
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising a question concerning the city's policemen's and firemen's pension fund which exists pursuant to KRS 95.520 to 95.620. You refer to KRS 95.580, setting forth the sources of the pension fund, and KRS 95.610(3), stating that if at any time there is not sufficient money in the fund to pay each beneficiary the full amount per month to which he is entitled, an equal percentage of the monthly payments due shall be paid until the fund is replenished so as to warrant payment in full to all beneficiaries.
You next refer to KRS 95.550(1)(c) which provides in part as follows:
"If any member of the police or fire department is killed or dies as the result of an injury received in the performance of duty, or dies of any disease contracted by reason of his occupation, or dies while in the service from any cause as a result of his service in the department, or dies in service or while on the retired list from any cause after fifteen (15) consecutive years of service in the department, and leaves a widow, widower or a child under eighteen (18) years of age, the board of trustees shall order a pension paid to the widow, widower or child. There shall be paid monthly to the widow or widower, while unmarried, a pension of not less than thirty dollars ($30.00), or not more than fifty percent (50%) of the deceased's monthly salary at the time of retirement or death . . ."
In the past few years several policemen and firemen receiving pensions have died leaving widows and one fireman died in the line of duty leaving a widow. The Board of Trustees of the pension fund elected to pay each of these widows 50% of the deceased's monthly salary at the time of death or retirement. The Board of Trustees now believes that there will be a shortage in the pension fund sometime in the future. Some board members are asking if the pension payments to the widows might be reduced but still kept within the range set forth in KRS 95.550(1)(c) or if the board may establish a policy in the future to reduce these amounts.
Your specific question to this office is whether or not recipient widows already receiving a pension pursuant to KRS 95.550(1)(c) may have their pensions reduced by the Board of Trustees of the Pension Fund and, if not, may future pensions of widows of policemen and firemen be reduced within the range set forth in KRS 95.550(1)(c).
In 60 Am.Jur.2d Pensions and Retirement Funds, § 65, the following appears:
"In those jurisdictions wherein the right to a pension is vested as an integral part of the contract of employment, an employee's vested contractual pension rights may be modified prior to retirement to permit the pension system to accommodate the changing conditions; such modifications, however, must be reasonable and must be materially related to the theory and successful operation of the system, and changes which result in disadvantages to employees should be accompanied by comparable new advantages. Once the employee has retired, however, the conditions precedent to the obligation of the public body have been fulfilled, and the pension rights of the employee may not be changed to his detriment by subsequent amendment."
In 70 C.J.S. Pensions, § 8, it is stated:
"The government which has granted a pension may terminate or revoke it at its pleasure, as by repealing the statute under which the pension was granted, without violating any constitutional provision, but, if the right to a pension installment has matured, it has been held that it may not be denied or interfered with by subsequent amendments or regulations concerning the payment."
The Court, in Moran v. Firemen's and Policemen's Pension Fund of New Jersey, 20 N.J. Misc. 479, 28 A.2d 885, 888 (1942), said:
"The general rule is that a pension granted by the public authorities is not a contractual obligation but a gratuitous allowance in the continuance of which the pensioner has no vested right and that a pension is, accordingly, terminable at the will of the grantor.
Gibbs v. Minneapolis Fire Dept. Relief Ass'n., 125 Minn. 174, 145 N.W. 1075, 37 Ann. Cas. 1915c, 751;
Pennie v. Reis, 132 U.S. 464, 10 S. Ct. 149, 33 L. Ed. 426. It is, however, conceded in most jurisdictions that where any particular payment under a pension has become due, the pensioner has a vested right therein. . . ."
An annotation in 52 ALR 2d 437, "Vested Right of Pensioner to Pension, " states at page 442:
"But what would appear to be a growing number of courts have viewed rights in pension systems calling for contributions on a compulsory basis as being nonvested only during the period prior to an employee's fulfilment of the requirements for a grant of the pension; upon fulfilment of those conditions, the pension rights are deemed to vest, thereafter being immune from abolition, if not from adverse change of any kind."
Footnote 15 on page 442 of the above-mentioned annotation in 52 ALR 2d lists Kentucky as among those jurisdictions in which pension rights vesting upon fulfillment of the requirements for award of the pension are viewed as immune from alteration of any kind. In the particular pension plan with which you are concerned there is, however, a provision in KRS 95.610(3) for a temporary pro rata reduction in benefits to beneficiaries during those times when there is insufficient money in the fund to pay each beneficiary the full monthly amount to which he is entitled. See also McQuillin Mun. Corp. (3rd Ed.), Vol. 3, § 12.171, which states in part:
". . . It has been held that the fact that a pension fund is paying out more than it is receiving, thereby depleting its reserves, is no justification for the reduction of a pension previously granted. However, a pro rata reduction may be authorized where there is insufficient money in the pension fund to meet commitments. . . ."
In
Miller v. Price, 282 Ky. 611, 139 S.W.2d 450 (1940), the Court concluded that a fireman whose name had not been placed on the retired list did not have any vested rights in the pension fund even though the fund was partly comprised of an involuntary assessment on the monthly salary of each fireman. The Court said in
City of Louisville v. Board of Education of Louisville, 291 Ky. 7, 163 S.W.2d 23 (1942), that a person has no vested right in a pension system until he becomes an actual beneficiary.
Finally, in Arnold v. Browning, 294 Ky. 164, 171 S.W.2d 239, 240 (1943), the Court held:
". . . The right to participate in a pension fund which has not been contributed to voluntarily by the pensioner is not a vested right per se. It is only when by the terms of the act providing for the fund, the claimant is shown to become entitled to the benefits that the right thereto becomes vested. . . ."
In conclusion, the Board of Trustees of the Policemen's and Firemen's Pension Fund is authorized to award pension benefits to those persons authorized by statute to receive same, within the amounts prescribed by KRS 95.550(1)(c). Once a person has fulfilled the requirements for a pension and a pension has been granted, the recipient acquires vested rights in the pension fund and those rights and benefits cannot be altered or abolished except pursuant to KRS 95.610(3) which permits a pro rata reduction in benefits to beneficiaries during those times when there is insufficient money in the fund to pay each beneficiary the full monthly amount to which he is entitled.