Request By:
Ms. Donna S. Early, Executive Secretary
Judicial Form Retirement System
P. O. Box 791
Frankfort, Kentucky 40602
Opinion
Opinion By: CHRIS GORMAN, ATTORNEY GENERAL; Gerard R. Gerhard, Assistant Attorney General
By letter of December 3, 1993, you posed questions related to Section 44 of Senate Bill 7 of the 1993 First Extra Session of the Kentucky General Assembly (now codified as KRS 6.696). That enactment provides, in part and in substance, for forfeiture by a legislator or former legislator, upon conviction for a felony related to his or her legislative duties, of retirement rights and benefits earned after September 16, 1993, under the state administered plan to which contributions have been made as a result of such person's service in the General Assembly.
Regarding the key question here involved, our view is that, since the Legislative Retirement Plan is deemed an "inviolable contract," a newly enacted statutory provision providing for forfeiture of benefits under the plan, under certain circumstances, may only be applied as against a legislator or former legislator who joins the plan on or after the effective date of such sanction. Discussion follows.
Background, Questions Presented
By way of background related to the questions posed in your letter, you explain that the statutes governing the Kentucky Legislators Retirement Plan are KRS 6.500 to 6.577, and that KRS 6.525 adopts several statutes found in Chapter 21 (of the Kentucky Revised Statutes) governing the Kentucky Judicial Retirement Plan. The plan (which we take to mean the Kentucky Legislators Retirement Plan) , you indicate, does not have regulations. Your letter also indicates:
Under the above statutes, a vested member shall forfeit all retirement benefit rights, and all personal contributions, in the event the member is 'removed for cause,' whereas a nonvested member shall be entitled to a refund of the member's entire personal contributions to the Plan. Also, the statutes provide for the payment of interest on personal contributions in the event a nonvested member leaves office and is under a certain age; in such event, the interest rate of 6% per annum will no longer accrue after the member reaches the age when the federal excise tax is no longer applicable (age 59-1/2 at this time).
Specifically, your letter asks that this office provide an opinion concerning:
(A) The applicability of Section 44 of 1993 Senate Bill No. 7 to the provisions governing the Legislators Retirement Plan as outlined in the preceding paragraph, and
(B) If the Plan commences to pay benefits, and subsequently the former member of the Plan is found guilty of a felony as set forth in Section 44, can the Plan recover from the member the benefits paid prior to the conviction?
KRS 6.696 provides:
(1) A legislator or former legislator convicted of a felony relating to his duties as a legislator, in any state or federal court of competent jurisdiction, shall forfeit rights and benefits earned after September 16, 1993, under the state administered retirement plan to which contributions have been made as a result of his service in the General Assembly, except for the return of his accumulated contributions and interest credited on those contributions.
(2) The payment of retirement benefits ordered forfeited shall be stayed pending any appeal of the conviction. If the conviction is reversed on final judgment, no retirement benefits shall be forfeited.
Applicability of Section 44, 1993 Senate Bill 7
As we understand it from follow-up discussions with you, your request for an opinion "as to the applicability of Section 44 of 1993 Senate Bill No. 7," now codified as KRS 6.696, is specifically a request for an opinion regarding whether KRS 6.696 is applicable to a legislator who was a member of the Legislators Retirement Plan on or prior to September 16, 1993. In accordance with the enactment, a legislator or former legislator forfeits rights and benefits in the Legislators Retirement Plan, earned after September 16, 1993, upon such person's conviction for a felony related to his or her legislative duties.
In our view the answer is no.
The Legislators Retirement Plan is, from a legal perspective, a contract. This view stems from KRS 6.525, related to the "government" of such plan, which expressly adopts KRS 21.480 (one of the provisions of the Judicial Retirement Plan) , as one of the governing provisions of the Legislators Retirement Plan. KRS 21.480 provides:
It is hereby declared that in consideration of the contributions by the members, and in further consideration of benefits received by the state through the inducement of qualified and experienced judges and commissioners to continue in service, KRS 21.350 to 21.510 shall constitute an inviolable contract of the Commonwealth, and the rights and benefits provided therein shall not be subject to reduction or impairment by alteration, amendment or repeal.
(Emphasis added.)
KRS 6.696, in adding new circumstances to the Legislators' Retirement Plan under which a Legislator's retirement benefits may be forfeited, obviously involves a "reduction or impairment by alteration, amendment or repeal" as that phrase is used in KRS 21.480. It follows that if such change were to be applied to a legislator who was a member of the plan prior to the effective date of KRS 6.696, such application would, in our view, be violative of Section 19 of the Constitution of Kentucky, which provides that "No ex post facto law, nor any law impairing the obligation of contracts, shall be enacted." Such application would also be violative of Article I Section 10 of the Constitution of the United States, which provides, in part pertinent here, that no state shall pass a law impairing the obligation of contracts. In accord with this view see the discussion in Opinion of the Attorney General (OAG) 78-4, copy enclosed, which we follow here.
Is Each Legislative Term a New Contract Period?
In the course of answering the key question you have presented, we have considered whether the terms of the Legislative Retirement Plan might be changed with respect to a legislator's succeeding term of office without infringing the "inviolable contract" provision. In our view the answer is no.
KRS 6.505 provides in part:
An election once made under this section either to participate or not to participate in the Legislators' Retirement Plan, shall be considered to apply to all future service as a legislator, whether in the same or a different office as a legislator, and whether or not it is in successive terms.
(Emphasis added.)
We believe this language affirmatively indicates that the participation of a legislator in the Legislators Retirement Plan is not contracted separately or anew with respect to each term of legislative office. Given the express terms of KRS 6.505, quoted above, legislators do not "start over," with respect to the Legislator's Retirement Plan, at the beginning of each term of office, such that a new term of office would be considered a new contract period for which different contractual terms could be applied to one who was previously a member of the plan.
It has been observed, of course, that the Contract Clause of the United States Constitution (Article I, Section 10) does not protect one against all possible revisions of contract terms. As the court indicated in
Marvel v. Dannemann, 490 F.Supp. 170, 175, (1980 D.C. Del.), (citing
United States Trust Co. v. New Jersey, 431 U.S. 1, 97 S. Ct. 1505, 52 L. Ed. 2d 92 (1977), "states have some power to modify terms of their own contracts when the public interest so requires."
Obviously, provisions (e.g., KRS 6.696) attempting to ensure the integrity of state legislators involve an important public interest. The new sanctions provided for by KRS 6.696, however, are in addition to other previously existing ones (as for example, might be found in the general criminal laws and the disqualification from holding of office as provided in Kentucky's constitution). Viewed in this context, we believe application of the KRS 6.696 sanction against a legislator's retirement benefits are not of such importance, in relation to legislator's already participating in the Legislators Retirement Plan at the time KRS 6.696 was enacted, as to justify overriding the ban against impairment of contracts found in both the United States Constitution and the Constitution of Kentucky.
In our view, in order not to be violative of Section 19 of the Constitution of Kentucky, and Article I Section 10 of the Constitution of the United States, KRS 6.696 must be applied only as against one who became a member of the Legislators Retirement Plan on or after the effective date of such enactment, so that the provision would be considered a part of the retirement plan contract of a legislator in keeping with KRS 21.480 as adopted by KRS 6.525.
Refund of Contributions and Credited Interest
A part of the background given with your questions indicates that:
Under the above statutes, a vested member shall forfeit all retirement benefit rights, and all personal contributions, in the event the member is 'removed for cause,' whereas a nonvested member shall be entitled to a refund of the member's entire personal contributions to the Plan.
The view expressed above in your letter is understood to be based upon provisions in the Judicial Retirement Plan that are adopted by KRS 6.525. We believe that KRS 6.696, as a later and specific enactment concerning the right of a legislator or former legislator to a return of contributions and interest credited thereon under certain circumstances, must control over the general provisions in such regard as contained in the Judicial Retirement Plan provisions.
Recovery of Previously Paid Benefits
As to the question of whether the Board of Trustees of the Kentucky Judicial Form Retirement System (KRS 21.540) can recover benefits paid to a former member of the Legislators Retirement Plan prior to the former member being found guilty of a felony within the meaning of KRS 6.696, we believe this question is generally answered by the same reasoning as discussed above in relation to the inviolable contract status of the Legislators Retirement Plan.
In our view, the Board can attempt to recover benefits previously paid to a former member of the Legislators Retirement Plan, following a pertinent felony conviction (KRS 6.696), if such action is pursued as against benefits earned after September 16, 1993, by a former member of the plan who became a member of the plan on or after the effective date of the legislation (September 16, 1993).
Cautionary Observations
Views expressed in this letter should not be taken as dispositive concerning a given case. How KRS 6.696 may bear upon a given legislator or former legislator's retirement rights and benefits under the state administered Legislators Retirement Plan must be carefully considered, in any given case, based upon the detailed facts related to that case.
"Due process of law" requirements must be observed in connection with a forfeiture or related action pursuant to KRS 6.696. Notice and a hearing concerning action proposed to be taken should be afforded.
The "Handbook for Members" of the Kentucky Legislators Retirement Plan should be modified to indicate the possible impact of KRS 6.696.
Future Research Aids
As a possible aid to future research in relation to the questions here involved, one might review, for general reasoning (although not dispositive of the questions here addressed)