Judges: MARK PRYOR, Attorney General
Filed Date: 4/29/2002
Status: Precedential
Modified Date: 7/5/2016
The Honorable Jimmy Jeffress State Senator P.O. Box 1695 Crossett, AR 71635-1695
Dear Senator Jeffress:
I am writing in response to your request for an opinion on the following question concerning the state employees' deferred compensation program:
Does Act 1596 of 2001 give the State of Arkansas the authority to remove previous contributions by State employees from their current accounts (Valic and Diversified Investment Advisors) and deposit these monies with the new plan administrator (CitiStreet) without the consent of the individual state employees?
RESPONSE
It is my opinion that the answer to this question is "yes."
Act 1596 of 2001 amends Title 21, Chapter 5, Subchapter 5 of the Arkansas Code pertaining to public employees' deferred compensation programs. It is codified at A.C.A. §§
(b)(1) The administrator of the deferred compensation program may:
(A) Contract for, purchase, or otherwise procure annuity contracts for the deferred compensation program; and
(B) Through a trust or custodian, contract for, purchase, or otherwise procure fixed or variable life insurance contracts, mutual funds, pooled investment funds, or such other investment vehicles that comply with state and federal laws and which permit the deferral of compensation for income tax purposes.
It is my understanding that the administrator of the state employees' deferred compensation program has developed a new state-sponsored deferred compensation plan called the Arkansas Diamond Deferred Compensation Plan (hereinafter "Diamond Plan"), following the enactment of Act 1596 of 2001.1 It is my further understanding that the state administrator has contracted with CitiStreet and Stephens Inc. pursuant to the above authority in Act 1596, and that existing annuity account balances have been or will be transferred from The Variable Annuity Life Insurance Company ("VALIC") and Diversified Investment Advisors ("DIA") to accounts at CitiStreet. Your question is whether Act 1596 provides authority for this transfer without the consent of the individual employees whose deferred compensation is invested in VALIC and DIA annuity contracts.
I believe it is clear that the new investment authority under Act 1596 of 2001 extends to current account balances, i.e., amounts that were previously deducted from the participants' pay to provide deferred compensation. The Emergency Clause to Act 1596 notes that "existing law concerning public employees' deferred compensation plans currently provides few alternatives for investing deferred compensation[,]" and that "additional investment alternatives are necessary to enable public employees to maximize their earnings from deferred compensation investments." Acts 2001, No. 1596, § 6. The act thus offers the alternative investment vehicles to remedy what was apparently viewed as an earnings limitation under existing law. Accordingly, it is my opinion that the act is "procedural" in nature, and that the legislature intended for it to apply to previous deferrals. Although legislation is presumed to operate only prospectively unless the General Assembly indicates otherwise (Employers Surplus Insurance Co. v. Murphy Oil USA, Inc.,
Following these principles of construction, I conclude that Act 1596 is remedial legislation and that it applies with respect to previous deferrals of compensation. In my opinion, no "vested rights" are disturbed by the act so as to prevent its retroactive effect. According to my review of the relevant statutes, the investment authority resides in the State rather than individual participating employees. This is clear, in my opinion, from the language of A.C.A. §
[t]he Board shall have the option to transfer all or any portion of the [DIA or VALIC] Annuity Contracts to an alternative funding medium under the Plan without Participant or Beneficiary consent, except the Board shall be subject to the transfer restrictions set forth in (a) above. 3
See Master Agreements for the State of Arkansas Deferred Compensation Plan, entered into between the State of Arkansas and DIA and between the State of Arkansas and VALIC (effective July 1, 1998) at Article 4.
It thus seems clear that a participant in the Plan had no vested right in the annuity contracts that were purchased by the State pursuant to A.C.A. §
In conclusion, therefore, it is my opinion that Act 1596 of 2001 remedies the previously limited investment authority of the State, and that the administrator of the State deferred compensation plan may, pursuant to its regulatory authority, transfer existing account balances from VALIC and DIA to other investment options without the consent of Plan participants.
Assistant Attorney General Elisabeth A. Walker prepared the foregoing opinion, which I hereby approve.
Sincerely,
MARK PRYOR Attorney General
MP:EAW/cyh