Untitled Texas Attorney General Opinion

OFFICE OF THE ATTORNEY GENERAL STATE OP TEXAS
JOHN CORNYN
June lo,1999
The Honorable Kenneth Armbrister Opinion No. JC-0066
Chair, Criminal Justice Committee
Texas State Senate Re: May city remit payments to Texas Municipal
P.O. Box 12068 Retirement System that it failed to make more
Austin, Texas 7871 l-2068 than 20 years ago? (RQ- 1006)
Dear Senator Annbrister:
Your predecessor as Chairofthe Senate Criminal Justice Committee inquired about correcting
errors made in reporting members’ contributions to the Texas Municipal Retirement System
(“TMRS”). The TMRS is a public retirement system for cities, governed by chapters 851 through
855 of the Government Code and administered by a six-member board of trustees appointed by the
governor. TEX. GOV’T CODEANN. 5 855.002 (Vernon 1994). Each month, the cities participating
in TMRS forward to it contributions from its employees who belong to the system and its own
contribution on behalf of its member employees. Id. $855.402. The TMRS deposits each member’s
contributions in an individual account in the employee savings fund and the municipality’s
contributions in its account in the municipality accumulation fund. Id. §§ 855.306(a), .307(a).
The opinion request from your predecessor stated that several police officers employed by the
City ofPort Arthur learned of errors in their respective TMRS accounts. The request letter explained
this problem as follows:
[T]he City of Port Arthur, by clerical errors and/or omissions, failed
to enroll these officers in the TMRS system upon the completion of
their employment probationary periods. The affected employees
were approximately hired in 1973 and were scheduled to become
eligible to retire this next year. It was discovered that each officer
was not enrolled for a period of months and therefore will not be
eligible to retire for this additional period. The times range between
two (2) and six (6) months.
Letter from Honorable John Whitmire, Chair of Senate Criminal Justice Committee, to Honorable
Dan Morales, Attorney General (Sept. 29, 1997) (on tile with Opinion Committee) [hereinafter
Whitmire letter of g/29/97].
A city employee receives credit in the retirement system for each month in which he or she
performs services while a member ofTMRS and makes the required contributions. TEX. GOV’T CODE
ANN. § 853.201 (Vernon 1994). The employees in question were not members of the retirement
The Honorable Kenneth Armbrister - Page 2 (X-0066)
system in the months before their enrollment and they made no contributions during those months.
Accordingly, their service for those months was not credited to the retirement system. The City of
Port Arthur has asked the TMRS about adjusting the retirement accounts to correct these errors, and
the TMRS has stated that it cannot correct errors made more than four years ago.
Your predecessor first asked whether “section 855.410 of the Texas Government Code
allow[s] for a remedy in this situation to make payments to adjust the respective employee’s TMRS
account for the errors and/or omissions.” Whitmire letter of g/29/97. We conclude that it does not.
Each payroll period, a participating municipality deducts a retirement contribution from the
compensation of each retirement system member it employs. TEX.GOV’TCODEANN. § 855.402(a)
(Vernon 1994). Section 855.403 of the Government Code requires the municipality to pay the
retirement system, before the sixteenth day of each month, the member contributions as well as a
contribution for the retirement system’s administrative expense. Section 855.410 ofthe Government
Code imposes the following interest payment on late contributions:
A participating municipality that fails to remit before the 16th
day of the month all contributions required by this subchapter to be
made, shall pay to the retirement system, in addition to the
contributions, interest on the past-due amounts at an annual rate that
is the total of the rates of interest credited by the retirement system to
accounts in the municipality accumulation fund for the preceding
calendar year, plus two percent.
Id. 5 855.410(a).
The predecessor of section 855.410 was adopted by the same bill that enacted the predecessor
of section 855.403, which fixes the time monthly contributions must be paid to the system. SENATE
COMM.ONSTATEAFFAIRS,BILLANALYSIS, Tex. S.B. 505,70thLeg.,R.S. (1987). Sections 855.403
and 855.410 are related, in that one provision fixes the time each month for remitting the
contributions, and the other requires the city to pay interest if it misses that deadline in any month.
Section 855.410 does not, however, address correcting a city’s errors in deducting retirement
contributions from members’ compensation or remitting the proper amounts to TMRS. It can be
contrasted with section 842.112 of the Government Code, which authorizes the Texas County and
District Retirement System (“TCDRS”) to correct certain reporting errors by participating
subdivisions:
If, as a result of a reporting error on the part of a participating
subdivision, a person has not received credited service or current
service credit or has received less than the correct amount of current
service credit for months in which the person performed service as an
employee of the subdivision, the retirement system shall correct the
error as authorized by this section.
The Honorable Kenneth Armbrister - Page 3 (X-0066)
TEX. GOV’T CODEANN. 5 842.112(a) (Vernon Supp. 1999).
Other subsections of Government Code section 842.112 set out the procedures and time limit
for correcting such errors in reporting member contributions. Id. $ 842.112 (b)-(d), (g), (h).
Corrections may not be made more than four years after the TCDRS system receives the erroneous
report and the person seeking the correction and the subdivision must make the contributions or
partial contributions that should have been made. Id. 5 842.112(b), (e), (f). Section 855.410 does not
contain the explicit authority for correcting errors found in the TCDRS statute, nor do we find any
other provision in chapters 85 1 through 855 ofthe Government Code comparable to section 842.112
of that code.
The TMRS has no express authority to correct a city’s errors in reporting an employee’s
service or in deducting and forwarding retirement contributions to it. Its enabling statute makes it
responsible for administering the retirement system and authorizes it to adopt rules and perform
reasonable activities it finds necessary or desirable for efficient administration of the system. TEX.
GOV’T CODE ANN. $4 855.101(b), .102(a) (Vernon 1994). Consistent with this authority, it has
established a policy whereby it will correct errors made in the past four years. In connection with this
limitation on time, your predecessor asked whether “the respective employees waive their rights to
these retirement sums by failing to act within a four (4) year period” and whether “TMRS [may]
refuse to accept these late payments?’ Whitmire letter of 9/29/97.
These questions require us to examine the reasons for limiting the time in which cities may
correct errors in information provided to TMRS. A brief prepared by the attorneys for TMRS states
that the four-year residuary statute of limitations for “[elvery action for which there is no express
limitations period,” TEX. Crv. PRAC.&REM. CODEANN. 5 16.051 (Vernon 1997), has been applied
since 1985 to all requests for retroactive correction of errors in reporting retirement contributions or in
timely enrolling persons in the retirement system. Brief from Terrence Kendall, Kendall, Randle,
Finch & Osbom, to Honorable Dan Morales, Attorney General 6 (Dec. 11, 1997) [hereinafter
T. Kendall brief of 12/11/97]. These requests were addressed in legal opinions prepared
for TMRS by its attorney. See Letter from Terrence Kendall, to Gary Anderson, Director TMRS
(Nov. 29, 1993) (Opinion No. 205) [hereinafter Kendall letter of 11/29/93]; Letter from
Gaynor Kendall, Legal Counsel TMRS, to Jimmie L. Mormon, Director TMRS (Feb. 13, 1987)
(Opinion No. 154); Letter from Gaynor Kendall, to Jimmie L. Mormon, Director TMRS
(Nov. 11, 1985) (Opinion No. 144) [hereinafter G. Kendall letter of 1l/l l/85].
The first opinion on correcting such errors, TMRS Opinion No. 144 (1985), addressed the
misclassification of two employees as part-time employees some six years and twenty-eight years
previously. G. Kendall letter of 1l/l l/85. The opinion stated as follows:
We do not mean to say that an error made in failing to enroll
a person holding a position that requires him to be a member cannot
be corrected retroactively. [Hlowever, the matter cannot be left
unresolved for long periods of years. How long can a person wait
before attempting to obtain correction of what he or she considers to
The Honorable Kenneth Armbrister - Page 4 (K-0066)
be a mistake in failing to enroll him or her as a member of the
System? If the right to membership is a “legal” right, it is required to
be asserted within a period of four years from the time the right
accrues. . . . [citing former TEX.Crv. STATANN.art. 5529 (1925), the
predecessor of section 16.051 of the Civil Practices and Remedies
Code]. . [Wlhether the right is considered “legal” or “equitable”
an unexcused delay in asserting it for a period beyond the longest
applicable period of limitations (i.e., four years) bars its assertion as
a “stale demand.”
Id. at 4 (citations omitted).
Some purposes of limitations statutes are relevant to the four-year limit in the TMRS policy
on correcting errors in the information that cities have reported to it. “The purpose of a statute of
limitations is to establish a point of repose and to terminate state claims.” Murray v. Sun Jucinto
Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990). Limitations statutes afford plaintiffs what the
legislature deems a reasonable time to present their claims and protect defendants and the courts
from having to deal with cases where search for truth may be impaired by loss of evidence, whether
by fading memories, disappearance of documents, or otherwise. Id.
Opinion No. 205 (1993) addressed a city’s failure to make contributions to the system on
certain forms of compensation and concluded that “the City can correct its payroll records to reflect
the additional compensation for a period not to exceed four years prior to the date of corrections,
provided that the City’s and the members’ additional contributions (including interest) accompany
such correction.” Kendall letter of 1 l/29/93. It pointed out some of the reasons for the four-year
time limitation: the practical need for a “cut off point” for correcting errors, the fact that any claim
that might be asserted would be barred by limitations of actions, and the financial impact that a
longer period of time for corrections would have. Id. at 2.
The TMRS brief explains the financial impact of long delays in correcting cities’ errors in
reporting employees’ creditable service and remitting contributions. Each year a city’s contribution
rate is determined by the TMRS actuary, subject to approval by the TMRS board. TEX.GOV’TCODE
ANN. $5 855.205(d), .406(b) (Vernon 1994). Rates are based in part on information obtained in “a
general investigation of the mortality and service experience of the members and annuitants of the
retirement system” made by the actuary at least every five years. Id. 55 855.205(c)(l); see id.
$5 855,205(c)(2) (onthebasisoftheinvestigation, actuary recommends tables andrates for adoption
by the board), 855.205(d) (actuary annually computes each city’s contribution rate on basis ofrates
and tables adopted by board). Each municipality’s contribution rate must be set at the level
“required to fund all obligations charged against the municipality’s account in the municipality
accumulation fund within the municipality’s amortization period without resulting in a probable
future depletion of that account.” Id. 5 855.406(b). The contribution rate may vary from city to city
and may change for one city from year to year because of factors such as payroll growth, employee
turnover, and the number of employees who remain in covered employment until retirement.
T. Kendall brief of 12/l l/97, at 3.
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TMRS decisions about cities’ contribution rates are made in reliance on the information
provided to it. Long-delayed correction of that information might in particular cases interfere with
accuracy of rates set in reliance on it. Cities of varying sizes participate in Th4RS, with numbers of
contributing employees ranging from 7,000 to 1. Id. at 7. Correction of the City of Port Arthur’s
errors involving a few months of service may have only a negligible effect on its retirement plan,
but correction of long-term errors could have a major effect on the plan of a small municipality. Id.
The correction of long-term errors could have a more direct financial impact on cities. Where
a city has failed to submit contributions to TMRS, correction of this error would require the
employee and the city to make lump-sum payments to TMRS. This requirement could place a
severe strain on the budget of a small city. Absent a limitations period, a small city that had
considered someone to be a non-covered employee for many years might suddenly be obligated to
make a lump-sum payment to TMRS in an amount greater than the city’s entire payroll. Zd.
We believe the TMRS policy allowing cities to correct only those errors made in the last four
years implements the boards authority to “perform reasonable activities it finds necessary or
desirable for efficient administration of the system.” TEX.GOV’TCODEANN. $855.102(a) (Vernon
1994). The policy contributes to the efficient administration of the system by limiting the negative
consequences that long-delayed corrections could have for the board’s rate setting process and the
financial circumstances of the participating cities. Accordingly, we conclude that TMRS may refuse
to comply with the City of Port Arthur’s request for correction of errors made more than four years
The expiration of the four-year time period for correcting errors does not raise a question of
waiver. Waiver of a statutory right and/or a property interest cannot occur without an intentional
relinquishment of a known right or intentional conduct inconsistent with claiming that right. Sun
Exploration &Prod. Co. Y. Benton, 728 S.W.2d 35,37 (Tex. 1987). However, property rights may
be lost by failure to claim them before the statute of limitations runs. See TEX. CIV. PRAC.&REM.
CODEANN. 5 16.003 (Vernon 1997 & Supp. 1999) (applyingtwo-year statute oflimitation to various
causes of action, including conversion or detaining of personal property and condemnation of real
property); Bayouth Y.Lion Oil Co., 671 S.W.2d 867,868 (Tex. 1984). The right to recover a pension
has been barred by limitation of actions. Creps v. Board of Firemen’s Relief & Retirement Fund
Trustees of Amarillo, 456 S.W.2d 434, 439 (Tex. Civ. App.-Amarillo 1970, writ ref d n.r.e.);
Hamilton v. BoardofFiremen ‘s Relief & Retirement Fund Trustees of Texarkana, 408 S.W.2d 781,
784 (Tex. Civ. App.-Texarkana 1966, writ ref d n.r.e.). Accordingly, the effect of limitations is not
a matter of waiver, but instead a matter of lost rights due to the passage of time. Whether the statute
of limitations would operate as a bar in a specific fact situation cannot be resolved in an attorney
general opinion.
Where an employee’s enrollment in the retirement system has been delayed through a city’s
error, section 853.305 of the Government Code may enable the city to give “restricted prior service
credit” to the employee for the months during which enrollment in the retirement system was
delayed. A city may adopt an ordinance authorizing the grant of restricted prior service credit to
an employee-member for service previously performed “as a full-time, paid employee of any
The Honorable Kenneth Armbrister - Page 6 (``-0066)
political subdivision of any state of the United States, for which service the person has not
otherwise received credited service in this system.” TEX. GOV’T CODEANN. 5 853.305(a) (Vernon
Supp. 1999). Restricted prior service credit may be used only to satisfy length-of-service
requirements for retirement, and has no monetary value in computing the annuity payments
allowable to the member. Id. § 853.305(b).
The Seventy-sixth Legislature has adopted a statute effective December 31, 1999, that
expressly authorizes TMRS to correct errors of participating municipalities in reporting employees
service. It is very similar to section 842.112(a) of the Government Code, which allows the Texas
County and District Retirement System to correct reporting errors of participating subdivisions.
Senate Bill 574 of the 76th Legislature provides as follows:
(a) If as a result of a reporting error on the part of a participating
municipality a person has not received credited service or current
service credit or has received less than the correct amount of current
service credit for months in which the person performed service as an
employee of the municipality, the retirement system shall correct the
error as authorized by this section.
(b) A correction may not be made as to current service performed,
or current service credit that should have been received, mope than
fouryears before the date an application for the correction, on a form
approved by the board of trustees, is received by the retirement
system.
TEX. GOV’T CODEANN. 5 852.110(a), (b) (effective Dec. 31, 1999) (emphasis added).
Thus, the legislature has adopted a four-year limit for correcting a city’s errors in reporting
creditable service by its member employees. After the effective date of the enactment, section
852.110 of the Government Code will control the correction of such errors.
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SUMMARY
Section 855.410 ofthe Government Code, which imposes an
interest payment on contributions that are not remitted by a
participating municipality to the Texas Municipal Retirement System
(“TMRS”) by the sixteenth day of each month, does not establish a
procedure for correcting errors in municipal employees’ retirement
accounts. Pursuant to its construction of the statute it administers,
TMRS may refuse to accept retirement contributions from acity more
than four years after the time they were due the retirement system.
Section 852.110 of the Government Code, adopted by the
Seventy-sixth Legislature and effective December 31, 1999, will
govern the correction of service credit reports that were made or
should have been made by participating cities. Pursuant to section
852.110 of the Government Code, corrections may not be made more
that four years after the report should have been made.
JOHN CORNYN
Attorney General of Texas
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General - General Counsel
ELIZABETH ROBINSON
Chair, Opinion Committee
Prepared by Susan Garrison
Assistant Attorney General