Could a Kentucky school district pay a deceased teacher's unused sick leave to the estate?

Plain-English summary

In 1994, Kentucky's Attorney General said a school district could not pay the value of an active teacher's accumulated unused sick leave to the teacher's estate or beneficiary after the teacher died before retiring. The office read the governing statutes as authorizing sick-leave compensation only at the time of actual retirement. Eligibility to retire did not itself satisfy that condition.

The opinion separately addressed a statute allowing certain beneficiaries of an active member who died to elect a retirement annuity calculated as if the member retired the previous day. The AG said that legal fiction served the annuity election only and did not convert unused sick leave into a survivor benefit.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

School districts and unused sick leave

KRS 161.155(8), as quoted by the opinion, permitted a district board to compensate an employee or teacher for unused sick days “at the time of retirement.” The AG said that language did not authorize payment when an employee resigned or died before retirement. It read KRS 157.420(3)'s escrow rule and KRS 161.623's alternative payment method as similarly tied to retirement.

Estates and named beneficiaries

The Daviess County question concerned an active teacher who was eligible for retirement but died during the school year. The AG said neither the estate nor named beneficiary could receive the sick-leave value under the 1994 provisions merely because the teacher could have retired.

Survivor-annuity election

The opinion acknowledged KRS 161.525(1)'s separate option for an eligible spouse or legal dependent to elect an annuity calculated as if the member had retired the day before death. It said that limited assumption did not carry over to the sick-leave payment statute. The annuity election and unused sick-leave payment were different benefits.

Common questions

Could a district pay unused sick leave when an active teacher died before retirement?

The AG answered no under the 1994 statutes, even if the teacher had been eligible to retire.

Did the survivor-annuity statute treat the teacher as retired for every purpose?

No. The AG read the assumed prior-day retirement as applying solely to the beneficiary's annuity election.

Were unused sick-leave payments allowed at actual retirement?

Yes, the opinion said KRS 161.155(8) permitted such a district payment at the time of retirement, subject to that statute's terms.

Background and statutory framework

The AG compared KRS 161.155(8)'s sick-leave payment condition with KRS 157.420(3)'s escrow provision and KRS 161.623. All, it said, referred to payment upon retirement. It then considered KRS 161.525(1), which provided a survivor-annuity choice, and declined to extend that statute's assumed retirement date to the separate sick-leave benefit. The opinion reaffirmed an earlier office letter and OAG 91-219's characterization of the sick-leave payment as a retirement benefit.

Citations and references

• KRS 161.155(8): unused sick-leave compensation at retirement.
• KRS 157.420(3): optional escrow for retirement sick-leave payments.
• KRS 161.623: alternative retired-employee payment method discussed by the AG.
• KRS 161.525(1): survivor-annuity election, distinguished from sick-leave pay.
• OAG 91-219: earlier opinion characterizing the payment as a retirement benefit.

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG94-039.htm

Original opinion text

OAG 94-39

May 23, 1994

Hon. David L. Yewell

Rummage, Kamuf, Yewell, Pace & Condon

322 Frederica Street

Owensboro, KY 42301

Dear Mr. Yewell:

As legal counsel for the Daviess County Board of Education, you have requested that the Attorney General issue an opinion regarding a school district's ability to compensate a deceased employee's beneficiaries for accumulated unused sick leave. You explain that an employed active public school teacher who was eligible for retirement died during the school year. The school district has asked whether it has authority to pay the estate for the employee's accumulated unused sick leave.

The answer to your question is no. The school district is only authorized to pay a school district employee for accumulated unused sick leave at the time of retirement. KRS 161.155(8) and KRS 161.623.

KRS 161.155(8) provides:

After July 1, 1982, a district board of education may compensate, at the time of retirement, an employee or a teacher for each unused sick leave day. The rate of compensation for each unused sick leave day shall be based on a percentage of the daily salary rate calculated from the employee's or teacher's last annual salary, not to exceed thirty percent (30%). Payment for unused sick leave days shall be incorporated into the annual salary of the final year of service; provided that the member makes the regular retirement contribution for members on the sick leave payment. The accumulation of these days includes unused sick leave days held by the employee or teacher at the time of implementation of the program.

KRS 161.155(8) (emphasis added).

The Office of the Attorney General has previously advised that pursuant to KRS 161.155(8) a school district may not compensate the estate of a deceased district employee for accumulated unused sick leave unless the employee had actually retired. (Miscellaneous letter to William E. Mitchell dated March 9, 1994.) We think this is sound advice since KRS 161.155(8) only authorizes payment of accumulated sick leave to retired school district employees and does not provide for compensation of unused sick leave to employees who resign or die before retirement.

In OAG 91-219, our office held that KRS 161.155(8) provides a retirement benefit that is part of the state's pension plan for public school teachers and is not a bonus under the Kentucky Constitution. OAG 91-219.

Another statute that refers to the payment of accumulated unused sick leave also specifically limits the payment to school district employees who have retired. KRS 157.420(3) provides that if a district compensates teachers or employees for unused sick leave at the time of retirement pursuant to KRS 161.155, then the district may create an escrow account to maintain the amount of funds necessary to paid teachers or employees who qualify for receipt of the benefit. KRS 157.420(3) permits, but does not require, these funds to be placed in escrow and states:

[T]he funds shall not be used for any purpose other than compensation for unused sick leave at the time of retirement and shall not be considered as part of the general fund balance in determining available local revenue for purposes of KRS 157.620.

KRS 157.420(3) (emphasis added).

Additionally, KRS 161.623 offers another method of paying a retired school district employee for accumulated unused sick leave. As with the above statutes, KRS 161.623 specifically provides that the payment may be made to an employed who has retired.

The statutes cited above, KRS 161.155(8), KRS 157.420(3) and KRS 161.623, literally state that the payment of accumulated unused sick leave may only be granted to employees who have retired. If the General Assembly had desired to make payment of unused sick leave a survivor's benefit then it certainly could have included language indicating this intention.

You ask whether KRS 161.525 impacts our decision limiting payment of accumulated unused sick leave to employees who have applied for retirement. KRS 161.525(1) provides in part:

Upon death of a member in active contributing status at the time of death, who was eligible to retire by reason of service, the spouse, if named as beneficiary of the member's retirement account, or in the absence of an eligible spouse, a legal dependent of the member, if named as beneficiary, shall be entitled to elect, in lieu of a refund of the member's account or benefits provided in KRS 161.520, an annuity actuarially equivalent at the attained age of the beneficiary to the annuity that would have been paid to the deceased member had retirement been effective on the day immediately preceding the member's death. Under the provisions of KRS 61.680, benefits shall be processed as if the member retired for service. . . .

KRS 161.525 does not impact our interpretation of KRS 161.155(8) relating to payment of accumulated unused sick leave. KRS 161.525 merely permits the deceased member's beneficiary to elect, in lieu of a refund of the member's account or benefit, to receive an annuity actuarially equivalent to the annuity that would have been paid to the deceased member had retirement been effective on the day preceding the member's death. KRS 161.525 creates a legal fiction that presumes the deceased member had retired the day before he died solely for the beneficiary's ability to elect the specified retirement annuity. We are not convinced that the legislature intended to extend this legal fiction to any other statute or benefit. It is obvious by the wording of KRS 161.525 that our General Assembly knows how to extend benefits to survivors of a deceased employee. We do not believe that KRS 161.525 impacts a school district's ability to compensate a retired employee for accumulated unused sick leave.

It is the opinion of the Attorney General that at the death of an employed active public school teacher, a school board may not pay the decedent's estate or named beneficiary the value of the employee's accumulated unused sick leave even if the employee were eligible for retirement. Rather, a local school district may only compensate a district employee at the time of retirement for accumulated unused sick leave.

Sincerely yours,

CHRIS GORMAN

ATTORNEY GENERAL

Lynne Schroering

Assistant Attorney General