Could Louisiana's education department pay interest owed on an employee's missed retirement contributions?

Plain-English summary

A former Department of Education employee had missed Louisiana State Employees' Retirement System credit because of an agency enrollment error. Education officials and the Department of Health and Hospitals disagreed about who could pay the interest on the employee's share of the make-up contributions. In Opinion 03-0266, the AG said the Department of Education could not pay interest attributable to the employee's portion. LSA-R.S. 11:423 assigned that compound interest to the member.

The opinion distinguished the employee's statutory share from the employing agency's own payment obligation. It rejected the argument that the constitutional exception for public contributions to pension programs let the department take over the employee's share without specific legal authority. The AG concluded that doing so would be a donation of public funds barred by the state constitution.

Currency note

This opinion is dated July 5, 2003. 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.

What the opinion meant at issuance

Employee seeking prior service credit

The AG said the employee remained responsible for the statutory employee contribution and its compound interest when buying the previously denied service credit. The agency's enrollment error did not shift that interest to the department under the statute the opinion applied.

Education department and retirement administrators

The opinion treated the agency's employer share and the employee's share as separate statutory obligations. It said the department could not use public money to pay interest assigned to the employee.

Common questions

Q: Did the agency's enrollment mistake make it responsible for the employee's interest? A: No. The AG read LSA-R.S. 11:423 as requiring the member to pay the employee-share interest even after an administrative error.

Q: Could the department treat that interest as a permitted pension contribution? A: The opinion said no. It found no specific legal authority or obligation for the agency to pay the employee portion and called that payment an unconstitutional donation.

Q: Did the statute assign any payment to the employing agency? A: Yes. The provision quoted by the AG assigned an employer-side payment to the agency, separately from the member's contributions and interest.

Background and statutory framework

The employee had not received service credit for earlier Education Department employment because of an administrative error. LSA-R.S. 11:423 provided a way to purchase qualifying denied credit and allocated payment between the member and the agency. The AG applied that allocation with the public-funds restriction in La. Const. Art. VII, Sec. 14 and earlier opinions on an employer paying an employee's retirement contribution.

Citations and references

Statute quoted or cited: LSA-R.S. 11:423.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0266

Original opinion text

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DEPARTMENT OF JUSTICE
One American Place
301 Main Street, Suite 600
CIVIL DIVISION
P.O. Box 94005
BATON ROUGE
TEL.: (225) 342-7013
FAX: (225) 342-2090
RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL
JUL 5 2003
Opinion Number 03-0266

Mr. Cecil J. Picard
92-A-2(g) RETIREMENT - State Employees
State Superintendent of Education
90-A-2 PUBLIC FUNDS - Loan, Pledge or Grants
La. Const. Art. VII, Sec. 14
Department of Education
LSA-R.S. 11:423
P. O. Box 94064
In accordance with LSA-R.S. 11:423, Department
Baton Rouge, Louisiana 70804-9064
of Education may not pay the interest accrued on
and attributable to employee’s portion of contributions necessary for employee to receive
Mr. Frank H. Perez, General Counsel
pdor service retirement credit.
Department of Health and Hospitals
Bureau of Legal Affairs
1201 Capitol Access Road
P. O. Box 3836
Baton Rouge, Louisiana 70821-3836

Gentlemen:

This office is in receipt of Mr. Picard’s request, as supplemented by Mr. Perez’s correspondence, regarding the purchase of prior service retirement credit for Ms.
Carolyn Jones, who was formerly employed by the Department of Education ("DOE") and is currently employed by the Department of Health and Hospitals ("DHH").

Mr. Picard has advised that as a result of an administrative error on the part of DOE, Ms. Jones did not receive service credit with the Louisiana State Employees’ Retirement System ("LASERS") for her period of employment with DOE. Ms. Jones and DOE now seek to redress this problem and purchase the appropriate amount of prior service credit on Ms. Jones behalf. However, a question has arisen as to what cost associated with the repurchase should be borne by Ms. Jones, and what costs should be borne by DOE.

In this regard, Mr. Picard has directed our attention to LSA-R.S. 11:423, which provides as follows:

"State service for which credit has not been received due to administrative error

A. Notwithstanding any other provision of law to the contrary, but in accordance with applicable laws relative to determining whether such state service is or was creditable, any person who was denied membership in the system for any state employment rendered in a position that should have made membership mandatory as a condition of

Page 2

Opinion Number 03-0266
Mr. Cecil J. Picard, State Superintendent of Education Department of Education Mr. Frank H. Perez, General Counsel Department of Health and Hospitals Page -2-
employment, but was not so enrolled due to an administrative error on the part of the agency where so employed, shall be entitled to receive service credit for the period denied.
B. The appointing authority or personnel officer of the agency wherein the service was performed shall certify the inclusive dates of employment, the base pay and earned compensation of the employee during the period, whether the employment was full-time or part-time, whether the employment was performed on a job appointment, interment or emergency basis, and the reason the member was not enrolled in the system at the time of employment.
C. State service previously denied to the member and deemed as creditable by the board may be purchased, provided application is filed with the retirement system as outlined in Subsection Bo f this Section. In addition, the member shall pay into the system an amount equal to the current employee contributions based on the member’s earned compensation at the time the service was performed, plus compound interest at the current board-approved actuarial valuation rate from date of service until paid, and the employing agency where such service was denied (or its successor agency) shaft pay into the system an amount equal to the greater of actuarial cost to the system of any additional retirement benefits payable as a result of the receipt of service credit as authorized by this Section or the sum of the employer contributions which would have been due plus interest thereon at the board-approved actuarial valuation rate, minus the amount to be paid by the member. No service credit shall be allowed until both the employee and employer have paid in full and prior to retirement the amounts described above." (Emphasis added).

Based upon the provisions of LSA-R.S. 11:423, Mr. Picard questions whether DOE can pay, on Ms. Jones’ behalf, the portion of the interest charges that LSA-R.S. 11:423 states that "the member shall pay". According to Mr. Picard, it is DOE’s position that since LSA-R.S. 11:423 states that the employee shall pay compound interest on the member’s earned compensation, any payment of the interest accrued on the employee’s portion of the payment would amount to a donation in violation of La. Const. Art. VII, Sec. 14.

On the other hand, Mr. Perez asserts DHH’s position that in addition to payment of the employer’s portion of contributions and accrued interest, a state agency should be able to pay, on its employee’s behalf, the employee’s portion of accrued interest. It is Mr. Perez’s position that the payment of the employee’s interest portion is in compliance with La. Const. Art. VII, Sec. 14(B), which provides, in pertinent part, that "Nothing in this Section shall prevent...(2) contributions of public funds to pension and insurance programs for the benefit of public employees."

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Opinion Number 03-0266
Mr. Cecil J. Picard, State Superintendent of Education Department of Education Mr. Frank H. Perez, General Counsel Department of Health and Hospitals Page -3-

Attorney General’s Opinion No 92-485, with respect to payment of an employee’s prior service retirement credit contributions by a school board, determined that pursuant to statutory authorization, a School Board could pay the employer’s portion of additional retirement ’time’ for prior creditable years service. That opinion also determined that the School Board could not pay the employee’s portion, as same would constitute an unconstitutional donation of public funds. Pertinently, that opinion provides:

"Contributions of public funds to pension and insurance programs for the benefit of public employees, however, must be specifically authorized by law, and must be made in payment of some legal obl~qation. See City of Port Allen v. Louisiana Municipal Risk Management Agency, Inc., 439 So.2d 399 (La. 1983). While the employer’s portion of the "retirement" contribution is authorized by law and made pursuant to a legal obligation, there is no authority for the employer to pay the employee’s portion of the contribution. An employer doing so would violate Article VII, Sec. 14(A).
Therefore, payment by the School Board of its portion of the retirement contribution does not violate this Article; however, the School Board may not lawfully pay the employee’s portion." (See also: Attorney General’s Opinions Nos. 02-13, 00-375, 98-183, 92-485, 80-83).

In light of the directory language of LSA-R.S. 11:423, which requires payment of interest accrued on the employee’s portion of contributions by the employee, the Department of Education may not pay the interest accrued on and attributable to Ms. Jones’ portion of contributions necessary for her to receive prior service retirement credit. In accordance with Attorney General’s Opinion No. 92-485 and the prior opinions of this office cited herein, it is the opinion of this office that any payment of the interest accrued on an employee’s portion of the payment by the Department of Education to LASERS would amount to a donation in violation of LA. Const. Art. VII, Sec. 14.

We trust the foregoing to adequately respond to your request.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

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