If a Tennessee county withdraws from TCRS, can its school district still participate for non-teacher employees?

Subject

Opinion No. 12-66, Effect of County's Withdrawal from Tennessee Consolidated Retirement System, June 29, 2012

Plain-English summary

State Treasurer David H. Lillard, Jr., asked whether the Jackson-Madison County School System could continue to participate in the Tennessee Consolidated Retirement System (TCRS) for non-teacher employees if Madison County itself withdrew from TCRS. In 2011, the Madison County Commission had passed a resolution under Tenn. Code Ann. § 8-35-218(a) terminating the county's participation in TCRS for new non-teacher employees, effective July 1, 2012.

The AG concluded: no. The school system cannot continue in TCRS for non-teachers if the county has withdrawn. Participation in TCRS turns on the action of the "chief legislative body of the political subdivision." For Madison County, that body is the Madison County Commission. Its 2011 resolution covers all county employees, including non-teacher school system employees, because the consolidated school system is funded by the County Commission and operates as a department or instrumentality of the county. The TCRS statutes do not authorize piecemeal participation by county departments without the county's overall participation.

Currency note

This opinion was issued in 2012. 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 background and statutory framework

TCRS and political subdivisions

Tenn. Code Ann. §§ 8-35-201 to -252 govern local political subdivisions' participation in TCRS. Section 8-35-201(a) provides that "the chief legislative body of any political subdivision of the state . . . may, by resolution . . ., authorize all its employees in all of its departments or instrumentalities to become eligible to participate in [TCRS]." So participation is initiated by the chief legislative body of the political subdivision, and it covers all employees in all departments.

Withdrawal

Tenn. Code Ann. § 8-35-218(a) permits the chief legislative body to withdraw from TCRS by resolution. The Madison County Commission did so in 2011 for new non-teacher employees, effective July 1, 2012.

Madison County's specific situation

The Madison County Quarterly Court (the County Commission's predecessor) passed a 1978 resolution authorizing Madison County government employees, including school employees, to participate in TCRS. In 1989, the Jackson City special school district and the Madison County school system consolidated. The consolidated Jackson-Madison County School System is funded by local taxes levied by the Madison County Commission (Tenn. Code Ann. § 49-2-101 grants the County Commission authority to adopt school budgets and set tax rates). The consolidated school board has all the powers and duties conferred by general law on county boards of education (§ 49-2-1202(e)).

When the County Commission's predecessor authorized TCRS participation in 1978, the authorization extended to school employees because they are employees of a department or instrumentality of Madison County. The same statutory mechanism (§ 8-35-201(a)) covered them.

Why the school system cannot continue independently

The TCRS statutes contemplate that an entire political subdivision, with all its departments and instrumentalities, will participate or not participate. A county school system is not a separate political subdivision from the county for these purposes. The AG noted no authority for a county school board to participate in TCRS without the county's chief legislative body's resolution.

The limited exception

Section 8-35-201(e) provides an exception for certain self-funded entities: "hospitals, nursing homes, transit authorities, utilities, or other instrumentalities which operate under the direction of their own governing board and which are not subject to the general control and administration of the chief legislative body of the political subdivision." But even these entities cannot affirmatively elect to participate without county approval; the exception only allows them to opt out of TCRS with the county's approval (§ 8-35-218(b)).

A county school system is not one of these autonomous entities. It depends on the county for its budget. So the school system has no independent path into or out of TCRS.

Result for Madison County

If the Madison County Commission's 2011 resolution is not rescinded, all new county employees (including non-teacher school employees) become ineligible to participate in TCRS effective July 1, 2012. The school board cannot enroll new non-teachers in TCRS on its own.

Common questions

What about teachers? Are they affected?

The opinion specifically addresses non-teacher school employees. Teachers participate in TCRS under a separate statutory regime (Title 8, Chapter 35, Part 5, governing teachers' retirement). The county's withdrawal under § 8-35-218(a) applies to non-teacher employees of the political subdivision.

Does this mean the school's existing non-teacher employees lose their TCRS benefits?

The opinion notes the 2011 Madison County resolution withdrew participation "for all new non-teacher employees." Already-enrolled employees typically continue under the rules in place when they joined. Confirm current TCRS rules for existing participants.

Could the school board pass its own resolution to keep participating?

According to this opinion, no. The school board has no independent authority to enroll its employees in TCRS without the county's chief legislative body's resolution.

Are there counties where the school system could operate independently from the county for TCRS purposes?

Only counties where the school system is structured as a separate political subdivision (rare in Tennessee) or where § 8-35-201(e) exception applies, but even § 8-35-201(e) entities depend on the chief legislative body for the original participation authorization.

What's the difference between TCRS and the teachers' retirement provisions?

TCRS is a consolidated system encompassing various groups of public employees. Teachers participate under separate statutory provisions specific to public school teachers. The opinion focused on non-teacher employees only because that was the question presented.

What happens to the employer contributions Madison County paid in for non-teacher school employees over the years?

Section 8-35-218 governs the financial consequences of withdrawal, including treatment of existing participant balances. The opinion did not analyze that aspect. The State Treasurer's office or TCRS plan documents are the authoritative source for benefit treatment.

Citations

• Tenn. Code Ann. §§ 8-35-201 to -252 (TCRS local participation)
• Tenn. Code Ann. § 8-35-201(a) (chief legislative body's authorization)
• Tenn. Code Ann. § 8-35-201(e) (autonomous entity exception)
• Tenn. Code Ann. § 8-35-218(a) (chief legislative body's withdrawal)
• Tenn. Code Ann. § 8-35-218(b) (autonomous entity opt-out)
• Tenn. Code Ann. § 49-2-101 (county school funding authority)
• Tenn. Code Ann. § 49-2-1202(e) (consolidated school board powers)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2012/op12-066.pdf

Original opinion text

June 29, 2012
Opinion No. 12-66
Effect of County's Withdrawal from Tennessee Consolidated Retirement System

QUESTION

Is the Jackson-Madison County School System eligible to be a participating employer in the Tennessee Consolidated Retirement System (TCRS) with respect to its non-teacher personnel if Madison County withdraws from TCRS?

OPINION

No. The school system may not participate in TCRS if Madison County withdraws. A local governmental entity's eligibility to participate in TCRS depends on the action of the chief legislative body of the political subdivision of which the entity is a part. In Madison County, non-teacher employees of the school system have been eligible to participate in TCRS only because the chief legislative body of Madison County passed an appropriate resolution authorizing such participation in 1978. The County's chief legislative body, now known as the Madison County Commission, has the authority to pass a resolution terminating its participation in TCRS, and this resolution is binding on non-teacher employees of the school system.

ANALYSIS

In 1978, the Madison County Quarterly Court passed a resolution for Madison County government employees, including school employees, to participate in TCRS. Subsequently, in 1989, the special school district of the City of Jackson and the public school system of Madison County consolidated. The consolidated school system, known as the Jackson-Madison County School System, is financed by local taxes levied and appropriations made by the Madison County Commission. The County Commission is responsible for adopting school budgets and setting the tax rates with respect to these budgets. See Tenn. Code Ann. § 49-2-101. Pursuant to the consolidation plan, participation in TCRS remained available to employees of the consolidated school system, including non-teacher employees. By law, the consolidated school board has all powers and duties conferred by general law upon other county boards of education. See Tenn. Code Ann. § 49-2-1202(e).

In 2011, the County Commission, as permitted by Tenn. Code Ann. § 8-35-218(a), passed a resolution terminating Madison County's participation in TCRS for all new non-teacher employees of Madison County. If the 2011 resolution is not rescinded or withdrawn, effective July 1, 2012, new county employees, including non-teacher employees of the school system, will not be eligible to participate in TCRS.

The Madison County Commission possesses the authority, as the chief legislative body for all of Madison County government, to withdraw from participation in TCRS on behalf of all county employees, including non-teacher employees of the school system. Participation in TCRS requires the action of a political subdivision's "chief legislative body." See Tenn. Code Ann. § 8-35-201(a) (providing that the "chief legislative body of any political subdivision of the state . . . may, by resolution . . ., authorize all its employees in all of its departments or instrumentalities to become eligible to participate in [TCRS]"). A political subdivision can have only one "chief legislative body" and, in this case, that body is the Madison County Commission. The predecessor of the County Commission (the old Quarterly County Court) passed the resolution that authorized non-teacher school employees to participate in TCRS in the first place, and the County Commission likewise had the authority to pass a resolution withdrawing these employees from participation.

Under the statutes governing local governmental units' participation in TCRS, codified at Tenn. Code Ann. §§ 8-35-201 to -252, no authority exists for a county school board to participate unilaterally in TCRS absent the affirmative action and approval of that political subdivision's chief legislative body. To the contrary, when a county elects to participate in TCRS, it requires a resolution of the county's chief legislative body, and the county must authorize participation for all employees of all county departments and instrumentalities, including the county school system. See Tenn. Code Ann. § 8-35-201(a). As structured, the statutes contemplate that the entire political subdivision, including all of its departments and instrumentalities, will participate in or withdraw from TCRS. Subject to certain exceptions not applicable here, see Tenn. Code Ann. § 8-35-201(e), the statutes do not permit county departments or instrumentalities to participate on a piecemeal basis. [The statutes governing local governmental units' participation in TCRS contain exceptions for certain types of county entities, such as "hospitals, nursing homes, transit authorities, utilities, or other instrumentalities which operate under the direction of their own governing board and which are not subject to the general control and administration of the chief legislative body of the political subdivision." Tenn. Code Ann. § 8-35-201(e). These TCRS statutory exceptions, however, do not give even these entities the authority affirmatively to elect to participate in TCRS without county approval. They merely give the described entities the ability to opt out of TCRS, with the approval of the county's chief legislative body. See Tenn. Code Ann. § 8-35-218(b). Accordingly, even if these provisions applied to the county school system, they provide no authority for the school system to participate in TCRS without a proper resolution of the county's chief legislative body.]

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

MARY ELLEN KNACK
Senior Counsel

Requested by:
The Honorable David H. Lillard, Jr.
State Treasurer
State Capitol
Nashville, Tennessee 37243-0225