MCDANIEL STATEMENT ON ELECTED OFFICIAL RETIREMENT ISSUE

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August 06, 2009

On June 1 of this year, I issued an opinion regarding retirement eligibility for members of the Arkansas Public Employee Retirement System (APERS). Specifically, the opinion addresses what an elected official must do to "terminate" his or her employment in order to draw retirement benefits. Since then, numerous questions have been raised about various elected officials who are receiving retirement benefits even though they did not actually vacate their offices. Rather, it is alleged that some elected officials applied for retirement and declared themselves to be "terminated from employment." Allegedly, these officials simply took themselves off of the payroll for 90 days while continuing to serve in office, and then began drawing both their full salary and full retirement after expiration of the 90 days.

 

Since these allegations have come to my attention, I have been in consultation with representatives of APERS, Legislative Audit, the Governor and members of the legislature in order to determine how to best address this situation. In light of these discussions and the information available, I am issuing this statement to specify what I believe should happen next.

 

First, there are some points about this process that need to be made clear.

 

1. The AG's Office is involved primarily as counsel for APERS and the State. My role is exclusively related to providing legal advice with regard to the proper administrative process and the potential for civil litigation. Legislative Audit is conducting the investigation at this time. If Legislative Audit determines that any actions constitute criminal behavior, it is specifically authorized by statute to refer its findings to the appropriate Prosecuting Attorney.


2. Although a number of state employees are currently employed by the State and drawing retirement benefits, they are not the primary concern. Rather, the focus is on elected officials, for the following reason--the important legal question is whether a retiree properly terminated his or her employment. For state employees, that is a matter to be determined by an employee and his or her agency director. However, for elected officials, the law specifically governs when one takes office and when and how one leaves office. Simply removing oneself from the payroll for some period of time does not constitute the vacation of an elected office. Thus, the question presented is as follows: can an elected official meet the definition of "terminated from employment" for purposes of qualifying for retirement if he or she fails to take the steps required by state law to formally vacate his or her office. As noted in Attorney General Opinion No. 2009-050, simply removing oneself from the payroll, without more, probably does not suffice.


3. The opinion of the Attorney General is nonbinding on his clients. The initial authority to interpret retirement law rests with the APERS board. If its interpretations are challenged in court, the Attorney General will either represent the Board and its position or approve the appointment of outside counsel to serve that role.


With those points in mind, I have advised APERS to exercise its legal authority to initiate an inquiry into this matter and take any necessary corrective action, including recovery of improperly paid benefits and unpaid employee contributions and employer match dollars. This is the very process traditionally undertaken by APERS in the event of overpayment, and these cases should not be handled any differently. I have advised Gail Stone, the Executive Director of APERS, that it is appropriate for her agency to gather the facts on cases currently known as well as any additional cases identified by Legislative Audit. If she determines that an individual is improperly receiving benefits, she should present the facts and the controlling law to the Board of Directors so that it can make a final agency determination. Such a process is supported by the law, will provide due process and will be fair to all interests.

Protecting the assets of APERS and interpreting the law are core obligations of the APERS Board. In this circumstance, a number of the board members remain employed yet are drawing retirement benefits. In my opinion, this creates a conflict of interest that prohibits them from sitting as board members in judgment over any cases involving this issue. They need not resign their positions as board members; however, I believe that each must recuse himself from all discussions or actions pertaining to this issue. Once that is done, the Governor has the authority to appoint special board members who will participate in deciding any cases brought before the board by Ms. Stone.

It is my expectation that Ms. Stone will be moving forward with this inquiry soon. This will not be an easy process. In fact, I expect there will be numerous factual and legal disputes presented to the Board. For example, I fully anticipate that some of the elected officials will allege that APERS staff either explicitly, or tacitly, approved of this procedure for "terminating employment." On the other hand, it should be noted that APERS has never produced a written policy or rule setting forth the requirements for "terminating employment." I personally believe that state employees should be able to rely upon the advice provided by the retirement counselors. However, if that advice proves to be contrary to state law, serious legal problems can ensue for APERS and the retirees. That may well be the case in this situation.

 

Finally, let me be clear, there should be no political favoritism extended in this matter. APERS must follow the facts and the law and let the chips fall where they may. My office will monitor the process and continue to advise the Governor as APERS moves forward and further facts are uncovered.

 

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