Request By:
E. Preston Young
722 Kentucky Home Life Building
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; Martin Glazer, Assistant Attorney General
You seek an opinion concerning the juxtaposition of two sets of statutes, KRS 161.158 and KRS 18.510-18.600.
You point out that subsection 2 of KRS 161.158 provides:
With the exception of membership dues, the board shall not be required to make more than one remittance, of amounts deducted during a pay period, for a separate type of deduction. Health insurance, life insurance, and tax-sheltered annuities shall be interpreted as separate types of deductions. When amounts have been correctly deducted and remitted by the board, said board shall bear no further responsibility or liability for subsequent transaction." (Emphasis supplied.)
This statute has been bolstered by the Jefferson County Board of Education's policy guidelines for purchasing and selling tax-sheltered annuities. You quote from Item 7, page 2, of the guidelines that: "Employees cannot have deductions in more than one active annuity company at a time."
KRS 18.510(1) defines the term "employe" as including ". . . persons in the public school system. "
KRS 18.510 - 18.600 deal with statutes governing the public employes' deferred compensation system.
You specifically want to know whether the Jefferson County Board of Education shall be required to deduct from salaries of employees not only for tax-sheltered annuities but also for the deferred compensation program administered by the Board of Trustees [of the Kentucky State Employe Deferred Compensation system - 18.550]. It is your belief that these two sets of statutes are in conflict.
In our view, the aforesaid statutes are not in conflict and the Jefferson County Board of Education must permit an employee to participate in the deferred compensation program, even though said employee is already participating in an existing annuity program, for the following reasons.
The Kentucky Deferred Compensation Plan was established by statute in 1974. Its purpose is to allow employees to participate in a type of retirement plan in addition to those already in existence in order to supplement benefits from existing plans.
The monies so chosen for contribution are not "deducted" from the employee's salary; they are "reduced." No income taxes are paid on such monies at the time they are "reduced." The monies at that time are the property of the deferred compensation system, and not that of the employee's.
Only at the time the employee retires, or leaves his employment (with certain limited exceptions) can the monies be paid to him and the taxes are then paid. The taxes are thus Beferred.
The deferred compensation system invests the money so "reduced." It can invest in an annuity but it is not required to do so (KRS 18.560, 18.570).
Only when the employee is ready to retire does he choose what type of program he wants the monies to be annuitized.
The other programs of which you speak are monies paid directly to an insurance company for an annuity. The monies "reduced" under KRS 18.510 et seq. go to the Board of Trustees of the Kentucky state public employes deferred compensation system.
Therefore, a reduction for the Kentucky deferred compensation system program is not a "deduction" for a tax-sheltered annuity. It is a different type of program than tax-sheltered annuities.
Where an employee participates in a tax-sheltered annuity and the Kentucky public employee's deferred compensation system, the reduction for both is not the "same type" of deduction, and does not violate KRS 161.158(2) or even the board's policy.
Secondly, KRS 18.510 et seq. was enacted in 1974, while KRS 161.158, subsection (2)'s language was in the law in 1972.
If the Kentucky General Assembly intended to limit the right of school employees' use of the Kentucky deferred compensation system to only those employees not covered by another deferred plan, it could have said so in its enactment. Certainly, it did not intend to cover persons in the public school system while at the same time excluding a substantial number of said eligibles, without spelling out such an exclusion.
That, coupled with the fact that the deferred compensation law was enacted after KRS 161.158(2), could be construed as impliedly amending so much of KRS 161.158 which limited the number of deductions for tax-sheltered annuities if one of them was for the Kentucky deferred compensation program (even assuming that such program is considered a tax-sheltered annuity) .
Therefore, we believe that the two sets of statutes are not in conflict and school employees can participate in both school annuity programs and the Kentucky deferred compensation system program.