Request By:
Richard E. Peyton, Esquire
MOORE, MORROW & FRYMIRE
The Kentucky Bank & Trust Building
Madisonville, Kentucky 42431
Opinion
Opinion By: Steven L. Beshear, Attorney General; John Stephen Kirby, Assistant Attorney General
Re: Kentucky Employees Retirement System
This letter is in response to your request for an Attorney General's Opinion, dated May 28, 1982. In that letter you requested an opinion defining "final monthly rate of pay" as used in KRS 61.607(b). KRS 61.607(b) reads as follows:
"61.607 Maximum disability benefit; determination
Notwithstanding any other provisions of KRS 16.505 to 16.652 or 61.510 to 61.692 or 78.510 to 78.852 a maximum disability benefit is hereby established which shall apply, upon disability retirement, to any disabled employes' account to which service credit is added to determine disability benefits or in any case where disability benefits are determined by computing a percentage of the disabled employe's final monthly rate of pay. The maximum disability benefit shall be determined by the following formula:
(2) . . .
(b) If the projected combined monthly benefit exceeds one hundred percent (100%) of the disabled employe's final rate of pay or his final compensation, whichever is greater, his disability retirement allowance from the retirement system shall be reduced to an amount which would cause his projected combined monthly benefit to equal one hundred percent (100%) of his final monthly rate of pay or his final compensation, whichever is greater; however, the disability retirement allowance shall not be reduced below an amount which would result from a computation of his disability retirement allowance from the retirement system using the disabled employe's actual total service."
[Emphasis added].
As can be seen, the section in question requires that the projected monthly benefit be reduced if it exceeds "one hundred percent (100%) of the disabled employe's final rate of pay or his final compensation, whichever is greater." Final rate of pay is defined in KRS 61.510(15)as:
"(15) 'Final rate of pay' means the actual rate upon which earnings of an employe were calculated during the twelve (12) month period immediately preceding the member's effective retirement date except for members of the general assembly the 'final rate of pay' shall be the creditable compensation. Such rate shall be certified to the board by the employer and the following equivalents shall be used to convert said rate to an annual rate; 1,950 hours, 260 days, 52 weeks, 12 months, one year;"
Final compensation is defined in KRS 61.510(14). If the disabled employe's combined monthly benefit exceeds such amount, his or her disability retirement allowance from the system must be reduced to an amount equal to "one hundred percent (100%) of his final monthly rate of pay or his final compensation, whichever is greater." There is no definition in KRS 61.510 for "final monthly rate of pay" .
The clear intention of the statute is to insure that the benefits received by a disabled employe not exceed one hundred percent (100%) of the final rate of pay or final compensation, whichever is greater. If the benefits exceed such amount it is to be reduced so that total benefits do not exceed one hundred percent (100%) of the final monthly rate of pay or final compensation, whichever is greater. The section of the statute in question [KRS 61.607(6)] must be read as a whole to obtain its clear meaning and purpose. Reading KRS 61.607(6) as a whole leaves no question as to its purpose or application. "Final monthly rate of pay" should then be read as "final rate of pay" , since there is no indication the drafter of the statute had any intention to define final monthly rate of pay other than final rate of pay.
This conclusion is based on the fact that there is a statutory definition of final rate of pay, but not one for final monthly rate of pay. The insertion of the term monthly does not change the application of the term "final rate of pay" , since that rate is based, by definition, on the employe's earnings "during the twelve (12) month period immediately preceding the member's effective retirement date. . . ." KRS 61.510(15). Therefore, "final rate of pay" is in effect the employe's "final monthly rate of pay" for the twelve (12) months prior to his date of retirement.
A second reason why the term should be so defined is that to define it otherwise would lead to a result which clearly is not intended by the statute. The intent of the statute is that combined monthly benefits do not exceed, but equal, one hundred percent (100%) of the final rate of pay or final compensation, whichever is greater. If an employe were to receive substantial pay increases in the last month of service and final monthly rate of pay was defined as the pay in the final month, an unintended result would occur. The Retirement System would take note of those employes receiving benefits in excess of one hunded percent (100%) of their final rate of pay or final compensation, whichever is greater, but be unable to reduce the monthly benefits because the "final monthly rate of pay" was the greatest and allowed benefits in excess of one hundred percent (100%) of the final rate of pay or final compensation. Such an interpretation would cause the statute to become a nullity and impossible to apply, as well as creating an unintended distinction in application of the law. For the above reasons "final rate of pay" should be equated with "final monthly rate of pay" .