Request By:
Mr. Joseph Klain
President
Shively FOP Lodge #17
6902 Triangle Drive
Louisville, Kentucky 40214
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of January 21 in which you raise a number of questions concerning police and firemen pensions in cities of the fourth class, to which Shively belongs. The answers to your questions are for the most part matters of statutory construction, concerning which the courts have not as yet dealt with.
Question 1:
"Does KRS 95.700 permit a fourth-class city to operate the police and fire departments without benefit of a civil service system? "
Our response to the above would be in the affirmative in view of the permissive language in KRS 95.761(1) authorizing fourth class cities who have established a regular police and fire department to create by ordinance a civil service commission which would operate pursuant to KRS 95.762 through 95.785. In addition, you will note the language found in KRS 95.785 which sustains the position that the civil service program prescribed under the referred to section is optional. See also OAG 79-342, copy attached.
Question 2:
"If yes to question one (1), then may that same city provide pensions (even without benefit of a civil service system) under KRS 95.520, et seq. and/or KRS 95.621, et seq. or some other section or sections?"
In response to your second question, it would appear that a fourth class city may, at its option, operate under the provisions of KRS 95.761(2) with respect to the establishment of its pension fund. This subsection authorizes the city to adopt the pension fund authorized for cities of the third class pursuant to KRS 95.520 to 95.620 but this would not include the alternate method for third class cities authorized under KRS 95.621 to 95.629, to which you refer. Also, the city may operate its pension fund under the terms of KRS 95.762 to 95.785 governing fourth class cities. In addition the city may operate a pension fund under the general civil service act [Chapter 90, KRS] relating to third class cities pursuant to KRS 95.761(3).
Your third question is as follows:
"Where a fourth-class city has by valid ordinance elected to operate a civil service system pursuant to the provisions of KRS 95.761, may that city choose to be bound by only portions of KRS 90.300, et seq. [assuming the city opted for the alternative at KRS 95.761(3)] or must the city adopt all the provisions of KRS 90.300, et seq. to and including KRS 90.410 as a complete legislative scheme? "
Our response to your third question in light of our answer to Question 2 would be that if the city elected to operate its civil service program under KRS 95.762 to 95.778, it could not operate under any portions of Chapter 90 or 95.520 to 95.620. On the other hand, if the city does not adopt the civil service program under Chapter 95 as referred to, it has the right under KRS 95.761(3) to adopt the provisions of KRS 90.300 to 90.420, and in doing so has the option of adopting a pension fund as provided in KRS 90.410. However, we believe that the only pension fund it may adopt, if it operates under Chapter 90, is the one provided for in that Act and could not, for example, utilize the pension system provided for under KRS 95.520 to 95.620 or the pension system under 95.761 to 95.785.
Question 4:
"As a corollary to question three (3), where a fourth-class city has adopted a valid ordinance 'pursuant to the provisions of KRS 95.761' is this same city linked in terms of pension provisions and administration to the provisions at KRS 95.761(2) or may the city choose one of several schemes for pensions at KRS 90.410, KRS 95.520, et seq. , KRS 95.621, et seq. , or even KRS 95.768, et seq. ?"
We believe your fourth question has been previously answered to the effect that where the city has merely established a police and fire department [no civil service] , it has the option of establishing solely a pension fund as authorized by KRS 95.761(2) pertaining to third class cities. On the other hand, as we have previously pointed out, if it desires to operate a pension fund under Chapter 90, it must adopt the civil service program therein provided. Also, if it desires to operate its pension fund under the terms of KRS 95.767, etc., it must operate its civil service program under the terms set out in this particular act.
Question 5:
"Assuming a fourth-class city has chosen to 'operate said civil service system under the provisions of KRS 90.310 - 90.400' and assuming further that your answer to question three (3) would indicate the city were bound by the entire legislative scheme embodied at KRS 90.300, et seq. , then may that city at its option create a board for the pension fund [KRS 90.410(2)] with powers including, for example, such powers as to generally administer the Plan, invest and reinvest funds, contract for such investment and reinvestment, advise the City on fund operations, report fund operations to the City and generally do anything the City would desire to empower the board to do to insure safe and sound management of the Plan - see City Resolution approved March 26, 1973 (copy attached as Exhibit "6")?"
Our response to your question would be in the affirmative. You will note that the city may create a board to administer the pension fund under KRS 90.410(2). However, such board is not limited in its ability to contract for investment advice provided it is authorized in an appropriate ordinance creating the board. You will note there is no restriction in this statute as to the powers and duties that can be given the board.
Question 6:
"May a pension Plan adopted pursuant to KRS 95.761 and KRS 90.300 et seq., validly provide that, on repeal of the enabling ordinance, 'all unexpended monies appropriated to said pension fund out of the said City's general fund to the Policemen's and Firemen's Fund by the said Board of Council of such City and at the time of adoption of a repeal ordinance shall revert back to the City's general fund, ' or must such contribution remain in the fund [KRS 90.410(3)] to be paid on eventual retirement of the contributing police and firemen? "
Your sixth question appears to involve the repeal of a pension ordinance adopted pursuant to KRS 90.410. KRS 95.761(4) clearly prohibits the repeal of any pension ordinance adopted under KRS 90.300 to 90.410 or, for that matter, under KRS 95.520 to 95.620. This statute has also been construed by the Court in the case of Turner v. Cole, Ky., 559 S.W.2d 170 (1977) to the effect that where a fourth class city provided for a pension plan pursuant to Chapter 90, such provisions, once adopted, cannot be repealed. Thus, in answer to your specific question, it would appear that the statute requires the contribution to remain in the fund to be paid upon retirement to the covered employees.
Question 7:
"Finally, may a fourth-class city adopting a pension Plan as suggested in question six (6) contract with a vendor for administration of the pension Plan and cause any portion of the costs of administration to be borne by the members or to reduce the City's Actuarily required contribution or must the City pay for commercial administration from general revenues?"
As pointed out in answer to your fifth question, KRS 90.410 does not detail the method of administering the pension fund as it does in other civil service programs under Chapter 95, KRS. As a consequence, we see no objection to the city providing in the pension ordinance for consultation with a private investment company having expertise in this field, the cost of which to be paid as an administrative cost in connection with the operation of the fund, or it could also probably be paid for from the general fund of the city. In this respect you will note there is no provision restricting the use of pension funds solely to the payment of pensions as found in similar programs under Chapter 95, KRS.
The above attempts to answer your questions involving as we said, the construction of a rather complicated set of optional statutes under which fourth class cities may operate. Whether the city has or has not complied with the terms of the referred to statutes in enacting the ordinances to which you have referred, are questions that only the courts can determine.