Request By:
John R. Elfers
Kenton County Attorney
Room 304 City County Building
Covington, Kentucky 41011
Opinion
Opinion By: Steven L. Beshear, Attorney General; Charles W. Runyan, Assistant Deputy Attorney General
Your problem concerns a local credit union and members which are also county employees. Your letter reads as follows:
"The Covington City Employees Credit Union, Inc., Covington, Kentucky, which is comprised of County Employees, utilizes a practice of having the borrowing member authorize the payment of any refund from his County Employees Retirement System, paid to the Credit Union upon his discharge or withdrawal of said pension funds.
We have reviewed your opinion, OAG 72-163, dated 3-7-72. We note on page four that you have interpreted a similar contractual agreement as constituting an assignment within the purview of KRS 61.690.
It is our opinion that an employee could authorize interception of the refund from the pension plan in order to make it payable to the Covington Credit Union, Inc., above mentioned. The basic reason is that upon termination of an employee's job with the governmental agency, the funds on deposit are no longer protected by KRS 61.690.
In the event you disagree with our opinion in this matter, please state under what conditions an intercept of the refund check might be lawful."
KRS 61.690 reads:
All retirement allowances and other benefits accrued or accruing to any person under the provisions of KRS 61.510 to 61.692 and 16.505 to 16.652 and 78.510 to 78.852, and the accumulated contributions and cash securities in the funds created under KRS 61.510 to 61.692 and 16.505 to 16.652 and 78.510 to 78.852, are hereby exempt from any state, county, or municipal tax, and shall not be subject to execution, attachment, garnishment, or any other process whatsoever, nor shall any assignment thereof be enforceable in any court.
The refund check is issued in the event the employee's employment is terminated. Your letter indicates that the members of the credit union who are borrowers from the union authorize the credit union to intercept any refund from the County Employees Retirement System.
We said in OAG 72-163 that KRS 61.690 clearly prohibits the levying of any execution, attachment, or garnishment against such refund checks. The exemption of retirement allowances and related benefits reflects a deliberate legislative intent to establish a protection from provisional remedies. Further, we were of the opinion that the application of the exemption to "any other process whatsoever" in KRS 61.690 did not embrace any agreement or power of attorney between the credit union and the member, wherein authority is given under the power to the credit union to intercept and take over the proceeds of any retirement refund check. We said that such an agreement would amount to a guarantee that the check will be delivered to the credit union for endorsement and negotiation. We pointed out that a private agreement between the credit union and the member does not constitute "other process", such process relating to court process. See Re Foster Const. Corp. (D.C., S.D. New York, 1931) 47 F.2d 276, 278; and Blacks Law Dictionary, 4th ed., p. 1370.
That view is buttressed by the doctrine of ejusdem generis. Under that rule where in a statute general words follow particular subjects, the meaning of the general words ordinarily will be presumed to be restricted by the particular categories of subjects and thus be of the same kind, class or nature as specifically enumerated. Steinfeld v. Jefferson County Fiscal Court, 312 Ky. 614, 229 S.W.2d 319 (1950), 320. Applying the doctrine here, "other process" refers to any other court process.
However, KRS 61.690 contains this language: " nor shall any assignment thereof be enforceable in any court." [Emphasis added].
It must be borne in mind that OAG 72-163 was written in the factual context of a state employee, while still an employee, who executes an assignment of any refund check that would be payable in the event the employee's employment is terminated and a request for refund of contributions and interest is made. Your opinion is framed around the idea that upon termination of employment, the contribution funds on deposit with the state are no longer protected by KRS 61.690. But you lose sight of the fact that KRS 61.690 protects against an assignment of such possible refund, which assignment is executed while the employee is still employed by the county.
In the factual problem you state, the employee has paid in contributions to the retirement system. Thus the assignment would include a definite interest, subject only to the contingency of whether the employee, upon termination of employment, would request a refund of his contributions and interest. See KRS 78.640. See also 6 Am.Jur.2d, Assignments, § 82, p. 263; 67A C.J.S., Assignments, § 13, pp. 604-605, § 14, pp. 605-606, and § 42, pp. 651-652. The case of Hillsdale Distillery Co. v. Briant, 129 Minn. 223, 152 N.W. 265, held that a saloon keeper's claim for refundment under a statute on revocation of his license was assignable so as to give the assignee title to the money refunded on entry of the order therefor.
In King v. Gilbert, (5th Cir. 1978) 569 F.2d 398, the Court held that an assignment of a tax refund was not precluded on the asserted theory that it was not properly in existence at the time of the assignment. The Court pointed out that under Georgia law the assignment of a contingency right will be enforced. When the contingency is realized, the right to the property attaches as of the time of the assignment. See also Segal v. Rochelle, 382 U.S. 375, 15 L. Ed. 2d 428, 86 S. Ct. 511 (1966), holding that refund claims vested in the trustee in bankruptcy because they were transferable property within the meaning of § 70a(5) of the Bankruptcy Act. The court observed that the anti-assignment statute must be interpreted in the light of its purpose to give protection to the government in connection with conflicting claims, with delay, and embarassment and the chance of multiple liability.
CONCLUSION
Under the above analysis, it is our opinion that the contract between a state credit union and an employee of the county government wherein the employee authorizes the credit union to intercept any refund check covering the employee's paid-in contributions, with interest, upon the termination of his employment, would be an assignment, which is in effect prohibited by KRS 61.690. We are not aware of any circumstances, when the contract is executed while the employee is still employed by the county, under which the said prohibition would not apply.