April 1, 1993
Mr. Dennis Ducker, Director Department of State Treasurer Retirement Systems Division Albemarle Building Raleigh, North Carolina 27611
Re: Advisory Opinion to Dennis Ducker, Deputy State Treasurer, from the Office of the Attorney General, Administrative Division, Services to State Agencies Section, Concerning the Application of Article V, Section 6(2), of the North Carolina Constitution to a Proposal to Use Assets of the Teachers’ and State Employees’ Retirement System of North Carolina to Fund Coverage Under the North Carolina Teachers’ and State Employees’ Comprehensive Major Medical Plan for Retirees and Other Retirement System Beneficiaries.
Dear Mr. Ducker:
We are writing in response to your letter of March 22, 1993, to Attorney General Michael F. Easley. In that letter, you explained that a proposal has been put forward by a member of the General Assembly which would require that assets of the Teachers’ and State Employees’ Retirement System of North Carolina be used to fund coverage of retirees and other Retirement System beneficiaries under the North Carolina Teachers’ and State Employees’ Comprehensive Major Medical Plan. Currently, such coverage is noncontributory for eligible retirees and beneficiaries and is funded by annual and biennial appropriations of the General Assembly. This proposal would shift the burden of funding such coverage from the General Fund to the Retirement System. You expressed concern about the constitutionality of this proposal and asked for an opinion on the subject from this Office. We are happy to respond to your request.
As you noted in your letter, the constitutionality of this proposal is controlled by the language of Article V, Section 6(2), of the North Carolina Constitution. That provision states:
Neither the General Assembly nor any public officer, employee, or agency shall use or authorize to be used any part of the funds of the Teachers’ and State Employees’ Retirement System or the Local Governmental Employees’ Retirement System for any purpose other than retirement system benefits and purposes, administrative expenses, and refunds; except that retirement system funds may be invested as authorized by law, subject to the investment limitation that the funds of the Teachers’ and State Employees’ Retirement System and the Local Governmental Employees’ Retirement System shall not be applied, diverted, loaned to, or used by the State, any State agency, State officer, public officer, or public employee.
The plain language of Article V, Section 6(2), makes clear that assets of the Teachers’ and State Employees’ Retirement System can be used only for three purposes: retirement system benefits and purposes, administrative expenses, and refunds. The payments of premiums for medical coverage does not fall within one of these three purposes. Pursuant to G.S. 135-40.2(a)(2) and (2a) and G.S. 135-40.3, retirees and certain other retirement system beneficiaries are entitled to medical coverage on a non-contributory basis. This benefit is not a retirement benefit; however, it is a medical insurance benefit by which retirees and other beneficiaries are treated similarly to active employees. Accordingly, Article V, Section 6(2), of the North Carolina Constitution prohibits assets of the Teachers’ and State Employees’ Retirement System from being used to fund noncontributory medical coverage for retirees and other retirement system beneficiaries.
We trust that this fully answers your questions. Please do not hesitate to contact us if we can be of any further assistance in this matter.
Ann Reed Senior Deputy Attorney General
Alexander McC. Peters Assistant Attorney General