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Bob Ferguson

AGLO 1974 No. 35 - Mar 19 1974
Attorney General Slade Gorton


Applicability of public employees' retirement system (PERS) to employees of private transportation company acquired by Metro Transit; entitlement of such employees to service credit for periods of employment with private company; funding of such service credit by employer; impact of labor contract between Metro Transit and bargaining representative of employees on the foregoing.

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                                                                  March 19, 1974

Honorable Lloyd G. Baker
Director, Washington Public
Employees' Retirement System
P.O. Box 918
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1974 No. 35

Dear Sir:

            By letter previously acknowledged you have asked for our opinion upon four questions which we paraphrase as follows:

            (1) Given the fact that the Municipality of Metropolitan Seattle (hereinafter referred to as Metro) is an employer under the Washington Public Employees' Retirement System (PERS) and that Metro Transit is a division thereof, when Metro Transit acquires the facilities and employees of a preexisting private transportation company pursuant to RCW 35.58.260, are those employees required to become members of that retirement system?

            (2) If question (1) is answered in the affirmative, are those employees of the preexisting private transportation company thus becoming members of PERS entitled to receive service credit thereunder for their previous periods of employment service to the private company?

            (3) If the employees involved in questions (1) and (2) are required to become members of PERS and entitled to service credit for their previous periods of employment service to the private company, what employer's contributions is Metro required to make to the retirement system to fund that service credit?

            (4) To what extent may the consequences of any of our answers to the foregoing questions be altered by the terms of a labor contract between Metro Transit and a bargaining representative of the employees involved?

            We answer question (1) in the affirmative as qualified in our analysis; question (2) in the affirmative; and questions (3) and (4) in the manner set forth in our analysis.

             [[Orig. Op. Page 2]]


            Question (1):

            Your first question stipulates that Metro, as a political subdivision participating in the public employees' retirement system under RCW 41.40.410, is an "employeer" as defined in RCW 41.40.010(4).  The personnel involved were previously employed by a private transportation company which has been acquired by Metro under RCW 35.58.260, and the facilities of which are currently being operated by a division thereof known as Metro Transit.  Upon the acquisition of this company and its facilities, those personnel became employees of Metro.

            Based upon these facts it is our opinion that their membership in the PERS is mandatory to the extent provided for in so much of RCW 41.40.120 as provides that, with certain listed exceptions,

            "Membership in the retirement system shall consist of all regularly compensated employees and appointive and elective officials of employers as defined in this chapter who have served at least six months without interruption or who are employed, appointed or elected on or after July 1, 1965, . . ."

            Among the exceptions to this requirement is one appearing in subsection (4) of this statute with respect to

            "Employees holding membership in, or receiving pension benefits under, any retirement plan operated wholly or in part by an agency of the state or political subdivision thereof, or who are by reason of their current employment contributing to or otherwise establishing the right to receive benefits from any such retirement plan: . . ."

            However, as indicated in AGO 61-62 No. 12 [[to John A. Petrich, State Senator on February 20, 1961]], copy enclosed, the mere act of making employer's contributions to a private pension plan is not sufficient to cause that plan to be of the type to which this exception refers.  Accordingly, the fact that some of the employees here involved may also continue to be covered by a private pension plan in which they were participating before their acquisition by Metro, as further discussed below, would not render them personally ineligible for simultaneous  [[Orig. Op. Page 3]] membership in PERS unless, in addition to making employer's contributions to that other plan, Metro were also to be actively engaged in its actual operation and administration.

            Beyond this possibility, you have not provided us with any other facts from which it might be concluded that any of the exceptions of RCW 41.40.120,supra, to mandatory membership in PERS are here applicable.  In the absence of such facts it therefore follows from what we have thus far said that your first question, as above paraphrased, is answerable in the affirmative.  Those regularly compensated employees of Metro Transit who became such upon Metro's acquisition of the private transportation company by which they were previously employed, and who occupy eligible positions and are otherwise personally eligible for membership in PERS under RCW 41.40.120, supra, are now mandatorily members of that retirement system.

            Questions (2) and (3):

            Both of these two questions are also readily answerable, in our opinion, on the basis of the following language of RCW 41.40.160(2):

            "(2) Employees of a public utility or other private enterprise all or any portion of which has been heretofore or may be hereafter acquired by a public agency as a matter of public convenience and necessity, where it is in the public interest to retain the trained personnel of such enterprise, all service to that enterprise shall, upon the acquiring public agency becoming an employer as defined in RCW 41.40.010(4) be credited on the same basis as if rendered to the said employer:  Provided, That this shall apply only to those employees who were in the service of the enterprise at or prior to the time of acquisition by the public agency and who remain in the service of the acquiring agency until they attain membership in the state employees' retirement system; and to those employees who were in the service of the enterprise at the time of acquisition by the public agency and subsequently attain membership through employment with any participating agency:Provided further, In the event that the acquiring agency is an employer at the time of the acquisition, employer's contributions in connection with members achieving service credit hereunder shall be made on the same basis as set forth in RCW 41.40.361 for an employer admitted after April 1, 1949."

             [[Orig. Op. Page 4]]

            Under this statute, the employees involved in your request, having become members of PERS by virtue of such an acquisition as is referred to therein, are entitled to have all service theretofore rendered to the acquired private enterprise credited to them for the purposes of this retirement system, ". . . on the same basis as if rendered to the said [acquiring] employer . . ."  Accordingly, the answer to your second question, as above paraphrased, is clearly in the affirmative.

            Insofar as question (3) is concerned, RCW 41.40.160(2), supra, then goes on to require the acquiring employer ‑ in this case, Metro ‑ to make employer's contributions to the retirement fund in connection with the members achieving service credit thereunder ". . . on the same basis as set forth in RCW 41.40.361 for an employer admitted after April 1, 1949."  RCW 41.40.361 in turn provides, in subsection (5) of that statute, as follows:

            "Any employer admitted to the retirement system after April 1, 1949, shall make an additional contribution until such time as the sum of such additional contributions equals the amount of contributions which such employer would have been required to contribute between April 1, 1949, and the date of such employer's admission to the retirement system:  Provided, All additional contributions hereunder and under the provisions of RCW 41.40.160(2) must be completed within fifteen years from the date of the employer's admission."

            Question (4):

            Your final question involves the relationship between RCW 41.40.160(2),supra, and the following provisions of RCW 35.58.265:

            "If a metropolitan municipal corporation shall perform the metropolitan transportation function and shall acquire any existing transportation system, it shall assume and observe all existing labor contracts relating to such system and, to the extent necessary for operation of facilities, all of the employees of such acquired transportation system whose duties are necessary to operate efficiently the facilities acquired shall be appointed to comparable positions to those which they held at the time of such transfer, and no employee or retired or pensioned employee of  [[Orig. Op. Page 5]] such systems shall be placed in any worse position with respect to pension, seniority, wages, sick leave, vacation or other benefits that he enjoyed as an employee of such system prior to such acquisition.  The metropolitan municipal corporation shall engage in collective bargaining with the duly appointed representatives of any employee labor organization having existing contracts with the acquired transportation system and may enter into labor contracts with such employee labor organization."  (Emphasis supplied.)

            You have asked whether the consequences of our answers to any of your first three questions might be altered by the terms of a labor contract entered into under this statute by Metro and a collective bargaining representative of the employees involved.  In asking this question you have advised us that at the time of their acquisition by Metro those employeeswere covered by a certain private pension plan earlier contracted for by their then employer, the private transportation company.  However, you have also informed us that if those employees, upon becoming members of PERS, are entitled to receive service credit for their previous service to the private transportation company (as we have indicated above that they are) the result will be that all will receive, upon their eventual retirement under chapter 41.40 RCW, substantially greater pensions than they would have received for the same service under that private pension plan.

            If Metro and a bargaining representative of the employees were to agree not only to continue coverage under the private plan but, in addition, to so structure it as to cause it to be "operated wholly or in part" by Metro within the meaning of RCW 41.40.120(4), supra, they could by such an agreement conceivably disqualify any employees electing to stay under that plan from at the same time participating in PERS.  They could not, however, force any of those employees to take the less beneficial private plan in place of the public retirement system.

            And because the lot of those employees under these particular circumstances would apparentlynot be "worsened" by covering them under PERS rather than continuing to cover them under the private plan, it would further be our opinion (although this goes a step beyond your precise question) that any continuation of coverage under the  [[Orig. Op. Page 6]] private planin addition to the public employees' retirement system would be entirely a matter of discretion between Metro and the employees involved and/or their bargaining representative; it is not, under these circumstances, required, in our judgment.

            A technical construction cannot be given to one portion of a statute which ignores the obvious import of the other portions thereof.  In re Cress, 13 Wn.2d 7, 123 P.2d 767 (1942).  In the instant case, the obvious intention of RCW 35.58.265 is to protect the acquired employees from a "worsening" of their benefit positon.  To take this obvious intent and so twist it as to compel dual pension coverage not extended to the other employees of the same employer would be such an absurd result as to be avoided if at all possible.  State ex rel. Thorp v. Devin, 26 Wn.2d 333, 173 P.2d 994 (1946), Alderwood Water Dist. v. Pope & Talbot, 62 Wn.2d 319, 382 P.2d 639 (1963).  Therefore, we conclude that in those instances where, as here, the coverage offered by PERS is equal to or better than that provided for by a prior private plan, the resulting public retirement system coverage and credit will satisfy the requirement of RCW 35.58.265 that the acquiring agency shall assume the obligation of existing contracts.  In any case, nothing in that statute purports to release the acquiring agency from the obligations imposed on it as an "employer" by RCW 41.40.160(2),supra.  By the same token, the acquiring agency could not by collective bargaining, avoid those statutory obligations.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Deputy Attorney General

Assistant Attorney General