After the 2016 FOCUS Act restructured Tennessee higher education governance, can state university employees still participate in the Board of Regents' 403(b) retirement plan?

Plain-English summary

The Focus on College and University Success Act (FOCUS Act) of 2016 restructured Tennessee's higher education governance. Before the Act, the Board of Regents governed all six state universities plus community colleges and state colleges of applied technology. After the Act, the Board of Regents kept the community colleges and state colleges of applied technology, but each of the six state universities got its own board of trustees with management authority.

The Chancellor of the Board of Regents asked whether state university employees were still eligible for the Board of Regents' 403(b) retirement plan after this governance shake-up. The AG said yes.

The Government Employees Deferred Compensation Plan Act (Tenn. Code Ann. §§ 8-25-101 to -114) names "the chancellor of the board of regents" as trustee of any 403(b) plan "maintained on behalf of employees of institutions thereunder." When that statute was enacted, the six state universities were institutions "under" the board of regents. The FOCUS Act did not expressly amend the Deferred Compensation Act. The question was whether it amended that act by implication.

The AG said no. Implied amendments are disfavored and require "manifestly repugnant" or "irreconcilable" conflict. The FOCUS Act's section 21(j) (codified at Tenn. Code Ann. § 49-8-203(j)) expressly preserved continuing participation in "retirement and deferred compensation programs" provided or administered by the Department of Treasury. That signals legislative intent not to disturb existing retirement programs. The system is still "called the board of regents" under § 49-8-101(a)(1), and state universities are still referred to as "board of regents state universities." So the system's state universities remain "institutions thereunder" for purposes of the chancellor's 403(b) trustee authority. Employees of the six state universities can still participate.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Background and statutory framework

The pre-FOCUS framework. The system contained six state universities plus 40 community colleges and state colleges of applied technology. Tenn. Code Ann. § 49-8-101(b) vested government, management, and control of the entire system in the Board of Regents. § 49-8-203 gave the Board of Regents authority over employee appointments, salaries, and operations.

The FOCUS Act change. 2016 Tenn. Pub. Acts ch. 869 (codified at Tenn. Code Ann. § 49-8-101(a)) split the governance. The community colleges and state colleges of applied technology stayed under the Board of Regents. Each of the six state universities (Austin Peay State, East Tennessee State, Middle Tennessee State, Tennessee State, Tennessee Tech, and the University of Memphis) got its own board of trustees with management authority, including employee appointments and salaries. But the overall "state university and community college system" is still "called the board of regents."

The 403(b) framework. Tenn. Code Ann. § 8-25-103(e) names the chancellor of the Board of Regents as trustee for "any § 403(b) plan maintained on behalf of employees of institutions thereunder." § 8-25-104(a)(4)(B) and § 8-25-105(c) give the chancellor companion authority to approve service providers and direct investments.

The implied-amendment question. Implied amendments occur when a later statute is "manifestly repugnant" to an earlier one. Hayes v. Gibson Cnty., 288 S.W.3d 334, 337 (Tenn. 2009). Courts strongly disfavor implied amendments and will read statutes to coexist when possible. Kentucky-Tennessee Clay Co. v. Huddleston, 922 S.W.2d 539, 542 (Tenn. Ct. App. 1995).

The FOCUS Act and the Deferred Compensation Act are not manifestly repugnant. The FOCUS Act addresses governance and management. The Deferred Compensation Act addresses retirement plan administration. They can stand together: the new university boards have management authority over operations, salaries, and personnel, while the Board of Regents chancellor retains trustee authority over the 403(b) plan that covers employees system-wide.

The express preservation in § 49-8-203(j). "Notwithstanding any provision of this act or any other provision of law to the contrary, the state university boards and their respective institutions shall continue to be participating employers in the Tennessee consolidated retirement system and utilize such . . . retirement and deferred compensation programs . . . as are provided or administered by the department of treasury . . . until the effective date of any subsequent legislation authorizing procurement from another provider." This section deals primarily with Treasury-administered programs, but the AG read it as evidence of broader legislative intent not to disturb existing retirement arrangements.

The "institutions thereunder" language. The system itself is "called the board of regents" under § 49-8-101(a)(1), and the FOCUS Act still refers to the state universities as "board of regents state universities" in § 49-8-101(a)(2)(A). So for 403(b) purposes, the state universities are still "institutions thereunder" the Board of Regents.

Common questions

Q: After the FOCUS Act, can a state university employee still join the Board of Regents 403(b) plan?
A: According to this opinion, yes, as long as the employee otherwise meets federal eligibility requirements for 403(b) plans.

Q: Who administers the plan?
A: The chancellor of the Board of Regents is the statutory trustee under § 8-25-103(e). The chancellor also approves service providers and directs investments.

Q: Did the FOCUS Act change anything about the 403(b) plan?
A: According to this opinion, no. The Act did not expressly amend the Deferred Compensation Act, and it did not impliedly amend it because the two statutes can coexist.

Q: What about the new university boards: do they have any 403(b) authority?
A: No. The 403(b) authority remains with the Board of Regents chancellor. The new university boards have governance and personnel authority but not 403(b) trustee authority.

Q: Can the legislature change this in the future?
A: Yes. § 49-8-203(j) anticipates future legislation that might authorize procurement of retirement and deferred compensation programs from another provider. But absent that future change, the existing arrangement remains in place.

Citations and references

Statutes:

• Tenn. Code Ann. § 49-8-101(a), (b)
• Tenn. Code Ann. § 49-8-203 (including subsection (j))
• Tenn. Code Ann. §§ 8-25-101 to -114
• Tenn. Code Ann. § 8-25-103(e), § 8-25-104(a)(4)(B), § 8-25-105(c)
• 26 U.S.C. § 403(b)
• 2016 Tenn. Pub. Acts ch. 869

Cases:

• Neff v. Cherokee Ins. Co., 704 S.W.2d 1 (Tenn. 1986)
• Lee v. Franklin Special Sch. Dist. Bd. of Educ., 237 S.W.3d 322 (Tenn. Ct. App. 2007)
• Hayes v. Gibson Cnty., 288 S.W.3d 334 (Tenn. 2009)
• Jenkins v. Loudon Cnty., 736 S.W.2d 603 (Tenn. 1987)
• State, Dep't of Revenue v. Moore, 722 S.W.2d 367 (Tenn. 1986)
• Cronin v. Howe, 906 S.W.2d 910 (Tenn. 1995)
• Kentucky-Tennessee Clay Co. v. Huddleston, 922 S.W.2d 539 (Tenn. Ct. App. 1995)
• Johnson v. Hopkins, 432 S.W.3d 840 (Tenn. 2013)
• Sharp v. Richardson, 937 S.W.2d 846 (Tenn. 1996)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2017/op17-033.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
June 13, 2017
Opinion No. 17-33
Impact of FOCUS Act on Tennessee Board of Regents' 403(b) Plan

Question
Are employees of state universities in Tennessee's state university and community college system still eligible to participate in the board of regents' 403(b) plan following the passage of the Focus on College and University Success ("FOCUS") Act?

Opinion
Yes.

ANALYSIS

Tennessee's state university and community college system contains six state universities and forty community colleges and state colleges of applied technology. See Tenn. Code Ann. § 49-8-101(a). Prior to the recent passage of the FOCUS Act, the General Assembly provided, for many years, that the "government, management and control" of the system was "vested in the board of regents." See Tenn. Code Ann. § 49-8-101(b) (2013); Tenn. Code Ann. § 49-8-101(b) (1983). The General Assembly further vested in the board of regents the power to assume general responsibility for the operation of the institutions in the system, as well as the power to select and employ a chief executive officer for each institution and to confirm the appointment of administrative personnel, teachers, and other employees of each state institution and to fix their salaries and terms of office. See Tenn. Code Ann. §§ 49-8-203(a)(1)(A), (E) (2013).

With the passage of the FOCUS Act in 2016, the General Assembly restructured the board of regents. There is established a state university and community college system to be called the board of regents. The state university and community college system is composed of state universities, community colleges, and state colleges of applied technology. See 2016 Tenn. Pub. Act ch. 869, § 1(a)(1) (codified at Tenn. Code Ann. § 49-8-101(a)(1)). The "board of regents state universities" shall be composed of the same six universities that have been traditional members of the system.

The FOCUS Act then diverts from prior law by enlarging the governing structure of the state university and community college system. Instead of one governing board, the Act provides for seven governing boards — the board of regents plus a board of trustees for each of the six state universities in the system. Under the new structure, the governance and management of the community colleges and colleges of applied technology remain vested in the board of regents, and the governance and management of the system's state universities are now vested in each university's respective board.

For the reasons explained below, the restructuring of the system under the FOCUS Act does not preclude employees of state universities in Tennessee's state university and community college system from participating in the board of regents' 403(b) plan, assuming that they otherwise meet applicable eligibility requirements.

The Government Employees Deferred Compensation Plan Act, codified at Tenn. Code Ann. §§ 8-25-101 to -114, authorizes State and local government employees to participate in deferred compensation plans, and specifically addresses 403(b) plans. The General Assembly has provided that "[t]he chancellor of the board of regents shall serve as trustee for any § 403(b) plan maintained on behalf of employees of institutions thereunder[.]" Tenn. Code Ann. § 8-25-103(e) (emphasis added). Commensurate with this delegation, the General Assembly has provided that "[t]he responsibility of approving any company providing investment or administrative services under any such § 403(b) plan shall rest with the chancellor of the board of regents for any § 403(b) plan maintained on behalf of employees of institutions thereunder"; "§ 403(b) plans shall be operated under the terms and conditions set out in contracts entered into by the chancellor of the board of regents for any § 403(b) plan maintained on behalf of employees of institutions thereunder"; and "[t]he chancellor of the board of regents for any § 403(b) plan maintained on behalf of employees of institutions thereunder . . . shall be responsible for investing the monies held pursuant to any such plan in investment options that meet the applicable requirements of the Internal Revenue Code." Id.; Tenn. Code Ann. § 8-25-104(a)(4)(B); Tenn. Code Ann. § 8-25-105(c).

The General Assembly's provision for the chancellor of the board of regents to serve as trustee of "any 403(b) plan maintained on behalf of employees of institutions thereunder," as well as the other provisions regarding the chancellor's duties and responsibilities for these plans, was enacted before the FOCUS Act. And, as discussed above, the law before the FOCUS Act clearly vested in the board of regents the government, management, and control of all institutions in the system — community colleges, state colleges of applied technology and the six state universities. Therefore, the phrase "institutions thereunder" that appears in all of these provisions refers to all institutions in the system. See Neff v. Cherokee Ins. Co., 704 S.W.2d 1, 4 (Tenn. 1986) (the legislature is presumed to know the state of the law on the subject under consideration at the time it enacts legislation); Lee v. Franklin Special Sch. Dist. Bd. Of Educ., 237 S.W.3d 322, 332 (Tenn. Ct. App. 2007).

When the General Assembly enacted the FOCUS Act, it was similarly aware of the Government Employees Deferred Compensation Plan Act. While the FOCUS Act expressly amended several provisions of the Tennessee Code, it did not amend the Government Employees Deferred Compensation Plan Act. Accordingly, the question is whether an "implied amendment" occurred: Did the FOCUS Act's transfer of governance and management powers to state university boards effectively usurp the power and duty of the chancellor of the board of regents under the Government Employees Deferred Compensation Plan Act to administer and serve as trustee of 403(b) plans for employees of the system's state universities.

An "implied amendment" has been defined as an act which purports to be independent of, but which in substance, alters, modifies, or adds to a prior act . . . . 82 C.J.S. Statutes § 291 (2017). Amendments of statutes by implication are not favored, and will not be upheld in doubtful cases. Hayes v. Gibson Cnty., 288 S.W.3d 334, 337 (Tenn. 2009); Jenkins v. Loudon Cnty., 736 S.W.2d 603, 607 (Tenn. 1987); State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 374 (Tenn. 1986). An amendment by implication can occur only when the terms of a later statute are so repugnant to an earlier statute that they cannot stand together. See Hayes, 288 S.W.3d at 337; Cronin v. Howe, 906 S.W.2d 910, 912 (Tenn. 1995). If the two enactments are capable of being construed so that they both may stand, the court should so construe them. Kentucky-Tennessee Clay Co. v. Huddleston, 922 S.W.2d 539, 542 (Tenn. Ct. App. 1995).

In this instance, a reasonable construction exists that allows the Deferred Compensation Act and the FOCUS Act to stand together. The FOCUS Act revises the governance structure of the institutions in Tennessee's state university and community college system, and it addresses the operation of these institutions going forward. While the FOCUS Act now gives university boards the power to govern and manage their respective state universities in the system, as well as the power to confirm the appointment of administrative personnel, teachers and other employees and to fix their salaries and terms of office, the FOCUS Act does not address retirement and deferred compensation plans for employees of state universities in the system.

In fact, the very section of the FOCUS Act that grants powers and duties to university boards, including the power to set salaries and terms of office, contains the following caveat: "Notwithstanding any provision of this act or any other provision of law to the contrary, the state university boards and their respective institutions shall continue to be participating employers in the Tennessee consolidated retirement system and utilize such claims administration services, risk management programs, investment funds and trusts, and retirement and deferred compensation programs, or any successor programs and services in the same fields, as are provided or administered by the department of treasury to any of the state universities on the effective date of the act until the effective date of any subsequent legislation authorizing procurement from another provider." See 2016 Tenn. Pub. Acts ch. 869, § 21(j) (codified at Tenn. Code Ann. § 49-8-203(j)). While this section does not specifically mention plans administered by the board of regents, this provision illustrates that the General Assembly did not intend for the FOCUS Act to change the law with respect to deferred compensation matters.

Furthermore, the FOCUS Act's own terms indicate that the system's state universities remain under the auspices of the board of regents for some purposes. The Act states that "[t]here is established a state university and community college system to be called the board of regents." See 2016 Tenn. Pub. Acts ch. 869, § 1(a)(1) (codified at Tenn. Code Ann. § 49-8-101(a)(1)) (emphasis added). And the Act still refers to the state universities as "board of regents state universities."

Accordingly, the FOCUS Act does not amend or alter the Government Employees Deferred Compensation Plan Act with respect to the eligibility of employees of state universities in Tennessee's state university and community college system to participate in the board of regents' 403(b) plan. A reasonable construction of the FOCUS Act permits the system's state universities to be "institutions []under" the board of regents for the purposes of the Government Employees Deferred Compensation Plan Act. There is no indication that the General Assembly intended for the FOCUS Act to disturb the power and duty of the chancellor of the board of regents to administer and serve as trustee of 403(b) plans for employees of the system's state universities.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:
The Honorable Flora W. Tydings
Chancellor
Tennessee Board of Regents
1 Bridgestone Park, Third Floor
Nashville, Tennessee 37214