Can a Texas appraisal district put its employees into a private retirement plan and pay for it with district funds?

Texas AG Opinion JM-1068: Can an Appraisal District Buy a Private Pension Plan?

Plain-English summary

The Comal County Attorney asked the Attorney General a straightforward question about how a county appraisal district can handle retirement benefits for its staff. An appraisal district is the local body, one in each county, that appraises property for property-tax purposes. The district wanted to know whether it could sign a contract with a private association to set up a "private retirement plan" for its employees and pay into that plan with district funds.

The Attorney General said no. The reasoning was about how Texas structures public-employee retirement, and about what the legislature's silence means. The Texas Constitution authorizes the legislature to create retirement programs for public officers and employees, and one provision calls for a statewide system that counties and other political subdivisions may voluntarily join. Acting on that authority, the legislature built out a detailed set of public systems: one for state employees, one for teachers, one for city employees, systems for judges, and the County and District Retirement System for counties and certain other political subdivisions. It also passed specific laws letting counties and cities set up their own local retirement programs, and separate pension laws for police officers and firefighters.

An appraisal district fits the definition of a "subdivision" that can join the public County and District Retirement System. The private plan the district asked about was not part of that public system. Reading the whole scheme, the AG found no provision, in either the constitution or the statutes, authorizing a body like an appraisal district to participate in any retirement plan other than the public County and District Retirement System. Given how carefully the legislature spelled out which public bodies could join which systems, the absence of any authority for an appraisal district to fund a private plan told the AG that the legislature did not intend to allow it. So the district could not contract for or spend district money on a private retirement plan.

The request also asked whether the federal retirement law known as ERISA would apply to such a private plan. Because the AG had already concluded that state law did not authorize the district to enter the contract at all, it did not need to reach the ERISA question.

Currency note

This opinion was issued in 1989. 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, deadline, or remedy mentioned here.

The public retirement statutes cited here as V.T.C.S. Title 110B have since been recodified into the Texas Government Code (the state's public retirement systems now appear there), and the local pension statutes cited by their old V.T.C.S. article numbers have been amended and reorganized since 1989. Anyone with a present-day question about what retirement benefits an appraisal district or other local body may offer should check the current Government Code provisions on the Texas County and District Retirement System and related public retirement law rather than relying on the 1989 citations used here.

Who this opinion affected (as of 1989)

Appraisal districts: The opinion told them they could not use district funds to buy into a private retirement plan for staff. Their route to a retirement benefit ran through the public County and District Retirement System.

Appraisal district employees: The opinion pointed their retirement coverage toward the public system rather than a privately offered plan the district might have preferred.

Other political subdivisions considering private plans: The opinion's reasoning, that the detailed public-system scheme implied no authority to fund private plans, applied broadly to bodies in the same position.

Common questions

Can a Texas appraisal district set up a private retirement plan for its workers?
No. The Attorney General concluded the appraisal district is not authorized to contract with a private association to adopt and fund a private retirement plan with district money.

What retirement system can an appraisal district use instead?
The public Texas County and District Retirement System. An appraisal district fits the definition of a "subdivision" eligible to participate in that system.

Why did the AG read the law to forbid a private plan when no statute says so directly?
Because the legislature spelled out in detail which public bodies could join which retirement systems and authorized specific local programs. Against that detailed scheme, the absence of any authority for an appraisal district to fund a private plan indicated the legislature did not intend to allow it.

Did the opinion decide whether the federal ERISA law applied?
No. Since state law did not authorize the district to enter the contract, the AG did not need to address whether ERISA would apply to the proposed private plan.

Background and statutory framework

The Comal County Attorney asked whether the Comal Appraisal District is authorized to contract with a private association under which the district would, for the benefit of district employees, adopt and contribute district funds to a private retirement plan offered by the association. An appraisal district is a political subdivision of the state established in each county to appraise property for ad valorem tax purposes of the state and the taxing entities in the district. Tax Code § 6.01 et seq.

Article XVI, section 67, of the Texas Constitution provides in part that the legislature may enact general laws establishing retirement programs for public officers and employees, and requires the legislature to establish retirement systems for various categories of public officers and employees. Article XVI, section 67(c)(1)(B) provides that the legislature shall provide for a statewide system of benefits for the officers and employees of counties or other political subdivisions of the state in which counties or other political subdivisions may voluntarily participate. That provision would apply to appraisal districts.

By statute, in V.T.C.S. Title 110B, the legislature provided for the Employees Retirement System for state officers and employees (section 21.001 et seq.); the Teacher Retirement System (section 31.001 et seq.); the Municipal Retirement System for officers and employees of cities and towns (section 61.001 et seq.); a Judicial Retirement System (sections 41.001 et seq. and 71.001 et seq.); and the County and District Retirement System for counties and certain other political subdivisions of the state (section 51.001 et seq.). See also V.T.C.S. Title 110B, ch. 36 (participation in a private retirement program for higher education faculty authorized under the Optional Retirement Program). The legislature also provided, in separate V.T.C.S. articles, that counties and cities or towns may, pursuant to an election, create local retirement programs for their officers and employees, along with provisions for retirement programs for firemen and policemen.

An appraisal district would appear to fall under the definition of "subdivision" in section 51.001 of Title 110B for the County and District Retirement System, and thus be eligible to participate in that system. The private retirement plan at issue was not part of the County and District Retirement System. Finding no provision in either the constitution or the statutes authorizing a subdivision such as an appraisal district to participate in any retirement plan other than the public County and District Retirement System under Title 110B, and in view of the detailed provisions the legislature made in Title 110B for statewide retirement systems and the specific authorization for local programs, the opinion concluded that the absence of any provision for a subdivision such as an appraisal district to participate in a plan other than the County and District Retirement System indicated the legislature did not intend to authorize such districts to contract and expend district funds for a private retirement plan. A footnote added that the opinion found no provisions of law authorizing the operation of such a private retirement plan as part of the County and District Retirement System.

The request also raised the applicability of the federal Employees Retirement Income Security Act (ERISA), found in chapter 18 of Title 29, United States Code, to such a private plan. Because the opinion concluded that under state law the appraisal district was unauthorized to contract for such a plan, it did not address the applicability of ERISA.

Citations

Statutory and constitutional authority:

• Tax Code § 6.01 et seq. (appraisal districts)
• Tex. Const. art. XVI, § 67, including § 67(c)(1)(B) (public-employee retirement systems)
• V.T.C.S. Title 110B (Employees Retirement System § 21.001 et seq.; Teacher Retirement System § 31.001 et seq.; Judicial Retirement System §§ 41.001 et seq., 71.001 et seq.; County and District Retirement System § 51.001 et seq.; Municipal Retirement System § 61.001 et seq.; ch. 36 Optional Retirement Program)
• Federal Employees Retirement Income Security Act (ERISA), 29 U.S.C. ch. 18 (not reached)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1068
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1068.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative. Several local pension-statute article numbers were partly illegible in the scan and are reproduced as best read.

July 6, 1989

Honorable Bill Reimer
Comal County Attorney
150 N. Seguin, Suite 318
New Braunfels, Texas 78130

Opinion No. JM-1068

Re: Validity of a contract between an appraisal district and a retirement plan (RQ-1732)

Dear Mr. Reimer:

You ask whether the Comal Appraisal District is authorized to enter into a contract with a private association under which the district would, for the benefit of district employees, adopt and contribute district funds to a "private retirement plan" offered by the association.

An appraisal district is a political subdivision of the state established in each county to appraise property in the district for ad valorem tax purposes of the state and taxing entities in the district. Tax Code § 6.01 et seq.

Having reviewed the constitutional and statutory scheme for the establishment of retirement plans for public employees in Texas, we conclude that an appraisal district is not authorized to enter into the contract you describe.

Article XVI, section 67, of the Texas Constitution provides in part that the legislature may enact general laws establishing retirement programs for public officers and employees. The provisions also require that the legislature establish retirement systems for various categories of public officers and employees. Article XVI, section 67(c)(1)(B), of the constitution provides that the legislature shall provide for "a statewide system of benefits for the officers and employees of counties or other political subdivisions of the state in which counties or other political subdivisions may voluntarily participate." The latter provision would apply to appraisal districts.

By statute, V.T.C.S. Title 110B, the legislature has provided for the Employees Retirement System for state officers and employees, section 21.001 et seq.; the Teacher Retirement System, section 31.001 et seq.; the Municipal Retirement System for officers and employees of cities and towns, section 61.001 et seq.; a Judicial Retirement System, sections 41.001 et seq. and 71.001 et seq.; and the County and District Retirement System for counties and certain other political subdivisions of the state, section 51.001 et seq. See also V.T.C.S. Title 110B, ch. 36 (participation in private retirement program for higher education faculty authorized under Optional Retirement Program).

The legislature has also provided, in V.T.C.S. articles 6228g and 6243k, that counties and cities or towns respectively may, pursuant to an election, create local retirement programs for their officers and employees. See also V.T.C.S. arts. 6243a, 6243b, 6243d-1, 6243e, 6243e-2, 6243f (provisions for retirement programs for firemen and policemen).

An appraisal district would appear to fall under the definition of "subdivision" in section 51.001 of the provisions of Title 110B, V.T.C.S., for the County and District Retirement System, and thus be eligible to participate in that system. We understand that the "private retirement plan" which you ask about is not part of the County and District Retirement System.[1]

We find no provision either in the constitution or statutes authorizing a subdivision such as an appraisal district to participate in any retirement plan other than the public County and District Retirement System provided for in sections 51.001 et seq. of V.T.C.S. Title 110B. In view of the detailed provisions made by the legislature in Title 110B for statewide retirement systems for education personnel, and state, county and district, and city officers and employees, and the specific authorization for the establishment of local programs for county and city personnel and policemen and firemen in V.T.C.S. articles 6228g, 6243k, 6243a, etc., we conclude that the absence of provisions for a subdivision such as an appraisal district to participate in a retirement plan other than the County and District Retirement System under Title 110B, indicates that the legislature did not intend to authorize such districts to contract and expend district funds for a private retirement plan.

[1] Please note also that we find no provisions of law authorizing the operation of such a "private retirement plan" as part of the County and District Retirement System.

You also raise an issue in your request as to the applicability of the federal Employees Retirement Income Security Act (ERISA), found in chapter 18 of Title 29, U.S.C., to such a private retirement plan. Since we have concluded that, under state law, the appraisal district is unauthorized to contract for such a plan, we need not address the applicability of ERISA to such a plan.

SUMMARY

The Comal Appraisal District is not authorized to enter into a contract with a private association under which the district would, for the benefit of its employees, adopt and contribute district funds to a private retirement plan offered by the association.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General