Tax Sheltered annuities. Whether state employers can make deductions for deferred compensation plans only for insurers that they endorse? ANSWER: Yes. 21-5-504, 21-5-506, 21-5-510.

STATE OF ARKANSAS OFFICE OF THE ATTORNEY GENERAL ——— 201 EAST MARKHAM STREET STEVE CLARK - HERITAGE WEST BUILDING ee §01) 371-2007 ATTORNEY GENERAL : . LITTLE ROCK, ARKANSAS 72201 (301) OPINION NO. 86-206 . - Hi oa April 29, 1986 Senator Jerry dD. Jewell ape: State Senator .. = ; 7 - 1813 Pulaski Street ~ = | | , _ a Little Rock, AR 72201 So co ae r RE; Tax ‘Sheltered ‘Annuities Dear Senator Jewell: Your’ request for an ‘official Attorney General's opinion pertaining to the above captioned matter presents the fol- ‘lowing question which is Tepeated Verbatim as follows: - The federal law provides certain tax - - benefits for employees of non-proift and. _ +: .., public service organizations and insti- er . +" tutions, The specifics are that they. oo - shave to be payroll deducted. ." 8 "The central core of my request is whe- ae _ ther employers — categorized (in the above paragraph) can make deductions only for -insurers that. ‘they endorse. " ae The relevant. provision. “of State Statutory ‘law is found at Ark: ~Stat;: ‘Ann, §12- 1618,: S24). wherein deferred. .-~.. compensation is authorized T ih the form of variable life ‘insurance ‘or- annuity ‘contracts. PO MiGs Sir sate ‘$12-1618 states: ~ “Deferred: compensation authorized aS ae +i: Variable life insurance or. annuity con- - . tracts. <== The state or any county, °°.” - city, town, or other political subdivi- | ~ -:Sion may, by contract, agree ‘with any - “employee to defer, in whole or in part,” any. portion of that. employee's furture .~ (sic) [future]. compensation and may.sub-" ~ Sequently, in its sole discretion, -con-.... tract for purchase, or otherwise procure | a. fixed or variable life. insurance. or: Senator Jerry D. Jewell } Page 2 ~ April 29, 1986 annuity contract or contracts pursuant ~ to a deferred compénsation program for the employee, from any life insurance agent duly licensed by this state who represents an insurance company licensed to contract business in this state, which offefs life insurance and both fixed and variable annuity contract, and which has signed a master agreement with the administrator of the plan, (emphasis supplied). OE Ark. Stat. Ann. §11-1620 states: Deferred compensation -- Administered by employees insurance advisory committee ~~ Regulations -- Procedure. -~- The administration of the Stdte government emptoyees' deferred compensation program shall be under the direction of the State Employees Insurance Advisory Com- | . Mittee; and administration of other _— me, : _ deferred compensation programs autho- Be . _ ‘ized by this Act [§$12-1618--12-1626] - - . ghail be under the direction of the a appropriate officer designated by the Sc county, city, town or other political subdivision. The State Employees Insur- -ance Advisory Committee, or the appro-- - “priate officer designated by the county, . Doo. se City, town, or other political ‘subdivi- “ “2c... .. gion, is hereby authorized and empowered — ES "to promulgate any and: all regulations - : ‘deemed necessary to carry out the | ‘intents and: purposes of this Act. . “Deferrals of income shall. be made, ‘in ‘each instance, by the appropriate dis- ~ bursing officer. The administrator of ‘the deferred compensation program may > “contract with a private corporation or institution for providing consolidated . billing. and other administrative ser- ‘vices [Acts 1975, No. 669, §3, ‘p. 1831, 1977, No. 937, §2, Dp. 2342. ] (emphasis supplied) = | Se a Ann. ; os Ark. ‘Stat. §12-1624 ‘states: ae Senator Jerry D. Jewell Page 3; April 29, 1986 Liability of state or political subdivit ; sions under deferral program -- The ~ a financial liability of the state, coun- ty, city, town, or other political sub- division under a deferred compensation program authorized by this Act [§$12- ~1618--12-1626] shall be limited in each . instance to-an amount determined by . reference to the value of the particular contract or contracts which may have been purchased with- respect to any em- ployee and any amounts deferred but not - ‘expended in purchase of such contracts. a - [Act 1975, No. 669, §7, p. 1831.] (en- phasis supplied) Due to the requirements set forth above of execution of a. master plan; the power of the State Employees’ Insurance ~ . -— Advisory Committee- and the administrator of other deferred compensation plans to promulgate rules and regulations; and the liability provisions imposed by §12-1624, it must be ; concluded that such employers can make déductions only For oe insurers that they endorse. , rs The foregoing opinion which I hereby approve was prepared by Deputy Attorney General Dan Kennett. . Sincerely, STEVE CLARK ae Attorney General —