t?                    OFFICE OF THE ATTORNEY GENERAL OF TEXAS
f                                                 AlJSTlN




    Honorable John S. Rudd, JP., Acting Director
    Tecoher Retirement System of Texas
    Aus tin, Texas

    Deer Sir:                                     Opinion Bo. O-4071
                                                  Rer Optional selection of service
                                                       retirement benefit6 under
                                                       Teacher Retirement Act.

                We have reoeived your letter of recent data in which
    you aek the opinion of thla department as to the propor inter-
    pretation Of SUb6eotlOn,i', Section 5, of the Teacher Retliwment
    Act (Article   2922-1, Vernon16 Annotated Civil Statutes). Such
    Pl’OViEiOll       IWAd    in   m3?t   66   fO11OUEl


                  "With the provislon that no,optional aeleotlon
              Shallbe 8ffeCtiV8 in oa6e a beneficiary      diea.vlthln
             thirty (30) days after retirement, ma    that    such  8
             beneficiary shall be considered a6 an active member
             at the time of death, until the first payment on ac-
             count of any eervlce benefit beCOme normally due,
             any member may eleot to reoeive his membership sn-
             nuity In an annuity payable throughout life,       or he
             may eleot to receive the actuarial equivslent       at thst        ,
             time, of hi6 membership annuity in a r8dUoed member-
             6hip annuity payable throughout life vith the provi-
              6iOIl   that;


                   "Option (1) Upon hi6 death, his reduoed mmber-
              ship annuity ehall be COntinUed throughout the life
                                                                by
              of, and paid to, 6uoh ger6On a6 he Sha11 nC66iiIat.e
              written deEi@XLtiOn duly acknowledged and flled vith
              the State Board of Trustees at the time of.his retire-
              ment; or

                   "Option (2). Upon his death, one4alf of his ce-
              duced membership annuity shall be continued through the
              life of, and paid to, such person as he shall nominate
              by written dealgnation duly aoknowledged and filed tith
              the State Board of Trustees at the time of his retire-
              ment: or
Honorable John 9. Rudd, Jr., Pse   2



          "Option (3).  Some other benefit or benefit.6
     shall be paid either to the member, or to euch per6on
     or persona as he shall nominate, provided such other
     benefit or benefits, together with the reduced mem-
     bership annuity, shall be certified by the actuary to
     be of equivalent actuarial value to his membership
     annuity, and approved by the State Board of Trustees.'

          Pou wish to know whether this provieion me.sns that in
the event a retired member fsils to file a duly executed eleotlon     _
of the manner in which he de6iP66 his annuity to be paid by the
time the flrat mohthly payment under such membership annuity 16
due, such beneficiary's membership annuity shall automatically
become an annuity payable throughout life, and the beneflolary
shall not thereafter have the right to elect any other option.
If ue answer this question in the negative, .you vant to know
vhether the Teacher Retirement Board may pa66 a regulation to
the e6m8 affect.

         At first glance It would appear that the retired member
murrt We s positive election before the first psyment beoomes
due. But we do not believe that this was the legislative intent.

          A reading of the provlelons of Article III, Seatlon 488,
Constitution of Texas, and the entire Tesdher Retirement Act con-
vinces un that the normal mode of payment of 6n annuity la to the
teacher himself on a monthly basis. The object of the act, pri-
marily at least, is for the benefit and protection of the teacher
himself after his retirement. The optional provision6 deal with
the payment of a reduced annuity to the retired member and ,to
such other person as such member de6ignateE. We believe that then
optional selections are the exceptions from the general rule that
the annuity la payable to the retired member throughout hla life.
We alao believe that the retired member by silence indicates his
election to receive his annuity as one payable throughout hi6
life.

          The language is that "until the first payent   on sc-
count of any service benefit becomes normally due, the member
may elect to receive his membership annuity in 6.n annuity payable
throughout life, or he mey elect to receive the actuarial equiva-
lent of his membership in a reduced membership annuity payable
throughout life with one of the options. The a:;;~,    i~~gyy;;;, .
in equal monthly installments.   Sec. 1, Subsets.
Honorable John 3. Rudd, Jr. Page   3


me tLme given by the statute to select an option if the retired
member desires to do so la "until the first payment . . . becomea
normally due." It la veil settled that an option muat be accept-
ed within the time specified or the aooeptance vi11 be Ineffective.
In 10 Tex. Jur. 59, it is said?

          "Time is generally regarded as being of the
     eseence of option contracts, and the option must be
     ac6epted.vlthl.n the time preecribed unless a provi-
     elon limiting the time has been valved."

.Therefore, under the statute the selection of the option must be
before the firat payment becomes nomally   due.

          It foflovs from vhat ve have said that vhere a bene-
flolary fulls to elect the muu~er in vhloh he desires his an-
nuity to be paid by the time his first monthly payment 18 due,
hi8 Cmnu1t.g shall be psld 68 an 6nrnl1tg payable throughout lire.
While the language ueed Is certainly susceptible to the inter-
pretatlon which ve have given, ve vould advise the Teacher Re-
tirement Board t0 pa88 a BSgLIlatlOIitO'the z+aLueeffect a0 that til
doubt vi>1 be eliminated.

                                             Yours very truly
