Bob Ferguson
Other LanguagesAGLO 1971 No. 108 -
Attorney General Slade Gorton
- - - - - - - - - - - - -
September 17, 1971
Honorable Walter C. Howe, Jr.
Director, Office of Program
Planning and Fiscal Management
Insurance Building
Olympia, Washington 98504
Cite as: AGLO 1971 No. 108 (not official)
Dear Sir:
By letter dated June 14, 1971, you directed our attention to the following provisions of § 1, chapter 264, Laws of 1971, 1st Ex. Sess. (Senate Bill No. 659):
"Any department, division, or separate agency of the state government, and any county, municipality or other political subdivision of the state acting through its principal supervising official or governing body is authorized to enter into an agreement with any life insurance company, bank trustee, or custodian authorized to do business in the state of Washington to provide deferred annuities in lieu of a portion of salary or wages for all officials and employees of said public entities deemed to be eligible by the agency of the United States government having jurisdiction of the matter under the provisions under 26 U.S.C., section 401 (a), as amended by Public Law 87-370, 75 Stat. 796 as now or hereafter amended. Such tax deferred annuity benefits shall be available to those employees who elect to participate in said agreement and who agree to take a reduction in salary in the equivalent amount of the contribution required to be made by the public entity for and on behalf of such employee. The funds derived from such reductions in salary shall be deposited and accounted for in an appropriately designated account maintained by the public employer of such employee and any official authorized to disburse such funds is empowered to remit these designated funds to the insurer, custodian or trustee in accordance with the salary reduction agreement between the public entity and the employee." (Emphasis supplied.)
[[Orig. Op. Page 2]]
Addressing yourself to the portion of this act which we have underscored, you have observed:
"Lines 15 and 16 of Engrossed Senate Bill No. 659, as passed, refers to '26 U.S.C., section 401 (a), as amended by Public Law 87-370, 75 Stat. 796 as now or hereafter amended.' Lines 1, 11 and 16 further refer to 'tax deferred annuity,' 'deferred annuities,' and 'tax deferred annuity' respectively. However, section 401 (a) of the U.S. Code sets forth the 'Requirements for Qualifications' for 'Qualified Pension, Profit-Sharing, and Stock Bonus Plans' and does not refer to tax deferred annuities. Furthermore Public Law 87-370, 75 Stat. 796 is an amendment to Section 403 (b) of the U.S. Code not Section 401 (a)."
Thereupon, you have called our attention to RCW 28.02.120 (codifying § 1, chapter 54, Laws of 1965, as amended by § 1, chapter 97, Laws of 1969) by which the legislature previously authorized the purchase of so-called "tax deferred annuities" for the employees of state educational institutions and local school districts. This statute reads as follows:
"The regents, trustees, or board of directors of any of the state educational institutions or school districts, the Washington state teachers' retirement system, the superintendent of public instruction, and county and intermediate district superintendents are authorized to provide and pay for tax deferred annuities for their respective employees in lieu of a portion of salary or wages as authorized under the provisions of 26 U.S.C., section 403 (b), as amended by Public Law 87-370, 75 Stat. 796 as now or hereafter amended. The superintendent of public instruction and county and intermediate district superintendents, if eligible, may also be provided with such annuities." (Emphasis supplied.)
ANALYSIS
Your question, under the foregoing circumstances, is whether the reference to "section 401 (a)," as contained in § 1, chapter 264, Laws of 1971, 1st Ex. Sess., supra, should be regarded as a scriverner's error and should be interpreted, instead, to read "section 403 (b)." We answer in the affirmative.
[[Orig. Op. Page 3]]
The principles of statutory construction which are applicable in this case are well summarized in an annotation appearing in 5 A.L.R. 996, "Effect of mistake in reference in statute to another statute, constitution, public document, record, or the like," as follows:
"In interpretation of a statute, it should be construed with reference to its general scope and the intent of the legislature in enacting it, and in order to ascertain what was the purpose the court must give effect to all of its clauses and provisions. Where the language used is ambiguous, or admits of more than one meaning, it is to be taken in such a sense as will conform to the scope of the act, and effectuate its purpose. The use of inapt, inaccurate, or improper terms or phrases will not invalidate the statute, provided the real meaning of the legislature can be gathered from the context or from the general purpose and tenor of the enactment. Clerical errors or misprisions, which, if not corrected, would render the statute unmeaning or incapable of reasonable construction, or would defeat or impair its intended operation, will not necessarily vitiate the act, for they will be corrected, if practicable. Nor will mere inadvertences or omissions have that effect, provided they can be supplied by reference to the context or to other statutes, and the true reading of the statute made obvious, and its real meaning apparent. Fortune v. Buncombe County (1905) 140 N.C. 322, 52 S.E. 950. And if the object, purpose, and intention of the legislature in the enactment of the particular statute can be fairly ascertained and arrived at, then it is the duty of the court to overlook and disregard all apparent inaccuracies and mistakes in the mere verbiage or phraseology of the statute, and, if possible, to give force and effect to the evident reason, spirit, and intention of the law. Clare v. State (1879) 68 Ind. 25.
"These principles apply in case of a mistake in a reference in a statute to another statute, constitution, public document, record, or the like, and ordinarily, where the real intent [[Orig. Op. Page 4]] of the legislature is manifest, but would be defeated by a literal adherence to the terms of a mistaken reference, the mistaken reference will be regarded as surplusage, or will be read as corrected, and the legislative intent given effect."
In the case of § 1, chapter 264, Laws of 1971, 1st Ex. Sess., the obvious intent of the legislature was to authorize all state agencies and municipalities to contract for tax deferred annuities for
". . . all officials and employees of said public entities deemed to be eligible by the agency of the United States government having jurisdiction of the matter . . ."
in the same manner that state educational institutions and local school districts were so empowered by the legislature's earlier enactment of RCW 28.02.120, supra. Although such "Qualified pension, profit-sharing, and stock bonus plans" as are covered by 26 U.S.C. § 401 (a) can be productive of a tax deferred treatment for the group of employees covered thereby if the over-all plan meets the criteria set forth therein, the issue of "employee eligibility" is not involved under this section as it is pursuant to the tax deferred annuity section, § 403 (b), which provides that the annuity contract in question must be purchased ‑
". . .
"(i) for an employee by an employer described in section 501 (c) (3) which is exempt from tax under section 501 (a), or
"(ii) for an employee (other than an employee described in clause (i)), who performs services for an educational institution (as defined in section 151 (e) (4)), by an employer which is a State, a political subdivision of a State, or an agency or instrumentality of any one or more of the foregoing,
". . ."
[[Orig. Op. Page 5]]
Thus, had the legislature actually intended a reference to § 401 (a) rather than § 403 (b), there would have been no reason for it to have required a determination by the "agency of the United States government having jurisdiction" (obviously, the internal revenue service) with respect to the eligibility of the ". . . officials and employees . . ." to be covered by the annuity plan to be provided.1/ Under a construction whereby the scrivener's error would be regarded as the inclusion of the clause ". . . as amended by Public Law 87-370 . . .," etc., rather than the reference to 26 U.S.C. § 401 (a) instead of § 403 (b), the entire ". . . deemed to be eligible . . ." clause would thus be rendered meaningless ‑ contrary to the fundamental rule that every word, phrase, clause or sentence of a statute is to be given meaning or effect if it is possible to do so. Murray v. Dept. of Labor and Industries, 151 Wash. 95, 275 Pac. 66 (1929).
In short, all of the language of the subject new state statute fits § 403 (b) of the internal revenue code (26 U.S.C. § 403 (b)), but none of it fits § 401 (a). For this reason, we believe it proper to interpret the legislature's reference to the latter as actually being an intended reference to the former. Section 1, chapter 264, Laws of 1971, 1st Ex. Sess., therefore, should be read as saying "26 U.S.C. section 403 (b)" because this is the federal code section which deals with the subject of this 1971 enactment.
This disposes of the essential question raised by your opinion request. However, before closing we would reiterate that before any such annuities as the act authorizes can be purchased for any category of state or municipal employees, determination will first have to be obtained from the internal revenue service as to the tax deferral eligibility of the officials and employees to be covered by the particular annuity contract. The question which will have to be decided by this federal agency will be that of whether these officials and employees come within the terms of either subparagraph (i) or (ii) of § 403 (b), as quoted above but here repeated for ease of reference:
". . .
"(i) for an employee by an employer described in section 501 (c) (3) which is exempt from tax under section 501 (a), or
[[Orig. Op. Page 6]]
"(ii) for an employee (other than an employee described in clause (i)), who performs services for an educational institution (as defined in section 151 (e) (4)), by an employer which is a State, a political subdivision of a State, or an agency or instrumentality of any one or more of the foregoing,
". . ."
Because § 501 (c) (3) does not refer to such public employers as the state of Washington or its various agencies or municipalities,2/ we would doubt that this requisite employee eligibility could be established under the first of these two subparagraphs. Therefore, it would appear to us that the only portion of 26 U.S.C. § 403 (b), supra, which could be pertinent in the case of state or municipal employees would be that portion referring to such employees as ". . . perform[s] services for an educational institution . . ." Since state and local governmental employees who are employed by an educational institution (i.e., university, college and community college employees and the employees of school districts) already had a statutory basis for tax deferred annuity coverage under RCW 28.02.120, supra, it will thus be seen, in all probability, that this new, 1971 act merely extends the availability of this coverage to those officials and employees who serve in some educational [[Orig. Op. Page 7]] institution by means of employment with some agency ‑ such as the state department of social and health services ‑ which is not, itself, one of the employers covered by the earlier, 1967, act. Of course, it is not a prerogative of this office finally to pass upon a question such as this, relating as it does to the interpretation of the internal revenue code. Under the subject statute, the critical determination of eligibility is to be made by the internal revenue service, as aforesaid, and not be the state attorney general's office.
We trust the foregoing will be of assistance to you.
Very truly yours,
FOR THE ATTORNEY GENERAL
Philip H. Austin
Deputy Attorney General
*** FOOTNOTES ***
1/Compare, Senate Bill 272, a 1971 departmental request of the department of social and health services which was apparently the forerunner of Senate Bill 659. In this earlier bill the identical ". . . deemed to be eligible . . ." clause was expressed in terms of a specific reference to 403 (b).
2/26 U.S.C. § 501 (c) (3) describes the following categories of employers as being tax exempt under § 501 (a):
"(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activites of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office."