B-132032, MARCH 26, 1962, 41 COMP. GEN. 614

B-132032, MARCH 26, 1962, 41 COMP. GEN. 614

PAY - RETIRED - ELECTION OF PAY COMPUTATION METHOD - RETROACTIVE A MEMBER OF THE UNIFORMED SERVICES WHO, ON THE BASIS OF CORRECT INFORMATION THAT THE RETIRED PAY HE WAS RECEIVING UNDER LAWS PRIOR TO THE CAREER COMPENSATION ACT OF 1949 WAS EQUAL TO THE RETIRED PAY THEN PAYABLE UNDER THE DIFFERENT METHODS OF COMPUTING RETIRED PAY IN SECTION 411 OF THE 1949 ACT, DI NOT MAKE AN ELECTION UNDER SECTION 411 (B) PRIOR TO THE EXPIRATION OF THE TIME LIMITATION MAY NOT HAVE THE FAILURE TO ELECT REGARDED AS THE EQUIVALENT OF AN ELECTION OF SAVED PAY UNDER SECTION 511 (A), PURSUANT TO THE GOVER CASE ( FAGAN, ET AL. V. UNITED STATES, CT. CL. NO. 535-57, DECIDED MAY 4, 1960), FOR AN AUTOMATIC RECOMPUTATION OF RETIRED PAY TO RECEIVE AN INCREASED AMOUNT UNDER THE CAREER INCENTIVE ACT OF 1955, THE RIGHT TO ELECT TO BE COVERED BY SECTION 511 IS PERSONAL TO THE MEMBER AND CAN BE EXERCISED ONLY AFTER CONSIDERATION OF VARIOUS FACTORS, INCLUDING INCOME TAX CONSIDERATIONS, KNOWN ONLY TO THE MEMBER; THEREFORE, THE LEGALITY OF PERMITTING AN ELECTION RETROACTIVE TO THE 1955 ACT BY MEMBERS WHO NOW FIND IT TO THEIR ADVANTAGE IS TOO DOUBTFUL TO WARRANT APPROVAL.

TO MAJOR JOHN A. RAPP, UNITED STATES MARINE CORPS, MARCH 26, 1962:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 11, 1962, FORWARDED HERE BY FIRST ENDORSEMENT OF THE COMMANDANT OF THE MARINE CORPS DATED JANUARY 12, 1962, WHEREIN YOU REQUEST DECISION AS TO WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT TO TECHNICAL SERGEANT OLIVER P. TURNER, 176962, U.S. MARINE CORPS, RETIRED, OF THE DIFFERENCE BETWEEN THE AMOUNT OF RETIRED PAY PAID HIM DURING THE PERIOD APRIL 1, 1955, THROUGH JANUARY 31, 1957, AND THAT WHICH WOULD BE PAYABLE SHOULD IT BE DETERMINED THAT THE RULING IN THE CASE OF LOUIS E. FAGAN, ET AL. ( LEWIS L. GOVER, PLAINTIFF NO. 2) V. UNITED STATES, 149 CT. CL. 716, IS APPLICABLE IN HIS CASE. YOUR REQUEST WAS ASSIGNED NO. DO-MC-625 BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

YOU REPORT THAT ON SEPTEMBER 30, 1941, TECHNICAL SERGEANT TURNER WAS TRANSFERRED TO THE FLEET MARINE CORPS RESERVE HAVING COMPLETED 20 YEARS AND 3 MONTHS OF ACTIVE NAVAL SERVICE, AND THAT ON NOVEMBER 1, 1941, UPON BEING FOUND NOT PHYSICALLY QUALIFIED FOR RETENTION IN THE FLEET MARINE CORPS RESERVE, HE WAS TRANSFERRED TO THE RETIRED LIST OF THE MARINE CORPS. EFFECTIVE OCTOBER 1, 1949, HE WAS ASSIGNED A PHYSICAL DISABILITY RATING OF 30 PERCENT AND WAS AFFORDED AN OPPORTUNITY TO ELECT TO QUALIFY FOR DISABILITY RETIREMENT UNDER TITLE IV OF THE CAREER COMPENSATION ACT OF 1949, 63 STAT. 816, 37 U.S.C. 271 (1952 USED.).

UNDER THE LAWS IN EFFECT ON SEPTEMBER 30, 1949, TURNER WAS RECEIVING RETIRED PAY AT THE RATE OF $118.80 PER MONTH AND BY LETTER OF OCTOBER 18, 1950, HE WAS ADVISED THAT HIS PRESENT RETIRED PAY WOULD AUTOMATICALLY BE CONTINUED UNLESS HE ELECTED TO QUALIFY FOR DISABILITY RETIREMENT PAY UNDER THE 1949 ACT. HE WAS FURTHER ADVISED THAT UNDER THAT ACT HE WOULD BE ENTITLED TO A PERCENTAGE OF DISABILITY RETIREMENT AT THE RATE OF $47.04 PER MONTH BASED ON 20 PERCENT DISABILITY ($70.56 WAS THE PROPER RATE FOR 30 PERCENT DISABILITY IN HIS CASE) OR A YEAR OF SERVICE RETIRMENT IN THE AMOUNT OF $117.60. ALSO HE WAS ADVISED THAT, WHILE THE RETIRED PAY HE WAS THEN RECEIVING WAS WHOLLY EXEMPT FROM INCOME TAX, ONLY THE AMOUNT PAYABLE ON THE BASIS OF PERCENTAGE OF DISABILITY WOULD BE EXEMPT FROM INCOME TAX SHOULD HE ELECT ONE OF THE TWO METHODS UNDER THE 1949 ACT, AND THAT HE SHOULD TAKE NO ACTION IF HE WISHED TO CONTINUE TO RECEIVE THE RETIRED PAY THEN BEING PAID TO HIM. ON THE BASIS OF SUCH INFORMATION HE DID NOT SUBMIT AN ELECTION AND HE WAS THEREFORE PAID RETIRED PAY AT THE RATE OF $118.80 PER MONTH FROM OCTOBER 1, 1949, THROUGH APRIL 30, 1952, THE RATE HE WAS RECEIVING ON SEPTEMBER 30, 1949, UNDER THE SAVING PROVISION OF SECTION 519 OF THE 1949 ACT, 37 U.S.C. 318 (1952 USED.); $123.55 (AN INCREASE OF 4 PERCENT ALLOWED BY THE ACT OF MAY 19, 1952, 66 STAT. 79, 37 U.S.C. 232) FROM MAY 1, 1952, THROUGH MARCH 31, 1955; AND $130.96 (A FURTHER INCREASE OF 6 PERCENT PROVIDED BY THE CAREER INCENTIVE ACT OF 1955, 69 STAT. 18, 37 U.S.C. 232 NOTE) FROM APRIL 1, 1955, THROUGH JULY 31, 1957, THE DATE PRECEDING THE EFFECTIVE DATE OF HIS WAIVER OF RETIRED PAY TO RECEIVE DISABILITY COMPENSATION FROM THE VETERANS ADMINISTRATION IN THE AMOUNT OF $161.80 PER MONTH. SINCE COMPUTATION OF HIS RETIRED PAY UNDER SECTION 511 (B) OF THE CAREER COMPENSATION ACT, AS AMENDED BY THE 1955 ACT, 37 U.S.C. 311 (B), WOULD HAVE RESULTED IN A GROSS MONTHLY PAYMENT OF $136.50 OR $5.54 PER MONTH GREATER THAN THE "SAVED PAY" HE WAS PAID, YOU REQUEST TO BE ADVISED WHETHER THE DECISION IN THE GOVER CASE IS APPLICABLE IN THE PRESENT CASE ON THE BASIS THAT HE RECEIVED RETIRED PAY UNDER METHOD (A) OF SECTION 511, 37 U.S.C. 311 (A), RATHER THAN UNDER SECTION 519 OF THE 1949 ACT, NOTWITHSTANDING THAT HE DID NOT EXPRESSLY AND FORMALLY ELECT UNDER SECTION 411 (B), TO RECEIVE RETIRED PAY COMPUTED UNDER SECTION 511.

SECTION 411 OF THE 1949 ACT, 37 U.S.C. 281 (A) AND (B) (1952 USED.), GAVE PERSONS THERETOFORE RETIRED FOR DISABILITY AND THEN ENTITLED TO RECEIVE RETIRED OR RETIREMENT PAY THE CHOICE OF TWO OPTIONS: (A) TO QUALIFY UNDER SECTION 402 (D), 37 U.S.C. 272 (D) (1) AND (2) (1952 USED.), AND THUS HAVE THEIR RETIRED PAY COMPUTED BY EITHER (1) THE LONGEVITY METHOD (BASIC PAY AS THERE PROVIDED MULTIPLIED BY YEARS OF ACTIVE SERVICE, MULTIPLIED BY 2 1/2 PERCENTUM), OR (2) THE DISABILITY METHOD (BASIC PAY MULTIPLIED BY PERCENTAGE OF DISABILITY WHEN RETIRED); OR (B) ONE OF THE TWO METHODS OF COMPUTATION UNDER SECTION 511 OF THE ACT CONSISTING OF (A) THE RETIRED PAY AUTHORIZED BY THE PROVISIONS OF LAW IN EFFECT ON SEPTEMBER 30, 1949, AND (B) A LONGEVITY METHOD SIMILAR TO THAT IN SECTION 402 (D) (1). DISABILITY RETIREMENT PAY COMPUTED UNDER THE LAWS IN EFFECT ON SEPTEMBER 30, 1949, AS WELL AS RETIREMENT PAY BASED ON PERCENTAGE OF DISABILITY AFTER THAT DATE, WAS NOT INCLUDABLE IN A PERSON'S GROSS INCOME FOR TAX PURPOSES. HOWEVER, UNDER THE PROVISIONS OF SECTION 402 (H), 37 U.S.C. 272 (H) (1952 USED.), AS INTERPRETED BY THE INTERNAL REVENUE SERVICE, TREASURY DEPARTMENT, DISABILITY RETIREMENT PAY COMPUTED BY THE LONGEVITY METHOD IS EXEMPT FROM INCOME TAX ONLY TO THE EXTENT THAT IT DOES NOT EXCEED THE DISABILITY RETIRED PAY WHICH WOULD HAVE BEEN RECEIVED IF SUCH PAY WERE COMPUTED ON THE BASIS OF PERCENTAGE OF DISABILITY. PERSONS OTHERWISE ELIGIBLE TO ELECT UNDER SECTION 411 WERE REQUIRED TO EXERCISE THEIR ELECTION PRIOR TO OCTOBER 1, 1954. ALL OTHER MEMBERS RETIRED BEFORE OCTOBER 1, 1949, CAME UNDER THE PROVISIONS OF SECTION 511 WITHOUT CHOICE AND THEY RECEIVED RETIRED PAY UNDER THE METHOD INDICATED IN SECTION 511 WHICH GAVE THEM THE MOST FAVORABLE RETURN. THE GOVER CASE HOLDS THAT A MEMBER COVERED BY SECTION 511 HAD A RIGHT TO RECOMPUTATION BETWEEN THE TWO METHODS THERE PRESCRIBED AND THAT THIS RIGHT CONTINUED TO EXIST UNTIL CUT OFF BY THE ACT OF MAY 20, 1958, 72 STAT. 122, 37 U.S.C. 232.

IT IS WELL SETTLED THAT WHERE THERE WAS NO RETROACTIVE CHANGE IN STATUS, NO INCORRECT INFORMATION WAS FURNISHED FROM ADMINISTRATIVE SOURCES AND THE MEMBER WAS IN POSSESSION OF SUFFICIENT FACTS UPON WHICH TO EXERCISE A SOUND JUDGMENT AS TO AN ELECTION UNDER SECTION 411, HE IS BOUND BY THE 5- YEAR LIMITATION PROVIDED IN THAT SECTION WITHIN WHICH THE ELECTION IS AUTHORIZED. 34 COMP. GEN. 646; 35 COMP. GEN. 557. IN ADDITION TO THE ELECTIONS AVAILABLE UNDER SECTION 411 OF THE 1949 ACT, SECTION 519 SAVED TO ANYONE THEN IN RECEIPT OF RETIRED PAY THE RETIRED PAY TO WHICH HE WAS ENTITLED UNDER ANY OTHER PROVISION OF LAW IN EFFECT PRIOR TO OCTOBER 1, 1949. FOR A RETIRED MEMBER TO CONTINUE TO ENJOY THE BENEFITS OF THE ACTS IN EFFECT PRIOR TO OCTOBER 1, 1949, NO ACTION WAS REQUIRED ON HIS PART; WHEREAS, TO RECEIVE RETIRED PAY IN THE AMOUNT, WHICHEVER WAS GREATER, COMPUTED UNDER ONE OF THE METHODS PROVIDED IN SECTION 511, AN AFFIRMATIVE ELECTION WAS REQUIRED UNDER OPTION (B) OF SECTION 411, PRIOR TO OCTOBER 1, 1954. RETIRED MEMBERS INELIGIBLE TO EXERCISE AN OPTION UNDER SECTION 411, SUCH AS THE PLAINTIFF IN THE GOVER CASE, WERE COVERED AUTOMATICALLY BY SECTION 511.

AS STATED ABOVE, A MEMBER IS NOT BOUND BY THE 5-YEAR PERIOD FOR MAKING AN ELECTION UNDER SECTION 411, IF IT APPEARS THAT HE WAS GIVEN MISLEADING OR ERRONEOUS INFORMATION AS TO HIS ELECTION RIGHTS. HOWEVER, THAT RULE RELATES TO RETIRED PAY RIGHTS WHICH COULD BE ASCERTAINED UNDER THEN EXISTING LAWS. IT APPEARS THAT THE INFORMATION FURNISHED TURNER IN 1950 CORRECTLY INFORMED HIM THAT THE RETIRED PAY THEN BEING PAID TO HIM WAS AT LEAST EQUAL TO RETIRED PAY THEN PAYABLE UNDER ANY OF THE DIFFERENT METHODS OF COMPUTING RETIRED PAY UNDER SECTION 411. WHILE HE WAS NOT ADVISED AS TO THE RECOMPUTATION RIGHTS OF PERSONS ELECTING TO BE COVERED BY SECTION 511--- RETIRED PAY COMPUTED BY EITHER METHOD (A) OR (B), WHICHEVER IS GREATER, IF THEY VARIED FROM TIME TO TIME--- NO RIGHT TO A RECOMPUTATION OF RETIRED PAY WOULD HAVE ACCRUED TO HIM PRIOR TO OCTOBER 1, 1954, IF HE HAD MADE AN ELECTION UNDER SECTION 411 (B). THUS, HE SUFFERED NO LOSS OF RETIRED PAY BEFORE THAT DATE AS A RESULT OF HIS INACTION.

A PREDICTION PRIOR TO OCTOBER 1, 1954, AS TO WHAT, IF ANY, LAWS MIGHT BE ENACTED BY THE CONGRESS AFTER THAT DATE WHICH WOULD AFFECT RECOMPUTATION RIGHTS UNDER SECTION 511 COULD NOT BE MADE. THE MATTER WAS ENTIRELY CONJECTURAL. OTHER UNKNOWN FACTORS INFLUENCING A POSSIBLE 411 (B) ELECTION BEFORE THAT DATE WERE THOSE RELATING TO FUTURE INCOME TAX LIABILITIES WHICH COULD VARY FROM TIME TO TIME. IN VIEW OF SECTION 402 (H), IT IS POSSIBLE TO ENVISION SITUATIONS WHERE A PERSON MAKING SUCH ELECTION BEFORE OCTOBER 1, 1954, WOULD BE PLACED IN A DISADVANTAGEOUS FINANCIAL POSITION BY A RECOMPUTATION UNDER A FUTURE LAW SUCH AS THE CAREER INCENTIVE ACT OF 1955, 69 STAT. 18--- ON WHICH ALL GOVER CASE BENEFITS ARE BASED--- SINCE THE INCREASED TAX IN SUCH SITUATIONS WOULD EXCEED THE INCREASED RETIRED PAY. RECOMPUTATIONS UNDER SECTION 511 WERE REQUIRED TO BE MADE WITHOUT REGARD TO INCOME TAX MATTERS. IN THIS CONNECTION, IT WOULD APPEAR THAT, IF THE FAILURE TO MAKE AN ELECTION SHOULD BE REGARDED AS THE EQUIVALENT OF AN ELECTION OF SAVED PAY UNDER SECTION 511 (A), AN AUTOMATIC RECOMPUTATION OF RETIRED PAY FOLLOWING ENACTMENT OF THE CAREER INCENTIVE ACT WOULD BE REQUIRED AND THIS THE MEMBER WOULD BE DEPRIVED OF HIS RIGHT TO DECIDE WHETHER, BECAUSE OF THE INCOME TAX PROBLEM AND UNCERTAINTY AS TO THE EXTENT, IF ANY, FUTURE LAWS MIGHT AFFECT HIS RIGHT TO RETIRED PAY, HE WANTED TO TAKE THE RISKS OF BEING REQUIRED TO ACCEPT A RECOMPUTATION UNDER SECTION 511 (B). THE RIGHT TO ELECT TO BE COVERED BY SECTION 511 WAS PERSONAL TO HIM AND NECESSARILY COULD BE EXERCISED ONLY AFTER CONSIDERATION OF VARIOUS FACTORS KNOWN ONLY TO THE INDIVIDUAL CONCERNED.

IN THE CIRCUMSTANCES, THE LEGALITY OF PERMITTING A SECTION 411 (B) ELECTION RETROACTIVE TO APRIL 1, 1955, EFFECTIVE DATE OF THE CAREER INCENTIVE ACT, BY THOSE WHO NOW FIND IT TO THEIR ADVANTAGE TO MAKE SUCH AN ELECTION, IS OF SUCH A DOUBTFUL NATURE AS NOT TO WARRANT APPROVAL BY THIS OFFICE. SEE LONGWILL V. UNITED STATES, 17 CT. CL. 288 AND CHARLES V. UNITED STATES, 19 CT. CL. 316.