B-203393, JUNE 15, 1983, 62 COMP.GEN. 471

B-203393, JUNE 15, 1983, 62 COMP.GEN. 471

PAY - RETIRED - SURVIVOR BENEFIT PLAN - SPOUSE - SOCIAL SECURITY OFFSET COMPUTATION COMPUTATION OF SETOFFS FROM SURVIVOR BENEFIT PLAN ANNUITIES WHICH ARE REQUIRED TO BE MADE IN AN AMOUNT EQUAL TO THE RETIREE'S SOCIAL SECURITY BENEFIT BASED SOLELY ON MILITARY SERVICE MUST TAKE INTO ACCOUNT THE REDUCTION IN SOCIAL SECURITY BENEFITS WHEN THE RETIREE RECEIVED BENEFITS BEFORE REACHING AGE 65. THUS, WHERE A WIDOW'S SOCIAL SECURITY BENEFIT IS REDUCED BECAUSE OF THE REDUCTION IN THE RETIREE'S BENEFIT, THE SERVICES MAY NOT CALCULATE THE OFFSET AGAINST THE SURVIVOR BENEFIT PLAN ANNUITY AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT.

MATTER OF: DORA M. LAMBERT, JUNE 15, 1983:

THIS DECISION IS BEING RENDERED ON THE QUESTION AS TO WHETHER THE REQUIRED SETOFF FROM AN ANNUITY UNDER THE SURVIVOR BENEFIT PLAN, 10 U.S.C. 1447-1455, ON ACCOUNT OF RECEIPT OF SOCIAL SECURITY WIDOW'S BENEFITS IS BEING CORRECTLY COMPUTED BY THE MILITARY SERVICES. FOR THE REASONS STATED, WE FIND THAT A DIFFERENT METHOD OF COMPUTATION WHICH WILL MORE CLOSELY REFLECT SOCIAL SECURITY BENEFITS RECEIVED SHOULD BE USED.

MRS. DORA M. LAMBERT, THE WIDOW OF MAJOR GENERAL JOE LAMBERT, USA, RETIRED, WHO DIED APRIL 21, 1979, IS RECEIVING A SURVIVOR BENEFIT PLAN ANNUITY REDUCED DUE TO HER SOCIAL SECURITY BENEFITS. MRS. LAMBERT ADVISED US THAT WHEN SHE BECAME ENTITLED TO THE ANNUITY, THE AMOUNT OF THE SETOFF COMPUTED BY THE ARMY FINANCE AND ACCOUNTING CENTER WAS $13.50 GREATER THAN THE SOCIAL SECURITY WIDOW'S BENEFIT SHE WAS RECEIVING. SHE POINTED OUT THAT ALL OF HER LATE HUSBAND'S SOCIAL SECURITY COVERAGE WAS EARNED THROUGH HIS MILITARY SERVICE AND CONTENDED THAT THE SETOFF REQUIRED BY 10 U.S.C. 1451(A) SHOULD NOT EXCEED THE AMOUNT OF HER WIDOW'S BENEFIT UNDER SOCIAL SECURITY.

THE SETOFF FROM MRS. LAMBERT'S ANNUITY IS COMPUTED BY THE ARMY FINANCE AND ACCOUNTING CENTER IN ACCORDANCE WITH THE REGULATIONS CONTAINED IN CHAPTER 5 OF THE DEPARTMENT OF DEFENSE MILITARY RETIRED PAY MANUAL (DOD MANUAL 1340.12M) AND CHAPTER 6 OF ARMY REGULATIONS 608 9. WE WERE ADVISED BY THE SOCIAL SECURITY ADMINISTRATION THAT MRS. LAMBERT'S MONTHLY SOCIAL SECURITY WIDOW'S BENEFIT WAS CORRECTLY COMPUTED. THEY POINTED OUT THAT MRS. LAMBERT'S BENEFIT WAS REDUCED BECAUSE GENERAL LAMBERT RECEIVED OLD AGE BENEFITS AT AGE 62. THIS CAUSED HIS MONTHLY BENEFITS TO BE LESS THAN THEY WOULD HAVE BEEN HAD HE WAITED UNTIL AGE 65 (THE AGE AT WHICH FULL BENEFITS ARE PAID). BUT SINCE MRS. LAMBERT WAS AGE 65 AT THE TIME OF HIS DEATH, SHE BECAME ENTITLED TO A SOCIAL SECURITY WIDOW'S BENEFIT EQUAL TO HIS REDUCED BENEFIT.

PARAGRAPH 90514 OF THE DEPARTMENT OF DEFENSE MILITARY RETIRED PAY MANUAL PROVIDES THAT "THE REDUCTION FACTORS APPLIES AGAINST THE TOTAL MILITARY PIA (PRIMARY INSURANCE AMOUNT) CALCULATED TO MEMBER'S AGE 65 REGARDLESS OF THE AGE WHEN THE MEMBER CLAIMED BENEFITS UNDER SOCIAL SECURITY."

FAILURE TO REDUCE THE SETOFF FROM A SURVIVOR ANNUITY WHEN THE RETIRED MEMBER RECEIVED REDUCED SOCIAL SECURITY BENEFITS BEFORE REACHING AGE 65 MAKES THE REDUCTION IN THE ANNUITY OF THE WIDOW CONCERNED MORE THAN THE SOCIAL SECURITY BENEFIT RECEIVED ON ACCOUNT OF THE MEMBER'S MILITARY SERVICE. THE DEPARTMENT OF DEFENSE HAS TAKEN THE POSITION THAT THEIR REGULATIONS AND THIS RESULT ARE CONSISTENT WITH THE PROVISIONS OF 10: U.S.C. 1451(A). THIS POSITION IS PREDICATED ON THE REQUIREMENT THAT SETOFF IS TO BE "CALCULATED ASSUMING THAT THE PERSON CONCERNED LIVES TO AGE 65."

ALTHOUGH WE AGREE THAT LANGUAGE REQUIRES COMPUTATIONS OF SURVIVOR ANNUITY SETOFFS WHICH WILL PRODUCE SETOFFS IN AMOUNTS DIFFERENT FROM THE SOCIAL SECURITY BENEFIT RECEIVED ON ACCOUNT OF MILITARY SERVICE, WE DO NOT FIND THAT THAT LANGUAGE SUPPORTS THE REDUCTION MADE IN THIS TYPE OF CASE.

THE SURVIVOR BENEFIT PLAN WAS DESIGNED TO SUPPLEMENT THE SOCIAL SECURITY BENEFITS RECEIVED BY SURVIVING SPOUSES AND DEPENDENT CHILDREN OF RETIRED MILITARY MEMBERS.AND SURVIVING SPOUSES OF ACTIVE DUTY PERSONNEL WHO DIE WHILE ELIGIBLE TO RETIRE. TO MAKE PARTICIPATING LESS COSTLY TO THE RETIRED MEMBER WHILE LIMITING COST TO THE GOVERNMENT, AN OFFSET AGAINST THE ANNUITY PAID TO A SURVIVING SPOUSE WAS REQUIRED WHEN THE SPOUSE BECOMES ENTITLED TO A WIDOW'S OR WIDOWER'S BENEFIT UNDER SOCIAL SECURITY.

THE LANGUAGE USED TO IMPLEMENT THAT PURPOSE IS CONTAINED IN 10 U.S.C. 1451(A) WHICH, AS IT RELATED TO MRS. LAMBERT'S SITUATION IN 1979, PROVIDED:

* * * WHEN THE WIDOW OR WIDOWER REACHES AGE 62 * * * THE MONTHLY ANNUITY SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE AMOUNT OF THE SURVIVOR BENEFIT, IF ANY, TO WHICH THE WIDOW OR WIDOWER WOULD BE ENTITLED UNDER SUBCHAPTER II OF CHAPTER 7 OF TITLE 42 BASED SOLELY UPON (MILITARY) SERVICE BY THE PERSON CONCERNED * * * AND CALCULATED ASSUMING THAT THE PERSON CONCERNED LIVED TO AGE 65. * * *

REGARDING THE INTEGRATION OF THE SURVIVOR BENEFIT PLAN WITH SOCIAL SECURITY BENEFITS, THE LEGISLATIVE HISTORY OF THE PLAN SHOWS THAT THE OFFSET WAS INTENDED TO BE THE EQUIVALENT OF THE SOCIAL SECURITY PAYMENT WHICH IS ATTRIBUTABLE TO THE RETIRED MEMBER'S MILITARY SERVICE. THE METHOD OF COMPUTING THE OFFSET WAS INTENDED TO BE A "MOST GENEROUS FORMULA * * * TO ASSURE THAT A WIDOW WILL RECEIVE AT LEAST 55 PERCENT OF THE MAN'S MILITARY RETIRED PAY." H. REPT. NO. 92-481, 92D CONG., 1ST SESS., SEPTEMBER 16, 1971, ACCOMPANYING H.R. 10670, AT PAGE 14. SIMILAR STATEMENTS APPEAR ON PAGES 30, 31, AND 53 OF S. REPT. NO. 92-1089, 92D CONG., 2D SESS., SEPTEMBER 6, 1972.

IT IS CLEAR, THEREFORE, THAT THE CONGRESS DID NOT INTEND TO AUTHORIZE AN OFFSET WHICH WOULD AMOUNT TO MORE THAN THE COMPARABLE SOCIAL SECURITY BENEFIT. WE DO NOT FIND THAT THE STATUTORY LANGUAGE OF THE SURVIVOR BENEFIT PLAN REQUIRES OR PERMITS THAT RESULT.

THE DEPARTMENT APPARENTLY READS THE LANGUAGE "ASSUMING THAT THE PERSON CONCERNED LIVED TO AGE 65" TO MEAN THAT THE PERSON NOT ONLY LIVED TO AGE 65 BUT THAT HE DID NOT APPLY FOR SOCIAL SECURITY BENEFITS BEFORE REACHING THAT AGE. WE DO NOT AGREE WITH THAT INTERPRETATION OF THE LANGUAGE CONCERNED BECAUSE, AS IS EVIDENT FROM MRS. LAMBERT'S CASE, THAT INTERPRETATION RESULTS IN A REDUCTION IN TOTAL SURVIVOR BENEFITS, WHEREAS THE PROVISION WAS INTENDED TO BE BENEFICIAL. FURTHER, UNDER THAT INTERPRETATION THE WIDOW'S BENEFIT UNDER THE PLAN PLUS THE SOCIAL SECURITY MAY BE LESS THAN 55 PERCENT OF THE MEMBER'S RETIRED PAY.

THE BENEFIT PROVIDED BY THE AGE 65 PROVISION RELATES TO THE ANNUITY REDUCTIONS APPLICABLE TO WIDOWS OR WIDOWERS OF RETIRED MEMBERS WHO DIE AT AN EARLY AGE. IF THIS PROVISION WERE NOT INCLUDED THE REDUCTION OF SURVIVOR BENEFITS RECEIVED BY THESE SURVIVORS WOULD BE DISPROPORTIONATELY LARGE WHEN COMPARED TO THE REDUCTION APPLICABLE TO THOSE BENEFICIARIES WHOSE PRINCIPALS LIVED TO BE 65. THIS IS SO BECAUSE THE AMOUNT OF INCOME FROM MILITARY SERVICE IS A FIXED AMOUNT. TO DETERMINE THE BENEFIT UPON RETIREMENT THIS AMOUNT IS DIVIDED BY THE NUMBER OF YEARS BETWEEN 1950 (OR THE YEAR THE INDIVIDUAL BECAME 21) AND THE YEAR OF DEATH OR THE YEAR HE OR SHE BECAME 62. THUS, IF THE RETIREE DIED AT AN EARLY AGE THE COMPUTED SOCIAL SECURITY BENEFIT FOR MILITARY SERVICE WOULD BE HIGHER THAN THAT OF THE INDIVIDUAL WHO LIVED LONGER. THIS WOULD RESULT IN A CORRESPONDINGLY LARGER REDUCTION IN THE SURVIVOR BENEFITS PAYABLE TO THE WIDOW OF THE RETIREE WHO DIED AT AN EARLY AGE.

THE USE OF AGE 65 IN 10 U.S.C. 1451(A) APPARENTLY RESULTED FROM THE FACT THAT THE CALCULATION OF THE SOCIAL SECURITY PRIMARY INSURANCE AMOUNT WAS BASED UPON WORK PERFORMED UP TO AGE 65 FOR COVERED MEN. THE CALCULATION WAS BASED ON WORK PERFORMED UNTIL AGE 62 FOR COVERED WOMEN. SEE 42 U.S.C. 415(B)(3) (1970). THIS PROVISION WAS CHANGED BY SECTION 104(B) OF THE SOCIAL SECURITY ACT AMENDMENTS OF 1972, PUBLIC LAW 92-603, OCTOBER 30, 1972, 86 STAT. 1329, 1334, TO BASE CALCULATIONS FOR BOTH MEN AND WOMEN ON WORK PERFORMED UNTIL AGE 62. THAT AMENDMENT DID NOT BECOME FULLY EFFECTIVE UNTIL JANUARY 1975.

WE RECOGNIZE THAT THE CALCULATION OF THE SOCIAL SECURITY OFFSET IS A THEORETICAL CALCULATION NOT PREDICATED ON THE ACTUAL SOCIAL SECURITY PAYMENTS MADE TO THE BENEFICIARY. FURTHER, THE REQUIREMENT TO INCLUDE IN THE CALCULATION THE FACTOR OF WHEN THE RETIREE CLAIMED SOCIAL SECURITY BENEFITS, IF BEFORE AGE 65, WILL REQUIRE THE DEPARTMENT TO OBTAIN INFORMATION THAT IS NOT INCLUDED IN THE MEMBER'S MILITARY PAY RECORDS. HOWEVER, AS IN THE CASE OF THE SURVIVORS OF RETIREES WHO DID NOT QUALIFY FOR SOCIAL SECURITY BENEFITS, THE CALCULATION COULD BE MADE BASED ON THE ASSUMPTION THAT THE RETIREE DID NOT RECEIVE SOCIAL SECURITY BENEFITS UNTIL AGE 65, BUT PERMIT A RECALCULATION OF THE SOCIAL SECURITY OFFSET IF THE BENEFICIARY DEMONSTRATES TO THE DEPARTMENT CONCERNED THAT THE RETIREE WAS RECEIVING A REDUCED SOCIAL SECURITY PAYMENT DUE TO THE FACT THAT BENEFITS WERE INITIATED BEFORE HE OR SHE REACHED 65.

FOR THE REASONS STATED, IN CALCULATING THE OFFSET IN THIS CASE GENERAL LAMBERT'S COVERED MILITARY INCOME SHOULD BE DIVIDED BY THE COVERED YEARS AFTER 1950 UNTIL HE REACHED AGE 62, LESS 5 YEARS, AS WAS REQUIRED IN CALCULATING HIS SOCIAL SECURITY BENEFIT. IN THAT CONNECTION THE FACT THAT HE ACTUALLY LIVED TO AGE 65 OR IS CONSIDERED TO HAVE LIVED TO AGE 65 WOULD NOT CHANGE THE COMPUTATION OF HIS SOCIAL SECURITY BENEFIT. FURTHER, THE REDUCTION IN HIS ANNUITY BECAUSE HE APPLIED FOR AND RECEIVED SOCIAL SECURITY BENEFITS BEFORE HE BECAME 65 SHOULD ALSO BE CALCULATED AND THE EFFECT OF THAT ON MRS. LAMBERT'S ANNUITY SHOULD BE DETERMINED. HER ANNUITY SHOULD BE REDUCED ONLY BY THE AMOUNT OF HER SOCIAL SECURITY BENEFIT PREDICATED ON THOSE CALCULATIONS.

FOR THE REASONS STATED THE SETOFF IN MRS. LAMBERT'S CASE SHOULD BE RECOMPUTED EFFECTIVE APRIL 1979 AND HER SURVIVOR ANNUITY PAYMENTS ADJUSTED TO REFLECT A SETOFF NOT TO EXCEED HER SOCIAL SECURITY WIDOW'S BENEFIT FOR THE PERIOD PRIOR TO DECEMBER 1, 1980. FOR THE PERIOD SUBSEQUENT TO THAT DATE, SECTION 3 OF PUBLIC LAW 96-402, APPROVED OCTOBER 9, 1980, 94 STAT. 1705, AMENDED 10 U.S.C. 1451(A) TO PROVIDE THAT REDUCTION OF A WIDOW'S SURVIVOR ANNUITY SHALL NOT EXCEED 40 PERCENT OF THE UNADJUSTED SURVIVOR BENEFIT PLAN ANNUITY. SUCH FURTHER CORRECTION AS IS REQUIRED UNDER THAT PROVISION SHOULD ALSO BE MADE IN MRS. LAMBERT'S CASE.