A-14957, AUGUST 4, 1926, 6 COMP. GEN. 100

A-14957: Aug 4, 1926

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IS NOT REQUIRED OR AUTHORIZED EITHER BEFORE OR AFTER DEMAND FOR PAYMENT HAS BEEN MADE UPON THE EMPLOYEE. 1926: I HAVE YOUR LETTER OF JUNE 27. RELATIVE TO THE COLLECTION OF INTEREST ON RETIREMENT DEDUCTIONS IN THOSE CASES IN WHICH THE RETIREMENT DEDUCTIONS WERE NOT TIMELY TAKEN FROM THE PAY OF THE EMPLOYEE DUE TO ADMINISTRATIVE ERRORS. ALL OF WHICH APPEAR TO HAVE BEEN SUBSEQUENT TO THE FIRST OF THE TWO DECISIONS OF THIS OFFICE ABOVE CITED. YOU STATE THAT: THE INCONGRUOUS RESULT OF THIS VIEW IS THAT EMPLOYEES WHO HAVE BEEN SUBJECT TO THE RETIREMENT LAW ARE EXCUSED FROM PAYMENT OF INTEREST ON DEDUCTIONS NOT CURRENTLY TAKEN BY ADMINISTRATIVE OFFICERS ON ACCOUNT OF INADVERTENCE OR MISCONCEPTION OF LAW.

A-14957, AUGUST 4, 1926, 6 COMP. GEN. 100

RETIREMENT, CIVILIAN - INTEREST ON DELAYED DEDUCTIONS INTEREST ON THE AMOUNT DUE FOR RETIREMENT DEDUCTIONS NOT TIMELY TAKEN FROM THE SALARY OF EMPLOYEES IN THE GOVERNMENT SERVICE SUBJECT TO THE RETIREMENT ACT, AS THE RESULT OF ADMINISTRATIVE ERROR, IS NOT REQUIRED OR AUTHORIZED EITHER BEFORE OR AFTER DEMAND FOR PAYMENT HAS BEEN MADE UPON THE EMPLOYEE. IN COMPUTING THE AMOUNT TO THE EMPLOYEE'S CREDIT FOR PURPOSES OF REFUND, INTEREST SHOULD NOT BE ALLOWED ON ANY DELAYED DEDUCTIONS FOR THE PERIOD OF THE DELAY.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE INTERIOR, AUGUST 4, 1926:

I HAVE YOUR LETTER OF JUNE 27, 1926, REQUESTING RECONSIDERATION OF THE QUESTION CONSIDERED IN DECISIONS OF THIS OFFICE DATED FEBRUARY 14, 1923, 2 COMP. GEN. 506, AND JUNE 11, 1926, 5 COMP. GEN. 974, RELATIVE TO THE COLLECTION OF INTEREST ON RETIREMENT DEDUCTIONS IN THOSE CASES IN WHICH THE RETIREMENT DEDUCTIONS WERE NOT TIMELY TAKEN FROM THE PAY OF THE EMPLOYEE DUE TO ADMINISTRATIVE ERRORS.

YOU STATE THAT YOUR DEPARTMENT HERETOFORE HAS NOT APPLIED THAT RULING IN CASES INVOLVING APPLICATIONS FOR ANNUITY OR FOR SERVICE CREDIT, THE VIEW BEING THAT SERVICE SINCE AUGUST 1, 1920, NOT FULLY COVERED BY APPROPRIATE DEDUCTIONS AND INTEREST THEREON, PROPERLY COULD NOT BE CREDITED, AND IN THAT CONNECTION YOU CITE OPINION OF THE ASSISTANT SECRETARY OF THE INTERIOR OF JULY 20, 1923, INSTRUCTIONS OF JANUARY 2, 1925, AND OPINION OF THE SOLICITOR OF THE INTERIOR, APPROVED FEBRUARY 28, 1925, ALL OF WHICH APPEAR TO HAVE BEEN SUBSEQUENT TO THE FIRST OF THE TWO DECISIONS OF THIS OFFICE ABOVE CITED, AND IN CONFLICT THEREWITH.

AFTER QUOTING THAT PART OF THE DECISION OF THIS OFFICE DATED JUNE 11, 1926, DEALING WITH THE VIEWS TAKEN BY YOUR DEPARTMENT, YOU STATE THAT:

THE INCONGRUOUS RESULT OF THIS VIEW IS THAT EMPLOYEES WHO HAVE BEEN SUBJECT TO THE RETIREMENT LAW ARE EXCUSED FROM PAYMENT OF INTEREST ON DEDUCTIONS NOT CURRENTLY TAKEN BY ADMINISTRATIVE OFFICERS ON ACCOUNT OF INADVERTENCE OR MISCONCEPTION OF LAW, WHILE EMPLOYEES WHO HAVE NOT BEEN SUBJECT TO THE ACT MUST, UPON COMING UNDER ITS OPERATION, PAY INTEREST ON THE BACK DEDUCTIONS COVERING ALL PRIOR SERVICE SINCE AUGUST 1, 1920, IF THEY SEEK CREDIT FOR THE PERIOD WHEN THEY WERE NOT SUBJECT TO CURRENT DEDUCTIONS.

THIS DEPARTMENT IS RELUCTANT TO CHANGE ITS REGULATIONS IN THIS RESPECT, BELIEVING THAT THEY ARE IN HARMONY WITH THE PURPOSE AND INTENT OF THE LAW AND FULLY WITHIN THE AUTHORITY CONFERRED BY SECTION 4 OF THE ORIGINAL ACT AND THE AMENDATORY ACT OF FEBRUARY 14, 1922 (42 STAT. 364), REQUIRING THIS DEPARTMENT TO ESTABLISH RULES AND REGULATIONS FOR CREDITING AND REPORTING DEDUCTIONS AND FOR COMPUTING INTEREST, AND GENERALLY FOR CARRYING THE ACT INTO FULL FORCE AND EFFECT.

THE WHOLE TENOR OF THE LAW IS TO THE EFFECT THAT THE RETIREMENT FUND IS TO HAVE THE BENEFIT NOT ONLY OF THE 2 1/2 PERCENT DEDUCTIONS BUT ALSO INTEREST THEREON, AT THE RATE OF 4 PERCENT PER ANNUM, COVERING ANY AND ALL SERVICE TO BE CREDITED SINCE AUGUST 1, 1920. WHEN DEDUCTIONS ARE NOT TAKEN CURRENTLY BUT ARE PAID SUBSEQUENTLY TO COVER PAST SERVICE, THE INTEREST THEREON IS AS MUCH A PART OF THE OBLIGATION AS THE DEDUCTIONS. THIS IS RECOGNIZED IN BOTH SECTIONS 10 AND 11, THE FORMER IN RESPECT TO DEPOSITS AND THE LATTER IN RESPECT TO REDEPOSITS. IN EITHER CASE THE AMOUNT PAID INTO THE TREASURY MUST BE SUFFICIENT TO SATISFY THE DEDUCTIONS INSTALLMENTS AND 4 PERCENT INTEREST THEREON CALCULATED FROM THE DATES WHEN DUE AND COVERING ALL PERIODS OF SERVICE THAT ARE TO BE CREDITED. WHERE AN EMPLOYEE HAS ERRONEOUSLY RECEIVED 100 PERCENT OF HIS SALARY, WHEN HE SHOULD HAVE BEEN PAID ONLY 97 1/2 PERCENT THEREOF, HIS REFUND IS COMPARABLE TO A REDEPOSIT, IF NOT TECHNICALLY SUCH, AND IT SHOULD CARRY INTEREST AS PROVIDED BY SECTIONS 10 AND 11. THERE IS NO INJUSTICE IN SUCH REQUIREMENT FOR HE HAS HAD THE USE OF THE MONEY AND THE RETIREMENT FUND HAS NOT RECEIVED THE BENEFIT OF TIMELY PAYMENT.

SECTIONS 10 AND 11, CIVIL RETIREMENT ACT OF MAY 22, 1920, 41 STAT. 618 AND 619, DEAL RESPECTIVELY WITH DEPOSIT OF DEDUCTIONS WHEN AN EMPLOYEE IS TRANSFERRED FROM AN UNCLASSIFIED TO A CLASSIFIED STATUS, OR UPON REINSTATEMENT OF A FORMER EMPLOYEE, AND REDEPOSIT BY AN EMPLOYEE WHO IS TRANSFERRED TO AN UNCLASSIFIED STATUS OR SEPARATED FROM THE SERVICE, PAID HIS RETIREMENT DEDUCTIONS, AND LATER REINSTATED IN A CLASSIFIED STATUS. IN NEITHER SECTION IS THERE ANY PROVISION MADE TO COVER CASES IN WHICH THE EMPLOYEE HAS BEEN IN A CLASSIFIED STATUS SINCE THE ENACTMENT OF MAY 22, 1920, OR FROM THE TIME HE ENTERS THE SERVICE, AND, DUE TO INADVERTENCE OR ERROR ON THE PART OF THE ADMINISTRATIVE OFFICE, TIMELY RETIREMENT DEDUCTIONS AS REQUIRED THEREUNDER WERE NOT MADE FROM HIS PAY. IN SUCH CASES THE PAYMENT OF THE DEDUCTIONS IN ARREARS CAN BE CONSIDERED NEITHER A DEPOSIT UNDER SECTION 10 NOR A REDEPOSIT UNDER SECTION 11 FOR THE REASON THAT THE STATUS OF THE EMPLOYEE HAS NOT CHANGED, AND THERE IS NO PROVISION IN THE CIVIL RETIREMENT ACTS REQUIRING HIM TO PAY INTEREST UPON THE DELAYED DEDUCTIONS.

WITH REFERENCE TO THE CONTENTION THAT THE EMPLOYEE HAS HAD THE USE OF THE MONEY WHEN DEDUCTIONS FROM HIS PAY WERE NOT TIMELY MADE AND THAT THE RETIREMENT FUND HAS NOT RECEIVED THE BENEFIT OF TIMELY PAYMENT, IT MAY BE NOTED THAT SECTION 8 OF THE CIVIL RETIREMENT ACT OF MAY 22, 1920, PROVIDING FOR THE RETIREMENT DEDUCTION FROM THE PAY OF EMPLOYEES IN THE CLASSIFIED CIVIL SERVICE IMPOSES NO DUTY ON THE EMPLOYEE IN CONNECTION THEREWITH; ON THE CONTRARY, IT SPECIFICALLY PROVIDES THAT THE SECRETARY OF THE TREASURY SHALL CAUSE AN AMOUNT EQUAL TO SAID DEDUCTIONS TO BE WITHHELD FROM ALL APPROPRIATIONS FOR SALARIES OR COMPENSATION AND TRANSFERRED ON THE BOOKS OF THE TREASURY DEPARTMENT TO THE CREDIT OF THE CIVIL-SERVICE RETIREMENT AND DISABILITY FUND. PRIOR TO JULY 1, 1926, THE GENERAL PRACTICE ADOPTED IN THE MATTER OF TRANSFERRING FUNDS AS DIRECTED UNDER THE SAID SECTION WAS TO EFFECT THE TRANSFER AT THE BEGINNING OF THE FISCAL YEAR FOR WHICH THE APPROPRIATIONS WERE MADE. 26 COMP. DEC. 1059. IT WAS ONLY IN EXCEPTIONAL CASES THAT THE TRANSFER WAS MADE SUBSEQUENT TO THE DEDUCTIONS. 27 COMP. DEC. 173. IT IS APPARENT THAT WHERE THE TRANSFER OF THE FUNDS WAS MADE FROM THE APPROPRIATION AT THE BEGINNING OF THE FISCAL YEAR THE DELAY IN EFFECTING THE RETIREMENT DEDUCTIONS FROM AN EMPLOYEE'S PAY COULD IN NO WAY AFFECT THE RETIREMENT FUND, BEING A MATTER INVOLVING ONLY AN ADJUSTMENT BETWEEN THE PAY OF THE EMPLOYEE AND THE APPROPRIATION FROM WHICH HE WAS PAID, AND INTEREST IN SUCH ADJUSTMENTS IS NOT CHARGEABLE UNLESS SPECIFICALLY PROVIDED BY LAW.

IN CASES WHERE, THROUGH ERROR OR OTHERWISE, THE PAY OF CERTAIN EMPLOYEES WAS NOT TAKEN INTO CONSIDERATION WHEN TRANSFERS INTO THE RETIREMENT FUND WERE MADE AT THE BEGINNING OF THE FISCAL YEAR, OR THEREAFTER WHEN THE TRANSFERS SHOULD HAVE BEEN MADE AND ADDITIONAL TRANSFERS BECOME NECESSARY, THERE IS INVOLVED AN ADJUSTMENT BETWEEN THE APPROPRIATION AND THE FUND RATHER THAN BETWEEN THE EMPLOYEE AND THE FUND. SUCH CASES ARE ESSENTIALLY DIFFERENT FROM CASES INVOLVING DEPOSITS MADE UNDER SECTION 10, OR REDEPOSITS UNDER SECTION 11, OF THE ACT OF MAY 22, 1920.

PURSUANT TO THE PROVISIONS OF SECTION 10 OF THE ACT OF JULY 3, 1926, 44 STAT. 910, THE PROCEDURE OF CREDITING THE RETIREMENT AND DISABILITY FUND HAS BEEN CHANGED BY GENERAL ACCOUNTING OFFICE GENERAL REGULATIONS NO. 54 OF JULY 6, 1926, EFFECTIVE JULY 1, 1926, WHICH PROVIDES IN SUBSTANCE THAT EACH DISBURSING OFFICER MAKING DEDUCTIONS ON ACCOUNT OF THE RETIREMENT FUND SHALL MAKE MONTHLY PAYMENTS THEREOF BY CHECK TO THE DISBURSING CLERK, BUREAU OF PENSIONS. SUCH CHANGE IN PROCEDURE, HOWEVER, NEITHER REQUIRES NOR AUTHORIZES ANY CHANGE IN THE RULE AS ANNOUNCED IN DECISIONS OF THIS OFFICE RELATIVE TO THE MATTER OF INTEREST UPON DELAYED RETIREMENT DEDUCTIONS. THE DEDUCTIONS FROM THE PAY OF THE EMPLOYEE REMAIN A MATTER FOR ADJUSTMENT BY THE DEPARTMENT OR ESTABLISHMENT CONCERNED OR BY THIS OFFICE BETWEEN SUCH EMPLOYEE AND THE APPROPRIATION, AND SUCH ADJUSTMENT IS SEPARATE FROM THE ADJUSTMENT BETWEEN THE APPROPRIATIONS AND THE RETIREMENT FUND.

WHAT HAS BEEN SAID HEREIN WOULD APPEAR SUFFICIENT TO ANSWER YOUR FURTHER QUESTION AS TO WHETHER INTEREST UPON RETIREMENT DEDUCTIONS NOT TIMELY TAKEN FROM AN EMPLOYEE'S PAY MAY BE CHARGED AND COLLECTED FROM THE DATE DEMAND FOR THE SAME HAS BEEN MADE, IN CASES WHERE THE AMOUNT DUE FOR RETIREMENT DEDUCTIONS IN ARREARS IS PAID BY INSTALLMENTS OR OTHERWISE, SUBSEQUENT TO THE DATE DEMAND FOR THE PAYMENT HAS BEEN MADE UPON THE EMPLOYEE, BUT IT MAY BE STATED SPECIFICALLY THAT THERE WOULD APPEAR TO BE NO MORE AUTHORITY FOR THE COLLECTION OF INTEREST AFTER THE DATE OF DEMAND THAN BEFORE, NO PROVISION THEREFOR BEING FOUND IN EITHER THE ACT OF MAY 22, 1920, OR THE ACT OF JULY 3, 1926, SUPRA. HOWEVER, IN COMPUTING THE EMPLOYEE'S CREDIT FOR PURPOSES OF RETIREMENT OR OF REFUND OF DEDUCTIONS, INTEREST SHOULD NOT BE ALLOWED ON ANY DELAYED DEDUCTION FOR THE PERIOD OF THE DELAY. SEE DECISION OF JULY 23, 1926, 6 COMP. GEN. 69.